NATIONAL GEOGRAPHIC SOCIETY v. CALIFORNIA BOARD OF EQUALIZATION
No. 75-1868
Supreme Court of the United States
Argued February 23, 1977-Decided April 4, 1977
430 U.S. 551
Philip M. Plant, Deputy Attorney General of California, argued the cause for appellee. With him on the brief were Evelle J. Younger, Attorney General, and Ernest P. Goodman, Assistant Attorney General.*
MR. JUSTICE BRENNAN delivered the opinion of the Court.
Appellant National Geographic Society, a nonprofit scientific and educational cоrporation of the District of Columbia, maintains two offices in California that solicit advertising copy for the Society‘s monthly magazine, the National Geographic Magazine. However, the offices perform no activities related to the Society‘s operation of a mail-order business for the sale from the District of Columbia of maps, atlases, globes, and books. Orders for these items are mailed frоm California directly to appellant‘s Washington, D. C., headquarters on coupons or forms enclosed with announcements mailed to Society members and magazine subscribers or on order forms contained in the magazine. Deliveries are made by mail from the Society‘s Washington, D. C., or Maryland offices. Payment is either by cash mailed with the order or after a mailed billing following receipt of the merchandise. Such mаil-order sales to California residents during the period involved in this suit aggregated $83,596.48.
The question presented by this case is whether the Society‘s activities at thе offices in California2 provided sufficient nexus between the out-of-state seller appellant and the State-as required by the
All States that impose sales taxes also impose a corollary use tax on tangible property bought out of State to protect sales tax revenues and put local retailers subject to the sales tax on a competitive parity with out-of-state retailers exempt from the sales tax. H. R. Rep. No. 565, 89th Cong., 1st Sess., 614 (1965). The constitutionality of such state schemes is settlеd. Henneford v. Silas Mason Co., 300 U. S. 577, 581 (1937); Monamotor Oil Co. v. Johnson, 292 U. S. 86 (1934).4 But the limitation of use taxes to consumption within the State so as to avoid problems of due process that might arise from the extension of the sales tax to interstate commerce, see, e. g., Nelson v. Sears, Roebuck & Co., 312 U. S. 359, 363 (1941); Monamotor Oil Co. v. Johnson, supra, at 95, does not avoid all constitutional difficulties. States necessarily impose the burden of collecting the tax on the out-of-state seller; the impracticability of its collection from the multitude of individual purchаsers is obvious. Miller Bros. Co. v. Maryland, 347 U. S. 340, 343 (1954). However, not every out-of-state seller may constitutionally be made liable for payment of the use tax on merchandise sold to purchasers in the State. The California Supreme Court concluded, based on its survey of the relevant decisions of this Court, that the “slightest presence” of the seller in California established sufficient nexus between the State and the seller constitutionally to support the imposition of the duty to collect and pay the tax. The California court stated, 16 Cal. 3d, at 644, 547 P. 2d, at 462:
“We are satisfied that from the above cited decisions
the following principle can be distilled and we thus hold: Where an out-of-state seller conducts a substantial mail order business with residents of a state imposing a use tax on such purchasers and the seller‘s connection with the taxing state is not exclusively by means of the instruments of interstate commerce, the slightest presence within such taxing state indeрendent of any connection through interstate commerce will permit the state constitutionally to impose on the seller the duty of collecting the use tax from such mail order purchasers and the liability for failure to do so.” (Emphasis supplied.)
Our affirmance of the California Supreme Court is not to be understood as implying agreement with that court‘s “slightest presence” standard of constitutional nexus. Appеllant‘s maintenance of two offices in the State and solicitation by employees assigned to those offices of advertising copy in the range of $1 million annually, Tr. of Oral Arg. 6, establish a much more substantial presence than the expression “slightest presence” connotes. Our affirmance thus rests upon our conclusion that appellant‘s maintenance of the two offices in California and activitiеs there adequately establish a relationship or “nexus” between the Society and the State that renders constitutional the obligations imposed upon appellant pursuant to
The requisite nexus was held to be shown when the out-of-state sales were arranged by the seller‘s local agents working in the taxing State, Felt & Tarrant Co. v. Gallagher, 306 U. S. 62 (1939); General Trading Co. v. Tax Comm‘n,
Standard Pressed Steel Co. v. Washington Rev. Dept., 419 U. S. 560 (1975), is also instructive. That case involved a direct tax upon the gross receipts of a foreign corporation resulting from sales to a State of Washington customer, and not imposition of use-tax-collection duties. Although “a vice in a tax on gross receipts of a corporation doing an interstate business is the risk of multiple taxation . . . ,” id., at 563, see Monamotor Oil Co. v. Johnson, supra, a concеrn not present when only imposition of use-tax-collection duty is involved, Standard Pressed Steel held that maintenance in the taxing State of a single employee, an engineer whose office was in his Washington home and whose primary responsibility was to consult with the Washington-based customer regarding its anticipated needs for the out-of-state supplier‘s product, established a sufficient relation to activities within the State producing the gross receipts as to support imposition of the tax. It is particularly significant for our purposes in this case that the Court characterized as “frivolous” the argument that the seller‘s in-state activities were so thin and inconsequential that the tax had no reasonable relation to the protection and benefits conferred by the taxing State, for the employee “made possible the realization and continuance of valuable contractual relations between [the seller and its Washington cus-
The case for the validity of the imposition upon the out-of-state seller enjoying such services of a duty to collect a use tax is even stronger. See Norton Co. v. Illinois Rev. Dept., 340 U. S. 534, 537 (1951). The out-of-state seller runs no risk of double taxation. The consumer‘s identification as a resident of the taxing State is self-evident. The out-of-state seller becomes liable for the tax only by failing or refusing to collect the tax from that resident consumer. Thus, the sole burden imposed upon the out-of-state seller by statutes like
Two decisions that have held fact patterns deficient to establish the necessary nexus to impose the duty to collect the use tax highlight the significance of the inquiry whether the out-of-state seller enjoys services of the taxing State. Miller Bros. Co. v. Maryland, 347 U. S. 340 (1954), struck down a Maryland assessment against a Delaware store near the border between the two States. The store had made over-the-counter sales to Maryland residents and occasionally shipped or delivered goods by truck into that State. The store advertised in Delaware by newspaper and radio, and some of these advertisements reached Maryland residents. These advertisements were sometimes supplemented with
National Bellas Hess, Inc. v. Illinois Rev. Dept., 386 U. S. 753 (1967), presented the quеstion in the case of an out-of-state seller whose only connection with customers in the taxing State was by common carrier or mail. Illinois subjected appellant Bellas Hess, a national mail-order house centered in Missouri, to use tax liability based upon mail-order sales to customers in that State. Bellas Hess owned no tangible property in Illinois, had no sales outlets, representatives, telephоne listings, or solicitors in that State, and did not advertise there by radio, television, billboards, or newspapers. It communicated with potential customers by mailing catalogues throughout the United States, including Illinois, twice a year and occasionally supplemented this effort by mailing out “flyers.” All orders for merchandise were mailed to Bellas Hess’ Missouri plant, and the goods were sent to customers by mail or common cаrrier. Bellas Hess held that, constitutionally, the basis for the requisite nexus was not to be found solely in Bellas Hess’ mail-order activities in the State. The Court‘s opinion carefully underscored, however, the “sharp distinction . . . between mail order sellers with retail outlets, solicitors, or property within [the taxing] State, and those [like Bellas Hess] who do no more than communicate with customers in the State by mail or common carriеr as part of a general interstate business.” Id., at 758. Appellant Society clearly falls into the former category.
...
The Society argues, however, that its contacts with customers in California were related solely to its mail-order sales by means of common carrier or the mail, that the two offices played no part in that activity, and that therefore this case is controlled by Bellas Hess.6 The Society argues in other words that there must exist a nexus or relationship not only between the seller and the taxing State, but also between the activity of the seller sought to be taxed and the seller‘s activity within the State. We disagree. However fatal to a direct tax a “showing that particular transactions are dissociated from the local business . . . ,” Norton Co. v. Illinois Rev. Dept., supra, at 537; American Oil Co. v. Neill, supra; Connecticut Gen. Life Ins. Co. v. Johnson, 303 U. S. 77 (1938), such dissociation does not bar the imposition of the use-tax-collection duty.7 It is true that Sears, Roebuck and Montgomery Ward, relied on by appellant, involved faсt patterns that included proof of assistance by local operations of the mail-order business. Sears maintained 12 retail stores in the taxing State and was qualified to do business there. Sears’ agents in the States, although not directly involved in the solicitation of the mail-order sales, at times assisted in processing such orders. The holding that Sears could not avoid use-tax liability did not, however, turn on that fact. The holding, rathеr, was that the fact Sears’ business was departmentalized-the mail-order and retail stores operations were separately administered-did not preclude the finding of sufficient nexus. Montgomery Ward, a companion case to Sears,
The Society‘s reliance on Miller Bros. Co. v. Maryland, supra, is also misplaced. The sales with respect to which Maryland sought to impose upon Miller the duty to collect its tax were of goods sold to residents of Maryland at Miller‘s Delaware store, although Miller made occasional deliveries in Maryland. Moreover, the lаck of certainty that the merchandise sold over the counter to Maryland customers in
We conclude that the Society‘s continuous presence in California in offices that solicit advertising for its magazine provides a sufficient nexus to justify that State‘s imposition upon the Society of the duty to act as collector of the use tax.
Affirmed.
THE CHIEF JUSTICE and MR. JUSTICE REHNQUIST took no part in the consideration or decision of this case.
MR. JUSTICE BLACKMUN, concurring in the result.
I am not at all convinced that thе Court‘s facile distinction of Miller Bros. Co. v. Maryland, 347 U. S. 340 (1954), on the ground that in that case “the seller obviously could not know whether the goods sold over the counter in Delaware were transported to Maryland prior to their use,” ante, at 559, and that there was a “lack of certainty that the merchandise sold over the counter to Maryland customers in Delaware was transported to Maryland prior to its use,” ante, at 561 and this page, is a proper and acceptable distinction. I thought that one of the factual difficulties of Miller, in the focus of the present case, was the Delaware seller‘s own delivery of goods to Maryland, some by common carrier and some by the seller‘s own truck. 347 U. S., at 341-342. Indeed, Miller Bros. stipulated that during the taxable period, it delivered or paid a common carrier to deliver $9,500 worth of merchandise to customers in Maryland ($8,000 through use of its truсk, $1,500 by common carrier). Id., at 350-351, n. 5. Miller Bros. exhibited no uncertainty as to the destination of those goods.
Thus, it seems to me, we have another instance where this Court‘s past decisions in the tax area are not fully consistent. See Complete Auto Transit, Inc. v. Brady, ante, p. 274, and its development from its immediate predecessor, Colonial Pipeline Co. v. Traigle, 421 U. S. 100, 101 (1975).
In any event, I find myself in accord with the Court‘s result in the present case. If, as I suspect, the result today is not fully consistent with the result in Miller, I am content to let Miller go.
Notes
“Except as provided by Sections 6292 and 6293 every retailer engaged in business in this state and making sales of tangible personal property for storage, use, or other consumption in this state, not exempted under Chapters 3.5 or 4 of this part, shall, at the time of making the sales or, if the storage, use, or other consumption of the tangible personal property is not then taxable hereunder, at the time the storage, use, or other consumption becomes taxable, collect the tax from the purchaser and give to the purchaser a receipt therefor in the manner and form prescribed by the board.
“‘Retailer engaged in business in this state’ as used in this and the preceding section means and includes any of the following:
“(a) Any retailer maintaining, occupying, or using, permanently or temporarily, directly or indirectly, or through a subsidiary, or agent, by whatever name called, an office, place of distribution, sales or sample room or place, warehouse or storage place or other place of business.”
“The tax required to be collectеd by the retailer and any amount unreturned to the customer which is not tax but was collected from the customer under the representation by the retailer that it was tax constitutes debts owed by the retailer to this state.”
The magazine is exempted from sales and use taxes as a “periodical.”