Lead Opinion
delivered the opinion of the Court.
This case raises the question whether Oklahoma’s sales tax on the full price of a ticket for bus travel from Oklahoma to another State is consistent with the Commerce Clause, U. S. Const., Art. I, § 8, cl. 3. We hold that it is.
I
Oklahoma taxes sales in the State of certain goods and services, including transportation for hire. Okla. Stat., Tit. 68, § 1354(1)(C) (Supp. 1988).
Respondent Jefferson Lines, Inc., is a Minnesota corporation that provided bus services as a common carrier in Oklahoma from 1988 to 1990. Jefferson did not collect or remit the sales taxes for tickets it had sold in Oklahoma for bus travel from Oklahoma to other States, although it did collect and remit the taxes for all tickets it had sold in Oklahoma for travel that originated and terminated within that State.
After Jefferson filed for bankruptcy protection on October 27, 1989, petitioner, Oklahoma Tax Commission, filed proof of claims in Bankruptcy Court for the uncollected taxes for tickets for interstate travel sold by Jefferson.
The Bankruptcy Court agreed with Jefferson, the District Court affirmed, and so did the United States Court of Appeals for the Eighth Circuit. In re Jefferson Lines, Inc., 15
II
Despite the express grant to Congress of the power to “regulate Commerce . . . among the several States,” U. S. Const., Art. I, §8, cl. 3, we have consistently held this language to contain a further, negative command, known as the dormant Commerce Clause, prohibiting certain state taxation even when Congress has failed to legislate on the subject. Quill Corp. v. North Dakota,
The command has been stated more easily than its object has been attained, however, and the Court’s understanding of the dormant Commerce Clause has taken some turns. In its early stages, see 1 J. Hellerstein & W. Hellerstein, State Taxation ¶¶ 4.05-4.08 (2d ed. 1993) (hereinafter Heller-stein & Hellerstein); Hartman, supra n. 3, §§2:9-2:16, the Court held the view that interstate commerce was wholly immune from state taxation “in any form,” Leloup v. Port of Mobile,
In 1938, the old formalism began to give way with Justice Stone’s opinion in Western Live Stock v. Bureau of Revenue,
“So far as the value contributed to appellants’ New Mexico business by circulation of the magazine interstate is taxed, it cannot again be taxed elsewhere any more than the value of railroad property taxed locally. The tax is not one which in form or substance can be repeated by other states in such manner as to lay an added burden on the interstate distribution of the magazine.” Id,, at 260.
The Court explained that “[i]t was not the purpose of the commerce clause to relieve those engaged in interstate commerce from their just share of state tax burden even though it increases the cost of doing the business.” Id., at 254. Soon after Western Live Stock, the Court expressly rested the invalidation of an unapportioned gross receipts tax on the ground that it violated the prohibition against multiple taxation:
“The vice of the statute as applied to receipts from interstate sales is that the tax includes in its measure, without apportionment, receipts derived from activities in interstate commerce; and that the exaction is of such a character that if lawful it may in substance be laid to the fullest extent by States in which the goods are sold as well as those in which they are manufactured.” J. D. Adams Mfg. Co. v. Storen,304 U. S. 307 , 311 (1938).
After a brief resurgence of the old absolutism that proscribed all taxation formally levied upon interstate commerce, see Freeman v. Hewit,
“considered not the formal language of the tax statute but rather its practical effect, and have sustained a tax against Commerce Clause challenge when the tax is applied to an activity with a substantial nexus with the taxing State, is fairly apportioned, does not discriminate against interstate commerce, and is fairly related to the services provided by the State.”430 U. S., at 279 .
Since then, we have often applied, and somewhat refined, what has come to be known as Complete Auto’s four-part test. See, e. g., Goldberg v. Sweet,
A
It has long been settled that a sale of tangible goods has a sufficient nexus to the State in which the sale is consummated to be treated as a local transaction taxable by that State. McGoldrick v. Berwind-White Coal Mining Co.,
B
The difficult question in this case is whether the tax is properly apportioned within the meaning of the second prong of Complete Auto’s test, “the central purpose [of which] is to ensure that eaсh State taxes only its fair share of an interstate transaction.” Goldberg, supra, at 260-261. This principle of fair share is the lineal descendant of Western Live Stock’s prohibition of multiple taxation, which is threatened whenever one State’s act of overreaching combines with the possibility that another State will claim its fair share of the value taxed: the portion of value by which
For over a decade now, we have assessed any threat of malapportionment by asking whether the tax is “internally consistent” and, if so, whether it is “externally consistent” as well. See Goldberg, supra, at 261; Container Corp., supra, at 169. Internal consistency is preserved when the imposition of a tax identical to the one in question by every other State would add no burden to interstate commerce that intrastate commerce would not also bear. This test asks nothing about the degree of economic reality reflected by the tax, but simply looks to the structure of the tax at issue to see whether its identical application by every State in the Union would place interstate commerce аt a disadvantage as compared with commerce intrastate. A failure of internal consistency shows as a matter of law that a State is attempting to take more than its fair share of taxes from the interstate transaction, since allowing such a tax in one State would place interstate commerce at the mercy of those remaining States that might impose an identical tax. See Gwin, White & Prince,
External consistency, on the other hand, looks not to the logical consequences of cloning, but to the economic justification for the State’s claim upon the value taxed, to discover whether a State’s tax reaches beyond that portion of value that is fairly attributable to economic activity within the taxing State. See Goldberg, supra, at 262; Container Corp., supra, at 169-170. Here, the threat of real multiple taxation (though not by literally identical statutes) may indicate a State’s impermissible overreaching. It is to this less tidy world of real taxation that we turn now, and at length.
The very term “apportionment” tends to conjure up allocation by percentages, and where taxation of income from interstate business is in issue, apportionment disputes have often centered around specific formulas for slicing a taxable pie among several States in which the taxpayer’s activities contributed to taxable value. In Moorman Mfg. Co. v. Bair,
In reviewing sales taxes for fair share, however, we have had to set a different course. A sale of goods is most readily viewed as a discrete event facilitated by the laws and amenities of the place of sale, and the transaction itself does not readily reveal the extent to which completed or anticipated interstate activity affects the value on which a buyer is taxed. We have therefore consistently approved taxation of sales without any division of the tax base among different States, and have instead held such taxes properly measurable by the gross charge for the purchase, regardless of any activity outside the taxing jurisdiction that might have preceded the sale or might occur in the future. See, e. g., McGoldrick v. Berwind-White Coal Mining Co., supra.
In deriving this rule covering taxation to a buyer on sales of goods we were not, of course, oblivious to the possibility of successive taxation of related events up and down the stream of commerce, and our cases are implicit with the understanding that the Commerce Clause does not forbid the
2
A sale of services can ordinarily be treated as a local state event just as readily as a sale of tangible goods can be located solely within the State of delivery. Cf. Goldberg v. Sweet,
Cases on gross receipts from sales of services include one falling into quite a different category, however, and it is on this decision that the taxpayer relies for an analogy said to control the resolution of the case before us. In 1948, the Court decided Central Greyhound Lines, Inc. v. Mealey,
We, however, think that Central Greyhound provides the wrong analogy for answering the sales tax apportionment question here. To be sure, the two cases involve the identical services, and apportionment by mileage per Stаte is equally feasible in each. But the two diverge crucially in the identity of the taxpayers and the consequent opportunities that are understood to exist for multiple taxation of the same taxpayer. Central Greyhound did not rest simply on the mathematical and administrative feasibility of a mileage apportionment, but on the Court’s express understanding that the seller-taxpayer was exposed to taxation by New Jersey and Pennsylvania on portions of the same receipts that New York was taxing in their entirety. The Court thus understood the gross receipts tax to be simply a variety of tax on income, which was required to be apportioned to reflect the location of the various interstate activities by which it was earned. This understanding is presumably the reason that the Central Greyhound Court said nothing about the arguably local character of the levy on the sales transaction.
Here, in contrast, the tax falls, on the buyer of the services, who is no more subject to double taxation on the sale of these services than the buyer of goods would be. The taxable event comprises agreement, payment, and delivery of some of the services in the taxing State; no other State can claim to be the site of the same combination. The economic activity represented by the receipt of the ticket for “consumption” in the form of commencement and partial provision of the
In sum, the sales taxation here is not open to the double taxation analysis on which Central Greyhound turned, and that decision does not control. Before we classify the Oklahoma tax with standard taxes on sales of goods, and with the taxes on less complicated sales of services, however, two questions may helpfully be considered.
3
Although the sale with partial delivery cannot be duplicated as a taxable event in any other State, and multiple taxation under an identical tax is thus precluded, is there a possibility of successive taxation so closely related to the transaction as to indicate potential unfairness of Oklahoma’s tax on the full amount of sale? And if the answer to that question is no, is the very possibility of apportioning by mileage a sufficient reason to conclude that the tax exceeds the fair share of the State оf sale?
a
The taxpayer argues that anything but a Central Greyhound mileage apportionment by State will expose it to the
If, for example, in the face of Oklahoma’s sales tax, Texas were to levy a sustainable, apportioned gross receipts tax on the Texas portion of travel from Oklahoma City to Dallas, interstate travel would not be exposed to multiple taxation in any sense different from coal for which the producer may be taxed first at point of severance by Montana and the customer may later be taxed upon its purchase in New York. The multiple taxation placed upon interstate commerce by such a confluence of taxes is not a structural evil that flows from either tax individually, but it is rather the “accidental incident of interstate commerce being subject to two different taxing jurisdictions.” Lockhart 75; See Moorman Mfg. Co.,
True, it is not Oklahoma that has offered to provide a credit for related taxes paid elsewhere, but in taxing sales Oklahoma may rely upon use-taxing States to do so. This is merely a practical consequence of the structure of use taxes as generally based upon the primacy of taxes on sales, in that use of goods is taxed only to the extent that their prior sale has escaped taxation. Indeed the District of Columbia and 44 of the 45 States that impose sales and use taxes permit such a credit or exemption for similar taxes paid to other States. See 2 Hellerstein & Hellerstein ¶ 18.08, p. 18-48; 1 All States Tax Guide ¶256 (1994). As one state court summarized the provisions in force:
“These credit provisions create a national system under which the first state of purchase or use imposes the tax. Thereafter, no other state taxes the transaction unless there has been no prior tax imposed ... or if the tax rate of the prior taxing state is less, in which case the subsequent taxing state imposes a tax measured only by the differential rate.” KSS Transportation Corp. v. Baldwin, 9 N. J. Tax 273, 285 (1987).
b
Finally, Jefferson points to the fact that in this case, unlike the telephone communication tax at issue in Goldberg, Oklahoma could feasibly apportion its sales tax on the basis of mileage as we required New York’s gross receipts tax to do in Central Greyhound. Although Goldberg indeed noted that “[a]n apportionment formula based on mileage or some other geographic division of individual telephone calls would produce insurmountable administrative and technological barriers,”
We now turn to the remaining two portions of Complete Auto’s test, which require that the tax must “not discriminate against interstate commerce,” and must be “fairly related to the services provided by the State.”
A State may not “impose a tax which discriminates against interstate commerce ... by providing a direct commercial advantage to local business.” Northwestern States Portland Cement Co. v. Minnesota,
The argument proffered by Jefferson and amicus Greyhound Lines is largely a rewriting of the apportionment challenge rejected above, and our response needs no reiteration here. See Brief for Respondent 40; Brief for Greyhound Lines, Inc., as Amicus Curiae 20-27. Jefferson takes the additional position, however, that Oklahoma discriminates against out-of-state travel by taxing a ticket “at the full 4% rate” regardless of whether the ticket relates to “a route entirely within Oklahoma” or to travel “only 10 percent within Oklahoma.” Brief for Respondent 40. In making the same point, amicus Greyhound invokes our decision in Scheiner, which struck down Pennsylvania’s flat tax on all trucks traveling in and through the State as “plainly discriminatory.”
In Scheiner, we held that a flat tax on trucks for the privilege of using Pennsylvania’s roads discriminated against interstate travel, by imposing a cost per mile upon out-of-state trucks far exceeding the cost per mile borne by local trucks that generally traveled more miles on Pennsylvania roads. Ibid. The tax here differs from the one in Scheiner, however, by being imposed not upon the use of the State’s roads, but upon “the freedom of purchase.” McLeod v. J. E. Dilworth Co.,
D
Finally, the Commerce Clause demands a fair relation between a tax and the benefits conferred upon the taxpayer by the State. See Goldberg,
The fair relation prong of Complete Auto requires no detailed accounting of the services provided to the taxpayer on account of the activity being taxed, nor, indeed, is a State limited to offsetting the public costs created by the taxed activity. If the event is taxable, the proceeds from the tax may ordinarily be used for purposes unrelated to the taxable event. Interstate commerce may thus be made to pay its fair share of state expenses and “ ‘contribute to the cost of providing all governmental services, including those serv
IV
Oklahoma’s tax on the sale of transportation services does not contravene the Commerce Clause. The judgment of the Court of Appeals is reversed, accordingly, and the case is remanded for further proceedings consistent with this opinion.
It is so ordered.
Notes
At the time relevant to the taxes at issue here, §1354 provided as follows: “There is hereby levied upon all sales ... an excise tax of four percent (4%) of the gross receipts or gross proceeds of each sale of the following .. . (C) Transportation for hire to persons by common carriers,
The parties have stipulated that the dispute cоncerns only those taxes for Jefferson’s in-state sales of tickets for travel starting in Oklahoma and ending in another State. App. 5; Tr. of Oral Arg. 3-4. The Commission does not seek to recover any taxes for tickets sold in Oklahoma for travel wholly outside of the State or for travel on routes originating in other States and terminating in Oklahoma. Accordingly, the validity of such taxes is not before us.
We follow standard usage, under which gross receipts taxes are on the gross receipts from sales payable by the seller, in contrast to sales taxes, which are also levied on the gross receipts from sales but are payable by the buyer (although they are collected by the seller and remitted to the taxing entity). P. Hartman, Federal Limitations on State and Local Taxation §§8:1,10:1 (1981).
The Court had indeed temporarily adhered to an additional distinction between taxes upon interstate commerce such as that struck down in the Case of State Freight Tax, and taxes upon gross receipts from such commerce, which were upheld that same Term in State Tax on Railway Gross Receipts,
Although New York’s tax reached the gross receipts only from ticket sales within New York State,
Any additional gross receipts tax imposed upon the interstate bus line would, of course, itself have to respect well-understood constitutional strictures. Thus, for example, Texas could not tax the bus company on the full value of the bus service from Oklahoma City to Dallas when the ticket is sold in Oklahoma, because that tax would, among other things, be internally inconsistent. And if Texas were to impose a tax upon the bus company measured by the portion of gross receipts reflecting in-state travel, it would have to impose taxes on intrastate and interstate journeys alike. In the event Texas chose to limit the burden of successive taxes attributable to the same transaction by combining an apportioned gross receipts tax with a credit for sales taxes paid to Texas, for example, it would have to give equal treatment to service into Texas purchased subject to a sales tax in another State, which it could do by granting a credit for sales taxes paid to any State. See, e. g., Henneford v. Silas Mason Co.,
Although we have not held that a State imposing an apportioned gross receipts tax that grants a credit for sales taxes paid in state must also extend such a credit to sales taxes paid out of state, see, e. g., Halliburton, supra, at 77 (Brennan, J., concurring); Silas Mason, supra, at 587; see also Williams v. Vermont,
Justice Breyer would reject review of the tax under general sales tax principles in favor of an analogy between sales and gross receipts taxes which, in the dissent’s view, are without “practical difference,” post, at 204. Although his dissenting opinion rightly counsels against the adoption of purely formal distinctions, economic equivalence аlone has similarly not been (and should not be) the touchstone of Commerce Clause jurispru
Justice Breyer’s opinion illuminates the difference between his view and our own in its suggestion, post, at 206, that our disagreement turns on differing assessments of the force of competing analogies. His analogy to Central Greyhound derives strength from characterizing the tax as falling on “interstate travel,” post, at 207, or “transportation,” post, at 202. Our analogy to prior cases on taxing sales of goods and services derives force from identifying the taxpayer in categorizing the tax and from the value of a uniform rule governing taxation on the occasion of what is generally understood as a sales transaction. The significance of the taxpayer’s identity is, indeed, central to the Court’s longstanding recognition of structural differences that permit successive taxation as an incident of multiple taxing jurisdictions. The decision today is only the latest example of such a recognition and brings us as close to simplicity as the conceptual distinction between sales and income taxation is likely to allow.
Concurrence Opinion
concurring in the judgment.
I agree with the Court’s conclusion that Oklahoma’s sales tax does not facially discriminate against interstate commerce. See ante, at 198-199. That seems to me the most we can demand to certify compliance with the “negative Commerce Clause” — which is “negative” not only because it negates state regulation of commerce, but also because it does not appear in the Constitution. See Amerada Hess Corp. v. Director, Div. of Taxation, N. J. Dept. of Treasury,
I would not apply the remainder of the eminently unhelpful, so-called “four-part test” of Complete Auto Transit, Inc. v. Brady,
Dissenting Opinion
dissenting.
Despite the Court’s lucid and thorough discussion of the relevant law, I am unable to join its conclusion for one simple reason. Like the judges of the Court of Appeals, I believe the tax at issue here and the tax that this Court held unconstitutional in Central Greyhound Lines, Inc. v. Mealey,
Justice Frankfurter wrote for the Central Greyhound Court that “it is interstate commerce which the State is seeking to reach,” id., at 661; that the “real question [is] whether what the State is exacting is a constitutionally fair demand ... for that aspect of the interstate commerce to which the State bears a special relation,” ibid.; and that by “its very nature an unapportioned gross receipts tax makes interstate transportation bear more than ‘a fair share of the cost of the local government whose protection it enjoys,’” id., at 663 (quoting Freeman v. Hewit,
“If New Jersey and Pennsylvania could claim their right to make appropriately apportioned claims against that substantial part of the business of appellant to which they afford protection, we do not see how on principle and in precedent such a claim could be denied. This being so, to allow New York to impose a tax on the gross receipts for the entire mileage — on the 57.47% within New York as well as the 42.53% without — would subject interstate commerce to the unfair burden of being taxed as to portions of its revenue by States which give pro*203 tection to those portions, as well as to a State which does not.”334 U. S., at 662 .
The Court essentially held that the tax lacked what it would later describe as “external consistency.” Container Corp. of America v. Franchise Tax Bd.,
The tax before us bears an uncanny resemblance to the New York tax. The Oklahoma statute (as applied to “[transportation ... by common carriers”) imposes an “excise tax” of 4% on “the gross receipts or gross proceeds of each sale” made in Oklahoma. Okla. Stat., Tit. 68, § 1354(1)(C) (Supp. 1988) (emphasis added). The New York statute imposed a 2% tax on the “receipts received ... by reason of any sale . . . made” in New York. See supra, at 202 (emphasis added). Oklahoma imposes its tax on the total value of trips of which a large portion may take place in other States. New York imposed its tax on the total value of trips of which a large portion took place in other States. New York made no effort to apportion the tax to reflect the comparative cost or value of the in-state and out-of-state portions of the trips. Neither does Oklahoma. Where, then, can one find a critical difference?
Not in the language of the two statutes, which differs only slightly. Oklahoma calls its statute an “excise tax” and “levie[s]” the tax “upon all sales” of transportation. New York called its tax an “[e]mergency tax on ... services” and levied the tax on “ ‘gross income,’ ” defined to include “ ‘receipts ... of any sale.’ ” This linguistic difference, however, is not significant. As the majority properly recognizes, purely formal differences in terminology should not make a constitutional difference. Ante, at 183. In both instances, the State im
The majority sees a number of reasons why the result here should be different from that in Central Greyhound, but I do not think any is persuasive. First, the majority points out that the New York law required a seller, the bus company, to pay the tax, whereas the Oklahoma law says that the “tax . . . shall be paid by the consumer or user to the vendor.” Okla. Stat., Tit. 68, § 1361(A) (Supp. 1988). This difference leads the majority to characterize the former as a “gross receipts” tax and the latter as a constitutionally distinguishable “sales tax.” This difference, however, seems more a formal, than a practical difference. The Oklahoma law makes the bus company (“the vendor”) and “each principal officer . . . personally liable” for the tax, whether or not they collect it from the customer. Ibid. Oklahoma (as far as I can tell) has never tried to collect the tax directly from a customer. And, in any event, the statute tells the customer to pay the tax, not to the State, but “to the vendor.” Ibid. The upshot is that, as a practical matter, in respect to both taxes, the State will calculate the tax bill by multiplying the rate times gross receipts from sales; the bus company will pay the tax bill; and, the company will pass the tax along to the customer.
Second, the majority believes that this case presents a significantly smaller likelihood than did Central Greyhound that the out-of-state portions of a bus trip will be taxed both “by States which give protection to those portions, as well as [by] ... a State which does not.” Central Greyhound,
In any event, the majority itself does not seem to believe that Oklahoma is taxing something other than bus transportation; it seems to acknowledge the risk of multiple taxation. The Court creates an ingenious set of constitutionally based taxing rules in footnote 6 — designed tо show that any other State that imposes, say, a gross receipts tax on its share of bus ticket sales would likely have to grant a credit for the Oklahoma sales tax (unless it forced its own citizens to pay both a sales tax and a gross receipts tax). But, one might have said the same in Central Greyhound. Instead of enforcing its apportionment requirement, the Court could have simply said that once one State, like New York, imposes a gross receipts tax on “receipts received ... by reason of any sale . . . made” in that State, any other State, trying to tax the gross receipts of its share of bus ticket sales, might have
Finally, the majority finds support in Goldberg v. Sweet,
Ultimately, I may differ with the majority simply because I assess differently the comparative force of two competing analogies. The majority finds determinative this Court’s case law concerning sales taxes applied to the sale of goods,