479 U. S. 130
December 9, 1986
A long time ago, Congress passed a law which allowed for the creation of “customs-bonded warehouses.” Imported materials stored in these warehouses would be temporarily exempt from federal customs. If the materials were sent abroad from these warehouses, no customs would be assessed at all, but if they were used domestically, customs would be assessed upon removal from the warehouses.
R. J. Reynolds Tobacco Company, which operated in North Carolina, kept imported tobacco in these sorts of warehouses, but all of it was apparently destined for eventual domestic use. North Carolina imposed a general tax on all tobacco stored in the state, and Reynolds contended that this tax should not apply to the tobacco in the customs-bonded warehouses. They argued that state taxation was contrary to the purpose of Congress in authorizing these warehouses, and thus precluded by the supremacy clause. In the alternative, Reynolds argued that the state tax functioned as an import duty, which states are not Constitutionally permitted to impose.
In a mercifully unanimous decision, Justice Blackmun held that North Carolina’s tax was valid. He first slapped down some jurisdictional challenges levied against Reynolds. North Carolina said that Reynolds had not been explicit in making its attack on the tax a Constitutional one, but the Court was unmoved. The Court also held that the NC Supreme Court’s dismissal of the case for want of substantial question qualified as a final judgment on the merits. Then Blackmun turned to the merits of the case.
In an earlier case, the Court had held that customs-bonded warehouses protected goods from state taxes when the goods were destined for export. Blackmun rejected the argument of Reynolds that the same logic should apply to good destined for domestic use, finding that this taxation was not inconsistent with the purposes and goals of Congress, and that to exempt the tobacco from taxation would disadvantage domestic growers. Thus, there was no supremacy clause violation. Finally, the Court rejected the contention that North Carolina’s tax was an import duty, reasoning that it did not have that purpose, and did not appear to function as such, since it applied to domestically produced tobacco as well as imported.
The ruling seems fairly reasonable I guess. Allowing or disallowing state tax based on the final destination of the goods appears to be a reasonable distinction to draw. I’m not sure how clear this distinction is from the actual law passed by Congress, but it is what it is I suppose.