483 U. S. 232
June 23, 1987
In 1984, the Supreme Court held a West Virginia tax scheme unconstitutional under the Commerce Clause. West Virginia exempted goods manufactured in the state from sales tax, reasoning that the state’s tax on manufacturing was an effective substitute. The Supreme Court, however, said that subjecting only out-of-state goods to the sales tax was discriminatory, and hampered interstate commerce. The State of Washington had a tax scheme which was sort of the inverse: all goods were subject to the sales tax, but goods sold in-state were exempted from the manufacturing tax.
The Supreme Court ruled 6-2 that Washington’s law was also unconstitutional (Powell did not participate). Stevens, writing for the Court, said that the law was still discriminatory on its face against interstate commerce, because only goods sold across state lines were subjected to the manufacturing tax. He rejected any argument that the two taxes could be viewed as offsetting, and claimed that the issue was squarely controlled by the earlier 1984 ruling. With regard to the question of remedy (i.e., whether any taxes would have to be refunded), Stevens remanded. In a unanimous section, the Court quickly shot down a separate legal challenge by an out-of-state manufacturer which objected to having to pay Washington’s sales tax. The court ruled that the company had enough contact with Washington to render it subject to the tax.
O’Connor’s concurrence stated that she agreed only because Washington’s scheme was facially discriminatory. Scalia filed a dissent joined by Rehnquist. He did not feel the West Virginia case controlled, and pointed out that the majority’s gloss on it ran counter to many decades worth of precedents. He saw no discrimination in the tax system at all: all it did was ensure that no good sold inside or outside of the state was taxed twice. It certainly had neither the goal or effect of weakening interstate commerce. Finally, in a section not joined by Rehnquist, Scalia gloriously attacked the entire doctrine of the ‘Dormant Commerce Clause,’ which the Court had long used to strike down state attempts to regulate commerce. It’s yet another brilliant display of originalism from the then-newest Justice.
To me, tax law is the most intimidating domain of our legal system. The last thing it needs is the Supreme Court making it more complex still, and on highly specious grounds at that. Sadly, the companion case decided the same day is an even more headache-inducing ruling. If I never come across another tax case, it will be too soon.