D. H. Holmes Co. v. McNamara

486 U. S. 24

May 16, 1988

A Louisiana company called D. H. Holmes had catalogs designed and printed outside of Louisiana. It then mailed these catalogs to potential customers, most of which lived in Louisiana. The state tried to collect a ‘use’ tax on the catalogs. In a use tax, a tax is levied on material purchased out-of-state, but used in-state, as the catalogs were. D. H. Holmes argued, among other things, that such a use tax on the catalogs violated the Interstate Commerce Clause.

Rehnquist wrote for the Court, which ruled unanimously that the tax was just fine. The legal test for use taxes, from a case called Complete Auto, said that use taxes were constitutional if: 1. The tax was levied on an entity with a substantial nexus to the state levying the tax. 2. The tax was fairly apportioned. 3. The tax did not discriminate against interstate commerce. 4. The tax was related to benefits provided by the state. As Rehnquist demonstrated, the Louisiana tax inarguably met all four conditions.

Rehnquist slapped down a few other arguments. Because the catalogs alerted Louisiana residents about the store, the catalogs were certainly being “used,” contrary to the assertions of D. H. Holmes. And even though catalogs from out-of-state companies had been held exempt from use taxes, there was no reason to extend this exemption to in-state companies. Even though I think this decision was legally correct, I also think ‘creative’ taxes like the use tax are awful, and ought to be scrapped.


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