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Keywords

plaintiffdefendantappealsummary judgmentdiscrimination
willdiscrimination

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Associated Industries of Missouri v. Lohman, 511 U.S. 641, 114 S.Ct. 1815, 128 L.Ed.2d 639, 73 A.F.T.R.2d 94-2061, 62 USLW 4391

Facts

The case arose when a trade association representing Missouri businesses and a local manufacturer contested the 1.5% use tax imposed on goods purchased outside Missouri and consumed within the state. They argued that the tax system discriminated against interstate commerce, particularly in localities where the use tax was higher than local sales tax rates. The Circuit Court granted summary judgment for the defendants, and the Missouri Supreme Court affirmed this decision, leading to the appeal to the U.S. Supreme Court.

Petitioner Associated Industries of Missouri is a trade association representing businesses that operate in Missouri and businesses that sell to customers in Missouri. Out-of-state members of the organization must collect the additional use tax on sales made into the State. Petitioner Alumax Foils, Inc., is a manufacturing firm in Missouri that pays the additional use tax on goods purchased from outside the State.

Issue

Whether Missouri's 1.5% use tax on goods purchased outside the state discriminates against interstate commerce in violation of the Commerce Clause.

Whether 'a state use tax may impose a greater burden than the various sales taxes in specific localities, if on a statewide basis the use tax imposes a lesser overall burden than do all the various sales taxes.'

Rule

A state tax scheme must not discriminate against interstate commerce, and any compensatory tax must impose equal burdens on both interstate and intrastate commerce.

A compensatory tax leaves a consumer free to make choices 'without regard to the tax consequences'; if he purchases within the State he may pay a tax, but if he purchases from outside the State he will pay a 'tax of the same amount.'

Analysis

The U.S. Supreme Court analyzed the Missouri tax scheme and found that it imposed a discriminatory burden on interstate commerce in localities where the use tax exceeded the local sales tax. The Court emphasized that discrimination should be assessed at the local level rather than on a statewide average, rejecting the Missouri Supreme Court's approach of averaging tax burdens across the state.

The Court emphasized that discrimination should be assessed at the local level rather than on a statewide average, rejecting the Missouri Supreme Court's approach of averaging tax burdens across the state.

Conclusion

The U.S. Supreme Court reversed the Missouri Supreme Court's decision, holding that the use tax scheme was unconstitutional in localities where it exceeded the local sales tax, but did not strike down the use tax entirely.

We agree that, in localities where the use tax exceeds the sales tax, the system is impermissibly discriminatory, and we therefore reverse the judgment of the Supreme Court of Missouri.

Who won?

The plaintiffs (trade association and manufacturer) prevailed because the U.S. Supreme Court found that the use tax discriminated against interstate commerce in certain localities.

The U.S. Supreme Court found that the use tax discriminated against interstate commerce in certain localities.

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