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Keywords

jurisdictioncorporationdue process
jurisdictionappealcorporationdue processappellantseizure

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Miller Bros. Co. v. State of Md., 347 U.S. 340, 74 S.Ct. 535, 98 L.Ed. 744

Facts

Miller Brothers Company, a Delaware corporation, sold furniture exclusively from its store in Wilmington, Delaware, without soliciting orders from Maryland residents. Maryland residents would travel to Delaware to make purchases, some of which were delivered to them in Maryland. Maryland imposed a use tax on these transactions, claiming that the corporation was liable for collecting the tax on behalf of the state. The corporation contested this, arguing that the Maryland taxing act violated the federal commerce power and the Due Process Clause of the Fourteenth Amendment.

Appellant is a Delaware merchandising corporation which only sells directly to customers at its store in Wilmington, Delaware.

Issue

Whether the State of Maryland can impose a use tax on a Delaware corporation for sales made to Maryland residents when the corporation has no physical presence or solicitation in Maryland.

The question is whether these factors, separately or in the aggregate, in each or all of the above types of sales, establish a state's power to impose a duty upon such an out-of-state merchant to collect and remit a purchaser's use tax.

Rule

A state may not impose a tax on an out-of-state vendor unless there is a sufficient jurisdictional basis, such as a physical presence or substantial connection to the state.

It is a venerable if trite observation that seizure of property by the State under pretext of taxation when there is no jurisdiction or power to tax is simple confiscation and a denial of due process of law.

Analysis

The Supreme Court analyzed the nature of the transactions between the Delaware corporation and Maryland residents, noting that the corporation did not engage in any solicitation directed at Maryland residents and that the sales occurred entirely in Delaware. The court emphasized that the mere incidental effects of advertising and occasional deliveries did not establish a sufficient connection to justify Maryland's imposition of a use tax on the corporation.

But visible territorial boundaries do not always establish the limits of a state's taxing power or jurisdiction.

Conclusion

The Supreme Court reversed the judgment of the Maryland courts, ruling that the Delaware corporation could not be held liable for the use tax due to the lack of jurisdictional basis.

The judgment appealed from is reversed and the case remanded for further proceedings not inconsistent herewith.

Who won?

Miller Brothers Company prevailed in the case because the Supreme Court found that Maryland lacked the jurisdiction to impose a use tax on the corporation for sales made to Maryland residents.

The States have been increasingly turning to sales and use taxes to raise the revenues they need to educate, protect, and serve their growing number of citizens.

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