Armco, Inc. v. Hardesty, 467 U.S. 638 (1984)

Armco, Inc. v. Hardesty

No. 83-297

Argued April 17, 1984
Decided June 12, 1984
467 U.S. 638

APPEAL FROM THE SUPREME COURT OF APPEALS OF

WEST VIRGINIA

Syllabus

West Virginia imposes a gross receipts tax on businesses selling tangible property at wholesale. Local manufacturers are exempt from the tax, but are subject to a higher manufacturing tax. Appellant is an Ohio corporation that manufactures and sells steel products and conducted business in West Virginia. It challenged the wholesale tax on the ground, inter alia, that the tax discriminated against interstate commerce because of the exemption granted to local manufacturers. Appellee State Tax Commissioner rejected the challenge. The Circuit Court reversed on other grounds, but in turn was reversed by the West Virginia Supreme Court of Appeals.

Held: The wholesale gross receipts tax unconstitutionally discriminates against interstate commerce. Pp. 642-646.

(a) Under the Commerce Clause, a State may not tax a transaction or incident more heavily when it crosses state lines than when it occurs entirely within the State. On its face, the wholesale tax has just that effect, since whether a wholesaler is subject to the tax depends upon whether it conducts manufacturing in the State or out of it. P. 642.

(b) The wholesale tax cannot be deemed a "compensating tax." Manufacturing and wholesaling are not "substantially equivalent events" such that the higher manufacturing tax can be said to compensate for the lighter burden placed on wholesalers from out of State by the wholesale tax. Pp. 642-643.

(c) Moreover, when the two taxes are considered together, discrimination against interstate commerce persists, since, if Ohio or any other State imposes a like tax on its manufacturers, then appellant and others from out of State will pay both a manufacturing tax and a wholesale tax, while West Virginia sellers will pay only the manufacturing tax. Appellant need not prove actual discriminatory impact on it by pointing to a State that imposes a manufacturing tax that results in a total burden higher than that imposed on in-state manufacturers. Any other rule would mean that the constitutionality of West Virginia’s tax laws would depend on the shifting complexities of the 49 other States’ tax laws, and that the validity of the taxes imposed on each taxpayer would depend on the particular other States in which it operated. Cf. Container Corp. of America v. Franchise Tax Board, 463 U.S. 159. Pp. 644-645.

___ W.Va. ___, 303 S.E.2d 706, reversed.

POWELL, J., delivered the opinion of the Court, in which BURGER, C.J., and BRENNAN, WHITE, MARSHALL, BLACKMUN, STEVENS, and O’CONNOR, JJ., joined. REHNQUIST, J., filed a dissenting opinion, post, p. 646.