Petition for Writ of Certiorari — Loudoun County, Virginia, Petitioner v. Dulles Duty Free, LLC

No. 17-____

IN THE

SUPREME COURT OF THE UNITED STATES

COUNTY OF LOUDOUN, VIRGINIA

Petitioner,

v.

DULLES DUTY FREE, LLC,

Respondent.

On Petition for a Writ of Certiorari to

the Supreme Court of Virginia

PETITION FOR A WRIT OF CERTIORARI

LEO P. ROGERS

County Attorney

STEVEN F. JACKSON

Assistant County Attorney

Office of the County Attorney

One Harrison Street SE

P.O. Box 7000

Leesburg, VA 20177

SCOTT E. GANT

Counsel of Record

AARON E. NATHAN

SAMUEL S. UNGAR

BOIES SCHILLER FLEXNER LLP

1401 New York Avenue, NW

Washington, DC 20005

(202) 237-2727

sgant@bsfllp.com

Counsel for Petitioner

i

QUESTIONS PRESENTED

The

Constitution’s

Import-Export

Clause

prohibits states from “lay[ing] any Imposts or Duties

on Imports or Exports.” U.S. Const. art. I, § 10, cl. 2.

This Court’s “modern Import-Export test was first

announced in” Michelin Tire Corp. v. Wages, 423 U.S.

276 (1976), in which the Court adopted an ImportExport Clause analysis focused on the “main concerns”

leading to adoption of the Clause. Itel Containers Int’l

Corp. v. Huddleston, 507 U.S. 60, 76 (1993).

Notwithstanding Michelin, the Supreme Court of

Virginia in the decision below, along with other state

courts of last resort and two federal courts of appeals,

continue to employ the formalistic test of Richfield Oil

Corp. v. State Bd. of Equalization, 329 U.S. 69 (1946),

to ascertain whether a tax affecting exports violates

the Import-Export Clause. These decisions relying on

Richfield Oil conflict with Michelin and subsequent

decisions by this Court, as well as with decisions by

other state and federal courts. This Court has

repeatedly deferred addressing Richfield Oil’s

continuing vitality, awaiting a case presenting that

issue.

The Questions Presented are:

1. Should the validity under the Import-Export

Clause of a non-discriminatory local business license

tax calculated on the basis of gross receipts be

evaluated using this Court’s approach in Michelin Tire

Corp. v. Wages, 423 U.S. 276 (1976), or in Richfield Oil

Corp. v. State Bd. of Equalization, 329 U.S. 69 (1946)?

ii

2. Does a local business license tax calculated

based on a gross receipts, which does not specifically

target imports or exports, violate the Import-Export

Clause if some of the gross receipts include export

sales?

iii

TABLE OF CONTENTS

QUESTIONS PRESENTED ................................................ i

TABLE OF CONTENTS ................................................... iii

TABLE OF AUTHORITIES ................................................ v

OPINIONS BELOW ............................................................ 1

JURISDICTION .................................................................. 1

CONSTITUTIONAL & STATUTORY

PROVISIONS ...................................................................... 1

INTRODUCTION ................................................................ 2

STATEMENT OF THE CASE ............................................ 3

A.

Legal Background ............................................... 3

B.

Factual Background and Proceedings Below ... 13

REASONS FOR GRANTING THE PETITION ................ 15

I.

Federal Courts of Appeals and State Courts

of Last Resort Have Reached Conflicting

Decisions About the Proper Interpretation of

the Import-Export Clause ................................. 16

A. One Federal Court of Appeals and Two

State Courts of Last Resort Have

Determined

That

Import-Export

Challenges to Assessments Affecting

Exports Should Be Evaluated Using This

Court’s Michelin Test, in Conflict With

the Decision Below ....................................... 16

B. Since Michelin, Two Federal Courts of

Appeals and Two State Courts of Last

iv

Resort Have Relied on Richfield Oil

Rather Than Michelin in Deciding an

Import-Export Clause Challenge to

Assessments Affecting Exports, in Accord

With the Decision Below.............................. 19

II.

This Case is an Ideal Vehicle for Resolving

the Questions Presented...................................... 22

III. The Questions Presented are Important ............. 25

IV. Loudoun’s BPOL Tax is Constitutional, and

the Decision of the Supreme Court of Virginia

was Incorrect ........................................................ 28

CONCLUSION .................................................................. 33

APPENDIX A: Opinion of the Supreme Court

of Virginia, Dated August 24, 2017........................ 1a

APPENDIX B: Opinion of the Circuit Court of

Loudoun County, Dated April 16, 2016 ............... 23a

APPENDIX C: Constitutional & Statutory

Provisions .............................................................. 47a

v

TABLE OF AUTHORITIES

Cases

Page(s)

Auto Cargo, Inc. v. Miami Dade County,

237 F.3d 1289 (11th Cir. 2001) ...................... 16, 17

Brown v. Maryland,

25 U.S. (12 Wheat.) 419 (1827) .................... 4, 5, 10

Camps Newfound/Owatonna Inc. v.

Town of Harrison,

520 U.S. 564 (1997) ..............................................29

Canton R.R. Co. v. Rogan,

340 U.S. 511 (1951) ..............................................31

Coast Pac. Trading, Inc. v. State,

719 P.2d 541 (Wash. 1986) ..................................22

Coe v. Town of Errol,

116 U.S. 517 (1886) ............................................6, 7

Connell Rice & Sugar Co., Inc. v. Yolo County,

569 F.2d 514 (9th Cir. 1978) ................................20

David Hazan, Inc. v. Tax Appeals Tribunal,

543 N.Y.S.2d 545, 547 (N.Y. App. Div. 1989) .....19

David Hazan, Inc. v. Tax Appeals Tribunal,

556 N.E.2d 1113 (N.Y. 1990) ...............................19

Department of Revenue v. Alaska Pulp Am., Inc.,

674 P.2d 268 (Alaska 1983) ........................... 17, 18

Department of Revenue of Or. v. ACF Indus., Inc.,

510 U.S. 332 (1994) ........................................25, 32

vi

Department of Revenue of Wash. v.

Association of Wash. Stevedoring Cos.,

435 U.S. 734 (1978) ...................................... passim

Dulles Duty Free, LLC v. County of Loudoun,

803 S.E.2d 54 (Va. 2017)........................................1

Hooven & Allison Co. v. Evatt (Hooven I),

324 U.S. 652 (1945) ........................................11, 23

Itel Containers Int’l Corp. v. Huddleston,

507 U.S. 60 (1993) .......................................i, 12, 24

Joy Oil Co. v. State Tax Comm’n,

337 U.S. 286 (1949) ..............................................31

Kosydar v. National Cash Register Co.,

417 U.S. 62 (1974) ................................................31

Limbach v. Hooven & Allison Co. (Hooven II),

466 U.S. 353 (1984) ........................................11, 23

Louisiana Land & Exploration Co. v.

Pilot Petroleum Corp.,

900 F.2d 816 (5th Cir. 1990) .................... 19, 20, 21

Low v. Austin,

80 U.S. (13 Wall.) 29 (1872) ........................... 5-6, 8

Michelin Tire Corp. v. Wages,

423 U.S. 276 (1976) ...................................... passim

National Private Truck Council, Inc. v.

Oklahoma Tax Comm’n,

515 U.S. 582 (1995) ..............................................32

R.J. Reynolds Tobacco Co. v. Durham Cty., N.C.,

479 U.S. 130 (1986) .................................. 12, 30, 31

vii

Richfield Oil Corp. v. State Bd. of Equalization,

329 U.S. 69 (1946) ........................................ passim

United States Steel Mining Co., LLC v. Helton,

631 S.E.2d 559 (W. Va. 2005) ........................ 18, 23

United States v. International Bus. Mach. Corp.,

517 U.S. 843 (1996) .................................. 25, 28, 31

Virginia Indonesia Co. v. Harris County

Appraisal Dist.,

910 S.W.2d 905 (Tex. 1995) ........................... 21, 22

Western Oil & Gas Ass’n v. Cory,

726 F.2d 1340 (9th Cir. 1984) ..............................21

Constitutional Provisions

U.S. Const. art. I, § 10, cl. 2 .............................. passim

Statutes

28 U.S.C. § 1257(a) ......................................................1

Loudoun County Ordinance § 840.03 .........................2

Loudoun County Ordinance § 840.13(c) ...................13

Loudoun County Ordinance § 840.14 .........................2

Loudoun County Ordinance § 840.14(o) ...................12

Loudoun County Ordinance § 840.01(k).....................2

Va. Code Ann. § 58.1-3984(A) ...................................13

Va. Code Ann. § 58.1-3702 ..........................................1

Va. Code Ann. § 58.1-3703.1 .......................................1

viii

Treatises

Walter Hellerstein & John A. Swain, State

Taxation

(3d ed. 2017) ................................................. passim

Other Authorities

3 The Records of the Federal Convention of

1787 (Max Farrand ed., 1911) ...............................4

Boris I. Bittker & Brannon P. Denning, The

Import-Export Clause, 68 Miss. L.J. 521

(1998) ......................................................................4

Brannon P. Denning, Bittker on the Regulation

of Interstate and Foreign Commerce § 12.07

(2d ed. 2013 and 2017 Cum. Supp.) .............. 12, 24

Alexander Hamilton, The Federalist No. 32

(Clinton Rossiter ed., 1961) .................................25

Robert G. Natelson, What The Constitution

Means By “Duties, Imposts, And Excises”—

And “Taxes” (Direct Or Otherwise),

66 Case W. Res. L. Rev. 297 (2015) .....................29

Lois Pasternak, US Duty Free market will

expand to $5bn by 2020, says research,

Travel Markets Insider, June 22, 2016 ...............27

Carrie Salls, Duty free stores at Dulles Airport

win at Va. SC; Decision significant for

Import-Export Clause, Legal NewsLine,

Sept. 6, 2017 .........................................................27

1

OPINIONS BELOW

The opinion of the Supreme Court of Virginia is

reported at 803 S.E.2d 54 and reproduced in the

Appendix to this Petition at App. 1a. The opinion of

the Circuit Court of Loudoun County is unreported, but

reproduced in the Appendix at App. 23a.

JURISDICTION

The judgment of the Supreme Court of Virginia

was entered on August 24, 2017. On October 17, 2017,

The Chief Justice extended the time to file a petition

for certiorari to December 22, 2017 (No. 17A408). This

Court’s jurisdiction rests on 28 U.S.C. § 1257(a).

CONSTITUTIONAL &

STATUTORY PROVISIONS

The Constitution’s Import-Export Clause provides,

in relevant part:

No State shall, without the Consent of the

Congress, lay any Imposts or Duties on Imports

or Exports, except what may be absolutely

necessary for executing its inspection Laws:

and the net Produce of all Duties and Imposts,

laid by any State on Imports or Exports, shall

be for the Use of the Treasury of the United

States; and all such Laws shall be subject to the

Revision and Controul of the Congress.

U.S. Const. art. I, § 10, cl. 2.

The text of that provision, and relevant Virginia

statutes and Loudoun County ordinances, are

reproduced at App. 47a-49a.

2

INTRODUCTION

In Michelin Tire Corp. v. Wages, 423 U.S. 276

(1976), this Court “initiated a different approach to

Import-Export Clause cases,” Department of Revenue of

Washington v. Association of Washington Stevedoring

Cos., 435 U.S. 734, 752 (1978), “abandon[ing] a century

of precedent.” Walter Hellerstein & John A. Swain,

State Taxation ¶ 5.02[2] (3d ed. 2017). But more than

four decades after Michelin this Court has yet to

expressly decide how the “modern Import-Export test”

first announced in Michelin applies when a State

directly taxes imports or exports in transit. In

Washington Stevedoring, decided two years after

Michelin, the Court specifically declined to reach that

issue, “prefer[ring] to defer decision until a case with

pertinent facts is presented.” Washington Stevedoring,

435 U.S. at 757 n.23.

This Petition presents the opportunity to answer

this long-open question. And an answer from this

Court is much-needed. Since Michelin and Washington

Stevedoring were decided, federal courts of appeals and

state courts of last resort have disagreed about how to

analyze Import-Export challenges to taxes on imports

or exports in transit. The decision below by the

Supreme Court of Virginia held that a state tax

assessed directly on export goods in transit violates the

Import-Export Clause because it fails the “stream of

export” test described by this Court in Richfield Oil

Corp. v. State Board of Equalization, 329 U.S. 69

(1946). Two federal courts of appeals and other state

courts of last resort follow that approach. But those

decisions are in conflict with decisions by one federal

3

court of appeals and other state courts of last resort,

which have concluded that Michelin and its progeny

have supplanted Richfield Oil.

The Court should grant this Petition to answer

important, unsettled questions about the ImportExport Clause, and resolve the conflicts among the

Supreme Court of Virginia, other state courts of last

resort and federal courts of appeals.

STATEMENT OF THE CASE

A. Legal Background

The Import-Export Clause provides that “[n]o State

shall, without the Consent of the Congress, lay any

Imposts or Duties on Imports or Exports, except what

may be absolutely necessary for executing its

inspection Laws . . . .” U.S. Const. art. I, § 10, cl. 2.

As this Court has explained, the Clause addressed

“[o]ne of the major defects of the Articles of

Confederation, and a compelling reason for the calling

of the Constitutional Convention of 1787 . . . the fact

that the Articles essentially left the individual States

free to burden commerce both among themselves and

with foreign countries very much as they pleased.”

Michelin, 423 U.S. at 283. States lacking ports

conducive to foreign trade were at the mercy of the

states that had them, and could tax goods moving

through those ports on their way to or from less

commercially fortunate states. James Madison thus

compared New Jersey to “a Cask tapped at both ends”

by New York and Philadelphia; whereas North

Carolina’s position between Virginia and South

4

Carolina made it “a patient bleeding at both Arms.” 3

The Records of the Federal Convention of 1787, at 542

(Max Farrand ed., 1911).

The Import-Export Clause was the “principal

remedy proposed by the Philadelphia Convention” for

this “commercial strife.” Boris I. Bittker & Brannon P.

Denning, The Import-Export Clause, 68 Miss. L.J. 521,

521 (1998). The political and economic problems to

which the Clause was addressed were so serious that

“[t]he Import-Export Clause . . . attracted more

attention at Philadelphia than the Commerce Clause.”

Id. at 523.

Early judicial interpretations of the Clause

assumed that any tax, if it touched “Imports or

Exports,” constituted a forbidden “Impost or Dut[y]”

under the Clause. Accordingly, these early cases

focused on the meaning of the terms “import” and

“export,” relying largely on formalistic tax and

Commerce Clause jurisprudence prevailing at the time

to elucidate those terms.

The most famous of these doctrines was the

“original package doctrine,” first developed by Chief

Justice Marshall in his opinion for the Court in Brown

v. Maryland, 25 U.S. (12 Wheat.) 419 (1827). Marshall

confronted the “conflict” between the Import-Export

Clause’s prohibition on state taxation of imports and

the states’ “acknowledged power to tax persons and

property within their territory”—which imported goods

obviously were, once they had been imported. Id. at

441. Which principle gave way to the other would

depend on whether the taxed good retained its status

5

as an “import” at the time the tax was assessed. To

determine whether an imported good was, at any given

moment, still an “Import” within the meaning of the

Clause, Chief Justice Marshall proposed that:

when the importer has so acted upon the thing

imported, that it has become incorporated and

mixed up with the mass of property in the

country, it has, perhaps, lost its distinctive

character as an import, and has become subject

to the taxing power of the State; but while

remaining the property of the importer, in his

warehouse, in the original form or package in

which it was imported, a tax upon it is too

plainly a duty on imports to escape the

prohibition in the constitution.

Brown, 25 U.S. (12 Wheat.) at 441-42. In Low v.

Austin, 80 U.S. (13 Wall.) 29 (1872), the Court held

that Brown’s original package doctrine applied to

nondiscriminatory ad valorem taxes—in other words,

to taxes that, though facially neutral as to imports and

exports, fall on imports or exports simply by virtue of

their being “included as part of the whole property of [a

state’s] citizens which is subjected equally to an ad

valorem tax.” 80 U.S. (13 Wall.) at 34. The Low Court

explained that under the bright-line rule of Brown:

the goods imported do not lose their character

as imports, and become incorporated into the

mass of property of the State, until they have

passed from the control of the importer or been

broken up by him from their original cases.

Whilst retaining their character as imports, a

6

tax upon them, in any shape, is within the

constitutional prohibition.

Id. at 34. A state’s nondiscriminatory ad valorem tax

could constitutionally be applied to a merchant’s

imported goods only if the merchant had “broken up”

those goods from their “original cases.”

In Coe v. Town of Errol, 116 U.S. 517 (1886), the

Court dealt with a state tax on exports. The Court

recognized that no definite rule had yet been adopted

identifying “the point of time at which the taxing

power of the state ceases as to goods exported to a

foreign country or to another state.” Id. at 527. To fill

this gap, the Court adopted a test akin to an inverseoriginal-package-doctrine to determine when goods

stopped being a part of a given state’s “mass of

property,” Low, 80 U.S. (13 Wall.) at 34, and became

“Exports” immune from state taxation under the

Import-Export Clause:

[S]uch goods do not cease to be part of the

general mass of property in the state, subject,

as such, to its jurisdiction, and to taxation in

the usual way, until they have been shipped,

or entered with a common carrier for

transportation, to another state, or have been

started upon such transportation in a

continuous route or journey.

Coe, 116 U.S. at 527. This became known as the

“stream of export” test: when a good began its

“journey” into the export stream, the Import-Export

Clause’s immunity attached.

7

Difficult questions remained about when, exactly, a

good intended for export began that journey. In

Richfield Oil Corp. v. State Board of Equalization, 329

U.S. 69 (1946), the Court confronted a tax on oil

intended for export by ship, assessed when the oil had

been pumped into the cargo ship’s tanks but before the

ship had left “California waters” for its foreign

destination. Id. at 83. The Court reviewed the few

precedents that could help answer the “question

whether at the time the tax accrued the oil was an

export,” id. at 78, and concluded the transfer of the oil

from tanks located on the dock into tanks on the cargo

ship “marked the commencement of the movement of

the oil abroad.” Id. at 83. The Court held that a good

has immunity under the Import-Export Clause upon

beginning some physical movement “so long as the

certainty of the foreign destination is plain.” Id.

Justice Black dissented, arguing that “[t]he

motivation of this tax and its economic consequences

plainly are not those which the writers of the

Constitution condemned.”

Id. at 89 (Black, J.,

dissenting). Observing that “the Constitution does not

define in words what is an impost or tax on exports and

what is not,” id., Justice Black argued for an

interpretation of the Import-Export Clause that would

be true to the original purpose of the Clause, not

formalistic tests detached from evidence about the way

the Framers wrote and thought.

Id. at 88-90

(“Constitutional interpretations which make serious

inroads into the power of both the States and the

Federal Government to tax sales made by local

businesses should not turn on fine legal concepts of

8

when title passed or delivery occurred in relation to the

beginning of exportation. . . . No persuasive evidence

has been produced to indicate that those who wrote the

Constitution thought in such terms or that they would

have handicapped the state and federal taxing power

in such a way.”).

The original package doctrine for imports, and the

“stream of export” doctrine for exports governed

Import-Export Clause jurisprudence for much of the

nineteenth and twentieth centuries, with mounting

criticism from judges and scholars.

In Michelin, 423 U.S. 276, this Court upended its

Import-Export Clause jurisprudence, “abandon[ing] a

century of precedent.” Walter Hellerstein & John A.

Swain, State Taxation ¶ 5.02[2] (3d ed. 2017). The

Michelin Tire Corporation had challenged a Georgia ad

valorem property tax on its “inventory of imported tires

and tubes,” which (with a few exceptions) had not been

removed from their original packages. 423 U.S. at 279.

Under Low v. Austin, that basic fact pattern was a

clear violation of the Import-Export Clause: even

though the Georgia tax did not facially discriminate

against imports, it could not validly be applied to any

imported goods that remained in their original

packages.

The Court rejected that analysis and overruled

Low v. Austin. Instead of a formalistic reliance on the

original package doctrine—and an exclusive focus on

whether a good retained its status as an “Import”

within the meaning of the Clause—the Court explained

that the Clause should be interpreted in light of its

9

original understanding and objectives, with attention

to “the specific abuses which led the Framers to

include the Import-Export Clause in the Constitution.”

Id. at 282-83.

The Michelin Court explained that in adopting the

Import-Export Clause, “[t]he Framers of the

Constitution . . . sought to alleviate three main

concerns.” Id. at 285. First, state taxation should not

interfere with the Federal Government’s ability to

“speak with one voice when regulating commercial

relations with foreign governments”; second, because

“import revenues were to be the major source of

revenue of the Federal Government,” states should not

be able to divert that revenue to themselves at the

Federal Government’s expense; and third, in order to

maintain “harmony among the States . . . seaboard

States, with their crucial ports of entry,” would have to

be prevented from “levying taxes on citizens of other

States by taxing goods merely flowing through their

ports to the other States not situated as favorably

geographically.” Id. at 285-86.

Because Georgia’s nondiscriminatory ad valorem

property tax did not conflict with any of those three

policies (even though it fell on property that included

some imports, and even though some of those imports

still resided in their “original packages”), the Court

held the tax was not a prohibited “Impost or Duty”

within the meaning of the Import-Export Clause. Id.

at 302.

Two years later, in Department of Revenue of

Washington v. Association of Washington Stevedoring

10

Cos., 435 U.S. 734 (1978), this Court confronted a

challenge to the State of Washington’s attempt to apply

its “business and occupation tax” to stevedoring—“the

business of loading and unloading cargo from ships.”

Id. at 736-37. The stevedoring activities subject to the

tax involved both imports and exports, each in the

midst of their import or export “journey.” The Court

reviewed its then-recent Michelin decision, explaining:

Before Michelin, the primary consideration

was whether the tax under review reached

imports or exports. With respect to imports,

the analysis applied the original package

doctrine of Brown v. Maryland, 12 Wheat. 419

(1827). So long as the goods retained their

status as imports by remaining in their import

packages, they enjoyed immunity from state

taxation.

With respect to exports, the

dispositive question was whether the goods

had entered the “export stream,” the final

continuous journey out of the country. As soon

as the journey began, tax immunity attached.

Id. at 752 (citations omitted). The Court explained

that because Washington’s application of its tax to

stevedoring activities did not violate any of the three

policies animating the Import-Export Clause, it did not

11

constitute “an ‘Impost or Duty’ subject to the absolute

ban of the Clause.” Id. at 755.1

The Washington Stevedoring Court stopped short,

however, of holding that the Michelin framework had

fully supplanted the “export stream” test that the

Court had previously applied to export goods already in

transit on their export “journey.” The Court noted that

in Michelin, it had not had to “face the question

whether a tax relating to goods in transit would be an

‘Impost or Duty’ even if it offended none of the policies

behind the Clause.” Id. But the Washington

Stevedoring Court again reserved the question, noting

that although the tax at issue fell on an “activity [that]

occur[ed] while imports and exports are in transit . . . .

the tax [did] not fall on the goods themselves”—only on

the “business of loading and unloading ships, or, in

other words, the business of transporting cargo within

the State of Washington.” Id. The Court used this

distinction to limit its holding to a tax that involves

imports or exports only indirectly, and “[did] not reach

the question of the applicability of the Michelin

See also Hellerstein & Swain, supra, ¶ 5.01 (“Michelin and

Washington Stevedoring marked a fundamental redirection of the

inquiry under the Import-Export Clause away from the question

whether a particular good is an ‘import’ or an ‘export’ and toward

the question whether a particular levy is an ‘impost’ or ‘duty.’

Since virtually all of the earlier precedents interpreting the clause

were preoccupied exclusively with the former question, they must

be viewed with considerable caution today.”).

1

12

approach when a State directly taxes imports or

exports in transit.” Id. at 757 n.23 (emphasis added).2

Since Washington Stevedoring the Court has

substantively addressed the Import-Export Clause on

only a few occasions. See, e.g., Limbach v. Hooven &

Allison Co. (Hooven II), 466 U.S. 353, 359 (1984)

(“Although Hooven I [Hooven & Allison Co. v. Evatt,

324 U.S. 652 (1945)] was not expressly overruled in

Michelin, it must be regarded as retaining no vitality

since the Michelin decision.”); R.J. Reynolds Tobacco

Co. v. Durham Cty., N.C., 479 U.S. 130 (1986)

(applying Michelin to an ad valorem property tax

affecting imported goods, finding no violation of the

Import-Export Clause); Itel Containers Int’l Corp. v.

Huddleston, 507 U.S. 60, 76-77 (1993) (applying

Michelin to a tax affecting cargo containers used in

international trade, finding no violation of the ImportExport Clause); see also Brannon P. Denning, Bittker

on the Regulation of Interstate and Foreign Commerce

§ 12.07 (2d ed. 2013 and 2017 Cum. Supp.) (“Since

Washington Stevedoring, the Supreme Court has

passed on only one case [Itel] alleging that a state tax

violated the Import-Export Clause because it was

levied on exports.”).

2 Despite that reservation, the Washington Stevedoring Court

determined “the Michelin approach should apply to taxation

involving exports as well as imports.” Id. at 758.

13

B. Factual Background and Proceedings Below

Respondent Dulles Duty Free, LLC (“DDF”)

operates “duty free” stores at Dulles International

Airport, which is located in Loudoun County, Virginia.

Those stores’ sales are predominantly to travelers

departing the United States (“international sales”), but

some sales are “domestic”—i.e., to passengers

remaining in the United States. App. 3a.

Petitioner Loudoun County imposes a 0.17%

Business, Professional and Occupational License

(“BPOL”) tax measured by the gross receipts of retail

stores located in the County.3 Loudoun accordingly

calculated the BPOL tax on DDF using gross receipts,

including the portion of its total sales attributable to

international travelers who purchase an item at its

Dulles Airport duty free stores, and then carry that

item out of the country on an international flight.

DDF filed an application in the Loudoun County

Circuit Court seeking correction of its BPOL taxes for

the tax years 2009-2013, arguing the County’s

collection of those taxes related to “international sales”

violated the Import-Export Clause under Richfield

Oil.4

Loudoun County Ordinance § 840.14(o); App. 49a. The County

imposes a flat $30 annual fee if gross receipts are $200,000 or less.

Loudoun County Ordinance § 840.13(c); App. 4a.

4 DDF filed its application pursuant to Va. Code Ann. § 58.13984(A), which authorizes an application in the Virginia courts “to

correct erroneous assessment of local levies.” App. 27a.

3

14

Following a two-day hearing, the Circuit Court

rejected DDF’s Import-Export challenge. App. 23a.

Applying Michelin and Washington Stevedoring, the

Circuit Court concluded that the BPOL tax “is not an

impost or duty, and does not transgress any of the

policy dictates behind the Import Export Clause.”

App.46a.

The Circuit Court entered its Final Order on May

6, 2016. DDF timely noticed an appeal on June 3,

2016, and petitioned the Supreme Court of Virginia on

June 22, 2016. On December 14, 2016, the Virginia

Supreme Court granted DDF’s petition for appeal.

The Supreme Court of Virginia reversed. Although

it acknowledged the contrary holdings of other courts,

App. 18a-19a, and observed that “[i]t is fair to say that

courts have struggled to determine which test to apply

when it comes to assessing the constitutionality of

taxes that fall on export goods in transit,” App. 16a, the

court held that this Court “has not overruled Richfield

Oil and, while it has significantly revised its ImportExport Clause jurisprudence, the Court has carefully

carved out for future disposition the issue whether the

Michelin test would apply to a non-discriminatory tax

that falls on export goods in transit.” App. 19a.

“Consequently,” the Supreme Court of Virginia

“conclude[d] that Richfield Oil supplies the rule of

decision.” Id. It also determined that the BPOL tax,

though it “is imposed on the direct receipts of a

business . . . is in its ‘operation and effect’ a direct tax

on the export goods in transit.” App. 21a (quoting

Richfield Oil, 329 U.S. at 84); see also App. 20a (“There

is no dispute that the merchandise Duty Free sells to

15

international travelers constitutes export goods in

transit.”). The court therefore held that, as applied to

DDF’s “export goods,” the BPOL “constitutes an

impermissible impost upon an export in violation of the

Import-Export Clause” and reversed the judgment of

the Circuit Court. App. 22a.

REASONS FOR GRANTING THE PETITION

This Court has repeatedly deferred “the question of

applicability of the Michelin approach when a State

directly taxes imports or exports in transit,” preferring

to wait “until a case with pertinent facts is presented.”

Washington Stevedoring, 435 U.S. at 757 n.23. This

Petition squarely presents the opportunity to answer

this long-open question, and to resolve disagreement

among federal courts of appeals and state courts of last

resort about the role (if any) Richfield Oil should play

in analyzing whether a non-discriminatory business

license tax measured on the basis of gross receipts

violates the Import-Export Clause.

16

I. Federal Courts of Appeals and State Courts of

Last Resort Have Reached Conflicting

Decisions About the Proper Interpretation of

the Import-Export Clause

A. One Federal Court of Appeals and Two

State Courts of Last Resort Have

Determined

That

Import-Export

Challenges to Assessments Affecting

Exports Should Be Evaluated Using This

Court’s Michelin Test, in Conflict With

the Decision Below

One federal court of appeals and two state courts of

last resort hold that the logic of Michelin and its

progeny have supplanted Richfield Oil, and that the

Michelin framework applies to all state taxation on

export goods in transit.

In Auto Cargo, Inc. v. Miami Dade County, 237

F.3d 1289 (11th Cir. 2001), the Eleventh Circuit

applied the Michelin framework to uphold a

nondiscriminatory tax imposed by Dade County,

Florida on “used, self-propelled vehicles” (i.e., used

cars) in export transit through the Port of Miami. Id. at

1290. A county ordinance required auto exporters to

pay a $7.50 “vehicle export fee” on each car “for which

export authorization was sought” at the Port. Id. at

1291. The “vehicle export fee” was assessed as each

car passed through the Port of Miami en route to its

foreign destination: after the car had entered the

“export stream.” The Eleventh Circuit explicitly

rejected Auto Cargo’s argument that Michelin and its

progeny could be confined to their facts, which (argued

17

Auto Cargo) had not involved goods already in the

“export stream”: the court explained that

“the framework established in Michelin for assessing

the constitutionality of an exaction under the ImportExport Clause is clearly a general one and not

restricted simply to the facts under consideration in

that case.” Id. at 1293. Instead, the Eleventh Circuit

emphasized: “Michelin overruled cases that stressed

the nature of the goods as imports or exports and

instead focused on the nature of the exaction at issue,”

and “establishes the only applicable standard for

determining whether an exaction is discriminatory

under the Import-Export Clause.” Id. at 1292, 1294.

In Department of Revenue v. Alaska Pulp America,

Inc., 674 P.2d 268 (Alaska 1983), the Supreme Court

of Alaska, upheld a business license tax on the gross

receipts of two domestic international sales

corporations (“DISCs”), federally authorized corporate

entities that act as “sales agent[s] for the products of

[their] parent corporation” and receive “federal income

tax incentives” on behalf of their domestic parent

corporations by “selling American products abroad.”

Id. at 277. In evaluating an Import-Export Clause

challenge to the business license tax on the DISCs’

gross receipts, the Supreme Court of Alaska explained:

“When a tax is challenged under the import-export

clause, the court must . . . determine whether the tax

offends any of the three purposes of that clause, as

delineated in Michelin.” Id. at 279. And, employing

that approach, the Supreme Court of Alaska held that

the assessment on gross receipts covering exports does

not conflict with the Clause and “merely requires the

18

taxpayers to pay their just share for the privilege of

conducting business in Alaska.” Id. at 280.

In United States Steel Mining Co., LLC v. Helton,

631 S.E.2d 559 (W. Va. 2005), cert. denied, 547 U.S.

1179 (2006), the Supreme Court of Appeals of West

Virginia, upheld a tax on coal mined in West Virginia

and exported abroad. Noting that Michelin marked a

“sharp turn” in the focus of Import-Export Clause

analysis, id. at 567, the court relied on Michelin to

uphold the tax without deciding whether the goods

were “in transit,” as Richfield Oil’s stream of export

test would require. See id. at 567 (the taxes “do not

offend the policies that the Supreme Court has said

underlie the Import-Export Clause”); id. at 567-68 (the

taxes “are not imposed on goods that are undisputedly

in export transit,” because the “initial loading of coal at

coal preparation facilities into rail cars [] is not clearly

a part of the export transit process”) (emphases added).

But two members of the Court dissented. Justice

Maynard contended that “the majority opinion’s

wholesale rejection of Richfield Oil in favor of the

Michelin Tire/Washington Stevedoring line of cases is

improper . . . .” Id. at 569. In his view, “Richfield Oil

remains good law and it directly control[led]” the case.

Id. Justice Benjamin wrote separately, dissenting in

part, arguing that the majority inappropriately

“presume[d] that Richfield Oil’s ‘stream-of-export’ rule

has been overruled or disregarded by the United States

Supreme Court in favor of Michelin’s policy rule.” Id.

at 581.

Justice Benjamin, however, found the

disagreement among members of the court

“understandable” given the absence of “non-divergent

19

case law,” explaining “one might understandably hope

that the United States Supreme Court would take the

opportunity to bring a new clarity to this area of

constitutional law in the near future.” Id. at 580.5

B. Since Michelin, Two Federal Courts of

Appeals and Two State Courts of Last

Resort Have Relied on Richfield Oil

Rather Than Michelin in Deciding an

Import-Export Clause Challenge to

Assessments Affecting Exports, in Accord

With the Decision Below

Two federal courts of appeals and two state high

courts have continued to apply Richfield Oil since

Michelin was decided, in accord with the decision

below.

In Louisiana Land & Exploration Co. v. Pilot

Petroleum Corp., 900 F.2d 816 (5th Cir. 1990), Pilot

Petroleum Corporation challenged a Louisiana tax

5 In David Hazan, Inc. v. Tax Appeals Tribunal, 556 N.E.2d 1113

(N.Y. 1990), the New York Court of Appeals affirmed a decision by

New York’s Tax Appeals Tribunal upholding a state tax under

Michelin and Washington Stevedoring. One Court of Appeals

judge dissented, adopting the reasoning of two dissenting judges

in the intermediate appellate court, who would have applied

Richfield Oil to invalidate the state tax at issue. See David

Hazan, Inc. v. Tax Appeals Tribunal, 543 N.Y.S.2d 545, 547 (N.Y.

App. Div. 1989) (Mikoll, J., dissenting) (“We disagree with the

Tribunal that Washington or Michelin, relied on by the Tribunal,

have abrogated the concept of ‘export stream.’”) (citations

omitted).

20

assessed on oil exports that the state assessed after the

oil had been loaded “into the tanks of a foreign-flagged

tanker.” Id. at 821. The Fifth Circuit, while observing

“[t]he broad prohibition against any and all taxation

upon imports and exports has been discarded” in

Michelin, nevertheless determined that Michelin did

not reach “in-transit” exports which were “[s]till

[w]ithin the [c]lause.” Id. at 820. And, looking to

Richfield Oil, the Court invalidated the tax because the

oil had already been loaded into the cargo ship’s tanks

in preparation for export. Id.

Judge Jolly dissented, however, explaining that

even though “the Supreme Court has not explicitly

addressed the [Import-Export] Clause’s application to

direct taxes on goods ‘in transit’ . . . . [t]he Court’s

recent decisions . . . make clear that even a tax

operating directly on goods ‘in transit’ is not prohibited

if it is non-discriminatory and does not frustrate the

policies underlying the Clause.” Id. at 822 (Jolly, J.,

dissenting). Without disputing that the tax at issue

would fail Richfield Oil’s “export stream” test, Judge

Jolly argued that Michelin provided the only

appropriate framework for assessing the tax’s

constitutionality under the Clause, and that under

Michelin, the tax was valid. Id. at 822-23.

The Ninth Circuit employed a similar approach

in Connell Rice & Sugar Co., Inc. v. Yolo County, 569

F.2d 514, 518 (9th Cir. 1978). There, the Court of

Appeals evaluated an Import-Export Clause challenge

21

to an ad valorem tax on rice, citing Richfield Oil as

“helpful authorit[y]” and applying the “export stream”

test, without any citation to or discussion of Michelin.6

In Virginia Indonesia Co. v. Harris County

Appraisal District, 910 S.W.2d 905 (Tex. 1995), the

Supreme Court of Texas likewise adhered to a preMichelin “stream of export doctrine” in striking down

an ad valorem property tax. The Virginia Indonesia

Company (“VICO”) procured goods throughout the

United States on behalf of an Indonesian joint venture.

VICO would gather the goods intended for export at an

export packer’s facility in Harris County, Texas. In

1991, the County assessed an ad valorem tax on

VICO’s property while it sat at the export packer’s

facility awaiting export. Noting “[t]he United States

Supreme Court has yet to announce whether the new

approach set forth in Michelin should be applied to a

direct tax on imports or exports in transit,” id. at 910,

the Texas Supreme Court eschewed the Michelin test

in favor of “the long-standing rule that a tax on goods

in the export stream of commerce violates the importexport clause.” Id. at 911-12. And, as in Pilot

Petroleum, the court’s reliance on pre-Michelin

analysis elicited a dissent: Justices Hecht and Owen

rejected the majority’s approach, contending that

“adherence to an in-transit rule is at odds with the

In a subsequent case the Ninth Circuit employed the Michelin

test to find a violation of the Import-Export Clause in a case

where the court did not mention Richfield Oil. See Western Oil &

Gas Ass'n v. Cory, 726 F.2d 1340 (9th Cir. 1984).

6

22

Supreme Court’s modern jurisprudence.” Id. at 916.

“The reasoning of Michelin and its progeny

demonstrate that the tax here does not offend the

policies of the Import-Export Clause,” they explained.

Id.7

II.

This Case is an Ideal Vehicle for Resolving

the Questions Presented

This case is an ideal vehicle to resolve the

questions presented.

First, the decision and judgment below turned

entirely on the Supreme Court of Virginia’s

interpretation and application of the Import-Export

Clause and not on any other grounds, including statelaw grounds, that would interfere with this Court’s

disposition of the question presented. Further, the

material facts underlying this dispute are uncontested.

App. 24a.

Second, the Supreme Court of Virginia

acknowledged Michelin but expressly concluded, in a

detailed opinion, that Richfield Oil controls. App. 7a.

(“Resolution of the constitutional propriety of the

BPOL tax to Duty Free’s in-transit export sales hinges

The Supreme Court of Washington has also held that Richfield

Oil continues to govern state taxation of export goods in transit

after Michelin. See Coast Pac. Trading, Inc. v. State, 719 P.2d

541, 544 (Wash. 1986) (“The parties thus correctly point out that

Michelin and Stevedoring have not overruled decisions that struck

down taxes levied directly on goods that had reached the export

stream . . . . includ[ing] Richfield Oil . . . .”).

7

23

on the applicability, and ongoing validity, of the

decision in Richfield Oil”); App. 16a, 19a (Richfield Oil

“supplies the rule of decision”).

Third, although uncertainty and disagreement

about the questions presented have been brewing for

some time, there are relatively few appropriate

vehicles for this Court to review and resolve these

questions.8 The Court should seize the opportunity

presented by this case to address these important

questions.9

*

*

*

*

In Helton, Justice Benjamin, writing in dissent,

encouraged this Court “to bring a new clarity to this

area of constitutional law in the near future.” Helton,

631 S.E.2d at 580.

Here, mindful of disagreement among the lower

courts, and the need for further guidance, the

unanimous Supreme Court of Virginia also has gently

suggested this Court’s review is welcome. Recognizing

See infra note 16 (Respondent’s counsel: The Supreme Court of

Virginia’s decision “represents perhaps the most significant

Import-Export Clause decision issued in the last 20 years.”).

9 The Court has previously granted review of a case to clarify the

impact of Michelin on an aspect of Import-Export Clause

jurisprudence. See Hooven II, 466 U.S. at 359 (“Although Hooven

I [Hooven & Allison Co. v. Evatt, 324 U.S. 652 (1945)] was not

expressly overruled in Michelin, it must be regarded as retaining

no validity since the Michelin decision. The conclusion of the

Supreme Court of Ohio that Hooven I retains current validity in

this respect is therefore in error.”).

8

24

“that courts have struggled to determine which test to

apply when it comes to assessing the constitutionality

of taxes that fall on export goods in transit,” App.

16a,10 the court concluded its assessment of this

question of federal law by observing: “It may be that

the Supreme Court will provide additional guidance

concerning the applicability of the Import-Export

Clause to non-discriminatory taxes” like the one at

issue. App. 22a.11

10

The Circuit Court in this case similarly observed: “It is

challenging to try to reconcile the Import Export Clause

jurisprudence.” App. 33a.

11 Commentators are understandably uncertain about the status

of Richfield Oil after Michelin and Washington Stevedoring. For

example, a leading treatise on state taxation observes: “State

courts have generally treated Richfield with considerable

skepticism,” while noting that in Itel the Court “itself cast doubt

on the continuing validity of Richfield.” Hellerstein & Swain,

supra, ¶ 5.05[2][a]. That treatise’s authors have concluded: “[T]he

weight of reason and authority support the view that

nondiscriminatory sales and use taxes may be imposed on goods in

import or export transit and that Richfield is no longer good law.”

Id. But even that assessment is hedged in light of post-Michelin

decisions by lower courts which embrace Richfield Oil, and “are a

reminder that it would be premature to give Richfield its last

rites.” Id. Another commentator who has written about the

Clause is similarly uncertain, observing: in Itel the Court

“[h]int[ed] that this prohibition [on the ‘direct’ taxation of imports

and exports ‘in transit’], which had been applied in the Richfield

Oil case, had been ‘altered’ (repudiated?) by the approach adopted

in Michelin.” Denning, supra, § 12.07; see Itel Containers, 507

U.S. at 77 (assuming but not resolving whether the rule followed

in Richfield Oil has “been altered by the approach we adopted in

Michelin”).

25

This Court should dispel the uncertainty and

conclusively answer the questions presented by this

Petition.12

III.

The Questions Presented are Important

The questions presented in this Petition are

important.

The Import-Export Clause operates as a constraint

on the power of states (and local governments) to raise

revenue. But taxation authority is “central to state

sovereignty.” Department of Revenue of Or. v. ACF

Indus., Inc., 510 U.S. 332, 345 (1994); see also The

Federalist No. 32, at 198 (Alexander Hamilton)

(Clinton Rossiter ed., 1961) (under the plan of the

Constitutional Convention “with the sole exception of

duties on imports and exports” states would retain the

authority to raise their own revenues “in the most

absolute and unqualified sense”).

In order to exercise their full authority to raise

revenue, state and local governments require a clear

and accurate understanding of the meaning and scope

of the Import-Export Clause. Uncertainty about what

is permitted and what is proscribed by the ImportExport Clause hampers state and local governments,

and may prevent them from collecting much-needed

revenue. That uncertainty can also lead to costly and

Cf. United States v. Int’l Bus. Mach. Corp., 517 U.S. 843, 846

(1996) (we “agreed to hear this case to decide whether we should

overrule Thames & Mersey [237 U.S. 19 (1915)],” given

“subsequent decisions interpreting the Import-Export Clause”

including “specifically, Michelin Tire Corp.”).

12

26

time-consuming litigation about the scope of the

Import-Export Clause and its application to particular

government assessments.

In addition to the general importance of clarity

about the Import-Export Clause, its specific application

to duty free operations, as in this case, has significant

economic consequences.

There are nearly 100

communities in the United States that host duty free

stores.

Most of these communities are not at

international airports: while more than three dozen

communities have international airports with duty free

stores, even more are located along the border with

Canada or Mexico (and one, in Anacortes, Washington,

at the ferry terminal to Canada).13 The authority of

state and local governments to impose taxes that affect

“exports” from these duty free locations (which is

currently unclear) is an issue of financial importance to

these communities. Respondent’s export sales for

2009-2013 at just the few of its locations in Loudoun

County exceeded $85 million. App. 3a. The duty free

stores spread across the United States14 are estimated

13

See Stores, United States, Duty Free Ams.,

https://www.dutyfreeamericas.com/locations/ (last visited Dec. 18,

2017) (further analysis on file with counsel).

14

Respondent’s parent, Duty Free Americas, Inc., itself has

locations in 19 states as well as the District of Columbia. See

Pretrial Memorandum of Dulles Duty Free, LLC, at 3, Dulles Duty

Free LLC v. County of Loudoun, Civil Action No. 90613 (Va. Cir.

Ct. May 6, 2016) (on file with counsel); Stores, United States,

supra.

27

to have aggregate annual sales of $4 billion.15 Counsel

for Respondent has asserted that the decision below

“will affect the entire U.S. duty-free industry.”16

Moreover, the implications of the decision below by

the Supreme Court of Virginia extend far beyond duty

free transactions. While the goods at issue here were

clearly “in transit” when conveyed to customers upon

departure from the United States, Loudoun’s BPOL tax

was assessed on an annual basis and calculated based

on the prior year’s gross sales. If a tax imposed

annually based on historical gross sales violates the

Import-Export Clause’s proscription on “imposts and

duties”—as the Supreme Court of Virginia concluded,

guided by Richfield Oil—then it is difficult to see how a

state or local government may lawfully impose any tax

for which the calculation depends in part on sales of

actually-exported goods (goods which were necessarily

“in transit” at the point of export).

Lois Pasternak, US Duty Free market will expand to $5bn by

2020, says research, Travel Markets Insider, June 22, 2016,

http://travelmarketsinsider.net/us-duty-free-market-will-expandto-5bn-by-2020-says-research/ (“The US market was worth $3.9

billion in 2015 and will expand by $1.1 billion at a Compound

Annual Growth Rate (CAGR) of 5% to reach $5 billion by 2020.”).

16 See Carrie Salls, Duty free stores at Dulles Airport win at Va.

SC; Decision significant for Import-Export Clause, Legal

NewsLine, Sept. 6, 2017, https://legalnewsline.com/stories/

511204498-duty-free-stores-at-dulles-airport-win-at-va-scdecision-significant-for-import-export-clause.

Counsel for

Respondent has also said the decision “represents perhaps the

most significant Import-Export Clause decision issued in the last

20 years.” Id.

15

28

IV.

Loudoun’s BPOL Tax is Constitutional, and

the Decision of the Supreme Court of

Virginia was Incorrect

The Petition should also be granted because

Loudoun’s BPOL tax is constitutional, and the decision

of the Supreme Court of Virginia was incorrect.

As a threshold matter, that decision depends

entirely on the view that Richfield Oil remains in full

force. But that notion is dubious. Although there is

clear and persistent disagreement among the lower

courts, “the weight of reason and authority support the

view . . . that Richfield is no longer good law.” See

Hellerstein & Swain, supra, ¶ 5.05[2][a].

The Supreme Court of Virginia’s conclusion that

the BPOL violates the Import-Export Clause is also

suspect for other reasons.

The Import-Export Clause, by its own terms,

concerns only “Imposts” and “Duties.” U.S. Const. art.

I, § 10, cl. 2. These terms are distinct from—and

narrower than—the term “taxes,” used elsewhere in

the Constitution. See United States v. Int’l Bus. Mach.

Corp., 517 U.S. 843, 857-58 (1996) (“impost and duty

are narrower terms than tax,” and “the absolute ban is

only of ‘Imposts or Duties’ and not of all taxes”);

Washington Stevedoring, 435 U.S. at 751 (Clause “bans

only ‘Imposts or Duties on Imports or Exports’”). Yet

the Supreme Court of Virginia failed to analyze

substantively whether Loudoun’s BPOL tax is a

29

“duty”17—instead relying entirely on its view that “[w]e

are hard pressed to see a difference of constitutional

magnitude between the BPOL tax and the tax at issue

in Richfield Oil.” App. 21a. That failure is especially

noteworthy given this Court’s rejection of reliance on

Richfield Oil by the taxpayer in Washington

Stevedoring, observing that Richfield Oil was not

“persuasive support” because it did not “recognize[]

that the term ‘Impost or Duty’ is not self-defining and

does not necessarily encompass all taxes.” Washington

Stevedoring, 435 U.S. at 759; id. (“[T]he central holding

of Michelin [is] that the absolute ban is only on

‘Imposts and Duties’ and not of all taxes.”).

The decision below also failed to heed one of the

principal lessons of Michelin: the Import-Export Clause

should be interpreted in light of the Framers’

“objectives” in enacting it. Michelin, 423 U.S. at 293.

While the Supreme Court of Virginia recognized this

Court “has significantly revised its Import-Export

Clause jurisprudence” since Richfield Oil, App. 19a, it

nevertheless mechanically adhered to its reading of

Richfield, without regard for whether Loudoun’s BPOL

may be sustained in light of the Import-Export

This case concerns only exports. The term “imposts” arguably

relates to imports only. See Camps Newfound/Owatonna Inc. v.

Town of Harrison, 520 U.S. 564, 637 (1997) (Thomas, J.,

dissenting) (“[A]s 18th-century usage of the word indicates, an

impost was a tax levied on goods at the time of importation.”); see

also Robert G. Natelson, What The Constitution Means By “Duties,

Imposts, And Excises”—And “Taxes” (Direct Or Otherwise), 66

Case W. Res. L. Rev. 297, 322-23 (2015).

17

30

Clause’s purposes in our constitutional scheme. But

this Court has already evaluated a post-Michelin

Import-Export challenge to a tax affecting exports in

light of the “policies behind the Clause.” R.J. Reynolds

Tobacco Co. v. Durham Cty., N.C., 479 U.S. 130, 153

(1986) (“The nondiscriminatory ad valorem property

tax at issue here seems indistinguishable from the tax

in Michelin in terms of these policies.”); see also Wash.

Stevedoring, 435 U.S. at 758 (“the Michelin approach

should apply to taxation involving exports as well as

imports”). Refusal to consider the purposes of the

Clause was particularly egregious given the ambiguity

of the terms “impost” and “duty” used in the Clause.

Cf. Michelin, 423 U.S. at 293-94 (“The terminology

employed in the Clause ‘Imposts or Duties’ is

sufficiently ambiguous that we decline to presume it

was intended to embrace taxation that does not create

the evils the Clause was specifically intended to

eliminate.”). Nothing about Loudoun’s BPOL tax

offends or undermines the purposes underlying

enactment of the Import-Export Clause.18

See

Michelin, 423 U.S. at 290 (“[T]he Clause was fashioned

to prevent the imposition of exactions which were no

more than transit fees on the privilege of moving

through a State.”).

18 The Supreme Court of Virginia did not opine that the BPOL tax

would be invalid under the Michelin approach. In its brief before

the Supreme Court of Virginia, DDF did not challenge the Circuit

Court’s conclusion that the BPOL tax is valid under the Michelin

approach. Br. of Appellant Dulles Duty Free, LLC at 4, 14-26, No.

160939 (Va. Jan. 17, 2017).

31

The judgment below is also difficult to reconcile

with this Court’s view that “a nondiscriminatory gross

receipts tax . . . may be sustained if fairly apportioned

to the business done within the taxing state.” Canton

R.R. Co. v. Rogan, 340 U.S. 511, 515 (1951); see also

R.J. Reynolds Tobacco, 479 U.S. at 134 (upholding

nondiscriminatory ad valorem tax where taxpayer

“receives identical city and county police, fire, and

other public services” at export and non-export

facilities). Here, “[t]he [BPOL] tax does not target

imports or exports; it applies across the board to all

sales.” App. 4a.19 And Respondent “does not dispute

that it owns inventory and other personal property in

Loudoun County. There is also no question that it

employs a large number of personnel in the County to

run its retail operations. [It] uses County roads, and

benefits from the protection of County fire and rescue,

law enforcement, the court system, and other County

services.” App. 3a. Even before Michelin this Court

determined that the Import-Export Clause was not

meant “to relieve property eventually to be exported

from its share of the cost of local services.” Kosydar v.

National Cash Register Co., 417 U.S. 62, 70 (1974)

(quoting Joy Oil Co. v. State Tax Comm’n, 337 U.S.

19 The Supreme Court of Virginia recognized that Loudoun’s

BPOL tax is “nondiscriminatory.” See App. 22a.

32

286, 288 (1949)).20 And Michelin itself expressed the

same idea. See Michelin, 423 U.S. at 287 (“Unlike

imposts and duties, which are essentially taxes on the

commercial privilege of bring goods into a country,

such property taxes are taxes by which a State

apportions the cost of such services as police and fire

protection among the beneficiaries according to their

respective wealth.”).

Federalism considerations also cast doubt on the

judgment below.

Because taxation authority is

“central to state sovereignty,” as when construing a

statute which impacts exercise of “the States’

traditional powers,” interpretation of the ImportExport Clause should not extend “beyond its evident

scope.” Department of Revenue of Or. v. ACF Indus.,

Inc., 510 U.S. 332, 345 (1994); see also National Private

Truck Council, Inc. v. Oklahoma Tax Comm’n, 515 U.S.

582, 586 (1995) (“We have long recognized that

principles of federalism and comity generally counsel

that courts should adopt a hands-off approach with

respect to state tax administration.”); see also Michelin,

423 U.S. at 293 (“[S]ince prohibition of

nondiscriminatory ad valorem property taxation would

not further the objective of the Import-Export Clause

20 The uncertainty and disagreement among the lower courts is

due in part to the fact that this Court has not expressly addressed

the application of the Michelin approach to a state tax “directly on

goods in import or export transit.” See Int’l Bus. Mach. Corp., 517

U.S. at 862; see also Washington Stevedoring, 435 U.S. at 757

n.23.

33

only the clearest constitutional mandate should lead us

to condemn such taxation.”).

The judgment of the Supreme Court of Virginia is

also likely to impose a substantial burden on state and

local governments. The decision below has farreaching implications. See supra at 27. Under its

logic, almost any tax for which the calculation depends

in part on sales of actually-exported goods would

violate the Import-Export Clause—depriving state and

local governments of revenue used to fund services

enjoyed by all taxpayers. State and local governments

will also face significant administrative burdens if they

are constitutionally proscribed from calculating nondiscriminatory taxes based on gross receipts.

CONCLUSION

For the foregoing reasons, this Petition for a Writ

of Certiorari should be granted.

Respectfully submitted,

LEO P. ROGERS

County Attorney

STEVEN F. JACKSON

Assistant County Attorney

Office of the County Attorney

One Harrison Street SE

P.O. Box 7000

Leesburg, VA 20177

(703) 777-0307

SCOTT E. GANT

Counsel of Record

AARON E. NATHAN

SAMUEL S. UNGAR

BOIES SCHILLER FLEXNER LLP

1401 New York Avenue, NW

Washington, DC 20005

(202) 237-2727

sgant@bsfllp.com

Counsel for Petitioner

DECEMBER 2017