Amicus Curiae Brief — Loudoun County, Virginia, Petitioner v. Dulles Duty Free, LLC

No. 17-904

IN THE

Supreme Court of the United States

__________

LOUDOUN COUNTY, VIRGINIA,

Petitioner,

v.

DULLES DUTY FREE, LLC,

Respondent.

__________

On Petition for Writ of Certiorari

to the Supreme Court of Virginia

__________

BRIEF OF TAX LAW PROFESSORS

AS AMICI CURIAE

IN SUPPORT OF PETITIONER

__________

JEFFREY A. LOVE

Counsel of Record

KELLOGG, HANSEN, TODD,

FIGEL & FREDERICK,

P.L.L.C.

1615 M Street, N.W.

Suite 400

Washington, D.C. 20036

(202) 326-7900

(jlove@kellogghansen.com)

January 25, 2018

QUESTION PRESENTED

Whether the validity under the Import-Export

Clause of a nondiscriminatory state or local tax

based on the value of sales or personal property that

applies to goods in the stream of export should be

evaluated under this Court’s approach in Michelin

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

Richfield Oil Corp. v. State Board of Equalization,

329 U.S. 69 (1946).

ii

TABLE OF CONTENTS

Page

QUESTION PRESENTED .......................................... i

TABLE OF AUTHORITIES ...................................... iii

INTEREST OF AMICI CURIAE ................................ 1

SUMMARY OF ARGUMENT .................................... 1

ARGUMENT ............................................................... 4

I. RICHFIELD OIL IS A DOCTRINAL

ANACHRONISM ............................................. 4

II. FAILURE TO ADDRESS RICHFIELD

OIL’S STATUS CREATES UNCERTAINTY FOR MARKET ACTORS AND

FOR STATE AND LOCAL GOVERNMENTS ........................................................... 10

III. RICHFIELD OIL SHOULD BE OVERRULED.............................................................. 13

A. Richfield Oil Does Not Supply Lower

Courts with an Administrable Test ......... 13

B. Richfield Oil Is Inefficient, Inequitable, and Unnecessarily Intrusive upon

State Fiscal Autonomy ............................. 16

C. Reliance Interests Do Not Weigh in

Favor of Retaining Richfield Oil .............. 19

CONCLUSION.......................................................... 22

APPENDIX ............................................................... 1a

iii

TABLE OF AUTHORITIES

Page

CASES

Ammex, Inc. v. Department of Treasury, 603

N.W.2d 308 (Mich. Ct. App. 1999) ...................... 11

Arizona Dep’t of Revenue v. Robinson’s Hardware, 721 P.2d 137 (Ariz. Ct. App. 1986).......11, 14

Auto Cargo, Inc. v. Miami Dade Cnty., 237 F.3d

1289 (11th Cir. 2001) ........................................... 10

Bradford Exch. A.G. v. Illinois Dep’t of Revenue, 508 N.E.2d 316 (Ill. App. Ct. 1987) ............. 11

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

(1827) ..................................................................... 5

City of Los Angeles v. Marine Wholesale/

Warehouse Co., 15 Cal. App. 4th 1834 (1993) ...... 12

Coast Pac. Trading, Inc. v. State, Dep’t of

Revenue, 719 P.2d 541 (Wash. 1986) .................. 11

Coe v. Town of Errol, 116 U.S. 517 (1886) ............. 2, 6

Complete Auto Transit, Inc. v. Brady, 430 U.S.

274 (1977) .....................................................2, 6, 21

David Hazan, Inc. v. Tax Appeals Tribunal,

543 N.Y.S.2d 545 (App. Div. 1989), aff ’d,

556 N.E.2d 1113 (N.Y. 1990)............................... 11

Department of Revenue of Washington v. Association of Washington Stevedoring Cos.,

435 U.S. 734 (1978) .......................................2, 7, 8,

11, 19, 20, 21

Dulles Duty Free, LLC v. County of Loudoun,

803 S.E.2d 54 (Va. 2017), pet. for cert. pending, No. 17-904 (U.S. filed Dec. 19, 2017) ......11, 17

Harris Cnty. Appraisal Dist. v. Virginia Indonesia Co., 518 U.S. 1004 (1996) .......................... 13

iv

Holt Hauling & Warehousing Sys., Inc. v.

Director, Div. of Taxation, 9 N.J. Tax 446

(1987) ................................................................... 11

Hooven & Allison Co. v. Evatt, 324 U.S. 652

(1945) ..................................................................... 6

Itel Containers Int’l Corp. v. Cardwell, 814

S.W.2d 29 (Tenn. 1991), aff ’d sub nom. Itel

Containers Int’l Corp. v. Huddleston, 507

U.S. 60 (1993) ........................................... 10-11, 20

Itel Containers Int’l Corp. v. Huddleston,

507 U.S. 60 (1993) ............................. 2-3, 7, 8-9, 20

Joy Oil Co. v. State Tax Comm’n, 337 U.S. 286

(1949) ................................................................... 15

Kosydar v. National Cash Register Co., 417 U.S.

62 (1974) .........................................................13, 16

Leegin Creative Leather Prods., Inc. v. PSKS,

Inc., 551 U.S. 877 (2007) ..................................... 20

Limbach v. Hooven & Allison Co., 466 U.S. 353

(1984) ..............................................................10, 20

Lipshutz Bros., Inc. v. Tax Review Bd., 4 Phila.

374, 1980 WL 194215 (C.P. Pa. 1980), aff ’d,

439 A.2d 862 (Pa. Commw. Ct. 1981) ................. 12

Louisiana Land & Exploration Co. v. Pilot

Petroleum Corp., 900 F.2d 816 (5th Cir. 1990) ....... 11

Low v. Austin, 80 U.S. (13 Wall.) 29 (1871) ........... 2, 5

McDonnell Douglas Corp. v. State Bd. of

Equalization, 10 Cal. App. 4th 1413 (1992)....12, 15

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

(1976) .................................................2, 3, 5, 7, 8, 9,

10, 11, 18, 20, 21

v

National Film Labs. v. California State Bd. of

Equalization, No. D049006, 2007 Cal. App.

Unpub. LEXIS 8088 (Oct. 4, 2007) ..................... 12

P.J. Lumber Co. v. City of Prichard, No. 2160627,

2017 Ala. Civ. App. LEXIS 185 (Civ. App.

Sept. 22, 2017) ..................................................... 11

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

Rodriguez de Quijas v. Shearson/American

Express, Inc., 490 U.S. 477 (1989) ...................... 10

State, Dep’t of Revenue v. Alaska Pulp Am.,

Inc., 674 P.2d 268 (Alaska 1983) ........................ 10

U.S. Steel Mining Co. v. Helton:

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

547 U.S. 1179 (2006) ......................................11, 21

547 U.S. 1179 (2006) ........................................... 13

United States v. IBM Corp., 517 U.S. 843

(1996) ............................................................4, 9, 21

Virginia Indonesia Co. v. Harris Cnty. Appraisal

Dist., 910 S.W.2d 905 (Tex. 1995) ..........2, 6, 11, 15

CONSTITUTION AND RULES

U.S. Const.:

Art. I:

§ 8, cl. 1 (Taxing and Spending Clause) .......... 9

§ 8, cl. 3 (Commerce Clause) ...............2, 4, 6, 21

§ 9, cl. 5 (Export Clause) .........................4, 9, 19

§ 10, cl. 2 (Import-Export Clause) .......... passim

vi

Sup. Ct. R.:

Rule 37.2(a) ............................................................ 1

Rule 37.6 ................................................................ 1

ADMINISTRATIVE MATERIALS

U.S. Census Bureau, U.S. International Trade

in Goods and Services (FT900) (Jan. 5, 2018),

available at https://www.census.gov/foreigntrade/Press-Release/current_press_release/

index.html .............................................................. 1

U.S. Dep’t of Commerce, Int’l Trade Admin.,

2016 NAICS Total All Merchandise Exports

to World, available at http://tse.export.gov/

tse/MapDisplay.aspx (last visited Jan. 23,

2018)..................................................................... 12

OTHER MATERIALS

Br. of Resp., Itel Containers Int’l Corp. v. Huddleston, No. 91-321 (U.S. filed June 25,

1992), 1992 WL 511845 ......................................... 8

Pet. for Cert., Harris Cnty. Appraisal Dist. v.

Virginia Indonesia Co., No. 95-1528 (U.S.

filed Mar. 20, 1996), 1996 WL 33439089 ............ 13

Pet. for Cert., U.S. Steel Mining Co. v. Helton,

No. 05-1268 (U.S. filed Mar. 31, 2006), 2006

WL 869888 ........................................................... 13

vii

Kathleen M. Sullivan, The Supreme Court,

1991 Term—Foreword: The Justices of

Rules and Standards, 106 Harv. L. Rev. 22

(1992) ................................................................... 16

World Trade Org., Report of the Appellate Body:

United States—Conditional Tax Incentives

for Large Civil Aircraft, WT/DS487/AB/R

(Sept. 4, 2017), available at https://www.

wto.org/english/tratop_e/dispu_e/487abr_e.

pdf ........................................................................ 19

INTEREST OF AMICI CURIAE 1

Amici are professors of tax law at universities

across the United States. As scholars and teachers,

they have considered the doctrinal roots and practical consequences of judicial limits on state and local

taxation. Amici join this brief solely on their own

behalf and not as representatives of their universities. A full list of amici appears in the Appendix to

this brief.

SUMMARY OF ARGUMENT

For more than seven decades, state and local

governments as well as market actors have labored

under an export tax regime that is inconsistent, inefficient, and inequitable. This case presents the Court

with a chance to restore rationality to the tax treatment of the export sector. The economic implications

are vast: annual exports of goods from the United

States exceed $1.4 trillion.2 The Court’s resolution of

this case will determine whether state and local governments can apply their sales and personal property

taxes to exports in a balanced and nondiscriminatory

fashion.

1 Pursuant to Supreme Court Rule 37.6, counsel for amici

represents that it authored this brief in its entirety and that

none of the parties or their counsel, nor any other person

or entity other than amici or their counsel, made a monetary

contribution intended to fund the preparation or submission

of this brief. Pursuant to Rule 37.2(a), counsel for amici also

represents that all parties were provided notice of amici ’s

intention to file this brief at least 10 days before it was due and

that the parties have consented to the filing of this brief.

2 See U.S. Census Bureau, U.S. International Trade in Goods

and Services (FT900), Exhibit 5 (Jan. 5, 2018), available at

https://www.census.gov/foreign-trade/Press-Release/current_

press_release/index.html.

2

Near the middle of the last century, this Court held

that the Import-Export Clause prohibits a State from

levying a sales tax on goods that have begun a

“continuous route or journey” to a foreign destination.

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

329 U.S. 69, 79 (1946).3 The Court borrowed this

“continuous route or journey” test—also known as

the “stream of export” test—from an earlier dormant

Commerce Clause decision that addressed the taxation of goods in interstate rather than international

trade. See Coe v. Town of Errol, 116 U.S. 517, 527

(1886). The Richfield Oil test for exports was the

jurisprudential analogue to the “original package” test

for imports, which held that imported goods retained

immunity from state personal property taxes until

they left the importer’s control or were broken up

from their original cases. See Low v. Austin, 80 U.S.

(13 Wall.) 29, 32-34 (1871).

In the years since Richfield Oil, this Court has

ceased to rely on Coe’s “continuous route or journey”

test for dormant Commerce Clause purposes. See

Complete Auto Transit, Inc. v. Brady, 430 U.S. 274,

279 (1977). The Court also has discarded the “original package” doctrine as applied to imports. See

Michelin Tire Corp. v. Wages, 423 U.S. 276, 285-86

(1976). And the Court has cast doubt on Richfield

Oil ’s continued validity in two cases. See Department

of Revenue of Washington v. Association of Washington Stevedoring Cos., 435 U.S. 734, 757 n.23 (1978);

Itel Containers Int’l Corp. v. Huddleston, 507 U.S. 60,

3 While Richfield Oil involved a tax on gross receipts (sales),

lower courts have extended its holding to taxes that are based

on the value of personal property. See, e.g., Virginia Indonesia

Co. v. Harris Cnty. Appraisal Dist., 910 S.W.2d 905, 907-15

(Tex. 1995).

3

77 (1993). Still, this Court has yet to overrule Richfield Oil explicitly.

Courts in eight States as well as one federal court

of appeals no longer adhere to Richfield Oil. Their

decision to depart from Richfield Oil follows logically

from this Court’s opinion in Michelin Tire, which

rejected the premises upon which Richfield Oil

rested. Courts in five other States as well as another

federal court of appeals have said that Richfield Oil

remains binding until this Court expressly overrules

it. This split generates uncertainty for market actors

as they struggle to develop long-term business plans,

and it interferes with the ability of state and local

governments to craft durable tax regimes.

Such uncertainty on its own is sufficient to justify

this Court’s intervention. And, if and when it steps

in, this Court should relegate Richfield Oil to the

dustbin. Richfield Oil ’s holding is at odds with the

text and purpose of the Import-Export Clause; it has

proven to be difficult for lower courts to apply; and it

encourages exporters to alter their business practices

in inefficient ways so as to ensure exemption for their

goods. The businesses that cannot or choose not to

put themselves through contortions in order to qualify

for exemption then bear a disproportionate tax burden.

Perhaps these consequences would be tolerable if

Richfield Oil vindicated important constitutional

values. But, to the contrary, Richfield Oil ’s holding

—that the Import-Export Clause prohibits the application of a nondiscriminatory tax to exports that

have begun a “continuous route or journey” out of the

country—needlessly infringes upon the fiscal autonomy of States without advancing the Import-Export

Clause’s core objectives.

4

In the end, all that Richfield Oil ’s holding has

going for it is stare decisis. But if stare decisis

was not enough to save Richfield Oil ’s dormant

Commerce Clause cousin or the analogous “original

package” rule for imports, it cannot carry the day

here. Reliance interests weigh on both sides, and the

Court has given fair warning to regulated parties

that it will reconsider Richfield Oil in the appropriate case. That case has now arrived, and this Court

should seize the opportunity to overrule Richfield Oil

once and for all.

ARGUMENT

I. RICHFIELD OIL IS A DOCTRINAL ANACHRONISM

Richfield Oil ’s essential holding—that state and

local governments cannot impose nondiscriminatory

sales taxes on goods that have begun a “continuous

route or journey” to a foreign destination—is based

on a dubious interpretation of the Constitution’s

Import-Export Clause. Cf. U.S. Const. art. I, § 10,

cl. 2 (“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 it’s [sic] inspection Laws . . . .”).4 The

“continuous route or journey” test for exports is the

analogue to the “original package” rule for imports,

which this Court adopted in the nineteenth century

4 The Import-Export Clause is distinct from the Export

Clause, which applies to Congress rather than to the States.

See U.S. Const. art. I, § 9, cl. 5 (“No Tax or Duty shall be laid

on Articles exported from any State.”); United States v. IBM

Corp., 517 U.S. 843, 857 (1996) (“The Export Clause prohibits

Congress from laying any ‘Tax or Duty’ on exports, while the

Import-Export Clause prevents the States from laying any

‘Imposts or Duties’ on imports or exports.”).

5

and ultimately discarded in the twentieth. Richfield

Oil ’s holding deserves the same fate.

The “original package” doctrine dates back to Chief

Justice Marshall’s opinion for the Court in Brown v.

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

Brown, a good qualifies as an “import”—and so is

immune from an “impost” or “duty” levied by a

State—as long as the good “remain[s] the property of

the importer, in his warehouse, in the original form

or package in which it was imported.” Id. at 442.

Significantly, Brown did not hold that every tax on

imported goods in their original packages violated

the Import-Export Clause. Under Brown, a tax on

imported goods in their original packages ran afoul of

the constitutional prohibition only if the tax also

qualified as an “impost” or “duty.” See Michelin Tire,

423 U.S. at 295-98 (explaining Brown).

Four-and-a-half decades after Brown was decided,

this Court in Low v. Austin extended the “original

package” rule far beyond its original scope and held

that the Import-Export Clause barred States from

imposing any tax on imported goods while those

goods remained in their original packages. See Low,

80 U.S. (13 Wall.) at 34. Under Low, even a personal

property tax that treated imported goods in their

original packages the same as other personal property

in the State would violate the Import-Export Clause.

See id. at 35. While the Low Court’s extension of

Brown was “uniformly” criticized as a misreading

of Chief Justice Marshall’s opinion, Michelin Tire,

423 U.S. at 282-83 (collecting sources), the Court

continued to apply Low’s “original package” rule to

strike down nondiscriminatory state and local taxes

into the middle of the twentieth century. See, e.g.,

6

Hooven & Allison Co. v. Evatt, 324 U.S. 652, 654, 679

(1945) (“Hooven I ”).

The “continuous route or journey” test for exports

is of more recent vintage. The rule is sometimes

attributed to this Court’s 1886 decision in Coe v.

Town of Errol, which held that goods remained subject to state taxation “in the usual way” until they

had “been shipped, or entered with a common carrier

for transportation, to another state,” or had “been

started upon such transportation in a continuous

route or journey.” 116 U.S. at 527. See, e.g., Virginia

Indonesia, 910 S.W.2d at 908. Coe, however, concerned the scope of the dormant Commerce Clause’s

restrictions on state taxation of interstate trade,

not the Import-Export Clause’s restrictions on state

taxation of foreign trade. See Coe, 116 U.S. at 526.

It was not until after World War II, in Richfield Oil,

that this Court first invoked Coe’s “continuous route

or journey” language to strike down a nondiscriminatory state tax on the grounds that it operated as a

duty on exports in violation of the Import-Export

Clause. See Richfield Oil, 329 U.S. at 79, 86.

In the years since Richfield Oil, this Court has

departed from Coe’s “continuous route or journey”

test in its dormant Commerce Clause jurisprudence.

Now, a state tax generally will survive a dormant

Commerce Clause challenge as long as the tax (1) “is

applied to an activity with a substantial nexus with

the taxing State,” (2) “is fairly apportioned,” (3) “does

not discriminate against interstate commerce,” and

(4) “is fairly related to the services provided by the

State.” Complete Auto, 430 U.S. at 279. And, at

around the same time as it moved beyond Coe’s

“continuous route or journey” formulation for dormant

Commerce Clause purposes, the Court expressly

overruled its “original package” doctrine for Import-

7

Export Clause purposes. See Michelin Tire, 423 U.S.

at 301. Now, a tax that applies to imports will be

struck down on Import-Export Clause grounds only if

it (1) undermines the federal government’s ability to

“speak with one voice when regulating commercial

relations with foreign governments,” (2) diverts import

revenue from the federal government to the States, or

(3) disturbs “harmony among the States” by allowing

“seaboard States, with their crucial ports of entry,”

to use their position to the disadvantage of “other

States not situated as favorably geographically.” Id.

at 285-86; accord Washington Stevedoring, 435 U.S.

at 753-55; Itel Containers, 507 U.S. at 76.

Michelin Tire was a case about imports, while this

case is about exports. But the holding of Michelin

Tire did not hinge on what it means to be an “import”; it turned on what it means to be an “impost” or

“duty.” As the Court in Michelin Tire explained:

[T]he [Import-Export] Clause is not written in

terms of a broad prohibition of every “tax.” The

prohibition is only against States laying “Imposts

or Duties” . . . . By contrast, Congress is empowered to “lay and collect Taxes, Duties, Imposts,

and Excises[,]” which plainly lends support to a

reading of the Import-Export Clause as not prohibiting every exaction or “tax” which falls in

some measure on imported goods. . . . The characteristic common to both “imposts” and “duties”

was that they were exactions directed at imports

or commercial activity as such and, as imposed

by the seaboard States under the Articles of

Confederation, were purposefully employed to

regulate interstate and foreign commerce and tax

States situated less favorably geographically.

423 U.S. at 290-93 (emphasis added).

8

Prior to Michelin Tire, cases such as Richfield Oil

“had assumed that all taxes on imports and exports

. . . were banned by the Clause.” Washington Stevedoring, 435 U.S. at 751-52 (recounting history). By

contrast, Michelin Tire “initiated a different approach

to Import-Export Clause cases” according to which

the Court focused instead on “analyz[ing] the nature

of the tax to determine whether it was an ‘Impost or

Duty.’ ” Id. at 752. Thus, even if goods obtain the

status of “exports” once they begin a “continuous

route or journey” to a foreign destination, the reasoning of Michelin Tire would suggest that such goods

still can be subject to nondiscriminatory state and

local taxes as long as those taxes are not imposts or

duties—that is, as long as they are not directed at

imports or exports as such.

But, while the logical implication of Michelin Tire

is that a nondiscriminatory state tax that applies

to exports is not a constitutionally prohibited impost

or duty, this Court has never explicitly overruled

Richfield Oil ’s holding that a nondiscriminatory tax

runs afoul of the Import-Export Clause if it applies

to goods that have begun a “continuous route or

journey” out of the country. Justice Powell pressed

the Court to take that step shortly after Michelin

Tire, but a majority of the Justices chose “to defer

decision until a case with pertinent facts is presented.” Washington Stevedoring, 435 U.S. at 757 n.23;

see id. at 761-64 (Powell, J., concurring in part and

concurring in the result). More recently, the State

of Tennessee urged this Court to recognize that

Richfield Oil had been “abandoned,” Br. of Resp. 4142, Itel Containers, No. 91-321 (U.S. filed June 25,

1992), 1992 WL 511845, but again the Court concluded

that the question was not squarely before it. See Itel

9

Containers, 507 U.S. at 77 (“Even assuming that [the

Richfield Oil ] rule has not been altered by the

approach we adopted in Michelin, it is inapplicable

here.”).

All of this puts Richfield Oil in precedential purgatory. The idea that every tax on exports is an impost

or duty—the idea underlying Richfield Oil ’s holding

—makes the word “tax” in other clauses of the

Constitution mere surplusage. See U.S. Const. art. I,

§ 8, cl. 1 (“Congress shall have Power To lay and

collect Taxes, Duties, Imposts and Excises”); art. I,

§ 9, cl. 5 (“No Tax or Duty shall be laid on Articles

exported from any State.”).5 And the notion that

a nondiscriminatory tax on exports is an impost or

duty within the meaning of the Import-Export Clause

stands in irreconcilable tension with this Court’s conclusion in Michelin Tire that a tax is not an impost or

duty unless it implicates the Import-Export Clause’s

core objectives. Whether one focuses on the ImportExport Clause’s text or its purpose, Richfield Oil has

little to recommend itself. It remains on the books

only because the Court has not yet heard a case in

which its status was directly at stake. The petition

here presents such a case.

5 Thus, overruling Richfield Oil ’s restriction on nondiscriminatory state and local taxes would be entirely consistent with

this Court’s holding in IBM, which prohibits Congress from

imposing a federal tax on exports. See IBM, 517 U.S. at 857

(“In both Michelin and Washington Stevedoring, we left open

the possibility that a particular state assessment might not

properly be called an impost or duty, and thus would be beyond

the reach of the Import-Export Clause, while an identical federal

assessment might properly be called a tax and would be subject

to the Export Clause.”).

10

II. FAILURE TO ADDRESS RICHFIELD OIL’S

STATUS CREATES UNCERTAINTY FOR

MARKET ACTORS AND FOR STATE AND

LOCAL GOVERNMENTS

This Court’s failure to address Richfield Oil ’s

ongoing validity puts lower courts in a bind. On the

one hand, the Court has instructed lower courts to

take heed of Michelin Tire’s obvious implications.

See Limbach v. Hooven & Allison Co., 466 U.S. 353,

359, 361 (1984) (“Hooven II ”) (“While we acknowledge that Hooven I was not expressly overruled in

Michelin, the latter case strongly implies that the

foundation of the former had been seriously undermined. . . . The conclusion of the Supreme Court of

Ohio that Hooven I retains current validity in this

respect is therefore in error.”). On the other hand,

this Court has said that, if one of its precedents “has

direct application in a case, yet appears to rest on

reasons rejected in some other line of decisions, the

[lower court] should follow the case which directly

controls, leaving to this Court the prerogative of

overruling its own decisions.” Rodriguez de Quijas v.

Shearson/American Express, Inc., 490 U.S. 477, 484

(1989). Caught between the force of Michelin Tire

and the rule of Rodriguez de Quijas, lower courts

have gone in both directions.

The Eleventh Circuit and the courts of at least

eight States—including three state supreme courts—

appear to have concluded that Michelin Tire supplants Richfield Oil.6 The Fifth Circuit and the

6 See Auto Cargo, Inc. v. Miami Dade Cnty., 237 F.3d 1289,

1292 (11th Cir. 2001) (Michelin Tire overruled the stream-ofexport doctrine); State, Dep’t of Revenue v. Alaska Pulp Am.,

Inc., 674 P.2d 268, 279 (Alaska 1983) (Michelin Tire test applies

to gross receipts tax on exported goods); Itel Containers Int’l

11

courts of at least five States—including three state

supreme courts—have recognized Richfield Oil as

good law.7

Courts of appeals in one State—

Corp. v. Cardwell, 814 S.W.2d 29, 37-38 (Tenn. 1991) (applying

Michelin Tire rather than Richfield Oil ), aff ’d on other grounds

sub nom. Itel Containers Int’l Corp. v. Huddleston, 507 U.S. 60

(1993); U.S. Steel Mining Co. v. Helton, 631 S.E.2d 559, 562-64

(W. Va. 2005) (same); P.J. Lumber Co. v. City of Prichard, No.

2160627, 2017 Ala. Civ. App. LEXIS 185, at *7 (Civ. App. Sept.

22, 2017) (Richfield Oil is “no longer valid”); Arizona Dep’t of

Revenue v. Robinson’s Hardware, 721 P.2d 137, 139 (Ariz. Ct.

App. 1986) (“[T]he rule enunciated in Richfield is no longer

the proper standard by which to measure the validity of state

taxation on foreign commerce under the Import-Export Clause.”);

Bradford Exch. A.G. v. Illinois Dep’t of Revenue, 508 N.E.2d

316, 321 (Ill. App. Ct. 1987) (applying Michelin Tire and noting

that “[t]he taxpayer’s reliance on Richfield Oil . . . ignores the

central holding of Michelin that the absolute ban is only of

‘Imposts or Duties’ and not of all taxes”); Holt Hauling & Warehousing Sys., Inc. v. Director, Div. of Taxation, 9 N.J. Tax 446,

449-52 (1987) (applying Michelin Tire rather than Richfield

Oil ); David Hazan, Inc. v. Tax Appeals Tribunal, 543 N.Y.S.2d

545 (App. Div. 1989), aff ’d without opinion, 556 N.E.2d 1113

(N.Y. 1990); see also David Hazan, 543 N.Y.S.2d at 547 (Mikoll,

J., dissenting) (noting that Tax Tribunal decision affirmed by

Appellate Division had concluded that Michelin Tire and Washington Stevedoring “abrogated the concept of ‘export stream’ ”).

7 See Louisiana Land & Exploration Co. v. Pilot Petroleum

Corp., 900 F.2d 816, 821 (5th Cir. 1990) (applying Richfield Oil );

Virginia Indonesia, 910 S.W.2d at 912-14 (following Louisiana

Land and Richfield Oil ); Dulles Duty Free, LLC v. County of

Loudoun, 803 S.E.2d 54, 60 (Va. 2017) (decision below) (“[t]he

bright line Richfield Oil test, rather than the policy based

Michelin test, supplies the rule of decision”); Coast Pac. Trading,

Inc. v. State, Dep’t of Revenue, 719 P.2d 541, 544 (Wash. 1986)

(“Michelin and Stevedoring have not overruled decisions that

struck down taxes levied directly on goods that had reached the

export stream. These decisions include Richfield Oil . . . .”);

Ammex, Inc. v. Department of Treasury, 603 N.W.2d 308, 313

(Mich. Ct. App. 1999) (“[W]e must conclude that Richfield Oil

12

California—appear to be split on the question. Compare McDonnell Douglas Corp. v. State Bd. of Equalization, 10 Cal. App. 4th 1413, 1421 n.4, 1424 (1992)

(applying Richfield Oil and noting that the ImportExport Clause’s exemption “still applies to goods in

the export stream”), with City of Los Angeles v.

Marine Wholesale/Warehouse Co., 15 Cal. App. 4th

1834, 1838, 1843-46 (1993) (upholding gross receipts

tax on warehouse “engaged solely in sales of goods

. . . to cruise ships and airlines that were engaged

solely in sailing to foreign ports and flying to foreign

locations”). Cf. National Film Labs. v. California

State Bd. of Equalization, No. D049006, 2007 Cal.

App. Unpub. LEXIS 8088, at *23-24 (Oct. 4, 2007)

(noting apparent split). The split divides the States

that rank highest in terms of total merchandise

exports, with Texas and Washington (number one

and number three) on the opposite side of New York

and Illinois (number four and number five), and the

second largest exporter—California—itself conflicted.8

Uncertainty over Richfield Oil ’s status has negative effects on market actors as well as state and

local governments. Businesses engaged in the export

of goods enter into long-term contracts without being

able to anticipate their tax liabilities. State and local

governments design their own tax systems without

knowing whether elements will be struck down on

has precedential value.”); Lipshutz Bros., Inc. v. Tax Review Bd.,

4 Phila. 374, 386, 1980 WL 194215 (C.P. Pa. 1980) (stream-ofexport doctrine “remains fully effective”), aff ’d, 439 A.2d 862

(Pa. Commw. Ct. 1981).

8 For figures on total merchandise exports by State, see U.S.

Dep’t of Commerce, Int’l Trade Admin., 2016 NAICS Total All

Merchandise Exports to World, available at http://tse.export.gov/

tse/MapDisplay.aspx (last visited Jan. 23, 2018).

13

Import-Export Clause grounds. For that reason,

litigants on both sides of the issue have asked the

Court to clarify whether Richfield Oil remains valid.

Compare Pet. for Cert., Harris Cnty. Appraisal Dist.

v. Virginia Indonesia Co., No. 95-1528 (U.S. filed

Mar. 20, 1996), 1996 WL 33439089 (asking Court to

overrule Richfield Oil ), cert. denied, 518 U.S. 1004

(1996), with Pet. for Cert., U.S. Steel Mining Co. v.

Helton, No. 05-1268 (U.S. filed Mar. 31, 2006), 2006

WL 869888 (asking Court to reaffirm Richfield Oil ),

cert. denied, 547 U.S. 1179 (2006). The status quo is

one in which no one wins.

III. RICHFIELD OIL SHOULD BE OVERRULED

By granting this petition and resolving the split

over Richfield Oil ’s status, this Court can reduce

uncertainty for all involved—whichever way it comes

down on the merits. That said, overruling Richfield

Oil is clearly the better course. Richfield Oil ’s

“continuous route or journey” test has proven difficult

to apply in practice, and, when applied, it produces

inefficient and inequitable results. Moreover, the

Richfield Oil doctrine has led to unnecessary infringement upon state and local fiscal autonomy. And,

because there are strong reliance interests on both

sides, stare decisis does not provide a persuasive

reason to retain Richfield Oil.

A. Richfield Oil Does Not Supply Lower

Courts with an Administrable Test

The Richfield Oil test has proven to be devilishly

difficult for lower courts to administer. This is

especially ironic given that the only justification this

Court has ever offered for the Richfield Oil rule is its

clarity. As the Court observed in Kosydar v. National

Cash Register Co., 417 U.S. 62, 71 (1974):

14

It may be said that insistence upon an actual

movement into the stream of export in the case

at hand represents an overly wooden or mechanistic application of the Coe doctrine. This is

an instance, however, where we believe that

simplicity has its virtues. . . . [E]ven if it is not an

easy matter to set down a rule determining the

moment in time when articles obtain the protection of the Import-Export Clause, it is highly

important, both to the shipper and to the State,

that it should be clearly defined so as to avoid all

ambiguity or question.

But, rather than “avoid[ing] all ambiguity,”

Richfield Oil ’s “continuous route or journey” test has

created decades of headaches for litigants and lower

courts. The test is easy enough to apply when a

U.S. manufacturer sends goods to a customer abroad

via common carrier, but distribution channels for

exporters are rarely so straightforward. Consider the

following scenarios, all drawn from litigated ImportExport Clause cases:

 A hardware store in the border city of Nogales,

Arizona, sells merchandise to Mexican factories.

The merchandise is delivered to warehouses

maintained by Mexican manufacturers on the

U.S. side of the border. At the time the goods

are sold by the hardware store, have they begun

their “continuous route or journey” to their

foreign destination, such that the State of

Arizona would be barred from imposing a tax

on the store’s sales? See Robinson’s Hardware,

721 P.2d at 137-38.

 A manufacturer in Long Beach, California, sells

aircraft parts to a Mexican airline. A U.S. common carrier transports the parts via truck to the

15

U.S.-Mexico border, where they remain for 48

hours to complete customs processing. The parts

are then loaded onto the trucks of a Mexican

common carrier and delivered to Mexico City.

Do the aircraft parts begin their “continuous

route or journey” to a foreign destination when

they are delivered to the U.S. trucker, or does

the 48-hour pause and the transfer from one

common carrier to another break up the trip?

See McDonnell Douglas, 10 Cal. App. 4th at

1416-17.

 A U.S. corporation, acting as agent for an

Indonesian joint venture, buys oil and gas exploration equipment from various vendors across

the United States. The equipment is delivered

to an independent export packer in Houston,

Texas, where it is inspected prior to export to

Indonesia. Some damaged or defective goods

may remain with the packer for up to six

months. At the time the goods arrive at the

export packer, have they already begun a

“continuous route or journey” to their ultimate

Indonesian destination? See Virginia Indonesia,

910 S.W.2d at 906-07, 912-15 (holding that goods

are immune from personal property tax). But

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

286, 288-89 (1949) (15-month delay interrupts

continuity of export process).

These fact patterns illustrate the array of difficult

line-drawing questions with which courts applying

Richfield Oil must wrestle. To be sure, any legal

doctrine requires line-drawing, but the line-drawing

challenge here is particularly acute. Typically, this

Court either (a) issues a “rule” that tells lower courts

precisely how to respond to specific triggering facts,

16

or (b) lays out a “standard” that directs lower courts

to apply background principles and policies on a

case-by-case basis. See Kathleen M. Sullivan, The

Supreme Court, 1991 Term—Foreword: The Justices

of Rules and Standards, 106 Harv. L. Rev. 22, 58-59

(1992). The problem with Richfield Oil is that it is

neither a bright-line rule nor a standard based on

principles and policies. Unlike a successful brightline rule, Richfield Oil leaves lower courts to confront

countless cases of ambiguity. And, unlike a successful standard, Richfield Oil identifies no background

principle or policy to which a lower court can appeal

in an ambiguous case.

The Richfield Oil test thus fails doubly in its attempt to “avoid all ambiguity” regarding the ImportExport Clause’s scope. Cf. Kosydar, 417 U.S. at 71.

First, it has not brought clarity to the tax treatment

of exports because States and market actors are not

sure whether Richfield Oil even applies. And, second,

even if the Court does reaffirm Richfield Oil, lower

courts will be left with little guidance as to how

to apply Richfield Oil ’s holding in the multitude of

cases that will fall close to the line. A general rule

that nondiscriminatory sales and personal property

taxes are not “imposts” or “duties” for purposes of the

Import-Export Clause would avoid the administrative and compliance challenges that Richfield Oil has

engendered.

B. Richfield Oil Is Inefficient, Inequitable,

and Unnecessarily Intrusive upon State

Fiscal Autonomy

Aside from administrability concerns, Richfield Oil

fails to allocate tax burdens in an efficient and equitable manner. It motivates market actors to distort

their behavior in order to claim exemption. It shifts

17

tax burdens from some businesses to others in entirely

arbitrary ways. And it gratuitously intrudes upon

the fiscal autonomy of state and local governments.

As for efficiency: Wherever lower courts applying

Richfield Oil ultimately draw the line between exports

and non-exports, market actors will be encouraged to

alter their operations so that their sales fall on the

export side of the line. For example, if a court holds

that delivery to a common carrier for transport to

Mexico marks the start of a “continuous route or

journey” abroad but that delivery to the Mexican

manufacturer’s U.S. warehouse does not, exporters

will have an incentive to deliver to the common

carrier even if delivery to the warehouse would be

more efficient from a non-tax perspective. Indeed,

the facts of the present case illustrate the extent

to which businesses may distort their distribution

channels in order to secure exemption. Instead of

delivering a handbag or watch to the purchaser at

the point of sale, respondent gives the purchaser a

ticket, and a “duty free runner” then “delivers the

item to the buyer at the jetway immediately prior to

boarding and the customer hands the ticket to the

runner.” Dulles Duty Free, 803 S.E.2d at 55 (decision

below). Such contortions may be necessitated by

Richfield Oil ’s “continuous route or journey” test, but,

if so, that is one strike against retaining Richfield

Oil.

As for equity: Richfield Oil allows some businesses

to escape the application of sales and personal

property taxes, and, by doing so, shifts more of the

tax burden to other businesses and individuals. See

Richfield Oil, 329 U.S. at 87 (Black, J., dissenting)

(foreseeing that Richfield Oil will “creat[e] an island

of constitutional tax immunity for a substantial pro-

18

portion of the profitable business of the nation” and

thus “throw[ ] an unfair part of the tax burden on

others”). This burden-shifting has little relationship

to the benefits that various businesses derive from

state and local government services. Businesses that

export goods to foreign countries rely on local police

and fire departments, roads, garbage clean-up, and

other state and municipal services no less than

counterparts that manufacture goods for in-state use

or that ship their goods domestically rather than

internationally. There is no apparent reason why

exporters should pay any less for those services than

other taxpayers in the same jurisdiction. See id. at

89 (“[T]he history and the evolution of the constitutional prohibition against taxation of exports manifest

that there was no intention to subsidize either export

businesses or foreign purchasers by any such broad

immunity from state and federal taxation.”).

All the while, Richfield Oil needlessly constrains

the fiscal autonomy of state and local governments.

Of course, the Import-Export Clause contemplates

such intrusions when necessary to vindicate the

clause’s core objectives: (1) to allow the federal government to “speak with one voice when regulating

commercial relations” with foreign nations; (2) to

ensure that “import revenues,” which were once the

federal government’s “major source of revenue,” are

not “diverted to the States”; and (3) to preserve

“harmony among the States” by preventing “seaboard

States, with their crucial ports of entry,” from

extracting rents from “other States not situated as

favorably geographically.” Michelin Tire, 423 U.S. at

285-86. But Richfield Oil addresses none of these

concerns.

19

Applying a nondiscriminatory state or local tax to

goods in the stream of export does not interfere with

the federal government’s conduct of international

economic affairs. When foreign governments object

to U.S. state and local tax treatment of exports, they

generally object on the grounds that exports are

treated too favorably. See, e.g., World Trade Org.,

Report of the Appellate Body:

United States—

Conditional Tax Incentives for Large Civil Aircraft,

WT/DS487/AB/R (Sept. 4, 2017) (European Union

challenge to Washington State tax incentives for

aircraft industry), available at https://www.wto.org/

english/tratop_e/dispu_e/487abr_e.pdf.

It is the

exemption of exports—not the nondiscriminatory

taxation of exports—that creates foreign policy

complications. Moreover, state and local taxation

of goods in the stream of export does not interfere

with federal revenue-raising. The federal government

historically has relied on import revenue but never

on export revenue—and, indeed, the federal government is itself prohibited from taxing exports. See

U.S. Const. art. I, § 9, cl. 5. Finally, a nondiscriminatory state or local tax based on the value of personal

property or sales does not raise the risk of “interstate

rivalry and friction.” Washington Stevedoring, 435

U.S. at 754. As this Court has said, “[t]he third

Import-Export Clause policy . . . is vindicated if the

tax falls upon a taxpayer with reasonable nexus to

the State, is properly apportioned, does not discriminate, and relates reasonably to services provided by

the State.” Id. at 754-55.

C. Reliance Interests Do Not Weigh in Favor

of Retaining Richfield Oil

Overruling a precedent—even a poorly reasoned

precedent that produces inconsistent, inefficient, and

20

inequitable results—is never a small matter.

“[R]eliance on a judicial opinion is a significant

reason to adhere to it.” Leegin Creative Leather

Prods., Inc. v. PSKS, Inc., 551 U.S. 877, 906 (2007).

Here, however, reliance interests cannot justify

Richfield Oil ’s retention—for three reasons.

First, reliance interests weigh on both sides in

this case. Concededly, some businesses may have

made long-term investments on the assumption that

Richfield Oil ensured exemption from certain state

and local taxes. At the same time, lawmakers and

tax authorities in jurisdictions whose courts no

longer follow Richfield Oil have constructed their

own tax systems on the assumption that this Court

would carry Michelin Tire through to its logical conclusion. Cf. Hooven II, 466 U.S. at 359, 361 (“error”

for state court to continue to rely on a precedent that

was “seriously undermined”—but “not expressly

overruled”—by Michelin Tire). So, too, businesses

in those jurisdictions that have not designed their

distribution channels in order to claim exemption

under Richfield Oil will be placed at a disadvantage

if new competitors can swoop in and secure immunity

from state and local taxes. The revival of Richfield

Oil in the twenty-first century would upset reliance

interests at least as much as a decision to lay

Richfield Oil to rest.

Second, this Court has given fair warning to all

who would listen that Richfield Oil stands on its last

legs. As far back as 1978, the Court indicated that it

would reconsider Richfield Oil when “a case with

pertinent facts is presented.” Washington Stevedoring, 435 U.S. at 757 n.23. And, again in 1993, the

Court issued a reminder that Richfield Oil ’s validity

was in doubt. See Itel Containers, 507 U.S. at 77

21

(“Even assuming that [the Richfield Oil ] rule has not

been altered by the approach we adopted in Michelin

. . . .”) (emphasis added). Any business that made a

long-term investment in the past several decades on

the assumption that Richfield Oil would survive

must have known that it was engaged in a gamble.

If the Court grants this petition and overrules

Richfield Oil, no one can claim that she or he was

blindsided.

Third, this Court did not consider the reliance

argument to be a sufficient justification for retaining

the “original package” doctrine for imports. See

Michelin Tire, 423 U.S. at 282-83. Nor did this Court

think that reliance interests weighed decisively

in favor of adhering to the formalistic dormant

Commerce Clause doctrine from which Richfield

Oil borrowed. See Complete Auto, 430 U.S. at 279.

Reliance interests here are no stronger—indeed,

much weaker—than in Michelin Tire or Complete

Auto. Both of those decisions marked significant

deviations from prior precedent. See Washington

Stevedoring, 435 U.S. at 752 (“Michelin initiated a

different approach to Import-Export Clause cases.”);

U.S. Steel Mining, 631 S.E.2d at 562 (“the focus of

Import-Export Clause analysis took a sharp turn

in Michelin Tire”); IBM, 517 U.S. at 851 (noting

“[o]ur rejection in Complete Auto of much of our

early dormant Commerce Clause jurisprudence”). By

contrast, overruling Richfield Oil would amount to

follow-through on an intention telegraphed well in

advance. Reliance interests thus supply no reason

for this Court to retain a doctrine that distorts

economic decisionmaking, allocates tax burdens

unfairly, and undermines the fiscal autonomy of

state and local governments.

22

CONCLUSION

The petition for a writ of certiorari should be

granted.

Respectfully submitted,

JEFFREY A. LOVE

Counsel of Record

KELLOGG, HANSEN, TODD,

FIGEL & FREDERICK,

P.L.L.C.

1615 M Street, N.W.

Suite 400

Washington, D.C. 20036

(202) 326-7900

(jlove@kellogghansen.com)

January 25, 2018

APPENDIX

1a

Amici are listed below in alphabetical order. Their

institutional affiliations are provided for identification purposes only.

Reuven S. Avi-Yonah, Irwin I. Cohn Professor of

Law, University of Michigan Law School

Lily Batchelder, Frederick I. and Grace Stokes Professor of Law, New York University School of Law

Samuel D. Brunson, Professor of Law, Loyola

University Chicago School of Law

J. Clifton Fleming, Ernest L. Wilkinson Chair and

Professor of Law, J. Reuben Clark Law School,

Brigham Young University

David Gamage, Professor of Law, Indiana University

Maurer School of Law

Ari Glogower, Assistant Professor of Law, Ohio State

University Moritz College of Law

Jacob Goldin, Assistant Professor of Law, Stanford

Law School

Daniel Hemel, Assistant Professor of Law, University

of Chicago Law School

Hayes Holderness, Assistant Professor of Law,

University of Richmond School of Law

Michael S. Knoll, Theodore K. Warner Professor of

Law, University of Pennsylvania Law School

2a

Zachary Liscow, Associate Professor of Law, Yale

Law School

Ruth Mason, Class of 1957 Research Professor of

Law, University of Virginia School of Law

Goldburn P. Maynard Jr., Assistant Professor of

Law, University of Louisville Brandeis School of Law

Richard Pomp, Alva P. Loiselle Professor of Law,

University of Connecticut School of Law

James R. Repetti, William J. Kenealy, S.J. Professor

of Law, Boston College Law School

Julie A. Roin, Seymour Logan Professor of Law,

University of Chicago Law School

Erin Scharff, Associate Professor of Law, Sandra Day

O’Connor College of Law, Arizona State University

Jay Soled, Professor, Rutgers Business School

Edward Zelinsky, Morris and Annie Trachman Professor of Law, Benjamin N. Cardozo School of Law,

Yeshiva University