Amicus Curiae Brief — Jimmy Swaggart Ministries v. Board of Equalization of Cal.

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No. 88-1374 \! | / |

JOSEPH F. SPANIOL,

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IN THE FN napcsrte:

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Supreme Court of the United States

OCTOBER TERM, 1989

THE JIMMY SWAGGART MINISTRIES,

Appellant,

V.

BOARD OF EQUALIZATION OF CALIFORNIA,

Appellee.

On Appeal from the Court of Appeal of the State of

California, Fourth Appellate District, Division One

BRIEF OF THE

NATIONAL CONFERENCE OF STATE LEGISLATURES,

NATIONAL LEAGUE OF CITIES,

U.S. CONFERENCE OF MAYORS,

NATIONAL ASSOCIATION OF COUNTIES, AND

INTERNATIONAL CITY MANAGEMENT ASSOCIATION;

JOINED BY THE MULTISTATE TAX COMMISSION

AS AMICI CURIAE IN SUPPORT OF APPELLEE

BENNA RUTH SOLOMON *

Chief Counsel

CHARLES ROTHFELD

STATE AND LOCAL LEGAL CENTER

444 N. Capitol Street, N.W.

Suite 349

Washington, D.C. 20001

(202) 638-1445

* Counsel of Record for the

Amici Curiae

WILSON - Epes PRINTING Co., INC. - 789-0096 - WASHINGTON, D.C. 20001

QUESTIONS PRESENTED

Amici will address the following questions:

1. Whether the court of appeal’s rejection of appel-

lant’s Due Process and Commerce Clause arguments rests

on an independent and adequate state ground.

2. Whether appellant’s systematic and purposeful ex-

ploitation of the California market in its mail order busi-

ness provides an adequate “nexus” to support the imposi-

tion of the State’s use tax.

(i)

TABLE OF CONTENTS

Page

QUESTIONS PRESENTED .......W.22.-eeeee eee i

SO Sr I becttterntccentenenntsieinnniiinainn iv

INTEREST OF AMICI CURIAE ..000.0...2..2..-2c.ccec-es-o-o 1

ET cceimanisttitnirisninindciinapesnniititind tiaailliisinnblii 2

SUMMARY OF ARGUMENT. ...00000..2....2..2.-..2c--c-c-ececeeses 7

TE Miia inulin inaiaineiteataiaitiariniiamaitiadie 10

APPELLANT’S ARGUMENTS ON “NEXUS”

Me eS 10

A. The State Court’s Rejection Of Appellant’s

“Nexus” Claim Rests On An Independent And

Adequate State Ground .........00.00 10

B. There Was Adequate “Nexus” To Support Im-

position Of California’s Use Tax On Property

CIID wsniceiiutshenninccsertininsindaiidaliatbiniaidiesen 13

CONCLUSION ..................... seniencnmneininginbeteiemsianeinaiadiatsaaiiionn 26

(iii)

iv

TABLE OF AUTHORITIES

CASES: Page

American Alliance Insurance Co. v. Board of

Equalization, 184 Cal. App. 3d 601 (1982)........ 18

Asahi Metal Industry Co. v. Superior Court, 480

el 17, 19

Atari, Inc. v. State Board of Equalization, 170

- eS § - eee 10, 11, 13

Barnes v. Board of Equalization, 118 Cal. App.

fe oO 13

Burger King Corp. v. Rudzewicz, 471 U.S. 462

EEE SE a eR 8, 18, 19, 20

Carmichael v. Southern Coal & Coke Co., 301 U.S.

RAR EE eee eee oe 16

Central R. Co. v. Pennsylvania, 370 U.S. 607

ESR EE Rare ene a nN 15

Commonwealth Edison Co. v. Montana, 453 U.S.

NG EER NCR Sa 15, 16

Complete Auto Transit, Inc. v. Brady, 480 U.S.

TEL Se Ee eS 15, 20

Cotton Petroleum Corp. v. New Mezico, 109 S.Ct.

1698 (1989) .. — 16

D.H. Holmes Co. v. "McNamara, 108 ‘S.Ct. "1619

Eee el ne eee. Aa nae 14, 16

Exxon Corp. v. Wisconsin Dept. of Revenue, 447

I 15

General Motors Corp. v. Washington, 377 U.S. 436

Ee a en eee 15

General Trading Co. v. Tax Comm’n, 322 U.S. 335

ESE recaaere ne ercee te nee eee eee 18

Goldberg v. Sweet, 109 S.Ct. 582 (1989) Bina) aolilindines 15, 16

Hathorn v. Lovorn, 457 U.S. 255 (1982) 13

International Shoe Co. v. Washington, 326 US.

ERT NR CC nr passim

King v. Board of Equalization, 22 Cal. App. 3d

REN ene ee ee 13

McGee v. International Life Insurance Co., 355

ERS eee ee 18, 19

Memphis Gas Co. v. Stone, 335 U.S. 80 (1948).... 15

Michigan v. Long, 463 U.S. 1082 (1983)... 10, 12

Michigan v. Tyler, 486 U.S. 499 (1978) ................. 7,10

Vv

TABLE OF AUTHORITIES—Continued

Page

Miller Brothers Co. v. Maryland, 347 U.S. 340

ra ianintiaineianamsiitl 15, 20, 23

Mobil Oil Corp. v. Commissioner, 445 U.S. 426

eer eR NN 15

Murdock v. Pennsylvania, 319 U.S. 105 (1943) ...9, 24, 25

National Bellas Hess, Inc. v. Dept. of Revenue,

ee I aii asatinctiedinmsannbsneneaiitamecennses 20

National Geographic Society v. California Board

of Equalization, 430 U.S. 551 (1977) ................... passim

Nelson v. Montgomery Ward & Co., 312 U.S. 373

a ee 20

Parker v. North Carolina, 397 U.S. 790 (1970)... 10

Shaffer v. Heitner, 483 U.S. 186 (1977) ................ 19

Standard Pressed Steel Co. v. Washington Dept.

of Revenue, 419 U.S. 560 (1975) ......................... 21

Texas Monthly, Inc. v. Bullock, 109 S.Ct. 890

ai a 24, 25-26

United Air Lines, Inc. v. Mahin, 419 U.S. 623

i 15

Wisconsin v. J.C. Penney Co., 311 U.S. 485

ESTP S eres weyer sees nae mene: 7, 8, 15, 16,17

Wolfe v. North Carolina, 364 U.S. 177 (1960).... 10, 18

World-Wide Volkswagen Corp. v. Woodson, 444

Fee 14, 18, 19, 20

CONSTITUTIONAL PROVISIONS:

U.S. Const.

Art. I, § 8, cl. 3, Commerce Clause .................... passim

EE icttcinth cust einaiciliaiiniebinicmtatethenensineniiell passim

Amend. XIV, Due Process Clause ...................... passim

STATUTES:

Cal. Rev. & Tax Code (1975 & Supp. 1989)

vi

TABLE OF AUTHORITIES—Continued

Page

NEE a Ne oe 10, 12

EES ee ee Se 10

MISCELLANEOUS:

R. Stern, E. Gressman & S. Shapiro, Supreme

Court Practice (6th ed. 1989) .......... edie sidhiitictaiea tens 10

In THE

Supreme Court of the United States

OCTOBER TERM, 1989

No. 88-1374

THE JIMMY SWAGGART MINISTRIES,

. Appellant,

BOARD OF EQUALIZATION OF CALIFORNIA,

Appellee.

On Appeal from the Court of Appeal of the State of

California, Fourth Appellate District, Division One

BRIEF OF THE

NATIONAL CONFERENCE OF STATE LEGISLATURES,

NATIONAL LEAGUE OF CITIES,

U.S. CONFERENCE OF MAYORS,

NATIONAL ASSOCIATION OF COUNTIES, AND

INTERNATIONAL CITY MANAGEMENT ASSOCIATION;

JOINED BY THE MULTISTATE TAX COMMISSION

AS AMICI CURIAE IN SUPPORT OF APPELLEE

INTEREST OF AMICI CURIAE

Amici National Conference of State Legislatures, Na-

tional League of Cities, U.S. Conference of Mayors, Na-

tional Association of Counties, and International City

Management Association are organizations whose mem-

bers include state, county, and municipal governments

and officials throughout the United States; they have a

compelling interest in legal] issues that affect state and

local governments. Amicus Multistate Tax Commission

is the official administrative agency of the Multistate

2

Tax Compact. The Compact has been entered into by

18 States and the District of Columbia as full members;

11 additional States have joined the Commission as asso-

ciate members.’ The Commission has a vital and con-

tinuing interest in tax disputes that may affect the

administration of state tax systems.

This case presents a recurring problem: appellant, an

out-of-state entity that derives profits from its systematic

and purposeful exploitation of an in-state market, is at-

tempting to avoid state taxation by asserting that it lacks

a sufficient “nexus” with the taxing State. This issue is

of enormous fiscal importance to state and local govern-

ments. Entities like appellant draw substantial benefits

from the services and infrastructure provided by individ-

ual States; unless those entities are made to pay their

own way, in-state taxpayers will be forced to shoulder

a disproportionate share of the state tax burden. Amici

therefore submit this brief to assist the Court in the

resolution of this case.?

STATEMENT

This brief addresses only the first question presented

in appellant’s brief on the merits (corresponding to the

fifth question presented in the jurisdictional statement) ,

which concerns the “nexus” requirement that the Court

has derived from the Due Process and Commerce Clauses.

The statement of the case therefore is limited to a de-

1 The current full members are Alaska, Arkansas, California,

Colorado, the District of Columbia, Hawaii, Idaho, Kansas, Minne-

sota, Missouri, Michigan, Montana, New Mexico, North Dakota,

Oregon, South Dakota, Texas, Utah, and Washington. The asso-

ciate members are Alabama, Arizona, Georgia, Louisiana, Maine,

Maryland, Massachusetts, New Jersey, Ohio, Pennsylvania, and

Tennessee. This brief should not be read to reflect the views of any

member State that files a separate brief in this case.

2 The parties’ letters of consent pursuant to Rule 36 of the Rules

of this Court have been filed with the Clerk of the Court.

3

scription of evidence and procedural developments that

are relevant to the nexus issue. The limited scope of this

brief, however, does not reflect disagreement with appel-

lee’s position on the merits of the First Amendment

question in this case; to the contrary, we associate our-

selves with appellee’s First Amendment arguments.

1. Appellant is a nonprofit religious organization.°

During 1974-1981, the tax years at issue here, appellant

operated a mail order business from its headquarters in

Baton Rouge, mailing religious items—principally books,

tapes, and records—to purchasers in (among other

places) California. J.S. App. A2-A4. These products

were offered for sale through magazines, product cata-

logs, and special flyers that were sent to individuals in

California whose names appeared on appellant’s mailing

list. J.A. 21, 49-50, 62. The parties stipulated below that

appellant’s California mail order saies during the period

at issue amounted to $1,702,942. J.S. Ann. 45.

Appellant also had other contacts with California dur-

ing 1974-1981, although the extent of those contacts is

somewhat uncertain because the issue was not the sub-

ject of discovery below. It nonetheless is clear that ap-

pellant conducted 23 evangelistic “crusades” in California

during that period, at which appellant held religious serv-

ices that involved preaching and singing, and sold vari-

ous religious and nonreligious items. J.S. App. A3.*

The “crusades” typically lasted from one to three days,

8 During most of the period at issue here appellant was a non-

profit religious corporation. In 1982 the Internal Revenue Service

changed appellant’s income tax status to that of a church, making

the change retroactive to 1980. J.S. App. A2 n.1.

4 The parties stipulated below that appellant sold $240,560 worth

of merchandise at the California crusades. J.S. App. A5. For pur-

poses of its nexus argument appellant does not contest the validity

of the imposition of California’s sales tax on these transactions

(Br. 16), and we therefore confine our discussion to the validity of

the use tax associated with appellant’s mail order sales.

4

with one “crusade” lasting six days; over the seven-year

period at issue here, appellant conducted 52 days of

“crusades” in California. Jbid. The crusade activity in

California was recorded for later sale or broadcast. /d.

at A3, A387; J.A. 20. In addition to the actual crusade

dates, there was evidence below that appellant’s staff

spent time in California, where they “made hotel reserve-

tions, negotiated and secured leases for crusade meeting

places, secured publicity for the meetings, etc.” J.A. 20.

Similarly, “[s]ome of the time between crusade meeting

dates in California included visits with local followers,

removal of equipment and facilities, travel to the next

location and setting up for the next meeting.” Ibid.

Appellant also had contacts with California that were

unrelated to the “crusades.” From 1978 through 1984,

a period that includes the last three of the tax years at

issue here, appellant maintained a full-time representa-

tive in California who counseled adherents and solicited

donations. J.S. App. A36; App. Br. 6; J.A. 21, 208.

In addition, appellant sold its religious programs to

California radio stations and cable television companies

for broadcast within the State. J.S. App. A37. Both the

“crusades” and appellant’s broadcasts were used to fur-

ther its mail order sales; appellant stipulated below that

the availability of mail order products was made known

“at evangelistic crusades and over the radio and tele-

vision in connection with [appellant’s] religious brcad-

casts.” J.A. 62. See id. at 49-50.

2. California requires retailers to pay a sales tax “(flor

the privilege of selling tangible personal property at re-

tail” within the State. Cal. Rev. & Tax Code § 6051 (1975

& Supp. 1989). California also imposes a complementary

use tax “on the storage, use, or other consumption in this

state of tangible personal property purchased from any

retailer * * * for storage, use, or other consumption.”

Cal. Rev. & Tax Code § 6201. The use tax typically is

applied in cases where the retail sale took place outside

5

California and therefore was not itself taxable; while the

incidence of the use tax falls on the purchaser (see Cal.

Rev. & Tax Code § 6201), the seller in most cases must

collect the use tax from the purchaser at the time of sale.

Cal. Rev. & Tax Code § 6202, 6203. :

During the tax years at issue here appellant neither

collected nor paid the use tax on its mail order sales of

religious property in California; appellant also failed to

pay sales tax on the sale of goods at its California

“crusades.” In 1981 the California Board of Equaliza-

tion (the “Board”) began an audit of appellant, and the

parties eventually stipulated that appellant “ ‘sold for

use in California tangible personal property for the

period April 1, 1974, through December 31, 1981, meas-

ured by payment to [appellant] of $1,702,942.00 for mail

order sales from Baton Rouge, Louisiana and $240,560.00

for crusade merchandise sales in California.’” J.S. App.

A5. The Board accordingly informed appellant that it

owed use and sales taxes of $118,294.54 (of which ap-

proximately $104,000 represented use tax on the mail

order sales), in addition to interes. and penalties. Jbid.

After receiving this notification, appellant filed a peti-

tion for redetermination, contesting its liability for the

use and sales taxes. The petition rested exclusively on

First Amendment grounds, contending that imposition of

the taxes would “constitute an interference with the ‘free

exercise’ of religion by the Swaggart organization” (J.A.

12; see id. at 11-16); appellant’s counsel specifically did

“not argue nexus” before the Board. J.A. 22. After a

hearing, the Board remitted the penalty but otherwise

reaffirmed appellant’s liability for the tax. J.A. 32-33.

Appellant paid the tax and filed a claim for a refund

before the Board; the refund claim incorporated by refer-

ence appellant’s previously filed petition for redetermina-

tion and therefore rested entirely on the Free Exercise

Clauses of the federal and state Constitutions. J.A. 34.

The Board subsequently denied the refund claim. J.A.

35-36.

6

8. Appellant then brought this action in California

superior court. Like its petition for redetermination and

claim for refund, appellant’s complaint was grounded on

the First Amendment and made no mention of nexus

(see J.A. 37-41); the parties stipulated before the trial

court that the case involved only free exercise issues.

J.A. 59. Appellant first raised a Due Process and Com-

merce Clause nexus claim immediately prior to trial.

Supp. C.T. 1-9. The trial court responded with an order

in limine excluding evidence unrelated to the First

Amendment issue (R.T. 12-14), and at the close of trial

rejected appellant’s request that it reconsider its exclu-

sion of the nexus question. R.T. 229-231. The court ulti-

mately ruled for the Board on the merits of the free

exercise claim, noting that it “made its finding solely

upon the issue framed by the pleadings as it relates to

first amendment grounds.” J.A. 213.

The court of appeal affirmed. J.S. App. Al-A40. The

court rejected appellant’s free exercise arguments (id.

at A7-A29), as well as state law, Ninth and Tenth

Amendment, and evidentiary cortentions (id. at A33-

A35, A37-A40) that are not repeated here. The court

also found that its consideration of appellant’s Commerce

Clause and due process nexus arguments was precluded

by appellant’s failure to advance those arguments before

the Board. Pointing to provisions of state law limiting

refund suits to those issues that were first advanced in

an administrative claim for refund, the court observed

that “(t]he only constitutional ground [appellant] speci-

fied [in its refund claim] was the First Amendment;

no other constitutional grounds were stated.” J.S. App.

A382; see id. at A30-A31. The court went on to hold

alternatively that “(t]he record contains evidence sup-

porting a finding [appellant] had a sufficient nexus to

California to justify imposing the use tax” (id. at A35;

see id. at A35-A37), but_on rehearing deleted the por-

tion of its opinion addressing the merits of the nexus

issue. J.S. App. A41.

7

The California Supreme Court denied review. J.S.

App. A4z,

SUMMARY OF ARGUMENT

A. The court of appeal’s decision on nexus rests on

an independent and adequate state ground. Under Cali-

fornia law, taxpayers bringing refund actions in court

may advance only those claims that were first specifically

presented to the Board. Appellant failed to comply with

this requirement. Its administrative refund claim—the

document that fixed the scope of its argument—advanced

only free exercise contentions. The trial court therefore

refused to address appellant’s nexus arguments, and the

court of appeal expressly grounded its rejection of the

those arguments on appellant’s procedural default. Be-

cause “[flailure to present a federal question in con-

formance with state procedures constitutes an adequate

and independent ground of decision barring review in

this Court” (Michigan v. Tyler, 436 U.S. 499, 512 n.7

(1978) )—and because the procedural rule involved here

serves important state interests—this Court should dis-

miss for want of jurisdiction the portion of the appeal

that advances Commerce Clause anc due process argu-

ments.

B. 1. If the Court reaches the merits of the nexus

issue, it should reject appellant’s arguments. The nexus

requirement, which the Court has found in both the Due

Process and Commerce Clauses, assures that state taxes

bear some relation to the “protection, opportunities and

benefits given hy the State” (Wisconsin v. J.C. Penney

Co., 311 U.S. 435, 444 (1940)), while guaranteeing that

States tax only those transactions with which they have

a connection. The Court repeatedly has made clear, how-

ever, that there need not be a dollar-for-dollar corre-

spondence between the benefits conferred by the State

and the tax imposed on out-of-state commercial entities,

and that those benefits need not be directly conferred.

8

Against this background, appellant is incorrect in

asserting that state taxes may be imposed only upon en-

tities that maintain a continuous physical presence in-

state. It is sufficient that the taxpayer has projected

a substantial economic presence into the State, marked

by the purposeful cultivation and exploitation of an in-

state market. Whether or not such a taxpayer physically

enters the State, its earnings are made possible by the

in-state infrastructure and workforce that facilitate ad-

vertising, permit the distribution of goods, and allow

for the development of a group of willing consumers—

all “benefits which [the State] has conferred by the fact

of being an orderly, civilized society.” J.C. Penney, 311

US. at 444.

This conclusion draws substantial support from the

Court’s recent decisions in the closely related area of

personal jurisdiction. In that setting, the Court has held

that a State does not exceed its powers under the Due

Process Clause when it asserts jurisdiction over firms

that deliver products into the stream of commerce with

the intention that they be purchased by consumers in

the forum State. See Burger King Corp. v. Rudzewicz,

471 U.S. 462, 473 (1985). California courts thus could

assert jurisdiction over appellant if, for example, an

in-state purchaser brought suit because he was injured

by one of the products that appellant shipped into the

State. There is no reason to suppose that the State

nevertheless lacks authority to impose a tax on appel-

lant arising out of the same transaction. To the con-

trary, “[t]he activities which establish [the taxpayer’s]

‘presence’ subject it alike to taxation by the state and

to suit to recover the tax.” International Shoe Co. v.

Washington, 326 U.S. 310, 321 (1945).

2. Viewed against these principles, the record here

demonstrates an adequate nexus to support the imposi-

tion of California’s use tax on appellant. Most obviously,

this Court’s decisions place it beyond dispute that appel-

9

lant is subject to tax for the three-year period during

which it had a full-time representative in California.

See National Geographic Society v. California Board of

Equalization, 480 U.S. 551 (1977). And for the entire

period involved here, appellant’s projection of its presence

into the State by radio and television, by repeated per-

sonal visits during “crusades,” and by magazine, catalog,

and flyer, plainly manifested a purposeful exploitation of

the California market. That exploitation was made pos-

sible by the infrastructure and services provided by the

State. Indeed, even if only physical presence is taken

into account, there is adequate nexus here: there is no

reason why a tax should be permissible (as it surely is)

when a firm maintains a single employee in-state year-

round, but not when the firm—as did appellant—period-

ically sends many employees into the State.

The Court also should reject appellant’s argument that

the “crusades” cannot be used to support nexus be-

eause doing so will discourage protected religious activity.

This argument is grounded on two propositions—that the

“crusades” are the only element providing nexus here,

and that the “crusades” did not generate mail order

sales—that are not supported by the record. In any

event, California’s use tax is not like the flat license fee

at issue in Murdock v. Pennsylvania, 319 U.S. 105

(1943), cited by appellant, which the Court found func-

tioned as a prior restraint on the exercise of religious

rights. It is, instead, quite similar to “a tax on the in-

come of one who engages in religious activities or a tax

on property used or employed in connection with those

activities.” Jd. at 112. Appellant is receiving benefits

from the State; like everyone else in society, appellant

is simply being asked to pay its own way.

10

ARGUMENT

APPELLANT’S ARGUMENTS ON “NEXUS” ARE

WITHOUT MERIT

A. The State Court’s Rejection Of Appellant’s “Nexus”

Claim Rests On An Independent And Adequate State

Ground

It is, of course, black letter law that this Court lacks

jurisdiction to “review judgments of state courts that

rest on adequate and independent state grounds.” Michi-

gan v. Long, 463 U.S. 1032, 1041-1042 (1983). In par-

ticular, “[flailure to present a federal question in con-

formance with state procedures constitutes an adequate

and independent decision barring review in this Court, so

long as the State has a legitimate interest in enforcing

its procedural rule.” Michigan v. Tyler, 436 U.S. 499,

512 n.7 (1978). See, ¢.g., Parker v. North Carolina, 397

U.S. 790, 798 (1970); Wolfe v. North Cc rolina, 364 U.S.

177, 195-196 (1960). See generally R. Stern, E. Gress-

man & S. Shapiro, Supreme Court Practice 181-183 (6th

ed. 1986). That principle is dispositive here.

California law provides that an administrative claim

for a tax refund must “state the specific grounds upon

which the claim is founded,” and refund suits will be

entertained only if “a claim for refund or credit has

been duly filed” with the Board. Cal. Rev. & Tax Code

§§ 6904(a) (emphasis added), 6932 (1975 & Supp.

1989). Under these provisions, “[t]he claim for refund

delineates and restricts the issues to be considered in a

taxpayer’s refund action. * * * The trial court and

[appellate] court are without jurisdiction to consider

grounds not set forth in the claim.” Atari, Inc. v. State

Board of Equalization, 170 Cal. App. 3d 665, 672 (1985).

A taxpayer therefore may not obtain relief on a theory

first propounded at trial. See id. at 671-672.

Appellant plainly failed to comply with the require-

ments of California law in advancing its nexus conten-

11

tions. The document that fixed the scope of appellant’s

argument, its administrative refund claim, simply in-

corporated by reference appellant’s previously filed peti-

tion for redetermination of tax. J.A. 34. The petition

for redetermination, in turn, was grounded exclusively

on the proposition that taxation would “constitute an in-

) terference with the ‘free exercise’ of religion by the

Swaggart organization.” J.A. 12; see id. at 1-16. The

Board’s hearing officer thus specifically noted, in for-

warding his decision and recommendation to the Board,

that appellant’s “[c]ounsel does not argue nexus.” J.A.

22.° Indeed, even after the Board’s rejection of the re-

fund claim, appellant’s trial court complaint made no

mention of nexus in general or of the Commerce or Due

Process Clauses in particular (except insofar as the First

Amendment is made applicable to the States through the

Fourteenth). J.A. 37-41. To the contrary, the parties

5 Appellant now asserts that “the State Board of Equalization

considered and ruled on the Commerce and Due Process Clause

issue.” Br. 17 n.12. This is a significant misstatement of the

record. The two documents appellant cites in support of its asser-

tion—a letter to appellant from a Board auditor (J.S. App. F3-

F4) and the recommendation of a Board hearing officer (J.A. 21)—

simply recited a Board counsel’s conclusion that there was sufficient

nexus to support the imposition of California’s use tax. As the

court of appeal explained, however, “[t]hese statements say noth-

ing as to whether the issues [of nexus] were disputed; whether

[appellant] made any claims on these bases before the Board.”

J.S. App. A382. In fact, as the court went on to note (ibid.), the

record makes clear that appellant “d[id] not argue nexus” before

the Board (J.A. 22 (emphasis added)), and neither the hearing

officer’s conclusion (see J.A. 22-29) nor the Board’s order (J.A.

82-33) addressed the issue. In any event, California law provides

that the refund claim is the dispositive document; a taxpayer who

fails to advance an issue in its refund claim cannot later rely on

materials relating to that issue prepared by the Board for its use

in resolving a petition for redetermination. See Atari, 170 Cal.

3d at 671-672. And, as we note above, the fact that appellant

belatedly attempted to raise the nexus issue at trial and on appeal

(see App. Br. 17 n.12) does not excuse its procedural default.

12

stipulated before the trial court that the claim for a re-

fund was grounded exclusively on the Free Exercise

Clauses of the federal and state Constitutions. J.A. 59.

Appellant first raised its nexus claim immediately

prior to trial. Supp. C.T. 1-9. The trial court responded

with an order in limine excluding evidence unrelated to

the First Amendment issue, although the court permitted

appellant to make offers of proof bearing on the nexus

claim. R.T. 12-14. At the close of trial the court rejected

appellant’s request that it reconsider its exclusion of the

nexus issue, noting that appellant’s failure to raise the

issue until trial deprived the Board of an opportunity to

engage in discovery. R.T. 229-231. In ruling for appellee

on the merits, the court stated that it “made its finding

solely upon the issue framed by the pleadings as it relates

to first amendment grounds.” J.A. 213.

In affirming, the court of appeal expressly grounded

its rejection of the nexus claim on appellant’s procedural

default, finding it dispositive that the nexus argument

was “not raised [by appellant] in its claim for a refund

from the Board.” J.S. App. A380. Noting the strict pro-

cedural requirements of California law (J.S. App. A30-

A31, A832), the court held that “[{t]he only constitu-

tional ground [appellant] specified [in its refund claim]

was the First Amendment; no other constitutional

grounds were stated. To adopt [appellant’s] position

[that its nexus claim was preserved] would require us

to rewrite section 6904, replacing its requirement of ‘spe-

cific grounds,’ with a general denial of tax liability

standard.” J.S. App. A32. This the court “decline[d] to

do.” Ibid. The court went on to find alternatively that

there was in fact a sufficient nexus to support the tax

(J.S. App. A338, A35-A37), but on rehearing deleted the

portion of its opinion addressing the merits of the nexus

issue (J.S. App. A41)—making it absolutely clear that

its holding involved only state rules of procedure. See

Long, 463 U.S. at 1041-1042.

——

Because both decisions below were grounded on state

law, the nexus issue is properly before this Court only

if the state procedural rule that barred appellant’s claim

was applied for the purpose of evading resolution of a

federal issue, or otherwise fails to advance legitimate

state interests. See Hathorn v. Lovorn, 457 U.S. 255, 262-

263 (1982). But appellant does not (and could not)

argue that to be the case. The requirement that tax-

payers first present their claims to the Board—which

is, after all, an ordinary exhaustion of remedies require-

ment—is routinely enforced by the California courts.

See, e.g., Atari, Inc. v. Board of Equalization, supra;

Barnes v. Board of Equalization, 118 Cal. App. 3d 994,

1001 (1981) ; American Alliance Insurance Co. v. Board

of Equalization, 134 Cal. App. 3d 601, 609 (1982) ; King

v. Board of Equalization, 22 Cal. App. 3d 1006, 1015

(1972). And the rule serves important state concerns.

“Prior to seeking relief from the superior court, a tax-

payer must present matters of law and fact to the State

Board of Equalization so that the Board may be afforded

the opportunity to rectify any mistake in tax collection.

* * * Such a rule prevents having an overworked court

consider issues and remedies available through admin-

istrative channels.” Atari, 170 Cal. App. 3d at 673. It

also, as this case itself makes clear, facilitates a fuller

development of the factual record.

Against this background, it is plain that the courts

below properly disposed of appellant’s nexus conten-

tions on state law grounds. This Court accordingly should

dismiss the portion of the appeal advancing Commerce

Clause and due process arguments for want of jurisdic-

tion. See, e.g., Wolfe, 364 U.S. at 196.

B. There Was Adequate “Nexus” To Support Imposition

Of California’s Use Tax On Property Sold By Ap-

pellant

If the Court nevertheless chooses to reach the Com-

merce and Due Process Clause issues here, we note, as

a preliminary matter, that appellant has framed the

14

nexus question in a highly misleading manner. Appel-

lant asserts that imposition of the use tax may be

grounded, if at all, solely “on the basis of 23 evangelistic

crusades appellant conducted in the State during 1974-

81.” Br. 16 (footnote omitted). In fact, while appellant’s

failure to raise the nexus issue until trial has left the

record in a somewhat murky state—a fact that cuts

powerfully against reaching the question now—the rec-

ord evidence does make clear that appellant’s presence

in California during the relevant period was considerably

more substantial than it now lets on. Any decision on

nexus should, of course, take account of the record as

a whole. Having said that, however, in our view im-

position of the use tax was supportable even on the facts

as stated by appellant; in either case, “[t]here is ‘nexus’

aplenty here.” D.H. Holmes Co. v. McNamara, 108 S.Ct.

1619, 1624 (1988).

1. This Court has held that States may tax out-of-

state entities when there is a “sufficient nexus” between

the two—a requirement that assures a fair relationship

between “the services provided the out-of-state seller and

the taxing State.” National Geographic Society v. Cali-

fornia Board of Equalization, 430 U.S. 551, 555, 558

(1977). The Court has found this requirement in both

the Due Process and Commerce Clauses.

The due process nexus requirement, as the Court has

explained in describing the closely related due process

limit on the assertion of personal jurisdiction, is grounded

on the principle that States may not assert authority over

out-of-state entities in a manner that “offend[s] ‘tradi-

tional notions of fair play and substantial justice.’” Jn-

ternational Shoe Co. v. Washington, 326 U.S. 310, 316

(1945) (citation omitted). See World-Wide Volkswagen

Corp. v. Woodson, 444 U.S. 286, 292 (1980). In the tax

setting, this due process “fair play” principle assures

that “the taxing power exerted by the State bears fiscal

relation to protection, opportunities and benefits given

15

by the State.” Wisconsin v. J.C. Penney Co., 311 U.S.

435, 444 (1940). See Exxon Corp. v. Wisconsin Dept.

of Revenue, 447 U.S. 207, 219-220 (1980); Mobil Oil

Corp. v. Cummissioner, 445 U.S. 426, 436-437 (1980);

General Motors Corp. v. Washington, 377 U.S. 436, 441

(1964) ; Central R. Co. v. Pennsylvania, 370 U.S. 607,

612 (1962); Miller Brothers Co. v. Maryland, 347 U.S.

340, 344-345 (1954). The parallel Commerce Clause

nexus requirement—the initial prong of the four-part

Commerce Clause test first set out in Complete Auto

Transit, Inc. v. Brady, 430 U.S. 274, 287 (1977)—is

similar to (and in part derived from) the due process

nexus limitation *; it prevents a multitude of States from

impeding interstate commerce by taxing transactions

with which they have no substantial connection. See gen-

erally Goidberg v. Sweet, 109 S.Ct. 582, 589-590 (1989) ;

United Air Lines, Inc. v. Mahin, 410 U.S. 623, 631

(1973) .7

While a State thus must provide opportunities or ben-

efits to the out-of-state taxpayer, those benefits need

not be directly conferred. It is enough that a State “runs

mass transit and maintains public roads which benefit

*The Complete Auto test evidently was inspired by Justice

Rutledge’s concurring opinion in Memphis Gas Co. v. Stone, 335

U.S. 80, 96-97 (1948), which found no threshold impediment to the

application of a state tax that was “clearly within the State’s power

to lay insofar as any limitation of due process or ‘jurisdiction to

tax’ in that sense is concerned.” See Complete Auto, 430 U.S. at

282.

™The nexus requirement also is “closely connected” (Common-

wealth Edison Co. v. Montana, 453 U.S. 609, 626 (1981)) to the

fourth prong of Complete Auto, which assures that the tax is

“fairly apportioned” to the taxpayer’s in-state activity. 430 U.S.

at 287. While the nexus requirement guarantees that the taxpayer

has a connection to che taxing State, the fair relation test “imposes

the additional limitation that the measure of the tax must be rea-

sonably related to the extent of the contact.” Commonwealth Edi-

son, 453 U.S. at 626 (emphasis in original). See Goldberg, 109

S.Ct. at 592.

16

[the taxpayer’s] customers, and supplies a number of

other civic services” (D.H. Holmes, 108 S.Ct. at 1624),

or makes possibile “ ‘the benefit of a trained work force’ ”

(Commonwealth Edison Co. v. Montana, 453 U.S. 609,

624 (1981) (citation omitted)), or offers the taxpayer

the “other advantages of civilized society” (Goidberg, 109

S.Ct. at 592); in such cases the tax is adequately “tied

to the earnings which the State * * * has made possible,

insofar as government is the prerequisite for the fruits

of civilization for which, as Mr. Justice Holmes was

fond of saying, we pay taxes.” J.C. Penney, 311 U.S. at

446. See Cotton Petroleum Corp. v. New Mezxico, 109

S.Ct. 1698, 1714-1715 (1989); Commonwealth Edison,

453 U.S. at 626.

Indeed, the Court has repeatedly held that there need

not be a dollar-for-dollar correspondence between the

benefits conferred by the State and the tax imposed on

an out-of-state commercial entity:

[t]he tax which may be imposed on a particular

interstate transaction need not be limited to the cost

of the services incurred by the State on account of

that particular activity. * * * On the contrary,

“interstate commerce may be required to contribute

to the cost of providing all governmental services,

including those services from which it arguably

receives no direct ‘benefit.’ ”

Goldberg, 109 S.Ct. at 592 (emphasis in original),

quoting Commonwealth Edison, 453 U.S. at 627 n.16.

See Cotton Petroleum, 109 S.Ct. at 1714-1715; Common-

wealth Edison, 453 U.S. at 623-624, 628-629; Carmichael

v. Southern Coal & Coke Co., 301 U.S. 495, 521-523

(1937). By the same token, the Court has rejected the

notion “that there must exist a nexus or relationship not

only between the seller and the taxing State, but also

between the activity of the seller sought to be taxed and

the seller’s activity within the State.” National Geo-

graphic, 430 U.S. at 560.

17

Against this background, appellant plainly is incorrect

in asserting (Br. 17) that state taxes may be imposed

only upon entities that maintain a continuous physical

presence in-state (although such a presence is, of course,

enough to establish nexus); the nexus test “cannot be

simply mechanical or quantitative.” International Shoe,

326 U.S. at 319. To the contrary, it is sufficient to create

nexus that the taxpayer has projected a substantial eco-

nomic presence into the State, marked by the pur-

poseful cultivation and exploitation of an in-state market.

Whether or not such a taxpayer is physically present in

the State for all (or, for that matter, for any) of the

relevant period, its earnings are made possible by the

in-state infrastructure and work force that facilitate

advertising, permit the distribution of goods, and allow

for the development of a group of willing consumers—all

“benefits which [the State] has conferred by the fact

of being an orderly, civilized society.” J.C. Penney, 311

U.S. at 444. At the same time, of course, an entity that

“has placed goods in the stream of commerce benefits eco-

nomically from the retail sale of the final product in the

forum State, and indirectly benefiis from the State’s

laws that regulate and facilitate commercial activity.”

Asahi Metal Industry Co. v. Superior Court, 480 U.S.

102, 117 (1987) (Brennan, J., concurring in part and

concurring in the judgment)

Nothing in the policies underlying the Commerce or

Due Process Clause nexus requirements suggests that such

an entity should be exempt from state taxation. And

that is particularly the case when the levy involved is

a use tax, for which “[t]he out-of-state seller becomes

liable * * * only by failing or refusing to collect the tax

from that resident consumer”; “the sole burden imposed

upon the out-cf-state seller by [a use tax statute] is the

administrative one of collecting it.” National Gergraphic,

430 U.S. at 558. Such a tax poses “no risk of double

18

taxation” of the sort that may offend the Commerce

Clause, since “(t]he consumer’s identification as a resi-

dent of the taxing State is self-evident.” Jbid. And it

hardly offends traditional due process notions of fair

play to “make the distributor the tax collector for the

State” (General Trading Co. v. Tax Comm’n, 322 U.S.

335, 338 (1944)) when the seller’s intentional projec-

tion of its economic presence into the State has given rise

to the taxed activity. Indeed, in an electronic age—

when radio and television make it possible for an out-of-

state entity to maintain a ubiquitous presence in-state,

and when sophisticated computer marketing and mailing

list techniques allow for systematic exploitation of dis-

tant markets—it would be anomalous to hold that com-

mercial entities may escape all taxation by the States

from which they draw substantial benefits simply because

they do not maintain a continuous physical presence

there. Cf. Burger King Corp. v. Rudzewicz, 471 U.S.

462, 476 (1985); McGee v. International Life Insurance

Co., 355 U.S. 220, 222-223 (1957).

This conclusion draws significant support from the

Court’s decisions in the closely related area of personal

jurisdiction. There, the Court has held that a “ ‘forum

State does not exceed its powers under the Due Process

Clause if it asserts personal jurisdiction over a corpora-

tion that delivers its products into the stream of com-

merce with the expectation that they will be purchased

by consumers in the forum State’ and those products sub-

sequently injure forum consumers.” Burger King, 471

U.S. at 473, quoting World-Wide Volkswagen, 444 U.S.

at 297-298. Thus,

[j]urisdiction in these circumstances may not be

avoided merely because the defendant did not physi-

cally enter the forum State. Although territorial

presence frequently will enhance a potential defend-

ant’s affiliation with a State and reinforce the rea-

sonable foreseeability of suit there, it is an in-

19

escapable fact of modern commercial life that a sub-

stantial amount of business is transacted solely by

mail and wire communications across state lines,

thus obviating the need for physical presence within

a State in which business is conducted. So long as

a commercial actor’s efforts are “purposefully di-

rected” toward residents of another State, [the

Court] ha[s] consistently rejected the notion that

an absence of physical contacts can defeat personal

jurisdiction there.

Burger King, 471 U.S. at 476 (emphasis in original).

See Asahi Metal Industry, 480 U.S. at 109-110 (plurality

opinion) ; id. at 117-120 (Brennan, J., concurring in part

and concurring in the judgment) .*

Under these precedents, California courts plainly

could assert jurisdiction over appellant if, for example,

an in-state purchaser brought suit because he was in-

jured by one of the products that appellant had shipped

into California. See Burger King, 471 U.S. at 473;

World-Wide Volkswagen, 444 U.S. at 297-298; McGee,

855 U.S. at 223. There is no reason to suppose that the

State nevertheless lacks authority to impose a duty to

collect a tax on appellant arising out of the same trans-

action. To the contrary, the Court held in the leading

case of International Shoe—which was both a personal

jurisdiction and a jurisdiction to tax case (see Shaffer v.

Heitner, 433 U.S. 186, 203 (1977) )—that due process

objections to personal jurisdiction and to state taxing

authority must be judged by the same standard: “The

§ The Court in Asahi Metal Industry was divided on whether

States may assert personal jurisdiction whenever out-of-state sellers

are “aware that the final product is being marketed in the forum

State” (480 U.S. at 117 (Brennan, J., concurring in part and

concurring in the judgment) ), or wi.cther out-of-state sellers must

have “an intent or purpose to serve the market in the forum State”

(id. at 112 (plurality opinion)). There is no need to resolve that

issue here, since appellant plainly acted with the purpose of ex-

ploiting the California market.

20

activities which establish [the taxpayer’s] ‘presence’

subject it alike to taxation by the state and to suit to

recover the tax.” 326 U.S. at 321. And that is hardly

surprising, since the same “minimum contacts” formula

is the touchstone in each setting. Compare, e.g., Burger

King, 471 U.S. at 474; World-Wide Volkswagen, 444

U.S. at 291; International Shoe, 326 U.S. at 316, with

National Geographic, 480 U.S. at 561; Miller Brothers,

847 U.S. at 345.°

2. The principles set out above must be applied to the

record here—a record that contains considerably more

than the episodic “crusades” discussed by appellant. Not

surprisingly, appellant’s staff spent more time in Cali-

fornia than the actual “crusade” dates: the Board’s

hearing examiner noted evidence that “an advance pro-

motion staff * * * made hotel reservations, secured pub-

licity for the meetings, etc.” J.A. 20. Similarly, “some

® We recognize that the suggestion that nexus may be found in

the absence of any physical presence by the taxpayer in the taxing

State is in some tension with National Bellas Hess, Inc. v. Dept. of

Revenue, 386 U.S. 753 (1967), which found no nexus when the

seller’s “only connection with customers in the State is by common

carrier or the United States mail” (386 U.S. at 758); the Court

there observed that the seller had no property within the State.

Id. at 754-755. But in National Bellas Hess, the seller (unlike ap-

pellant) did not advertise locally or project its presence into the

State through radio or television, conduct that benefits from serv-

ices provided in-state and that manifests a direct intent to develop

a local market. Cf. Nelson v. Montgomery Ward & Co., 312 U.S.

873, 376 (1941) (imposition of tax on out-of-state taxpayer in part

justified by “solicitation through local- advertising”). And the

Court nowhere suggested in National Bellas Hess that continuous

physical presence was needed in the State to provide nexus; here,

appellant was present in California at least episodically, and it gen-

erated sales through local television and radio broadcasts. In any

event, the decision in National Bellas Hess predated the Court’s

reformulation of Commerce Clause doctrine in Complete Auto, as

well as its recent elaboration of personal jurisdiction doctrine, and

we have some doubt that the specific factual holding of National

Bellas Hess should survive those decisions.

21

of the time between crusade meeting dates in California

included visits with local followers, removal of equipment

and facilities, travel to the next location and setting up

for the next meeting.” Jbid. And the “crusades” them-

selves were of continuing value to appellant, since Cali-

fornia crusade activity was recorded for later broadcast

and sale. J.S. App. A87; J.A. 20.

Indeed, even apart from the “crusades,” appellant main-

tained a full-time representative in California to counsel

adherents and solicit donations from 1978 through 1984,

a period that includes three of the seven tax years at

issue here. J.S. App. A86; App. Br. 6; J.A. 21, 208.

Appellant also sold religious programs (which advertised

the availability of its mail order items) that were broad-

cast by California radio and television stations. J.S. App.

A87; J.A. 49-50, 62. And appellant of course used its

mailing list to solicit purchases through magazines, prod-

uct catalogs, and special flyers. J.A. 219849-50, 62.

This is a record that is replete with nexus. Perhaps

most obviously, this Court’s decisions place it beyond dis-

pute that appellant is subject to tax for the three-year

period during which its full-time representative was

present in California. It is irrelevant (even if true)

that the representative’s activities were unrelated to the

sale of mail order items. See National Geographic, 430

U.S. at 560-561. So long as he enjoyed the benefit of the

State’s services, as appellant’s California representative

plainly did, the presence of even a single employee estab-

lishes nexus. See id. at 557-558; Standard Pressed Steel

Co. v. Washington Dept. of Revenue, 419 U.S. 560, 562

(1975) .'°

10 Appellant acknowledges the existence of this full-time employee

in California (Br. 6-7 & n.4) but entirely fails to discuss the em-

ployee’s significance; instead, appellant simply asserts that “[a]t

no time did the Board rely on the activities of this religious coun-

selor as a nexus for taxation.” Br. 7. Like appellant’s assertion

that the Board addressed and resolved the nexus issue (see note 5,

22

And for the entire tax period involved here, peti-

tioner’s other contacts with California establish nexus.

Appellant’s projection of its presence into the State by

radio and television (accompanied by solicitations for

purchases), along with its solicitations by magazine,

catalog, and flyer, plainly manifested a purposeful de-

velopment and exploitation of the California market.

That exploitation was made possible by the infrastructure

and services provided by the State: the power system,

trained workforce, and police and fire protection neces-

sary for the broadcast of appellant’s programs into Cali-

fornia homes, as well as the “civilized society” that made

possible the distribution of goods to affluent consumers.

Against this, appellant’s insistence that physical presence

is the only relevant criterion relies on an archaic and

excessively formal conception of the power to tax. Cf.

International Shoe, 326 U.S. at 316.

We nevertheless add that, in our view, there is ade-

quate nexus here even if physical presence in the State

is the only factor that may be taken into account. While

many of this Court’s decisions have involved taxpayers

with a continuous in-state presence, nothing in those deci-

sions suggests that an uninterrupted presence is a neces-

sary prerequisite for taxation. Surely, for example, an

supra), this is a substantial misstatement of the record. Again,

appellant relies on a letter to appellant from a Board auditor (J.S.

App. F3-F4) and the decision and recommendation of the Board

hearing officer (J.S. App. 21-22). And again, since nexus was not

contested before the Board, neither document purported to settle

the relevance of the employee for nexus purposes. Indeed, when

appellant finally raised the nexus issue before the state courts, the

Board (while insisting that the issue had not been preserved) in

fact noted that the employee’s presence in California established

nexus. See, e.g., Board C.A. Br. 42 n.28. In any event, the issue

now, if the Court reaches it, is simply whether the State has the

constitutional authority to impose a tax on appellant, which turns

on the facts as they actually existed; thei» i- no principle of pre-

clusion that prevents this Court from cons’ ering the entire record

in addressing the scope of state taxing authority.

23

adequate nexus exists for the imposition of a use tax

when a firm sends into the State a salesperson who,

while there, solicits all of the firm’s orders from that

State—even if the salesperson spends only one day a

month (or one day a year) in-state. And, as we note

above, the level of state services provided need not

precisely match the tax; there is thus no reason why

a tax should be permissible (as it surely is) when a firm

maintains a single employee in-state year-round, but not

when the firm periodically sends many employees into

the State—certainly so long as there is a pattern of

purposeful, continuing entry into the State. In this case,

where appellant conducted 23 “crusades” in California

over a seven-year period (along with associated in-state

activity), the record plainly “demonstrate[s] ‘some defi-

nite link, some minimum connection, between [the State

and] the person ... it seeks to tax.’” National Geo-

graphic, 430 U.S. at 561, quoting Miller Brothers, 347

U.S. at 344-345 (emphasis added by the Court).

3. Appellant also makes the additional argument (Br.

18-20) that religious activities—in particular, the “cru-

sades”—cannot supply the nexus that justifies the im-

position of California’s use tax. This contention is in

part identical to appellant’s general First Amendment

argument, which is beyond the scope of this brief. But

insofar as appellant’s argument is directed specifically

at nexus, it seems to have three parts: (1) that appel-

lant would not be liable for any use tax in the absence

of the “crusades”; (2) that the volume of appellant’s

mail order sales (and thus its use tax liability) is en-

tirely unrelated to the conduct of the “crusades”; and

(3) that using the “crusades” as the nexus supporting

imposition of use tax liability therefore will discourage

the conduct of the “crusades,” an effect that is precluded

by the First Amendment. In our view, all of these

propositions are insupportable.

At the outset, for the reasons set out above, there is

nexus aplenty here even apart from the “crusades”; if

24

the Court accepts our submission on that point, appel-

lant’s First Amendment/nexus submission necessarily

must fail. As for appellant’s second proposition, there is

in fact reason to believe that the “crusades” were used

to—and did—generate mail order sales. Appellant stipu-

lated below that “[o]Jral announcements were * * *

made at evangelistic crusades and over the radio and

television in connection with [appellant’s] religious

broadcasts describing the ‘tangible personal property’ of-

fered for ‘sale’ by [appellant], the ‘prices’ or ‘donations’

required to secure such items and the manner in which

they could be obtained.” J.A. 62. And while appellant’s

failure to raise the nexus issue in a timely manner

precluded development of an adequate record (by disclos-

ing, for example, whether mail order sales increased dur-

ing or after “crusades”), appellant’s mail order busi-

ness surely benefitted from the radio, television, and

newspaper publicity that accompanied the “crusades.”’

Appellant is thus incorrect in asserting that “the use

tax bears no relation whatsoever to the size or frequency

of appellant’s crusades in California” (Br. 19).

Finally, even if the first two prongs of appellant’s

argument had substance, the third would be without

merit on its own terms. California’s use tax plainly is

not the equivalent of a fine on the expression of par-

ticular religious beliefs, as appellant asserts (Br. 18).

And it is not “a flat tax imposed on the exercise of a

privilege granted by the Bill of Rights” of the sort at

issue in Murdock v. Pennsylvania, 319 U.S. 105, 113

(1943). As the Court recently explained, “a flat license

or occupation ‘tax poses a greater threat to the free exer-

cise of religion than do [income or property] taxes, be-

cause it is ‘levied and collected as a condition to the pur-

suit of activities whose encouragement is guaranteed by

the First Amendment’ and thus ‘restrains in advance

those constitutional liberties.’” Texas Monthly, Inc. v.

Bullock, 109 S.Ct. 890, 903 (1989) (plurality opinion),

quoting Murdock, 319 U.S. at 114. Here, by definition,

25

the existence of nexus means that the State is providing

benefits to appellant; like everyone else in society, appel-

lant is simply being asked to pay its own way.

The tax here thus is quite similar to “a tax on the

income of one who engages in religious activities or a tax

on property used or employed in connection with those

activities.” Murdock, 319 U.S. at 112. Such taxes, of

course, may discourage religious activity; it is possible,

for example, that a church might be forced to refuse the

gift of a piece of property on which it could have offered

religious services so as not to become liable for continu-

ing property tax liability. That prospect, however, does

not exempt churches from nondiscriminatory property

taxes. The same principle applies here.

Appellant nevertheless argues that applying a tax here

would be anomalous because (by appellant’s hypothesis)

its relatively brief forays into California will subject it

to a relatively large use tax liability. The fact remains,

however, that the tax here is imposed, not on the “cru-

sades,” but on the use of mail order property by Cali-

fornia purchasers; appellant must pay the use tax

with its own funds only if it refuses to collect the tax

from its customers. See National Geographic, 430 U.S.

at 558. And appellant’s sale of property to those pur-

chasers will remain profitable whether or not appellant

is liable for the use tax." The use tax is thus not at all

11 Appellant observes (Br. 19) that the use tax liability amounts

to almost one half the value of the materials sold at the “crusades.”

That comparison, however, has no significance; the use tax is im-

posed, of course, not on the “crusade” sales, but on the more than

$1.7 million worth of property sold by mail order. Appellant is thus

incorrect in suggesting (Br. 19 n.14) that the figures here have any

relationship to those in Murdock. In that case, as the Court re-

cently noted, the monthly licensing fees at issue likely exceeded

the taxpayer’s entire monthly income from the distribution of

religious material—-meaning that the taxpayer there “could not

even afford the necessary licenses, let alone support himself once

he had met his legal obligation.” Texas Monthly, 109 S.Ct. at 904

26

“functionally identical to the flat license fee struck down

in Murdock,” as appellant asserts (Br. 19). See note 11,

supra. And appellant’s suggestion (Br. 20) that Cali-

fornia supplied no services that benefitted the “crusades”

simply disregards the costs of maintaining roads and pro-

viding the general public services that made the “cru-

sades,” as well as all of appellant’s other in-state activi-

ties, possible. In these circumstances, the imposition of

use tax liability on appellant was entirely proper.

CONCLUSION

The appeal on the nexus issue should be dismissed.

Alternatively, the judgment of the court of appeals should

be affirmed.

Respectfully submitted,

BENNA RUTH SOLOMON *

Chief Counsel

CHARLES ROTHFELD

STATE AND LOCAL LEGAL CENTER

444 N. Capitol Street, N.W.

Suite 349

Washington, D.C. 20001

(202) 638-1445

* Counsel of Record for the

Amici Curiae

August 21, 1989

n.10 (plurality opinion). There is no danger that the use tax—by

definition, a small percentage of the value of the property sold—

will impose such a burden on appellant. Indeed, had appellant col-

lected the use tax from its customers, the levy would have imposed

no direct financial burden on appellant.