Amicus Curiae Brief — McLane Western Western, Inc. v. Colorado Department of Revenue (No. 05-1294)

Supreme Court, U.S

FILED

{

JUN 1 2 2006 |

'

Jn the Supreme Court of the Gnited States

MCLANE WESTERN, INC.,

Petitioner,

¥.

DEPARTMENT OF REVENUE; STATE OF COLORADO, ET AL.

Respondents.

On Petition for a Writ of Certiorari to

the Colorado District Court of Appeals, Division IV

BRIEF OF THE AMERICAN TRUCKING

ASSOCIATIONS, INC., AND THE CHAMBER OF COM-

MERCE OF THE UNITED STATES OF

AMERICA AS AMICI CURIAE IN

SUPPORT OF PETITIONER

ROBERT DIGGES, JR. CHARLES A. ROTHFELD

ATA Litigation Center Counsel of Record

2200 Mill Road EVAN M. TAGER

Alexandria, VA 22314 Mayer, Brown, Rowe

(703) 838-1865 & Maw LLP

1909 K Street, NW

ROBIN S. CONRAD Washington, DC 20006

AMAR D. SARWAL (202) 263-3000

National Chamber Litigation

Center, Inc.

1615 H Street, NW

Washington, DC 20062

(202) 463-5337

Counsel for Amici Curiae

No. 05-1294 OFFICE OF THE CLERK |

QUESTION PRESENTED

Whether a facially neutral state tax that is structured in

such a way that it invariably imposes a greater burden on in-

terstate businesses than on identical businesses that confine

their operations to the taxing state violates the Commerce

‘Clause of the U.S. Constitution.

(I)

il

TABLE OF CONTENTS

Page

SRE S WAPEN FURLIRESIN © GSUD ons cinccnnspsincccasensncncssenqssecscecccneceans (I)

PNPM AAT FAAS BRIGIIGE LEED spessssesencrecsoscscensnccsocnsenensoecnenes ili

I eos ha Sua yagascaessvakdceceb iG cnsenssessousvedeosesancens 2

REASONS FOR GRANTING THE PETITION ...............04. 3

A. The Coloradce Tax Imposes Discriminatory

Burdens On Interstate Commence ..............ccccseeeees 4

B. ‘A State Tax That Discriminates Against Inter-

state Commerce In Its Practical Effect Is In-

consistent With The Commerce Clause ................... 6

C. The Court Should Grant Review To Clarify

The Proper Treatment Of State Taxes That

Discriminate Against Interstate Commerce In

PIE METI ci cnacicnsanscesiantavensccnsceevencsnenssces 10

IE 1 (od ach dat hvasahbbanshsnnnsinanensonnncaseenssecoseeenseyes 15

ill

TABLE OF AUTHORITIES

Page(s)

Cases:

American Trucking Associations, Inc. v. Conway,

DOB Ak S325 4 Vs BRO asisitissitcinenhisconsmnninten 12

American Trucking Associations, Inc. v. Cowan,

No.TX91-01608 (Ariz. Chancery Ct., 1992)... eee 12

American Trucking Associations, Inc. v. Denn,

No. C2-95-4910 (Minn. Dist. Ct.,

PG Cg LF sti sen iariecpnchin oot ena ppiarcienaaeneets 12

American Trucking Associations, Inc. v. Goldstein,

SR PE Fee COs. CO iisccniceinachnvsine catccentatsaancinacin tons 13

American Trucking Associations, Inc. v. Gray,

F968 SS. WORST T CAM TRG wivsiinisn ccittiiciiivarns 13

American Trucking Associations, Inc. v. Kline,

O07 TO GST Fd Fe eihkiiinimraiiont 13

American Trucking Associations, Inc. v. New

Hampshire, No. 89-E-00405 (N.H. Super. Ct.,

eR |) RRR eaR en ietiembn earn erin yeer em Ce UE 12

American Trucking Associations, Inc. v. New

Hampshire, No. 89-E-00405-B

(N.H. Super. Ct., Merrimack Co., 1995)... ee eeeeees 12

American Trucking Associations, Inc. v. Scheiner,

WES WEE. BOG CIPS cckkiesceicensnt icivbhawekakiSuicsh 5, 6, 8

American Trucking Associations, Inc. v. Secretary

of Acmin., 613 N.E. 2d 9S (Mass. 1993)...........:ccesseeees 12

American Trucking Associations, Inc. v. Secretary

of State, No. CV-89-410 (Me. 1990)..........cccccsseeeeeeeeees 12

American Trucking Associations, Inc. v. Secretary

of State, 595 A.2d 1014 (Me. 1991)... eee MM t2

iV

American Trucking Associations, Inc. v. Smith,

No. 89-0385 (Ark. Chancery Ct., 1992)... 12

American Trucking Associations, Inc. v. State,

556 N.W. 2d 761 (Wis. Ct. App. 1996), rev.

denied, 560 N.W.2d 274 (Wisc. 1996)...........cccseeeees 11,12

American Trucking Associations, Inc. v. State of

New Jersey, 852 A.2d 152 (N.J. 2004)... ceeesesseeeeees 12

American Trucking Associations, Inc. v. State of

Oregon, 124 P. 3d 1210 (Or. 2005)... eeeeteeeeeeeeee 13

Baldwin v. G.A.F. Seelig, Inc., 294 U.S. 511 1935)........... 7,9

Best & Co. v. Maxwell, 311 U.S. 454 (1940)........0....... 10, 14

Black Beauty Trucking, Inc. v. Indiana Dept. of

Revenue, 527 N.E. 2d 1163 (Ind. Tax Ct. 1988)......11, 13

Camps Newfound/Owatonna, Inc. v. Town of Har-

Piao, SAF AI SR CI vssiviisscccsnsvtenssnsvcanéonviinrssonsi 6, 14

Capitol Greyhound Lines v. Brice,

ae EF alk ac ect ta denice vache gmnaninbianinneee 9

Commonwealth Edison Co. v. Montana,

Bo ie EE aa witianiiadectacndasnhenerss acthisovinenternanns 7

Commonwealth Transportation Cabinet v. Ameri-

can Trucking Associations, Inc.,

FOS Ee ee I, CRO) inkiices ep cicesnsicacrninpeiventonins lL, B

Complete Auto Transit, Inc. v. Brady,

BP ods BP AE TD ckiskbiatntacicodsentcenmapiacmaaaes 7,7

Dean Milk v. Madison, 340 U.S. 349 (1951) ...... cc eeeeeeeeeeeees 10

Halliburton Oil Well Cementing Co. v. Reily,

a EN Teeny lea dandy mane aoa tReeeor otra 4

Hunt v. Washington State Apple Advertising

CE Sk AI. SIF IGT) vccsvecsicdisinccnienscds tncasssinees 10

Marx v. American Trucking Associations, Inc.,

GEE Se Bk EEG CIR. BY oi sisi aesesdicciennsstencivenesenmnciin 1]

Vv

Nippert v. City of Richmond, 327 U.S. 416 (1946)...... 7, 8, 10

Oklahoma Tax Comm'n v. Jefferson Lines,

mT 2 BE Bg 8 & bs 5 pengrenent imipenem serene or Ne 5, 6, 7, 13

Oregon Waste Sys., Inc. v. Dep't of Envtl. Qual-

Ba SEE as FEA AI ies idcastereasntctsen nn Miasiniasmacenaten 14

Raymond Motor Tranport, Inc. v. Rice,

oan ey EL, | OER ES CoE EN R EOTCY 1]

West Lynn Creamery, Inc. v. Healy, 512 U.S.

BI ID oss cessncsavidatscucesbarakakcinas teindensetunnterecsennteenen passim

Statutes, Rules And Regulations:

BST AAO, ADR: $6 BEG, Di vvsiaccinivnccsccnccisesczesaassnntsucsnssinns 4,5

PATER TRAN TS RII vaiscsas acdestanssians cscs encase 12

RNS TE: Be bd siinicie es ends pertinence taken 12

PERE. TAN TO SAO esses hniiniin enasninicsntsicscvcniey tanrvvecairasis 12

Ark. Code Ann: § 26-55-7065 (2) e occscicsnsicssicsccsesssssasessesvanvens 12

PE, COGS AGA TORRE Bie chk avigiaiancn aims 13

PI TORO RS FOO isch ei Risccinanssintaceiicrteaasne 13

Colo. Rev. Stat. §29-28.5-10] .......sssscsascorsssncorsneneacsessesssseneses 3

Rie SU a hei i iciteincn decaennees 13

Ky. Rev. Stat. Ann. § 1388.660(4-7)............... cee cesseeseeseseee 13

Nees CH, LAWS OR. ZI, OFF ini acircres tccsncntsctecinacna 12

BVERDE. AFORE: TWIG RR GEG, BOT scisiis ssvisccsssecciastcccnnsadacestedinns 12

Md. Ann. Code art. 81, § 423(a)

CP eer MER I iG Gcicscn vnicedevenstconuarslpsvcauaoneniaaes 13

Me. Rev. Stat. Ann. tit. 29 § 246-A ........:.cssssssssssessseseseres 12

Me. Rev. Stat. Ann. tit. 29°§ 246-D. .......0:...sicscsssccsssssoreseceses 12

Se ee | : Nae ian ae ern crate a eer ncn 12

vi

Miss. Code Ann. § 27-61-5(1).........::ceseeesseeeeeees

Miss. Code Ann. § 77-7-119 ........cceeeseeccceseesnees

N.H. Rev. Stat. Ann. § 21-P:20, IV...

N.H. Rev. Stat. Ann. § 147-A:6, ID........... eee

N.H. Rev. Stat. Ann. § 260:52, V (Supp. 1988)

Peak Cts FAI, BESS RIG oo oesisccscavctcicsscesesssecarens

N.J. Stat. Ann. § 54:39A-10 oo... eee ceeceeeceeteees

Vt. Stat. Ann. Tit. 23 § 415 (1982) ......

Vt. Stat. Ann. Tit. 23 § 3007 (1982) .................

Wis. Admin. Code § SERB 4.03(2)(a)-(e)........

Miscellaneous:

U.S. Department of Transportation & U.S. De-

partment of Commerce, 2002 Commodity

FE IE ecccnciiathncisdinh tucaaiives babndvibsavssin’

INTEREST OF THE AMICI CURIAE'

American Trucking Associations, Inc. (ATA) is a non-

profit corporation incorporated under the laws of the District

of Columbia, with its principal place of business in Alexan-

dria, Virginia. ATA is the national trade association of the

trucking industry. It has more than 2,000 direct motor carrier

members and, in cooperation with state trucking associations

and affiliated national trucking conferences, ATA represents

tens of thousands of motor carriers. ATA was created to

promote and protect the interests of the trucking industry,

which consists of every type and geographical scope of mo-

tor carrier operation in the United States, including for-hire

carriers, private carriers, leasing companies and others. ATA

regularly advocates the trucking industry’s position before

this and other courts.

Interstate commercial operations of the trucking industry

are massive in size and scope. As of July 2004, the U.S. De- -

partment of Transportation’s Federal Motor Carrier Safety

Administration had on file 524,309 registered interstate mo-

tor carers. Almost eight billion tons of freight, with a value

of $6.2 trillion, moved by truck in interstate commerce in

2002. U.S. Department of Transportation & U.S. Depart-

ment of Commerce, 2002 Commodity Flow Survey, at Table

la. Millions of shipments per day are necessary to move that

volume of freight and service the needs of the American

economy.

ATA and its members have a critical interest in the pro-

tection of interstate commercial activity against all forms of

' Pursuant to Rule 27.6 of the Rules of this Court, amici state that

this brief was not authored in whole or in part by counsel for a

party and that no person or entity, other than the amici curiae, their

members, and their counsel made a monetary contribution to its

preparation and submission. The written consents of the parties to

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

2

discriminatory state taxation and regulation. Discrimination

that impedes the free flow of products in interstate commerce

negatively affects the trucking industry in the same manner

as does direct discrimination against interstate trucking itself.

The interstate trucking industry historically has been one of

the principal targets of discriminatory state taxation and regu-

lation. As a result, ATA and its members have brought or

participated in Commerce Clause challenges to a wide range

of state taxes, fees, and regulations before this Court and

other state and federal courts.

The Chamber of Commerce of the United States of

America is the world’s largest business federation, represent-

ing a membership of more than three million businesses and

organizations of every size, in every industry sector and geo-

graphical region of the country. A central function of the

Chamber is to represent the interests of its members in im-

portant matters before the courts, Congress, and the Execu-

tive Branch. To that end, the Chamber has filed amicus briefs

in numerous cases in this Court addressing issues of vital

concern to the Nation’s business community, and has regu-

larly participated in cases involving the meaning of the

Commerce Clause.

The Chamber has a substantial interest in the issue pre-

sented in this case: businesses in all sectors of the economy

have been affected by state taxes that discriminate against

interstate commerce in their practical effects. Such discrimi-

nation, moreover, discourages the conduct of business across

state lines and works a substantial drag on the national econ-

omy. The Chamber believes that the experience of its mem-

bers with these problems makes it well situated to address the

issues presented here.

STATEMENT

This case involves a challenge to a Colorado tax on ac-

tivities related to the distribution of certain tobacco products

in the State. Insofar as is relevant here, the tax is collected

3

from the person in the distribution chain who “first receives”

the products in Colorado. Colo. Rev. Stat. §29-28.5-101, 102.

During the time at issue in this case, the tax was imposed at a

rate of twenty per cent on the price paid by the first Colorado

distributor of the products.

Under this tax regime, the more that is done to the prod-

uct (for example, marketing, sales, and distribution activity)

outside Colorado, the higher the price of the product will be

when it finally reaches and is “first receive[d]” by a distribu-

tor in the State -- and the higher the tax due on the product

will be. The court below recognized this, acknowledging

that, “if the manufacturer and all the distributors were located

within Colorado, the tax base would be at its lowest level.”

Pet. App. 6a. That is so because the tax is imposed only once

per product, and when manufacturing and all distribution of

the product takes place in Colorado, the tax is calculated at

the time of first in-state distribution on the basis of a price

that has not yet been inflated by the mark-ups related to

transportation, marketing, and related activities that inevita-

bly take place along the distribution chain. Thus, as petitioner

explains (at Pet. 4), this tax structure means that the tax base

is higher (and the amount collected correspondingly greater)

when more of the products’ distribution chain is located out-

side Colorado.

Petitioner brought this suit in Colorado state court, con-

tending that the Colorado tax is unconstitutional under the

Commerce Clause of the U.S. Constitution because it dis-

criminates against interstate commerce in its practical effect.

The trial court upheld the tax (Pet. App. 14a-25a) and the

Colorado Court of Appeals affirmed. /d. at 1a-13a. The court

of appeals recognized that, under the Colorado scheme, “the

location of the manufacturers, suppliers, or distributors in-

volved in the product’s distribution network” has an impact

on the size of the tax base and that, as a consequence, “the

tax base will be higher the later in the distribution network

the product is taxed.” /d. at 6a. The court also acknowledged

4

that this regime “may place the product” that is distributed

interstate “at a competitive disadvantage in the marketplace

because the higher tax is added to the price.” Jd. at 8a. But

the court nevertheless held the Colorado tax constitutional

-because it does not “tax[] out-of-state transactions or entities

at a rate higher than it taxes in-state transactions, entities, or

products, or * * * exemp([t] in-state transactions, entities, or

products from an otherwise uniform tax.” /d. at 7a.

REASONS FOR GRANTING THE PETITION

The Coiorado tax imposes an obvious impediment to in-

terstate commerce; the court below itself candidly acknowl-

edged that the levy places products at a competitive

disadvantage if more of their distribution chain is located out

of state. This discriminatory impact on goods that are moved

interstate should render the Colorado tax unconstitutional. In

reaching the contrary conclusion, the court below was of the

view that a tax’s discrimination against interstate commerce

in practical effect is immaterial so long as the levy does not

overtly accord interstate commerce disparate treatment. But

that conclusion, which invites states to develop subtle means

of discrimination against interstate businesses, surely is

wrong. Because the decision below illustrates a resistance to

fundamental Commerce Clause principles that is found in

many state tax regimes — and because it adopts an approach

to the Clause that is inconsistent with the imperative for a

uniform national economy that the Constitution was designed

to foster — further review is warranted.

A. The Colorado Tax Imposes Discriminatory

Burdens On Interstate Commerce

At the outset, there should be no doubt that the Colorado

tax is inconsistent with the Commerce Clause. Petitioner

demonstrates in detail that the tax should not survive applica-

tion of the rule articulated in Halliburton Oil Well Cementing

Co. v. Reily, 373 U.S. 64 (1963). See Pet. 10-13. Unsurpris-

ingly, the tax also runs afoul of the broader principles that

5

animate this Court’s Commerce Clause jurisprudence. The

Court has understood the Clause to prevent states ‘from re-

treating into economic isolationism or jeopardizing the wel-

fare of the Nation as a whole” (Oklahoma Tax Comm'n v.

Jefferson Lines, 514 U.S. 175, 179-180 (1995)), either by

directly discriminating against interstate commerce or by im-

posing taxes that more subtly “exert[] an inexorable hydrau-

lic pressure on interstate businesses to ply their trade within

the State that enacted the measure rather than ‘among the

several States.”” American Trucking Associations, Inc. v.

Scheiner, 483 U.S. 266, 286-287 (1987) (quoting U.S.

Const., Art. I, § 8, cl. 3). The Colorado tax does both.

The discriminatory impact of the tax is manifest. The

amount of the levy turns on the price paid for the taxed prod-

uct by the distributor who “first receives” the product in

Colorado. As a consequence, it necessarily is the case that the

amount of tax due will go up as more of the distribution

chain is located outside Colorado, even if the products, pack-

aging, marketing, and all other aspects of distribution are

identical in every respect save location. There is no doubt

about this effect of the tax. Indeed, the court below expressly

acknowledged that “the location of the manufacturers, sup-

pliers, or distributors involved in the product’s distribution

network and the price mark-up of each impacts the tax base

or the price upon which the constant twenty percent tax rate

is imposed” and “agree[d] with McLane’s assertions that the

tax base will be higher the later in the distribution network

the product is taxed.” Pet. App. 6a. The court accordingly

agreed, as well, “that the tax base calculated on the price paid

by the taxable distributor may place the product at a competi-

tive disadvantage in the marketplace because the higher tax is

added to the price.” /d. at 8a. That effect casts grave doubt on

the constitutionality of the tax: “Under [this Court’s] consis-

tent course of decisions in recent years a state tax that favors

in-state business over out-of-state business for no other rea-

son than the location of its business is prohibited by the

Commerce Clause.” Scheiner, 483 U.S. at 286.

By the same token, taxes like Colorado’s place “an inexo-

rable hydraulic pressure on interstate businesses to ply their

trade within the State that enacted the measure rather than

‘among the several States.’” The court below denied that ef-

fect, declaring that “the OTP tax scheme does not pressure

out-of-state businesses to move to Colorado.” Pet. App. 10a.

But the court gave no explanation for its conclusion, which

plainly is wrong. After all, when the distribution network is

entirely in one state the tax is lower than when otherwise

identical distribution activities cross state lines. See id. at 6a.

Such a regime “place[s] interstate commerce at a disadvan-

tage as compared with commerce intrastate.” Jefferson Lines,

514 U.S. at 185. Thus, “{a]s a practical matter, the statute en-

courages affected entities to limit their out-of-state” activities

(Camps Newfound/Owatonna, Inc. v. Town of Harrison, 520

U.S. 564, 576 (1997)), which necessarily encourages “ten-

dencies toward economic Balkanization.” Jefferson Lines,

514 U.S. at 180 (citations and internal quotation marks omit-

ted).

B. A State Tax That Discriminates Against Interstate

Commerce In Its Practical Effect Is Inconsistent

With The Commerce Clause

In nevertheless upholding the Colorado tax, the court be-

low construed this Court’s Commerce Clause decisions to

establish that “a tax is discriminatory if it taxes out-of-state

transactions or entities at a rate higher than it taxes in-state

transactions, entities, or products, or if it exempts in-state

transactions, entities, or products from an otherwise uniform

tax.” The court accordingly found it dispositive that “[a}ll

taxable distnbutors of OTP are taxed at the same rate and on

a tax base determined in the same fashion.” /d. at App. 8a.

This focus on the superficial form of the tax — and the com-

7

plete disregard for the practical consequences of the tax’s

discriminatory effects — was a serious error.

Although the court below placed crucial weight on the

fact that the Colorado tax does not facially discriminate

against out-of-state entities in its rate or exemptions, this

Court has emphasized that “the Commerce Clause has a

deeper meaning that may be implicated even though state

provisions, such as the one[] reviewed here, do not allocate

tax burdens between insiders and outsiders in a manner that

is facially discriminatory.” Scheiner, 483 U.S. at 281. In giv-

ing force to this “deeper meaning,” the Court in its modern

Commerce Clause decisions addressing state taxation has

eschewed “a focus on * * * formalism [that] merely obscures

the question whether the tax produces a forbidden effect.”

Complete Auto Transit, Inc. v. Brady, 430 U.S. 274, 288

(1977). Instead, in its “more recent decisions” the Court has

““moved toward a standard of permissibility of state taxation

based upon its actual effect rather than its legal terminol-

ogy.’” Scheiner, 483 U.S. at 294-295 (quoting Complete

Auto Transit, 430 U.S. at 281). See, e.g., Jefferson Lines, 514

U.S. at 183; Commonwealth Edison Co. v. Montana, 453

U.S. 609, 615 (1981).

Starting from this perspective, the Court’s “cases have

eschewed formalism for a sensitive, case-by-case analysis of

purposes and effects.” West Lynn Creamery, Inc. v. Healy,

512 U.S. 186, 201 (1994). This means that ““‘[w)hat is ulti-

mate is the principle that one state in its dealings with an-

other may not put itself in a position of economic isolation.

Formulas and catchwords are subordinate to this overmaster-

ing requirement.’” /d. at 202 (quoting Baldwin v. G.A.F.

Seelig, Inc., 294 U.S. 511, 527 (1935)).

The Court has applied this principle repeatedly to invali-

date state taxes that do not facially discriminate in their rates,

exemptions, or tax bases, but that necessarily place interstate

commerce at a competitive disadvantage. In Nippert v. City

of Richmond, 327 U.S. 416 (1946), for example, one of the

seminal cases establishing the Court’s modern Commerce

Clause doctrine,’ the Court struck down a flat municipal li-

cense fee imposed on solicitors (so-called “drummers”) do-

ing business in the city, explaining:

[T]he tax * * * cannot be taken to apply generally to lo-

cal distributors in the same manner and with like effects

as in application to out-of-state distributors. The very

difference in locations of their business headquarters, if

any, and of their activities makes this impossible. This,

of course, is but another way of saying that the very dif-

ference between interstate and local trade, taken in con-

junction with the inherent character of the tax, makes

equality of application between those two classes of

commerce, generally speaking, impossible.

Id. at 432.°

? The Court’s opinion in Nippert was authored by Justice Rutledge,

whose views anticipated the Court’s modern Commerce Clause

doctrine in significant respects and were substantially incorporated

in the Complete Auto Transit test. See Complete Auto Transit, 430

U.S. at 280-281, 282

> The Court placed particular emphasis on the practical conse-

quences of the challenged tax: “‘[The] tax imposes substantial ex-

cluding and discriminatory effects of its own. * * * [T]he small

operator and especially the casual or occasional one from out of

the State will find the tax not only burdensome but prohibitive,

with the result that the commerce is stopped before it is begun.

And this effect will be extended to more substantial and regular

operators, particularly those whose * * * market in any single lo-

cality * * * cannot be mined more than once every so often.” Such

a tax thus “can easily mean the stoppage of a large amount of

commerce which would be carried on either in the absence of the

tax or under the incidence of one taking account of those varia-

tions.” /d. “Whether or not it was so intended, those are [the flat

tax’s] necessary effects.” Jd. at 434.

9

The Court applied this same principle to invalidate flat

taxes on interstate motor carriers in Scheiner. Although the

levies were “facially neutral” (483 U.S. at 269), the Court

recognized that the challenged taxes necessarily disadvan-

taged interstate businesses: ‘“[T]he very nature of the market

that interstate operators serve prevents them from making full

use of the privilege * * * for which they have paid the State”

a flat fee. /d. at 284 n.16. Thus,

“the intrastate vehicle can and will exercise the privilege

whenever it is in operation, while the interstate vehicle

must necessarily forego [sic] the privilege some of the

time simply because of its interstate character, i.e., be-

cause it operates in other States as well. In the general

average of instances, the privilege is not as valuable to

the interstate as to the intrastate carrier.”

Id. at 291 (quoting Capitol Greyhound Lines v. Brice, 339

U.S. 542, 557 (1950) (Frankfurter, J., dissenting)).

Similarly, in Baldwin v. G.A.F. Seelig, supra, the Court

held dispositive the practical effect of a facially neutral levy.

There, New York established a uniform, minimum price for

all milk, wherever produced. But “[t]his Court * * * did not

hesitate to strike [the tax} down.” West Lynn Creamery, 512

U.S. at 193. Writing for the Court, Justice Cardozo ex-

plained:

Neither the power to tax nor the police power may be

used by the state of destination with the aim and effect

of establishing an economic barrier against competition

with the products of another state or the labor of its resi-

dents. Restrictions so contrived are an unreasonable clog

upon the mobility of commerce. They set up what is

equivalent to a rampart of customs duties designed to

neutralize advantages belonging to the place of origin.

294 U.S. at 527. As the Court subsequently described Bald-

win, “because the minimum price regulation had the same

10

effect as a tariff or customs duty — neutralizing the advantage

possessed by lower cost out-of-state producers — it was held

unconstitutional.” West Lynn Creamery, 512 U.S. at 194. See

also, e.g., Hunt v. Washington State Apple Advertising

Comm'n, 432 U.S. 333, 352-353 (1977); Dean Milk v. Madi-

son, 340 U.S. 349 354 (1951); Best & Co. v. Maxwell, 311

U.S. 454, 455-456 (1940).

In all of these cases, the challenged taxes — like the Colo-

rado levy — gave the appearance of equality. Like the Colo-

rado tax, none of the challenged levies “tax[ed] out-of-state

transactions or entities at a rate higher than it taxe[d] in-state

transactions, entities, or products, or * * * exemptled] in-

state transactions, entities, or products from an otherwise uni-

form tax.” Pet. App. 7a. Yet this Court invalidated them all

because they were structured so that their practical effects

placed interstate commerce at a disadvantage as compared to

otherwise identical commerce conducted exclusively in one

state. Precisely the same conclusion is warranted here: as was

true of the levy invalidated in Nippert, the Colorado tax

‘cannot be taken to apply generally to local distributors in the

same manner and with like effects as in application to out-of-

state distributors.”327 U.S. at 432.

C. The Court Should Grant Review To Clarify The

Proper Treatment Of State Taxes That

Discriminate Against Interstate Commerce In

Their Practical Effect

The fundamental question presented here — how courts

should approach state taxes that are facially neutral but dis-

criminate against interstate commerce in their practical effect

— is an important and recurring one that warrants this Court’s

review. It is an unfortunate reality that states have never

stopped experimenting with taxes that place subtle but sig-

nificant burdens on businesses that operate across state lines.

Express discrimination is rare; “[i]n fact, tariffs against the

products of other states are so patently unconstitutional that

11

[the Court’s] cases reveal not a single attempt by any State to

enact one. Instead, the cases are filled with state laws that

aspire to reap some of the benefits of tariffs by other means.”

West Lynn Creamery, 512 U.S. at 193.

There is no mystery about the reason for the perennial na-

ture of such state enactments. The practical burden of truly

evenhanded state taxes “‘usually falls on local economic in-

terests as well as other States’ economic interests, thus insur-

ing that a State’s own political processes will serve as a

check against unduly burdensome regulations.’” West Lynn

Creamery, 512 U.S. at 200 (quoting Raymond Motor Tran-

port, Inc. v. Rice, 434 U.S. 429, 444 n. 18 (1978)). But there

is no in-state political constituency to curtail the enactment of

tax regimes that disproportionately burden out-of-state tax-

payers. To the contrary, every state has an understandable

incentive to export as much of its tax burden as possible to

foreign entities -- a course that has the added benefit (from

the enacting state’s perspective) of providing a competitive

advantage to businesses that concentrate their operations in

the taxing state.

ATA’s experience demonstrates this reality. Following

this Court’s landmark Scheiner decision in 1987, which held

that flat state taxes on interstate motor carriers violate the

Commerce Clause, ATA hoped that states would recognize

the decision’s unequivocal condemnation of flat, annual

charges on interstate trucking operations and quickly elimi-

nate them. Instead, most states tried to evade Scheiner’s

principles and forced ATA to undertake an ongoing, decades-

long litigation effort to enforce the Commerce Clause re-

quirements that Scheiner articulated. See, e.g., Common-

wealth Transportation Cabinet v. American Trucking

Associations, Inc., 746 S.W. 2d 65 (Ky. 1988); Black Beauty

Trucking, Inc. v. Indiana Dept. of Revenue, 527 N.E. 2d 1163

(Ind. Tax Ct. 1988); American Trucking Associations, Inc. v.

Secretary of State, 595 A.2d 1014 (Me. 1991); American

Trucking Associations, Inc. v. State, 556 N.W. 2d 761 (Wis.

12

Ct. App. 1996), rev. denied, 560 N.W.2d 274 (Wis. 1996).

All told, ATA has been forced to bring suit against 15 states

challenging more than two dozen flat state taxes and fees im-

posed on interstate trucking.’ Indeed, that effort continues to

4 American Trucking Associations, Inc. v. State of New Jersey, 852

A.2d 152 (N.J. 2004) (hazardous waste transporter fee (N.J. Stat.

Ann. § 13:1E-18)); American Trucking Associations, Inc. v. State,

556 N.W. 2d 761 (Wis. Ct. App. 1996), rev. denied, 560 N.W.2d

274 (Wisc. 1996) ($400-per-company hazardous material transpor-

tation fee (Wis. Admin. Code § SERB 4.03(2)(a)-(e)); American

Trucking Associations, Inc. v. New Hampshire, No. 89-E-00405-B

(N.H. Super. Ct., Merrimack Co., 1995) ($200-per-unit hazardous

waste transporter fee (N.H. Rev. Stat. Ann. § 147-A:6, II) and $25-

per-unit hazardous material fee (reduced to $5-per-truck during the

litigation) (N.H. Rev. Stat. Ann. § 21-P:20, IV)); American Truck-

ing Associations, Inc. v. Denn, No. C2-95-4910 (Minn. Dist. Ct.,

Ramsey Cty., 1995) ($40-per-vehicle cab card fee (Minn. Stat. §

221.31)); American Trucking Associations, Inc. v. Secretary of

Admin., 613 N.E. 2d 95 (Mass. 1993) ($7-per-truck license fee and

$7-per-truck “user of special fuels” license fee (Mass. Gen. Laws

ch. 62C, § 67) and $200-per-truck hazardous waste carrier fee

(Mass. Gen. Laws ch. 21C, § 7)); American Trucking Associations,

Inc. v. Smith, No. 89-0385 (Ark. Chancery Ct., 1992) ($10-per-

truck fuel decal tax (Ark. Code Ann. § 26-55-708 (2)); American

Trucking Associations, Inc. v. Cowan, No.TX91-01608 (Ariz.

Chancery Ct., 1992) ($125-per-truck cargo tank fee (Ariz. Rev.

Stat. § 28-3005) and $100-per-carrier, $25-per-truck hazardous and

special waste transporter fees (Ariz. Rev. Stat. §§ 28-2421 and 28-

2422)); Marx v. American Trucking Associations, Inc., 600 So. 2d

212 (Miss. 1992) ($12-per-truck fuel identification fee (Miss. Code

Ann. § 27-61-5(1)) and $13-per-truck bingo stamp fee (Miss. Code

Ann. § 77-7-119)); American Trucking Associations, Inc. v. Secre-

tary of State, 595 A.2d 1014 (Me. 1991) ($25-per-truck hazardous

waste fee (Me. Rev. Stat. Ann. tit. 29 § 246-D)); American Truck-

ing Associations, Inc. v. New Hampshire, No. 89-E-00405 (N.H.

Super. Ct., Merrimack Co., 1991) ($20-per-truck decal fee (N.H.

Rev. Stat. Ann. § 260:52, V (Supp. 1988))); American Trucking

Associations, Inc. v. Secretary of State, No. CV-89-410 (Me.

13

this day: ATA’s challenge to Oregon’s flat motor carrier tax,

which was successful in the Oregon Court of Appeals but

rejected by the Oregon Supreme Court, is now pending in

this Court. See No. 05-1177, American Trucking Associa-

tions, Inc. v. State of Oregon (cert. pending) (challenging

American Trucking Associations, Inc. v. State of Oregon, 124

P. 3d 1210 (Or. 2005)).

Although interstate motor carriers have been a particular

target of parochial state taxation, all businesses that operate

across state lines are potential victims of taxes that have a

discriminatory impact on interstate commerce. This Court’s

decisions, which over the years have resolved Commerce

Clause challenges brought by taxpayers in virtually all indus-

tries and sectors of the economy, illustrate that point graphi-

cally. See, e.g., West Lynn Creamery, 512 U.S. at 194 (citing

cases). Yet, as the decision below shows, the lower courts

continue to struggle with the principles that govern “practical

effects” discrimination.

1990) ($15-per-truck decal fee (Me. Rev. Stat. Ann. tit. 29 § 246-

A)); American Trucking Associations, Inc. v. Conway, 566 A.2d

1323 (Vt. 1989) ($50-per-truck fuel decal fee (Vt. Stat. Ann. tit. 23

§ 415 (1982)) and $50-per-truck retaliatory fee (Vt. Stat. Ann. tit.

23 § 3007 (1982))); American Trucking Associations, Inc. v. Gold-

stein, 541 A.2d 955 (Md. 1988) ($25-per-truck fuel decal fee (Md.

Ann. Code art. 81, § 423(a)(1987 Cum. Supp.)); Commonwealth

Transportation Cabinet v. American Trucking Associations, Inc.,

746 S.W.2d 65 (Ky. 1988) ($150-per-truck supplemental highway

use tax (Ky. Rev. Stat. Ann. § 1388.660(4-7)); American Trucking

Associations, Inc. v. Gray, 746 S.W.2d 377 (Ark. 1988) ($175-per-

truck highway use equalization tax (Ark. Code. Ann. §§ 75-817

and 75-819)); Black Beauty Trucking, Inc. v. Indiana Dept. of

Revenue, 527 N.E.2d 1163 (Ind.Tax Ct., 1988) ($50-per-truck sup-

plemental highway use tax (Ind. Code § 6-6-8-1 et seq.)); Ameri-

can Trucking Associations, Inc. v. Kline, 9 N.J.Tax 631 (N.J.,

1987) ($25-per-truck fuel decal fee (NJ. Stat. Ann. § 54:39A-10)).

14

This issue involves a matter of tremendous importance to

the national economy. As the Court has observed repeatedly,

the values embodied in the Commerce Clause “reflect a cen-

tral concern of the Framers that was an immediate reason for

calling the Constitutional Convention: the conviction that in

order to succeed, the new Union would have to avoid the

tendencies toward economic Balkanization that had plagued

relations among the Colonies and later among the States un-

der the Articles of Confederation.” Jefferson Lines, 514 U.S.

at 180 (citations and internal quotation marks omitted). See,

e.g., Oregon Waste Sys., Inc. v. Dep't of Envtl. Quality, 511

U.S. 93, 98 (1994).

Thus, as ATA emphasizes in its own pending petition for

certiorari in No. 05-1177, American Trucking Associations,

Inc. v. State of Oregon, whether or not “the facts of this par-

ticular case, viewed in isolation, * * * appear to pose any

threat to the health of the national economy,” the aggregate

effect of statutes like these cannot be gainsaid:

{H]istory, including the history of commercial conflict

that preceded the constitutional convention as well as

the uniform course of Commerce Clause jurisprudence

animated and enlightened by that early history, provides

the context in which each individual controversy must

be judged. The history of [the Court’s] Commerce

Clause jurisprudence has shown that even the smallest

scale discrimination can interfere with the project of our

federal Union. As Justice Cardozo recognized, to coun-

tenance discrimination of the sort that [Colorado’s] stat-

ute represents would invite significant inroads on our

“national solidarity.”

Camps Newfound/Owatonna, 520 U.S. at 595 (quoting

Baldwin, 294 U.S. at 523). In light of this important princi-

ple, the Court has acknowledged its “‘duty to determine

whether the statute under attack, whatever its name may be,

will in its practical operation work discrimination against in-

15

terstate commerce.’” West Lynn Creamery, 512 U.S. at 201

(quoting Best & Co., 311 U.S. at 455-456). Because the

Colorado tax is structured to work such a practical discrimi-

nation, because discriminatory state taxes of this sort regu-

larly pop up to bedevil taxpayers across the country, and

because the proper treatment of such taxes continues to con-

fuse state courts, this Court should grant review.

CONCLUSION

The petition for a wnt of certiorari should be granted.

Respectfully submitted.

ROBERT DIGGES, JR. CHARLES A. ROTHFELD

ATA Litigation Center Counsel of Record

2200 Mill Road EVAN M. TAGER

Alexandria, VA 22314 Mayer, Brown, Rowe

(703) 838-1865 & Maw LLP

1909 K Street, NW

ROBIN S. CONRAD Washington, DC 20006

AMAR D. SARWAL (202) 263-3000

National Chamber Litigation

Center, Inc.

1615 H Street, NW

Washington, DC 20062

(202) 463-5337

Counsel for Amici Curiae

JUNE 2006