Amicus Curiae Brief — Franks & Son, Inc. v. Washington

No. 98-1282

UFR

In the Supreme Court of the Gnited States

OCTOBER TERM, 1998

FRANKS & SON, INC., on behalf of

themselves and all others similarly situated

Petitioner

THE STATE OF WASHINGTON. W

A CTITAIS TSA

VAONINGIUN (

TRANSPORTATION COMMISSION, AND OFFICE OI

THE STATE TREASURER

On Petition for a Writ of Certiorari to the

Supreme Court of Washington

BRIEF OF AMERICAN TRUCKING

ASSOCIATIONS, INC. AS AMICUS

CURIAE IN SUPPORT OF PETITIONER

ROBERT DIGGES, JR. WALTER HELLERSTEIN

ATA LITIGATION CENTER UNIVERSITY OF GEOR‘

2200 MILL ROAD LAW SCHOOI

ALEXANDRIA, VA 22314 ATHENS, GA 30602

(703) 838-1889 (706) 542-5175

. Ci unsel of Re

QUESTION PRESENTED

Whether the Commerce Clause requirement that state taxes be

apportioned is applicable to “regulatory fees” — that is, state

actions that are used to pay for regulatory activity

il

TABLE OF CONTENTS

Page

QUESTION PRESENTED .... 2.3 ete ee eee (I)

TABLE OF AUTHORITi&€s © 6... «eee Pee ates Se ili

REASONS FOR GRANTING THE PETITION ......... 2

INTRODUCTION .o.eien ee 2

I. LOWER COURTS NEED GUIDANCE ON THE

RELEVANCE AND APPLICATION OF THE “TAX

VERSUS FEE” DESTEIWG, Sat sc oe ee 6

Il. THE COMMERCE CLAUSE’S APPORTIONMENT

REQUIREMENT APPLIES EQUALLY TO TAXES

AND FEES 2.6 esi use © ae ee ee 12

A. The Validity of a State Charge Under the Commerce

Clause is Based Upon its Practical Effect on

Imerstate COMMMEIGO 2 os va oe ee eee ee 12

B. Because the Practical Effect of Flat Taxes and Fees

Under the Commerce Clause is the Same, There is

no Basis for Applying a Different Legal Analysis . . 15

C. Separate Commerce Clause Standards for Fees and

Taxes Would Needlessly Complicate Judicial

Review, Leading to State Manipulation of Charges

and Inconsistemt ReMMS ... 6a ee esa oe eeu 17

Il. A PIKE ANALYSIS IS NOT APPROPRIATE FOR

REGULATORY FEES 543-2455. 02 8 18

CONCLUSION . 6.5 i654 © a uneee ee ee eee 20

il

TABLE OF AUTHORITIES

Cases

American Trucking Associations, Inc. v. Conway,

566 A.2d 1323 (Vt. 1989) ......,.

American Trucking Associations, Inc. y. Denn,

No. C2-95-4910 (Dist. Ct., Ramsey Cty., 1995)

American T, an ont Associations, Inc. v. Goldstein.

541 A.2d 955 (Md. 1988) ...........°

American Trucking Associations, Inc. v. Gray,

746 S.W.2d 377 (Ark. 1988) .....°...

American Trucking Associations, Inc. v. Kline.

> N.J.Tax G51 (N.J., 1987) ............

American Trucking Associations, Inc. v. New

Hampshire, No. 89-E-00405-B (N.H.

Super. Ct., Merrimack Co., ee en

American Trucking Associations, Inc. v. New

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

Super. Ct., Merrimack Co., 1991) ........

American Trucking Associations, Inc. v. New Jersey,

No. 001601-94 (N.J. Tax Ct.) ........°°

American Trucking Associations, Inc. y.

New Jersey, No. 001601 (N.J. Tax Ct..

eeu. 17,0908) ..............

American Trucking Associations, Inc. v. New

Jersey, No. 011562-92 (N.J. Tax Ct.

March 23, 1998), pees docketed,

No. A-6334-97T3F (N.J. Super. Ct., App.

wwommy 15,1998) .................

American Trucking Associations, Inc. v.

Scheiner, 483 U.S. 266 (1987) ........

American Trucking Associations, Inc. v.

Secretary of Administration, 613 N.E.2d 95

TE sy is neces cn eke

Pages

ee)

iV

TABLE OF AUTHORITIES — Continued

Pages

American Trucking Associations, Inc. v. Secretary

of State, 595 A.2d 1014 (Me. 1991) .....---- Fe Be

American Trucking Associations, Inc. v. Secretary

of State, No. CV-89-410 (Me. 1990) .......----:- 3

American Trucking Associations, Inc. v. Smith,

No. 89-0385 (Ark. Chancery Ct., 1992) .......-.-.-- 3

American Trucking Associations, Inc. Vv.

Cowan, No.TX91-01608 (Ariz. Chancery

"Se RRR eS ie i A Pee ere 2

American Trucking Associations, Inc. v. State,

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

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

Armco Inc. v. Hardesty, 467 U.S. 638 (1984) ...-..-.-- 20

Black Beauty Trucking, Inc. v. Indiana Dept.

of Revenue, 527 N.E. 2d 1163 (Ind.

eae Oe PN are ees se Oke ee Roa ete 2

Capitol Greyhound Lines v. Bryce, 339 U.S. 542

A ce elceta Cee ee ah ay Fe + eee ene) 13

Commonwealth Edison Co. v. Montana,

453: U.S. GOO UIGS1) cc et ee et eee es 9,12,14,16

Commonwealth Transportation Cabinet v.

American Trucking Associations, Inc.,

146 S.W.2d 65 (Ky. 1988) ....----- +s seers 3

Complete Auto Transit v. Brady,

SID US. TISCISTT) cg oe ee we cee ee 12,14,17,18

Covell v. City of Seattle, 127 Wash. 2d 874,

9A Be NOD oo eco Scere we hen wie 08 ae Oe 10

Evansville-Vanderburgh Airport Authority

Dist. v. Delta Airlines, Inc., 405 U.S.

ints if) ee Ree Eee eee ees, 8

TABLE OF AUTHORITIES — Continued

Pages

Fair Assessment in Real Estate Association, Inc..

5 UD. WOO CIS). ok oe howe ee eee ae 7

Fairbank v. United States, 181 U.S. 283 (1901) ........ 12

Federal Power Commission v. New England Power

Co, 453 US. 5 Ge. ot ee 6

Head Money Cases, 112 U.S. 580 (1884) ............ 6

In re Jenny Lynn Mining Co., 780 F.2d 585

eee Ca es te te eee 7

Interstate Towing Ass’n v. Cincinnati,

© F.30 1156 Gee Cir. 1993) .. . . 6 oe we ee chee ey 11

Kentucky v. American Trucking Associations, Inc..,

FO S.W. 206 GS Gy. TSG) os oc ce wc ec ccc 2

Marx v. American Trucking Associations, Inc..,

600 So. 24 212 (Miss. 1992) ............c..e. 3

Massachusetts v. United States.

Rae €) Ge CRT: 63s hw a ae eee 6, 7

National Cable Television Ass’n v. United States.

G3) Us SEPP 6% be eee ee eee 6, 8

Pace v. Burgess, 92 U.S. 372 (1876) 2. nw we ee. 6

Perez v. Ledesma, 401 U.S. 82 (1971) ......... Pe oe

Pike v. Bruce Church, Inc.,

Per Ue ROT CUO ve x oo Oe eee 19, 20

Rosewell v. La Salle National Bank, 450 U.S.

PEP CODES 8b oo bo eS ee a Oe, ee eee 8

San Juan Cellular Phone Co. v. Public Service

Comm’n, 967 F.2d 683 (ist Cir. 1992) .......... 7,8

Turpin v. Burgess, 117 U.S. 504 (1886) ............. 6

v1

TABLE OF AUTHORITIES — Continued

Pages

Union Pacific Railroad Co. v. Public Utility Comm'n,

899 F.2d 854 (Sth Cir. 1990) 2... ce et ees 11

United States Shoe Corp. v. United States,

118 S. Ct. 1290 (1998) .......2 2 ee eee. 6,7, 8,9

United States v. Sperry Corp.,

493 U.S. $2 (1969) ww ee re eee ere es 6

V-1 Oil Co. v. Utah State Dept. of Public Safety,

131 F.3d 1415 (10th Cir. 1997) ........--505--: 1]

Westlake Transportation, Inc. v. Michigan Public

Service Commission, No. 95-15628-CM (Mich.

Ct. Cl., October 13, 1995), appeal docketed,

No. 216090 (Mich. App. Ct., Dec. 3, 1998) ...... 2,5

Statutes and Regulations

31 U.S.C. §483a 6... ee er eee 8

31 U.S.C. § 583a 2... ee eee 10

31 U.S.C. §9701 .. 0. ee ee ee 6

49 U.S.C. § 1103(b) . 2. 2 ee ees 7

Ark. Code Ann. § 26-55-708 (2) ....-..-- 5555555: 3

Ark. Code. Ann. §§ 75-817 and 75-819 ..........-.-.-.-. 3

Ariz. Rev. Stat. §§ 28-2421 and 28-2422 ..........-.. 3

Ariz. Rev. Stat. § 28-3005 ........-.--5-5555525- 3

Ind. Code § 6-6-8-1 ......-- 5-2 eee ee es 3

Ky. Rev. Stat. Ann. § 1388.660(4-7)....---- 5-5-5: - 3

N_H. Rev. Stat. Ann. § 147-A:6, If .........--.--.--. 2

N.H. Rev. Stat. Ann. § 21-P:20,I1V .............-.-.-. 3

N.H. Rev. Stat. Ann. § 260:52, V (Supp. 1988) .......-. 3

N.J.S.A. 13:1E-18(a) ...-...--- eee ee eee eee ees 3

N.J.S.A. § 54:39A-10 2.0.0.2 ee ee 3

Mass. Gen. Laws ch. 21C,§7 ........- 5555555 ees 3

Mass. Gen. Laws ch. 62C, § 67 .......-.---5+5505: 3

Md. Ann. Code art. 81, § 423(a) ... 2... 2-2 ee ee ees 3

Me. Rev. Stat. Ann. tit. 29 § 246-A ..........-.555: 3

Me. Rev. Stat. Ann. tit. 29 §246-D ............5.-5. 3

Mich. Comp. Laws 478.2(2) .. 2... 5-5-2 eee eee 2

Minn. Stat. § 221.31... 0... - 2. ee eee eee eee ees 3

Miss. Code Ann. § 27-61-5(1) .. 2... 2. ee ee ee es 3

Miss. Code Ann. § 77-7-119 .... 2.2... 2 ee ee eee ees 3

LLU“

V1

TABLE OF AUTHORITIES — Continued

Pages

Vt. Stat. Ann. tit. 23 §

Vt. Stat. Ann. tit. 23 §

§ §

oo

Ar

ra

oc

rh

Miscellaneous

Hellerstein, Js "Internal Consistency" Foolish

Reflections on an Emerging Commerce Claus:

Restraint on State Taxation," 87 MICH. |

REV. 138 (1988)

Lockhart, State Tax Barriers to Interstate Trad:

53 HARV. L. REV. 1253 (1940)

U.S. Department of Transportation, Highway

Statistics 1997, IV-5 - IV-6 (1997)

INTEREST OF THE AMICUS CURIAE

American Trucking Associations, Inc. (ATA), is a national

trade association of motor carriers, state trucking associations, and

national trucking conferences created to promote and protect the

interests of the trucking industry.' That industry consists of every

type of motor carrier operation in the United States and includes

tens of thousands of interstate for-hire carriers, private carriers, and

leasing companies.

The interstate trucking industry traditionally has been one of

the principal targets of discriminatory state taxation and regulation.

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.

Indeed, ATA was the lead plaintiff (appellant before this Court) in

the case whose principles are most directly at issue in this appeal

(American Trucking Associations, Inc. vy. Scheiner, 483 U.S. 266

(1987) (“Scheiner”)), and it has often litigated the identical “tax

vs. fee” issue raised in this matter. E.g., American Trucking

Associations, Inc. v. Secretary of State, 595 A.2d 1014 (Me. 1991)

(“Secretary of State”): American Trucking Associations, Inc. y.

Secretary of Administration, 613 N -E.2d 95 (Mass. 1993)

(“Secretary of Administration”); American T; rucking Associations,

Inc. v. New Jersey, No. 011562-92 (N.J. Tax Ct. March 23, 1998),

appeal docketed, No. A-6334-97T3F (N.J. Super. Ct., App. Div.

July 15, 1998).

Moreover, despite ATA’s and others’ Strenuous efforts to

enforce Scheiner’s Commerce Clause Standards, states and localities

persist in imposing unapportioned, annual charges on interstate

trucking operations. These governmental entities argue that the

discriminatory and burdensome structure of these charges should be

ignored on the ground that the charges involved are not taxes but

' Pursuant to Rule 37.2 of the Rules of this Court, the parties have

consented to the filing of this brief amicus curiae. Their letters of consent

have been filed with the Clerk of the Court.

Pursuant to Rule 37.6 of the Rules of this Court, amicus states that

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

no person or entity, other than amicus or its members, made a monetary

contribution to the preparation or submission of this brief.

5

“regulatory fees.” ATA accordingly has a strong interest in the

question presented by this case — whether the Commerce Clause’s

fair apportionment requirement ceases to apply to an exaction

merely because the levy may be characterized as a regulatory fee.

REASONS FOR GRANTING THE PETITION

INTRODUCTION

Following this Court’s Scheiner decision in 1987, ATA hoped

that states would recognize the decision’s unequivocal

condemnation of flat, annual charges on interstate trucking

operations and quickly eliminate them. Instead, most states tried

to evade Scheiner’s principles and forced ATA to undertake an

ongoing, decade-long litigation effort to enforce the Commerce

Clause requirements that Scheiner articulated. See, e.g., Kentucky

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) (“Black Beauty”); Secretary

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

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

1996), rev. denied, 560 N.W.2d 274 (Wis. 1996) (“Srate). All

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

challenging more than two dozen flat state taxes and fees imposed

on interstate trucking.’

2 American Trucking Associations, Inc. v. New Jersey, No. 011562-92

(N.J. Tax Ct. March 23, 1998), appeal docketed, No. A-6334-97T3F (N.J.

Super. Ct., App. Div. July 15, 1998) ($212-per-unit 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 transportation fee) (Wis. Admin. Code § SERB 4.03(2)(a)-(e));

Westlake Transportation, Inc. v. Michigan Public Service Commission, No.

95-15628-CM (Mich. Ct. Cl., October 13, 1995), appeal docketed, No.

216090 (Mich. App. Ct., Dec. 3, 1998) ($100-per-truck intrastate operating

fee (Mich. Comp. Laws 478.2(1)) and $100-per-vehicle flat annual

interstate registration fee (Mich. Comp. Laws 478.2(2)); American

Trucking Assaciations, 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

CC

ee)

hazardous material fee (reduced to $5-per-truck during the litigation) (N.H.

Rev. Stat. Ann. § 21-P:20, IV)); American Trucking Associations, Inc. vy.

Denn, No. C2-95-4910 (Dist. Ct., Ramsey Cty., 1995) ($40-per-vehicle cab

card fee (Minn. Stat. § 221.31)); American Trucking Associations, Inc. v.

New Jersey, No. 001601 (N.J. Tax Ct., filed Feb. 17, 1994) (flat-per-

company hazardous waste transporter business disclosure fee (N.J. Stat.

Ann. §§ 13:1E-18 and 13:1E-126 et seq.)); 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. Secretary of State, 595 A.2d 1014 (Me. 1991) ($25-

per-truck hazardous waste fee (Me. Rev. Stat. Ann. tit. 29 § 246-D));

American Trucking 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. 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 (23 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. Goldstein, 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 vy. 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 supplemental

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

Associations, Inc. v. Kline, 9 N.J.Tax 63] (N.J., 1987) ($25-per-truck fuel

In those cases, states have attempted to exploit every ambiguity

in Scheiner. For example, states have contended that the decision

applies only to situations where a state, by means of other tax

reductions, exempts local interests from the impact of the flat

charge — a blatant mischaracterization of Scheiner’s scope. See

483 U.S. at 273-75.° And states have attempted, as in this case, to

circumvent Scheiner’s apportionment requirement by arguing that

the decision applies only to taxes and not fees.

The “tax versus fee” argument has, therefore, been expressly

considered by courts in ATA cases. Rejecting the argument, the

Supreme Judicial Court of Massachusetts found that “[ijt is of no

relevance what label is attached to the assessment imposed by a

State if it actually discriminates against interstate commerce.”

Secretary of Administration, 613 N.E.2d at 99 n. 9. Likewise, the

Supreme Judicial Court of Maine held that “a tariff such as the one

imposed here is forbidden if it produces the prohibited

discriminatory effects on interstate commerce, whether designated

as a ‘fee’ or a general revenue ‘tax.’” Secretary of State, 595 A.2d

at 1016. Accordingly, the decision below directly conflicts with the

decisions of the highest courts of two states, and review by this

Court is needed to settle the standard of Commerce Clause review

governing “fees” that affect interstate commercial activities.

Moreover, the issue of the appropriate Commerce Clause

standar¢ to be applied to “fees” is now pending in two cases

challenging impositions by the State of New Jersey. Ina challenge

to a $212-per-unit annual hazardous waste transporter fee (which,

like the Washington fee, funds, in part, roadside safety

inspections), the New Jersey Tax Court rejected the State’s claim

decal fee (N.J. Stat. Ann. § 54:39A-10)).

3 As Petitioners note (Pet. at 26), states have also argued that

apportionment was impracticable, that it was inappropriate because the

charge involved was not for highway maintenance or construction, and

that their charge, as a “user fee,” need not be apportioned. See e.g.

State, 566 N.W. 2d at 767-68; Secretary of State, 595 A.2d at 1016;

Secretary of Administration, 613 N.E.2d at 101-03.

——— ss s—“‘_SN

5

that the charge was a regulatory fee that need not be apportioned.

The Court held that “[i]t is irrelevant whether I call the transporter

fees fees or taxes under Commerce Clause jurisprudence. It is

clear in Scheiner that the United States Supreme Court looked not

at the formal designation or character of a state imposition as being

a ‘fee or tax,’ but instead to the affect of that imposition on

interstate commerce .. .” American T, rucking Associations, Inc. v.

New Jersey, No. 011562-92 (N.J. Tax Ct. March 23. 1998) appeal

docketed, No. A-6334-97T3F (N.J. Super. Ct., App. Div. July 15,

1998).

An identical “tax versus fee” issue is pending in a concurrent

challenge to New Jersey’s flat, annual per-company hazardous

waste transporter business disclosure fee (N.J.S.A. 13: 1E-18(a)).

American Trucking Associations, Inc. v. New Jersey, No. 001601-

94 (N.J. Tax Ct.). And recently, the Michigan Court of Claims

rejected an ATA challenge to a $100-per-truck intrastate regulatory

fee that affects interstate commerce, expressing the view that state

regulation of safety standards “is not amenable to a fee structure

based on apportionment by usage.” Westlake Ti ransportation, Inc.

v. Michigan Public Service Commission, No. 95-15628-CM (Mich.

Ct. Cl., (Oct. 13, 1998)), appeal docketed, No. 216090 (Mich.

App. Ct., Dec. 3, 1998). Consequently, the case below presents

a substantial, recurring legal issue that demands this Court’s

attention.

Finally, many other substantial flat, annual charges, which are

not subject to current challenge, are being imposed on interstate

trucking operations (and other interstate businesses). See Petition

at 24n. 17. Without guidance from this Court on the “tax versus

fee” issue, the chances of eliminating those discriminatory charges,

without years of costly litigation, will be slim. Indeed, given the

recalcitrant attitude that many states have taken regarding flat,

annual taxes and fees, it can be reasonably expected that those

States will be emboldened by the decision below to enact new flat,

annual “fees” on the interstate trucking industry and other interstate

businesses. States have a powerful incentive to utilize flat charges

to export an unfair portion of their tax burden to out-of-state

interests; in Scheiner (483 U.S. at 276), the Court recognized that

the flat charges effectively cost interstate highway users five times

as much as local users. It is again, therefore, critically important

:

6

that this Court clarify the Commerce Clause standards applicable

to state “fees” to prevent further mischief in this area.

I. LOWER COURTS NEED GUIDANCE ON THE

RELEVANCE AND APPLICATION OF THE “TAX

VERSUS FEE” DISTINCTION

Whether a particular exaction constitutes a “tax” or a “fee” is

a recurring question that arises in a wide variety of contexts. For

example, this Court recently had to determine whether the federal

Harbor Maintenance Tax, as it applies to exports, constituted a tax

prohibited by the Export Clause of the Constitution (U.S. Const.

art. I, § 9, cl. 5), or a fee that fell outside the constitutional

prohibition. United States Shoe Corp. v. United States, 118 S. Ct.

1290 (1998); see also Turpin v. Burgess, 117 U.S. 504 (1886);

Pace v. Burgess, 92 U.S. 372 (1876). Similarly, the Court has had

to determine whether charges by federal agencies are authorized

fees for benefits granted* or are in substance taxes that Congress |

can impose only by the exercise of its taxing power. Federal Power

Commission v. New England Power Co., 415 U.S. 345 (1974);

National Cable Television Ass'n v. United States, 415 U.S. 336

(1974). It has had to determine whether federal registration fees

imposed on civil aircraft constituted taxes that arguably violated the

states’ constitutional immunity from federal taxation, or were

reasonable user fees that were not barred by that doctrine.

Massachusetts v. United States, 435 U.S. 444 (1978). And, over a

century ago, the Court had to determine whether per-passenger

charges on those transporting immigrants into the country

constituted an allegedly nonuniform exercise of the federal taxing

power, see U.S. Const. art. I, § 8, cl. 1, or a fee for services

rendered that was not subject to the constitutional restraint on that

power. Head Money Cases, 112 U.S. 580 (1884). Cf. United States

v. Sperry Corp., 493 U.S. 52 (1989) (distinguishing charges that

constitute governmental takings under Due Process Clause from

reasonable user fees).

* See 31 U.S.C. § 9701 (delegating to administrative agencies the

authority to assess charges in situations where a “service or thing of

value” is provided by the agency).

7

Other courts have addressed similar questions in yet other

contexts. See, e.g., San Juan Cellular Phone Co. v. Public Service

Comm'n, 967 F.2d 683 (1st Cir. 1992) (Breyer, J.) (determining

whether an exaction is a tax, which may not be challenged in

federal court under the anti-tax injunction act, or a fee, which may

be so challenged); Union Pacific Railroad Co. v. Public Utility

Comm'n, 899 F.2d 854 (9th Cir. 1990) (determining whether a

levy is a tax subject to the antidiscrimination provisions of the

Railroad Revitalization and Regulatory Reform Act of 1976, 49

U.S.C. § 1103(b), or a fee not subject to the Act’s

antidiscrimination provisions); In re Jenny Lynn Mining Co., 780

F.2d 585 (6th Cir. 1986) (determining whether a levy is a tax

subject to priority in bankruptcy proceedings or a fee not entitled

to such priority).

In each of these cases, even though the question is nominally

the same—whether the particular exaction at issue is a tax or a

fee—the underlying reasons for (and the legal consequences of)

characterizing the exaction as a tax or a fee are often quite different

and unrelated to one another. Thus, the characterization of an

exaction as a tax rather than a fee resolves such disparate questions

as whether the exaction should be subject to constitutional restraints

on federal taxation of exports (United States Shoe); whether the

exaction constitutes an impermissible levy by the Federal

Government on the states (Massachusetts); whether the exaction

must conform to constitutional uniformity principles (Head Taxes );

whether the exaction may be challenged in federal court (San Juan

Cellular); and whether the exaction is subject to priority in

bankruptcy proceedings (Jenny Lynn Mining).

Because each of these inquiries is informed by different

constitutional and statutory provisions and the discrete policies

underlying them, it would be surprising if the line drawn between

a tax and fee in one context would provide controlling or even

meaningful guidance to the appropriate line, if any, between a tax

and a fee in another context. For example, the policies underlying

the tax injunction act—to prevent federal interference with the

lifeblood of state government (see Fair Assessment in Real Estate

Association, Inc. v. McNary, 454 U.S. 100 (1981))—have little to

do with the policies underlying the limited Statutory grant to federal

8

agencies to assess charges that provide “‘value to the recipient.’”

National Cable, 415 U.S. at 341 (quoting 31 U.S.C. § 483a).

As Justice Breyer observed when he was sitting on the First

Circuit, in rejecting the argument that an exaction that does not

provide individual “value to the recipient” must be deemed a tax

for all purposes:

Deciding whether (or to what extent) a particular fee provides

such individual value could make sense in the context of such

a statute.

Here, however we are dealing with a very different

statute, a “tax injunction” statute, which has as its objective to

prevent a taxpayer from “throwing” state “tax administration

. into disarray” as the taxpayer tries to “escape... .

ordinary procedural requirements” by going to federal court

for an injunction, perhaps thereby “damaging” the “State’s

budget” and “shifting to the State . . . the risk of taxpayer

insolvency.” Whether a particular agency charge defrays the

administrative costs of regulating a single regulated firm or a

class of such firms has little, or nothing, to do with this

problem. Hence, the Court’s limiting language in National

Cable is irrelevant here.

San Juan Cellular, 967 F.2d at 10-11 (ellipses in original) (quoting

Rosewell v. La Salle National Bank, 450 U.S. 503, 527 (1981)

(quoting Perez v. Ledesma, 401 U.S. 82, 128 (1971) (Brennan, J.,

concurring in part and dissenting part))) (additional citation

omitted).

This Court has likewise recognized that the question whether

an exaction should be considered as a tax or fee for constitutional

or other purposes is an inquiry that depends on the context in which

the question arises, and that the lines drawn in one context do not

determine the lines drawn in another. Thus in United States Shoe,

which involved the question whether an exaction was a tax for

purposes of the limitation on federal taxation of exports, the Court

distinguished cases that had drawn a line between taxes and fees

under the Takings Clause (Sperry), the intergovernmental immunity

doctrine.(Massachusetts), and the Commerce Clause (Evansville-

Vanderburgh Airport Authority Dist. v. Delta Airlines, Inc., 405

SS

9

U.S. 707 (1972))°: “Those decisions involved constitutional

provisions other than the Export Clause . . . and thus do not

govern here.” United States Shoe, 118 S. Ct. at 1295.

The Washington Supreme Court utterly ignored the context-

specific nature of the “tax versus fee” inquiry, and the necessity of

identifying the constitutional or Statutory concerns at stake, in

mechanically determining that the exaction at issue was a

“regulatory fee” and, “therefore” (according to the court) not

subject to the Commerce Clause requirement that taxes be fairly

apportioned and internally consistent. Pet. App. at 10a-16a. The

court relied on cases arising under a variety of disparate and

unrelated provisions in concluding that the exaction constituted a

“regulatory fee” that was insulated from the Court’s Commerce

Clause jurisprudence applicable to state taxing measures. See Pet.

App. at lla-12a (discussing Union Pacific, arising under the

Railroad Revitalization and Regulatory Reform Act); Pet. App. at

> Tt is worth observing that, in the Commerce Clause context, the only

distinction the Court has ever drawn between a tax and fee is a distinction

between general revenue measures, on the one hand, and user fees, on the

other, and then only to point out that user fees are subjected to a greater

degree of constitutional scrutiny than are general revenue measures. As

the Court observed in Commonwealth Edison Co. v. Montana, 453 U.S.

609 (1981), with regard to “‘user’ fees or ‘taxes’ that were designed and

defended as a specific charge imposed by the State for the use of state-

owned or state-provided transportation or other facilities and services” (id.

at 621):

“[sJuch imposition although termed a tax, cannot be tested by

standards which generally determine the validity of taxes.” Because

such charges are purportedly assessed to reimburse the State for

costs incurred in providing specific, quantifiable services, we have

required a showing, based on factual evidence in the record, that

“the fees charged do not appear to be manifestly disproportionate to

the services rendered ... .”

Id. at 622 n.12 (citation omitted: ellipses in original). There is no

Suggestion here that the exaction at issue is a user charge in the sense

employed by the Court. Moreover, even if it were, it would expose the

charge to increased — not lesser — constitutional scrutiny, as the court

below suggested.

10

12a (discussing National Cable, arising under the Independent

Offices Appropriation Act, 31 U.S.C. § 583a); Pet. App. at 12a-

13a (discussing Covell v. City of Seattle, 127 Wash. 2d 874, 905

P.2d 324 (1995), arising under the Washington State constitutional

requirement of uniformity and equality in property taxation).

The court below therefore failed to pay attention to the

rationale, if any, for excluding the exaction at issue from

Commerce Clause scrutiny applicable to taxes. The court’s failure

in this regard is most dramatically illustrated by its heavy reliance

on the distinction purportedly drawn between taxes and fees in

Hellerstein, Js “Internal Consistency” Foolish?: Reflections on an

Emerging Commerce Clause Restraint on State Taxation,” 87

MICH. L. REV. 138 (1988). The court declared that the article:

identified “professional and similar licensing fees that are

imposed by every state” as possible victims of strict

application of internal consistency to nondiscriminatory

regulatory fees.

Many of these fees are flat and unapportioned, and, for

that reason, could be challenged under the “internal

consistency” rationale. . . . One feature of these licensing

fees, however, arguably insulates them from challenge

under the “internal consistency” doctrine. In contrast to

.. exactions . . . presumed to be imposed for general

revenue purposes pursuant to the state’s taxing power, the

levies considered here are presumed to be imposed for

regulatory purposes pursuant to the state’s police power.

However thin that distinction may be in some cases, it is

a distinction the law recognizes, and the question for

present purposes is whether it is a distinction that makes

a constitutional difference insofar as the commerce clause

(and “internal consistency”) analysis is concerned.

Pet. App. at 16a (quoting Hellerstein, supra, 87 MICH. L. REV. at

156 (omission of footnotes and ellipses in original)).

While the court relies on the distinction the article identifies

between exactions imposed for general revenue purposes and levies

imposed for regulatory purposes in support of its conclusion that

the latter need not satisfy the “internal consistency” test, if

ee eee

1]

completely ignores the article’s analysis of the issue, which flatly

contradicts the court’s conclusion. In answering the question posed

— whether the “tax versus fee” distinction is one that “makes a

constitutional difference insofar as the commerce clause (and

‘internal consistency’) analysis is concerned” — the article declares:

Although the Court’s formal criteria for evaluating

commerce clause challenges to state regulations are not

identical to its criteria for evaluating commerce clause

challenges to state taxation, there is no reason to believe that

a regulatory license fee would be immune from the “internal

consistency” requirement merely because it constituted an

exercise of the regulatory power rather than an exercise of the

State's taxing power. Surely the evils that the “internal

consistency” test was designed to combat are the same

regardless of whether the unapportioned flat levy is an exercise

of the tax power or the regulatory power. In each case, the

licensee carrying on his trade in more than one jurisdiction

bears a greater financial burden than his intrastate competitor

merely because he is engaging in interstate commerce with the

consequent interference with free trade among the states.

Hence, there does not appear to be any sound policy basis for

distinguishing the “fee” from the “tax” cases insofar as the

application of the “internal consistency” doctrine is concerned.

Hellerstein, supra, 87 MICH. L. REV. at 157 (emphasis supplied;

footnote omitted). In short, rather than Supporting the court’s

conclusion, the article’s analysis demonstrates that there is no sound

basis for declining to apply the Commerce Clause’s fair

apportionment requirement, and its related “internal consistency”

test, to the “regulatory fee” at issue here.

The Washington Supreme Court is not alone in its misguided

reliance ‘on cases from other contexts to resolve the question

whether the Commerce Clause restraints imposed on state taxes

apply to exactions that may be characterized as “regulatory fees.”

See, e.g., V-1 Oil Co. v. Utah State Dept. of Public Safety, 131

F.3d 1415 (10th Cir. 1997) (relying on unrelated state law

precedents in holding that an exaction should be analyzed as a

“regulation” rather than a “tax” under the Commerce Clause):

Interstate Towing Ass'n v. Cincinnati, 6 F.3d 1154 (6th Cir. 1993)

12

(same). Moreover, the Washington decision is in conflict with

decisions of other courts that have properly recognized the

irrelevance of the tax-regulatory fee dichotomy for purposes of

analyzing whether a flat, annual charge on interstate trucks violates

the Commerce Clause. See, e.g., Secretary of Administration;

Secretary of State.

Consequently, this Court’s guidance is sorely needed to assure

that the question whether an exaction is subject to the restraints that

the Commerce Clause imposes on the exercise of state tax power

is resolved in light of the principles that underlie the Court’s

Commerce Clause jurisprudence and not by reference to cases from

other, unrelated contexts. Courts need to be reminded, as this Court

observed many years ago, that “we must regard things rather than

names” (Fairbank v. United States, 181 U.S. 283, 304 (1901)), in

undertaking the constitutional analysis.

Ii. THE COMMERCE CLAUSE’S FAIR APPORTIONMENT

REQUIREMENT APPLIES EQUALLY TO TAXES AND

FEES

A. The Validity of a State Charge Under the Commerce

Clause is Based Upon its Practical Effect on Interstate

Commerce

In recent decades, this Court has adjudicated virtually every

Commerce Clause challenge to a state charge (whether denominated

a tax or a fee) under the four-prong analysis of Complete Auto

Transit, Inc. v. Brady, 430 U.S. 274, 279 (1977) (a charge will

pass muster only if it “is applied to an activity with a substantial

nexus with the taxing State, is fairly apportioned, does not

discriminate against interstate commerce, and is fairly related to

services provided by the State.”).

In applying Complete Auto’s analysis, this Court has also made

clear that “the permissibility of state taxation [is] based upon its

actual effect rather than its legal terminology” (id. 439 U.S. at

281), noting that “a focus on that formalism merely obscures the

question whether the tax produces a forbidden effect.” Jd. at 288.

See also Commonwealth Edison, 453 U.S. at 616 (“In reviewing

Commerce Clause challenges to state taxes, our goal has instead

been to ‘establish a consistent and rational method of inquiry’

13

focusing on ‘the practical effect of a challenged tax.’”) (citations

omitted).

It is beyond dispute that flat, annual charges have the same

impact on interstate motor carriers (and on other interstate

businesses) no matter what the charges are denominated. This is

So because the level of the fee is “not keyed to the interstate

truckers’ actual use of State highways, facilities, or services.”

Secretary of Administration, 613 N.E. 2d at 100. Consequently,

“an interstate carrier will be subject to the [flat] taxes of several

States, even though his entire use of the [States’] highways[,]

[services, or facilities] is not significantly greater than that of

intrastate operators who are subject to only one [flat] tax.”

~ Scheiner, 483 U.S. at 292 (quoting Capitol Greyhound Lines y.

‘Bryce, 339 U.S. 542, 557 (1950) (Frankfurter, J., dissenting)).

This is true, of course, no matter what a state charge is called and

no matter what the uses to which the state puts the charge’s

proceeds.

For example, whether called a regulatory fee, a highway user

tax or fee, or a general revenue tax, a flat. annual $50 per-truck

charge costs an interstate trucker as much as $2,450 (to operate in

the 48 contiguous states and the District of Columbia), while

costing a purely intrastate trucker only $50. This is so even though

the two trucks’ level of operations are identical. This “cumulative

effect does not result from the mileage or distance traveled, but

from the interstate character of the journey.” Scheiner, 483 U.S.

at 284 n.16 (quoting Lockhart, State Tax Barriers to Interstate

Trade, 53 HARV. L. REV. 1253, 1269 (1940)).

The result of this cumulative burden is that some entities

engaged in interstate commerce will be forced to draw back from

full participation in the interstate market. In Scheiner, the Court

observed that flat, annual charges have a “forbidden impact on

interstate commerce because [they] [] exert{] an inexorable

hydraulic pressure on interstate businesses to ply their trade within

the State that enacted the measure rather than ‘among the several

States.’” Scheiner, 483 U.S. at 286-87. Consequently, flat annual

charges of all sorts do not “maintain state boundaries as a neutral

factor in [a taxpayer’s]” economic decisionmaking” (id. at 283).

Such charges therefore offend the Commerce Clause.

14

Moreover, any type of unapportioned annual charge “‘bear[s]

more heavily in the aggregate on a firm that [does business] in

many places than on a firm otherwise identical . . . that [does

business] in only one place.’” Scheiner, 483 U.S. 285 n.20

(citation omitted). As this Court explained in Scheiner, “in the

general average of instances, the privilege is not as valuable to the

interstate carriers” because “the very nature of the market that

interstate operators serve prevents them from making full use of the

privilege of doing business for which they have paid the State.” Jd.

at 284 n.16, 291. Consequently, interstate motor carriers and other

interstate businesses, under any type of a flat annual charge,

inherently pay more than their fair share of a state’s costs. See

Scheiner, 483 U.S. at 296 (“[I]mposition of [a] flat tax{] for a

privilege that is several times more valuable to a local business than

to its out-of-state competitors is unquestionably discriminatory and

thus offends the Commerce Clause.”).

Finally, it is also indisputable that any type of flat charge fails

Complete Auto’s fourth prong requirement that taxes be “fairly

related to services provided by the state.” Complete Auto, 430 U.S.

at 279. With respect to taxes, this requirement has been interpreted

to require that “the measure of the tax must be reasonably related

to the extent of the [taxpayer’s] contact, since it is the activities or

presence of the taxpayer in the State that may be properly made to

bear a just ‘share of state tax burden.’” Commonwealth Edison,

453 U.S. at 626. When taxes “are assessed in proportion to a

taxpayer’s activities or presence in a State, [a] taxpayer is

shouldering its fair share” of the state’s tax burden. /d. at 627.

Conversely, “‘when the measure of a tax bears no relation to the

taxpayer’s presence or activities in a State, a court may properly

conclude . . . that the State is imposing an undue burden on

interstate commerce.’” Scheiner, 483 U.S. at 291 (quoting

Commonwealth Edison, 453 U.S. at 629.) Indeed, as we have

noted (at note 5, supra), under the fourth prong fees are subject to

an even more demanding Commerce Clause analysis than are

general revenue taxes.

In practice, unapportioned annual charges, whether labeled a

tax or a fee, expose interstate motor carriers (and other forms of

interstate business) to duplicative taxation. Such levies also

inherently place a disproportionate and discriminatory share of a

15

State’s tax or regulatory cost on out-of-state taxpayers. Such flat

charges therefore unquestionably violate the Commerce Clause.

B. Because the Practical Effect of Flat Taxes and Fees

Under the Commerce Clause is the Same, There is no

Basis for Applying a Different Legal Analysis

Before allowing a state to impose a flat, annual charge that

inherently discriminates against and burdens interstate commerce,

it would be reasonable to expect some explanation as to why such

a charge was appropriate in the context of a “regulatory” or “user”

fee — an explanation, that is, of what is it about a regulatory or

user fee that makes a flat charge any less discriminatory or

burdensome, less of a threat to the free movement of interstate

commerce, or more difficult to apportion than a general revenue

tax. But while the Supreme Court of Washington alludes to “policy

reasons” that justify a different Commerce Clause standard for

regulatory fees, it never explains those reasons. Instead, it

speculates that applying an apportionment requirement could

jeopardize other forms of flat state charges (Pet. App. at 15a) and

cites out-of-context cases holding that the burden on interstate

commerce from “a direct tax” is “inherently greater” than from

“police power regulations.” Jd. at lla.

The Court’s concern about the potential invalidation of all flat

charges is simply wrong. Per-use flat charges, such as the

enplaning fee in Evansville, or toll charges or head taxes, are self-

apportioned (each use triggers a separate fee payment) and

therefore do not violate the Commerce Clause. Such fees are

“directly related, in purpose and amount, to the use of a service or

privilege” (Secretary of Administration, 613 N.E.2d at 102),

making each feepayer’s payment equivalent to the approximate

value of the services received from the state. Likewise, flat

administrative fees also would not offend the Commerce Clause

when they simply recoup the state’s true administrative cost of

doing a particular administrative task (e.g., fees for processing a

license application). Under a true administrative fee, the state’s

cost would be the same for each feepayer, would not vary with the

level of a feepayer’s activity in the state, and would be in an

amount appropriate to provide compensation for an identifiable,

specific administrative service.

16

Other flat, annual “fees” imposed to reimburse a state for

generic costs of regulation or providing a service or facility must

be apportioned to protect interstate commerce against potential

multiple taxation. State regulatory programs or generic services

whose costs vary with the level of a feepayer’s in-state activity

(e.g., conducting random inspections) involve charges very much

akin to general revenue taxes, a point that is discussed below.

Feepayers in such circumstances simply contribute to the costs of

a generic government program. As with general revenue taxes, the

only fair way to distribute the cost of such programs is to apportion

them according to the feepayer’s level of activity or presence in the

state. Consequently, the Washington court’s supposition that

regulatory fees do not as directly affect interstate commerce as do

general revenue taxes is simply wrong. A $50 per-truck charge

labeled a regulatory user fee is just as burdensome to interstate

motor carriers and just as much a threat to interstate commerce as

a $50 per-truck charge labeled a highway tax.

Finally, it is worth noting that apportioning a regulatory or

user fee is no more difficult than apportioning a general revenue

tax. In fact, it should be easier for a state to apportion a regulatory

or user fee according to usage of state services or facilities than it

is to apportion a general revenue tax that is imposed to recoup costs

of general governmental benefits. See Commonwealth Edison, 453

U.S. at 623 (noting that a general revenue tax “is not an assessment

of benefits”). In any event, apportionment is not based on

identifying each cost imposed on a state by particular activities and

then apportioning those costs to specific feepayers. Rather,

apportionment is instead based on the level of activities or presence

in the state of the taxpayer. See id. at 626 (“a tax [must be]

reasonably related to the extent of the [taxpayer’s] contact [with the

taxing State], since it is the activities or presence of the taxpayer in

the State that may properly be made to pay a ‘just share of state tax

burden.’”) (citation omitted). It is no more difficult to apportion

a fee (based on the extent of in-state activity) than it is a tax.

17

C. Separate Commerce Clause Standards for Fees and

Taxes Would Needlessly Complicate Judicial Review,

Leading to State Manipulation of Charges and

Inconsistent Results

State exactions do not fall into neat, well-defined tax and fee

categories. States impose many types of charges for many different

purposes. Some charges are broad-based taxes that generate

revenue for general governmental purposes (e.g., personal and

corporate income taxes, sales and use taxes). Others are more

selective taxes that likewise generate revenue for general

governmental purposes (e.g., alcohol and tobacco taxes). Still

others are selective charges (taxes and fees) that are earmarked for

a particular governmental purpose (e.g., highway use taxes

earmarked for road construction and maintenance, regulatory fees

earmarked for funding state regulatory services). And finally, there

are per-use fees and administrative fees that are charges for

individualized uses of specific state services or facilities (e.g., tolls,

administrative filing fees).

It is not always easy to determine exactly where a state charge

falls along the “tax versus fee” continuum. For example, the

charges reviewed in Scheiner (one denominated a tax and one a

fee), were fees in the same sense as was the Washington per-truck

charge at issue in this case. The Scheiner charges were imposed on

truck owners to pay general highway costs incurred by the state

because of the operation of their vehicles (see Scheiner, 483 U.S.

at 270-71), while the Washington fees were imposed on truck

owners to fund general state safety activities related to the operation

of their trucks. Yet, although there is virtually no practical

difference between the types of charges, the Washington Supreme

Court categorized them differently and in a manner that ultimately

controlled, according to that court, their constitutionality under the

Commerce Clause.

Basing the validity under the Commerce Clause of a state

exaction On its categorization rather than its practical effect would

add a complicated layer of analysis to constitutional review. As

this Court recognized in Complete Auto, such a formalistic view

would “operate only as a rule of draftsmanship, and serve[] only to

distract the courts and parties from their inquiry into whether the

18

challenged tax produced results forbidden by the Commerce

Clause.” Complete Auto, 430 U.S. at 285. Undoubtedly, courts

would reach inconsistent conclusions on charges that imposed “no

real economic difference” on the parties. /d. at 284. Whether a

State charge is a tax or fee simply does “not address the problems

with which the Commerce Clause is concerned.” /d. at 288.

Moreover, such formalism invites states to attempt to

manipulate the legal analysis. State legislatures are under pressure

from local interests to export as much of their tax and regulatory

cost burden as possible to out-of-state entities. Flat, annual charges

are a proven tool for just such discrimination. If flat highway taxes

are unconstitutional, but flat regulatory fees are permissible, it will

be a simple matter for a state to break down a general highway tax

into a number of so-called regulatory fees.

For example, highway taxes fund a variety of state activities,

including capital outlays for road construction and improvements;

maintenance costs to keep highways in a usable condition; highway

and traffic service costs, such as traffic control devices, snow

removal, and the like; administrative costs related to general

highway planning and research; highway law enforcement and

safety expenditures, including traffic supervision, vehicle

inspection, and enforcement of size and weight limitations; debt

service costs; and intergovernmental transfers for local road-related

projects. U.S. Department of Transportation, Highway Statistics

1997, IV-5 - IV-6 (1997). It would not be difficult for a state to

replace a flat unconstitutional general highway tax (e.g., the

Pennsylvania $36 per-axle tax or $25 marker fee) with a series of

flat regulatory/user fees (a safety inspection fee, a hazardous

material enforcement fee, a size and weight inspection fee, a rest

area fee, a snow removal fee, and so on). Indisputably, the impact

of such fees would be the same on interstate commerce as an

identical exaction labeled a highway tax.

Ill. A PIKE ANALYSIS IS NOT APPROPRIATE FOR

REGULATORY FEES

Even if the distinction between a tax and a “regulatory fee”

were deemed to have some bearing on the standards for

adjudicating the constitutionality of an exaction under the

Commerce Clause, it does not follow, as the court below

19

concluded, that the appropriate standards are those stated in Pike v

Bruce Church, Inc., 397 U.S. 137 (1970). In Pike, this Court

articulated the now-familiar balancing test that it has frequently

applied to state statutes that regulate interstate commerce:

Where the statute regulates evenhandedly to effectuate a

legitimate local public interest, and its effects on interstate

commerce are only incidental, it wiil be upheld unless the

burden imposed on such commerce is clearly excessive in

relation to the putative local benefits. If a legitimate local

purpose is found, then the question becomes one of degree

And the extent of the burden that will be tolerated will of

course depend on the nature of the local interest involved, and

on whether it could be promoted as well with a lesser impact

On interstate activities.

Pike, 397 U.S. at 142 (citations omitted).

On its face, the open-ended balancing test that has been used

to determine the constitutionality of state regulations of interstate

commerce has no application to fees that do not themselves have

any regulatory content. No matter what the revenue they generate

is used for, the “regulatory fees” at issue here do not function as

regulations. The only thing that the fees require is that the truckers

pay money to the state. There is simply no “putative local

benefit”—the effect of a substantive regulation under the Pike

test—to balance against the burden of the tax.°

Moreover, even if the Pike test were applicable to the

exactions at issue here, it is plain that the court below misapplied

it. Under Pike, a regulation must “regulate[] evenhandedly” (i.e. ,

be nondiscriminatory) before a court may “balance” the burden the

regulation imposes against the benefit it provides. But the flat levy

at issue here is clearly discriminatory. However one may

characterize this levy (as a tax, a regulatory fee, or something

® In this respect, the regulatory fee at issue here is easily distinguishable

from a fee that itself may function as a regulation, e.g., a progressive fee

calibrated to the amount of pollutants a feepayer discharges into the

environment. Such a fee does not merely raise revenue; it also directly

affects the level of pollutants discharged.

20

else), and whatever test of constitutionality may govern its validity,

it is indisputable that the levy is unfairly apportioned. Indeed, the

State conceded as much (see Pet. App. at 15a), contending instead

that the fair apportionment requirement was inapplicable. But this

Court has flatly stated that “[a] tax that unfairly apportions income

from other States is a form of discrimination against interstate

commerce.” Armco Inc. v. Hardesty, 467 U.S. 638, 644 (1984). It

is therefore apparent that the flat levy at issue here cannot satisfy

the threshold requirement of the Pike test because it is structurally

discriminatory and thus not “evenhanded.”

Furthermore, even if one overlooked the fact that flat levies by

their very nature discriminate against interstate commerce, the levy

at issue here would sril/ flunk the Pike balancing test. Under Pike,

no burden on interstate commerce will be tolerated if the state’s

purpose in the regulation can “be promoted as well with a lesser

impact on interstate activities.” Pike, 397 U.S. at 142. Here, of

course, the State undeniably could fund its motor carrier safety

enforcement program with a fairly apportioned levy. Hence a

reasonable, nondiscriminatory alternative to the State’s flat levy

clearly exists. Accordingly, the Court’s review of this case is

needed to confine the Pike balancing test within its appropriate

bounds and to assure that, within those bounds, the Pike analysis

is properly construed.

CONCLUSION

The petition for a writ of certiorari should be granted.

Respectfully submitted.

ROBERT DIGGES, JR. WALTER HELLERSTEIN*

ATA LITIGATION CENTER UNIVERSITY OF GEORGIA

2200 MILL ROAD LAW SCHOOL

ALEXANDRIA, VA 22314 ATHENS, GA 30602

(703) 838-1889 (706) 542-5175

* Counsel of Record

MARCH 12, 1999