Editing Dormant Commerce Clause (section)

==State taxation==
Over the years, the Supreme Court has consistently held that the language of the Commerce Clause contains a further, negative command prohibiting certain state taxation even when Congress has failed to legislate on the subject.<ref>Examples of such cases are ''[[Quill Corp. v. North Dakota]]'', 504 U.S. 298 (1992); ''Northwestern States Portland Cement Co. v. Minnesota'', 358 U.S. 450, 458 (1959) and ''H.P. Hood & Sons, Inc. v. Du Mond'', 336 U.S. 525 (1949).</ref>

More recently, in the 2015 case of ''[[Comptroller of the Treasury of Maryland v. Wynne]]'',<ref name=Wynne>[https://www.supremecourt.gov/opinions/14pdf/13-485_o7jp.pdf Comptroller of Treasury of MD. v. Wynne], 575 U.S. 542 (2015).</ref> the Court addressed Maryland's unusual practice of taxing personal income earned in Maryland, and taxing personal income of its citizens earned outside Maryland, ''without'' any tax credit for income tax paid to other states. The Court held this sort of double-taxation to be a violation of the dormant Commerce Clause.<ref name=Wynne /> The Court faulted Justice [[Antonin Scalia]]'s criticism of the dormant Commerce Clause doctrine by saying that he failed to "explain why, under his interpretation of the Constitution, the Import-Export Clause 
would not lead to the same result that we reach under the dormant Commerce Clause".<ref name=Wynne />

Application of the dormant commerce clause to state taxation is another manifestation of the Court's holdings that the Commerce Clause prevents a State from retreating into economic isolation or jeopardizing the welfare of the Nation as a whole, as it would do if it were free to place burdens on the flow of commerce across its borders that commerce wholly within those borders would not bear. The Court's taxation decisions thus "reflected a central 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 under the [[Articles of Confederation]]."<ref>''Wardair Canada, Inc. v. Florida Dept. of Revenue'', 477 U.S. 1 (1986); ''[[Hughes v. Oklahoma]]'', 441 U.S. 322 (1979); ''Oklahoma Tax Commission v. Jefferson Lines, Inc.'', 514 U.S. 175 (1995).</ref> 

===Formalistic approach===
As with the Court's application of the dormant commerce clause to discriminatory regulation, the pre-[[New Deal]] Court attempted to apply a [[Commerce Clause#Dormant Commerce Clause jurisprudence|formalistic approach]] to state taxation alleged to interfere with interstate commerce. The history is described in ''Oklahoma Tax Commission v. Jefferson Lines, Inc.'', 514 U.S. 175 (1995):

<blockquote>The command has been stated more easily than its object has been attained, however, and the Court's understanding of the dormant Commerce Clause has taken some turns. In its early stages, the Court held the view that interstate commerce was wholly immune from state taxation "in any form", "even though the same amount of tax should be laid on (intrastate) commerce". This position gave way in time to a less uncompromising but formal approach, according to which, for example, the Court would invalidate a state tax levied on gross receipts from interstate commerce, or upon the "freight carried" in interstate commerce, but would allow a tax merely measured by gross receipts from interstate commerce as long as the tax was formally imposed upon franchises, or "'in lieu of all taxes upon (the taxpayer's) property,'" Dissenting from this formal approach in 1927, Justice Stone remarked that it was "too mechanical, too uncertain in its application, and too remote from actualities, to be of value." </blockquote>

===Decline of formalism===
Accompanying the revolution in approach in the Court's Congressional powers jurisprudence, the New Deal Court began to change its approach to state taxation as well. The ''Jefferson Lines'' decision continues:

<blockquote>In 1938, the old formalism began to give way with Justice Stone's opinion in ''Western Live Stock v. Bureau of Revenue'', 303 U.S. 250, which examined New Mexico's franchise tax, measured by gross receipts, as applied to receipts from out-of-state advertisers in a journal produced by taxpayers in New Mexico but circulated both inside and outside the State. Although the assessment could have been sustained solely on prior precedent, Justice Stone added a dash of the pragmatism that, with a brief interlude, has since become our aspiration in this quarter of the law.  ... The Court explained that "[i]t was not the purpose of the commerce clause to relieve those engaged in interstate commerce from their just share of state tax burden even though it increases the cost of doing the business."  </blockquote>

During the transition period, some taxes were upheld based on a careful review of the actual economic impact of the tax, and other taxes were reviewed based on the kind of tax involved, whether the tax had a nefarious impact on commerce or not. Under this formalistic approach, a tax might be struck down, and then re-passed with exactly the same economic incidence, but under another name, and then withstand review.

The absurdity of this approach was made manifest in the two ''Railway Express'' cases. In the first, a tax imposed by the [[U.S. state|state]] of Virginia on [[United States|American]] business concerns operating within the state was struck down because it was a business privilege tax imposed on the privilege of doing business in interstate commerce. But then, in the second, Virginia revised the wording of its statute to impose a "franchise tax" on "intangible property" in the form of "going concern" value as measured by gross receipts.

The Court upheld the reworded statute as not violative of the prohibition on privilege taxes, even though the impact of the old tax and new were essentially identical. There was no real economic difference between the statutes in ''Railway Express I'' and ''Railway Express II''. The Court long since had recognized that interstate commerce may be made to pay its way. Yet under the Spector rule, the economic realities in ''Railway Express I'' became irrelevant. The Spector rule (against privilege taxes) had come to operate only as a rule of draftsmanship, and served only to distract the courts and parties from their inquiry into whether the challenged tax produced results forbidden by the Commerce Clause.

The death knell of formalism occurred in ''[[Complete Auto Transit, Inc v. Brady]]'', 430 U.S. 274 (1977),<ref>{{Cite web|url=https://caselaw.findlaw.com/us-supreme-court/430/274.html|title=FindLaw's United States Supreme Court case and opinions.|website=Findlaw}}</ref> which approved a Mississippi privilege tax upon a Michigan company engaged in the business of shipping automobiles to Mississippi dealers.  The Court there explained:

<blockquote>Appellant's attack is based solely on decisions of this Court holding that a tax on the "privilege" of engaging in an activity in the State may not be applied to an activity that is part of interstate commerce. See, e. g., ''[[Spector Motor Service v. O'Connor]]'', 340 U.S. 602 (1951); ''[[Freeman v. Hewit]]'', 329 U.S. 249 (1946). This rule looks only to the fact that the incidence of the tax is the "privilege of doing business"; it deems irrelevant any consideration of the practical effect of the tax. The rule reflects an underlying philosophy that interstate commerce should enjoy a sort of "free trade" immunity from state taxation. </blockquote>

''Complete Auto Transit'' is the last in a line of cases that gradually rejected a per se approach to state taxation challenges under the commerce clause. In overruling prior decisions which struck down privilege taxes per se, the Court noted the following, in what has become a central component of commerce clause state taxation jurisprudence:

<blockquote>We note again that no claim is made that the activity is not sufficiently connected to the State to justify a tax, or that the tax is not fairly related to benefits provided the taxpayer, or that the tax discriminates against interstate commerce, or that the tax is not fairly apportioned.</blockquote>

These four factors, nexus, relationship to benefits, discrimination, and apportionment, have come to be regarded as the four Complete Auto Transit factors applied repeatedly in subsequent cases. Complete Auto Transit must be recognized as the culmination of the Court's emerging commerce clause approach, not just in taxation, but in all of its aspects. Application of Complete Auto Transit to State taxation remains a highly technical and specialized venture, requiring the application of commerce clause principles to an understanding of specialized tax law.<!--   How does a federal court decide whether a tax is "fairly related to benefits provided the taxpayer", and what deference should the court show to state legislative determinations?  How does the Court determine whether a tax which is facially non-discriminatory should be upheld or struck down?  What level of nexus is required, and how does one determine that a tax is fairly apportioned.  All of these issues belong in an article on the law of local taxation.-->