Dormant Commerce Power: Overview
Article I, Section 8, Clause 3:
[The Congress shall have Power . . . ] To regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes; . . .
The grant of power to Congress over commerce, unlike that of power to levy customs duties, the power to raise armies, and some others, is unaccompanied by correlative restrictions on state power.1 This circumstance does not, however, of itself signify that the states were expected to participate in the power thus granted Congress, subject only to the operation of the Supremacy Clause. As Hamilton pointed out in The Federalist,2 while some of the powers that are vested in the National Government admit of their “concurrent” exercise by the states, others are of their very nature “exclusive,” and hence render the notion of a like power in the states “contradictory and repugnant.” As an example of the latter kind of power, Hamilton mentioned the power of Congress to pass a uniform naturalization law. Was the same principle expected to apply to the power over foreign and interstate commerce?
Unquestionably, one of the great advantages anticipated from the grant to Congress of power over commerce was that state interferences with trade, which had become a source of sharp discontent under the Articles of Confederation, would thereby be brought to an end.3 As Webster stated in his argument for appellant in Gibbons v. Ogden: “The prevailing motive was to regulate commerce; to rescue it from the embarrassing and destructive consequences, resulting from the legislation of so many different States, and to place it under the protection of a uniform law.” 4 In other words, the constitutional grant was itself a regulation of commerce in the interest of uniformity.5
That the Commerce Clause, unimplemented by congressional legislation, took from the states any and all power over foreign and interstate commerce was by no means conceded and was, indeed, counterintuitive, considering the extent of state regulation that existed before the Constitution.6 Moreover, legislation by Congress that regulated any particular phase of commerce would raise the question whether the states were entitled to fill the remaining gaps, if not by virtue of a “concurrent” power over interstate and foreign commerce, then by virtue of “that immense mass of legislation” as Marshall termed it, “which embraces everything within the territory of a State, not surrendered to the general government” 7 —in a word, the “police power.”
The text and drafting record of the Commerce Clause fails, therefore to settle the question of what power is left to the states to adopt legislation regulating foreign or interstate commerce in greater or lesser measure.8 To be sure, in cases of flat conflict between an act or acts of Congress that regulate such commerce and a state legislative act or acts, from whatever state power ensuing, the act of Congress is today recognized, and was recognized by Marshall, as enjoying an unquestionable supremacy.9 But suppose, first, that Congress has passed no act, or second, that its legislation does not clearly cover the ground traversed by previously enacted state legislation. What rules then apply? Since Gibbons v. Ogden, both of these situations have confronted the Court, especially as regards interstate commerce, hundreds of times, and in meeting them the Court has, first, determined that it has power to decide when state power is validly exercised, and, second, it has coined or given currency to numerous formulas, some of which still guide, even when they do not govern, its judgment.10
Thus, it has been judicially established that the Commerce Clause is not only a “positive” grant of power to Congress, but is also a “negative” constraint upon the states. This aspect of the Commerce Clause, sometimes called the “dormant” commerce clause, means that the courts may measure state legislation against Commerce Clause values even in the absence of congressional regulation, i.e., when Congress’s exercise of its power is dormant.
Webster, in Gibbons, argued that a state grant of a monopoly to operate steamships between New York and New Jersey not only contravened federal navigation laws but violated the Commerce Clause as well, because that clause conferred an exclusive power upon Congress to make the rules for national commerce, although he conceded that the grant to regulate interstate commerce was so broad as to reach much that the states had formerly had jurisdiction over, the courts must be reasonable in interpretation.11 But, because he thought the state law was in conflict with the federal legislation, Chief Justice Marshall was not compelled to pass on Webster's arguments, although in dicta he indicated his considerable sympathy with them and suggested that the power to regulate commerce between the states might be an exclusively federal power.12
Chief Justice Marshall originated the concept of the “dormant commerce clause” in Willson v. Black Bird Creek Marsh Co.,13 although in dicta. Attacked before the Court was a state law authorizing the building of a dam across a navigable creek, and it was claimed the law was in conflict with the federal power to regulate interstate commerce. Rejecting the challenge, Marshall said that the state act could not be “considered as repugnant to the [federal] power to regulate commerce in its dormant state . . . .”
Returning to the subject in Cooley v. Board of Wardens of Port of Philadelphia,14 the Court, upholding a state law that required ships to engage a local pilot when entering or leaving the port of Philadelphia, enunciated a doctrine of partial federal exclusivity. According to Justice Curtis' opinion, the state act was valid on the basis of a distinction between those subjects of commerce that “imperatively demand a single uniform rule” operating throughout the country and those that “as imperatively” demand “that diversity which alone can meet the local necessities of navigation,” that is to say, of commerce. As to the former, the Court held Congress’s power to be “exclusive” ; as to the latter, it held that the states enjoyed a power of “concurrent legislation.” 15 The Philadelphia pilotage requirement was of the latter kind.
Thus, the contention that the federal power to regulate interstate commerce was exclusive of state power yielded to a rule of partial exclusivity. Among the welter of such cases, the first actually to strike down a state law solely16 on Commerce Clause grounds was the State Freight Tax Case.17 The question before the Court was the validity of a nondiscriminatory statute that required every company transporting freight within the state, with certain exceptions, to pay a tax at specified rates on each ton of freight carried. Opining that a tax upon freight, or any other article of commerce, transported from state to state is a regulation of commerce among the states and, further, that the transportation of merchandise or passengers through a state or from state to state was a subject that required uniform regulation, the Court held the tax in issue to be repugnant to the Commerce Clause.
Whether exclusive or partially exclusive, however, the Commerce Clause as a restraint upon state exercises of power, absent congressional action, received no sustained justification or explanation; the clause, of course, empowers Congress, not the courts, to regulate commerce among the states. Often, as in Cooley and in later cases, the Court stated or implied that the rule was imposed by the Commerce Clause.18 In 2019, the Supreme Court said in Tennessee Wine and Spirits Retailers Association v. Thomas that pursuant to “history” and “established case law,” “the Commerce Clause by its own force restricts state protectionism.” 19 In Welton v. Missouri,20 the Court attempted to suggest a somewhat different justification. The case involved a challenge to a state statute that required a “peddler's” license for merchants selling goods that came from other states, but that required no license if the goods were produced in the state. Declaring that uniformity of commercial regulation is necessary to protect articles of commerce from hostile legislation and that the power asserted by the state belonged exclusively to Congress, the Court observed that “[t]he fact that Congress has not seen fit to prescribe any specific rules to govern inter-State commerce does not affect the question. Its inaction on this subject . . . is equivalent to a declaration that inter-State commerce shall be free and untrammelled.” 21
It has been evidently of little importance to the Court to explain. “Whether or not this long recognized distribution of power between the national and state governments is predicated upon the implications of the commerce clause itself . . . or upon the presumed intention of Congress, where Congress has not spoken . . . the result is the same.” 22 Thus, “[f]or a hundred years it has been accepted constitutional doctrine . . . that . . . where Congress has not acted, this Court, and not the state legislature, is under the commerce clause the final arbiter of the competing demands of state and national interests.” 23
Two other justifications can be found throughout the Court's decisions. For example, in Welton v. Missouri,24 the statute under review, as the Court observed several times, was clearly discriminatory as between in-state and interstate commerce, but that point was not sharply drawn as the constitutional fault of the law. That the Commerce Clause had been motivated by the Framers' apprehensions about state protectionism has been frequently noted.25 A later theme has been that the Framers desired to create a national area of free trade, so that unreasonable burdens on interstate commerce violate the clause in and of themselves.26
Nonetheless, the power of the Court is established and is freely exercised. No reservations can be discerned in the opinions for the Court.27 Individual Justices, to be sure, have urged renunciation of the power and remission to Congress for relief sought by litigants,28 but that has not been the course followed.
The State Proprietary Activity (Market Participant) Exception
In a case of first impression, the Court held that a Maryland bounty scheme by which the state paid scrap processors for each “hulk” automobile destroyed is “the kind of action with which the Commerce Clause is not concerned.” 29 As first enacted, the bounty plan did not distinguish between in-state and out-of-state processors, but it was amended in a manner that substantially disadvantaged out-of-state processors. The Court held “that entry by the State itself into the market itself as a purchaser, in effect, of a potential article of interstate commerce [does not] create[ ] a burden upon that commerce if the State restricts its trade to its own citizens or businesses within the State.” 30
Affirming and extending this precedent, the Court held that a state operating a cement plant could in times of shortage (and presumably at any time) confine the sale of cement by the plant to residents of the state.31 “[T]he Commerce Clause responds principally to state taxes and regulatory measures impeding free private trade in the national marketplace. . . . There is no indication of a constitutional plan to limit the ability of the States themselves to operate freely in the free market.” 32 It is yet unclear how far this concept of the state as market participant rather than market regulator will be extended.33
Congressional Authorization of Otherwise Impermissible State Action
The Supreme Court has heeded the lesson that was administered to it by the Act of Congress of August 31, 1852,34 which pronounced the Wheeling Bridge “a lawful structure,” thereby setting aside the Court's determination to the contrary earlier the same year.35 The lesson, subsequently observed the Court, is that “[i]t is Congress, and not the Judicial Department, to which the Constitution has given the power to regulate commerce.” 36 Similarly, when in the late 1880s and the early 1890s statewide prohibition laws began making their appearance, Congress again authorized state laws that the Court had held to violate the dormant commerce clause.
The Court applied the “original package” doctrine to interstate commerce in intoxicants, which the Court denominated “legitimate articles of commerce.” 37 Although it held that a state was entitled to prohibit the manufacture and sale of intoxicants within its boundaries,38 it contemporaneously laid down the rule, in Bowman v. Chicago & Northwestern Ry. Co.,39 that, so long as Congress remained silent in the matter, a state lacked the power, even as part and parcel of a program of statewide prohibition of the traffic in intoxicants, to prevent the importation of liquor from a sister state. This holding was soon followed by another to the effect that, so long as Congress remained silent, a state had no power to prevent the sale in the original package of liquors introduced from another state.40 Congress soon attempted to overcome the effect of the latter decision by enacting the Wilson Act,41 which empowered states to regulate imported liquor on the same terms as domestically produced liquor, but the Court interpreted the law narrowly as subjecting imported liquor to local authority only after its resale.42 Congress did not fully nullify the Bowman case until 1913, when enactment of the Webb-Kenyon Act43 clearly authorized states to regulate direct shipments for personal use.
National Prohibition, imposed by the Eighteenth Amendment, temporarily mooted these conflicts, but they reemerged with repeal of Prohibition by the Twenty-first Amendment. Section 2 of the Twenty-first Amendment prohibits “the importation into any State . . . for delivery or use therein of intoxicating liquors, in violation of the laws thereof.” Initially the Court interpreted this language to authorize states to discriminate against imported liquor in favor of that produced in-state, but the modern Court has rejected this interpretation, holding instead that “state regulation of alcohol is limited by the nondiscrimination principle of the Commerce Clause.” 44
Less than a year after the ruling inUnited States v. South-Eastern Underwriters Ass'n45 that insurance transactions across state lines constituted interstate commerce, thereby establishing their immunity from discriminatory state taxation, Congress passed the McCarran-Ferguson Act,46 authorizing state regulation and taxation of the insurance business. In Prudential Ins. Co. v. Benjamin,47 the Court sustained a South Carolina statute that imposed on foreign insurance companies, as a condition of their doing business in the state, an annual tax of three percent of premiums from business done in South Carolina, while imposing no similar tax on local corporations. “Obviously,” said Justice Rutledge for the Court, “Congress’s purpose was broadly to give support to the existing and future state systems for regulating and taxing the business of insurance. This was done in two ways. One was by removing obstructions which might be thought to flow from its own power, whether dormant or exercised, except as otherwise expressly provided in the Act itself or in future legislation. The other was by declaring expressly and affirmatively that continued state regulation and taxation of this business is in the public interest and that the business and all who engage in it 'shall be subject to' the laws of the several states in these respects.” 48
Justice Rutledge continued: “The power of Congress over commerce exercised entirely without reference to coordinated action of the states is not restricted, except as the Constitution expressly provides, by any limitation which forbids it to discriminate against interstate commerce and in favor of local trade. Its plenary scope enables Congress not only to promote but also to prohibit interstate commerce, as it has done frequently and for a great variety of reasons. . . . This broad authority Congress may exercise alone, subject to those limitations, or in conjunction with coordinated action by the states, in which case limitations imposed for the preservation of their powers become inoperative and only those designed to forbid action altogether by any power or combination of powers in our governmental system remain effective.” 49
Thus, it is now well-established that “[w]hen Congress so chooses, state actions which it plainly authorizes are invulnerable to constitutional attack under the Commerce Clause.” 50 But the Court requires congressional intent to permit otherwise impermissible state actions to “be unmistakably clear.” 51 The fact that federal statutes and regulations had restricted commerce in timber harvested from national forest lands in Alaska was, therefore, “insufficient indicium” that Congress intended to authorize the state to apply a similar policy for timber harvested from state lands. The rule requiring clear congressional approval for state burdens on commerce was said to be necessary in order to strengthen the likelihood that decisions favoring one section of the country over another are in fact “collective decisions” made by Congress rather than unilateral choices imposed on unrepresented out-of-state interests by individual states.52 And Congress must be plain as well when the issue is not whether it has exempted a state action from the Commerce Clause but whether it has taken the less direct form of reduction in the level of scrutiny.53
Foreign Commerce and State Powers
State taxation and regulation of commerce from abroad are also subject to negative commerce clause constraints. In the seminal case of Brown v. Maryland,54 in the course of striking down a state statute requiring “all importers of foreign articles or commodities,” preparatory to selling the goods, to take out a license, Chief Justice Marshall developed a lengthy exegesis explaining why the law was void under both the Import-Export Clause55 and the Commerce Clause. According to the Chief Justice, an inseparable part of the right to import was the right to sell, and a tax on the sale of an article is a tax on the article itself. Thus, the taxing power of the states did not extend in any form to imports from abroad so long as they remain “the property of the importer, in his warehouse, in the original form or package” in which they were imported. This is the famous “original package” doctrine. Only when the importer parts with his importations, mixes them into his general property by breaking up the packages, may the state treat them as taxable property.
Obviously, to the extent that the Import-Export Clause was construed to impose a complete ban on taxation of imports so long as they were in their original packages, there was little occasion to develop a Commerce Clause analysis that would have reached only discriminatory taxes or taxes upon goods in transit.56 In other respects, however, the Court has applied the foreign commerce aspect of the clause more stringently against state taxation.
Thus, in Japan Line, Ltd. v. County of Los Angeles,57 the Court held that, in addition to satisfying the four requirements that govern the permissibility of state taxation of interstate commerce,58 “When a State seeks to tax the instrumentalities of foreign commerce, two additional considerations . . . come into play. The first is the enhanced risk of multiple taxation. . . . Second, a state tax on the instrumentalities of foreign commerce may impair federal uniformity in an area where federal uniformity is essential.” 59 Multiple taxation is to be avoided with respect to interstate commerce by apportionment so that no jurisdiction may tax all the property of a multistate business, and the rule of apportionment is enforced by the Supreme Court with jurisdiction over all the states. However, the Court is unable to enforce such a rule against another country, and the country of the domicile of the business may impose a tax on full value. Uniformity could be frustrated by disputes over multiple taxation, and trade disputes could result.
Applying both these concerns, the Court invalidated a state tax, a nondiscriminatory, ad valorem property tax, on foreign-owned instrumentalities, i.e., cargo containers, of international commerce. The containers were used exclusively in international commerce and were based in Japan, which did in fact tax them on full value. Thus, there was the actuality, not only the risk, of multiple taxation. National uniformity was endangered, because, although California taxed the Japanese containers, Japan did not tax American containers, and disputes resulted.60
On the other hand, the Court has upheld a state tax on all aviation fuel sold within the state as applied to a foreign airline operating charters to and from the United States. The Court found the Complete Auto standards met, and it similarly decided that the two standards specifically raised in foreign commerce cases were not violated. First, there was no danger of double taxation because the tax was imposed upon a discrete transaction—the sale of fuel—that occurred within only one jurisdiction. Second, the one-voice standard was satisfied, because the United States had never entered into any compact with a foreign nation precluding such state taxation, having only signed agreements with others, which had no force of law, aspiring to eliminate taxation that constituted impediments to air travel.61 Also, a state unitary-tax scheme that used a worldwide-combined reporting formula was upheld as applied to the taxing of the income of a domestic-based corporate group with extensive foreign operations.62
Extending Container Corp., the Court in Barclays Bank v. Franchise Tax Bd. of California,63 upheld the state's worldwide-combined reporting method of determining the corporate franchise tax owed by unitary multinational corporations, as applied to a foreign corporation. The Court determined that the tax easily satisfied three of the four-part Complete Auto test—nexus, apportionment, and relation to state's services—and concluded that the nondiscrimination principle—perhaps violated by the letter of the law—could be met by the discretion accorded state officials. As for the two additional factors, as outlined in Japan Lines, the Court pronounced itself satisfied. Multiple taxation was not the inevitable result of the tax, and that risk would not be avoided by the use of any reasonable alternative. The tax, it was found, did not impair federal uniformity or prevent the Federal Government from speaking with one voice in international trade, in view of the fact that Congress had rejected proposals that would have preempted California’s practice.64 The result of the case, perhaps intended, is that foreign corporations have less protection under the negative commerce clause.65
The power to regulate foreign commerce was always broader than the states' power to tax it, an exercise of the “police power” recognized by Chief Justice Marshall in Brown v. Maryland.66 That this power was constrained by notions of the national interest and preemption principles was evidenced in the cases striking down state efforts to curb and regulate the actions of shippers bringing persons into their ports.67 On the other hand, quarantine legislation to protect the states' residents from disease and other hazards was commonly upheld though it regulated international commerce.68 A state game-season law applied to criminalize the possession of a dead grouse imported from Russia was upheld because of the practical necessities of enforcement of domestic law.69
Nowadays, state regulation of foreign commerce is likely to be judged by the extra factors set out in Japan Line.70 Thus, the application of a state civil rights law to a corporation transporting passengers outside the state to an island in a foreign province was sustained in an opinion emphasizing that, because of the particularistic geographic situation the foreign commerce involved was more conceptual than actual, there was only a remote hazard of conflict between state law and the law of the other country and little if any prospect of burdening foreign commerce.
- Thus, by Article I, § 10, cl. 2, States are denied the power to “lay any Imposts or Duties on Imports or Exports” except by the consent of Congress. The clause applies only to goods imported from or exported to another country, not from or to another State, Woodruff v. Parham, 75 U.S. (8 Wall.) 123 (1869), which prevents its application to interstate commerce, although Chief Justice Marshall thought to the contrary, Brown v. Maryland, 25 U.S. (12 Wheat.) 419, 449 (1827), and the contrary has been strongly argued. W. Crosskey, Politics and the Constitution in the History of the United States 295-323 (1953).
- The Federalist No. 32, at 199–203 (Alexander Hamilton) (Jacob E. Cooke ed., 1961). Note that in connection with the discussion that follows, Hamilton avowed that the taxing power of the States, save for imposts or duties on imports or exports, “remains undiminished.” Id. at 201. The States “retain [the taxing] authority in the most absolute and unqualified sense[.]” Id. at 199.
- See, e.g., Tenn. Wine and Spirits Retailers Ass’n v. Thomas, 588 U.S. ____, No. 18-96, slip op. at 7 (2019) ( “[R]emoving state trade barriers was a principal reason for the adoption of the Constitution.” ).
- 22 U.S. (9 Wheat.) 1, 11 (1824). Justice Johnson's assertion, concurring, was to the same effect. Id. at 226. Late in life, James Madison stated that the power had been granted Congress mainly as “a negative and preventive provision against injustice among the States.” 4 Letters and Other Writings of James Madison 14–15 (1865).
- It was evident from The Federalist that the principal aim of the Commerce Clause was the protection of the national market from the oppressive power of individual States acting to stifle or curb commerce. Id. No. 7, at 39–41 (Alexander Hamilton); id. No. 11, at 65–73 (Hamilton); id. No. 22, at 135–37 (Hamilton); id. No. 42, 283–84 (James Madison); id. No. 53, at 362–64 (Madison). See H. P. Hood & Sons v. Du Mond, 336 U.S. 525, 533 (1949). For a comprehensive history of the adoption of the Commerce Clause, which does not indicate a definitive answer to the question posed, see Abel, The Commerce Clause in the Constitutional Convention and in Contemporary Comment, 25 Minn. L. Rev. 432 (1941). Professor Abel discovered only nine references in the Convention records to the Commerce Clause, all directed to the dangers of interstate rivalry and retaliation. Id. at 470–71 & nn. 169–75.
- The strongest suggestion of exclusivity found in the Convention debates is a remark by Madison. “Whether the States are now restrained from laying tonnage duties depends on the extent of the power ‘to regulate commerce.’ These terms are vague but seem to exclude this power of the States.” 2 Records of the Federal Convention of 1787, at 625 (Max Farrand ed., 1937). However, the statement is recorded during debate on the clause, Art. I, § 10, cl. 3, prohibiting states from laying tonnage duties. That the Convention adopted this clause, when tonnage duties would certainly be one facet of regulating interstate and foreign commerce, casts doubt on the assumption that the commerce power itself was intended to be exclusive.
- Gibbons v. Ogden, 22 U.S. (9 Wheat.) 1, 203 (1824).
- Cf. Tenn. Wine and Spirits Retailers Ass’n v. Thomas, 588 U.S. ____, No. 18-96, slip op. at 8 (2019) ( “In light of this [historical] background, it would be strange if the Constitution contained no provision curbing state protectionism, and at this point in the Court’s history, no provision other than the Commerce Clause could easily do the job.” ).
- 22 U.S. at 210–11.
- The writings detailing the history are voluminous. See, e.g., F. Frankfurter, The Commerce Clause Under Marshall, Taney, and White (1937); B. Gavit, The Commerce Clause of the United States Constitution (1932) (usefully containing appendices cataloguing every Commerce Clause decision of the Supreme Court to that time); Sholleys, The Negative Implications of the Commerce Clause, 3 U. Chi. L. Rev. 556 (1936). Among the recent writings, see Sedler, The Negative Commerce Clause as a Restriction on State Regulation and Taxation: An Analysis in Terms of Constitutional Structure, 31 Wayne L. Rev. 885 (1985) (a disputed conceptualization arguing the Court followed a consistent line over the years), and articles cited, id. at 887 n.4.
- 22 U.S. (9 Wheat.) at 13–14, 16.
- 22 U.S. at 17–18, 209. In Sturges v. Crowninshield, 17 U.S. (4 Wheat.) 122, 193–96 (1819), Chief Justice Marshall denied that the grant of the bankruptcy power to Congress was exclusive. See also Houston v. Moore, 18 U.S. (5 Wheat.) 1 (1820) (militia).
- 27 U.S. (2 Pet.) 245, 252 (1829).
- 53 U.S. (12 How.) 299 (1851). The issue of exclusive federal power and the separate issue of the dormant commerce clause was present in the License Cases, 46 U.S. (5 How.) 504 (1847), and the Passenger Cases, 48 U.S. (7 How.) 283 (1849), but, despite the fact that much ink was shed in multiple opinions discussing the questions, nothing definitive emerged. Chief Justice Taney, in contrast to Marshall, viewed the clause only as a grant of power to Congress, containing no constraint upon the states, and the Court's role was to void state laws in contravention of federal legislation. 46 U.S. (5 How.) at 573; 48 U.S. (7 How.) at 464.
- 48 U.S. at 317–20. Although Chief Justice Taney had formerly taken the strong position that Congress’s power over commerce was not exclusive, he acquiesced silently in the Cooley opinion. For a modern discussion of Cooley, see Goldstein v. California, 412 U.S. 546, 552–60 (1973), in which, in the context of the Copyright Clause, the Court, approving Cooley for Commerce Clause purposes, refused to find the Copyright Clause either fully or partially exclusive.
- Just a few years earlier, the Court, in an opinion that merged Commerce Clause and Import-Export Clause analyses, had seemed to suggest that it was a discriminatory tax or law that violates the Commerce Clause and not simply a tax on interstate commerce. Woodruff v. Parham, 75 U.S. (8 Wall.) 123 (1869).
- Reading R.R. v. Pennsylvania, 82 U.S. (15 Wall.) 232 (1873). For cases in which the Commerce Clause basis was intermixed with other express or implied powers, see Crandall v. Nevada, 73 U.S. (6 Wall.) 35 (1868); Steamship Co. v. Portwardens, 73 U.S. (6 Wall.) 31 (1867); Woodruff v. Parham, 75 U.S. (8 Wall.) 123 (1868). Chief Justice Marshall, in Brown v. Maryland, 25 U.S. (12 Wheat.) 419, 488–89 (1827), indicated, in dicta, that a state tax might violate the Commerce Clause.
- “Where the subject matter requires a uniform system as between the States, the power controlling it is vested exclusively in Congress, and cannot be encroached upon by the States.” Leisy v. Hardin, 135 U.S. 100, 108–09 (1890). The Commerce Clause “remains in the Constitution as a grant of power to Congress . . . and as a diminution pro tanto of absolute state sovereignty over the same subject matter.” Carter v. Virginia, 321 U.S. 131, 137 (1944). The Commerce Clause, the Court has said, “does not say what the states may or may not do in the absence of congressional action, nor how to draw the line between what is and what is not commerce among the states. Perhaps even more than by interpretation of its written word, this Court has advanced the solidarity and prosperity of this Nation by the meaning it has given these great silences of the Constitution.” H. P. Hood & Sons, Inc. v. Du Mond, 336 U.S. 525, 534–35 (1949). Subsequently, the Court stated that the Commerce Clause “has long been recognized as a self-executing limitation on the power of the States to enact laws imposing substantial burdens on such commerce.'” Dennis v. Higgins, 498 U.S. 439, 447 (1991) (quoting South-Central Timber Dev., Inc. v. Wunnicke, 467 U.S. 82, 87 (1984) (emphasis added)).
- 588 U.S. ____, No. 18-96, slip op. at 10 (2019).
- 91 U.S. 275 (1876).
- 91 U.S. at 282. In Steamship Co. v. Portwardens, 73 U.S. (6 Wall.) 31, 33 (1867), the Court suggested that congressional silence with regard to matters of “local” concern may in some circumstances signify a willingness that the states regulate. These principles were further explained by Chief Justice Stone, writing for the Court in Graves v. New York ex rel. O'Keefe, 306 U.S. 466, 479 n.1 (1939). “The failure of Congress to regulate interstate commerce has generally been taken to signify a Congressional purpose to leave undisturbed the authority of the states to make regulations affecting the commerce in matters of peculiarly local concern, but to withhold from them authority to make regulations affecting those phases of it which, because of the need of a national uniformity, demand that their regulation, if any, be prescribed by a single authority.” The fullest development of the “silence” rationale was not by the Court but by a renowned academic, Professor Dowling. Interstate Commerce and State Power, 29 Va. L. Rev. 1 (1940); Interstate Commerce and State Power: Revisited Version, 47 Colum. L. Rev. 546 (1947).
- Southern Pacific Co. v. Arizona, 325 U.S. 761, 768 (1945).
- 325 U.S. at 769. See also California v. Zook, 336 U.S. 725, 728 (1949).
- 91 U.S. 275, 277, 278, 279, 280, 281, 282 (1876).
- 91 U.S. at 280–81; Brown v. Maryland, 25 U.S. (12 Wheat.) 419, 446 (1827) (Chief Justice Marshall); Guy v. City of Baltimore, 100 U.S. 434, 440 (1879); Baldwin v. G.A.F. Seelig, Inc., 294 U.S. 550, 552 (1935); Maryland v. Louisiana, 451 U.S. 725, 754 (1981).
- E.g., Gwin, White & Prince, Inc. v. Henneford, 305 U.S. 434, 440 (1939); McLeod v. J. E. Dilworth Co., 322 U.S. 327, 330–31 (1944); Freeman v. Hewit, 329 U.S. 249, 252, 256 (1946); H. P. Hood & Sons, Inc. v. Du Mond, 336 U.S. 525, 538, 539 (1949); Dennis v. Higgins, 498 U.S. 439, 447–50 (1991). “[W]e have steadfastly adhered to the central tenet that the Commerce Clause 'by its own force created an area of trade free from interference by the States.'” American Trucking Ass'ns v. Scheiner, 483 U.S. 266, 280 (1987) (quoting Boston Stock Exchange v. State Tax Comm'n, 429 U.S. 318, 328 (1977)).
- E.g., Fort Gratiot Sanitary Landfill, Inc. v. Michigan Natural Resources Dep't, 504 U.S. 353, 359 (1992); Quill Corp. v. North Dakota, 504 U.S. 298 (1992); Wyoming v. Oklahoma, 502 U.S. 437, 455 (1992). Indeed, the Court, in Dennis v. Higgins, 498 U.S. 439, 447–50 (1991), broadened its construction of the clause, holding that it confers a “right” upon individuals and companies to engage in interstate trade. With respect to the exercise of the power, the Court has recognized Congress’s greater expertise to act and noted its hesitancy to impose uniformity on state taxation. Moorman Mfg. Co. v. Bair, 437 U.S. 267, 280 (1978).
- In McCarroll v. Dixie Lines, 309 U.S. 176, 183 (1940), Justice Black, for himself and Justices Frankfurter and Douglas, dissented, taking precisely this view. See also Adams Mfg. Co. v. Storen, 304 U.S. 307, 316 (1938) (Justice Black dissenting in part); Gwin, White & Prince, Inc. v. Henneford, 305 U.S. 434, 442 (1939) (Justice Black dissenting); Southern Pacific Co. v. Arizona, 325 U.S. 761, 784 (1945) (Justice Black dissenting); id. at 795 (Justice Douglas dissenting). Justices Douglas and Frankfurter subsequently wrote and joined opinions applying the dormant commerce clause. In Michigan-Wisconsin Pipe Line Co. v. Calvert, 347 U.S. 157, 166 (1954), the Court rejected the urging that it uphold all not-patently discriminatory taxes and let Congress deal with conflicts. More recently, Justice Scalia has taken the view that, as a matter of original intent, a “dormant” or “negative” commerce power cannot be justified in either taxation or regulation cases, but, yielding to the force of precedent, he will vote to strike down state actions that discriminate against interstate commerce or that are governed by the Court's precedents, without extending any of those precedents. CTS Corp. v. Dynamics Corp. of America, 481 U.S. 69, 94 (1987) (concurring); Tyler Pipe Indus. v. Washington State Dep't of Revenue, 483 U.S. 232, 259 (1987) (concurring in part and dissenting in part); Bendix Autolite Corp. v. Midwesco Enterprises, Inc., 486 U.S. 888 (1988) (concurring in judgment); American Trucking Assn's v. Smith, 496 U.S. 167 (1990) (concurring); Itel Containers Int'l Corp. v. Huddleston, 507 U.S. 60, 78 (1993) (Justice Scalia concurring) (reiterating view); Oklahoma Tax Comm'n v. Jefferson Lines, Inc., 514 U.S. 175, 200–01 (1995) (Justice Scalia, with Justice Thomas joining) (same). Justice Thomas has written an extensive opinion rejecting both the historical and jurisprudential basis of the dormant commerce clause and expressing a preference for reliance on the imports-exports clause. Camps Newfound/Owatonna, Inc. v. Town of Harrison, 520 U.S. 564, 609 (1997) (dissenting; joined by Justice Scalia entirely and by Chief Justice Rehnquist as to the Commerce Clause but not the Imports-Exports Clause).
- Hughes v. Alexandria Scrap Corp., 426 U.S. 794, 805 (1976).
- 426 U.S. at 808.
- Reeves, Inc. v. Stake, 447 U.S. 429 (1980).
- 447 U.S. at 436–37; see also McBurney v. Young, 569 U.S. ___, No. 12–17, slip op. at 14 (2013) (to the extent that the Virginia Freedom of Information Act created a market for public documents in Virginia, the Commonwealth was the sole manufacturer of the product, and therefore did not offend the Commerce Clause when it limited access to those documents under the Act to citizens of the Commonwealth).
- See also White v. Massachusetts Council of Construction Employers, 460 U.S. 204 (1983) (city may favor its own residents in construction projects paid for with city funds); South-Central Timber Dev., Inc. v. Wunnicke, 467 U.S. 82 (1984) (illustrating the deep divisions in the Court respecting the scope of the exception).
- Ch. 111, 10 Stat. 112, § 6.
- Pennsylvania v. Wheeling & Belmont Bridge Co., 54 U.S. (13 How.) 518 (1852), statute sustained in Pennsylvania v. Wheeling & Belmont Bridge Co., 59 U.S. (18 How.) 421 (1856). The latter decision seemed facially contrary to a dictum of Justice Curtis in Cooley v. Board of Wardens of Port of Philadelphia, 53 U.S. (12 How.) 299, 318 (1851), and cf. Tyler Pipe Indus., Inc. v. Washington State Dept. of Revenue, 483 U.S. 232, 263 n.4 (1987) (Justice Scalia concurring in part and dissenting in part), but if indeed the Court is interpreting the silence of Congress as a bar to action under the dormant commerce clause, then when Congress speaks it is enacting a regulatory authorization for the states to act.
- Transportation Co. v. Parkersburg, 107 U.S. 691, 701 (1883).
- The Court had developed the “original package” doctrine to restrict application of a state tax on imports from a foreign country in Brown v. Maryland, 25 U.S. (12 Wheat.) 419, 449 (1827). Although Chief Justice Marshall had indicated in dictum in Brown that the same rule would apply to imports from sister states, the Court had refused to follow that dictum in Woodruff v. Parham, 75 U.S. (8 Wall.) 123 (1869).
- Mugler v. Kansas, 123 U.S. 623 (1887). Relying on the distinction between manufacture and commerce, the Court soon applied this ruling to authorize states to prohibit manufacture of liquor for an out-of-state market. Kidd v. Pearson, 128 U.S. 1 (1888).
- 125 U.S. 465 (1888).
- Leisy v. Hardin, 135 U.S. 100 (1890).
- Ch. 728, 26 Stat. 313 (1890), upheld in In re Rahrer, 140 U.S. 545 (1891).
- Rhodes v. Iowa, 170 U.S. 412 (1898).
- Ch. 90, 37 Stat. 699 (1913), sustained in Clark-Distilling Co. v. Western Md. Ry., 242 U.S. 311 (1917). See also Department of Revenue v. Beam Distillers, 377 U.S. 341 (1964).
- Granholm v. Heald, 544 U.S. 460, 487 (2005). Accord Tenn. Wine and Spirits Retailers Ass’n v. Thomas, 588 U.S. ____, No. 18-96, slip op. at 24 (2019); Healy v. The Beer Institute, 491 U.S. 324, 340 (1989); Brown-Forman Distillers Corp. v. N.Y. State Liquor Auth., 476 U.S. 573, 579 (1986); Bacchus Imports Ltd. v. Dias, 468 U.S. 263, 276 (1984). See also infra Amend. XXI, § 2, Discrimination Against Interstate Commerce.
State Taxation and Regulation: The Modern Law
- 322 U.S. 533 (1944).
- 59 Stat. 33, 15 U.S.C. §§ 1011-15.
- 328 U.S. 408 (1946).
- 328 U.S. at 429–30.
- 328 U.S. at 434–35. The Act restored state taxing and regulatory powers over the insurance business to their scope prior to South-Eastern Underwriters. Discriminatory state taxation otherwise cognizable under the Commerce Clause must, therefore, be challenged under other provisions of the Constitution. See Western & Southern Life Ins. Co. v. State Bd. of Equalization, 451 U.S. 648 (1981). An equal protection challenge was successful in Metropolitan Life Ins. Co. v. Ward, 470 U.S. 869 (1985), invalidating a discriminatory tax and stating that a favoring of local industries “constitutes the very sort of parochial discrimination that the Equal Protection Clause was intended to prevent.” Id. at 878. In Northeast Bancorp, Inc. v. Board of Governors of the Federal Reserve System, 472 U.S. 159, 176–78 (1985), the Court declined to follow Ward where state statutes did not, as in Ward, favor local corporations at the expense of out-of-state corporations, but instead “favor[ed] out-of-state corporations domiciled within the New England region over out-of-state corporations from other parts of the country.” The Court noted that the statutes in Northeast Bancorp were concerned with “preserv[ing] a close relationship between those in the community who need credit and those who provide credit,” and with protecting “the independence of local banking institutions” ; they did not, like the statutes in Ward, discriminate against “nonresident corporations solely because they were nonresidents.”
- Northeast Bancorp, Inc. v. Board of Governors of the Federal Reserve System, 472 U.S. 159, 174 (1985) (interpreting a provision of the Bank Holding Company Act, 12 U.S.C. § 1842(d), permitting regional interstate bank acquisitions expressly approved by the state in which the acquired bank is located, as authorizing state laws that allow only banks within the particular region to acquire an in-state bank, on a reciprocal basis, since what the states could do entirely they can do in part).
- South-Central Timber Dev., Inc. v. Wunnicke, 467 U.S. 82, 90 (1984).
- 467 U.S. at 92. See also Hillside Dairy, Inc. v. Lyons, 539 U.S. 59 (2003) (authorization of state laws regulating milk solids does not authorize milk pricing and pooling laws). Earlier cases had required express statutory sanction of state burdens on commerce but under circumstances arguably less suggestive of congressional approval. E.g., Sporhase v. Nebraska ex rel. Douglas, 458 U.S. 941, 958–60 (1982) (congressional deference to state water law in 37 statutes and numerous interstate compacts did not indicate congressional sanction for invalid state laws imposing a burden on commerce); New England Power Co. v. New Hampshire, 455 U.S. 331, 341 (1982) (disclaimer in Federal Power Act of intent to deprive a State of “lawful authority” over interstate transmissions held not to evince a congressional intent “to alter the limits of state power otherwise imposed by the Commerce Clause” ). But see White v. Massachusetts Council of Construction Employers, 460 U.S. 204 (1983) (Congress held to have sanctioned municipality's favoritism of city residents through funding statute under which construction funds were received).
- Maine v. Taylor, 477 U.S. 131 (1986) (holding that Lacey Act's reinforcement of state bans on importation of fish and wildlife neither authorizes state law otherwise invalid under the Clause nor shifts analysis from the presumption of invalidity for discriminatory laws to the balancing test for state laws that burden commerce only incidentally).
- 25 U.S. (12 Wheat.) 419 (1827).
- Article I, § 10, cl. 2. This aspect of the doctrine of the case was considerably expanded in Low v. Austin, 80 U.S. (13 Wall.) 29 (1872), and subsequent cases, to bar states from levying nondiscriminatory, ad valorem property taxes upon goods that are no longer in import transit. This line of cases was overruled in Michelin Tire Corp. v. Wages, 423 U.S. 276 (1976).
- See, e.g., Halliburton Oil Well Co. v. Reily, 373 U.S. 64 (1963); Minnesota v. Blasius, 290 U.S. 1 (1933). After the holding in Michelin Tire, the two clauses are now congruent. The Court has observed that the two clauses are animated by the same policies. Japan Line, Ltd. v. County of Los Angeles, 441 U.S. 434, 449–50 n.14 (1979).
- 441 U.S. 434 (1979).
- Complete Auto Transit, Inc. v. Brady, 430 U.S. 274, 279 (1977). A state tax failed to pass the nondiscrimination standard in Kraft General Foods, Inc. v. Iowa Dept. of Revenue and Finance, 505 U.S. 71 (1992). Iowa imposed an income tax on a unitary business operating throughout the United States and in several foreign countries. It taxed the dividends that a corporation received from its foreign subsidiaries, but not the dividends it received from its domestic subsidiaries. Therefore, there was a facial distinction between foreign and domestic commerce.
- 441 U.S. at 446, 448. See also Itel Containers Int'l Corp. v. Huddleston, 507 U.S. 60 (1993) (sustaining state sales tax as applied to lease of containers delivered within the state and used in foreign commerce).
- 441 U.S. at 451–57. For income taxes, the test is more lenient, accepting not only the risk but the actuality of some double taxation as something simply inherent in accounting devices. Container Corp. of America v. Franchise Tax Board, 463 U.S. 159, 187–192 (1983).
- Wardair Canada v. Florida Dep't of Revenue, 477 U.S. 1, 10 (1986).
- Container Corp. of America v. Franchise Tax Board, 463 U.S. 159 (1983). The validity of the formula as applied to domestic corporations with foreign parents or to foreign corporations with foreign parents or foreign subsidiaries, so that some of the income earned abroad would be taxed within the taxing state, is a question of some considerable dispute.
- 512 U.S. 298 (1994).
- Reliance could not be placed on Executive statements, the Court explained, because “the Constitution expressly grants Congress, not the President, the power to ‘regulate Commerce with foreign Nations.’” 512 U.S. at 329. “Executive Branch communications that express federal policy but lack the force of law cannot render unconstitutional California’s otherwise valid, congressionally condoned, use of worldwide combined reporting.” Id. at 330. Dissenting Justice Scalia noted that, although the Court’s ruling correctly restored preemptive power to Congress, “it permits the authority to be exercised by silence. Id. at 332.”
- The Supreme Court, Leading Cases, 1993 Term, 108 Harv. L. Rev. 139, 139–49 (1993).
- 25 U.S. (12 Wheat.) 419, 443–44 (1827).
- New York City v. Miln, 36 U.S. (11 Pet.) 102 (1837) (upholding reporting requirements imposed on ships' masters), overruled by Henderson v. Mayor of New York, 92 U.S. 259 (1876); Passenger Cases, 48 U.S. (7 How.) 283 (1849); Chy Lung v. Freeman, 92 U.S. 275 (1876).
- Campagnie Francaise De Navigation a Vapeur v. Louisiana State Bd. of Health, 186 U.S. 380 (1902); Louisiana v. Texas, 176 U.S. 1 (1900); Morgan v. Louisiana, 118 U.S. 455 (1886).
- New York ex rel. Silz v. Hesterberg, 211 U.S. 31 (1908).
- Japan Line, Ltd. v. County of Los Angeles, 441 U.S. 434, 456 n.20 (1979) (construing Bob-Lo Excursion Co. v. Michigan, 333 U.S. 28 (1948)).
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