State Import Taxes: Constitutional?

The Import-Export Clause of the US Constitution states that no state can impose duties on imports or exports without the consent of Congress. This clause was created to address the weaknesses of the Articles of Confederation, which allowed states to impose tariffs and regulations that conflicted with Congress' efforts to regulate foreign trade. The Framers of the Constitution sought to ensure that the federal government could regulate commercial relations with foreign governments and that import revenues would be the major source of revenue for the federal government. The Import-Export Clause also aimed to prevent states with major ports from taxing goods destined for other states, disturbing harmony among the states. The Supreme Court has interpreted and applied this clause in various cases, shaping the understanding of state taxation powers and their limitations.

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The Import-Export Clause

• The Federal Government must speak with one voice when regulating commercial relations with foreign governments.
• Import revenues were to be the major source of revenue for the Federal Government, not the states.
• Harmony among the States might be disturbed unless states with major ports were prohibited from levying taxes on citizens of other states by taxing goods flowing through their ports to less favourably located states.

State taxation of exports

The Import-Export Clause of the US Constitution states that "No State shall, without the Consent of Congress, lay any Imposts or Duties on Imports or Exports". This clause is an absolute prohibition on state taxation of exports, with some exceptions for state inspection laws.

The clause was adopted to address the commercial strife between states with major ports and those without, as the former group of states used tariffs on goods passing through to other states to generate revenue. The Import-Export Clause was also intended to prevent states with convenient ports from taxing goods destined for states without good ports.

The Supreme Court has interpreted the clause to mean that once goods are headed for export, they cannot be taxed. However, there is an exception for windfall profits from mineral extraction, even if the minerals are ultimately exported. The court has also upheld a state tax on aviation fuel sold to a foreign airline, as there was no risk of double taxation and the US had not entered into any compact with a foreign nation precluding such state taxation.

The original package doctrine, established in the case of Brown v. Maryland, states that imports remain under the protection of the Import-Export Clause so long as they are in their original form or packaging and have not been mixed with the general mass of property in the country. Once the importer breaks up the packages, the state can treat the goods as taxable property.

Federal vs state power

The power dynamics between federal and state governments in the US have been a subject of debate since the country's founding. The Constitution, through various clauses, outlines the powers of each level of government, including taxation, with Congress having the authority to regulate state taxation.

The Import-Export Clause, also known as Article I, Section 10, Clause 2, is a key provision in the Constitution that addresses state taxation of imports and exports. It states that no state shall lay imposts or duties on imports or exports without the consent of Congress. This clause was adopted to ensure that the federal government had the power to regulate commercial relations with foreign governments and to prevent states from imposing taxes that could affect foreign relations. The Supreme Court, in Michelin Tire Corp. v. Wages (1976), affirmed that the Import-Export Clause gives the federal government sole power over import tariffs.

The Tonnage Clause, or Article I, Section 10, Clause 3, prohibits states from imposing taxes based on the tonnage or internal capacity of vessels, preventing indirect taxation of imports and exports. The Export Clause, on the other hand, prohibits the federal government from imposing taxes on exports, addressing concerns of southern delegates during the Constitutional Convention about the negative impact on their agricultural exports.

The Commerce Clause grants Congress the authority to regulate interstate and foreign commerce, including the ability to restrict state taxing powers. This clause has been interpreted to prevent states from attaching restrictions to exports or imports to control commerce in other states and to prohibit discriminatory taxes against interstate commerce. The Court has also ruled that states cannot justify discriminatory taxes in the name of revenue generation or environmental protection, as in the case of Maine v. Taylor (1986).

The Supremacy Clause and the War Powers Clause are additional provisions that implicitly prohibit states from taxing federal entities and provide Congress with the authority to enact laws affecting state taxation. The Tenth Amendment, however, prevents the federal government from commandeering state legislatures to implement federal programs, and the Spending Clause allows Congress to encourage state behaviour by conditioning the provision of federal funds.

In conclusion, the US Constitution, through various clauses, establishes a balance between federal and state powers regarding taxation. The Import-Export Clause, Tonnage Clause, and Commerce Clause specifically address state taxation of imports and exports, with the federal government holding the ultimate authority to regulate and restrict state taxing powers. The Supreme Court has played a significant role in interpreting and enforcing these clauses, ensuring that state taxation does not interfere with interstate commerce or federal authority.

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Tonnage Clause

The Tonnage Clause, found in Article I, Section 10, Clause 3 of the US Constitution, prevents states from imposing taxes based on the tonnage (internal capacity) of a vessel. This was an indirect method used to tax imports and exports.

At the time the Constitution was adopted, duties of tonnage were imposed on ships for entering or remaining in a harbour, distinct from charges for pilotage or loading and unloading cargo. The Tonnage Clause was intended to prevent states with major ports from imposing taxes on goods that were merely passing through their ports en route to other states that were not as favourably located geographically. This was in response to the commercial strife between states with and without major ports, where the former would use tariffs on goods to generate revenue.

The Tonnage Clause was also designed to supplement the Import-Export Clause, which prohibits states from imposing tariffs and duties on imports and exports without the consent of Congress. The Import-Export Clause was adopted to address the weaknesses of the Articles of Confederation, under which the national government lacked the power to regulate commerce and impose taxes, leading to significant trade quarrels among the states.

The Tonnage Clause ensures federal primacy in regulating commerce and restricts states from imposing taxes on shipments of cargo without Congressional consent. It reads: "No State shall, without the Consent of Congress, lay any Duty of Tonnage". This clause was ratified in 1787.

The Constitution and interstate commerce

The Constitution of the United States grants Congress the power to 'regulate commerce' with foreign nations and among the states. The Commerce Clause forbids states from levying taxes that discriminate against or burden interstate commerce. The Import-Export Clause, or Article I, Section 10, Clause 2, states that no state shall lay imposts or duties on imports or exports without the consent of Congress. This clause was adopted to address the issues under the Articles of Confederation, where states could impose tariffs and regulations that conflicted with Congress' efforts to regulate foreign trade.

The Import-Export Clause has an exception for state inspection laws, which allow states to impose taxes on imports or exports necessary for executing inspection laws. The Tonnage Clause, or Article I, Section 10, Clause 3, also prevents states from imposing taxes based on the internal capacity of a vessel, which is an indirect method of taxing imports and exports.

The Export Clause, on the other hand, prohibits the federal government from imposing taxes or duties on exports. This clause was included to ensure national government revenue, as the Articles of Confederation failed to requisition funds from the states. The Framers of the Constitution sought to address concerns by committing sole power over imposts and duties on imports to the federal government.

The Constitution also includes the Port Preference Clause, which constrains the national government from favoring ports in some states over others for commercial benefit. The Supreme Court has interpreted and applied these clauses in various cases, such as Brown v. Maryland, Hooven & Allison Co. v. Evatt, and Camps Newfound/Owatonna, Inc. v. Town of Harrison.

In summary, the Constitution grants Congress the power to regulate interstate and foreign commerce, prohibiting states from imposing discriminatory taxes on imports and exports. The Import-Export Clause, Tonnage Clause, and Export Clause work together to regulate taxation on commerce, with the Supreme Court providing further interpretation and application.

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