throbber
(Slip Opinion)
`
`
`
` OCTOBER TERM, 2014
`
`
`Syllabus
`
`1
`
` NOTE: Where it is feasible, a syllabus (headnote) will be released, as is
`
`
`
` being done in connection with this case, at the time the opinion is issued.
`
`
`
` The syllabus constitutes no part of the opinion of the Court but has been
`
` prepared by the Reporter of Decisions for the convenience of the reader.
`
` See United States v. Detroit Timber & Lumber Co., 200 U. S. 321, 337.
`
`
`SUPREME COURT OF THE UNITED STATES
`
`
`
` Syllabus
`
`
`
` COMPTROLLER OF THE TREASURY OF MARYLAND
`v. WYNNE ET UX.
`
`CERTIORARI TO THE COURT OF APPEALS OF MARYLAND
`No. 13–485. Argued November 12, 2014—Decided May 18, 2015
`
`Maryland’s personal income tax on state residents consists of a “state”
`income tax, Md. Tax-Gen. Code Ann. §10–105(a), and a “county” in-
`come tax, §§10–103, 10–106. Residents who pay income tax to anoth-
`er jurisdiction for income earned in that other jurisdiction are al-
`lowed a credit against the “state” tax but not the “county” tax. §10–
`
`703. Nonresidents who earn income from sources within Maryland
`
`must pay the “state” income tax, §§10–105(d), 10–210, and nonresi-
`dents not subject to the county tax must pay a “special nonresident
`tax” in lieu of the “county” tax, §10–106.1.
`Respondents, Maryland residents, earned pass-through income
`
`
`from a Subchapter S corporation that earned income in several
`States. Respondents claimed an income tax credit on their 2006
`Maryland income tax return for taxes paid to other States. The Mary-
`
`land State Comptroller of the Treasury, petitioner here, allowed re-
`spondents a credit against their “state” income tax but not against
`
`their “county” income tax and assessed a tax deficiency. That deci-
`sion was affirmed by the Hearings and Appeals Section of the Comp-
`troller’s Office and by the Maryland Tax Court, but the Circuit Court
`for Howard County reversed on the ground that Maryland’s tax sys-
`
`
`tem violated the Commerce Clause of the Federal Constitution. The
`Court of Appeals of Maryland affirmed and held that the tax uncon-
`stitutionally discriminated against interstate commerce.
`
`
`Held: Maryland’s personal income tax scheme violates the dormant
`Commerce Clause. Pp. 4–28.
`
`(a) The Commerce Clause, which grants Congress power to “regu-
`late Commerce . . . among the several States,” Art I, §8, cl. 3, also has
`
`“a further, negative command, known as the dormant Commerce
`Clause,” Oklahoma Tax Comm’n v. Jefferson Lines, Inc., 514 U. S.
`
`
`
`
`
`
`
`
`
`

`
`COMPTROLLER OF TREASURY OF MD. v. WYNNE
`
`
`Syllabus
`
`175, 179, which precludes States from “discriminat[ing] between
`transactions on the basis of some interstate element,” Boston Stock
`
`
`Exchange v. State Tax Comm’n, 429 U. S. 318, 332, n. 12. Thus, inter
`alia, a State “may not tax a transaction or incident more heavily
`when it crosses state lines than when it occurs entirely within the
`State,” Armco Inc. v. Hardesty, 467 U. S. 638, 642, or “impose a tax
`which discriminates against interstate commerce either by providing
`a direct commercial advantage to local business, or by subjecting in-
`terstate commerce to the burden of ‘multiple taxation,’ ” Northwestern
`
`
`States Portland Cement Co. v. Minnesota, 358 U. S. 450, 458. Pp. 4–
`6.
`
`
`(b) The result in this case is all but dictated by this Court’s
`dormant Commerce Clause cases, particularly J. D. Adams Mfg. Co.
`v. Storen, 304 U. S. 307, 311, Gwin, White & Prince, Inc. v.
`Henneford, 305 U. S. 434, 439, and Central Greyhound Lines, Inc. v.
`
`Mealey, 334 U. S. 653, 662, which all invalidated state tax schemes
`that might lead to double taxation of out-of-state income and that
`discriminated in favor of intrastate over interstate economic activity.
`Pp. 6–7.
`
`(c) This conclusion is not affected by the fact that these three cases
`
`involved a tax on gross receipts rather than net income, and a tax on
`
`corporations rather than individuals. This Court’s decisions have
`previously rejected the formal distinction between gross receipts and
`net income taxes. And there is no reason the dormant Commerce
`Clause should treat individuals less favorably than corporations; in
`addition, the taxes invalidated in J. D. Adams and Gwin, White ap-
`plied to the income of both individuals and corporations. Nor does
`the right of the individual to vote in political elections justify dispar-
`ate treatment of corporate and personal income. Thus the Court has
`previously entertained and even sustained dormant Commerce
`Clause challenges by individual residents of the State that imposed
`the alleged burden on interstate commerce. See Department of Reve-
`nue of Ky. v. Davis, 553 U. S. 328, 336; Granholm v. Heald, 544 U. S.
`
`460, 469 (2005). Pp. 7–12.
`
`(d) Maryland’s tax scheme is not immune from dormant Commerce
`
`Clause scrutiny simply because Maryland has the jurisdictional pow-
`
`
`
`er under the Due Process Clause to impose the tax. “[W]hile a state
`may, consistent with the Due Process Clause, have the authority to
`tax a particular taxpayer, imposition of the tax may nonetheless vio-
`
`late the Commerce Clause.” Quill Corp. v. North Dakota, 504 U. S.
`
`298, 305. Pp. 12–15.
`
`
`(e) Maryland’s income tax scheme discriminates against interstate
`commerce. The “internal consistency” test, which helps courts identi-
`fy tax schemes that discriminate against interstate commerce, as-
`
`
`
`
`
`
`
`
`
`
`
`
`
`2
`
`
`
`
`

`
`
`
`3
`
`
`Cite as: 575 U. S. ____ (2015)
`
`
`Syllabus
`sumes that every State has the same tax structure. Maryland’s in-
`
`come tax scheme fails the internal consistency test because if every
`State adopted Maryland’s tax structure, interstate commerce would
`
`
`be taxed at a higher rate than intrastate commerce. Maryland’s tax
`scheme is inherently discriminatory and operates as a tariff, which is
`fatal because tariffs are “[t]he paradigmatic example of a law dis-
`
`criminating against interstate commerce.” West Lynn Creamery, Inc.
`
`
`
`v. Healy, 512 U. S. 186, 193. Petitioner emphasizes that by offering
`
`residents who earn income in interstate commerce a credit against
`
`the “state” portion of the income tax, Maryland actually receives less
`tax revenue from residents who earn income from interstate com-
`merce rather than intrastate commerce, but this argument is a red
`
`
`herring. The critical point is that the total tax burden on interstate
`
`commerce is higher. Pp. 18–26.
`431 Md. 147, 64 A. 3d 453, affirmed.
`ALITO, J., delivered the opinion of the Court, in which ROBERTS, C. J.,
`and KENNEDY, BREYER, and SOTOMAYOR, JJ., joined. SCALIA, J., filed a
`dissenting opinion, in which THOMAS, J., joined as to Parts I and II.
`
`
`THOMAS, J., filed a dissenting opinion, in which SCALIA, J., joined except
`
`as to the first paragraph. GINSBURG, J., filed a dissenting opinion, in
`which SCALIA and KAGAN, JJ., joined.
`
`
`
`
`

`
`
`
`
`
` Cite as: 575 U. S. ____ (2015)
`
`Opinion of the Court
`
`1
`
`
` NOTICE: This opinion is subject to formal revision before publication in the
`
`
`
` preliminary print of the United States Reports. Readers are requested to
`
` notify the Reporter of Decisions, Supreme Court of the United States, Wash­
`
` ington, D. C. 20543, of any typographical or other formal errors, in order
`
`
` that corrections may be made before the preliminary print goes to press.
`
`
`
`
`SUPREME COURT OF THE UNITED STATES
`
`_________________
`
` No. 13–485
`_________________
`COMPTROLLER OF THE TREASURY OF MARYLAND,
`
` PETITIONER v. BRIAN WYNNE ET UX.
`
`ON WRIT OF CERTIORARI TO THE COURT OF APPEALS OF
`
`
`MARYLAND
`
`[May 18, 2015]
`
`JUSTICE ALITO delivered the opinion of the Court.
`
`This case involves the constitutionality of an unusual
`feature of Maryland’s personal income tax scheme. Like
`many other States, Maryland taxes the income its resi­
`dents earn both within and outside the State, as well as
`the income that nonresidents earn from sources within
`Maryland. But unlike most other States, Maryland does
`not offer its residents a full credit against the income
`taxes that they pay to other States. The effect of this
`scheme is that some of the income earned by Maryland
`
`residents outside the State is taxed twice. Maryland’s
`scheme creates an incentive for taxpayers to opt for intra­
`
`state rather than interstate economic activity.
`
`We have long held that States cannot subject corporate
`income to tax schemes similar to Maryland’s, and we see
`no reason why income earned by individuals should be
`treated less favorably. Maryland admits that its law has
`the same economic effect as a state tariff, the quintessen­
`tial evil targeted by the dormant Commerce Clause. We
`therefore affirm the decision of Maryland’s highest court
`and hold that this feature of the State’s tax scheme vio­
`
`
`
`
`
`

`
`
`
`2
`
`
`COMPTROLLER OF TREASURY OF MD. v. WYNNE
`
`Opinion of the Court
`lates the Federal Constitution.
`I
`Maryland, like most States, raises revenue in part by
`
`levying a personal income tax. The income tax that Mary­
`land imposes upon its own residents has two parts: a
`“state” income tax, which is set at a graduated rate, Md.
`Tax-Gen. Code Ann. §10–105(a) (Supp. 2014), and a so-
`called “county” income tax, which is set at a rate that
`varies by county but is capped at 3.2%, §§10–103, 10–106
`(2010). Despite the names that Maryland has assigned to
`these taxes, both are State taxes, and both are collected by
`the State’s Comptroller of the Treasury. Frey v. Comptrol-
`ler of Treasury, 422 Md. 111, 125, 141–142, 29 A. 3d 475,
`483, 492 (2011). Of course, some Maryland residents earn
`income in other States, and some of those States also tax
`this income.
`If Maryland residents pay income tax to
`another jurisdiction for income earned there, Maryland
`allows them a credit against the “state” tax but not the
`“county” tax. §10–703; 431 Md. 147, 156–157, 64 A. 3d
`453, 458 (2013) (case below). As a result, part of the in­
`come that a Maryland resident earns outside the State
`may be taxed twice.
`
`Maryland also taxes the income of nonresidents. This
`
`tax has two parts. First, nonresidents must pay the
`“state” income tax on all the income that they earn from
`sources within Maryland. §§10–105(d) (Supp. 2014), 10–
`210 (2010). Second, nonresidents not subject to the county
`tax must pay a “special nonresident tax” in lieu of the
`“county” tax. §10–106.1; Frey, supra, at 125–126, 29 A.
`3d, at 483. The “special nonresident tax” is levied on
`income earned from sources within Maryland, and its rate
`is “equal to the lowest county income tax rate set by any
`Maryland county.” §10–106.1. Maryland does not tax the
`income that nonresidents earn from sources outside Mary­
`land. See §10–210.
`
`
`
`

`
`
`
`3
`
`
`Cite as: 575 U. S. ____ (2015)
`
`Opinion of the Court
`Respondents Brian and Karen Wynne are Maryland
`
`residents. In 2006, the relevant tax year, Brian Wynne
`owned stock in Maxim Healthcare Services, Inc., a Sub-
`chapter S corporation.1 That year, Maxim earned income
`
`
`in States other than Maryland, and it filed state income
`tax returns in 39 States. The Wynnes earned income
`passed through to them from Maxim. On their 2006 Mary­
`land tax return, the Wynnes claimed an income tax credit
`for income taxes paid to other States.
`
`Petitioner, the Maryland State Comptroller of the
`
`Treasury, denied this claim and assessed a tax deficiency.
`In accordance with Maryland law, the Comptroller allowed
`the Wynnes a credit against their Maryland “state” income
`tax but not against their “county” income tax. The Hear­
`
`ings and Appeals Section of the Comptroller’s Office
`slightly modified the assessment but otherwise affirmed.
`The Maryland Tax Court also affirmed, but the Circuit
`Court for Howard County reversed on the ground that
`Maryland’s tax system violated the Commerce Clause.
`
`
`The Court of Appeals of Maryland affirmed. 431 Md.
`147, 64 A. 3d 453. That court evaluated the tax under the
`four-part test of Complete Auto Transit, Inc. v. Brady, 430
`
`
`
`
`
`
`
`——————
`1Under federal law, S corporations permit shareholders “to elect a
`
`‘pass-through’ taxation system under which income is subjected to only
` one level of taxation. The corporation’s profits pass through directly to
`
`its shareholders on a pro rata basis and are reported on the sharehold­
`ers’ individual tax returns.” Gitlitz v. Commissioner, 531 U. S. 206, 209
`(2001) (citation omitted). Maryland affords similar pass-through
`treatment to the income of an S corporation. 431 Md. 147, 158, 64 A. 3d
`453, 459 (2013). By contrast, C corporations—organized under Sub-
`chapter C rather than S of Chapter 1 of the Internal Revenue Code—
`must pay their own taxes because they are considered to be separate
`tax entities from their shareholders. 14A W. Fletcher, Cyclopedia of
`the Law of Corporations §§6971, 6973 (rev. ed. 2008 and Cum. Supp.
`2014–2015). Because of limitations on the number and type of share­
`holders they may have, S corporations tend to be smaller, more closely
`held corporations. Id., §§7025.50, 7026.
`
`
`
`
`
`
`
`

`
`
`
`4
`
`
`COMPTROLLER OF TREASURY OF MD. v. WYNNE
`
`Opinion of the Court
`U. S. 274 (1977), which asks whether a “tax is applied to
`an activity with a substantial nexus with the taxing State,
`is fairly apportioned, does not discriminate against inter­
`state commerce, and is fairly related to the services pro­
`vided by the State.” Id., at 279. The Court of Appeals
`held that the tax failed both the fair apportionment and
`nondiscrimination parts of the Complete Auto test. With
`
`respect to fair apportionment, the court first held that the
`tax failed the “internal consistency” test because if every
`State adopted Maryland’s tax scheme, interstate com­
`merce would be taxed at a higher rate than intrastate
`commerce. It then held that the tax failed the “external
`consistency” test because it created a risk of multiple
`taxation. With respect to nondiscrimination, the court
`held that the tax discriminated against interstate com­
`merce because it denied residents a credit on income taxes
`paid to other States and so taxed income earned interstate
`at a rate higher than income earned intrastate. The court
`thus concluded that Maryland’s tax scheme was unconsti­
`tutional insofar as it denied the Wynnes a credit against
`
`the “county” tax for income taxes they paid to other States.
`Two judges dissented and argued that the tax did not
`violate the Commerce Clause. The Court of Appeals later
`issued a brief clarification that “[a] state may avoid dis­
`
`crimination against interstate commerce by providing a
`tax credit, or some other method of apportionment, to
`avoid discriminating against interstate commerce in viola­
`
`tion of the dormant Commerce Clause.” 431 Md., at 189,
`64 A. 3d at 478.
`
`
`We granted certiorari. 572 U. S. ___ (2014).
`
`II
`A
`
`The Commerce Clause grants Congress power to “regu­
`late Commerce . . . among the several States.” Art. I, § 8,
`
`cl. 3. These “few simple words . . . reflected a central
`
`
`
`

`
`
`
`5
`
`
`
`
`
` Cite as: 575 U. S. ____ (2015)
`
`Opinion of the Court
`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.” Hughes v.
`
`
`Oklahoma, 441 U. S. 322, 325–326 (1979). Although the
`Clause is framed as a positive grant of power to Congress,
`“we have consistently held this language to contain a
`further, negative command, known as the dormant Com­
`merce Clause, prohibiting certain state taxation even
`when Congress has failed to legislate on the subject.”
`
`Oklahoma Tax Comm’n v. Jefferson Lines, Inc., 514 U. S.
`175, 179 (1995).
`
`This interpretation of the Commerce Clause has been
`disputed. See Camps Newfound/Owatonna, Inc. v. Town
`of Harrison, 520 U. S. 564, 609–620 (1997) (THOMAS, J.,
`dissenting); Tyler Pipe Industries, Inc. v. Washington State
`Dept. of Revenue, 483 U. S. 232, 259–265 (1987) (SCALIA,
`J., concurring in part and dissenting in part); License
`Cases, 5 How. 504, 578–579 (1847) (Taney, C. J.). But it
`also has deep roots. See, e.g., Case of the State Freight
`Tax, 15 Wall. 232, 279–280 (1873); Cooley v. Board of
`Wardens of Port of Philadelphia ex rel. Soc. for Relief of
`Distressed Pilots, 12 How. 299, 318–319 (1852); Gibbons v.
`Ogden, 9 Wheat. 1, 209 (1824) (Marshall, C. J.). By pro­
`hibiting States from discriminating against or imposing
`excessive burdens on interstate commerce without con­
`gressional approval, it strikes at one of the chief evils that
`led to the adoption of the Constitution, namely, state
`tariffs and other laws that burdened interstate commerce.
`Fulton Corp. v. Faulkner, 516 U. S. 325, 330–331 (1996);
`
`Hughes, supra, at 325; Welton v. Missouri, 91 U. S. 275,
`
`280 (1876); see also The Federalist Nos. 7, 11 (A. Hamil­
`ton), and 42 (J. Madison).
`Under our precedents, the dormant Commerce Clause
`
`
`
`
`
`
`

`
`
`
`6
`
`
`COMPTROLLER OF TREASURY OF MD. v. WYNNE
`
`Opinion of the Court
`precludes States from “discriminat[ing] between transac­
`tions on the basis of some interstate element.” Boston
`
`Stock Exchange v. State Tax Comm’n, 429 U. S. 318, 332,
`n. 12 (1977). This means, among other things, that a
`State “may not tax a transaction or incident more heavily
`when it crosses state lines than when it occurs entirely
`
`within the State.” Armco Inc. v. Hardesty, 467 U. S. 638,
`642 (1984). “Nor may a State impose a tax which discrim­
`inates against interstate commerce either by providing a
`direct commercial advantage to local business, or by sub­
`jecting interstate commerce to the burden of ‘multiple
`
`taxation.’” Northwestern States Portland Cement Co. v.
`Minnesota, 358 U. S. 450, 458 (1959) (citations omitted).
`B
`Our existing dormant Commerce Clause cases all but
`
`dictate the result reached in this case by Maryland’s high­
`est court. Three cases involving the taxation of the income
`of domestic corporations are particularly instructive.
`In J. D. Adams Mfg. Co. v. Storen, 304 U. S. 307 (1938),
`Indiana taxed the income of every Indiana resident (in­
`cluding individuals) and the income that every nonresi­
`dent derived from sources within Indiana. Id., at 308.
`
`The State levied the tax on income earned by the plaintiff
`Indiana corporation on sales made out of the State. Id., at
`309. Holding that this scheme violated the dormant
`Commerce Clause, we explained that the “vice of the
`statute” was that it taxed, “without apportionment, re­
`ceipts derived from activities in interstate commerce.” Id.,
`at 311. If these receipts were also taxed by the States in
`which the sales occurred, we warned, interstate commerce
`would be subjected “to the risk of a double tax burden to
`which intrastate commerce is not exposed, and which the
`commerce clause forbids.” Ibid.
`
`The next year, in Gwin, White & Prince, Inc. v.
`
`
`Henneford, 305 U. S. 434 (1939), we reached a similar
`
`
`
`
`
`

`
`
`
` Cite as: 575 U. S. ____ (2015)
`
`Opinion of the Court
`result. In that case, the State of Washington taxed all the
`
`income of persons doing business in the State. Id., at 435.
`Washington levied that tax on income that the plaintiff
`Washington corporation earned in shipping fruit from
`Washington to other States and foreign countries. Id., at
`436–437. This tax, we wrote, “discriminates against inter­
`
`state commerce, since it imposes upon it, merely because
`interstate commerce is being done, the risk of a multiple
`burden to which local commerce is not exposed.” Id., at
`439.
`
`
`In the third of these cases involving the taxation of a
`domestic corporation, Central Greyhound Lines, Inc. v.
`Mealey, 334 U. S. 653 (1948), New York sought to tax the
`portion of a domiciliary bus company’s gross receipts that
`were derived from services provided in neighboring States.
`
`Id., at 660; see also id., at 665 (Murphy, J., dissenting)
`(stating that the plaintiff was a New York corporation).
`Noting that these other States might also attempt to tax
`this portion of the company’s gross receipts, the Court held
`that the New York scheme violated the dormant Com­
`merce Clause because it imposed an “unfair burden” on
`
`interstate commerce. Id., at 662 (majority opinion).
`
`In all three of these cases, the Court struck down a state
`tax scheme that might have resulted in the double taxa­
`tion of income earned out of the State and that discrimi­
`nated in favor of intrastate over interstate economic activ­
`ity. As we will explain, see Part II–F, infra, Maryland’s
`
`tax scheme is unconstitutional for similar reasons.
`C
`
`The principal dissent distinguishes these cases on the
`sole ground that they involved a tax on gross receipts
`rather than net income. We see no reason why the dis­
`tinction between gross receipts and net income should
`matter, particularly in light of the admonition that we
`must consider “not the formal language of the tax statute
`
`
`
`
`
`
`
`
`
`7
`
`
`
`

`
`COMPTROLLER OF TREASURY OF MD. v. WYNNE
`
`Opinion of the Court
`but rather its practical effect.” Complete Auto, 430 U. S.,
`at 279. The principal dissent claims, post, at 13 (opinion
`of GINSBURG, J.), that “[t]he Court, historically, has taken
`the position that the difference between taxes on net
`income and taxes on gross receipts from interstate com­
`merce warrants different results.” 2 C. Trost & P. Hart­
`man, Federal Limitations on State and Local Taxation 2d
`§10:1, p. 251 (2003) (emphasis added) (hereinafter Trost).
`
`But this historical point is irrelevant. As the principal
`dissent seems to acknowledge, our cases rejected this
`formal distinction some time ago. And the distinction
`between gross receipts and net income taxes was not the
`basis for our decisions in J. D. Adams, Gwin, White, and
`Central Greyhound, which turned instead on the threat of
`multiple taxation.
`The discarded distinction between taxes on gross re­
`
`ceipts and net income was based on the notion, endorsed
`in some early cases, that a tax on gross receipts is an
`impermissible “direct and immediate burden” on inter­
`state commerce, whereas a tax on net income is merely an
`
`
`“indirect and incidental” burden. United States Glue Co.
`
`v. Town of Oak Creek, 247 U. S. 321, 328–329 (1918); see
`also Shaffer v. Carter, 252 U. S. 37, 57 (1920). This arid
`distinction between direct and indirect burdens allowed
`“very little coherent, trustworthy guidance as to tax valid­
`ity.” 2 Trost §9:1, at 212. And so, beginning with Justice
`Stone’s seminal opinion in Western Live Stock v. Bureau of
`Revenue, 303 U. S. 250 (1938), and continuing through
`cases like J. D. Adams and Gwin, White, the direct-
`indirect burdens test was replaced with a more practical
`approach that looked to the economic impact of the tax.
`
`These cases worked “a substantial judicial reinterpreta­
`tion of the power of the States to levy taxes on gross in­
`come from interstate commerce.” 1 Trost §2:20, at 175.
`After a temporary reversion to our earlier formalism,
`
`see Spector Motor Service, Inc. v. O’Connor, 340 U. S. 602
`
`
`
`
`
`
`
`
`
`8
`
`
`

`
`9
`
`
`Cite as: 575 U. S. ____ (2015)
`
`Opinion of the Court
`(1951), “the gross receipts judicial pendulum has swung in
`
`a wide arc, recently reaching the place where taxation of
`gross receipts from interstate commerce is placed on an
`equal footing with receipts from local business, in Com-
`
`plete Auto Transit Inc. v. Brady,” 2 Trost §9:1, at 212. And
`we have now squarely rejected the argument that the
`Commerce Clause distinguishes between taxes on net and
`gross income. See Jefferson Lines, 514 U. S., at 190 (ex­
`plaining that the Court in Central Greyhound “understood
`the gross receipts tax to be simply a variety of tax on
`
`income”); Moorman Mfg. Co. v. Bair, 437 U. S. 267, 280
`(1978) (rejecting a suggestion that the Commerce Clause
`distinguishes between gross receipts taxes and net income
`
`taxes); id., at 281 (Brennan, J., dissenting) (“I agree with
`the Court that, for purposes of constitutional review, there
`
`is no distinction between a corporate income tax and a
`gross-receipts tax”); Complete Auto, supra, at 280 (uphold­
`ing a gross receipts tax and rejecting the notion that the
`Commerce Clause places “a blanket prohibition against
`
`any state taxation imposed directly on an interstate
`
`transaction”).2
`For its part, petitioner distinguishes J. D. Adams, Gwin,
`
`White, and Central Greyhound on the ground that they
`concerned the taxation of corporations, not individuals.
`
`But it is hard to see why the dormant Commerce Clause
`should treat individuals less favorably than corporations.
`
`——————
` 2The principal dissent mischaracterizes the import of the Court’s
`
`statement in Moorman that a gross receipts tax is “ ‘more burdensome’ ”
`
`
`
`than a net income tax. Post, at 13. This was a statement about the
`relative economic impact of the taxes (a gross receipts tax applies
`
`
`regardless of whether the corporation makes a profit). It was not, as
`
`Justice Brennan confirmed in dissent, a suggestion that net income
`taxes are subject to lesser constitutional scrutiny than gross receipts
`taxes. Indeed, we noted in Moorman that “the actual burden on inter­
`state commerce would have been the same had Iowa imposed a plainly
`valid gross-receipts tax instead of the challenged [net] income tax.”
`
`Moorman Mfg. Co. v. Bair, 437 U. S. 267, 280–281 (1978).
`
`
`
`
`
`
`
`
`
`

`
`
` 10
`
`
`COMPTROLLER OF TREASURY OF MD. v. WYNNE
`
`Opinion of the Court
` See Camps Newfound, 520 U. S., at 574 (“A tax on real
`
`estate, like any other tax, may impermissibly burden
`interstate commerce” (emphasis added)). In addition, the
`
`distinction between individuals and corporations cannot
`stand because the taxes invalidated in J. D. Adams and
`Gwin, White applied to the income of both individuals and
`corporations. See Ind. Stat. Ann., ch. 26, §64–2602 (Burns
`1933) (tax in J. D. Adams); 1935 Wash. Sess. Laws ch.
`180, Tit. II, §4(e), pp. 710–711 (tax in Gwin, White).
`
`Attempting to explain why the dormant Commerce
`
`Clause should provide less protection for natural persons
`than for corporations, petitioner and the Solicitor General
`argue that States should have a free hand to tax their
`residents’ out-of-state income because States provide their
`residents with many services. As the Solicitor General
`puts it, individuals “reap the benefits of local roads, local
`police and fire protection, local public schools, [and] local
`health and welfare benefits.” Brief for United States as
`Amicus Curiae 30.
`This argument fails because corporations also benefit
`
`heavily from state and local services. Trucks hauling a
`corporation’s supplies and goods, and vehicles transport­
`ing its employees, use local roads. Corporations call upon
`local police and fire departments to protect their facilities.
`
`Corporations rely on local schools to educate prospective
`
`employees, and the availability of good schools and other
`government services are features that may aid a corpora­
`
` tion in attracting and retaining employees. Thus, dispar­
`ate treatment of corporate and personal income cannot be
`
`justified based on the state services enjoyed by these two
`groups of taxpayers.
`
`The sole remaining attribute that, in the view of peti­
`tioner, distinguishes a corporation from an individual for
`present purposes is the right of the individual to vote. The
`principal dissent also emphasizes that residents can vote
`
` to change Maryland’s discriminatory tax law. Post, at 3–4.
`
`
`
`
`
`
`
`
`
`

`
`
`
`
`11
`
`
`Cite as: 575 U. S. ____ (2015)
`
`Opinion of the Court
`The argument is that this Court need not be concerned
`about state laws that burden the interstate activities of
`individuals because those individuals can lobby and vote
`against legislators who support such measures. But if a
`State’s tax unconstitutionally discriminates against inter­
`state commerce, it is invalid regardless of whether the
`
`plaintiff is a resident voter or nonresident of the State.
`This Court has thus entertained and even sustained
`dormant Commerce Clause challenges by individual resi­
`dents of the State that imposed the alleged burden on
`interstate commerce, Department of Revenue of Ky. v.
`Davis, 553 U. S. 328, 336 (2008); Granholm v. Heald, 544
`U. S. 460, 469 (2005), and we have also sustained such a
`challenge to a tax whose burden was borne by in-state
`consumers, Bacchus Imports, Ltd. v. Dias, 468 U. S. 263,
`
`272 (1984).3
`The principal dissent and JUSTICE SCALIA respond to
`
`
`these holdings by relying on dictum in Goldberg v. Sweet,
`488 U. S. 252, 266 (1989), that it is not the purpose of the
`dormant Commerce Clause “‘to protect state residents
`from their own state taxes.’” Post, at 3 (GINSBURG, J.,
`dissenting); post, at 5 (SCALIA, J., dissenting). But we
`
`repudiated that dictum in West Lynn Creamery, Inc. v.
`Healy, 512 U. S. 186 (1994), where we stated that “[s]tate
`
`taxes are ordinarily paid by in-state businesses and con­
`sumers, yet if they discriminate against out-of-state prod­
`ucts, they are unconstitutional.” Id., at 203. And, of
`course, the dictum must bow to the holdings of our many
`
`cases entertaining Commerce Clause challenges brought
`——————
`3Similarly, we have sustained dormant Commerce Clause challenges
`by corporate residents of the State that imposed the burden on inter­
`state commerce. See, e.g., Camps Newfound/Owatonna, Inc. v. Town of
`
`
`Harrison, 520 U. S. 564, 567 (1997); Fulton Corp. v. Faulkner, 516 U. S.
`
`
`325, 328 (1996); Central Greyhound Lines, Inc. v. Mealey, 334 U. S. 653,
`654 (1948); Gwin, White & Prince, Inc. v. Henneford, 305 U. S. 434, 435
`
`(1939); J. D. Adams Mfg. Co. v. Storen, 304 U. S. 307, 308 (1938).
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`

`
`
` 12
`
`
`COMPTROLLER OF TREASURY OF MD. v. WYNNE
`
`Opinion of the Court
`by residents. We find the dissents’ reliance on Goldberg’s
`dictum particularly inappropriate since they do not find
`themselves similarly bound by the rule of that case, which
`applied the internal consistency test to determine whether
`the tax at issue violated the dormant Commerce Clause.
`
`488 U. S., at 261.
`
`In addition, the notion that the victims of such discrimi­
`nation have a complete remedy at the polls is fanciful. It
`is likely that only a distinct minority of a State’s residents
`
`
`earns income out of State. Schemes that discriminate
`against income earned in other States may be attractive
`to legislators and a majority of their constituents for pre­
`
`
`
`cisely this reason. It is even more farfetched to suggest that
`natural persons with out-of-state income are better able to
`influence state lawmakers than large corporations head­
`quartered in the State. In short, petitioner’s argument
`would leave no security where the majority of voters prefer
`protectionism at the expense of the few who earn income
`interstate.
`
`It would be particularly incongruous in the present case
`to disregard our prior decisions regarding the taxation of
`corporate income because the income at issue here is a
`type of corporate income, namely, the income of a Sub-
`chapter S corporation. Only small businesses may incor­
`porate under Subchapter S, and thus acceptance of peti­
`tioner’s submission would provide greater protection for
`
`income earned by large Subchapter C corporations than
`small businesses incorporated under Subchapter S.
`D
`
`
`In attempting to justify Maryland’s unusual tax scheme,
`the principal dissent argues that the Commerce Clause
`
`imposes no limit on Maryland’s ability to tax the income of
`
`its residents, no matter where that income is earned. It
`argues that Maryland has the sovereign power to tax all of
`the income of its residents, wherever earned, and it there­
`
`
`
`
`
`
`
`

`
`
`
`
`
` 13
`
`
`
` Cite as: 575 U. S. ____ (2015)
`
`Opinion of the Court
`fore reasons that the dormant Commerce Clause cannot
`constrain Maryland’s ability to expose its residents (and
`nonresidents) to the threat of double taxation.
`This argument confuses what a State may do without
`
`violating the Due Process Clause of the Fourteenth
`Amendment with what it may do without violating the
`Commerce Clause. The Due Process Clause allows a State
`to tax “all the income of its residents, even income earned
`outside the taxing jurisdiction.” Oklahoma Tax Comm’n v.
`Chickasaw Nation, 515 U. S. 450, 462–463 (1995). But
`“while a State may, consistent with the Due Process
`Clause, have t

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