Interstate Transit, Inc. v. Lindsey
Headline: Court strikes down Tennessee’s graduated privilege tax on interstate buses, ruling the fee isn’t highway compensation and easing the tax burden on interstate bus operators.
Holding: The Court held that Tennessee’s graduated privilege tax on interstate buses was not a highway-use charge, unlawfully burdened interstate commerce, and therefore the bus company could recover amounts paid.
- Prevents states from taxing interstate bus operations as general privilege taxes.
- Requires highway-related charges to be tied to road use or highway funds.
- Lets bus companies recover improperly levied taxes paid under protest.
Summary
Background
Interstate Transit, Inc., an Ohio company running buses between Cincinnati and Atlanta, paid a Tennessee tax based on each vehicle’s seating capacity and sued to get the money back. The tax came from Tennessee’s 1927 General Revenue Act, which listed many business "privileges" and sent proceeds to the State’s general fund rather than a highway fund. A trial court ordered recovery, the Tennessee Supreme Court reversed, and the case reached this Court.
Reasoning
The key question was whether the charge was a valid fee for using state highways or an invalid tax on interstate business. The Court explained that a state may collect a reasonable highway-use charge from interstate vehicles only if the measure is tied to actual use or the money is clearly reserved for highway purposes. Tennessee’s levy was part of a general schedule of business privilege taxes, graded by seating or earning capacity and paid into the general fund, not a highway fund. Because the amount did not depend on mileage, wear, or other measures of road use, the Court found it was not compensatory but a burden on interstate commerce, and it reversed the state court’s judgment.
Real world impact
Interstate bus companies may recover similar charges that were not tied to highway use. States must tie highway-related charges to actual use or reserve proceeds for highway purposes to tax interstate carriers lawfully. The ruling preserves a distinction between ordinary occupation taxes and permissible highway user charges.
Dissents or concurrances
Justice McReynolds dissented, believing the state tax should be upheld; he would have affirmed the lower court’s ruling.
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