Eastern Air Transport, Inc. v. South Carolina Tax Commission

Background

A Delaware airline company that operates interstate flights and makes regular stops in South Carolina sued to stop a South Carolina law that adds six cents per gallon to gasoline sold inside the State. The tax is described as a license tax on sellers, and gasoline dealers add it to the price so the airline pays about $5,000 more a year. A three-judge federal trial court denied the airline’s request for an emergency injunction, and the airline appealed to this Court.

Reasoning

The core question was whether the State tax placed a direct burden on interstate commerce when the airline bought fuel inside South Carolina. The Court explained the tax is imposed on dealers for the privilege of selling gasoline within the State and that the challenged transactions were purely in-state sales. The Court said a neutral, non-discriminatory tax on local sales does not directly burden interstate commerce merely because the buyer uses the fuel in interstate transport. The opinion contrasted an earlier case where a tax was directly aimed at using fuel in interstate transport and so was treated differently.

Real world impact

By affirming the lower court, the Court allowed South Carolina to enforce the license tax as applied to local gasoline sales. Businesses that purchase fuel in the State for interstate use, like airlines, will continue to face the higher price when dealers add the tax. The ruling leaves in place the distinction between taxes on local sales and taxes directly aimed at the use of goods in interstate commerce.