International Shoe Co. v. Washington
Headline: Allows Washington to make a Delaware shoe company pay unemployment taxes and face state lawsuits because its salesmen’s regular solicitation created sufficient in‑state activity to justify collection and suit.
Holding:
- Allows states to tax out-of-state employers with regular in-state sales agents.
- Permits serving process on in-state agents plus registered mail to provide reasonable notice.
- Requires out-of-state firms with continuous sales ties to defend related suits in that state.
Summary
Background
A Delaware corporation based in St. Louis manufactured and sold shoes and employed eleven to thirteen salesmen who lived and worked in Washington. The salesmen displayed sample shoes, solicited orders, and sent orders to St. Louis for acceptance; the company shipped goods f.o.b. from outside Washington. Washington’s unemployment law required employers to contribute a percentage of wages to the state fund. The state assessed unpaid contributions based on the salesmen’s commissions, served notice on a salesman in Washington, and mailed registered notice to the company’s home office. Administrative review and state-court appeals upheld the assessment.
Reasoning
The Court addressed whether the company’s activities in Washington were enough to satisfy the Fourteenth Amendment’s requirement of fair notice and connection before a state can tax or sue it. The Court found the sales activity was systematic and continuous, producing a regular flow of merchandise and giving the company benefits and protections of state law. Because the unpaid contributions grew directly from those activities, the contacts were sufficient to make it reasonable for Washington to enforce the tax and maintain the suit. The Court also accepted the state’s reading that the tax applied to commissions and noted Congress had authorized states to impose such contributions.
Real world impact
Out-of-state businesses that keep regular sales agents and a steady stream of orders into a state can be taxed there and required to defend related suits. Service on in-state agents plus registered mail to the home office was held adequate notice. The ruling upholds a state’s power to collect unemployment contributions tied to in-state employment activity.
Dissents or concurrances
Justice Black agreed the tax and notice were proper but would have dismissed the appeal as unsubstantial. He warned against broad, vague due-process standards and urged a simpler rule letting states tax and open their courts when agents do business there.
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