New York v. United States

Background

The dispute arose when the United States sought to collect a federal excise tax on mineral waters bottled and sold by New York from the Saratoga Springs reservation. New York argued the State was performing a traditional government function and thus immune from the tax. Lower courts ruled for the United States, and the case reached the Court after extensive briefing and many States appearing as friends of the Court.

Reasoning

The Justices examined older decisions about when States can be taxed for activities they carry on like private businesses. The majority rejected a broad rule that would keep States entirely free from federal taxes simply because they are governments. Instead, the Court said Congress may impose a generally applicable tax on a source of revenue that is open to both private sellers and State sellers, so long as the tax does not single out State functions or unduly interfere with core sovereign activities. Applying that test, the Court affirmed that the mineral-water tax was valid.

Real world impact

The decision means States that operate commercial enterprises — for example, selling natural resources or running utilities — can be covered by federal taxes that apply equally to private sellers. The ruling trims the old doctrine of absolute state immunity and leaves open limits where a tax would uniquely burden a State’s core governmental functions.

Dissents or concurrances

Several Justices wrote separately. Two concurring opinions agreed with the result but stressed limits on taxing true governmental functions. A dissent warned that subjecting State activities to general federal taxes risks undermining State sovereignty and urged that any such change be left to the Constitution or Congress.