Central Greyhound Lines, Inc. v. Mealey

1948-06-14

Headline: Limits New York’s power to tax bus fares that cross other states, blocks taxing full gross receipts but allows taxing the in-state mileage portion, affecting carriers and state revenues.

Holding: The Court held that New York may not constitutionally tax the entire gross receipts from continuous transportation that passes through other states, but may lawfully tax the portion apportioned to the mileage within New York.

Real World Impact:

Prevents New York from taxing entire gross receipts on trips that run through other states.
Requires apportioning taxable revenue to in-state mileage when feasible.
Affects bus and transportation companies and state tax collections across multi-state routes.

Topics: state taxation, interstate commerce, transportation taxes, apportionment

Summary

Background

A New York bus company operating routes between points in New York but traveling over highways in New Jersey and Pennsylvania was assessed a New York tax on its total gross receipts under § 186-a of the New York Tax Law. The company challenged the tax as unconstitutional because portions of the trips occurred outside New York. State agencies and New York courts upheld the unapportioned tax, and the company appealed to the Supreme Court.

Reasoning

The central question was whether New York could tax the entire revenue from continuous trips between New York points that pass through other states. The Court said this transportation is interstate commerce and an unapportioned gross receipts tax places an unfair burden on interstate commerce. The majority ruled that the whole tax could not stand as applied, but the State may constitutionally tax the portion of receipts fairly apportioned to the mileage within New York; the case was reversed and sent back for further proceedings consistent with that rule.

Real world impact

Carriers that run through other states cannot be taxed by New York on their entire fares for those trips when a significant portion occurs outside the State. States may, however, collect taxes apportioned to in-state mileage when a fair method of apportionment is feasible. The Supreme Court’s decision requires lower courts and tax agencies to apply apportionment rules on remand.

Dissents or concurrances

Three Justices dissented, arguing the taxed activity is commercially local and that New York could lawfully tax the total receipts under prior decisions like Lehigh Valley; one Justice concurred in the result only.