Associated Industries of Mo. v. Lohman

Background

The dispute involves a Missouri trade association representing businesses (including out-of-state sellers) and a Missouri manufacturer that pays an extra tax on goods bought from outside the State. Missouri has a statewide sales tax and matching use taxes, plus an additional 1.5% use tax applying only to purchases made outside Missouri. Local governments also impose sales taxes that vary widely. Petitioners sued, saying the 1.5% use tax discriminates against out-of-state commerce. Missouri courts upheld the tax after looking at statewide averages; a state justice dissented, arguing each locality must treat in-state and out-of-state sales equally.

Reasoning

The Court asked whether the 1.5% use tax unlawfully discriminates against interstate commerce. It held that the compensatory tax rule requires equal treatment where the transaction occurs. Where the use tax exceeds a locality’s sales tax, the system imposes a higher burden on out-of-state purchases and thus discriminates. The Court rejected Missouri’s argument that statewide averaging could excuse local discrimination and said motive or decentralized decisionmaking does not cure actual unequal treatment. It reversed the Missouri Supreme Court and remanded for further proceedings.

Real world impact

The ruling affects out-of-state sellers forced to collect the tax and Missouri buyers in localities where their local sales tax is lower than 1.5%. The State must address unequal treatment through remedies such as refunds, equalizing local taxes, or other measures on remand. The decision does not prescribe a single remedy and leaves procedures and relief for the lower courts to determine.

Dissents or concurrances

At the state level, a dissent warned against using statewide averages to assess discrimination. On this Court, Justice Blackmun agreed with the judgment to reverse.