Oklahoma Tax Commission v. Jefferson Lines, Inc.

Background

Oklahoma's tax agency sought unpaid sales taxes on bus tickets sold in Oklahoma for trips that continued into other States. A Minnesota bus company sold such tickets but did not collect or remit taxes for interstate trips. After the company entered bankruptcy, Oklahoma filed claims for the unpaid taxes. Lower courts sided with the bus company, finding the tax unapportioned under earlier decisions, and the case reached the Supreme Court.

Reasoning

The Court asked whether a State may tax the full purchase price of a ticket sold inside the State when part of the travel occurs elsewhere. Applying the familiar four-part test (nexus, apportionment, nondiscrimination, and relation to state services), the Court found enough connection because the sale and the start of the service occur in Oklahoma. The Court concluded the sale is a local taxable event, distinguished an older case that struck down a seller-focused gross receipts tax, and said the risk of multiple taxation is controlled by the usual credit and apportionment practices among States. The majority therefore held the sales tax constitutional.

Real world impact

States can tax the full ticket price when a passenger buys travel that begins in that State, and bus companies must collect and remit that tax. Passengers buying interstate tickets in Oklahoma will continue to pay the sales tax. The decision reverses the appeals court and sends the case back for further proceedings consistent with this ruling.

Dissents or concurrances

Justice Scalia joined only the judgment and would limit review to facial discrimination, urging Congress to act; Justice Breyer (joined by O'Connor) dissented, arguing the tax is effectively identical to a previously invalidated unapportioned tax and should be struck down.