Crew Levick Co. v. Pennsylvania

Background

The State of Pennsylvania passed a law in 1899 that required merchants to pay annual license fees. Wholesale dealers had to pay a small fixed fee of three dollars and an additional percentage (one-half mill on each dollar) based on gross annual sales. In 1913 a wholesale business in Pennsylvania sold about $47,000 worth of goods inside the State and about $430,000 to customers in foreign countries. Many foreign orders were taken by agents abroad and transmitted to the company in Pennsylvania, and the goods were shipped from its Pennsylvania warehouse. The company objected to the tax portion based on sales shipped abroad, and state courts sustained the tax.

Reasoning

The main question was whether a state tax measured by gross receipts from goods shipped to foreign countries operates as a regulation of foreign commerce or as an export duty. The Supreme Court accepted the state court's view that the law was a business license but looked at its practical effect. The Court concluded that the additional percentage tied to gross receipts from foreign sales directly burdens foreign commerce and functions like an export duty. The Court therefore held that this portion of the tax conflicts with the Constitution and must be struck down.

Real world impact

The decision prevents a State from using a percentage of gross sales to tax goods shipped to foreign countries, protecting businesses that export from such state levies. The small fixed license fee of three dollars was not challenged and is permissible. The ruling requires states to design taxes so they do not directly tie to export receipts, and similar statutes will be vulnerable if they impose proportional taxes on exports.