Question 1

If a state tax on interstate commerce discriminates against a natural person who is a nonresident, which of the following Clauses is least likely to be relevant in determining whether the tax is valid? A The Equal Protection Clause B The Privileges and Immunities Clause of Article IV C The Commerce Clause D The Privileges or Immunities Clause of the Fourteenth Amendment

Accepted Answer

D The Privileges or Immunities Clause of the Fourteenth Amendment would not apply to a state tax on interstate commerce that discriminates against a natural person who is a nonresident. It applies when a state denies its own citizens rights of national citizenship. The Commerce Clause would be relevant in determining the validity of a state tax on interstate commerce that discriminates against a natural person who is a nonresident. The negative implications of the Commerce Clause (or the Dormant Commerce Clause) prohibit taxes that discriminate against nonresidents. The Privileges and Immunities Clause of Article IV would be relevant in determining the validity of a state tax on interstate commerce that discriminates against a natural person who is a nonresident. This Clause prohibits a state from discriminating against nonresidents regarding commercial activities. The Equal Protection Clause would also be relevant in determining the validity of a state tax on interstate commerce that discriminates against a natural person who is a nonresident. This Clause prohibits states from unreasonably discriminating among similarly situated people. QUESTION ID: L0044 Additional Learning

Question 2

In assessing whether a nondiscriminatory state tax on interstate commerce is valid absent any federal legislation in the area, courts will typically consider which of the following factors: (A) There is a substantial nexus between the taxpayer and the state. (B) The tax is fairly apportioned (C) The tax has some reasonable relation to revenue production. (D) There is a fair relationship between the tax and the services or benefits provided by the state. A A, B, and C B A, B, and D C B, C, and D D A, C, and D

Accepted Answer

B In assessing whether a nondiscriminatory state tax on interstate commerce is valid absent any federal legislation in the area, typically a court will consider three things: 1. Whether there is a substantial nexus between the taxpayer and the state; 2. Whether the tax is fairly apportioned; and 3. Whether there is a fair relationship between the tax and the services or benefits provided by the state. Whether a tax has some reasonable relation to revenue production generally will not be considered in assessing whether a nondiscriminatory state tax on interstate commerce is valid absent any federal legislation in the area. Whether a tax has a reasonable relationship to revenue production is something the courts will consider when Congress imposes a tax in an area over which Congress has no regulatory power. Because states have broad authority to regulate under the police power, state taxes generally are not subject to the reasonable relation to revenue production test. QUESTION ID: L0043B Additional Learning

Question 3

Which of the following is not an exception to the general rule under the Commerce Clause prohibiting states from discriminating against out-of-state competition? A When the regulation limits access to privately owned in-state products. B When the regulation furthers an important, noneconomic state interest such as health or safety and there are no reasonable alternatives available. C When the state acts as a market participant. D When the regulation is necessary to further an important, noneconomic state interest such as health or safety.

Accepted Answer

A A regulation limiting access to privately owned in-state products would violate the negative implications of the Commerce Clause; there is no exception for such regulations. When a state acts as a market participant, it generally is not restricted by the Commerce Clause; it may favor its own citizens, such as by distributing state-owned resources only to residents or paying residents more for something than it would pay an a nonresident (although such conduct might violate the Article IV Privileges and Immunities Clause). When a regulation is necessary to further an important, noneconomic state interest such as health or safety, it is excepted from the general rule of the negative implications of the Commerce Clause prohibiting discrimination against out-of-state competition. There also is an exception for when the regulation furthers an important, noneconomic state interest such as health or safety and there are no reasonable alternatives available. Actually, this is the same answer as above—if there are no reasonable alternatives, the method chosen is considered a necessary method. QUESTION ID: L0036 Additional Learning

Question 4

The Twenty-First Amendment gives state governments wide latitude over the importation of liquor and the conditions under which liquor is sold or used within the state. As a consequence of the Twenty-First Amendment, a state may: A Prohibit interstate shipments of liquor from passing through the state B Prohibit sellers from making direct shipments of liquor to customers within the state C Require out-of-state sellers to charge in-state customers no more than the sellers charge in other states

Accepted Answer

B A state may prohibit sellers from making direct shipments of liquor to customers within the state. The Twenty-First Amendment allows states to broadly control importation of liquor and the conditions under which liquor is sold or used within the state. States may even prohibit liquor sales within their borders. However, state liquor regulations that constitute only an economic preference for local liquor manufacturers may violate the Commerce Clause. Thus, a state could not prohibit out-of-state sellers from directly shipping to customers within the state while allowing in-state suppliers to do so. A state may NOT prohibit interstate shipments of liquor to pass through the state. Although the Twenty-First Amendment gives the states wide latitude to regulate liquor sales, the states still may not violate the Commerce Clause. Prohibiting interstate shipments from traveling through a state would unduly burden interstate commerce in violation of the Commerce Clause. A state may NOT require out-of-state sellers to charge in-state customers no more than the sellers charge in other states. Such a requirement has been held to violate the Commerce Clause. QUESTION ID: L0040A Additional Learning

Question 5

A state use tax imposed on users of goods purchased out of state is usually invalid if it: A Requires out-of-state sellers to collect the tax B Imposes a higher tax on goods purchased out of state C Singles out for taxation goods purchased in interstate commerce D Requires the user to come forward to pay the tax

Accepted Answer

B A state use tax imposed on users of goods purchased out of state is usually invalid if it imposes a higher tax on goods purchased out of state. Use taxes are upheld when they seek to equalize the taxes on goods purchased out of state with goods purchased in state. If the tax on goods purchased out of state is higher than the tax on goods purchased in state, the tax usually will be found to discriminate against interstate commerce and be invalid for that reason. It is not true that a use tax is invalid if it singles out for taxation goods purchased in interstate commerce. By definition, a use tax is a tax that singles out interstate sales for taxation, and such a tax will be upheld if it merely equalizes in-state and out-of-state commerce. A state use tax is not invalid merely because it requires out-of-state sellers to collect the tax. A state may force a nonresident, interstate seller to collect a use tax from a local buyer and remit it to the state if the seller has a substantial nexus to the state. The substantial nexus requirement can be met if the seller engages in some significant activity in the buyer's state, e.g., maintains offices there. Neither is a state use tax invalid merely because it requires the user to come forward to pay the tax. A use tax may (and most do) require the user to come forward to pay the tax. QUESTION ID: L0045B Additional Learning

Question 6

When may a state impose an ad valorem property tax on goods shipped through interstate commerce? A Whenever there is a break in the continuity of transit B Whenever there is a break in the continuity of transit or the goods reach their final destination C Only when the goods reach their destination

Accepted Answer

C A state may impose an ad valorem property tax on goods shipped through interstate commerce only when the goods reach their destination. A state may not impose an ad valorem property tax on goods moving through the state in interstate commerce, and this is true even if there is a break in the continuity of transit. As discussed above, states may impose an ad valorem property tax only on goods that have reached their final destination. A break in transit does not change this rule. QUESTION ID: L0047B Additional Learning

Question 7

A state law that does not discriminate against interstate commerce will be upheld if __________. A it is rationally related to a legitimate local interest B it does not conflict with the laws of other states C it is necessary to achieve a compelling local interest D the burden on interstate commerce does not outweigh the promotion of legitimate local interests

Accepted Answer

D A nondiscriminatory state law will be upheld under the negative implications of the Commerce Clause if the burden on interstate commerce does not outweigh the promotion of legitimate local interests. This is a balancing test. "Necessary to achieve a compelling local interest" is too high a standard. This standard is used for state regulations of commerce that discriminate against interstate commerce. It also is used when a law interferes with a fundamental right or when a regulation discriminates on the basis of a suspect classification. "Rationally related to a legitimate local interest" is too low a standard. This standard is used when a run-of-the-mill regulation is challenged (i.e., when no fundamental right or suspect or quasi-suspect classification is involved). It does not conflict with the laws of other states is an incorrect choice because, as mentioned above, the proper test balances incidental burdens on interstate commerce against the promotion of local interests. A conflict with the laws of other states would be a burden on interstate commerce, but the state law could still be upheld if the local interest is great and the conflict is minimal. QUESTION ID: L0038 Additional Learning

Question 8

The "market participant" exception, which allows a state to favor its own residents in interstate commerce when the state itself acts as a participant in the market, is an exception to: A Neither the Dormant Commerce Clause nor Privileges and Immunities Clause B The Dormant Commerce Clause C The Privileges and Immunities Clause D Both the Dormant Commerce Clause and Privileges and Immunities Clause

Accepted Answer

B The market participant exception is an exception to the Dormant Commerce Clause. When a state acts as a market participant, it generally is not restricted by the Dormant Commerce Clause; it may favor its own citizens, such as by distributing state-owned resources only to residents or paying residents more for something than it would pay a nonresident. While a state or local government does not violate the Dormant Commerce Clause by preferring its own citizens while acting as a market participant, there is no market participant exception to the Interstate Privileges and Immunities Clause. Thus, a regulation that interferes with private sector employment may violate the Privileges and Immunities Clause unless the regulating entity can show a substantial justification for the regulation. QUESTION ID: L0039B Additional Learning

Question 9

Can a law that discriminates against interstate commerce be valid under the Commerce Clause? A Yes, Congress can pass laws that discriminate against interstate commerce, and the states can too if authorized by federal law B Yes, Congress can pass laws that discriminate against interstate commerce, but the states cannot even if authorized by Congress C No, under the Commerce Clause neither the federal government nor the states may pass a law that discriminates against interstate commerce

Accepted Answer

A Under the Commerce Clause, Congress can adopt laws discriminating against interstate commerce, and the states can too if authorized by federal law. Congress's power over interstate commerce is plenary; i.e., Congress can adopt a law discriminating against interstate commerce as long as the law does not violate some other constitutional provision. And although the states generally may not adopt laws that discriminate against interstate commerce, they may do so if authorized by federal law. Accordingly, the choices indicating that states cannot pass a law even if authorized by Congress and neither the federal government nor the states may pass a law that discriminates against interstate commerce are incorrect. QUESTION ID: L0034A Additional Learning

Question 10

Which of the following statements is true regarding Congress's power to regulate interstate commerce? A It is exclusively federal, and states have no power to regulate any aspect of interstate commerce. B Congress has no power to regulate interstate commerce because it is an exclusive state power that has been reserved to the states by the Tenth Amendment. C Although it is a federal power, states may regulate interstate commerce subject to the negative implications of the Commerce Clause. D As long as there is no conflict with existing federal legislation, states are free to regulate interstate commerce.

Accepted Answer

C It is true that although it is a federal power, states may regulate interstate commerce subject to the negative implications of the Commerce Clause. The negative implications (also called Dormant Commerce Clause) generally prohibit states from discriminating against out-of-state business or unduly burdening interstate commerce. The power to regulate interstate commerce is NOT exclusively federal; states DO have power to regulate aspects of interstate commerce, as long as they do not discriminate against out-of-state business or unduly burden interstate commerce and Congress has not preempted the field of regulations. It is not true that the regulation of commerce is an exclusive state power that has been reserved to the states by the Tenth Amendment. As discussed above, it is a power delegated in the Constitution by the Tenth Amendment. It is not true that as long as there is no conflict with existing federal legislation, states are free to regulate interstate commerce. As discussed above, states may not regulate a field preempted by federal law or unduly burden interstate commerce. QUESTION ID: L0033 Additional Learning

Question 11

To be constitutional, a "doing business" tax (e.g., a privilege, franchise, or occupation tax imposed on businesses for the privilege of doing business in a state): A Must fairly relate to services provided by the state and cannot be a flat tax B Must be fairly apportioned and cannot be a flat tax C Must be fairly apportioned and must fairly relate to services provided by the state

Accepted Answer

C To be constitutional, a "doing business" tax must be fairly apportioned and must fairly relate to services provided by the state. Additionally, such taxes must tax an activity with a substantial nexus to the taxing state and must not discriminate against interstate commerce. As long as a "doing business" tax meets the above requirements, it CAN be a flat tax. QUESTION ID: L0049A Additional Learning

Question 12

Which of the following statements about state sales and use taxes is correct under the Commerce Clause? A Sales taxes are invalid but use taxes are valid. B Both sales taxes and use taxes may be valid. C Neither sales taxes nor use taxes are valid. D Sales taxes may be valid but use taxes are invalid.

Accepted Answer

B Both sales taxes and use taxes may be valid under the Commerce Clause. A sales tax is a tax on sales made within a state, and a use tax is a tax on goods purchased out of state and brought into the state for use. Sales taxes generally do not discriminate against interstate commerce and are valid. Use taxes generally will not be held to discriminate against interstate commerce if they merely seek to equalize taxes on goods purchased out of state with those purchased within the state. Each of the choices indicating that either or both taxes are invalid is incorrect since both may be valid, as explained above. QUESTION ID: L0046 Additional Learning

Question 13

Who has the power to tax interstate commerce? A The states hold most of the power, but the federal government may tax a few aspects B The federal government holds most of the power, but the states may tax local aspects C The federal government holds the power exclusively

Accepted Answer

B The federal government holds most of the power to tax interstate commerce, but states may tax local aspects. Thus, it is incorrect to say that the power is exclusively federal or that the states hold most of the power. QUESTION ID: L0041B Additional Learning

Question 14

If Congress has not enacted laws regarding the subject, a state government may regulate local aspects of interstate commerce if the __________. A regulation of commercial activities is rationally related to a legitimate state objective B regulation is necessary to protect local businesses Incorrect C regulation of commercial activities is narrowly tailored to serve an important state interest D regulation does not discriminate against out-of-state competition and does not unduly burden interstate commerce

Accepted Answer

D If Congress has not acted, state regulation of interstate commerce is valid if the regulation does not discriminate against out-of-state competition and does not unduly burden interstate commerce. "Narrowly tailored to serve an important state interest" is an intermediate scrutiny standard used in some equal protection cases. It does not reflect the standard used to judge state regulations of commerce. "Rationally related to a legitimate state objective" reflects the rational basis test used in some due process and equal protection cases and does not reflect the standard used to judge state regulations of commerce. "The regulation is necessary to protect local businesses" does not reflect a standard used in any case; if a state regulation seeks to protect local business it generally is invalid under the Dormant Commerce Clause. QUESTION ID: L0035 Additional Learning

Question 15

If a state law violates the Privileges and Immunities Clause of Article IV: A It cannot also violate the Dormant Commerce Clause B It might also violate the Dormant Commerce Clause C It will also violate the Dormant Commerce Clause

Accepted Answer

B If a state law violates the Privileges and Immunities Clause of Article IV, it might also violate the Dormant Commerce Clause. The Privileges and Immunities Clause of Article IV limits state discrimination against nonresidents with regard to fundamental rights, which includes commercial rights. The Dormant Commerce Clause, among other things, prohibits states from discriminating against out-of-state business. The two clauses often reinforce one another. However, violation of one does not necessarily mean that there is a violation of the other. For example, the Commerce Clause has an exception for discrimination where the state is acting as a market participant. The Privileges and Immunities Clause does not include this exception. Thus, the choice will also violate goes too far and the choice cannot also violate is untrue—the clauses are not mutually exclusive. QUESTION ID: L0039A Additional Learning

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Constitutional Law AMP - State Regulation And Taxation Of Commerce Flashcards

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