State regulation and taxation of commerce

Question 1

Dormant Commerce Clause

Answer 1

General rule—If Congress has not, States can regulate interstate commerce so long as regulation does not
• Discriminate against out-of-state commerce
• Unduly burden interstate commerce, or
• Regulate wholly out-of-state activity

Discrimination against out-of-state commerce (protecting local economic interests at the expense of out-of-state competitors)
• State or local discriminatory regulation may be upheld if
o Important government interest—Not allowed unless important local interest being served and no other nondiscriminatory means available to achieve that purpose
o Market participant—State can favor local commerce or discriminate against nonresident commerce like a private business
o Traditional government function—Regulation can favor state/local government entities if entities are performing traditional government function
o Congressionally permitted discrimination—Must be unmistakably clear that Congress allows impermissible state regulation

Undue burden on interstate commerce
• Balancing test - purpose of state law against burden on interstate commerce and evaluate whether there are less restrictive alternatives
o If benefits are grossly outweighed, even nondiscriminatory regulation may be struck down

Question 2

State taxation of commerce

Answer 2

Interstate commerce
• General rule—Permitted only if Congress has not already regulated a particular activity and tax does not discriminate against or unduly burden interstate commerce
• Four-part test
o Substantial nexus between activity being taxed and taxing state
o Fair tax apportionment such that interstate commerce doesn’t pay total taxes greater than local commerce
o No local direct commercial advantage over interstate competitors (even if neutral on its face), and
o Tax must be fairly related to services provided by taxing state

Foreign commerce—States must have congressional consent to impose import/export taxes