STATE REGS & TAXATION OF COMMERCE

Dormant Commerce Clause – General Rule

Under the Dormant Commerce Clause principle, state and local laws are unconstitutional violations of the Commerce Clause if they place an undue burden on interstate commerce

Privileges and Immunities Clause – General Rule

Under the Privileges and Immunities Clause, states may not deprive citizens of other states of the privileges and immunities it accords its own citizens

Are corporations and noncitizens protected by the Privileges and Immunities Clause?

NO

Can corporations and noncitizens claim that a law violates the DCC?

YES

Privileges or Immunities Clause – General Rule

Under the Privileges or Immunities Clause, state laws that interfere with the right to travel are unconstitutional

What applies if the state law does NOT discriminate against out-of-staters?

A balancing test

Does the P&I Clause apply if the state law does NOT discriminate against out of staters?

NO

Balancing Test – State Law Does NOT Discriminate Against Out-of-Staters

If the government is burdening interstate commerce, and if the burden exceeds the benefit to the state, then the law violates the DCC

What if the law does NOT discriminate against out-of-staters, but the statute was adopted by the state of incorporation to regulate the internal governance of a corporation?

A corporate governance statute that heavily impacts interstate commerce may be upheld

Law Discriminates Against Out-of-Staters – DCC Analysis

If the law discriminates against out-of-staters, and if the law burdens interstate commerce, then it violates the DCC unless it is necessary to achieve an important government purpose

Law Discriminates Against Out-of-Staters – DCC Analysis – What Must the Gov Show?

To be valid, the government must show that no less discriminatory alternatives are available

Are state or local regulations that discriminate against interstate commerce to protect local economic interests valid?

NO

Law Discriminates Against Out-of-Staters – DCC Analysis – Exceptions

(1) Congressional approval and (2) State as a market participant

Law Discriminates Against Out-of-Staters – DCC Analysis – Market Participant Exception

A state or local government may prefer its own citizens in receiving benefits from government programs or in dealing with government-owned businesses, however, once a state sells state-owned resources, it cannot control what happens to the resource after that

Law Discriminates Against Out-of-Staters – DCC Analysis – Favoring Traditional Gov Functions

When a law favors government action that involves the performance of a traditional government function, discrimination against interstate commerce in such a case is permissible because it is likely motivated by legitimate objectives rather than by economic protectionism

Law Discriminates Against Out-of-Staters – P&I Analysis

A law violates the Privileges and Immunities Clause if it discriminates against individual out-of-staters with regard to important economic activities or fundamental rights to earn a livelihood unless the discrimination is necessary to achieve an important government purpose

Law Discriminates Against Out-of-Staters – What if the plaintiff is a noncitizen or a corporation?

You can ONLY use the DCC analysis

Does Congress have complete power to authorize or forbid state taxation that affects interstate commerce?

YES

May state use their tax systems to help in-state businesses?

NO

When may a state tax activities?

If there is a substantial nexus to the state from a business availing itself of the privilege of doing business in the state

How must state taxation of businesses be apportioned?

Fairly

When may a state require that out-of-state businesses collect sales taxes?

If they have a substantial nexus to the state, even if there is no physical presence