MR. CHIEF JUSTICE WARREN delivered the opinion of the Court.
This appeal presents the issue of whether, where a licensed Idaho dealer in motor fuels sells and transfers gasoline outside the State for importation into the State by an agency of the Federal Government, the State of Idaho may constitutionally impose an excise tax upon the transaction on the theory that the dealer constructively "receives" the gasoline in Idaho upon its importation.
On June 26, 1959, invitations for bids were issued by the United States Government from the Regional Office of the General Services Administration (GSA) at Seattle, Washington, covering some 607 separate items—each designed to supply a distinct motor fuel need of a particular government agency at one of a multitude of locations in Idaho, Montana, Oregon, and Washington for the period from November 1, 1959, through October 31, 1960. Bids on each item were to be submitted to the Seattle office and were to be evaluated on their individual merits and accepted or rejected without reference to other items.
Appellant's predecessor in interest, Utah Oil Refining Company (Utah Oil), is a Delaware corporation. Pursuant to the GSA invitation it transmitted bids from its offices in Salt Lake City, Utah, on various items. Included were numbers 63 and 64 dealing with the supply of
On October 26, 1959, Utah Oil's bids on the two items were accepted in Seattle by the GSA. Under the terms of the contract gasoline was to be sold to the AEC at a designated price f. o. b. Bulk Plant, Salt Lake City. The total price did not include any state tax but provision was made for an increase in the contract price if any such tax was imposed.
In accordance with the contract, the AEC, or its operating agent, Phillips Petroleum Company, periodically ordered some 1,436,355 gallons of gasoline. Delivery was effected by Utah Oil in Salt Lake City. Although the facts subsequent to delivery are in dispute, it appears that thereafter common carriers, selected and paid by the AEC, transported the fuel from Salt Lake City to Idaho Falls where it was placed in AEC-owned storage tanks and used in AEC operations in Idaho.
During the time that Utah Oil was performing the contract, it was authorized to do business in the State of Idaho as a "licensed dealer" as defined by the Idaho Motor Fuels Tax Act, as amended, Idaho Code, Tit. 49, c. 12 (1957). This Act imposes an initial requirement that all motor fuel "dealers" hold a permit issued by the
A "dealer" is defined by § 49-1201 as any person who first receives motor fuels in the State within the meaning of the word "received"
During its performance of the contracts Utah Oil submitted the required monthly reports. The State Tax Collector thereupon insisted that payment of the six-cent tax be forthcoming pursuant to § 49-1201 (g) due to the fact
The trial judge granted summary judgment for the appellant finding that the imposition of the tax violated the Due Process and Commerce Clauses since it was applied to a sale made outside of Idaho. On appeal the Idaho Supreme Court reversed, finding the constitutional objections to be without merit. 86 Idaho 7, 383 P.2d 350. We noted probable jurisdiction, 377 U.S. 962, because the validity of a state statute had been upheld over an objection that it was repugnant to the Constitution. 28 U. S. C. § 1257 (2) (1958 ed.).
When passing on the constitutionality of a state taxing scheme it is firmly established that this Court concerns itself with the practical operation of the tax, that is, substance rather than form. Wisconsin v. J. C. Penney Co., 311 U.S. 435, 443-444; Lawrence v. State Tax Comm'n, 286 U.S. 276, 280, and cases cited therein. This approach requires us to determine the ultimate effect of the law as applied and enforced by a State or, in other words, to find the operating incidence of the tax. Connecticut Gen. Life Ins. Co. v. Johnson, 303 U.S. 77, 80.
When a state court has made its own definitive determination as to the operating incidence, our task is simplified. We give this finding great weight in determining the natural
The trial judge found that the operating incidence of the tax clearly fell on the dealer:
This conclusion was further buttressed by finding that the Idaho administrative interpretation of the statute in the past has been to treat it as a privilege tax upon the dealer.
On appeal the Idaho Supreme Court left the trial court's conclusions undisturbed. Moreover, the State Attorney General in his brief before this Court expressly states that the tax "is a privilege tax, the incidence of
Although the Idaho Supreme Court agreed with the trial judge that the taxed events were the sales of gasoline in Utah, two factors were considered sufficient to bring the transactions within the purview of Idaho's taxing power. First, Utah Oil sold the gasoline with knowledge that it would be imported into and used within Idaho; and, second, Utah Oil had been authorized to do business in Idaho having applied for and received a dealer's permit "authorizing it to enter into the Idaho market as a distributor of motor fuels . . . ." 86 Idaho, at 23, 383 P. 2d, at 360. We conclude that these considerations are insufficient to uphold the tax as against attack under the Due Process Clause.
The mere fact that Utah Oil knew that the gasoline was to be imported into Idaho merits little discussion. More than once this Court has struck down taxes directly imposed on or resulting from out-of-state sales which were held to be insufficiently related to activities within the taxing State, despite the fact that the vendor knew that the goods were destined for use in that State. Miller Bros. Co. v. Maryland, 347 U.S. 340 (use tax); Norton Co. v. Department of Revenue, 340 U.S. 534 (gross receipts
These cases have also firmly established the doctrine that when a tax is imposed on an out-of-state vendor, "nexus" between the taxing State and the taxpayer is the outstanding prerequisite on state power to tax. Consistent with this requirement there must be "some definite link, some minimum connection, between a state and the person, property or transaction it seeks to tax." Miller Bros. Co. v. Maryland, supra, at 344-345. Granted that when a corporation, pursuant to permission given, enters a State and proceeds to do local business the "link" is strong. In such instances there is a strong inference that it exists between the State and transactions which result in economic benefits obtained from a source within the State's territorial limits. The corporation can, however, exempt itself by a clear showing that there are no in-state activities connected with out-of-state sales. In such instances, the transactions are said to be "dissociated from the local business," Norton Co. v. Department of Revenue, supra, at 537, and therefore may not, consistent with due process, be taxed.
In the present case it is plain that neither Utah Oil's position as a licensed dealer in Idaho nor the fact that it otherwise engaged in business there will suffice to uphold the tax. Utah Oil's transfer of gasoline was unquestionably an out-of-state sale vis-a-vis Idaho and entirely unconnected with its business in that State. Each and every phase of the transaction had its locus outside of Idaho: invitations for bids were issued by the Government in Seattle, Washington; Utah Oil submitted its bids from Salt Lake City; the bids were accepted in Seattle; the contract called for delivery of the gasoline f. o. b. Salt Lake City; Utah Oil delivered the gasoline to Salt Lake City, and it was there that title passed. There is no reason to suppose, nor does the record in any way
The Idaho Supreme Court was fully cognizant of these facts but chose to characterize Utah Oil's dealer's permit as authorizing it "to engage in the very activity it now claims is exempt from the tax." 86 Idaho, at 23, 383 P. 2d, at 360. This statement, however, fails to reflect the clear holding by this Court that the granting by a State "of the privilege of doing business there and its consequent authority to tax the privilege do not withdraw from the protection of the due process clause the privilege" of doing business elsewhere. Connecticut Gen. Life Ins. Co. v. Johnson, supra, at 82. This is exactly the situation present in the instant case. Under the circumstances we hold the fact that Utah Oil was the holder of an Idaho dealer's permit to be purely fortuitous.
Since we decide that the exacted tax violates the Due Process Clause, there is no need for discussion of constitutionality under the Commerce or Supremacy Clause. The decision of the Idaho Supreme Court is reversed and the case remanded to that court for proceedings not inconsistent with this opinion.
Reversed and remanded.
MR. JUSTICE BLACK dissents.