A BASIC OPERATING principle of the judicial system is embodied in the Latin words, stare decisis ("to stand by decided cases"), that is to follow precedents. But occasionally a high court finds that a precedent has outlived its usefulness and must be set aside. That happened in a case involving a state tax in the U.S. Supreme Court, when the so-called Spector rule was dumped.
The case was Complete Auto Transit, Inc., v. Brady, Chairman, Mississippi State Tax Commission, decided March 7. The appellant, the transit firm, carried autos, which were assembled outside Mississippi, from Jackson, Miss., to local dealers in the state. Mississippi sought to tax this activity by levying a sales tax, termed a "privilege tax," on transportation companies. Clearly, the movement of the new autos was part of interstate commerce, and the federal Constitution has made interstate commerce a subject of federal control (Art. I, sec. 8). Moreover, the Supreme Court in Spector Motor Service v. O'Connor, decided in 1951, had said that a state "tax on the 'privilege' of doing business [within a state] is unconstitutional if applied against what is exclusively interstate commerce."
On this basis, the tax must be invalid. But the court was unwilling to find it so. The Mississippi Supreme Court, which had upheld the tax, had pointed out that the transit firm was benefited by state police protection and services the same as other businesses and ought to pay its fair share of taxes as long as the tax does not discriminate against interstate commerce. The transit firm itself did not contend that the tax was discriminatory or unfair or unrelated to services provided by Mississippi. The claim of unconstitutionality was based solely on the Spector rule.
The court, in an opinion by Justice Blackmun, found that decisions involving interstate tax questions since Spector had "considered not the formal language of the tax statute, but rather its practical effect, and have sustained a tax against Commerce Clause challenge when the tax is applied to an activity with a substantial nexus with the taxing state, is fairly apportioned, does not discriminate against interstate commerce, and is fairly related to the services provided by the State."
"If Mississippi had called its tax one on 'net income' or on the "going concern value' of appellant's business, the Spector rule could not invalidate it," Justice Blackmun concluded. "There is no economic consequence that follows necessarily from the use of the particular words, 'privilege of doing business,' and a focus on that formalism merely obscures the question whether the tax produces a forbidden effect." Spector, the court held, "is overruled" and the validity of the tax was sustained.
A decision broadening state powers to tax interstate business could have far reaching consequences, because the states are hungry for new revenues and most of the business of this country has an interstate character. But it seems unlikely any such result will follow from this decision. The Spector rule, as Justice Blackmun remarked, had come to have "no relationship to economic realities" but stood "only as a trap for the unwary draftsman" of tax laws. Legislative draftsmen, at least, can rejoice that one less technicality in case law has been wiped out./ W.L.D.
Circuit Court
Cocaine not a drug
THE LEGISLATIVE classification of cocaine with other narcotic drugs is arbitrary and unreasonable, according to a ruling by the Seventh Judicial Circuit Court in Springfield. Since there are no separate statutes on cocaine, law enforcement officials have no law to enforce on the use of cocaine. At a hearing March 17 on a motion to dismiss in the case of People v. Julian P. Gabriel, Judge-George P. Coutrakon said "cocaine is a non-narcotic and harmless substance. The statutes, so far as they pertain to the classification of cocaine. violate the equal protection and due process clauses of the federal and state constitutions." He dismissed the case./ M.C.G.
28 / May 1977 / Illinois Issues