The Supreme Court, in decisions expected to have considerable impact on state tax powers, yesterday declared unconstitutional tax laws in Pennsylvania and Washington state.
The laws in question -- taxing trucks that use Pennsylvania roads and manufacturers that make goods in Washington and sell them elsewhere -- had yielded substantial revenue to both states, and yesterday's decision may cause budgetary problems in Washington.
In the Pennsylvania case, the court, by a 5-4 vote, ruled that a pair of laws -- under which the state collected $250 million -- unduly discriminate against interstate commerce.
Several other states already have similar laws on their books. Had the court upheld the Pennsylvania taxes, other states likely would have followed suit.
The laws were challenged by the American Trucking Associations and individual trucking firms.
The first law, in effect from 1980 to 1983, imposed a $25 annual fee on trucks that are registered outside Pennsylvania, weigh more than 17,000 pounds and use the state's highways. No fee was imposed on trucks registered within the states.
That law was superseded in 1983 by one, still on the books, which imposes an annual $36-per-axle fee on trucks weighing over 26,000 pounds ($180 per typical five-axle truck). The new tax brought in about $60 million annually.
Lawyers for the trucking industry argued that the tax falls almost exclusively on truckers not based in Pennsylvania because the law gives in-state trucks a corresponding reduction in registration costs.
The Supreme Court agreed.
"While flat taxes may be perfectly valid when administrative difficulties make collection of more finely calibrated user charges impracticable, we conclude that this justification is unavailable in the case of Pennsylvania's unapportioned marker fee and axle tax," Justice John Paul Stevens wrote for the court.
"The administrative machinery of revenue collection for highways is now obviously capable of taking into account at least the gross variations in cost per unit of highway usage between Pennsylvania-based and out-of-state carriers," Stevens added.
Joining Stevens were Justices William J. Brennan, Byron R. White, Thurgood Marshall and Harry A. Blackmun.
Chief Justice William H. Rehnquist and Justices Sandra Day O'Connor, Lewis F. Powell and Antonin Scalia dissented.
In the Washington case, the court in a 6-2 decision said the tax discriminates unconstitutionally against interstate commerce because the levy, in effect, is assessed only on products manufactured in Washington that are sold to out-of-state customers.
State officials said it might be necessary to call a special legislative session to make up for a shortfall in revenue of between $200 million and $350 million over the next two years.
Justice Stevens said Washington's tax "exposes manufacturing or selling activity outside the state to a multiple burden from which only the activity of manufacturing in-state and selling in-state is exempt."
Stevens added, "The fact that the tax has the advantage of appearing nondiscriminatory does not save it from invalidation."
Some 70 businesses challenged the state levy, arguing it is similar to one in West Virginia that the Supreme Court invalidated in 1984.
The court had ruled in the West Virginia case that a state may not tax any transaction more heavily when it crosses state lines than when it occurs entirely within the state.
Stevens said yesterday that the Washington tax indirectly works the same way.
Washington -- through its business and occupation tax -- taxes the gross receipts of all manufacturing within the state.
Manufacturers selling their products outside the state must pay the tax. But those selling products only within the state are exempt if they pay Washington's gross receipts tax on wholesale and retail selling.
By paying either the wholesaling or retailing tax, a wholly in-state business thus gains an exemption from the state manufacturing tax.
But companies doing interstate business receive no such manufacturing-tax exemption from Washington when paying business taxes in other states.