Facts of the Case

One of the types of fees that Pennsylvania used to finance the cost of its highway maintenance was lump-sum annual fees, also known as flat taxes. In 1980, Pennsylvania increased the fee for an identification marker required of every truck over a certain weight from $2 to $25, but exempted trucks registered in Pennsylvania from the fee _ the marker fee was "deemed" to be included in the registration fee that local truckers had to pay. In 1982, the marker tax was reduced to $5, but a new tax was introduced, taxing trucks by the axle. The axle tax applied to all trucks weighing more than 26,000 pounds, but the registration fee for Pennsylvania trucks was reduced in an amount calculated to offset that new tax for most trucks. These flat taxes were contested in two state court cases on the ground, inter alia, that they violated the Commerce Clause of the Federal Constitution. Since Pennsylvania-based trucks travel, on average, about five times as many miles in Pennsylvania as out-of-state trucks, the cost of the flat taxes was approximately five times as high per mile of road use for out-of-state vehicles as for local vehicles. For that reason, the lower courts in Pennsylvania found that both the marker tax and the axle tax violated the Commerce Clause. The Supreme Court of Pennsylvania considered both cases together and reversed.

Question

Do flat state taxes on the use of a state's highways run afoul of the Commerce Clause by discriminating against interstate commerce?

Conclusion

Yes. In a 5-to-4 decision, the Court held that the flat taxes violated the basic principle that the Commerce Clause created an area of trade free from interference by the states. One problem with the flat taxes is that they do not pass the "internal consistency" test, which is to say that they could not be applied by every state without interfering with free trade. If many states adopted them, truckers would pay more to go through those states than to drive the same distance in only one state. This would disrupt the market for interstate transportation services. In addition, because the cost to out-of-state truckers is approximately five times as heavy per mile, the taxes have a discriminatory effect. It is no defense that Pennsylvania's registration fee is fairly high, conferring a competitive advantage to trucks based in other states; the solution to that problem is to lower the level of the registration fee. It is also no defense to describe the flat taxes as user fees because such fees are acceptable only insofar as they are neither discriminatory nor excessive. Finally, Pennsylvania cannot appeal to administrative convenience because it has shown itself capable of administering taxes that reflect the quantity of highway use.