Document Type



Taxation-State and Local


In Jefferson Lines (1995), the U.S. Supreme Court may appear to have retreated from the economic-substance test articulated in Complete Auto (1977). In Jefferson Lines, the Court upheld an Oklahoma sales tax on the full sales price of bus tickets for interstate trips. At the same time, the Court reaffirmed Central Greyhound Lines, Inc. v. Mealey, which struck down a New York gross receipts tax on the full sales price of bus tickets for interstate trips. Jefferson Lines and Central Greyhound are essentially identical from an economic standpoint. The case is significant because the Court has recognized explicitly for the first time that the application of Complete Auto's Commerce Clause criteria can—and should—depend to a critical extent on the nature of the tax under scrutiny, a position that runs counter to the assumed universality of the Complete Auto standard that underlies the Court's earlier opinions.

The Court's new tax-by-tax approach is notable for many reasons, not the least of which is its implications concerning the role of economic analysis in resolving Commerce Clause issues. Although economic considerations clearly have an important role to play in Commerce Clause adjudication of state tax cases, the establishment of uniform constitutional rules for economically equivalent exactions is not the only goal of Commerce Clause analysis of state taxation, as the Court correctly concluded in Jefferson Lines.

Despite reaching a proper result, Jefferson Lines is significantly flawed in its reasoning. The Court fails to ground its opinion in the normative and structural considerations. Instead, it appears to have engaged in the type of ad hoc decision making that has substantially reduced the predictive power of its dormant Commerce Clause jurisprudence and has weakened the claims of that jurisprudence to legitimacy.

This Article analyzes Jefferson Lines and its implications for Commerce Clause adjudication of state taxation. Section II examines the Court's opinion in Jefferson Lines, discusses the flaws in the Court's analysis and presents a better justification for the result reached in that case. Section III considers the opinion's ramifications for the existing pattern of state sales and gross receipts taxation and, in particular, for state taxation of services. Section IV takes a broader look at Jefferson Lines' impact on the Court's Commerce Clause jurisprudence in state tax cases.