concurring:
My primary reason for concurring in a separate opinion is to note my continuing concern regarding the “internal consistency” test mentioned in syllabus point 2 of the majority opinion and discussed in section II of the body thereof.
Near the beginning of section II of the majority opinion the Court recognizes that the “internal consistency” test was originally applied by the Supreme Court of the United States only in cases involving the apportionment of interstate net income. The “internal consistency” test was first applied, as a discrimination-against-interstate-commerce test, to invalidate a so-called gross receipts tax in Armco, Inc. v. Hardesty, 467 U.S. 638, 104 S.Ct. 2620, 81 L.Ed.2d 540 (1984) (8-1 decision). Subsequently it has been applied, as a discrimination test, to invalidate a motor vehicle marker fee and an axle tax in American Trucking Associations, Inc. v. Scheiner, 483 U.S. 266, 107 S.Ct. 2829, 97 L.Ed.2d 226 (1987) (5-4 decision); and, as a discrimination test, to invalidate a so-called gross receipts tax in Tyler Pipe Industries, Inc. v. Washington Department of Revenue, 483 U.S. 232, 107 S.Ct. 2810, 97 L.Ed.2d 199 (1987) (6-2 decision; O’Connor, J., concurring, did not read majority opinion as extending internal consistency test to taxes not facially discriminatory).
For the reasons stated by then Associate Justice Rehnquist in his dissenting opinion in Armco and by Justice Scalia, joined by Chief Justice Rehnquist, in section I of their opinion concurring in part (on a different issue) and dissenting in part (on the discrimination issue) in Tyler Pipe Industries, I believe that the use of the internal consistency test in any case other than one involving the apportionment of a net income tax is improper and adds much confusion to an already complicated area of the law.
The aforementioned dissent in Armco contains this insightful summary of the impropriety of applying the internal consistency test to the West Virginia business and occupation tax, a so-called gross receipts tax:
[A]ppellant has not demonstrated that it in fact has a higher tax burden in West Virginia solely by reason of interstate commerce. The Court sidesteps that fact, however, by borrowing a concept employed in our net income tax cases. Under that line of cases a state tax must have an internal consistency that takes into consideration the impact on interstate commerce if other jurisdictions employed the same tax. See Container Corp. of America v. Franchise Tax Board, 463 U.S. 159, 169 [, 103 S.Ct. 2933, 2942, 77 L.Ed.2d 545, 556] (1983). It is perfectly proper, to examine a State’s net income tax system for hypothetical burdens on interstate commerce. Nevertheless, that form of analysis is irrelevant to examining the validity of a gross receipts tax system based on manufacturing or wholesale [or contracting] transactions. Where a State’s taxes are linked exactly to the activities taxed, it should be unnecessary to examine a hypothetical taxing scheme to see if interstate commerce would be unduly burdened.
Armco, 467 U.S. at 648, 104 S.Ct. at 2625, 81 L.Ed.2d at 549 (emphases added). Stated another way, there is, as a matter of logic, no concern about internal consistency among jurisdictions where, as with gross receipts taxes, only one jurisdiction has the power to tax a particular activity.
Similarly, the opinion dissenting on the discrimination issue in Tyler Pipe Industries distinguishes between activity-based taxes, such as the business and occupation tax of the State of Washington involved there, and net income taxes:
[W]hen more than one State has taxing jurisdiction over a multistate enterprise, an inconsistent apportionment scheme could result in taxation of more than 100 percent of that firm’s net income. Where, however, tax is assessed not on unitary income but on discrete events such as sale, manufacture, and delivery, which can occur in a single State or in different States, that apportionment principle is not applicable; there is simply no unitary figure or event to apportion.
*600Tyler Pipe Industries, 483 U.S. at 256, 107 S.Ct. at 2824-25, 97 L.Ed.2d at 219 (emphasis added).
The standard for discrimination against interstate commerce utilized by the Supreme Court of the United States in Arm-co, American Trucking Associations and Tyler Pipe Industries “has no basis in the Constitution, and is not required by our past decisions.” Tyler Pipe Industries, 483 U.S. at 254, 107 S.Ct. at 2823, 97 L.Ed.2d at 218 (Scalia, J., dissenting on this issue, joined by Rehnquist, C.J.). I would concur also with the following remarks of the dissenters in Tyler Pipe Industries:
The Court's presumed basis for creating this [“internal consistency” discrimination] rule now, 198 years after adoption of the Constitution, is that the reasoning of Armco requires it. In my view, however, that reasoning was dictum, which we should explicitly reject....
... To expand that brief discussion [in Armco ] into a holding that internal consistency is always required, and thereby to revolutionize the law of state taxation, is remarkable.
Rather than use isolated language, written with no evident consideration of its potential significance if adopted as a general rule, to overturn a lengthy list of settled decisions, one would think that we would instead use the settled decisions to limit the scope of the isolated language. As the cases from the past few Terms indicate, the internal consistency test invalidates a host of taxing methods long relied upon by the States and left unhampered by Congress....
It seems to me that we should adhere to our long tradition of judging State taxes on their own terms, and that there is even less justification for striking them down on the basis of assumptions as to what other States might do than there is for striking them down on the basis of what other States in fact do.... Evaluating each State’s taxing scheme on its own gives this Court the power to eliminate evident discrimination, while at the same time leaving the States an appropriate degree of freedom to structure their revenue measures. Finer tuning than this is for the Congress.
Tyler Pipe Industries, 483 U.S. at 254-259, 107 S.Ct. at 2824-26, 97 L.Ed.2d at 219-21 (citation omitted).
Justice O’Connor in her dissenting opinion in American Trucking Associations, joined by Chief Justice Rehnquist and Justice Powell, who authored Armco,* made the following observations with which I would concur:
Nor do I read Armco as establishing a grandiose version of the ‘internal consistency test’ as the constitutional measure of all state taxes under the Commerce Clause_ Creating an ‘internal consistency' rule of general application is an entirely novel enterprise that the Court undertakes for the first time in this case [and in Tyler Pipe Industries decided the same day]. Yet the Court gives no reason why such a rule is necessary or desirable, nor does it discuss the views of the lower courts or commentators. Indeed, the limited scholarly work on general application of the internal consistency test is largely negative. See, e.g., Judson & Duffy, An Opportunity Missed: Armco, Inc. v. Hardesty, A Retreat From Economic Reality in Analysis of State Taxes, 87 W.Va.L.Rev. 723, 739-740 (1985); Lathrop, Armco — A Narrow and Puzzling Test for Discriminatory State Taxes Under the Commerce Clause, 63 Taxes 551, 557 (1985). I am simply unwilling to follow the Court down this path without some greater understanding of the need, and authority, for doing so.
American Trucking Associations, 483 U.S. at 302-303, 107 S.Ct. at 2850-51, 97 L.Ed.2d at 255-56.
As the dissenting opinions in Armco, American Trucking Associations and Tyler Pipe Industries■ indicate, and as the commentators cited by Justice O’Connor *601supra emphasize, the utilization of the internal consistency test, as a discrimination test, to invalidate taxes other than net income taxes results in a disregard of actual economic effects of state taxes on interstate businesses. Instead, such a test looks to hypothetical taxes of other states to determine the discrimination question. This approach is certainly an aberration in the trend of the last decade of deciding interstate commerce taxation cases with a view toward the practical economic effects.
Notwithstanding these major problems with the internal consistency test as applied in Armco, American Trucking Associations and Tyler Pipe Industries, these cases are binding precedents which this Court must follow. Accordingly, having stated my reservations as to the concept, I concur with the majority’s application of the internal consistency test to the present case.
Justice Scalia, joined by Chief Justice Rehnquist, filed a separate dissenting opinion in American Trucking Associations. This dissent tracked the dissent in Tyler Pipe Industries.