On January 14, 2005, the Supreme Court granted certiorari in two cases of interest to the business community. Amicus briefs in support of petitioners will be due on Monday, February 28, 2005, and amicus briefs in support of respondents will be due on Monday, April 4, 2005.
1. State Taxation of Interstate Commerce — Motor Carriers. The State of Michigan imposes a flat annual fee of $100 per vehicle on all motor carriers for the privilege of transporting property between points within the State. The same tax must be paid both by vehicles that confine their operations to Michigan and by those that engage in a combination in interstate and intrastate operations. The amount due does not vary according to miles traveled or number of trips taken in Michigan, and is not adjusted to reflect the portion of time that a truck devotes to traveling between states or intrastate in states other than Michigan.
Interstate motor carriers brought suit to challenge the Michigan tax under the Constitution’s Commerce Clause, arguing that the levy should be apportioned to take account of activities that trucks conduct in other states; if the tax is not apportioned, the argument continued, the tax effectively discriminates against interstate truckers who conduct only occasional intrastate Michigan trips. The Michigan court of appeals rejected this argument, holding that the levy is not subject to the Commerce Clause apportionment requirement because it is a "regulatory fee" rather than a tax. 662 N.W.2d 784. That is so, the court reasoned, because the proceeds of the levy are used to support regulatory activities. In American Trucking Ass’ns, Inc. v. Michigan Public Service Comm’n, No. 03-1230, the Supreme Court granted certiorari to decide whether the Michigan tax violates the Commerce Clause.
Although it arises in the context of a tax on motor carriers, this case is important to all companies that conduct an interstate business. Many states have tried to escape Commerce Clause limits on state taxation by labeling their levies "regulatory fees." If they are able to do so, state tax burdens on businesses that conduct operations across state lines could increase substantially.
Mayer, Brown, Rowe & Maw LLP is counsel of record for petitioners.
2. Federal Preemption — Motor Carrier Registration Fees. Michigan also imposes a $100 per vehicle registration fee on motor carriers that operate exclusively in interstate commerce. Interstate carriers brought suit, arguing that the Michigan fee is preempted by the federal Single State Registration System (SSRS), under which interstate motor carriers register with only one state; that state may charge a registration fee "not to exceed $10 per vehicle." But the Michigan court of appeals rejected the challenge, holding that the SSRS restriction does not apply because the Michigan levy could reasonably be characterized as a "regulatory fee" rather than a "registration fee." 662 N.W.2d 784. In Mid-Con Freight Systems, Inc. v. Michigan Public Service Comm’n, No. 03-1234, the Supreme Court granted certiorari to decide whether this distinction is valid.
This case is important to interstate motor carriers, which could face substantially increased fees in their states of registration if the Michigan rule is upheld. And more broadly, the Michigan court’s semantic hair-splitting is problematic for all businesses that benefit from the preemptive effect of federal law.
Copyright © 2007, Mayer, Brown, Rowe & Maw LLP. and/or Mayer Brown International LLP. This Mayer Brown article provides information and comments on legal issues and developments of interest. The foregoing is not a comprehensive treatment of the subject matter covered and is not intended to provide legal advice. Readers should seek specific legal advice before taking any action with respect to the matters discussed herein.
Mayer Brown is a combination of two limited liability partnerships: one named Mayer Brown LLP, established in Illinois, USA; and one named Mayer Brown International LLP, incorporated in England.