Find Laws Find Lawyers Free Legal Forms USA State Laws
Home » Find Laws » Tax Laws » Constitutional Constraints » What You Should Know About the Commerce Clause?

What You Should Know About the Commerce Clause?

Commerce Clause Overview


The Commerce Clause allows congress to have control over commerce within each state, with a foreign state and among Indian Tribes. However, Congress does grant each state the ability to make certain rulings on taxation of commerce. For example, a state may make determinations about the taxation of manufacturing within that state, but not other issues of commerce. The state is entitled to do so as long as the tax is free of prejudice and not does not discourage business.

In essence, a state may not impose taxes that are detrimental to the nation. In fact, no state, or member of congress, may make allowances for taxation, or other issues of commerce, that could hurt the country. The power granted to congress in the Commerce Clause has consistently been upheld by the courts. However, the Clause, and issues of taxation stemming form it, are continuously challenged in court. The Commerce Clause can be applied to any issue of commerce, but has been utilized frequently to make determinations about issues of taxation of commerce, including the conditionality of certain taxes imposed by each state.

Congressional Power:

According to the Commerce Clause, Congress has the authority to make determinations about all issues of commerce. Those issues of commerce may pertain to any state, Indian Tribe, or foreign trade. Congress was granted that authority in order to prevent state governments from abusing their ability to tax commerce within a state. Congressional power has often been called upon in order to decide certain issues of commerce, even commerce that strictly takes place within one state.

Although the ability for congress to make determinations about intrastate commerce has been challenged, that right has been upheld. Intrastate commerce can effect the Nation in the same way that interstate commerce can, and therefore those determinations are allowed by the Commerce Clause. No act of commerce is permitted to be detrimental to the nation or to be based on discrimination. For example, a state may not impose higher taxes on gun manufacturers simply because a state's politics suggest that citizens are inherently opposed to guns. The state does have the right to tax that commerce, but not in an excessive, or discriminatory manner.

Role of the Federal Court System:

The Federal Court system hears cases that challenge issues of commerce, including challenges to the Commerce Clause. There have been cases that challenged the Commerce Clause on issues where states have imposed taxes on commerce. For example, cases like Complete Auto Transit v. Brady, allowed the Federal Courts to make determinations about a states control over taxing a company that conducts business in more than one state, and is headquartered in only one state.

The Company challenged the states authority to impose such a tax but the courts ruled the the tax was allowed by the Constitution. Mississippi was legally allowed to impose a tax on a company, for granting that company the privilege of being able to conduct business in Mississippi. The taxes were valid because that company enjoyed benefits in the state that were funded through taxation and therefore, the company should be required to shoulder some of the burden of taxation. Any disputes about issues of commerce, including taxation, are heard by the federal courts because of congressional authority over commerce.

"Dormant" Commerce Clause:

The Dormant commerce clause grants each state the ability to control certain issues that relate to commerce, such as manufacturing. Congress may not interfere in state taxation issues, unless they are in violation of the commerce clause, or other constitutional principles.

The Dormant Commerce clause grants each state the ability to impose taxes in cases where a company conducts business in a state, or is headquartered in a state. While congress has the authority over commerce issues, even when the business is intrastate, states do have limited power over such matters. However, due process allows any individual or entity to challenge those determinations. Cases that make challenges to the Commerce Clause, are often heard in Federal court.

Complete Auto Transit v. Brady:

Mississippi imposed a tax on Complete Auto Transit after they began to transport vehicles through the state. In addition to transporting vehicles through the state, they also delivered vehicles to businesses in the state. Mississippi declared that Complete Auto Transit owed a state tax based on the company enjoying the benefit of conducting business in the state.

The company challenged Mississippi in court, declaring that the tax was a violation of the Commerce Clause, which did not allow for taxation on interstate commerce if it would discourage business, or if it was discriminatory. Taxes based on discrimination, such as a business being based in another state, were thought to be in violation of the Commerce Clause. However, the court's decision reaffirmed each states ability to impose certain commerce taxes, as long as the taxes were not detrimental to the Nation. Taxes that were considered detrimental to the nation, were those that prohibited companies from conducting business, or those that discouraged business in certain jurisdictions.

NEXT: Fair Tax

Related Articles

Link To This Page


Find an Tax Lawyer
Find an WA Lawyer
Guide to Finding a Lawyer


Fair Tax Fair Tax