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U.S. Supreme Court

Northwestern Cement Co. v. Minnesota, 358 U.S. 450 (1959)

Northwestern States Portland Cement Co. v. Minnesota

No. 12

Argued October 14,1958

Decided February 24,1959*

358 U.S. 450


1. Net income from the exclusively interstate operations of a foreign corporation may be subjected to state taxation, provided the levy is not discriminatory and is properly apportioned to local activities within the taxing State forming sufficient nexus to support the same. Pp. 358 U. S. 452-465.

2. In each of these two cases, a State imposed on a foreign corporation an income tax computed at a nondiscriminatory rate on that portion of the net income from the corporation's interstate business which was reasonably attributable to its business activities within the State. In each case, the corporation had within the taxing State an office and one or more salesmen who actively solicited within the State orders for the purchase of the corporation's products, which orders were accepted at, and filled from, the corporation's head office in another State. In neither case was any question raised as to the reasonableness of the apportionment of net income nor as to the amount of the final assessment made.

Held: These taxes did not violate either the Commerce Clause or the Due Process Clause of the Federal Constitution. Pp. 358 U. S. 452-465.

(a) The entire net income of a corporation, generated by interstate as well as intrastate activities, may be fairly apportioned among the States for tax purposes by formulas utilizing in-state aspects of interstate affairs. Pp. 358 U. S. 459-461.

(b) The state taxes here involved are not regulations of interstate commerce in any sense of that term; they do not discriminate against or subject interstate commerce to an undue burden; and they are not levied on the privilege of engaging in interstate commerce. Pp. 358 U. S. 461-462.

(c) There is no showing here that the formula applied by the State in determining the portion of the taxpayer's total income attributable to activities within the State will subject interstate

Page 358 U. S. 451

commerce to multiple taxation or require it to bear more than its fair share of the tax burden. Pp. 358 U. S. 462-463.

(d) Since each of the taxes here involved is based only upon the net profits earned within the taxing State, the State has utilized a valid "constitutional channel" to "make interstate commerce pay its way." Spector Motor Service v. O'Connor, 340 U. S. 602, distinguished. Pp. 358 U. S. 463-464.

(e) The taxes here involved do not violate the Due Process Clause, since they are levied only on that portion of the taxpayer's net income which arises from its activities within the taxing State and those activities form a sufficient "nexus" to satisfy due process requirements. Pp. 358 U. S. 464-465.

Page 358 U. S. 452

250 Minn. 32, 84 N.W. 2d 373, affirmed. 213 Ga. 713, 101 S.E.2d 197, reversed.

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