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U.S. Supreme Court

Boston Stock Exchange v. State Tax Comm'n, 429 U.S. 318 (1977)

Boston Stock Exchange v. State Tax Commission

No. 75-1019

Argued November 2, 1976

Decided January 12, 1977

429 U.S. 318


A New York statute imposing a transfer tax on securities transactions, if part of the transaction occurs in New York, was amended in 1968 so that transactions involving an out-of-state sale are taxed more heavily than most transactions involving a sale within the State. The amendment provides for two deviations from the prior uniform application of the statute under which a transaction involving a sale and transfer of shares in New York was taxed the same as a transaction involving an in-state transfer but an out-of-state sale: (1) transactions by nonresidents of New York are afforded a 50% reduction in the tax rate when the transaction involves an in-state sale; and (2) the total tax liability of any taxpayer (resident or nonresident) is limited to $350 for a single transaction when it involves a New York sale. The purpose of the amendment was to provide relief from the competitive disadvantage thought to be created by the transfer tax for New York stock exchanges, as against out-of-state exchanges. Appellant "regional" stock exchanges brought action in state court against appellee State Tax Commission and its members challenging the constitutionality of the 1968 amendment under the Commerce Clause. The trial court denied the Commission's motion to dismiss, but on appeal the amendment was declared to be constitutional.

Held: The amendment discriminates against interstate commerce in violation of the Commerce Clause. Pp. 429 U. S. 328-337.

(a) No State, consistent with the Commerce Clause, may "impose a tax which discriminates against interstate commerce . . . by providing a direct commercial advantage to local business," Northwestern Cement Co. v. Minnesota, 358 U. S. 450, 358 U. S. 458. P. 429 U. S. 329.

(b) Because it imposes a greater tax liability on out-of-state sales than on in-state sales, the transfer tax, as amended, falls short of the substantially evenhanded treatment demanded by the Commerce Clause, the extra tax burden on out-of-state sales neither compensating for a like burden on in-state sales nor neutralizing an economic advantage previously enjoyed by appellant exchanges as a result of the unamended statute. Pp. 429 U. S. 329-332.

(c) The diversion of interstate commerce and diminution of free

Page 429 U. S. 319

competition in securities, sales created by the 1968 amendment are wholly inconsistent with the free trade purpose of the Commerce Clause. With respect to residents, the discriminatory burden of the maximum tax on out-of-state sales promotes intrastate transactions at the expense of interstate commerce to out-of-state exchanges. With respect to nonresidents, both the maximum tax and the rate reduction provisions discriminate against out-of-state sales, and the fact that this discrimination is in favor of nonresident, in-state sales which may also be considered as interstate commerce, does not save the amendment from Commerce Clause restrictions. Pp. 429 U. S. 333-336.

37 N.Y.2d 535, 337 N.E.2d 758, reversed and remanded.

WHITE, J., delivered the opinion for a unanimous Court.

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