Congressional Authority - The Dormant Commerce Clause

Question 1

What is the Dormant Commerce Clause (or the negative implication so of the commerce clause)?

Answer 1

Principal that state and local law is unconstitutional if it places an extra burden on federal government. Even if Congress has not acted in the realm, state cannot place burden on interstate commerce.

Question 2

What are the types of dormant commerce clauses?

Answer 2

1. Law does not discriminate;

2. Law discriminates against out of staters;

Question 3

Analysis for if the law does not discriminate:

Answer 3

1. Privileges and Immunities Clause does not apply;
2. Burden on Interstate Commerce? Balacing Test: Benefits of law vs burdens of law.
3. If burdens outweigh benefits, violates DCC and unconstitutional.
4. If benefits outweigh burdens, then no DCC violation and constitutional.

Question 4

What is a “use” tax and is it discriminatory?

Answer 4

No, it is not discriminatory. It is a tax that a state places on purchases made out of state but then brought back in state to be used. This is essentially a tax to level the playing field between states with different sales tax.

Question 5

What is the “Market Participation Exception”?

Answer 5

this is when a state is acting as a business rather than as a state. The negative commerce clause only jumps in when government is jumping in and regulating commerce. But if a state is acting as a business, it cannot be sued for dormant commerce clause.

Question 6

What is the Privilege and Immunities Clause of Art. IV?

Answer 6

No state can deprive a citizen of another state of the privileges and immunities of their own state. This only comes into play when State A discriminates against citizens of State B.

Question 7

What is the Privileges and Immunties Clause of the 14th Amend.

Answer 7

The right to travel between states.

Question 8

Analysis for when the state law discriminates against out-of-staters:

Answer 8

1. Burden on Interstate Commerce: violates DCC unless it is necessary to achieve an important government interest.
2. Examine whether it is “protectionist” in nature, if yes then it will never suffice. Giving in-staters and advantage over out-of-staters is always unconstitutional.
3. Check Exceptions:
   a. Congressional approval;
   b. Market Participant - state/local government can favor its own citizens in receiving benefits from government programs or in dealing with government owned businesses.

Question 9

Analysis if the law discriminates against out-of-staters regarding their ability to earn their livelihood:

Answer 9

1. Violates privileges and immunties clause of Art. IV unless necessary to achieve an important government purpose.
   Requirements:
   a. Must discriminate against out of states;
   b. regard to a fundamental right or important economic activity;
   c. corporation and aliens cannot use the PorI clause;
   d. discrimination must be necessary to achieve an imporant government purpose.

Question 10

What are the limitations on state taxation of interstate commerce?

Answer 10

1. States cannot use their tax systems to help in-state businesses;
2. A state may only tax activities if there is a substantial nexus to the state;
3. State taxation of interstate businesses must be fairly apportioned.