60
OCTOBER TERM, 1992
Syllabus
certiorari to the supreme court of tennessee
No. 91-321. Argued October 14, 1992—Decided February 23, 1993
Petitioner Itel Containers International Corporation is a domestic company that leases cargo containers for use exclusively in international shipping. After paying under protest a Tennessee sales tax on its proceeds from the lease of containers delivered in the State, Itel filed a refund action, challenging the tax's constitutionality under the Commerce, Import-Export, and Supremacy Clauses. The last challenge was based on an alleged conflict with federal regulations and with two international Container Conventions signed by the United States: the 1956 Convention prohibiting the imposition of a tax "chargeable by reason of importation," and the 1972 Convention prohibiting taxes "collected on, or in connexion with, the importation of goods." The State Chancery Court reduced the assessment on state-law grounds but rejected the constitutional claims, and the State Supreme Court affirmed.
Held: Tennessee's sales tax, as applied to Itel's leases, does not violate the
Commerce, Import-Export, or Supremacy Clause. Pp. 64-78. (a) The sales tax is not pre-empted by the 1972 or 1956 Container Convention. The Conventions' text makes clear that only those taxes imposed based on the act of importation itself are disallowed, not, as Itel contends, all taxes on international cargo containers. The fact that other signatory nations may place only an indirect value added tax (VAT) on container leases does not demonstrate that Tennessee's direct tax on container leases is prohibited, because the Conventions do not distinguish between direct and indirect taxes. While the VAT system is not equivalent to Tennessee's sales tax for the purposes of calculation and assessment, it is equivalent for purposes of the Conventions: neither imposes a tax based on importation. The Federal Government agrees with this Court's interpretation of the Container Conventions, advocating a position that does not conflict with the one it took in Japan Line, Ltd. v. County of Los Angeles, 441 U. S. 434. Pp. 64-69. (b) The tax, which applies to domestic and foreign goods without differentiation, does not impede the federal objectives expressed in the Conventions and related federal statutes and regulations. The federal regulatory scheme for containers used in foreign commerce discloses no congressional intent to exempt those containers from all or most domes-
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