334
Opinion of the Court
issue, then, is whether the taxable percentage deduction can be sustained as compensatory.
A
As we have said, a State that invokes the compensatory tax defense must identify the intrastate tax for which it seeks to compensate, see supra, at 332, and it should go without saying that this intrastate tax must serve some purpose for which the State may otherwise impose a burden on interstate commerce. In Maryland v. Louisiana, 451 U. S. 725 (1981), for example, we rejected Louisiana's argument that, because it imposed a severance tax on natural resources extracted from its own soil, it could impose a compensating "first use" tax on resources produced out of state but used within Louisiana. Because "Louisiana has no sovereign interest in being compensated for the severance of resources from the federally owned [Outer Continental Shelf] land," we held that "[t]he two events are not comparable in the same fashion as a use tax complements a sales tax." Id., at 759.
In this case, the Secretary suggests that the intangibles tax, with its taxable percentage deduction, compensates for the burden of the general corporate income tax paid by corporations doing business in North Carolina. But because North Carolina has no general sovereign interest in taxing income earned out of state, Maryland v. Louisiana teaches that the Secretary must identify some in-state activity or benefit in order to justify the compensatory levy. Indeed, we have repeatedly held that "no state tax may be sustained unless the tax . . . has a substantial nexus with the State . . . [and] is fairly related to the services provided by the State." Id., at 754; see also Jefferson Lines, 514 U. S., at 183-184; Complete Auto Transit, Inc. v. Brady, 430 U. S., at 279. The Secretary does not disagree, but rather insists that North Carolina may impose a compensatory tax upon foreign corpo-
Page: Index Previous 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 NextLast modified: October 4, 2007