General Motors Corp. v. Tracy, 519 U.S. 278 (1997)

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certiorari to the supreme court of ohio

No. 95-1232. Argued October 7, 1996—Decided February 18, 1997

Ohio imposes general sales and use taxes on natural gas purchases from all sellers, whether in-state or out-of-state, that do not meet its statutory definition of a "natural gas company." Ohio's state-regulated natural gas utilities (generally termed "local distribution companies" or LDC's) satisfy the statutory definition, but the State Supreme Court has determined that producers and independent marketers generally do not. LDC gas sales thus enjoy a tax exemption inapplicable to gas sales by other vendors. The very possibility of nonexempt gas sales reflects an evolutionary change in the natural gas industry's structure. Traditionally, nearly all sales of natural gas directly to consumers were by LDC's, and were therefore exempt from Ohio's sales and use taxes. As a result of congressional and regulatory developments, however, a new market structure has evolved in which consumers, including large industrial end users, may buy gas from producers and independent marketers rather than from LDC's, and pay pipelines separately for transportation. Indeed, during the tax period in question, petitioner General Motors Corporation (GMC) bought virtually all the gas for its plants from out-of-state independent marketers, rather than from LDC's. Respondent Tax Commissioner applied the general use tax to GMC's purchases, and the State Board of Tax Appeals sustained that action. GMC argued on appeal, inter alia, that denying a tax exemption to sales by marketers but not LDC's violates the Commerce and Equal Protection Clauses. The Supreme Court of Ohio initially concluded that the tax regime does not violate the Commerce Clause because Ohio taxes natural gas sales at the same rate for both in-state and out-of-state companies that do not meet the statutory definition of "natural gas company." The court then stepped back to hold, however, that GMC lacked standing to bring a Commerce Clause challenge, and dismissed the equal protection claim as submerged in GMC's Commerce Clause argument.

Held: 1. GMC has standing to raise a Commerce Clause challenge. Cognizable injury from unconstitutional discrimination against interstate commerce does not stop at members of the class against whom a State ultimately discriminates. Customers of that class may also be injured, as in this case where the customer is liable to pay the tax and as a result

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