WASHINGTON -- For the second time in two weeks, the Supreme Court has asked the solicitor general to spell out the views of the U.S. government in a case challenging the constitutionality of a state tax.
The court's request, which came yesterday in Itel Containers International Corp. v. Huddleston, appears to suggest the justices may be ready to grapple with the degree to which state taxes may impinge on foreign commerce.
Lawyers close to the case, however, cautioned against reading too much into the court's action, which ultimately could lead to a decision that may hurt states' revenues.
"I wouldn't generalize from it," said Andrew L. Frey, a partner in the Washington office of Chicago-based Mayer, Brown & Platt. "It's not necessarily easy for the court to untangle this kind of case. The court is looking for some kind of reality check here," added Mr. Frey, whose firm is helping to represent Itel in the case.
Itel is challenging a Tennessee Supreme Court ruling that allows the state to impose its sales tax on Itel's lease of cargo containers used exclusively in foreign commerce. In its petition for Supreme Court review, the company said the tax "imposes an unwarranted burden" on goods exported from and to the United States in violation of the Constitution's foreign commerce clause, and "threatens to prompt retaliation by our trading partners against American firms."
Itel also claims the tax violates provisions of the 1972 Customs Convention on Containers, an international agreement entered into by the United States in 1985.
The court's request came a week after it asked the solicitor general to file a brief in a case challenging Iowa's corporate tax and its impact on U.S. firms that have foreign subsidiaries. The case, Kraft General Foods Inc. v. Iowa Department of Revenue, tests whether the tax violates the Constitution's foreign commerce clause, which gives Congress sole authority to regulate foreign trade.
The solicitor general is the government's top courtroom lawyer, and the Supreme Court's justices often look to the solicitor general's office for advice on whether to review a case. The solicitor general's views in the two tax cases are expected to carry particular weight because of the federal government's interest in promoting international trade.
But whether the solicitor general, currently Kenneth Starr, will urge the court to hear arguments in the cases is far from certain.
In a 1979 case, Japan Line Ltd. v. Los Angeles County, the court struck down a property tax on containers owned by foreign-based firms and used in foreign commerce. The solicitor general sided with Japan Line and argued against the tax.
"This case is trickier because Itel is a domestic company," Mr. Frey said. "There is no foreign interest yelling and screaming about this yet, which means there is one less thing pressing the [Bush] administration to get excited about this case," he said.
The court in a 1977 case, Complete Auto Transit Inc. v. Brady, established a four-pronged test for evaluating whether a state tax violates the Constitution's domestic commerce clause.
Under the Complete Auto test, the court looks at: whether the tax is applied to an activity with a substantial link with the taxing state; whether the tax is fairly apportioned; whether the tax discriminates against interstate commerce; and whether the tax is related to the services provided by the state.
In Japan Line, the leading case in the court's disposition of foreign commerce clause disputes, the court added two other considerations, which include an analysis of whether there is a risk of multiple taxation and whether the tax gets in the way of the federal government's ability to conduct foreign policy.