WASHINGTON -- Oklahoma told the Supreme Court yesterday that a sales tax applied to purchasers of interstate bus tickets differs from an income tax applied to sellers of the bus tickets and, therefore, is valid under the Constitution's commerce clause.

During-oral argument yesterday in Oklahoma v. Jefferson Lines Inc., the justices sought to understand the difference when each type of tax uses the same measure.

"As a practical matter, what is the difference? The measure is the same -- the sale price of the ticket," said Justice Sandra Day O'Connor.

"Ws simply the moment at which you do the figuring" that appears to make the difference, said Justice David Souter. A sales tax is an "up-front" cost borne by customers, whereas an income tax is treated as a company's cost of doing business that is passed through to customers, he said.

Since there would be no other kind of income considered in a gross receipts tax in this case, other than revenue from the ticket sales, "I am not sure what the difference is" between the two types of taxes, Souter said.

The question is critical because at issue is the fair apportionment of Oklahoma's sales levy on tickets that are bought for interstate travel that originates in the state. The application of the tax to intrastate tickets is not at issue.

A gross receipts tax on sellers of interstate tickets that is not fairl,v apportioned among states in which the seller does business would not meet the high court's previously set test for determining whether a tax violates the commerce clause, according to Jefferson Lines Inc., an interstate bus line operating in Oklahoma.

The commerce clause prohibits states from erecting barriers to interstate trade.

Jefferson said that the 4.5% sales tax that it is required to collect and remit to Oklahoma for sales of interstate tickets illegally discriminates against interstate commerce. The tax is levied only by Oklahoma, even when the service is provided elsewhere, and thus is not fairly apportioned among states, Jefferson said.

The U.S. Court of Appeals for the Eighth Circuit affirmed a lower court in holding that the tax is fairly apportioned because no other state can impose an identical tax on the purchaser since the transaction physically takes place in one state. This meets the Supreme Court's requirement that a state tax be "internally consistent," which means other states cannot impose the tax and cause multiple taxation.

But the Eighth Circuit also held that by taxing the entire purchase price of an interstate ticket, Oklahoma receives revenues that exceed the amount that can be attributed to the leg of the journey within the state. Thus the tax failed the Supreme Court's test for "external consistency" of a state tax.

The court concluded that there is no significant distinction between Oklahoma's sales tax on a ticket's purchaser and a gross receipts tax on a bus company that was struck down in a 1948 decision by the high court in Central Greyhound Lines Inc. v. Mealey.

Oklahoma's tax commission argued that it is the sale of the ticket itself, and not the transportation service, that is at issue and that distinguishes the case from the Central Greyhound decision.

"The transportation involved doesn't have to be used;' and the purchased ticket can be sold, given away, or left in a will, said Stanley Johnston, deputy general counsel of the Oklahoma Tax Commission. The Oklahoma levy "is not a tax on transportation," and the two types of taxes -- sales and gross receipts -- "are not equatable," he said during yesterday's arguments.

But Steven DeRuyter, the Minneapolis attorney representing Jefferson, told the court that "this is a tax on interstate bus transportation."

DeRuyter acknowledged in response to questioning by O'Connor that "no other state can tax the act of making the sale." But he said the court must look beyond the transaction itself to the services provided.

Justice Anthony Kennedy asked why, if the tax is valid, other states had not enacted similar statutes. DeRuyter said he thought two or three other states imposed similar taxes, but he could not specify which ones.

The State and Local Legal Center, which intervened on behalf of state and local interest groups, said the case is important because invalidation of the Oklahoma tax would threaten the ability of states to collect sales taxes -- "an increasingly important source of revenue."

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