Court to hear GM appeal Federal rule to detail states' power to tax external purchases

April 02, 1996|By Lyle Denniston | Lyle Denniston,SUN NATIONAL STAFF

WASHINGTON -- The Supreme Court, taking on an appeal by General Motors Corp., agreed yesterday to clarify the power of states to impose taxes on goods bought elsewhere and brought back for use in the state.

GM contends that prior court rulings make clear that it is unconstitutional for a state to give taxpayers a break on sales taxes they pay for home-state purchases, if an equal break is denied to those who face a "use tax" on goods bought outside the state.

At issue is the Ohio tax that GM had to pay when it went out of state to buy natural gas, then shipped it back to Ohio for use as fuel at three of its factories. The Ohio Supreme Court upheld the tax's constitutionality in August, saying it did not discriminate against out-of-state purchases.

The key to its decision is that GM buys its gas from independent marketers -- gas dealers that do not own distribution equipment for delivering gas. In Ohio, purchases made from utilities that own distribution networks are exempt from the sales or use tax. It is constitutionally permissible to exempt from tax distribution companies but not independents, the state court ruled.

GM disputes that point, arguing that the tax discriminates against interstate purchases.

Dealing with an independent marketer, inside or outside the state, results in a tax -- a sales tax if the purchase is made within Ohio, a use tax if it is made elsewhere. GM must pay the use tax, the state court said, because it buys from an independent.

The Supreme Court's ruling, due next year, is likely to offer guidance on how states must match their sales and use taxes.

In a second action yesterday, the court turned aside, without comment, a constitutional challenge to a federal rule that limits municipal bond dealers' political donations to local government officials or candidates.

At issue is a two-year-old Securities and Exchange Commission rule that bars such dealers from doing business with a local government for two years after they give political contributions to an officeholder or candidate in that community.

William Blount, an Alabama bond dealer, unsuccessfully challenged the rule as a violation of his First Amendment right to give money to political campaigns he supports.

Pub Date: 4/02/96

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