## Facts

- General Trading Co., a Minnesota corporation, sold tangible personal property to customers in Iowa but had no Iowa office, branch, warehouse, or foreign-corporation qualification.
- The company sent traveling salesmen into Iowa to solicit orders; all orders were subject to acceptance in Minnesota.
- After acceptance in Minnesota, goods were shipped from Minnesota to Iowa customers by common carrier or mail.
- Iowa imposed a 2% use tax on tangible personal property purchased for use in Iowa, generally payable by the in-state user.
- Iowa’s scheme required certain retailers to collect the tax from purchasers and remit it to the state as a collection mechanism.
- Iowa sought to compel General Trading Co. to collect and remit the use tax on goods shipped into Iowa for use there; the company argued this was unconstitutional given the out-of-state contracting and lack of physical facilities in Iowa.

## Issues

1. Whether Iowa could constitutionally impose a use tax on the in-state use of goods purchased from an out-of-state seller.
2. Whether Iowa could constitutionally require an out-of-state seller, with in-state solicitation through traveling salesmen but no in-state facilities, to collect and remit that use tax.

## Decision

- The U.S. Supreme Court affirmed the Iowa Supreme Court’s judgment for the State Tax Commission.
- Iowa’s use tax on goods used in Iowa was constitutional even though the sales were accepted outside Iowa.
- Iowa could require General Trading Co. to collect and remit the use tax because its systematic in-state solicitation created sufficient connection with Iowa.
- The Court relied on, and treated as controlling, prior decisions upholding similar use-tax collection obligations for sellers engaging in in-state solicitation.

## Legal Principles

- A state may tax the in-state use of tangible personal property even when the retail sale occurs outside the state, because the taxable event is the in-state use.
- A use tax may exist independently of a sales tax; a state may structure a use tax to complement a sales tax and reduce avoidance through out-of-state purchases.
- An out-of-state seller may be required to act as the state’s collection agent for a use tax when the seller has sufficient in-state contacts, including regular solicitation through traveling salesmen.
- Requiring collection in these circumstances does not, by itself, violate constitutional limits on state power over interstate commerce or due process, where the seller purposefully exploits the in-state market and ships goods into the state for use there.

## Conclusion

The Court upheld Iowa’s authority to tax the in-state use of goods purchased from an out-of-state seller and to compel that seller to collect and remit the tax when the seller regularly solicited Iowa customers through traveling salesmen and shipped goods into Iowa for use.


General Trading Co. v. State Tax Comm’n of Iowa, 322 U.S. 335 (1944)