## Facts

- International Harvester Co. and affiliated corporations were incorporated outside Indiana but were authorized to do business in Indiana.
- The companies operated manufacturing plants in Indiana and maintained sales branches in Indiana and other states, with sales territories that sometimes crossed state lines.
- Indiana imposed a gross income tax on certain receipts for 1935–1936; the companies paid the tax and sued to recover amounts they claimed were unconstitutionally assessed.
- The challenged assessments concerned three transaction classes:
  - Class C: Orders taken by out-of-state branches from Indiana customers; customers took delivery at Indiana factories.
  - Class D: Orders taken by Indiana branches from out-of-state customers; customers came to Indiana and accepted delivery there.
  - Class E: Orders taken by Indiana branches from Indiana customers; goods were shipped from outside Indiana to customers in Indiana under contract.
- The Indiana Supreme Court invalidated the tax as to some categories but upheld it as applied to Classes C, D, and E; the companies sought review.

## Issues

1. Whether applying Indiana’s gross income tax to receipts from Classes C, D, and E imposed an unconstitutional burden on interstate commerce under the Commerce Clause.
2. Whether applying the tax to those receipts violated the Fourteenth Amendment’s Due Process or Equal Protection Clauses due to inadequate nexus or discriminatory treatment.

## Decision

- The U.S. Supreme Court affirmed the Indiana Supreme Court’s judgment upholding the tax on receipts from Classes C, D, and E.
- The Court held that the Commerce Clause did not bar Indiana from taxing gross receipts where the taxable incident occurred in Indiana, even if the transactions had interstate elements.
- The Court held that the Fourteenth Amendment was not violated because the companies’ in-state operations and the in-state consummation or destination of the sales supplied sufficient connection to Indiana, and the tax applied on equal terms to comparable local transactions.

## Legal Principles

- A state may impose a nondiscriminatory gross receipts (gross income) tax on transactions with substantial local incidents within the state, even when the seller’s overall business is interstate.
- The Commerce Clause does not preclude taxation of receipts from transactions consummated within the taxing state (including delivery and transfer within the state), so long as the tax does not discriminate against interstate commerce.
- For due process, a tax on gross receipts is valid when the taxpayer’s in-state presence and the taxed transactions’ in-state consummation or in-state destination provide a sufficient nexus.
- Equal protection is satisfied where the taxing scheme applies alike to wholly local transactions and to transactions with interstate attributes when the same local taxable incident is present.

## Conclusion

Indiana constitutionally applied its gross income tax to International Harvester’s receipts from sales completed by delivery in Indiana or fulfilled by shipment into Indiana for Indiana buyers, because the tax targeted local taxable incidents, was nondiscriminatory, and had an adequate connection to the state under the Commerce Clause and Fourteenth Amendment.


International Harvester Co. v. Dep’t of Treasury of Ind., 322 U.S. 340 (1944)