## Facts

- Florida imposed a liquor excise tax that granted preferential rate reductions to certain beverages made from products “commonly grown” in Florida, favoring in-state products.
- McKesson Corporation, a wholesale liquor distributor, sold products that did not qualify for the preferential rates and paid higher taxes.
- Florida’s procedures and penalties made it impractical to withhold payment pending litigation, effectively requiring taxpayers to pay first and sue later for a refund.
- McKesson paid the tax for several months and sued in Florida state court seeking prospective relief and a refund of the discriminatory excess taxes.
- The trial court held the preferential scheme unconstitutional and enjoined future enforcement, but denied any refund or other retrospective relief; enforcement was stayed pending appeal and Florida continued collecting the tax.
- The Florida Supreme Court affirmed, denying retrospective relief based on equitable considerations, including the State’s asserted good-faith reliance and concerns about fiscal disruption.

## Issues

1. Whether the Eleventh Amendment bars the U.S. Supreme Court from exercising appellate jurisdiction over a state-court judgment in a state tax refund action against state defendants.
2. Whether the Due Process Clause requires a state to provide meaningful postpayment relief when taxpayers are effectively compelled to pay a tax before obtaining judicial review and the tax is later held unconstitutional.

## Decision

- The Court held that the Eleventh Amendment does not bar Supreme Court appellate review of state-court judgments, including judgments in state tax refund actions against state entities.
- The Court held that when a state’s tax system effectively forces “pay first, litigate later,” due process requires a meaningful, backward-looking remedy for taxes collected under an unconstitutional scheme.
- The Court ruled that Florida’s denial of any retrospective relief was constitutionally inadequate because it left the unconstitutional discrimination unremedied.
- The Court vacated the Florida Supreme Court’s judgment and remanded for the state courts to provide a remedy consistent with due process.

## Legal Principles

- The Eleventh Amendment limits certain suits against states in federal trial courts but does not prevent the U.S. Supreme Court from reviewing state-court judgments raising federal questions.
- If a state places substantial barriers to predeprivation review of a tax and effectively compels payment before litigation, due process requires both (1) a fair chance to contest legality and (2) a “clear and certain” postpayment remedy for unlawful collections.
- A state may not retain taxes collected under a scheme that is unconstitutional due to discriminatory treatment; prospective-only relief can be insufficient in a pay-first regime.
- Due process does not mandate a single remedial form; constitutionally acceptable options include refunding the discriminatory excess to disfavored taxpayers, retroactively assessing favored taxpayers to equalize burdens, or another method that removes the discriminatory effect.
- Administrative burden, good-faith reliance, or fiscal impact does not justify refusing meaningful retrospective relief for unconstitutional taxation.

## Conclusion

The Court required Florida to provide a clear and certain retrospective remedy for taxes paid under a discriminatory excise tax because Florida’s procedures effectively compelled payment before review, and it confirmed that the Eleventh Amendment does not bar Supreme Court appellate review of state-court tax refund judgments.


McKesson Corp. v. Div. of Alcoholic Beverages & Tobacco, 496 U.S. 18 (1990)