## Facts

- Oklahoma imposed a generally applicable sales tax on goods and services sold in the state, including “transportation for hire,” with legal incidence on the purchaser and collection duties on the seller.
- Jefferson Lines, a bus carrier, sold tickets in Oklahoma for both intrastate trips and interstate trips originating in Oklahoma.
- Jefferson collected and remitted the sales tax on intrastate ticket sales but did not collect or remit tax on interstate tickets sold in Oklahoma.
- After Jefferson filed for bankruptcy, the Oklahoma Tax Commission filed claims for uncollected sales taxes on interstate ticket sales; Jefferson objected under the Commerce Clause, arguing the tax was unapportioned and risked multiple taxation.
- The bankruptcy court sustained Jefferson’s objection; the district court and Eighth Circuit affirmed, reasoning the tax failed the fair-apportionment requirement under the *Complete Auto* framework.
- The Supreme Court granted review.

## Issues

1. Whether an unapportioned state sales tax on the full price of an interstate bus ticket sold in the taxing state for travel originating there violates the dormant Commerce Clause.
2. Whether the tax satisfies the “fair apportionment” requirement of *Complete Auto Transit v. Brady*, including internal and external consistency.
3. Whether the tax otherwise meets *Complete Auto*’s nexus, nondiscrimination, and fair-relation requirements.

## Decision

- The Supreme Court reversed and remanded.
- Oklahoma’s sales tax, as applied to interstate ticket sales occurring in Oklahoma for travel originating there, satisfied all four *Complete Auto* prongs.
- On fair apportionment, the tax was internally consistent because only the origin state (under Oklahoma’s structure) would tax the sale, avoiding multiple taxation of the same sale.
- The tax was externally consistent because the taxable event was the in-state retail sale, a discrete transaction occurring wholly within Oklahoma even though the service purchased crossed state lines.
- The Court distinguished an unapportioned retail sales tax on a single in-state sale from an unapportioned gross-receipts tax on multi-state transportation revenues.

## Legal Principles

- A state tax affecting interstate commerce is valid under the Commerce Clause if it (1) applies to an activity with substantial nexus to the state, (2) is fairly apportioned, (3) does not discriminate against interstate commerce, and (4) is fairly related to state-provided services.
- “Fair apportionment” includes:
  - Internal consistency: if every state imposed the same tax, interstate commerce would not bear a higher aggregate burden than intrastate commerce.
  - External consistency: the tax must not reach beyond the value fairly attributable to economic activity within the taxing state.
- A retail sales tax imposed on an in-state sale may be unapportioned when the taxable event is the discrete in-state transaction (even if the purchased service is performed in multiple states), and the structure does not permit multiple sales taxes on the same sale.
- Nondiscrimination is satisfied when the tax applies equally to comparable in-state and interstate transactions and does not single out interstate commerce for unfavorable treatment.
- A tax is fairly related to state services when the taxed activity has a rational relationship to governmental services supporting the taxpayer’s in-state operations; precise cost matching is not required.
- Unapportioned gross-receipts taxes measured by multi-state transportation activity are materially different from retail sales taxes on discrete in-state sales and may require apportionment.

## Conclusion

The Court upheld Oklahoma’s ability to impose an unapportioned sales tax on the full price of an interstate bus ticket when the ticket is sold in Oklahoma and the travel originates there, because the tax targets a discrete in-state sale and satisfies *Complete Auto*’s nexus, fair-apportionment, nondiscrimination, and fair-relation requirements.


Okla. Tax Comm’n v. Jefferson Lines, Inc., 514 U.S. 175 (1995)