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Congressional Laws and Trading in Different States Case Study

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Updated: Sep 20th, 2022

Statement of Facts

The following are the facts on the four cases for the Congressional Laws. The first case is on Farmer v. Higgins which was filed in October 24, 1986 with Bureau of Alcohol, Tobacco, and Firearms. The prosecutor wanted to be granted legal rights to make and licences a machine gun for personal use. This request was denied by the bureau because Firearms Owners’ Protection Act of 1986 prohibits manufacturing of machine guns to be owned by private individuals.

Farmer then filed declaratory judgment as well as writ of mandamus compelling for the approval of his request, by the district court, on the basis of National Firearms Act. The ruling was, however, reversed by the court of appeal holding that section 922(o) prohibited private ownership of machine guns. In a related case of United States v. Lopez, the court ruled that under the commerce clause the state had the authority to regulate all persons, activities, and or products within its state boundaries.

The other selected case is California v. Texas the Supreme Court of the United States upheld that individuals are mandated to the Affordable Care Act (ACA) by characterising the consequences of failure to purchase health insurance as tax. This contradicted the constitution since the Congress has powers for imposing such penalties. In 2017, the Congress in which the majority were Republicans amended the ACA and decided that there was no negative implication for not purchasing the insurance but did not interfere with the Act. The Republican era, especially during the presidency of Donald Trump was characterised by significant opposition to the Affordable Care Act.

Texas, a few people and some states filed a law suit challenging the personal mandate stating that with a zero penalty it is no longer classified as a tax and is thus unconstitutional. The state of California joined in defence of individual mandate. The ruling of the federal government was that the individual mandate had become unconstitutional rendering the whole ACA invalid since the act cannot survive without individual mandate.

The third case is on South Dakota v. Wayfair, Inc. in which the prosecutor required out-of-state sellers to remit and also take the sales tax the same way as businesses with the same physical presence in the state. Justice Kennedy proposed doing away with “physical presence standard and replace it, in all likelihood, with some sort of measurement based on an out-of-state vendor’s economic presence in the state” (Smith, 2017, p. 834).

This will make the company to have some tax obligation to the state. The current order stipulates that the entrepreneurs give the tax to the Department of Revenue. Therefore, failure to remit the tax is solved by in-state consumers being separately responsible to pay for use tax at the same rate. In this case, Wayfair, Inc., Newegg, Inc. and Overstock.com, Inc. were enterprises without real estate or employees in South Dakota.

The Wayfair, Inc was the leading enterprise with high revenues stream from its sales. In 2016, South Dakota passed Senate Bill 106 which mandated out-of-state merchants to pay sales tax if their transactions surpassed $100,000 yearly or if they finalized above 200 dealings in South Dakota yearly (Oyen, 2017). South Dakota filed a case stating that the defendant should have license registration for collection and remit of tax. Given the Court’s decisions in precedents National Bellas Hess, Inc. v. Department of Revenue (1967) and, predominantly, Quill Corp. v. North Dakota (1992), Senate Bill 106 seemed unlawful owing to the Commerce Clause.

The fourth case is West Lynn Creamery Inc. v. Healy, (1994) where as a result of financial hardship of the dairy farmers in Massachusetts, the commissioner of the State’s Department of Food and Agriculture gave an order on January 28, 1992. The pricing order demanded all milk dealers who sold milk to their state to give a premium payment on a monthly basis which would be distributed among the dairy agriculturalist in Massachusetts. LeComte’s Dairy and West Lynn Creamery were both selling milk in the State. The latter got his supply from out-of-state producers whereas LeComte was supplied for by West Lynn. The dealers filed an action in which they claimed that the commissioner’s order violated the Commerce Clause.

Questions Presented

  1. Does the Congress have power to administer the buyback program for semi-automated assault weapons under the Commerce Clause?
  2. Is it unconstitutional for states that decline Medicaid expansion to lose 25% of their current Medicaid funding?
  3. Should the Court support and impose a sales tax on out-of-state retailers (internet sales), given that the Commerce Clause awards congressional power, not judicial power?
  4. Will the temporary ban of import of all corn, which is mainly food for chickens, but also for other animals not affected by fowl cholera violate the Commerce Clause?

Short Answers

  1. Yes. Since the people, activities (gun violence) and products (guns) are in Florida the State has the power granted by the Commerce Clause as was ruled in the United States v. Lopez.
  2. Maybe. The issue of individual mandate may arise since the interstate commerce demands that people have insurance. However, individual mandate should not be assumed to be similar to tax obligation.
  3. Yes. The Congress has power to regulate interstate commerce, including the online sales, which was an aspect outlined in both Bellas Hess and Quill. Therefore, if Congress wishes to adjust interstate commerce in any way, it may pass its own legislation (Stanfield, 2019).
  4. Maybe. On the one hand, under West Lynn Creamery Inc. v. Healy, (1994) the court ruled that the Commerce Clause was not violated. On the other hand, the “Dormant Commerce Clause” protects states from putting unreasonable constraints on other states when engaged in interstate trade.

On the issue of fire arm violence including mass shooting which has become rampant over the past decade Farmer v. Higgins indicates that the Congressional power is applicable in banning machine gun. There are also state laws that have been enacted to control possession of guns including the National Firearms Act codified as P.L. 73-474 (1934). This law levies taxes for transfer and manufacture of lethal firearms and weapons that that are automated. However, it does not guarantee that private individuals have the legal right to posses such weapons. The 18 U.S.C. §922(o) and the Gun Control Act codded as P.L. 90-618 (1968) states that possession of machine gun is illegal. The implication is that the Congress may not be in violation if it orders for semi-automated weapons to be returned.

Controversies may arise under the Firearm Owners’ Protection Act P.L. 99-308 (1986) in which banning may be argued as an attempt to control the commerce within the state. In addition, the Brady Handgun Violence Prevention Act only requires that a background check should be conducted on a person attempting to purchase a weapon within five days. There is no specification on whether purchase of semi-automated weapons should be banned. However, the ruling of the court of appeal reversing district verdict in the case of Farmer v. Higgins indicates that the congressional powers on control is constitutional. In the United States v. Lopez, the court ruled that the State can apply the Commerce Clause for activities that have substantial effect on the state. Given that gun violence has increased civilian suicide and homicide the congressional power is upheld.

Regarding the California v. Texas case on ACA, there are certain controversies involving the individual mandate and the federal Commerce Clause. The Center on Budget and Policy Priorities (2020), states that the introduction of Medicaid in 1965 was intended to offer public insurance that will give health coverage to families from low income and special groups such as senior citizens, children, pregnant women, persons with disabilities, and parents.

Its funding is done by both the state and the federal government. Upon the introduction of ACA which was a new deal by the democrat government the ACA complimented the Medicaid as it expanded edibility to include 138% of individuals below the poverty line (Center on Budget and Policy Priorities, 2020). Consequently, the federal government has been funding up to 90% of the Medicaid insurance (Center on Budget and Policy Priorities, 2020). The fact that this policy affects the entire nation implies that the Florida states may not fully control its activities.

The United States is a country that strives to ensure that there is some level of equality through power to tax and spend. Specifically, under Article 1, Section 8, Clause one the Congress is accorded power to impose, lay and collect taxes, pay debts, imposts and excises to enhance common defense and promote the welfare of the nation. However, the same law has restrictions in that there must be uniformity throughout out the states. Florida may have a right standing with this ArtI.S8.C1.2 as they may claim that if their Medicaid funding is cut down then the federal government will not be upholding the need for uniformity.

It is the Congress that has the most power in constituting what pertains to the general welfare of the citizens. The state of Florida can therefore decide that it is persuaded that ACA is not the best way to promote development of its citizens (Miller, 2019). Regarding the individual mandate, it can only be enforced when there is a tax or penalty obligation. Some legal authorities, mostly in the Republican era have registered their position demanding that the power for regulation of interstate commerce within the Congress should be curtailed.

In South Dakota v. Wayfair, Inc. the appellate carried suit to gather use charges from applicant Quill, without any sources or agents in North Dakota, according to N.D. Penny. Code § 57-40.2-01(6). The preliminary court administered in support of candidate, yet the state high court switched, declining to follow point of reference National Bellas Hess, Inc. v. Branch of Revenue of Ill., 386 U.S. 753, 87 S.Ct. 1389 (1967). Code § 57-40.2-01(6), despite candidate’s supposed secured out-of-state, “significant nexus” status. Both sides of the Court present their opinions regarding this issue. Justice Kennedy contends that “physical presence is not necessary to create a substantial nexus” which means the rulings in Bellas Hess and Quill on this issue are overruled (Stanfield, 2019, p. 304). It is independent of substantial nexus which might be the determining factor of interstate e-commerce being state taxable.

There was some contention about the case due to fear that imposing tax may not be fair for all traders. Chief Justice Roberts contradicts Justice Kennedy’s point completely, stating that “the burden will fall disproportionately on small businesses.” This is due to the lack of current software, which will obfuscate their marketing approaches and force them to purchase into pricey, new software exclusively to do interstate commerce (Oyen, 2017).

Accordingly, small businesses will be under enormous pressure to navigate the jurisdictions’ intricacy across the nation, depending on where their goods are being shipped. There is also controversy as to whether the Quill decision creates market distortions despite the continuous development of e-commerce since the beginning of the 1990s (Pomp, 2019). Justice Kennedy says that Quill leads to fluctuations in businesses due to the evolving nature of the business and increased interstate sales.

Since the Court has highlighted the importance of substantial nexus regarding the ability to tax out-of-state internet sales, this ruling appears definite for e-commerce going forward. Whether that is true or not – depending on future considerations of the Court – this point does not eliminate Congressional powers of stating. It is independent of substantial nexus which might be the determining factor of interstate e-commerce being state taxable. Regardless of what the future holds on this debate, there are undoubted burdens placed on the states through the ruling in this case.

Therefore, the fundamental takeaway in Bellas Hess is that the intervention of a state with interstate commerce is an infringement of the Fourteenth Amendment’s Due Process Clause and an illegitimate duty. There is a possibility that distortion of the online marketplace will occur with the confusion of countless jurisdictions to abide by. Some court rulings have given the national government “power to encompass all subjects which might have substantial effects on interstate commerce-even if such activity was wholly intrastate” (Richard, 2017, p. 877). Presently, it is essential to note that this authority is dictated to Congress by the Commerce Clause.

Regarding Florida banning all imports of corn on the basis that is responsible for the outbreak of fowl cholera presents with significant legal concerns. The State is obviously cautioning its farmers because the chicken that get infected with the disease have to be killed immediately. Without the ban more of the poultry farmers are expected to get substantial drawbacks in their enterprise. On the other hand, the ban will affect the interstate business especially with the trade partners including Kentucky and Southern Indiana. Worthy of note, the latter has corns which are safe for consumption hence the ban is unfair to their traders. Besides, corns are not only consumed by chicken but also other animals.

There is a lot to borrow from the West Lynn Creamery Inc. v. Healy, (1994) which also resulted from congressional leader trying to caution its dairy farmers from the economic crisis. The “Dormant Commerce Clause” protects states from putting unreasonable constraints on others during the interstate trade (Preis, 2016). The intense complexity of jurisdictions imposing different sales taxes on a massive amount of different goods is sure to impose an undue burden on other states (Donnini, 2018). The banning may thus be burdensome to states that have safe corn.

If the state of Florida decides to continue trading with Indiana because their corn is safe for consumption some legal controversies may rise. The Dormant Commerce Clause expresses that states cannot economically discriminate against other states since this would interfere with interstate commerce (Oyen, 2017). However, if it decides to trade with Indiana only the action may be interpreted as impending Kentucky and Southern Indiana from fair trade. The other possible concern will be on the intergovernmental tax immunity since the traders are connected with a common supply chain. Some business transactions may be double taxed when engaging in interstate commerce with some states.

Conclusively, it is apparent that the Commerce Clause accords more power to congressional government, especially, in running local affairs. Regarding the first issue of buyback of the guns, the federal government will not have any contention based on past rulings. Florida has the power since the activities of mass killings occur within their jurisdiction and by individuals within the State. On the issue of reduction of federal funding of Medicaid upon dropping the ACA some contention may arise.

The state has the authority to decide what constitute general wellness and the power to tax and spend. However, because the insurance is largely funded by the federal government and uniformity is relevant there may be a case. On taxing online enterprises, the State does not have a case and introduction of such policies may be unfair to small business owners. Last but not least, the temporary ban of corn due to outbreak of fowl cholera is unfair for interstate trades especially regions with safe corns. However, the ban may be justified to caution farmers from huge losses.

References

Center on Budget and Policy Priorities. (2020). . Web.

Donnini, G.J. II (2018). . The Florida Bar Journal, 92(8), 82. Web.

Miller, B. (2019). Situational irony? How implementing a medicaid block grant will exacerbate everything it purports to fix. Brigham Young University Law Review, 2018(3), 729-772. Web.

Oyen, T. (2017). Stare decisis. Cornell Law School: Legal Information Institute. Web.

Pomp, R.D. (2019). Wayfair: Its implications and missed opportunities. Washington University Journal of Law & Policy. Web.

Preis, J. F. (2016). The Dormant Commerce Clause as a limit on personal jurisdiction. Iowa Law Review, 102(1), 121-164. Web.

Richard, K. (2017). Towards a standard for Intergovernmental Tax Immunity between the several states. The Tax Lawyer, 70(4), 869-905. Web.

Smith, E. S. (2017). Due process implications related to State Notice and Economic Nexus Laws. The Tax Lawyer, 70(4), 833-867. Web.

Stanfield, L. (2019). The wake of Wayfair: Addressing state taxation issues after South Dakota v. Wayfair. Belmont Law Review, 6(2), 284-324. Web.

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