Bacchus Imports, Ltd. v. Dias
468 U.S. 263, 1984 U.S. LEXIS 135, 82 L. Ed. 2d 200 (1984)
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Rule of Law:
A state tax that facially discriminates against out-of-state products by providing an exemption for certain locally produced goods violates the Commerce Clause. The Twenty-first Amendment does not save such a law when its purpose is mere economic protectionism rather than a core purpose of the Amendment, such as promoting temperance.
Facts:
- The State of Hawaii imposed a 20% excise tax on sales of liquor at wholesale.
- The Hawaii legislature enacted tax exemptions for two locally produced beverages, okolehao (a brandy) and pineapple wine.
- The stated purpose of these exemptions was to encourage the development and growth of Hawaii's local liquor industry.
- Bacchus Imports, Ltd., and Eagle Distributors, Inc., were wholesalers in Hawaii that primarily sold liquor produced out-of-state.
- These wholesalers were required to pay the 20% tax on their products, while local producers of okolehao and pineapple wine were not.
- This tax scheme resulted in products sold by the wholesalers being more expensive relative to the exempt local beverages.
Procedural Posture:
- Bacchus Imports, Ltd., and other liquor wholesalers paid the Hawaii excise tax under protest.
- The wholesalers sued the Director of Taxation in the Hawaii Tax Appeal Court, a state court of first instance, to recover the taxes paid.
- The Tax Appeal Court ruled in favor of the state, upholding the tax.
- The wholesalers appealed to the Supreme Court of Hawaii, the state's highest court.
- The Supreme Court of Hawaii affirmed the trial court's decision, holding that the tax did not violate the Commerce Clause.
- The wholesalers, as appellants, sought and were granted review by the Supreme Court of the United States.
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Issue:
Does a state excise tax on liquor sales that exempts certain locally produced alcoholic beverages violate the Commerce Clause of the United. States Constitution?
Opinions:
Majority - Justice White
Yes, the Hawaii excise tax violates the Commerce Clause. A state law that constitutes economic protectionism by discriminating against interstate commerce is subject to a strict rule of invalidity. The Hawaii tax is discriminatory on its face because it provides a direct commercial advantage to local products over out-of-state products. The state's argument that the local products do not compete with other liquors is unpersuasive; the purpose of the exemption was to foster competition by encouraging consumers to switch to the lower-priced local options. It is irrelevant whether the protected industry is 'thriving' or 'struggling,' as any form of economic protectionism is prohibited. Furthermore, the Twenty-first Amendment does not save the tax because the state's purpose was to promote local industry, not to advance any of the amendment's core concerns, such as temperance. When a state law violates a central tenet of the Commerce Clause and is not supported by a clear concern of the Twenty-first Amendment, the law must be struck down.
Dissenting - Justice Stevens
No, the Hawaii tax does not violate the Commerce Clause because the claim is squarely foreclosed by the Twenty-first Amendment. Section 2 of the Twenty-first Amendment grants states broad, near-plenary power to regulate the importation and use of intoxicating liquors within their borders. This power is unconfined by the ordinary limitations of the Commerce Clause. As established in prior cases like State Board of Equalization v. Young's Market Co., if a state has the power to prohibit all importation of liquor to create a local monopoly, it necessarily has the lesser power to discourage importation through a discriminatory tax. The majority's focus on the legislature's 'central purpose' is a novel and unsound approach that contradicts the clear text of the Amendment, which expressly authorizes this type of state regulation of the local liquor market.
Analysis:
This decision significantly clarifies the interaction between the dormant Commerce Clause and the Twenty-first Amendment. It establishes that the Twenty-first Amendment does not grant states unlimited power to regulate liquor in ways that favor local economic interests at the expense of interstate commerce. The Court created a balancing framework, holding that protectionist state liquor laws will be struck down unless they are shown to advance a core purpose of the Twenty-first Amendment, such as promoting temperance. This precedent limits states' ability to enact discriminatory taxes on alcohol and reinforces the principle that the Commerce Clause's prohibition against economic protectionism applies even in the context of liquor regulation.
