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Goldberg v. Sweet

Supreme Court of the United States

October 12, 1988, Argued ; January 10, 1989, 1 Decided

No. 87-826, 87-1101

Opinion

 [*254]  [***612]  [**585]    JUSTICE MARSHALL delivered the opinion of the Court.

 In this appeal, we must decide whether  [****6]  a tax on interstate telecommunications imposed by the State of Illinois violates the Commerce Clause. We hold that it does not.

These cases come to us against a backdrop of massive technological and legal changes in the telecommunications industry. 3 Years ago, all interstate telephone calls were relayed through electric wires and transferred by human operators working switchboards. Those days are past. Today, a computerized network of electronic paths transmits thousands of electronic signals per minute through a complex system of microwave radios, fiber optics, satellites, and cables. DOJ  [*255]  Report 1.2-1.6, 1.8; Brief for MCI Telecommunications Corporation as Amicus Curiae 2. When fully connected, this network offers billions of paths from one point to another. DOJ Report 1.18. When a direct path is full or not working efficiently, the computer system instantly activates another path. Signals may even change  [***613]  paths in the middle of a telephone call without perceptible interruption. Brief for National Conference of State Legislatures et al. as Amici Curiae 6. Thus, the path taken by the electronic signals is often indirect and typically bears [****7]  no relation to state boundaries. 4 The number of possible paths, the nature of the electronic signals, and the system of computerized switching make it virtually impossible to trace and record the actual paths taken by the electronic signals which create an individual telephone call.

 [****8]  The explosion in new telecommunications technologies and the breakup of the AT&T monopoly 5 has led a number of States to  [**586]  revise the taxes they impose on the telecommunications industry. 6 In 1985, Illinois passed the Illinois  [*256]  Telecommunications Excise Tax Act (Tax Act), Ill. Rev. Stat., ch. 120, paras. 2001-2021 (1987). The Tax Act imposes a 5% tax on the gross charge of interstate telecommunications (1) originated or terminated in Illinois, para. 2004, § 4 (hereinafter § 4) 7 [****10]  and (2) charged to an Illinois service address, regardless of where the telephone call is billed or paid. para. 2002, §§ 2(a) and (b). 8 The Tax Act imposes an identical 5% tax on intrastate telecommunications.  [***614]  para. 2003, § 3. In order to prevent "actual multi-state taxation," the Tax Act provides a credit to any taxpayer upon proof that the taxpayer has paid a tax in another State on the same telephone call which triggered the Illinois tax. para. 2004, § 4. To facilitate collection, the Tax Act  [*257]  requires telecommunications retailers, like appellant GTE Sprint Communications Corporation (Sprint), to collect the tax from the consumer who charged the call to [****9]  his service address. para. 2005, § 5.

Eight months after the Tax Act was passed, Jerome Goldberg and Robert McTigue, Illinois residents who are subject to and have paid telecommunications taxes through their retailers, filed a class action complaint in the Circuit Court of Cook County, Illinois. They named as defendants J. Thomas Johnson, Director of the Department of Revenue for the State of Illinois, (Director), 9 and various long-distance telephone carriers, including Sprint. The complaint alleged that § 4 of the Tax Act violates the Commerce Clause of the United States Constitution. 10 Sprint cross-claimed against the Director, seeking a declaration that the Tax Act is unconstitutional under the Commerce Clause. The Director then filed a motion for summary judgment against Sprint and the other long-distance carriers. Sprint responded  [**587]  with a motion for summary judgment against the Director;  [****11]  Goldberg and McTigue, in turn, filed their own motion for summary judgment against both the Director and Sprint.

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488 U.S. 252 *; 109 S. Ct. 582 **; 102 L. Ed. 2d 607 ***; 1989 U.S. LEXIS 308 ****; 57 U.S.L.W. 4070; 98 P.U.R.4th 263; 65 Rad. Reg. 2d (P & F) 1402

GOLDBERG ET AL. v. SWEET, DIRECTOR, ILLINOIS DEPARTMENT OF REVENUE, ET AL.

Prior History:  [****1]  APPEAL FROM THE SUPREME COURT OF ILLINOIS.

Disposition:  117 Ill. 2d 493, 512 N. E. 2d 1262, affirmed.

CORE TERMS

interstate, telecommunications, telephone call, Tax Act, taxes, interstate commerce, multiple taxation, discriminate, state tax, intrastate, electronic, paths, fairly apportioned, terminating, originated, signals, consistency, residents, consumer, taxpayer, nexus, prong, provide a service, apportionment, telephone, trucks, cases, sales tax, invalidating, in-state

Tax Law, State & Local Taxes, Public Utility Taxes, Imposition of Tax, General Overview, Constitutional Law, Congressional Duties & Powers, Commerce Clause, Business & Corporate Compliance, Overview & Legal Concepts, Related Legal Issues, Taxation, Franchise Taxes, Communications Law, Sales Taxes