State statutes that clearly discriminate against interstate commerce are routinely struck down, unless the discrimination is demonstrably justified by a valid factor unrelated to economic protectionism.
Ohio used to offer gasohol dealers a credit of so many cents per gallon of ethanol used in their product against the state motor vehicle fuel sales tax payable on both ethanol and gasoline irrespective of the source of the ethanol. Ohio later enacted § 5735.145(B), which denied the credit to ethanol from states that did not grant a tax credit, exemption, or refund to ethanol from Ohio. For states that granted a smaller tax advantage than Ohio's, the statute granted only an equivalent credit to ethanol from that state. An out-of-state energy company, sought declaratory and injunctive relief alleging that § 5735.145(B)(1986) violated the Commerce Clause by discriminating against out-of-state ethanol producers to the advantage of the in-state industry. Tax Commissioner of Ohio and others, argued that § 5735.145(B) was nondiscriminatory, that it promoted interstate commerce, and that even if § 5735.145(B) was discriminatory, it was not covered by the Commerce Clause because of the market-participant doctrine. The Ohio Supreme Court ultimately found that the provision was not protectionist or unreasonably burdensome and the energy company appealed.
Is § 5735.145(B) discriminatory?
The court held that (1) § 5735.145(B) imposed an economic disadvantage upon out-of-state sellers; (2) the promise to remove that disadvantage if reciprocity was accepted no more justified disparity of treatment than it would justify categorical exclusion; (3) the market-participant doctrine did not apply; and (4) health and commerce justifications did not validate the discrimination.