US SUPREME COURT DECISIONS

Vermont collects a use tax when cars are registered with it, but the tax is not imposed if the car was purchased in Vermont and a sales tax has been paid. The tax is also reduced by the amount of any sales or use tax paid to another State if that State would afford a credit for taxes paid to Vermont in similar circumstances. The credit is available, however, only if the registrant was a Vermont resident at the time he paid the taxes. Appellants, who bought and registered cars outside of Vermont before becoming Vermont residents, were required to pay the full use tax in order to register their cars in Vermont. In proceedings in the Vermont Superior Court, appellants alleged that Vermont's failure to afford them credit for the out-of-state sales taxes they had paid violated, inter alia, the Equal Protection Clause of the Fourteenth Amendment because the credit was provided in the case of vehicles acquired outside the State by Vermont residents. Rejecting appellants' contention, the court dismissed the complaint. The Vermont Supreme Court affirmed by citation to another decision handed down the same day, Leverson v. Conway, 144 Vt. 523, 481 A.2d 1029, in which it rejected a similar equal protection challenge to the tax credit, concluding that the Vermont statute was rationally related to the legitimate state interest in raising revenue to maintain and improve the highways, and rationally placed the burden on those who used them.

Held: When the Vermont statute is viewed on its face, appellants have stated a claim of discrimination prohibited by the Equal Protection Clause. Pp. 472 U. S. 18-28.

(a) While the State asserts that the tax credit applies only to Vermont residents who register their cars in Vermont without first having registered them elsewhere, and that a resident who purchases, pays a sales or use tax on, and registers a car in another State must also pay the Vermont use tax upon his return, it does not appear that the Vermont Supreme Court, in ruling on the equal protection claim in Leverson, supra, construed the exemption in such a manner. Instead, every indication is that a Vermont resident enjoys a credit for any sales taxes paid to a reciprocating State, even if he registered and used the car there before registering it in Vermont. Pp. 472 U. S. 18-21.

(b) An exemption such as that challenged here will be sustained if the legislature could have reasonably concluded that the challenged classification chanrobles.com-red

Page 472 U. S. 15

would promote a legitimate state purpose. No legitimate purpose is furthered by the discriminatory exemption here. Residence at the time of purchase is a wholly arbitrary basis on which to distinguish among present Vermont registrants -- at least among those who used their cars elsewhere before coming to Vermont. The distinction between them bears no relation to the statutory purpose of raising revenue for the maintenance and improvement of Vermont roads. The customary rationale for a use tax -- relating to protecting local merchants from out-of-state competition which, because of its lower or nonexistent tax burdens, can offer lower prices -- has no application to purchases made out-of-state by those who were not residents of the taxing State at the time of purchase. Nor can the distinction here be justified by a state policy of making those who use the highways contribute to their maintenance and improvement, or as encouraging interstate commerce by enabling Vermont residents, faced with limited automobile offerings at home, to shop outside the State without penalty. Pp. 472 U. S. 21-27.

144 Vt. 649, 478 A.2d 993, reversed and remanded.

WHITE, J., delivered the opinion of the Court, in which BURGER, C.J.,and BRENNAN, MARSHALL, and STEVENS, JJ., joined. BRENNAN, J., filed a concurring opinion, post, p. 472 U. S. 28. BLACKMUN, J., filed a dissenting opinion, in which REHNQUIST and O'CONNOR, JJ., joined, post, p. 472 U. S. 28. POWELL, J., took no part in the decision of the case.