Wardair Canada Inc. v. Florida Department of Revenue

477 U.S. 1, 106 S. Ct. 2369, 91 L. Ed. 2d 1, 1986 U.S. LEXIS 105, 54 U.S.L.W. 4687

Opinions

Justice Brennan

delivered the opinion of the Court.

Appellant Wardair Canada Inc., a Canadian airline that operates charter flights to and from the United States, maintains in this action that the Commerce Clause¹ of the Constitution precludes Florida from applying to it a tax on aviation fuel purchased in that State. Wardair also asserts that the Florida tax must fall because it violates a “clear unequivocal directive of Congress,” allegedly implicit in the Federal Aviation Act, 49 U. S. C. App. § 1301 et seq. (1982 ed. and Supp. II), that the Federal Government has exclusive regulatory power over foreign air commerce. Brief for Appellant v, 15.

We disagree with appellant’s view and analysis of the operation of the Commerce Clause, and find that Congress has not acted to pre-empt state taxes such as that imposed by Florida. Accordingly, we affirm the judgment of the Supreme Court of Florida upholding the tax.

I

Florida has for many years taxed the sale of fuel to common carriers, including airlines, within the State. Prior to April 1,1983, the tax was prorated on a mileage basis, so that a carrier was liable for only the portion of the otherwise payable tax that was equal to the ratio of its Florida mileage to its worldwide mileage for the previous fiscal year. Fla. Stat. § 212.08 (4) (1975). Effective April 1,1983, the Florida law was amended to repeal the mileage proration formula for airlines, and the fuel tax was established at a rate of 5% on a deemed price of $1,148 per gallon. Fla. Stat. §212.08 (4)(a)(2) (1985).² Under the amended law, an airline was liable for the full amount of the fuel tax whether that fuel was used to fly within or without the State, and regardless of whether the airline engaged in a substantial or a nominal amount of business within the State. The effect of this amendment was, of course, to increase substantially the tax liability of airlines, such as foreign airlines, who fly largely outside of Florida, and who had, under the old scheme, paid little Florida tax on fuel.

Shortly after the new law was enacted, appellant filed suit in state court attacking its validity insofar as it authorized the assessment and collection of a tax on fuel used by foreign airlines exclusively in foreign commerce. Wardair argued, among other things, that the law was unconstitutional under the Commerce Clause and that it was inconsistent with the Nonscheduled Air Services Agreement, May 8, 1974, United States-Canada, Art. XII, 25 U. S. T. 787, T. I. A. S. No. 7826 (U. S.-Canadian Agreement or Agreement), a bilateral agreement between the Governments of Canada and the United States regulating air charter service between the two countries. Wardair’s case was consolidated for trial with a similar suit brought by a number of other foreign airlines.

In a separate order addressing only Wardair’s claims, the trial court rejected the Commerce Clause arguments but found that the U. S.-Canadian Agreement expressed a “federal policy” to exempt foreign airlines from fuel taxes. The court further found that this “policy” precluded the individual States from acting in this area and thus preventing the United States from “speaking with one voice” with respect to foreign commerce. In reaching this conclusion, the court relied largely on our decision in Japan Line, Ltd. v. County of Los Angeles, 441 U. S. 434 (1979). The court granted appellant a permanent injunction against the Florida Department of Revenue from assessing and collecting the fuel tax from Wardair.

The case was certified to the Supreme Court of Florida, which reversed, in part, the trial court. 455 So. 2d 326 (1984). The Supreme Court first noted that the U. S.Canadian Agreement by its terms exempted carriers only from national, as opposed to state or local (or, in the case of Canada, provincial) excise taxes, inspection fees, and other charges, and thus held that the Agreement did not pre-empt state sales taxes. Nor was the court persuaded that the Florida tax was invalid under the Foreign Commerce Clause. The court again referred to the fact that the Agreement exempted only national taxes, and “presume[d] this has been done intentionally.” Id., at 329. Having determined that the Federal Government had, in effect, itself elected not to prohibit the States from taxing aviation fuel, the court rejected the contention that the state tax “prevents our federal government from speaking with one voice,” ibid., and thus distinguished Japan Line. We noted probable jurisdiction, 474 U. S. 943 (1984), and now affirm.

■I

Wardair suggests that by enacting the Federal Aviation Act (Act), Congress “left no room for local government participation” with respect to foreign air travel. Brief for Appellant 39. Appellant does not expressly label this a preemption argument; rather, it relies on metaphor and tells us that “in the field of foreign air commerce it is the Federal Government that calls the tune. It is the Federal Government that is the conductor of the music, deciding how it is to be played and who are the players.” Id., at 44. We assume that appellant intends, by this metaphor, to persuade us that Congress has determined to “occupy the field” of international aviation, and thus to pre-empt all state regulation. The argument is without merit.

It is of course true, as appellant notes, that Congress has, through the Act, regulated aviation extensively. The agencies charged by Congress with regulatory responsibility over foreign air travel exercise power, as appellant observes, over licensing, route services, rates and fares, tariffs, safety, and other aspects of air travel. However, state law is not preempted whenever there is any federal regulation of an activity or industry or area of law. The Supremacy Clause, among other things, confirms that when Congress legislates within the scope of its constitutionally granted powers, that legislation may displace state law, and this Court has throughout the years employed various verbal formulations in identifying numerous varieties of pre-emption. See, e. g., Louisiana Public Service Comm’n v. FCC, 476 U. S. 355, 368-369 (1986). But we have consistently emphasized that the first and fundamental inquiry in any pre-emption analysis is whether Congress intended to displace state law, and where a congressional statute does not expressly declare that state law is to be pre-empted, and where there is no actual conflict between what federal law and state law prescribe, we have required that there be evidence of a congressional intent to pre-empt the specific field covered by the state law. Pacific Gas & Electric Co. v. State Energy Resources Conservation and Development Comm’n, 461 U. S. 190 (1983); Silkwood v. Kerr-McGee Corp., 464 U. S. 238 (1984). In the present case, not only is there no indication that Congress wished to preclude state sales taxation of airline fuel, but, to the contrary, the Act expressly permits States to impose such taxes. Section 1113 of the Act, as added, 87 Stat. 90, and as amended, 49 U. S. C. App. § 1513, addresses the issue of “State taxation of air commerce,” detailing in § 1113(a) the kinds of taxes which are prohibited and in § 1113(b) those which are permissible. Among the permissible taxes are “sales or use taxes on the sale of goods or services.” It is, of course, plausible that Congress never considered whether States should be permitted to impose sales taxes on foreign, as opposed to domestic, carriers, and therefore we do not rely on the existence of this section to answer the Commerce Clause issue raised here by appellant and considered by us infra. However, this section of the Act does provide the complete response to appellant’s pre-emption argument. For what § 1113(b) shows is that, to the degree that Congress considered the power of the States to tax air travel, it expressly and unequivocally permitted the States to exercise that authority. In other words, rather than prohibit state regulation in the area, Congress invited it. This is not the stuff of pre-emption.

Ill

In cases involving the so-called dormant Commerce Clause, both interstate and foreign, the Federal Government has not affirmatively acted, and it is the responsibility of the judiciary to determine whether action taken by state or local authorities unduly threatens the values the Commerce Clause was intended to serve. See Southern Pacific Co. v. Arizona, 325 U. S. 761 (1945). As we have previously observed: “The few simple words of the Commerce Clause . . . reflected a central concern of the Framers that was an immediate reason for calling the Constitutional Convention: the conviction that in order to succeed, the new Union would have to avoid the tendencies toward economic Balkanization that had plagued relations among the Colonies and later among the States under the Articles of Confederation.” Hughes v. Oklahoma, 441 U. S. 322, 325-326 (1979). In recognition of the importance of this conviction, we have acknowledged the self-executing nature of the Commerce Clause and held on countless occasions that, even in the absence of specific action taken by the Federal Government to disapprove of state regulation implicating interstate or foreign commerce, state regulation that is contrary to the constitutional principle of ensuring that the conduct of individual States does not work to the detriment of the Nation as a whole, and thus ultimately to all of the States, may be invalid under the un-exercised Commerce Clause. See H. P. Hood & Sons, Inc. v. DuMond, 336 U. S. 525 (1949); Southern Pacific Co. v. Arizona, supra. In the unique context of foreign commerce, we have alluded to the special need for federal uniformity: "'In international relations and with respect to foreign intercourse and trade the people of the United States act through a single government with unified and adequate national power.’ Board of Trustees v. United States, 289 U. S. 48, 59 (1933),’” Japan Line, 441 U. S., at 448. As in the context of cases alleging violations of the dormant Interstate Commerce Clause, the concern in these Foreign Commerce Clause cases is not with an actual conflict between state and federal law, but rather with the policy of uniformity, embodied in the Commerce Clause, which presumptively prevails when the Federal Government has remained silent.

When a state tax is challenged as violative of the dormant Interstate Commerce Clause, we have asked four questions: is the tax applied to an activity with a substantial nexus with the taxing State; is the tax fairly apportioned; does the tax discriminate against interstate commerce; and is the tax fairly related to the services provided by the State. Complete Auto Transit, Inc. v. Brady, 430 U. S. 274, 279 (1977). In Japan Line, supra, we noted that when the state tax allegedly interferes with the Federal Government’s authority to regulate foreign commerce, two additional questions must be asked: “first, whether the tax, notwithstanding apportionment, creates a substantial risk of international multiple taxation, and, second, whether the tax prevents the Federal Government from speaking with one voice when regulating commercial relations with foreign governments.” Id., at 451.

In the present case, appellant concedes that Florida’s tax satisfies the four-part test set out in Complete Auto. In other words, it is not disputed that if this ease did not involve foreign commerce, the Florida tax on the sale of aviation fuel would not contravene the Commerce Clause. Appellant also recognizes that there is no threat of multiple international taxation in this case, since the tax is imposed only upon the sale of fuel, a discrete transaction which occurs within one national jurisdiction only. Appellant and the United States as amicus curiae thus rely entirely on the final factor identified in Japan Line, and argue that the Florida tax violates the Foreign Commerce Clause because it threatens the ability of the Federal Government to “speak with one voice.” Specifically, they urge that there exists a federal policy of reciprocal tax exemptions for aircraft, equipment, and supplies, including aviation fuel, that constitute the instrumentalities of international air traffic, and that this “policy” represents the statement that the “one voice” of the Federal Government wishes to make and which is threatened by the state law. We disagree. In our view, the evidence relied upon by appellant and the United States not only fails to reveal any such federal policy, but, even more fundamentally, shows also that in the context of this case we do not confront federal governmental silence of the sort that triggers dormant Commerce Clause analysis. On the contrary, the international agreements cited demonstrate that the Federal Government has affirmatively acted, rather than remained silent, with respect to the power of the States to tax aviation fuel, and thus that the case does not call for dormant Commerce Clause analysis at all. Moreover, in our view the actions taken by the Federal Government accept the authority of States to tax as Florida has here, and lend further support to the position and views advanced by appellee and relied on by the Florida Supreme Court in rejecting Wardair’s arguments.

Appellant and the United States maintain that the policy of tax exemption for the instrumentalities of international air traffic is manifested by, among other things, (1) the Chicago Convention on International Civil Aviation, opened for signa ture, Dec. 7, 1944, 61 Stat. 1180 (Chicago Convention), an international convention to which the United States and 156 other nations, including Canada, are parties; (2) a Resolution (Resolution) adopted November 14, 1966, by the International Civil Aviation Organization (ICAO), an organization of which the United States is a member by virtue of being a party to the Chicago Convention; (3) more than 70 bilateral agreements, including the U. S.-Canadian Agreement, into which the United States has entered with various foreign countries dealing with international aviation. But what these documents show is that while there appears to be an international aspiration on the one hand to eliminate all impediments to foreign air travel — including taxation of fuel— the law as it presently stands acquiesces in taxation of the sale of that fuel by political subdivisions of countries. Thus, Article 24(a) of the Chicago Convention by its terms precludes the imposition of local taxes on fuel only when the fuel is “on board an aircraft... on arrival . . . and retained on board on leaving” a contracting party; it does not prohibit taxation of fuel purchased in that country. 61 Stat. 1186. We agree with amici National Governors’ Association et al. that the negative implications of this provision support recognizing Florida’s power to tax; certainly, the provision demonstrates the international community’s awareness of the problem of state and local taxation of international air travel, specifically aviation fuel, and represents a decision by the parties to that Convention to address the problem by curtailing and limiting only some of the localities’ power to tax, while implicitly preserving other aspects of that authority.

Nor does the Resolution provide support for appellant’s contention that there is a clear national policy of exempting aviation fuel from state sales taxes. While the Resolution undeniably does endorse an international scheme whereby fuel would be exempt “ ‘from all customs and other duties,’ ” which it defines as including “‘import, export, excise, sales, consumption and internal duties and taxes of all kinds levied ... by any taxing authority within a State,’ ” Brief for United States as Amicus Curiae 12 (Sept. 17,1985), quoting Resolution pp. 3, 4 (emphasis deleted), the Resolution is formally merely the work product of an international organization of which the United States is a member; it has not been specifically endorsed, let alone signed, entered into, agreed upon, approved, or passed by either the Executive or Legislative Branch of the Federal Government. In other words, no action has been taken to give the Resolution the force of law. While it is not argued by either appellant or by the United States as amicus that this Resolution in and of itself should operate to pre-empt state law, we also think it untenable to assert, as they do, that this Resolution represents a policy of the United States, as opposed to a policy of an organization of which the United States is one of many members.

Our reluctance in this regard is bolstered by the fact that the United States has, since the time that the Convention came into force, become a party to more than 70 bilateral aviation agreements, and in not one of these agreements has the United States agreed to deny the States the power asserted by Florida in this case. Most of these agreements explicitly commit the United States to refrain from imposing national taxes on aviation fuel used by airlines of the other contracting party, see Brief for United States as Amicus Curiae 14-17, 19, but as the United States concedes, “none of our bilateral aviation agreements explicitly interdicts state or local taxes on aviation fuel used by foreign airlines in international traffic.” Id., at 17. Most strikingly as it relates to the case before us, the U. S.-Canadian Agreement itself limits the tax exemption to be afforded to foreign air carriers to “national duties and charges.” App. A-58. Taxation by political subdivisions of either the United States or Canada are not mentioned, an omission which must be understood as representing a policy choice by the contracting parties, especially in light of the fact that the Resolution addressed this concern eight years before the United States and Canada en tered into the Agreement. We note that throughout the time that the U. S.-Canadian Agreement has been in force, some American States, as well as some Canadian Provinces, have imposed taxes within their jurisdictions on aviation fuel used by Canadian and American carriers respectively in international travel. Furthermore, there was not, until recently, any challenge to the localities’ legal authority to do so. Although not dispositive, this course of conduct suggests that the parties to the Agreement and those most immediately affected by it understood it to permit this sort of taxation.

What all of this makes abundantly clear is that the Federal Government has not remained silent with regard to the question whether States should have the power to impose taxes on aviation fuel used by foreign carriers in international travel. By negative implication arising out of more than 70 agreements entered into since the Chicago Convention, the United States has at least acquiesced in state taxation of fuel used by foreign carriers in international travel. Again, in the U. S.-Canadian Agreement only “national” charges are barred, and we presume that drafters from two federalist nations understood this as representing a choice not to preclude local taxation. It would turn dormant Commerce Clause analysis entirely upside down to apply it where the Federal Government has acted, and to apply it in such a way as to reverse the policy that the Federal Government has elected to follow. For the dormant Commerce Clause, in both its interstate and foreign incarnations, only operates where the Federal Government has not spoken to ensure that the essential attributes of nationhood will not be jeopardized by States acting as independent economic actors. However, the Federal Government is entitled in its wisdom to act to permit the States varying degrees of regulatory authority. In our view, the facts presented by this case show that the Federal Government has affirmatively decided to permit the States to impose these sales taxes on aviation fuel. Accord ingly, there is no need for us to consider, and nothing in this opinion should be understood to address, whether, in the absence of these international agreements, the Foreign Commerce Clause would invalidate Florida’s tax.

In Japan Line, 441 U. S., at 451, we explained that Foreign Commerce Clause analysis requires that a court ask whether a state tax “prevents the Federal Government from ‘speaking with one voice when regulating commercial relations with foreign governments.’” But we never suggested in that case or any other that the Foreign Commerce Clause insists that the Federal Government speak with any particular voice.

In light of the above, the judgment of the Supreme Court of Florida is

Affirmed.

Footnotes

1

The Constitution provides that “Congress shall have Power ... To regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes.” Art. I, §8, el. 3.

2

Florida has since substantially amended its statute which imposes taxes on aviation fuel. Those amendments, which became effective July 1, 1985, do not in any way bear on the present controversy, which concerns only appellant’s tax liability from April 1, 1983, to July 1, 1985.