State Tax Discrimination and Internal Consistency

Abstract

The contours of the U.S. Supreme Court’s dormant Commerce Clause doctrine of internal consistency, which asks whether a state tax intrinsically overreaches in imposing a burden upon interstate commerce, are difficult to understand. This is despite the fact that a determination that a state tax violates internal consistency can have significant state fiscal consequences. This uncertainty was suggested again by the recent case, Zilka v. Tax Review Board City of Philadelphia, for which the Supreme Court later denied certiorari. See 304 A.3d 1153 (Pa. 2023), cert. denied, 145 S. Ct. 1045 (2025).

The parameters of the internal consistency doctrine should not be so obscure. The doctrine would be more logical and understandable if it were primarily utilized, not as a stand-alone test, but as a tool to evaluate state tax discrimination, i.e., whether a state has impermissibly sought to favor local businesses over businesses based in other states. This Article explains how this approach would be more firmly grounded in the Court’s current approach to the dormant Commerce Clause and, for example, would be consistent with the Court’s “undue burden” balancing inquiry as recently reconsidered in National Pork Producers Council v. Ross, 143 S. Ct. 1142 (2023). This Article also sets forth how this analysis would comport with the Supreme Court’s prior internal consistency cases, including Comptroller of the Treasury of Maryland v. Wynne, 575 U.S. 542 (2015), and recent state court cases applying the internal consistency test.