December 7, 2011
Federal Cigarette Tax Likely Violates Due Process, but not Tenth Amendment
Chief Judge Royce C. Lamberth (D.D.C.) ruled on Monday in Gordon v. Holder that the tax requirement in the federal Prevent All Cigarette Trafficking Act, or PACT, likely violates due process, but not the Tenth Amendment. Judge Lamberth also ruled that the PACT's ban on mailing cigarettes through the U.S. mail does not violate equal protection or due process.
Plaintiff Gordon owns and runs a cigarette retail business. He previously took orders by mail and through the internet; since 2010, he takes only phone orders and walk-ins. He challenged two provisions of the PACT: its ban on mailing cigarettes through the U.S. mail; and its requirement that remote cigarette sellers pay applicable state and local sales taxes in advance.
Judge Lamberth ruled that Gordon's claim that the tax provision violates due process is likely to succeed. Judge Lamberth concluded that Gordon didn't have sufficient contacts with some states where he sold cigarettes to satisfy the "minimum connection" test in Quill Corp. v. North Dakota (and borrowed from International Shoe Co. v. Washington). Without the minimum connection, the tax provision likely violates due process.
But Judge Lamberth rejected Gordon's other claims. Judge Lamberth wrote that the PACT's ban on sales of cigarettes through the U.S. mail satisifed rational basis review, and that the PACT's tax provision didn't commandeer states or their officers. (Nothing in PACT compels states to adopt or to change their taxes. Instead, the PACT simply compels cigarette retailers to comply with applicable state taxes.)
Judge Lamberth thus issued a preliminary injunction against the tax provision on due process grounds, but denied a preliminary injunction on Gordon's other claims.
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