Court Allows Sales Tax on Out-of-State Transportation : Travel: The ruling reinstates Oklahoma’s tax and paves the way for others to levy a fee.

The Supreme Court ruled Monday that states can charge sales taxes on the full price of bus trips and other transportation heading out of state.

The Constitution lets states tax transportation even when part of the travel occurs outside their borders, the court ruled in voting, 7 to 2, to let Oklahoma reinstate its tax on the out-of-state portion of bus trips.

“If every state were to impose a tax identical to Oklahoma’s, that is, a tax on ticket sales within the state for travel originating there, no sale would be subject to more than one state’s tax,” Justice David H. Souter wrote for the Supreme Court.

Oklahoma is apparently the only state that has charged a sales tax on the full price of interstate bus trips. Today’s ruling opens the way for other states to do the same.

The decision reversed a federal appeals court ruling that barred Oklahoma from taxing the out-of-state portion of interstate bus trips.

The state charges a 4.5% sales tax on transportation for hire, including railroads, airlines, taxicabs and bus companies.

Jefferson Lines, a Minneapolis-based bus company, collected and paid the tax on tickets it sold for bus trips within Oklahoma but not for those with out-of-state destinations.

In October, 1989, Jefferson filed for protection from creditors under Chapter 11 of the federal bankruptcy law. The Oklahoma Tax Commission filed a claim for $46,659 in unpaid taxes for the interstate trips.

A federal bankruptcy judge in Minnesota denied the claim. A federal judge agreed, saying the tax on interstate bus trips violated the Constitution’s Commerce Clause, which gives Congress the authority to regulate interstate commerce.

The 8th U.S. Circuit Court of Appeals upheld that ruling, relying on a 1948 Supreme Court ruling that barred New York from taxing gross receipts from transportation outside its borders.

Souter said the 1948 case differed from the one decided today because the New York tax essentially was a tax on income rather than sales.

Lawyers for the Oklahoma Tax Commission had argued that the sales tax applied to the in-state sale of bus tickets, not to out-of-state travel.

Jefferson’s lawyers said that allowing Oklahoma to tax bus travel in other states could lead to double taxation if other states decided to tax transportation within their borders.