Petition for Writ of Mandamus - Filed - Supreme Court of Texas

The Margin Tax imposes a 0.5% tax on wholesalers and retailers and a 1% tax on
manufacturers. Pursuant to the Due Process Clause, this significant difference in tax rate
must be based on a difference in the protections, opportunities, and benefits conferred by
Texas on the entities. In other words, manufacturers must receive greater benefits from
Texas than wholesalers and retailers receive. This is not the case with entities, such as
Nestle, that manufacture outside of Texas, but only wholesale and/or retail within Texas.
Such entities do not receive any additional benefits from Texas with respect to their
manufacturing operations. By taxing these entities based on activities for which Texas
confers no benefit, the Margin Tax violates the Due Process Clause of the United States
Constitution.
IV.
The Margin Tax Violates the Commerce Clause of the United States
Constitution.
The Commerce Clause prohibits discrimination against interstate commerce and
bars state regulation that unduly burdens interstate commerce. Quill, 504 U.S. at 312; see
U.S. CONST. art. 1, § 8. Specifically, the Commerce Clause requires that a state tax (1)
be applied to an activity with a substantial nexus with the taxing state, (2) be fairly
apportioned, (3) not discriminate against interstate commerce, and (4) fairly relate to the
services provided by the state. Complete Auto Transit, Inc. v. Brady, 430 U.S. 274, 279
(1977). A valid tax must treat similarly situated in-state and out-of-state taxpayers
equally. Tyler Pipe Indus. v. Wash. State Dep’t of Revenue, 483 U.S. 232, 246 (1987)
(citing Halliburton Oil Well Cementing Co. v. Reily, 373 U.S. 64, 70 (1963)). Further,
the measure of the tax must be reasonably related to the extent of the taxpayer’s presence
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