Majority Justice Marshall wrote the decision for the majority. He was joined by
Chief Justice Burger and
Justices Brennan,
Stewart,
White and
Rehnquist. Justice Marshall addressed the Commerce Clause issue first. The majority agreed with Commonwealth Edison's claim that, even though a tax is imposed before the goods become interstate commerce, this does not mean the tax evades constitutional analysis. Rejecting the reasoning in
Heisler v. Thomas Colliery Co., the majority "disapproved" of any distinction between intrastate and interstate commerce based on the idea that the Commerce Clause denies states the right to burden interstate commerce, and concluded that state severance taxes came under the jurisdiction of the Constitution's Commerce Clause. The respondents argued that the appropriate test for evaluating a tax under the Commerce Clause should be the four-prong test set forth in
Complete Auto Transit, Inc. v. Brady, and that the Montana tax violated the third prong of the
Complete Auto Transit test by discriminating against out-of-state consumers of Montana's coal. But the majority concluded no discrimination existed, because the tax burden was borne equally by all out-of-state consumers. The appellants also argued the tax violated the fourth prong of the test because it was not "fairly related to the services provided by the State" (e.g., the amount of the tax collected exceeds the cost of services provided). But the majority disagreed: Commonwealth Edison had fundamentally misconstrued the Court's test in
Complete Auto. Thus, there could be no "excessiveness" test. Nor was there any question that the state of Montana had the right to levy the tax for the purposes it did. Justice Marshall next identified how the fourth prong of the
Complete Auto test should be interpreted: The relevant inquiry under the fourth prong of the
Complete Auto Transit test is not, as appellants suggest, the amount of the tax or the value of the benefits allegedly bestowed as measured by the costs the State incurs on account of the taxpayer's activities. Rather, the test is closely connected to the first prong of the
Complete Auto Transit test. Under this threshold test, the interstate business must have a substantial nexus with the State before any tax may be levied on it. See
National Bellas Hess, Inc. v. Illinois Revenue Dept., 386 U.S. 753 (1967). Beyond that threshold requirement, the fourth prong of the
Complete Auto Transit test imposes the additional limitation that the measure of the tax must be reasonably related to the extent of the contact, since it is the activities or presence of the taxpayer in the State that may properly be made to bear a "just share of state tax burden,"
Western Live Stock v. Bureau of Revenue, 303 U.S., at 254. See
National Geographic Society v. California Board of Equalization, 430 U.S. 551 (1977);
Standard Pressed Steel Co. v. Washington Revenue Dept., 419 U.S. 560 (1975). The Court held that the Montana severance tax easily met this test. The Court refused to decide whether a tax could ever be "too high" under the Constitution, leaving this judgment expressly to the legislative branch. Justice Marshall next addressed whether the tax violated the Supremacy Clause. The first contention was that the tax interfered with the purposes of the Mineral Lands Leasing Act of 1920, 30 U.S.C. § 181 et seq., as amended by the Federal Coal Leasing Amendments Act of 1975, P.L. 94-377. But the Court observed that the Mineral Lands Leasing Act of 1920 expressly authorizes states to impose severance and excise taxes on coal mined from federal land, and that the Supreme Court had agreed with this interpretation of the law in
Mid-Northern Oil Co. v. Walker. There was nothing in the legislative history of either the 1920 Act or the 1975 Amendments to indicate otherwise; indeed, if a state severance tax were found to interfere with federal leases, all such taxes (of any amount) would have to be enjoined—an outcome Congress clearly did not intend. Appellants had also argued that the Montana tax "frustrated" the broad goals of national energy policy, but the Court refused to agree on two grounds. First, the Court would not overturn a state act unless "the nature of the regulated subject matter permits no other conclusion, or that the Congress has unmistakably so ordained." Second, the Supreme Court found that during debates over recent national energy legislation Congress had been fully cognizant of the Montana tax and had refused to take action to pre-empt it or ameliorate its impact on other states. In a brief concurrence, Justice White called the issues involved "troubling". Nonetheless, "Congress has the power to protect interstate commerce from intolerable or even undesirable burdens," he wrote, and "The constitutional authority and the machinery to thwart efforts such as those of Montana, if thought unacceptable, are available to Congress... . As I presently see it, therefore, the better part of both wisdom and valor is to respect the judgment of the other branches of the Government."
Dissent Justice Blackmun dissented, joined by
Justices Powell and
Stevens. For Justice Blackmun, the issue was whether the Montana severance tax constituted a "tailored tax" in violation of the test in
Complete Auto Transit. He was deeply troubled by the fact that Montana had control over one-quarter of the nation's coal reserves and nearly total control of the nation's low-sulfur coal reserves, and that most of these reserves lay under land controlled by the federal government. In addition, Blackmun argued there was a "tension" in the Court's ruling as to whether interstate commerce should be relatively unhindered from interference by state taxation and whether states should be allowed to recoup costs associated with interstate commerce. Blackmun agreed with the majority that the tax was not discriminatory. But he disagreed that the tax did not burden interstate commerce, characterizing the majority's ruling as making Montana free "to tax this coal at 100% or even 1,000% of value, should it choose to do so." Blackmun characterized the majority's decision as "mechanical," and claimed it was not in step with prior Court rulings on burdensome taxation. Blackmun further argued that the Montana severance tax was a "tailored tax" because it only taxed coal destined for interstate commerce, and thus deserved stricter scrutiny under the
Complete Auto test. Accordingly, given the economic conditions and importance of national energy policy, Blackmun would have remanded the case for trial for further determination of these issues. Blackmun agreed with the majority, however, that there was no Supremacy Clause issue. ==Further developments and rulings==