453 U.S. 609 (1981)

COMMONWEALTH EDISON CO. ET AL.
v.
MONTANA ET AL.

No. 80-581.

Supreme Court of United States.

Argued March 30, 1981. Decided July 2, 1981. APPEAL FROM THE SUPREME COURT OF MONTANA.

*611 William P. Rogers argued the cause for appellants. With him on the briefs were William R. Glendon, Stanley Godofsky, Stephen Froling, James N. Benedict, Patrick F. Hooks, William J. Carl, and George J. Miller.

Mike Greely, Attorney General of Montana, argued the cause for appellees. With him on the brief were Mike McCrath and Mike McCarter, Assistant Attorneys General, and A. Raymond Randolph, Jr.^[*]

Briefs of amici curiae urging affirmance were filed for the United States by Solicitor General McCree, Acting Assistant Attorney General Liotta, Deputy Solicitor General Claiborne, Edwin S. Kneedler, Edward J. Shawaker, and Christopher Kirk Harris; for the State of New Mexico by Jeff Bingaman, Attorney General, Thomas L. Dunigan, Deputy Attorney General, Denise Fort, Assistant Attorney General, and Paul L. Bloom, Special Assistant Attorney General; for the State of North Dakota et al. by Robert O. Welfald, Attorney General of North Dakota, and Leo F. J. Wilking, Assistant Attorney General, and Chauncey H. Browning, Jr., Attorney General of West Virginia; for the State of Wyoming et al. by John D. Troughton, Attorney General of Wyoming, Mary B. Guthrie and Dennis M. Boal, Assistant Attorneys General, Nancy D. Freudenthal, Special Assistant Attorney General, and Steven F. Freudenthal, J. D. MacFarlane, Attorney General of Colorado, Richard H. Bryan, Attorney General of Nevada, David H. Leroy, Attorney General of Idaho, Kenneth O. Eikenberry, Attorney General of Washington, and Dave Frohnmayer, Attorney General of Oregon; for Max Baucus et al. by R. Stephen Browning, Hamilton P. Fox III, and Peter Van N. Lockwood; for the Environmental Defense Fund et al. by David B. Roe; for Malcolm Wallop et al. by Ann B. Vance and Dennis Charles Stickley; for the Western Conference of the Council of State Governments by John E. Thorson.

Briefs of amici curiae were filed by Richard Anthony Baenen, Edward M. Fogarty, and Thomas J. Lynaugh, for the Crow Tribe of Indians; and by David E. Engdahl for the Western Governors' Policy Office.

*612 JUSTICE MARSHALL delivered the opinion of the Court.

Montana, like many other States, imposes a severance tax on mineral production in the State. In this appeal, we consider whether the tax Montana levies on each ton of coal mined in the State, Mont. Code Ann. § 15-35-101 et seq. (1979), violates the Commerce and Supremacy Clauses of the United States Constitution.

I

Buried beneath Montana are large deposits of low-sulfur coal, most of it on federal land. Since 1921, Montana has imposed a severance tax on the output of Montana coal mines, including coal mined on federal land. After commissioning a study of coal production taxes in 1974, see House Resolutions Nos. 45 and 93, Senate Resolution No. 83, 1974 Mont. Laws 1619-1620, 1653-1654, 1683-1684 (Mar. 14 and *613 16, 1974); Montana Legislative Council, Fossil Fuel Taxation (1974), in 1975, the Montana Legislature enacted the tax schedule at issue in this case. Mont. Code Ann. § 15-35-103 (1979). The tax is levied at varying rates depending on the value, energy content, and method of extraction of the coal, and may equal, at a maximum, 30% of the "contract sales price."^[1] Under the terms of a 1976 amendment to the Montana Constitution, after December 31, 1979, at least 50% of the revenues generated by the tax must be paid into a permanent trust fund, the principal of which may be appropriated only by a vote of three-fourths of the members of each house of the legislature. Mont. Const., Art. IX, § 5.

Appellants, 4 Montana coal producers and 11 of their out-of-state utility company customers, filed these suits in Montana state court in 1978. They sought refunds of over $5.4 million in severance taxes paid under protest, a declaration that the tax is invalid under the Supremacy and Commerce Clauses, and an injunction against further collection of the tax. Without receiving any evidence, the court upheld the tax and dismissed the complaints.

On appeal, the Montana Supreme Court affirmed the judgment of the trial court. — Mont.—, 615 P. 2d 847 (1980). The Supreme Court held that the tax is not subject to scrutiny under the Commerce Clause^[2] because it is imposed on the severance of coal, which the court characterized as an intrastate activity preceding entry of the coal into interstate *614 commerce. In this regard, the Montana court relied on this Court's decisions in Heisler v. Thomas Colliery Co., 260 U. S. 245 (1922), Oliver Iron Mining Co. v. Lord, 262 U. S. 172 (1923), and Hope Natural Gas Co. v. Hall, 274 U. S. 284 (1927), which employed similar reasoning in upholding state severance taxes against Commerce Clause challenges. As an alternative basis for its resolution of the Commerce Clause issue, the Montana court held, as a matter of law, that the tax survives scrutiny under the four-part test articulated by this Court in Complete Auto Transit, Inc. v. Brady, 430 U. S. 274 (1977). The Montana court also rejected appellants' Supremacy Clause^[3] challenge, concluding that appellants had failed to show that the Montana tax conflicts with any federal statute.

We noted probable jurisdiction, 449 U. S. 1033 (1980), to consider the important issues raised. We now affirm.

II

A

As an initial matter, appellants assert that the Montana Supreme Court erred in concluding that the Montana tax is not subject to the strictures of the Commerce Clause. In appellants' view, Heisler's "mechanical" approach, which looks to whether a state tax is levied on goods prior to their entry into interstate commerce, no longer accurately reflects the law. Appellants contend that the correct analysis focuses on whether the challenged tax substantially affects interstate commerce, in which case it must be scrutinized under the Complete Auto Transit test.

We agree that Heisler's reasoning has been undermined by more recent cases. The Heisler analysis evolved at a time when the Commerce Clause was thought to prohibit the States from imposing any direct taxes on interstate commerce. *615 See, e. g., Helson & Randolph v. Kentucky, 279 U. S. 245, 250-252 (1929); Ozark Pipe Line Corp. v. Monier, 266 U. S. 555, 562 (1925). Consequently, the distinction between intrastate activities and interstate commerce was crucial to protecting the States' taxing power.^[4]

The Court has, however, long since rejected any suggestion that a state tax or regulation affecting interstate commerce is immune from Commerce Clause scrutiny because it attaches only to a "local" or intrastate activity. See Hunt v. Washington Apple Advertising Comm'n, 432 U. S. 333, 350 (1977); Pike v. Bruce Church, Inc., 397 U. S. 137, 141-142 (1970); Nippert v. Richmond, 327 U. S. 416, 423-424 (1946). Correspondingly, the Court has rejected the notion that state taxes levied on interstate commerce are per se invalid. See, e. g., Washington Revenue Dept. v. Association of Wash. Stevedoring Cos., 435 U. S. 734 (1978); Complete Auto Transit, Inc. v. Brady, supra. In reviewing Commerce Clause challenges to state taxes, our goal has instead been to "establish a consistent and rational method of inquiry" focusing on "the practical effect of a challenged tax." Mobil Oil Corp. v. Commissioner of Taxes, 445 U. S. 425, 443 (1980). See Moorman Mfg. Co. v. Bair, 437 U. S. 267, 276-281 (1978); Washington Revenue Dept. v. Association of Wash. Stevedoring *616 Cos., supra, at 743-751; Complete Auto Transit, Inc. v. Brady, supra, at 277-279. We conclude that the same "practical" analysis should apply in reviewing Commerce Clause challenges to state severance taxes.

In the first place, there is no real distinction—in terms of economic effects—between severance taxes and other types of state taxes that have been subjected to Commerce Clause scrutiny.^[5] See, e. g., Michigan-Wisconsin Pipe Line Co. v. Calvert, 347 U. S. 157 (1954); Joseph v. Carter & Weekes Stevedoring Co., 330 U. S. 422 (1947), Puget Sound Stevedoring Co. v. State Tax Comm'n, 302 U. S. 90 (1937), both overruled in Washington Revenue Dept. v. Association of Wash. Stevedoring Cos., supra.[6] State taxes levied on a "local" activity preceding entry of the goods into interstate commerce may substantially affect interstate commerce, and this effect is the proper focus of Commerce Clause inquiry. See Mobil Oil Corp. v. Commissioner of Taxes, supra, at 443. Second, this Court has acknowledged that "a State has a significant interest in exacting from interstate commerce its fair share of the cost of state government," Washington Revenue Dept. v. Association of Wash. Stevedoring Cos., supra, at 748. As the Court has stated, "`[e]ven interstate business must pay its way.'" Western Live Stock v. Bureau of Revenue, 303 U. S. 250, 254 (1938), quoting Postal Telegraph-Cable *617 Co. v. Richmond, 249 U. S. 252, 259 (1919). Consequently, the Heisler Court's concern that a loss of state taxing authority would be an inevitable result of subjecting taxes on "local" activities to Commerce Clause scrutiny is no longer tenable.

We therefore hold that a state severance tax is not immunized from Commerce Clause scrutiny by a claim that the tax is imposed on goods prior to their entry into the stream of interstate commerce. Any contrary statements in Heisler and its progeny are disapproved.^[7] We agree with appellants that the Montana tax must be evaluated under Complete Auto Transit's four-part test. Under that test, a state tax does not offend the Commerce Clause if it "is applied to an activity with a substantial nexus with the taxing State, is fairly apportioned, does not discriminate against interstate commerce, and is fairly related to services provided by the State." 430 U. S., at 279.

B

Appellants do not dispute that the Montana tax satisfies the first two prongs of the Complete Auto Transit test. As the Montana Supreme Court noted, "there can be no argument here that a substantial, in fact, the only nexus of the severance of coal is established in Montana." — Mont., at —, 615 P. 2d, at 855. Nor is there any question here regarding apportionment or potential multiple taxation, for as the state court observed, "the severance can occur in no other state" and "no other state can tax the severance." Ibid. Appellants do contend, however, that the Montana tax is invalid under the third and fourth prongs of the Complete Auto Transit test.

Appellants assert that the Montana tax "discriminate[s] against interstate commerce" because 90% of Montana coal is shipped to other States under contracts that shift the tax burden primarily to non-Montana utility companies and thus *618 to citizens of other States. But the Montana tax is computed at the same rate regardless of the final destination of the coal, and there is no suggestion here that the tax is administered in a manner that departs from this evenhanded formula. We are not, therefore, confronted here with the type of differential tax treatment of interstate and intrastate commerce that the Court has found in other "discrimination" cases. See, e. g., Maryland v. Louisiana, 451 U. S. 725 (1981); Boston Stock Exchange v. State Tax Comm'n, 429 U. S. 318 (1977); cf. Lewis v. BT Investment Managers, Inc., 447 U. S. 27 (1980); Philadelphia v. New Jersey, 437 U. S. 617 (1978).

Instead, the gravamen of appellants' claim is that a state tax must be considered discriminatory for purposes of the Commerce Clause if the tax burden is borne primarily by out-of-state consumers. Appellants do not suggest that this assertion is based on any of this Court's prior discriminatory tax cases. In fact, a similar claim was considered and rejected in Heisler. There, it was argued that Pennsylvania had a virtual monopoly of anthracite coal and that, because 80% of the coal was shipped out of State, the tax discriminated against and impermissibly burdened interstate commerce. 260 U. S., at 251-253. The Court, however, dismissed these factors as "adventitious considerations." Id., at 259. We share the Heisler Court's misgivings about judging the validity of a state tax by assessing the State's "monopoly" position or its "exportation" of the tax burden out of State.

The premise of our discrimination cases is that "[t]he very purpose of the Commerce Clause was to create an area of free trade among the several States." McLeod v. J. E. Dilworth Co., 322 U. S. 327, 330 (1944). See Hunt v. Washington Apple Advertising Comm'n, 432 U. S., at 350; Boston Stock Exchange v. State Tax Comm'n, supra, at 328. Under such a regime, the borders between the States are essentially irrelevant. As the Court stated in West v. Kansas Natural Gas Co., 221 U. S. 229, 255 (1911), "`in matters of foreign *619 and interstate commerce there are no state lines.'" See Boston Stock Exchange v. State Tax Comm'n, supra, at 331-332. Consequently, to accept appellants' theory and invalidate the Montana tax solely because most of Montana's coal is shipped across the very state borders that ordinarily are to be considered irrelevant would require a significant and, in our view, unwarranted departure from the rationale of our prior discrimination cases.

Furthermore, appellants' assertion that Montana may not "exploit" its "monopoly" position by exporting tax burdens to other States, cannot rest on a claim that there is need to protect the out-of-state consumers of Montana coal from discriminatory tax treatment. As previously noted, there is no real discrimination in this case; the tax burden is borne according to the amount of coal consumed and not according to any distinction between in-state and out-of-state consumers. Rather, appellants assume that the Commerce Clause gives residents of one State a right of access at "reasonable" prices to resources located in another State that is richly endowed with such resources, without regard to whether and on what terms residents of the resource-rich State have access to the resources. We are not convinced that the Commerce Clause, of its own force, gives the residents of one State the right to control in this fashion the terms of resource development and depletion in a sister State. Cf. Philadelphia v. New Jersey, supra, at 626.^[8]

*620 In any event, appellants' discrimination theory ultimately collapses into their claim that the Montana tax is invalid under the forth prong of the Complete Auto Transit test: that the tax is not "fairly related to the services provided by the State." 430 U. S., at 279. Because appellants concede that Montana may impose some severance tax on coal mined in the State,^[9] the only remaining foundation for their discrimination theory is a claim that the tax burden borne by the out-of-state consumers of Montana coal is excessive. This is, of course, merely a variant of appellants' assertion that the Montana tax does not satisfy the "fairly related" prong of the Complete Auto Transit test, and it is to this contention that we now turn.

Appellants argue that they are entitled to an opportunity to prove that the amount collected under the Montana tax is not fairly related to the additional costs the State incurs because of coal mining.^[10] Thus, appellants' objection is to *621 the rate of the Montana tax, and even then, their only complaint is that the amount the State receives in taxes far exceeds the value of the services provided to the coal mining industry. In objecting to the tax on this ground, appellants may be assuming that the Montana tax is, in fact, intended to reimburse the State for the cost of specific services furnished to the coal mining industry. Alternatively, appellants could be arguing that a State's power to tax an activity connected to interstate commerce cannot exceed the value of the services specifically provided to the activity. Either way, the premise of appellants' argument is invalid. Furthermore, appellants have completely misunderstood the nature of the inquiry under the fourth prong of the Complete Auto Transit test.

The Montana Supreme Court held that the coal severance tax is "imposed for the general support of the government." — Mont., at —, 615 P. 2d, at 856, and we have no reason to question this characterization of the Montana tax as a general revenue tax.^[11] Consequently, in reviewing appellants' contentions, we put to one side those cases in which the Court reviewed challenges to "user" fees or "taxes" that were designed and defended as a specific charge imposed by the State for the use of state-owned or state-provided transportation or other facilities and services. See, e. g., Evansville-Vanderburgh *622 Airport Authority Dist. v. Delta Airlines, Inc., 405 U. S. 707 (1972); Clark v. Paul Gray, Inc., 306 U. S. 583 (1939); Ingels v. Morf, 300 U. S. 290 (1937).^[12]

This Court has indicated that States have considerable latitude in imposing general revenue taxes. The Court has, for example, consistently rejected claims that the Due Process Clause of the Fourteenth Amendment stands as a barrier against taxes that are "unreasonable" or "unduly burden-some." See, e. g., Pittsburgh v. Alco Parking Corp., 417 U. S. 369 (1974); Magnano Co. v. Hamilton, 292 U. S. 40 (1934); Alaska Fish Salting & By-Products Co. v. Smith, 255 U. S. 44 (1921). Moreover, there is no requirement under the Due Process Clause that the amount of general revenue taxes collected from a particular activity must be reasonably related to the value of the services provided to the activity. Instead, our consistent rule has been:

"Nothing is more familiar in taxation than the imposition of a tax upon a class or upon individuals who enjoy no direct benefit from its expenditure, and who are not responsible for the condition to be remedied.

"A tax is not an assessment of benefits. It is, as we *623 have said, a means of distributing the burden of the cost of government. The only benefit to which the taxpayer is constitutionally entitled is that derived from his enjoyment of the privileges of living in an organized society, established and safeguarded by the devotion of taxes to public purposes. Any other view would preclude the levying of taxes except as they are used to compensate for the burden on those who pay them, and would involve abandonment of the most fundamental principle of government—that it exists primarily to provide for the common good." Carmichael v. Southern Coal & Coke Co., 301 U. S. 495, 521-523 (1937) (citations and footnote omitted).

See St. Louis & S. W. R. Co. v. Nattin, 277 U. S. 157, 159 (1928); Thomas v. Gay, 169 U. S. 264, 280 (1898).

There is no reason to suppose that this latitude afforded the States under the Due Process Clause is somehow divested by the Commerce Clause merely because the taxed activity has some connection to interstate commerce; particularly when the tax is levied on an activity conducted within the State. "The exploitation by foreign corporations [or consumers] of intrastate opportunities under the protection and encouragement of local government offers a basis for taxation as unrestricted as that for domestic corporations." Ford Motor Co. v. Beauchamp, 308 U. S. 331, 334-335 (1939); see also Ott v. Mississippi Valley Barge Line Co., 336 U. S. 169 (1949). To accept appellants' apparent suggestion that the Commerce Clause prohibits the States from requiring an activity connected to interstate commerce to contribute to the general cost of providing governmental services, as distinct from those costs attributable to the taxed activity, would place such commerce in a privileged position. But as we recently reiterated. "[i]t was not the purpose of the commerce clause to relieve those engaged in interstate commerce from their just share of state tax burden even though it increases *624 the cost of doing business.'" Colonial Pipeline Co. v. Traigle, 421 U. S. 100, 108 (1975), quoting Western Live Stock v. Bureau of Revenue, 303 U. S., at 254. The "just share of state tax burden" includes sharing in the cost of providing "police and fire protection, the benefit of a trained work force, and `the advantages of a civilized society.'" Exxon Corp. v. Wisconsin Dept. of Revenue, 447 U. S. 207, 228 (1980), quoting Japan Line, Ltd. v. County of Los Angeles, 441 U. S. 434, 445 (1979). See Washington Revenue Dept. v. Association of Wash. Stevedoring Cos., 435 U. S., at 750-751; id., at 764 (POWELL, J., concurring in part and concurring in result); General Motors Corp. v. Washington, 377 U. S. 436, 440-441 (1964).

Furthermore, there can be no question that Montana may constitutionally raise general revenue by imposing a severance tax on coal mined in the State. The entire value of the coal, before transportation, originates in the State, and mining of the coal depletes the resource base and wealth of the State, thereby diminishing a future source of taxes and economic activity.^[13] Cf. Maryland v. Louisiana, 451 U. S., at 758-759. In many respects, a severance tax is like a real property tax, which has never been doubted as a legitimate means of raising revenue by the situs State (quite apart from the right of that or any other State to tax income derived from use of the property). See, e. g., Old Dominion S.S. Co. v. Virginia, 198 U. S. 299 (1905); Western Union Telegraph Co. v. Missouri ex rel. Gottlieb, 190 U. S. 412 (1903); Postal Telegraph Cable Co. v. Adams, 155 U. S. 688 (1895). When, as here, a general revenue tax does not discriminate against interstate commerce and is apportioned to activities occurring within *625 the State, the State "is free to pursue its own fiscal policies, unembarrassed by the Constitution, if by the practical operation of a tax the state has exerted its power in relation to opportunities which it has given, to protection which it has afforded, to benefits which it has conferred by the fact of being an orderly, civilized society." Wisconsin v. J. C. Penney Co., 311 U. S. 435, 444 (1940). As we explained in General Motors Corp. v. Washington, supra, at 440-441:

"[T]he validity of the tax rests upon whether the State is exacting a constitutionally fair demand for that aspect of interstate commerce to which it bears a special relation. For our purposes, the decisive issue turns on the operating incidence of the tax. In other words, the question is whether the State has exerted its power in proper proportion to appellant's activities within the State and to appellant's consequent enjoyment of the opportunities and protections which the State has afforded. . . . As was said in Wisconsin v. J. C. Penney Co., 311 U. S. 435, 444 (1940), `[t]he simple but controlling question is whether the state has given anything for which it can ask return.'"

The relevant inquiry under the fourth prong of the Complete Auto Transit test^[14] 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.^[15] Rather, the test is *626 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). As the Court explained in Wisconsin v. J. C. Penney Co., supra, at 446 (emphasis added), "the incidence of the tax as well as its measure [must be] tied to the earnings which the State . . . has made possible, insofar as government is the prerequisite for the fruits of civilization for which, as Mr. Justice Holmes was fond of saying, we pay taxes."

Against this background, we have little difficulty concluding that the Montana tax satisfies the fourth prong of the Complete Auto Transit test. The "operating incidence" of the tax, see General Motors Corp. v. Washington, 377 U. S., at 440-441, is on the mining of coal within Montana. Because it is measured as a percentage of the value of the coal taken, the Montana tax is in "proper proportion" to appellants' activities within the State and, therefore, to their "consequent enjoyment of the opportunities and protections which the State has afforded" in connection with those activities. Id., at 441. Cf. Nippert v. Richmond, 327 U. S., at 427. *627 When a tax is assessed in proportion to a taxpayer's activities or presence in a State, the taxpayer is shouldering its fair share of supporting the State's provision of "police and fire protection, the benefit of a trained work force, and `the advantages of a civilized society.'" Exxon Corp. v. Wisconsin Dept. of Revenue, 447 U. S., at 228, quoting Japan Line, Ltd. v. County of Los Angeles, 441 U. S., at 445.

Appellants argue, however, that the fourth prong of the Complete Auto Transit test must be construed as requiring a factual inquiry into the relationship between the revenues generated by a tax and costs incurred on account of the taxed activity, in order to provide a mechanism for judicial disapproval under the Commerce Clause of state taxes that are excessive. This assertion reveals that appellants labor under a misconception about a court's role in cases such as this.^[16] The simple fact is that the appropriate level or rate of taxation is essentially a matter for legislative, and not judicial, resolution.^[17] See Helson & Randolph v. Kentucky, 279 U. S. 245, 252 (1929); cf. Pittsburgh v. Alco Parking Corp., 417 *628 U. S. 369 (1974); Magnano Co. v. Hamilton, 292 U. S. 40 (1934). In essence, appellants ask this Court to prescribe a test for the validity of state taxes that would require state and federal courts, as a matter of federal constitutional law, to calculate acceptable rates or levels of taxation of activities that are conceded to be legitimate subjects of taxation. This we decline to do.

In the first place, it is doubtful whether any legal test could adequately reflect the numerous and competing economic, geographic, demographic, social, and political considerations that must inform a decision about an acceptable rate or level of state taxation, and yet be reasonably capable of application in a wide variety of individual cases. But even apart from the difficulty of the judicial undertaking, the nature of the factfinding and judgment that would be required of the courts merely reinforces the conclusion that questions about the appropriate level of state taxes must be resolved through the political process. Under our federal system, the determination is to be made by state legislatures in the first instance and, if necessary, by Congress, when particular state taxes are thought to be contrary to federal interests.^[18] Cf. Mobil Oil Corp. v. Commissioner of Taxes, 445 U. S., at 448-449; Moorman Mfg. Co. v. Bair, 437 U. S., at 280.

Furthermore, the reference in the cases to police and fire protection and other advantages of civilized society is not, as appellants suggest, a disingenuous incantation designed to avoid a more searching inquiry into the relationship between the value of the benefits conferred on the taxpayer and the amount of taxes it pays. Rather, when the measure of a tax is reasonably related to the taxpayer's activities or presence in the State—from which it derives some benefit such as the *629 substantial privilege of mining coal—the taxpayer will realize, in proper proportion to the taxes it pays, "[t]he only benefit to which the taxpayer is constitutionally entitled . . . [:] that derived from his enjoyment of the privileges of living in an organized society, established and safeguarded by the devotion of taxes to public purposes." Carmichael v. Southern Coal & Coke Co., 301 U. S., at 522. Correspondingly, when the measure of a tax bears no relationship to the taxpayers' presence or activities in a State, a court may properly conclude under the fourth prong of the Complete Auto Transit test that the State is imposing an undue burden on interstate commerce. See Nippert v. Richmond, 327 U. S., at 427; cf. Michigan-Wisconsin Pipe Line Co. v. Calvert, 347 U. S. 157 (1954). We are satisfied that the Montana tax, assessed under a formula that relates the tax liability to the value of appellant coal producers' activities within the State, comports with the requirements of the Complete Auto Transit test. We therefore turn to appellants' contention that the tax is invalid under the Supremacy Clause.

III

A

Appellants contend that the Montana tax, as applied to mining of federally owned coal, is invalid under the Supremacy Clause because it "substantially frustrates" the purposes of the Mineral Lands Leasing Act of 1920, ch. 85, 41 Stat. 437, 30 U. S. C. § 181 et seq. (1976 ed. and Supp. III) (1920 Act), as amended by the Federal Coal Leasing Amendments Act of 1975, Pub. L. 94-377, 90 Stat. 1083 (1975 Amendments). Appellants argue that under the 1920 Act, the "economic rents" attributable to the mining of coal on federal land—i. e., the difference between the cost of production (including a reasonable profit) and the market price of the coal— are to be captured by the Federal Government in the form of royalty payments from federal lessees. The payments thus *630 received are then to be divided between the States and the Federal Government according to a formula prescribed by the Act.^[19] In appellants' view, the Montana tax seriously undercuts and disrupts the 1920 Act's division of revenues between the Federal and State Governments by appropriating directly to Montana a major portion of the "economic rents." Appellants contend the Montana tax will alter the statutory scheme by causing potential coal producers to reduce the amount they are willing to bid in royalties on federal leases.

As an initial matter, we note that this argument rests on a factual premise—that the principal effect of the tax is to shift a major portion of the relatively fixed "economic rents" attributable to the extraction of federally owned coal from the Federal Treasury to the State of Montana—that appears to be inconsistent with the premise of appellants' Commerce Clause claims. In pressing their Commerce Clause arguments, appellants assert that the Montana tax increases the cost of Montana coal, thereby increasing the total amount of "economic rents," and that the burden of the tax is borne by out-of-state consumers, not the Federal Treasury.^[20] But *631