IN SUPREME COURT
Mayo Collaborative Services, Inc.,
Commissioner of Revenue,
O R D E R
Based upon all the files, records and proceedings herein,
IT IS HEREBY ORDERED THAT:
13 of the slip opinion filed on June 30, 2005, is hereby modified by the
addition of a footnote after the citation “
recognize that in Fulton Corp. v.
Faulkner, where the “only issue” was whether a facially discriminatory tax
was nevertheless constitutional as a “compensatory” tax, the Supreme Court held
that Darnell and Kidd were “no longer good law under the Commerce Clause.” Fulton,
2. The attached slip opinion, amended as stated above, shall be substituted for the opinion filed June 30, 2005.
3. The petition for rehearing of Mayo Services, Inc., is in all other respects denied.
4. The motion of Mayo Collaborative Services, Inc., for leave to file a reply memorandum in support of its petition for rehearing is denied.
Dated: July 29, 2005
BY THE COURT:
IN SUPREME COURT
Tax Court Hanson, J.
Mayo Collaborative Services, Inc.,
vs. Filed: June 30, 2005
Office of Appellate Courts
Commissioner of Revenue,
S Y L L A B U S
1. Minnesota Statutes § 295.53, subd. 1(a)(4)-(5) (2000), which grants an exemption from the MinnesotaCare tax on the gross revenues of a health-care provider for revenue received from another health-care provider who is also subject to the MinnesotaCare tax, does not facially discriminate against interstate commerce.
2. The MinnesotaCare tax revenue exemption is internally consistent and therefore fairly apportioned under the Commerce Clause of the United States Constitution.
Heard, considered, and decided by the court en banc.
O P I N I O N
We review the
question of whether the MinnesotaCare tax on the gross revenues of health-care
providers transacting business in
submitted the case to the tax court on stipulated facts. Mayo is a
(a) The following payments are excluded from the gross revenues subject to the hospital, surgical center, or health care provider taxes under sections 295.50 to 295.59:
* * * *
(4) payments received from hospitals or surgical centers for goods and services on which liability for tax is imposed under section 295.52 * * *.
(5) payments received from health care providers for goods and services on which liability for tax is imposed under this chapter * * *.
Minn. Stat. § 295.53, subd. 1(a)(4)-(5).
For the tax years
1998 through 2001, Mayo reported its gross revenues from all sources but then
deducted, as exempt, revenue received from all health-care providers, including
those located and transacting business outside of
On appeal to the tax
court, Mayo argued that the MinnesotaCare revenue exemption violated the
Commerce Clause because it discriminated against interstate commerce and was
not “fairly apportioned,” violating two prongs of what has come to be known as
the Complete Auto test. Mayo argued that the exemption facially
discriminated against interstate commerce because it provided an exemption for
revenue received from a provider that would resell the service in
argued that the exemption was not facially discriminatory because, by its plain
language, the exemption was based on whether the customer had already paid the
tax, not on whether the customer was located out of state. The Commissioner argued that the exemption
was internally consistent because the MinnesotaCare tax scheme ensures that tax
is imposed on a specific medical service only once, albeit on different
taxpayers: when Mayo serves a
The tax court held in favor of the Commissioner, reasoning that the MinnesotaCare tax exemption was not facially discriminatory because it was not based on geography, and was internally consistent and thus fairly apportioned because the tax was being assessed on a “single taxpayer, the Minnesota lab,” and there was no risk that any state would impose tax on the same health-care service more than once. Mayo Collaborative Servs., 2004 WL 2199503 at *7-*9.
The parties renew
their arguments before this court. In
addition, to demonstrate that the exemption was not geographically based and
therefore not facially discriminatory, the Commissioner asserts that Mayo could
not deduct revenue received from a Minnesota customer who was not subject to
the MinnesotaCare tax, such as a patient who seeks Mayo’s laboratory services
directly without first visiting a hospital or clinic. And, to demonstrate that the MinnesotaCare
tax scheme was fairly apportioned under the internal consistency test, the
Commissioner argues that any threat of multiple taxation as a burden on
interstate commerce is eliminated by a tax credit that is provided for a health-care
provider “that has paid taxes to another jurisdiction measured by gross
revenues and is subject to [MinnesotaCare] tax * * * on the same gross revenues
* * *.” Minn. Stat.
§ 295.54, subd. 1 (2000). Mayo does
not dispute that it could not exclude revenue received from a
decisions from the Minnesota Tax Court, we determine (1) whether the tax court
had jurisdiction, (2) whether the tax court decision was supported by the
evidence and was in conformity with the law, and (3) whether the tax court
committed any other error of law. Wilson
v. Comm’r of Revenue,656
N.W.2d 547, 551-52 (
States have wide
latitude to establish taxation schemes, and “a taxpayer challenging the
constitutionality of a state tax statute bears a heavy burden.” Id.; see also Container Corp. of Am. v. Franchise Tax
Bd.,463 U.S. 159, 164 (1983) (citing precedent indicating
that taxpayer bears “distinct burden” of proof by “clear and cogent
evidence”). “The presumption is that a
statute is constitutional, and we are required to place a construction on the
statute that will find it so if at all possible.” Kline v. Berg Drywall, Inc.,685 N.W.2d 12, 23 (
We begin by examining
whether the MinnesotaCare exemption discriminates against interstate commerce,
in violation of prong 3 of the Complete Auto test. See
note 2, supra. The petitioner
bears the burden of providing “convincing evidence showing that the tax deters,
or for that matter discriminates against, interstate activities.” Am.
Trucking Ass’ns, Inc. v. Michigan Pub. Serv. Comm’n, 545 U.S. __, 2005 WL
1421164, at *5 (June 20, 2005). A state
tax discriminates against interstate commerce if it “tax[es] a transaction or incident
more heavily when it crosses state lines than when it occurs entirely within
the State.” Fulton Corp. v. Faulkner,
516 U.S. 325, 331 (1996) (citations omitted).
Stated another way, a state tax discriminates against interstate
commerce if it gives “differential treatment [to] in-state and out-of-state
economic interests that benefits the former and burdens the latter.”
Mayo does not argue
that the exemption had a discriminatory intent or purpose. The Commissioner suggests, and Mayo does not
disagree, that the purpose of the revenue exemption was to avoid “pyramiding”
tax liability, based on an intent to avoid multiple taxation within
Likewise, Mayo does
not explicitly argue that the revenue exemption was discriminatory in
effect. Instead, it argues that the
MinnesotaCare exemption facially discriminates against interstate commerce
“because it denies an exclusion for payments received from non-Minnesota
providers that is allowed for payments received from
The Commissioner argues that the MinnesotaCare tax revenue exemption does not expressly condition the exemption on where health-care providers or their customers are located, and therefore may be distinguished from cases in which we, as well as the United States Supreme Court, have held tax statutes to be facially discriminatory. See Chapman,651 N.W.2d at 834 (holding that statute affording tax deduction for contributions to charity “located in and carrying on substantially all of its activities” in Minnesota was facially discriminatory because “[o]n its face, the statute treats contributions to in-state charitable organizations differently from contributions to out-of-state charitable organizations”); Oregon Waste Sys., Inc.,511 U.S. at 96, 100 (holding solid-waste surcharge based on costs attributable to handling out-of-state waste facially discriminatory because the “geographic distinction * * * patently discriminates against interstate commerce”); Chemical Waste Mgmt., Inc. v. Hunt,504 U.S. 334, 338, 344 (1992) (holding state surcharge on solid waste “generated outside of Alabama” facially discriminatory).
Mayo suggests that
the requirement that the geographic distinction be express was invalidated in Camps
Mayo suggests that a specific reference to geography is unnecessary for facial discrimination and refers us to Armco Inc. v. Hardesty, 467 U.S. 638, 642-43 (1984), and Tyler Pipe Industries, Inc. v. Washington Department of Revenue, 483 U.S. 232, 240-41 (1987), as holding that the taxes challenged in those cases were “facially discriminatory because of their potential impact on interstate commerce.” We find these two cases to be the most relevant to our consideration.
In Armco, the Court held that the
tax provides that two companies selling tangible property at wholesale in
Tyler Pipe, the Court held that a
Armco and Tyler Pipe each involved a taxing structure that had some aspects that were parallel to the MinnesotaCare tax. Each contained a multiple transaction exemption that was designed to avoid the pyramiding of taxation—that is, West Virginia exempted a manufacturer from the wholesale tax to the extent it was subject to West Virginia’s tax on manufacturing; Washington exempted a manufacturer from the manufacturing tax to the extent it was subject to Washington’s tax on wholesale sales; and Minnesota exempted a health-care provider from the gross revenues tax on health-care services to the extent that another health-care provider was subject to the MinnesotaCare tax on the same services. Armco and Tyler Pipe support Mayo’s facial discrimination argument to the extent that the exemptions in West Virginia and Washington were based on the fact that the taxable transaction was subject to a separate tax of the same state and that separate tax could be applicable only to intrastate transactions.
In Tyler Pipe, the Court suggested that to
avoid discrimination against interstate commerce, a multiple activities
exemption should “provide a credit against Washington tax liability for
wholesale taxes paid by local manufacturers to any State, not just
In Jefferson Lines, the Court posited a hypothetical tax structure that also had some parallel aspects to Armco, Tyler Pipe, and the MinnesotaCare tax. Jefferson Lines, 514 U.S. at 192 n.6. The Court explained:
[I]f Texas were to impose a tax upon the bus company measured by the portion of gross receipts reflecting in-state travel, it would have to impose taxes on intrastate and interstate journeys alike. In the event Texas chose to limit the burden of successive taxes attributable to the same transaction by combining an apportioned gross receipts tax with a credit for sales taxes paid to Texas, for example, it would have to give equal treatment to service into Texas purchased subject to a sales tax in another State, which it could do by granting a credit for sale taxes paid to any State.
Id. at 192 n.6.
Although Armco, Tyler Pipe, and the footnote hypothetical in Jefferson Lines might be read to suggest that a tax exemption such as Minnesota’s is facially discriminatory if applied to in-state sales but denied to out-of-state sales, there is a crucial distinction between those circumstances and this case. In Armco, Tyler Pipe, and the Jefferson Lines hypothetical, the successive taxation fell upon the same taxpayer. Here, the successive tax on which the exemption is based is paid by a third party. And in Jefferson Lines, the Court concluded the hypothetical discussion by stating, “We express no opinion on the need for equal treatment when a credit is allowed for payment of in- or out-of-state taxes by a third party. See Darnell v. Indiana, 226 U.S. 390 (1912).” Jefferson Lines, 514 U.S. at 193 n. 6.
Darnell involved an Indiana tax on stock owned by a taxpayer
domiciled in Indiana. All shares of
stock whether in domestic or foreign corporations were subject to the tax, but
there was an exemption for shares of a corporation where the property of the
corporation “is not exempt or is not taxable to the corporation itself.” 226 U.S. at 397. In other words, the ownership tax would not
apply to domestic stock if the property of the domestic corporation was taxed
Court said that this conclusion followed Kidd
v. Alabama, 188 U.S. 730 (1903), involving an
The state of Alabama is not bound to make its laws harmonize in principle with those of other States. If property is untaxed by its laws, then for the purpose of its laws the property is not taxed at all.
Because Mayo bears a heavy burden to provide “convincing evidence” that the MinnesotaCare tax is discriminatory, see Am. Trucking Ass’ns, Inc., 2005 WL 1421164, slip op. at 7, and because decisions of the United States Supreme Court suggest that the Interstate Commerce Clause does not require equal treatment when an exemption is allowed for payment by a third party of a separate in-state tax but not of a separate out-of-state tax, we affirm the tax court’s conclusion that the MinnesotaCare statute is not facially discriminatory under Complete Auto. Mayo Collaborative Servs., 2004 WL 2199503 at *8.
Next, we consider whether the MinnesotaCare tax revenue exemption was “fairly apportioned” under prong 2 of the Complete Auto test, which now incorporates the United States Supreme Court’s “internal consistency” test.
purpose behind the apportionment requirement is to ensure that each State taxes
only its fair share of an interstate transaction.” Goldberg v. Sweet, 488
Recently, in American Trucking Associations, Inc. v. Michigan Public Service Commission, the Supreme Court observed that the internal consistency test is “typically used where taxation of interstate transactions are at issue,” the relevant inquiry being: “What would happen if all States did the same?” 2005 WL 1421164, at *6. At issue was whether Michigan’s $100-per-vehicle annual fee on trucks that perform point-to-point deliveries inside state borders was constitutional given that truckers typically “top off” interstate loads with intrastate loads. Id. at *2, *4, *6. The Court observed that it “must concede” that a trucker would be subject to multiple fees if states besides Michigan enacted such laws, but nevertheless held that the tax was constitutional because “[a]n interstate firm with local outlets normally expects to pay local fees that are uniformly assessed upon all those who engage in local business.” Id. at *6.
Because American Trucking was decided after oral argument, Mayo and the Commissioner argued apportionment of the MinnesotaCare exemption primarily under Jefferson Lines, which at the time provided the Supreme Court’s most-recent guidance on the question. After reiterating that the possibility of multiple taxation is the central question, the Court observed that the “threat of malapportionment” is subject to the “internal consistency” rule:
consistency is preserved when the imposition of a tax identical to the one in
question by every other State would add no burden to interstate commerce that
intrastate commerce would not also bear.
This test asks nothing about the degree of economic reality reflected by
the tax, but simply looks to the structure of the tax at issue to see whether
its identical application by every State in the
Jefferson Lines, 514 U.S. at 185.
Given that neither
the MinnesotaCare tax nor the exemption involves an “interstate transaction,”
the internal consistency test may be inapplicable. See
American Trucking, 2005 WL 1421164, at *6.
Even if the test applies, the holding in American Trucking suggests that a tax that fails the test is not
per se unconstitutional. See id.
Accordingly, we turn our analysis to Jefferson
Lines, where the issue was whether an Oklahoma sales tax imposed on bus
tickets sold in the state for travel within as well as outside the state was
fairly apportioned. 514 U.S. at
177. The Court held that the tax was
fairly apportioned because it was internally and externally consistent and
because there was no threat of multiple taxation. Id.
at 184-88, 194-95. “If every State were
to impose a tax identical to
In Jefferson Lines, the Court discussed two
distinctions that are relevant to our facts.
First, the Court suggested that the apportionment prong is concerned
with multiple taxation through more than one jurisdiction imposing tax on a
single transaction. The Court explained
that the essential purpose of the apportionment prong is to assure that a state
imposes tax only on its fair share of an interstate transaction, and notes that
this principle is “the lineal descendent of [the] prohibition of multiple
taxation.” Id. at 184. When the Court referred
to multiple taxation of a single interstate transaction, the references are all
singular—to a buyer, a sale, a transaction.
As applied to Mayo, then, Jefferson
Lines suggests that a central question is whether a single
transaction—here, a laboratory service—is subject to more than one
jurisdiction’s tax. Clearly, only
Beyond framing its analysis of multiple taxation in terms of a single taxable event, the Court in Jefferson Lines also referenced serial taxable events. But those references indicate that multiple taxation is not problematic in such situations. For example, in explaining that a sale of goods in a single transaction cannot be subject to multiple taxation, the Court explained:
In deriving this rule covering taxation to a buyer on sales of goods we were not, of course, oblivious to the possibility of successive taxation of related events up and down the stream of commerce, and our cases are implicit with the understanding that the Commerce Clause does not forbid the actual assessment of a succession of taxes by different States on distinct events as the same tangible object flows along. Thus, it is a truism that a sales tax to the buyer does not preclude a tax to the seller upon the income earned from a sale, and there is no constitutional trouble inherent in the imposition of a sales tax in the State of delivery to the customer, even though the State or origin of the things sold may have assessed a property or severance tax on it.
Later in the Jefferson Lines opinion, the Court addressed another aspect of successive taxation, asking:
Although the sale with partial delivery cannot be duplicated as a taxable event in any other State, and multiple taxation under an identical tax is thus precluded, is there a possibility of successive taxation so closely related to the transaction as to indicate potential unfairness of Oklahoma’s tax on the full amount of sale?
Id. at 191. In this part of its analysis (apparently the external consistency element), the Court concluded that even if Texas were to apply an apportioned gross receipts tax on the Texas portion of the travel from Oklahoma City to Dallas, this would not constitute impermissible multiple taxation because
travel would not be exposed to multiple taxation in any sense different from
coal for which the producer may be taxed first at point of severance by
The footnote to the above quotation addressed the issue of successive and complementary taxes at some length. Id. at 192-93 n.6. In this discussion, the Court again used the singular, referencing “the same transaction” several times. Based on these references in the Jefferson Lines opinion, it appears that the apportionment factor is aimed at multiple taxation of the same transaction. As applied here, there is no multiple taxation by other jurisdictions of Mayo’s laboratory services.
distinction in Jefferson Lines
relevant here is the Court’s differentiation between “activities”-based taxes
imposed on businesses that operate in several states, and taxes based on sales
of goods and services.
As for sales-based taxes, the Court observed that it has “set a different course,” and that the Commerce Clause does not require a tax to be apportioned to where a good ultimately is consumed:
A sale of goods is most readily viewed as a discrete event facilitated by the laws and amenities of the place of sale, and the transaction itself does not readily reveal the extent to which completed or anticipated interstate activity affects the value on which a buyer is taxed. We have therefore consistently approved taxation of sales without any division of the tax base among different States, and have instead held such taxes properly measurable by the gross charge for the purchase, regardless of any activity outside the taxing jurisdiction that might have preceded the sale or might occur in the future.
* * * *
In other words, the very conception of the common sales tax on goods, operating on the transfer of ownership and possession at a particular time and place, insulated the buyer from any threat of further taxation of the transaction.
On its face, the MinnesotaCare
tax is based on whether a health-care provider “transact[s] business” in
Minnesota, e.g., performs “activities” in the state.
Mayo employs a hypothetical under the internal consistency test to suggest that if Wisconsin had a law identical to MinnesotaCare and Mayo had a Wisconsin hospital as a customer, Mayo would pay Minnesota taxes on revenue received from its sale to the Wisconsin hospital, Mayo would pass through that tax in its charges to the hospital, and the hospital would also pay Wisconsin taxes on revenue it received from resale of Mayo’s service to the patient. Mayo argues that this potential for multiple taxation in an interstate transaction would not exist in a comparable intrastate transaction because Mayo would be able to exempt the revenue received from its sale of services to a Minnesota hospital because the resale of those services to the patient would be subject to the tax, resulting in only a single tax being applied to the intrastate sale and resale of lab services.
argues that Mayo’s hypothetical is analytically incorrect because it looks at
the combined effect of two states’ taxes on two separate taxpayers (e.g., the
We agree with the Commissioner
and the Tax Court that Mayo’s hypothetical fails to prove that the
MinnesotaCare tax scheme is internally inconsistent. Mayo’s argument is that an out-of-state buyer
risks paying state taxes twice—once when the hospital pays Wisconsin tax upon
reselling Mayo’s services, and again when Mayo “passes through” its
falls on the buyer of the services, who is no more subject to double taxation on the sale of these services than the buyer of goods would be. The taxable event comprises agreement, payment, and delivery of some of the services in the taxing State; no other State can claim to be the site of the same combination.
514 U.S. at 190.
In addition, in Jefferson Lines,the Court held that even under the internal consistency test, “the
Commerce Clause does not forbid the actual assessment of a succession of taxes
by different States on distinct events as the same tangible object flows
Finally, even if the MinnesotaCare tax scheme could be considered internally inconsistent because, as Mayo argues, Mayo’s pass-through of the Minnesota tax to a Wisconsin customer was deemed to be the imposition of the Minnesota tax on that customer, any potential for unfair apportionment would be eliminated by the MinnesotaCare credit provision.
The Supreme Court has signaled, and other courts and commentators agree, that any credit that serves to alleviate the threat of multiple taxation must be considered under the fair apportionment prong. Jefferson Lines, 514 U.S. at 194 (“Oklahoma may rely upon use-taxing States” to provide a credit “for related taxes paid elsewhere”); Tyler Pipe,483 U.S. at 245 n.13 (observing that tax would have been fairly apportioned had state provided “tax credits” that would “alleviate or eliminate the potential multiple taxation”); Goldberg,488 U.S. at 261, 264 (Illinois taxing scheme fairly apportioned because it was internally consistent and because credit provision “operates to avoid actual multiple taxation”); Gen. Motors Co. v. City & County of Denver,990 P.2d 59, 69 (Colo. 1999) (holding fair apportionment prong satisfied if tax relates to activity taking place within state or if credit is provided for similar taxes paid in other jurisdictions); Walter Hellerstein, Is “Internal Consistency” Foolish?: Reflections on an Emerging Commerce Clause Restraint on State Taxation,87 Mich. L. Rev. 138, 182-83 (1988) (“A tax that appears to be internally inconsistent will nevertheless pass the ‘internal consistency’ test if the taxing state grants a credit for taxes paid to other states on the same tax base.”). But see Tennessee Gas Pipeline Co. v. Urbach,750 N.E.2d 52, 59 (N.Y. 2001) (holding credit provision “invalid” because court would need “to define the parameters of the credit and the manner in which it will be implemented,” in violation of separation of powers).
The relevant version of the MinnesotaCare tax credit, Minn. Stat. § 295.54, subd. 1 (2000), stated:
A hospital, surgical center, or health care provider that has paid taxes to another jurisdiction measured by gross revenues and is subject to tax under sections 295.52 to 295.59 on the same gross revenues is entitled to a credit for the tax legally due and paid to another jurisdiction to the extent of the lesser of (1) the tax actually paid to the other jurisdiction, or (2) the amount of tax imposed by Minnesota on the gross revenues subject to tax in the other taxing jurisdictions.
(Emphasis added.) Mayo argues that, properly construed, the
credit would never have been available to the hypothetical
we are to presume that the legislature did not intend for the statute to
violate the United States Constitution.
as to the words “paid taxes,” Mayo cannot have it both ways. If the words “paid taxes” do not include
Mayo’s pass-through of the Minnesota tax to the Wisconsin customer, then there
is no risk of multiple taxation of the Wisconsin customer and no internal
inconsistency. But if we accept Mayo’s
hypothetical to the contrary, we would then be persuaded by the Commissioner’s counter
argument that the words “paid taxes” should be construed to include a party who
bears the economic incidence of the tax, not just the party who bears the legal
incidence of the tax. For purposes of
the hypothetical, Mayo and the Commissioner agree that it is reasonable to
assume that Mayo would pass through the MinnesotaCare tax to the
of the words “paid taxes” is supported by legislative history. As originally enacted, the credit used
language that would be more supportive of Mayo’s interpretation. It offered a credit to any “resident”
Minnesota health-care provider that was “liable for taxes payable” in another
jurisdiction. Act of April 23, 1992, ch. 549, art. 9, § 9,
1992 Minn. Laws 1487, 1614 (codified at Minn. Stat. § 295.54 (1992)). But in 1996, as a result of circumstances we
will describe below, the legislature amended this language by broadening the
availability of the credit from a “resident hospital or resident health care
provider who is liable for taxes” in another jurisdiction to a “hospital,
surgical center, pharmacy, or health care provider that has paid taxes” to
another jurisdiction. Act of April 12,
1996, ch. 471, art. 6, § 9, 1996 Minn. Laws 1717, 1814 (codified at Minn.
Stat. § 295.54, subd. 1 (1996)).
Because the persons who are entitled to the credit under the 1996
amendment include both resident and nonresident providers, and only a resident
provider would be directly liable for MinnesotaCare taxes, the words “paid
taxes” must include those who paid the tax indirectly, as through a
pass-through charge. Accordingly, we
construe the words “paid taxes” to include a
Third, as to the words “same gross revenues,” we are persuaded that those words should be construed as a generic reference to the type of revenues that are subject to the MinnesotaCare tax, and include both the revenue on the original sale and the revenue on the resale of the same qualifying services.
acceptance of this broad construction of the “same gross revenues,” and our
broad reading of “paid taxes,” are supported by the observation that, if the
credit is not read broadly to apply to the hypothetical
At oral argument,
Mayo argued that its narrow construction of the credit would not make it
meaningless. Mayo suggested that when
the MinnesotaCare tax was originally enacted, it made nonresident hospitals
subject to MinnesotaCare tax on any revenues from “patients domiciled in
But this argument
fails because, first, the credit as originally enacted applied only to
“resident” providers and, second, the legislature retained and even expanded
the credit after it removed nonresident hospitals from the tax. In 1993, physicians domiciled in Wisconsin,
Iowa, and South Dakota sought an injunction to prevent application of the
MinnesotaCare tax to them as nonresident providers, claiming violations of the
Due Process and Commerce Clauses of the United States Constitution. The district court employed the Commerce
Clause to permanently enjoin the Commissioner from applying the MinnesotaCare
tax to nonresident health-care providers, observing that “[a]s written, the
Act’s reach is nationwide.” Baertsch
The existence of the
credit, as thus construed, eliminates any hypothetical burden on interstate
commerce. A Minnesota hospital would not
be encouraged to purchase all laboratory services in Minnesota because it would
be entitled to credit any economic incidence of a tax imposed by another state
on services bought from a provider in that state against the MinnesotaCare tax
otherwise imposed on the revenue it received from the resale of those services
to a patient in Minnesota. Likewise, a
We conclude that Mayo has not met its burden of proving that the MinnesotaCare tax revenue exemption, Minn. Stat. § 295.53, subd. 1(a)(4)-(5), is either unfairly apportioned or discriminatory under Complete Auto,and hold that the provision is constitutional under the Commerce Clause of the United States Constitution. We affirm the decision of the tax court.
 This language now appears at Minn. Stat. § 295.53, subd. 1(a)(3)-(4) (2004).
 In Complete Auto Transit, Inc. v.
Brady, the United States Supreme Court said that the Commerce Clause
requires state taxes to (1) have a “substantial nexus to the taxing State,” (2)
be “fairly apportioned,” (3) not discriminate against interstate commerce, and
(4) “fairly relate to the services provided by the State.” 430
 Before the tax court, the Commissioner also argued that Mayo had not satisfied the threshold question of whether the MinnesotaCare tax “implicates” the Commerce Clause. See, e.g., Stelzner v. Comm’r of Revenue, 621 N.W.2d 736, 740 (Minn. 2001) (stating that, when examining whether a state tax unduly burdens interstate commerce, this court determines (1) whether the tax “implicates” the Commerce Clause and, only if so, (2) whether the tax violates the clause). The tax court concluded that the MinnesotaCare tax did implicate the Commerce Clause and the Commissioner has not appealed that conclusion.
 Armco and Tyler Pipe seem to place less reliance on the requirement that the geographic distinctions be “express” because, in essence, the exemptions were measured (as in the MinnesotaCare tax exemption) by whether the transaction was subject to another tax. Armco and Tyler Pipe can be read to support the conclusion that the exemptions were sufficiently transparent to satisfy the “express” requirement because the transaction could be subject to the other tax only if that transaction was conducted intrastate.
 Interestingly, despite this
Although we have not held that a State imposing an apportioned gross receipts tax that grants a credit for sales taxes paid in state must also extend such a credit to sales taxes paid out of state, we have noted that equality of treatment of interstate and intrastate activity has been the common theme among the paired (or “compensating”) tax schemes that have passed constitutional muster.
Jefferson Lines, 514 U.S. at 193 n.6 (citations omitted).
 We recognize that in Fulton Corp. v. Faulkner, where the
“only issue” was whether a facially discriminatory tax was nevertheless
constitutional as a “compensatory” tax, the Supreme Court held that Darnell and Kidd were “no longer good law under the Commerce Clause.” Fulton,
 The use of the “internal
consistency” test to determine fair apportionment first surfaced in Container
Corp. of America v. Franchise Tax Board,a case involving a state “unitary business” tax where
the Court held that the first inquiry as to fair apportionment “is what might
be called internal consistency—that is the formula must be such that, if
applied by every jurisdiction, it would result in no more than all of the
unitary business’s income being taxed.”
 The credit provided:
A resident hospital or resident health care provider who is liable for taxes payable to another state or province or territory of Canada measured by gross receipts and is subject to tax under section 295.52 is entitled to a credit for the tax paid to another state or province or territory of Canada to the extent of the lesser of (1) the tax actually paid to the other state or province or territory of Canada, or (2) the amount of tax imposed by Minnesota on the gross receipts subject to tax in the other taxing jurisdictions.
 We ruled that the dispute was ripe and
that the district court had jurisdiction.