Mr. Justice Powell
delivered the opinion of the Court.
The Compact Clause of Art. I, § 10, cl. 3, of the Constitution provides: “No State shall, without the Consent of Congress, . . . enter into any Agreement or Compact with another State, or with a foreign Power . . . .” The Multistate Tax Compact, which established the Multistate Tax Commission, has not received congressional approval. This appeal requires us to decide whether the Compact is invalid for that reason. We also are required to decide whether it impermissibly encroaches on congressional power under the Commerce Clause and whether it operates in violation of the Fourteenth Amendment.
I
The Multistate Tax Compact was drafted in 1966 and became effective, according to its own terms, on August 4, 1967, after seven States had adopted it. By the inception of this litigation in 1972, 21 States had become members. Its formation was a response to this Court's decision in Northwestern States Portland Cement Co. v. Minnesota, 358 U. S. 450 (1959), and the congressional activity that followed in its wake.
In Northwestern States, this Court held that net income from the interstate operations of a foreign corporation may be subjected to state taxation, provided that the levy is nondiscriminatory and is fairly apportioned to local activities that form a sufficient nexus to support the exercise of the taxing power. This prompted Congress to enact a statute, Act of Sept. 14, 1959, Pub. L. 86-272, 73 Stat. 555, which sets forth certain minimum standards for the exercise of that power. It also authorized a study for the purpose of recommending legislation establishing uniform standards to be observed by the States in taxing income of interstate businesses. Although the results of the study were published in 1964 and 1965, Congress has not enacted any legislation dealing with the subject.
While Congress was wrestling with the problem, the Multi-state Tax Compact was drafted. It symbolized the recognition that, as applied to multistate businesses, traditional state tax administration was inefficient and costly to both State and taxpayer." In accord with that recognition, Art. I of the Compact states four purposes: (1) facilitating proper determination of state and local tax liability of multistate taxpayers, including the equitable apportionment of tax bases and settlement of apportionment disputes; (2) promoting uniformity and compatibility in state tax systems; (3) facilitating taxpayer convenience and compliance in the filing of tax returns and in other phases of tax administration; and (4) avoiding duplicative taxation.
To these ends, Art. VI creates the Multistate Tax Commission, composed of the tax administrators from all the member States. Section 3 of Art. VI authorizes the Commission (i) to study state and local tax systems; (ii) to' develop and recommend proposals for an increase in uniformity and compatibility of state and local tax laws in order to encourage simplicity and improvement in state and local tax law and administration; (iii) to compile and publish information that may assist member States in implementing the Compact and taxpayers in complying with the tax laws; and (iv) to do all things necessary and incidental to the administration of its functions pursuant to the Compact.
Articles YII and VIII detail more specific powers of the Commission. Under Art. VII, the Commission may adopt uniform administrative regulations in the event that two or more States have uniform provisions relating to specified types of taxes. These regulations are advisory only. Each member State has the power to reject, disregard, amend, or modify any rules or regulations promulgated by the Commission. They have no force in any member State until adopted by that State in accordance with its own law.
Article VIII applies only in those States that specifically adopt it by statute. It authorizes any member State or its subdivision to request that the Commission perform an audit on its behalf. The Commission, as the State’s auditing agent, may seek compulsory process in aid of its auditing power in the courts of any State that has adopted Art. VIII. Information obtained by the audit may be disclosed only in accordance with the laws of the requesting State. Moreover, individual member States retain complete control over all legislation and administrative action affecting the rate of tax, the composition of the tax base (including the determination of the components of taxable income), and the means and methods of determining tax liability and collecting any taxes determined to be due.
Article X permits any party to withdraw from the Compact by enacting a repealing statute. The Compact’s other provisions are of less relevance to the matter before us.
In 1972, appellants brought this action on behalf of them-selves and all other multistate taxpayers threatened with audits by the Commission. They named the Commission, its individual Commissioners, and its Executive Director as defendants. Their complaint challenged the constitutionality of the Compact on four grounds: (1) the Compact, never having received the consent of Congress, is invalid under the Compact Clause; (2) it unreasonably burdens interstate commerce; (3) it violates the rights of multistate taxpayers under the Fourteenth Amendment; and (4) its audit provisions violate the Fourth and Fourteenth Amendments. Appellants sought a declaratory judgment that the Compact is invalid and a permanent injunction barring its operation.
The complaint survived a motion to dismiss. 367 F. Supp. 107 (SDNY 1973). After extensive discovery, appellees moved for summary judgment. A three-judge District Court, convened pursuant to 28 U. S. C. § 2281, rejected appellants' claim that the record would not support summary judgment. 417 F. Supp. 795, 798 (SDNY 1976). Turning to -the merits, the District Court first rejected the contention that the Compact Clause requires congressional consent to every agreement between two or more States. The court cited Virginia v. Tennessee, 148 U. S. 503 (1893), and New Hampshire v. Maine, 426 U. S. 363 (1976), in support of its holding that consent is necessary only in the case of a compact that enhances the political power of the member States in relation to the Federal Government. The District Court found neither enhancement of state political power nor encroachment upon federal supremacy. Concluding that appellants’ Commerce Clause, Fourth Amendment, and Fourteenth Amendment claims also lacked merit, the District Court granted summary judgment for appellees.
Before this Court, appellants have abandoned their search- and-seizure claim. Although they preserved their claim relating to the propriety of summary judgment, we find no reason to disturb the conclusion of the court below on that point. We have before us, therefore, appellant’s contentions under the Compact Clause, the Commerce Clause, and the Fourteenth Amendment. We consider first the Compact Clause contention.
II
Read literally, the Compact Clause would require the States to obtain congressional approval before entering into any agreement among themselves, irrespective of form, subject, duration, or interest to the United States. The difficulties with such an interpretation were identified by Mr. Justice Field in his opinion for the Court in Virginia v. Tennessee, supra. His conclusion that the Clause could not be read literally was approved in subsequent dicta, but this Court did not have occasion expressly to apply it in a holding until our recent decision in New Hampshire v. Maine, supra.
Appellants urge us to abandon Virginia v. Tennessee and New Hampshire v. Maine, but provide no effective alternative other than a literal reading of the Compact Clause. At this late date, we are reluctant to accept this invitation to circumscribe modes of interstate cooperation that do not enhance state power to the detriment of federal supremacy. We have examined, nevertheless, the origin and development of the Clause, to determine whether history lends controlling support to appellants’ position.
Article I, § 10, cl. 1, of the Constitution — the Treaty Clause — declares: “No State, shall enter into Any Treaty, Alliance or Confederation . . . .” Yet Art. I, § 10, cl. 3 — the Compact Clause — permits the States to enter into “agrees ments” or “compacts,” so long as congressional consent is obtained. The Framers clearly perceived compacts and agreements as differing from treaties. The records of the Constitutional Convention, however, are barren of any clue as to the precise contours of the agreements and compacts governed by the Compact Clause. This suggests that the Framers used the words “treaty,” “compact,” and “agreement” as terms of art, for which no explanation was required and with which we are unfamiliar. Further evidence that the Framers ascribed precise meanings to these words appears in contemporary commentary.
Whatever distinct meanings the Framers attributed to the terms in Art. I, § 10, those meanings were soon lost. In 1833, Mr. Justice Story perceived no clear distinction among any of the terms. Lacking any clue as to the categorical definitions the Framers had ascribed to them, Mr. Justice Story-developed his own theory. Treaties, alliances, and confederations, he wrote, generally connote military and political accords and are forbidden to the States. Compacts and agreements, on the other hand, embrace “mere private rights of sovereignty; such as questions of boundary; interests in land situate in the territory of each other; and other internal regulations for the mutual comfort and convenience of States bordering on each other.” 2 J. Story, Commentaries on the Constitution of the United States § 1403, p. 264 (T. Cooley ed. 1873.). In the latter situations, congressional consent was required, Story felt, “in order to check any infringement of the rights of the national government.” Ibid.
The Court’s first opportunity to comment on the scope of the Compact Clause, Holmes v. Jennison, 14 Pet. 540 (1840), proved inconclusive. Holmes had been arrested in Vermont on a warrant issued by Jennison, the Governor. The warrant apparently reflected an informal agreement by Jennison to deliver Holmes to authorities in Canada, where he had been indicted for murder. On a petition for habeas corpus, the Supreme Court of Vermont held Holmes’ detention lawful. Although this Court divided evenly on the question of its jurisdiction to review the decision, Mr. Chief Justice Taney, in an opinion joined by Mr. Justice Story and two others, addressed the merits of Holmes’ claim that Jennison’s informal agreement to surrender him fell within the scope of the Compact Clause. Mr. Chief Justice Taney focused on the fact that the agreement in question was between a State and a foreign government. Since the clear intention of the Framers had been to cut off all communication between the States and foreign powers, id., at 568-579, he concluded that the Compact Clause would permit an arrangement such as the one at issue only if “made under the supervision of the United States ...,” id., at 578. In his separate opinion, Mr. Justice Catron expressed disquiet over what he viewed as Mr. Chief Justice Taney’s literal reading of the Compact Clause, noting that it might threaten agreements between States theretofore considered lawful.
Despite Mr. Justice Catron’s fears, courts faced with the task of applying the Compact Clause appeared reluctant to strike down newly emerging forms of interstate cooperation. For example, in Union Branch R. Co. v. East Tennessee & G. R. Co., 14 Ga. 327 (1853), the Supreme Court of Georgia rejected a Compact Clause challenge to an agreement between Tennessee and Georgia concerning the construction of an interstate railroad. Omitting any mention of Holmes v. Jennison, the Georgia court seized upon Story’s observation that the words “treaty, alliance, and confederation” generally were known to apply to treaties of a political character. Without explanation, the court transferred this description of the Treaty Clause to the Compact Clause, which it perceived as restraining the power of the States only with respect to agreements “which might limit, or infringe upon a full and complete execution by the General Government, of the powers-intended to be delegated by the Federal Constitution . . . 14 Ga., at 339. A broader prohibition could not have been intended, since it was unnecessary to protect the Federal Government. Unless this view was taken, said the court:
“We must hold that a State, without the consent of Congress, can make no sort of contract, whatever, with another State. That it cannot sell to another state, any portion of public property, . . . though it may so sell to individuals. . . .
“We can see no advantage to be gained by, or benefit in such a provision; and hence, we think it was not intended.” Id., at 340.
It was precisely this approach that formed the basis in 1893 for Mr. Justice Field's interpretation of the Compact Clause in Virginia v. Tennessee. In that case, the Court held that Congress tacitly had assented to the running of a boundary between the two States. In an extended dictum, however, Mr. Justice Field took the Court's first opportunity to comment upon the Compact Clause since the neglected essay in Holmes v. Jennison. Mr. Justice Field, echoing the puzzlement expressed by Story 60 years earlier, observed:
“The terms 'agreement' or 'compact' taken by themselves are sufficiently comprehensive to embrace all forms of stipulation, written or verbal, and relating to all kinds of subjects; to those to which the United States can have no possible objection or have any interest in interfering with, as well as to those which may tend to increase and build up the political influence of the contracting States, so as to encroach upon or impair the supremacy of the United States or interfere with their rightful management of particular subjects placed under their entire control.” 148 U. S., at 517-518.
Mr., Justice Field followed with four examples of interstate agreements that could in “no respect concern the United States”: (1) an agreement by one State to purchase land within its borders owned by another State; (2) an agreement by one State to ship merchandise over a canal owned by another; (3) an agreement to drain a malarial district on the border between two States; and (4) an agreement to combat an immediate threat, such as invasion or epidemic. As the Compact Clause could not have been intended to reach every possible interstate agreement, it was necessary to construe the terms of the Compact Clause by reference to the object of the entire section in which it appears:
“Looking at the clause in which the terms 'compact’ or 'agreement’ appear, it is evident that the prohibition is directed to the formation of any combination tending to the increase of political power in the States, which may encroach upon or interfere with the just supremacy of the United States.” Id., at 519.
Mr. Justice Field reiterated this functional view of the Compact Clause a year later in Wharton v. Wise, 153 U. S. 155, 168-170 (1894).
Although this Court did not have occasion to apply Mr. Justice Field’s test for many years, it has been cited with approval on several occasions. Louisiana v. Texas, 176 U. S. 1, 17 (1900); Stearns v. Minnesota, 179 U. S. 223, 246-248 (1900); North Carolina v. Tennessee, 235 U. S. 1, 16 (1914). Moreover, several decisions of this Court have upheld a variety of interstate agreements effected through reciprocal legislation without congressional consent. E. g., St. Louis & S. F. R. Co. v. James, 161 U. S. 545 (1896); Hendrick v. Maryland, 235 U. S. 610 (1915); Bode v. Barrett, 344 U. S. 583 (1953); New York v. O’Neill, 359 U. S. 1 (1959). While none of these cases explicitly applied the Virginia v. Tennessee test, they reaffirmed its underlying assumption: not all agreements between States are subject to the strictures of the Compact Clause. In O’Neill, for example, this Court upheld the Uniform Law to Secure the Attendance of Witnesses from Within or Without the State in Criminal Proceedings, which had been enacted in 41 States and Puerto Rico. That statute permitted the judge of a court of any enacting State to invoke the process of the courts of a sister State for the purpose of compelling the attendance of witnesses at criminal proceedings in the requesting State. Although no Compact Clause question was directly presented, the Court’s opinion touched upon similar concerns:
“The Constitution did not purport to exhaust imagination and resourcefulness in devising fruitful interstate relationships. It is not to be construed to limit the variety of arrangements which are possible through the voluntary and cooperative actions of individual States with a view to increasing harmony within the federalism created by the Constitution. Far from being divisive, this legislation is a catalyst of cohesion. It is within the unrestricted area of action left to the States by the Constitution.” 359 U. S., at 6.
The reciprocal-legislation cases support the soundness of the Virginia v. Tennessee rule, since the mere form of the interstate agreement cannot be dispositive. Agreements effected through reciprocal legislation may present opportunities for enhancement of state power at the expense of the federal supremacy similar to the threats inherent in a more formalized “compact.” Mr. Chief Justice Taney considered this point in Holmes v. Jennison, 14 Pet., at 573:
“Can it be supposed, that the constitutionality of the act depends on the mere form of the agreement? We think not. The Constitution looked to the essence and substance of things, and not to mere form. It would be but an evasion of the constitution to place the question upon the formality with which the agreement is made.”
The Clause reaches both “agreements” and “compacts,” the formal as well as the informal. The relevant inquiry must be one of impact on our federal structure.
This was the status of the Virginia v. Tennessee test until two Terms ago, when we decided New Hampshire v. Maine, 426 U. S. 363 (1976). In that case we specifically applied the test and held that an interstate agreement locating an ancient boundary did not require congressional consent. We reaffirmed Mr. Justice Field's view that the “application of the Compact Clause is limited to agreements that are ‘directed to the formation of any combination tending to the increase of political power in the States, which may encroach upon or interfere with the just supremacy of the United States.''' Id., at 369, quoting Virginia v. Tennessee, 148 U. S., at 519. This rule states the proper balance between federal and state power with respect to compacts and agreements among States.
Appellants maintain that history constrains us to limit application of this rule to bilateral agreements involving no independent administrative body. They argue that this Court never has upheld a multilateral agreement creating an active administrative body with extensive powers delegated to it by the States, but lacking congressional consent. It is true that most multilateral compacts have been submitted for congressional approval. But this historical practice, which may simply reflect considerations of caution and convenience on the part of the submitting States, is not controlling. It is also true that the precise interstate mechanism involved in this case has not been presented to this Court before. New York v. O’Neill, supra, however, involving analogous multilateral arrangements, stands as an implicit rejection of appellants’ proposed limitation of the Virginia v. Tennessee rule.
Appellants further urge that the pertinent inquiry is one of potential, rather than actual, impact upon federal supremacy. We agree. But the multilateral nature of the agreement and its establishment of an ongoing administrative body do not, standing alone, present significant potential for conflict with the principles underlying the Compact Clause. The number of parties to an agreement is irrelevant if it does not impermis-sibly enhance state power at the expense of federal supremacy. As to the powers delegated to the administrative body, we think these also must be judged in terms of enhancement of state power in relation to the Federal Government. See Virginia v. Tennessee, supra, at 520 (establishment of commission to run boundary not a “compact”). We turn, therefore, to the application of the Virginia v. Tennessee rule to the Compact before us.
Ill
On its face the Multistate Tax Compact contains no provisions that would enhance the political power of the member States in a way that encroaches upon the supremacy' of the United States. There well may be some incremental increase in the bargaining power of the member States quoad the corporations subject to their respective taxing jurisdictions. Group action in itself may be more influential than independent actions by the States. But the test is whether the Compact enhances state power quoad the National Government. This pact does not purport to authorize the member States to exercise any powers they could not exercise in its absence. Nor is there any delegation of sovereign power to the Commission; each State retains complete freedom to adopt or reject the rules and regulations of the Commission. Moreover, as noted above, each State is free to withdraw at any time. Despite this apparent compatibility of the Compact with the interpretation of the Clause established by our cases, appellants argue that the Compact’s effect is to threaten federal supremacy.
A
Appellants contend initially that the Compact encroaches upon federal supremacy with respect to interstate commerce. This argument, as we understand it, has four principal components. It is claimed, first, that the Commission’s use in its audits of “unitary business” and “combination of income” methods for determining a corporate taxpayer’s income creates a risk of multiple taxation for multistate businesses. Whether or not this risk is a real one, it cannot be attributed to the existence of the Multistate Tax Commission. When the Commission conducts an audit at the request of a member State, it uses the methods adopted by that State. Since appellants do not contest the right of each State to adopt these procedures if it conducted the audits separately, they cannot be heard to complain that a threat to federal supremacy arises from the Commission’s adoption of the unitary-business standard in accord with the wishes of the member States. Indeed, to the extent that the Commission succeeds in promoting uniformity in the application of state taxing principles, the risks of multiple taxation should be diminished.
Appellants’ second contention as to enhancement of state power over interstate commerce is that the Commission’s regulations provide for apportionment of nonbusiness income. This allegedly creates a substantial risk of multiple taxation, since other States are said to allocate this income to the place of commercial domicile. We note first that the regulations of the Commission do not require the apportionment of nonbusiness income. They do define business income, which is apportionable under the regulations, to include elements that might be regarded as nonbusiness income in some States. P-H State & Local Tax Serv. ¶¶ 6100-6286 (1973). But again there is no claim that the member States could not adopt similar definitions in the absence of the Compact. Any State’s ability to exact additional tax revenues from multistate businesses cannot be attributed to the Compact; it is the result of the State’s freedom to select, within constitutional limits, the method it prefers.
The third aspect of the Compact’s operation said to encroach upon federal commerce power involves the Commission’s requirement that multistate businesses under audit file data concerning affiliated corporations. Appellants argue that the costs of compiling financial data of related corporations burden the conduct of interstate commerce for the benefit of the taxing States. Since each State presumably could impose similar fifing requirements individually, however, appellants again do not show that the Commission’s practices, as auditing agent for member States, aggrandize their power or threaten federal control of commerce. Moreover, to the extent that the Commission is engaged in joint audits, appellants’ fifing burdens well may be reduced.
Appellants’ final claim of enhanced state power with respect to commerce is that the “enforcement powers” conferred upon the Commission enable that body to exercise authority over interstate business to a greater extent than the sum of the States’ authority acting individually. This claim also falls short of meeting the standard of Virginia v. Tennessee. Article VIII of the Compact authorizes the Commission to require the attendance of persons and the production of documents in connection with its audits. The Commission, however, has no power to punish failures to comply. It must resort to the courts for compulsory process, as would any auditing agent employed by the individual States. The only novel feature of the Commission’s “enforcement powers” is the provision in Art. VIII permitting the Commission to resort to the courts of any State adopting that Article. Adoption of the Article, then, amounts to nothing more than reciprocal legislation for providing mutual assistance to the auditors of the member States. Reciprocal legislation making the courts of one State available for the better administration of justice in another has been upheld by this Court as a method “to accomplish fruitful and unprohibited ends.” New York v. O’Neill, 359 U. S., at 11. Appellees make no showing that increased effectiveness in the administration of state tax laws, promoted by such legislation, threatens federal supremacy. See n. 21, supra.
B
Appellants further argue that the Compact encroaches upon the power of the United States with respect to foreign relations. They contend that the Commission has conducted multinational audits in which it applied the unitary business method to foreign corporate taxpayers, in conflict with federal policy concerning the taxation of foreign corporations.
This contention was not presented to the court below and in any event lacks substance. The existence of the Compact simply has no bearing on an individual State’s ability to utilize the unitary business method in determining the income of a particular multinational taxpayer. Bass, Ratcliff & Gretton, Ltd. v. State Tax. Comm’n, 266 U. S. 271 (1924). The Commission, as auditing agent, adopts the method only at the behest of a State requesting an audit. To the extent that its use contravenes any foreign policy of the United States, the facial validity of the Compact is not implicated.
C
Appellants’ final Compact Clause argument charges that the Compact impairs the sovereign rights of nonmember States. Appellants declare, without explanation, that if the use of the unitary business and combination methods continues to spread among the Western States, unfairness in taxation — presumably the risks of multiple taxation — will be avoidable only through the efforts of some coordinating body. Appellants cite the belief of the Commission’s Executive Director that the Commission represents the only available vehicle for effective coordination, and conclude that the Compact exerts undue pressure to join upon nonmember States in violation of their “sovereign right” to refuse.
We find no support for this conclusion. It has not been shown that any unfair taxation of multistate business resulting from the disparate use of combination and other methods will redound to the benefit of any particular group of States or to the harm of others. Even if the existence of such a situation were demonstrated, it could not be ascribed to the existence of the Compact. Each member State is free to adopt the auditing procedures it thinks best, just as it could if the Compact did not exist. Risks of unfairness and double taxation, then, are independent of the Compact.
Moreover, it is not explained how any economic pressure that does exist is an affront to the sovereignty of nonmember States. Any time a State adopts a fiscal or administrative policy that affects the programs of a sister State, pressure to modify those programs may result. Unless that pressure transgresses the bounds of the Commerce Clause or the Privileges and Immunities Clause of Art. IV, § 2, see, e. g., Austin v. New Hampshire, 420 U. S. 656 (1975), it is not clear how our federal structure is implicated. Appellants do not argue that an individual State's decision to apportion nonbusiness income — or to define business income broadly, as the regulations of the Commission actually do — -touches upon constitutional strictures. This being so, we are not persuaded that the same decision becomes a threat to the sovereignty of other States if a member State makes this decision upon the Commission's recommendation.
IY
Appellants further challenge, on relatively narrow grounds, the validity of the Multistate Tax Compact under the Commerce Clause and the Fourteenth Amendment. They allege that the Commission has abused its powers by conducting a campaign of harassment against members of the plaintiff class. Specifically, they claim that the Commission induced eight States to issue burdensome requests for production of documents and to deviate from the provisions of state law by issuing arbitrary assessments against taxpayers who refuse to comply with these harassing production orders.
These allegations do not establish that the Compact is in violation either of the Commerce Clause or the Fourteenth Amendment. We observe first that this contention was not presented to the court below. The only evidence of record relating to the allegations are statements in the affidavit of appellants’ counsel and an ambiguous excerpt from a letter of the Commission to the Director of Taxation of the State of Hawaii, quoted therein. App. 51-53. On this fragile basis, we hardly would be justified in making an initial finding of fact that appellees engaged in the campaign sketched in the affidavit.
Even if appellants’ factual allegations were supported by the record, they would be irrelevant to the facial validity of the Compact. As we have noted above, it is only the individual State, not the Commission, that has the power to issue an assessment — whether arbitrary or not. If the assessment violates state law, we must assume that state remedies are available. E. g., Colgate-Palmolive Co. v. Dorgan, 225 N. W. 2d 278 (N. D. 1974).
Y
We conclude that appellants’ constitutional challenge to the Multistate Tax Compact fails. We affirm the judgment of the District Court.
Affirmed.
Those States were: Alaska, Alaska Stat. Ann. §43.19.010 (1977); Arkansas, Ark. Stat. Ann. § 84-4101 (Supp. 1977); Colorado, Colo. Rev. Stat. §24-60-1301 (1973); Florida, Fla. Stat. §213.15 (1971); Haw. Rev. Stat. § 255-1 (Supp. 1976); Idaho, Idaho Code § 63-3701 (1976); Illinois, Ill. Rev. Stat., ch. 120, § 871 (1973); Indiana, Ind. Code § 6-8-9-101 (1972); Kansas, Kan. Stat. Ann. § 79-4301 (1969); Michigan, Mich. Comp. Laws §205.581 (1970); Missouri, Mo. Rev. Stat. §32.200 (1969); Montana, Mont. Rev. Codes Ann. § 84-6701 (Supp. 1977); Nebraska, Neb. Rev. Stat. §77-2901 (1943); Nevada, Nev. Rev. Stat. §376.010 (1973); New Mexico, N. M. Stat. Ann. § 72-15A-37 (Supp. 1975); North Dakota, N. D. Cent. Code §57-59-01 (1972); Oregon, Ore. Rev. Stat. § 305.655 (1977); Texas, Tex. Rev. Civ. Stat. Ann., Art. 7359a (Vernon Supp. 1977); Utah, Utah Code Ann. §59-22-1 (1953 and Supp. 1977); Washington, Wash. Rev. Code § 82.56.010 (1974); Wyoming, Wyo. Stat. §39-376 (Supp. 1975).
Since the suit began, four States — Florida, Illinois, Indiana, and Wyoming — have withdrawn from the Compact, see 1976 Fla. Laws, ch. 76-149, § 1; 1975 HI. Laws, No. 79-639, § 1; 1977 Ind. Acts, No. 90; 1977 Wyo. Sess. Laws, ch. 44, § 1. Two others — California and South Dakota— have joined it, see Cal. Rev. & Tax. Code Ann. § 38001 (West Supp. 1977); S. D. Comp. Laws Ann. § 10-54r-l (Supp. 1977), for a current total of 19 members.
Title I of Pub. L. 86-272, codified as 15 U. S. C. §§ 381-384, essentially forbids the imposition of a tax on a foreign corporation’s net income derived from activities within a State, if those activities are limited to the solicitation of orders that are approved, filled, and shipped from a point outside the State.
H. R. Rep. No. 1480, 88th Cong., 2d Sess. (1964); H. R. Rep. No. 565, 89th Cong., 1st Sess. (1965); H. R. Rep. No. 952, 89th Cong., 1st Sess. (1965).
There have been several unsuccessful attempts. H. R. 11798, 89th Cong., 1st Sess. (1965); H. R. 16491, 89th Cong., 2d Sess. (1966); S. 317, 92d Cong., 1st Sess. (1971); H. R. 1538, 92d Cong., 1st Sess. (1971); S. 1245, 93d Cong., 1st Sess. (1973); H. R. 977, 93d Cong., 1st Sess. (1973); S. 2080, 94th Cong., 1st Sess. (1975); H. R. 9, 94th Cong., 1st Sess. (1975).
The model Act proposed as the Multistate Tax Compact, with minor exceptions, has been adopted by each member State.
Article II consists of definitions. Article III permits small taxpayers— those whose only activities within the jurisdiction consist of sales totaling less than $100,000 — to elect to pay a tax on gross sales in lieu of a levy on net income. The Uniform Division of Income for Tax Purposes Act, contained in Art. IV, allows multistate taxpayers to apportion and allocate their income under formulae and rules set forth in the Compact or by any other method available under state law. It was approved by the National Conference of Commissioners on Uniform State Laws and the American Bar Association in 1957. Article V deals with sales and use taxes. Article IX provides for arbitration of disputes, but is not in effect. Article XI disclaims any attempt to affect the power of member States to fix rates of taxation or limit the jurisdiction of any court. Finally, Art. XII provides for liberal construction and severability.
The action was filed by United States Steel Corp., Standard Brands Inc., General Mills, Inc., and the Procter & Gamble Distributing Co. On February 5, 1974, the court below permitted Bethlehem Steel Corp., Bristol Myers Co., Eltra Corp., Goodyear Tire & Rubber Co., Green Giant Co., International Business Machines Corp., International Harvester Co., International Paper Co., International Telephone & Telegraph Corp., McGraw-Hill, Inc., NL Industries, Inc., Union Carbide Corp., and Xerox Corp. to intervene as plaintiffs. The court below ordered that the suit proceed as a class action. International Business Machines and Xerox withdrew as intervenor plaintiffs before decision.
Congressional consent has been sought, but never obtained. See S. 3892, 89th Cong., 2d Sess. (1966); S. 883, 90th Cong., 1st Sess. (1967); S. 1551, 90th Cong., 1st Sess. (1967); H. R. 9476, 90th Cong., 1st Sess. (1967); H. R. 13682, 90th Cong., 1st Sess. (1967); S. 1198, 91st Cong., 1st Sess. (1969); H. R. 6246, 91st Cong., 1st Sess. (1969); H. R. 9873, 91st Cong., 1st Sess. (1969); S. 1883, 92d Cong., 1st Sess. (1971); H. R. 6160, 92d Cong., 1st Sess. (1971); S. 3333, 92d Cong., 2d Sess. (1972); S. 2092, 93d Cong., 1st Sess. (1973).
E. g., Wharton v. Wise, 153 U. S. 155, 168-170 (1894); North Carolina v. Tennessee, 235 U. S. 1, 16 (1914).
The history of interstate agreements under the Articles of Confederation suggests the same distinction between "treaties, alliances, and confederations” on the one hand, and “agreements and compacts” on the other. Article VI provided in part as follows:
“No State without the consent of the United States, in Congress assembled, shall send any embassy to, or receive any embassy from, or enter into any confe[r]ence, agreement, alliance or treaty, with any long, prince or state ....
“No two or more States shall enter into any treaty, confederation, or alliance whatever, between them, without the consent of the United States, in Congress assembled, specifying accurately the purposes for which the same is to be entered into, and how long it shall continue.”
Congressional consent clearly was required before a State could enter into an “agreement” with a foreign state or power or before two or more States could enter into “treaties, alliances, or confederations.” Apparently, however, consent was not required for mere “agreements” between States. “The articles inhibiting any treaty, confederation, or alliance between the States without the consent of Congress . . . were not designed to prevent arrangements between adjoining States to facilitate the free intercourse of their citizens, or remove barriers to their peace, and prosperity . . . Wharton v. Wise, supra, at. 167.
For example, the Virginia-Maryland Compact of 1785, which governed navigation and fishing rights in the Potomac River, the Pocomoke River, and the Chesapeake Bay, did not receive congressional approval, yet no question concerning its validity under Art. VI ever arose. As the Court noted in Wharton v. Wise, in reference to the 1785 Compact, “looking at the object evidently intended by the prohibition of the Articles of Confederation, we are clear they were not directed against agreements of the character expressed by the compact. under consideration. Its execution could in no respect encroach upon or weaken the general authority of Congress under those articles. Various compacts were entered into between Pennsylvania and New Jersey and between Pennsylvania and Virginia, during the Confederation, in reference to boundaries between them, and to rights of fishery in their waters, and to titles to land in their respective States, without the consent of Congress, which indicated that such consent was not deemed essential to their validity.” 153 U. S., at 170-171.
On July 25, 1787, the Convention created a Committee of Detail composed of John Rutledge, James Wilson, Edmund Randolph, Nathaniel Gorham, and Oliver Elsworth. The Convention then adjourned until August 6 to allow the Committee to prepare a draft. 2 M. Farrand, Records of the Federal Convention of 1787, pp. 97, 128 (1911). Section 10 of the Committee’s first draft provided in part: “No State shall enter into any Treaty, Alliance or Confederation with any foreign Power-nor witht. Const, of U. S. into any agreemt. or compact wh another State or Power . . . .” Id,., at 169 (abbreviations in original). On August 6, the Committee submitted a draft to the Convention containing the following articles:
“XII No State shall . . . enter into any treaty, alliance, or confederation ....
“XIII No State, without the consent of the Legislature of the United States, shall . . . enter into any agreement or compact with another State, or with any foreign power . . . .” Id., at 187.
The Committee of Style, created to revise the draft, reported on September 12, id., at 590, but nothing appears to have been said about Art. I, § 10, which contained the treaty and compact language incorporated into the Constitution as approved on September 17. The records of the state ratification conventions also shed no light. Publius declared only that the prohibition against treaties, alliances, and confederation, “for reasons which need no explanation, is copied into the new Constitution,” while the portion of Art. I, § 10, containing the Compact Clause fell “within reasonings which are either so obvious, or have been so fully developed, that they may be passed over without remark.” The Federalist, No. 44, pp. 299, 302 (J. Cooke ed. 1961) (J. Madison).
Some commentators have theorized that the Framers understood those terms in relation to the precisely defined categories, fashionable in the contemporary literature of international law, of accords between sovereigns. See, e. g., Engdahl, Characterization of Interstate Arrangements: When Is a Compact Not a Compact?, 64 Mich. L. Rev. 63 (1965); Weinfeld, What Did the Framers of the Federal Constitution Mean by “Agreements or Compacts”?, 3 U. Chi. L. Rev. 453 (1936). The international jurist most widely cited in the first 50 years after the Revolution was Emmerich de Yattel. 1 J. Kent, Commentaries on American Law 18 (1826). In 1775, Benjamin Franklin acknowledged receipt of three copies of a new edition, in French, of VattePs Law of Nations and remarked that the book “has been continually in the hands of the members of our Congress now sitting 2 F. Wharton, United States Revolutionary Diplomatic Correspondence 64 (1889), cited in Weinfeld, supra, at 458.
Yattel differentiated between “treaties,” which were made either for perpetuity or for a considerable period, and “agreements, conventions, and pactions,” which “are perfected in their execution once for all.” E. Vattel, Law of Nations 192 (J. Chitty ed. 1883). Unlike a “treaty” or “alliance,” an “agreement” or “paction^ was perfected upon execution:
“[T]hose compacts, which are accomplished once for all, and not by successive acts, — are no sooner executed then they are completed .and perfected. If they are valid, they have in their own nature a perpetual and irrevocable effect . . . .” Id., at 208.
This distinction between supposedly ongoing accords, such as military alliances, and instantaneously executed, though perpetually effective, agreements, such as boundary settlements, may have informed the drafting in Art. I, § 10. The Framers clearly recognized the necessity for amicable resolution of boundary disputes and related grievances. See Virginia v. West Virginia, 246 U. S. 565, 597-600 (1918); Frankfurter & Landis, The Compact Clause of the Constitution — A Study in Interstate Adjustments, 34 Yale L. J. 685, 692-695 (1925). Interstate agreements were a method with which they were familiar. Id., at 694, 732-734. Although these dispositive compacts affected the interests of the States involved, they did not represent the continuing threat to the other States embodied in a “treaty of alliance,” to use Vattel’s words. E. Yattel, supra, at 192.
St. George Tucker, who along with Madison and Edmund Randolph was a Virginia commissioner to the Annapolis Convention of 1786, drew a distinction between “treaties, alliances, and confederations” on the one hand, and “agreements or compacts” on the other:
“The former relate ordinarily to subjects of great national magnitude and importance, and are often perpetual, or made for a considerable period of time; the power of making these is altogether prohibited to the individual states; but agreements, or compacts, concerning transitory or local affairs, or such as cannot possibly affect any other interest but that of the parties, may still be entered into by the respective states, with the consent of congress.” 1 W. Blackstone, Commentaries, Appendix 310 (S. Tucker ed. 1803) (footnotes omitted).
Tucker cited Vattel as authority for his interpretation of Art. I, § 10.
Mr. Justice Story found Tucker’s view, see n. 13, supra, unilluminating:
“What precise distinction is here intended to be taken between treaties, and agreements, and compacts, is nowhere explained, and has never as yet been subjected to any exact judicial or other examination. A learned commentator, however, supposes, that the former ordinarily relate to subjects of great national magnitude and importance,' and are often perpetual, or for a great length of time; but that the latter relate to transitory or local concerns, or such as cannot possibly affect any other interests but those of the parties [citing Tucker]. But this is at best a very loose and unsatisfactory exposition, leaving the whole matter open to the most latitudinarian construction. What are subjects of great national magnitude and importance? Why may not a compact or agreement between States be perpetual? If it may not, what shall be its duration? Are not treaties often made for short periods, and upon questions of local interest, and for temporary objects?” 2 J. Story, Commentaries on the Constitution of the United States § 1402, p. 263 (T. Cooley ed. 1873) (footnotes omitted).
In Green v. Biddle, 8 Wheat. 1 (1823), the Court, including Mr. Justice Story, had been presented with a question of the validity of the Virginia-Kentucky Compact of 1789, to which Congress had never expressly assented. Henry Clay argued to the Court that the Compact Clause extended “to all agreements or compacts, no matter what is the subject of them. It is immaterial, therefore, whether that subject be harmless or dangerous to the Union.” Id., at 39. The Court did not address that issue, however, for it held that Congress’ consent could be implied. Id., at 87.
Notwithstanding Mr. Justice Catron’s unease, Mr. Chief Justice Taney’s opinion in Jennison is not inconsistent with the rule of Virginia v. Tennessee. At some length, Taney emphasized that the State was exercising the power to extradite persons sought for crimes in other countries, which was part of the exclusive foreign relations power expressly reserved to the Federal Government. He concluded, therefore, that the State’s agreement would be constitutional only if made under the supervision of the United States.
After the Jennison case had been disposed of by the Court, the Vermont court discharged Holmes. It concluded from an examination of the five separate opinions in the case that a majority of this Court believed the Governor had no power to deliver Holmes to Canadian authorities. Holmes v. Jennison, 14 Pet. 540, 597 (1840) (Reporter’s Note).
See generally Abel, Interstate Cooperation as a Child, 32 Iowa L. Rev. 203 (1947); Engdahl, supra, n. 12, at 86.
The court failed to mention that Story described the terms of the Treaty Clause, not the Compact Clause, as political. It was the political character of treaties, in his view, that led to their absolute prohibition. Story theorized that the Compact Clause dealt with “private rights of sovereignty,” see supra, at 464, but that congressional consent was required to prevent possible abuses.
Taking a similar view of the Compact Clause, and also ignoring Holmes v. Jennison, were Dover v. Portsmouth Bridge, 17 N. H. 200 (1845), and Fisher v. Steele, 39 La. Ann. 447, 1 So. 882 (1887). Holmes v. Jennison apparently was not cited in a case relating to the Compact Clause until 1917, 14 years after Mr. Justice Field formulated the rule of Virginia v. Tennessee. See McHenry County v. Brady, 37 N. D. 59, 70, 163 N. W. 540, 544 (1917).
Mr. Chief Justice Taney may have shared the Georgia court’s view of compacts which, unlike the “agreement” in Holmes v. Jennison, did not implicate the foreign relations power of the United States. A year after Union Branch B. Co. was decided, he suggested in dictum that the Compact Clause is aimed at an accord that is “in its nature, a political question, to be settled by compact made by the political departments of the government.” Florida v. Georgia, 17 How. 478, 494 (1855). The purpose of the Clause, he declared, is “to guard the rights and interests of the other States, and to prevent any compact or agreement between any two States, which might affect injuriously the interest of the others.” A similar concern with agreements of a political nature may be found in a dictum of Mr. Chief Justice Marshall:
“It is worthy of remark, too, that these inhibitions [of Art. I, §10] generally restrain state legislation on subjects entrusted to the general government, or in which the people of all the states feel an interest.
“A state is forbidden to enter into any treaty, alliance or confederation. If these compacts are with foreign nations, they interfere with the treaty making power which is conferred entirely on the general government; if with each other, for political purposes, they can scarcely fail to interfere with the general purpose and intent of the constitution.” Barron v. Baltimore, 7 Pet. 243, 249 (1833).
In support of this conclusion, Mr. Justice Field misread Story’s Commentaries in precisely the same way as the Georgia court did in Union Branch R. Co. See n. 17, supra.
State courts repeatedly have applied the test in confirming the validity of a variety of interstate agreements. E. g., McHenry County v. Brady, supra; Dixie Wholesale Grocery, Inc. v. Martin, 278 Ky. 705, 129 S. W. 2d 181, cert. denied, 308 U. S. 609 (1939); Ham v. Maine-New Hampshire Interstate Bridge Authority, 92 N. H. 268, 30 A. 2d 1 (1943); Roberts Tobacco Co. v. Department of Revenue, 322 Mich. 519, 34 N. W. 2d 54 (1948); Bode v. Barrett, 412 Ill. 204, 106 N. E. 2d 521 (1952), aff’d, 344 U. S. 583 (1953); Landes v. Landes, 1 N. Y. 2d 358, 135 N. E. 2d 562, appeal dismissed, 352 U. S. 948 (1956); Ivey v. Ayers, 301 S. W. 2d 790 (Mo. 1957); State v. Doe, 149 Conn. 216, 178 A. 2d 271 (1962); General Expressways, Inc. v. Iowa Reciprocity Board, 163 N. W. 2d 413 (Iowa, 1968); Kinnear v. Hertz Corp., 86 Wash. 2d 407, 545 P. 2d 1186 (1976). See also Henderson v. Delaware River Joint Toll Bridge Comm’n, 362 Pa. 475, 66 A. 2d 843 (1949); Opinion of the Justices, 344 Mass. 770, 184 N. E. 2d 353 (1962); State v. Ford, 213 Tenn. 582, 376 S. W. 2d 486 (1964); Dresden School Dist. v. Hanover School Dist., 105 N. H. 286, 198 A. 2d 656 (1964); Colgate-Palmolive Co. v. Dorgan, 225 N. W. 2d 278 (N. D. 1974).
One commentator has noted the relevance of reciprocal-legislation cases, particularly those involving reciprocal tax statutes, to Compact Clause adjudication:
“Compact clause adjudication focuses on a federalism formula suggested in an 1893 Supreme Court case [Virginia v. Tennessee]: congressional consent is required to validate only those compacts infringing upon 'the political power or influence’ of particular states and ‘encroaching . . . upon the full and free exercise of Federal authority.’ Reciprocal tax statutes, which provide the paradigm instance of arrangements not deemed to require the consent of Congress, illustrate this principle in that they neither project a new presence onto the federal system nor alter any state’s basic sphere of authority.” Tribe, Intergovernmental Immunities in Litigation, Taxation, and Regulation: Separation of Powers Issues in Controversies about Federalism, 89 Harv. L. Rev. 682, 712 (1976) (footnotes omitted).
See also Frankfurter & Landis, supra, n. 12, at 690-691.
Although there is language in West Virginia ex rel. Dyer v. Sims, 341 U. S. 22, 27 (1951), that could be read to suggest that the formal nature of a “compact” distinguishes it from reciprocal legislation, that language, properly understood, does not undercut our analysis. Referring in dictum to the compact at issue in Dyer, Mr. Justice Frankfurter observed that congressional consent had been required, “as for all compacts.” The word “compact” in that phrase must be understood as a term of art, meaning those agreements falling within the scope of the Compact Clause. Cf. Frankfurter & Landis, supra n. 12, at 690, and n. 22a. Otherwise, the word “agreement” is read out of Art. I, § 10, cl. 3, entirely.
Appellants describe various Compacts, including the Interstate Compact to Conserve Oil and Gas Act of 1935, 49 Stat. 939, and the Interstate Compact to Conserve Oil and Gas (Extension) of 1976, 90 Stat. 2365, and attempt to show that they are similar to the Compact before us. They then point out that the Compacts they describe received the consent of Congress and argue from this fact that the Multistate Tax Compact also must receive congressional consent in order to be valid. These other Compacts are not before us. We have no occasion to decide whether congressional consent was necessary to their constitutional operation, nor have we any reason to compare those Compacts to the one before us. It suffices to test the Multistate Tax Compact under the rule of Virginia v. Tennessee.
The “unitary business” technique involves calculating a corporate taxpayer’s net income on the basis of all phases of the operation of a single enterprise (e. g., production of components, assembly, packing, distribution, sales), even if located outside the jurisdiction. The portion of that income attributable to activities within the taxing State is then determined by means of an apportionment formula. See, e. g., Underwood Typewriter Co. v. Chamberlain, 254 U. S. 113 (1920). “Combination of income” involves applying the unitary business concept to separately incorporated entities engaged in a single enterprise. See Edison California Stores, Inc. v. McColgan, 30 Cal. 2d 472, 183 P. 2d 16 (1947).
Individual States are free to employ the unitary-business standard. Underwood Typewriter Co. v. Chamberlain, supra; accord, Bass, Ratcliff & Gretton, Ltd. v. State Tax Comm’n, 266 U. S. 271 (1924). Nor do appellants claim that individual States could not employ the combination method of determining taxpayer income. Cf. Edison California Stores, supra.
Taxable income deemed apportionable is that which is not considered to have its source totally within one State. It is distributed by means of an apportionment formula among the States in which the multistate business operates. Taxable income deemed allocable is that which is considered as having its source within one State and is assigned entirely to that State for tax purposes. See generally Sharpe, State Taxation of Interstate Businesses and the Multistate Tax Compact: The Search for a Delicate Uniformity, 11 Colum. J. Law & Soc. Prob. 231, 233-239 (1975). “Business income” is defined generally as income arising from activities in the regular course of the taxpayer’s business. See, e. g., Uniform Division of Income for Tax Purposes Act § 1 (a). Definitions of income arising in the regular course of business vary from one State to another. For example, rents and royalities may be considered business income in one State, but not in another. See generally Sharpe, supra, at 233-239.
For example, appellants raise no challenge to the many reciprocal statutes providing for recovery of taxes owing to one State in the courts of another. A typical statute is Tennessee’s: “Any state of the United States or the political subdivisions thereof shall have the right to sue in the courts of Tennessee to recover any tax which may be owing to it when the like right is accorded to the state of Tennessee and its political subdivisions by such state.” Tenn. Code Ann. §20-1709 (1955). See generally Leflar, Out-of-State Collection of State and Local Taxes, 29 Vand. L. Rev. 443 (1976).
Tax Convention with the United Kingdom of Great Britain and Northern Ireland, 94th Cong., 2d Sess. (1976) (as published in Message from President submitting Convention); Protocol to the 1975 Tax Convention with the United Kingdom of Great Britain and Northern Ireland, 94th Cong., 2d Sess. (1976) (as published in Message from President submitting Protocol); Second Protocol to the 1975 Tax Convention with the United Kingdom of Great Britain and Northern Ireland, 95th Cong., 1st Sess. (1977) (as published in Message from President submitting Second Protocol). Article 9, ¶ 4, of the treaty, which is currently pending before the Senate, would prohibit the combination of the income of any enterprise doing business in the United States with the income of related enterprises located in the United Kingdom.
Corrigan, Interstate Corporate Income Taxation — Recent Revolutions and a Modern Response, 29 Vand. L. Rev. 423, 441-442 (1976).
Appellants do not specify in their brief which Clause of the Fourteenth Amendment is violated. Our conclusion makes it unnecessary to consider each one.
Appellants conceded this point in the hearing before the three-judge court. Tr. of Hearing, Feb. 3, 1976, pp. 16-18. Cf. State Tax Comm’n v. Union Carbide Corp., 386 F. Supp. 250 (Idaho 1974).
The dissent appears to confuse potential impact on “federal interests” with threats to “federal supremacy.” It dwells at some length on the unsuccessful efforts to obtain express congressional approval of this Compact, relying on the introduction of bills that never reached the floor of either House. This history of congressional inaction is viewed as “demon-stratfing] ... a federal interest in the rules for apportioning multistate and multinational income,” and as showing “a -potential impact on federal concerns.” Post, at 488, 489. That there is a federal interest no one denies.
The dissent’s focus on the existence of federal concerns misreads Virginia v. Tennessee and New Hampshire v. Maine. The relevant inquiry under those decisions is whether a compact tends to increase the political power of the States in a way that “may encroach upon or interfere with the just supremacy of the United States.” Virginia v. Tennessee, 148 U. S., at 519. Absent a threat of encroachment or interference through enhanced state power, the existence of a federal interest is irrelevant. Indeed, every state cooperative action touching interstate or foreign commerce implicates some federal interest. Were that the test under the Compact Clause, virtually all interstate agreements and reciprocal legislation would require congressional approval.
In this case, the Multistate Tax Compact is concerned with a number of state activities that affect interstate and foreign commerce. But as we have indicated at some length in this opinion, the terms of the Compact do not enhance the power of the member States to affect federal supremacy in those areas.
The dissent appears to argue that the political influence of the member States is enhanced by this Compact, making it more difficult — in terms of the political process — to enact pre-emptive legislation. We may assume that there is strength in numbers and organization. But enhanced capacity to lobby within the federal legislative process falls far short of threatened “encroach[ment] upon or interfer[ence] with the just supremacy of the United States.” Federal power in the relevant areas remains plenary; no action authorized by the Constitution is “foreclosed,” see post, at 491, to the Federal Government acting through Congress or the treatymaking power.
The dissent also offers several aspects of the Compact that are thought to confer “synergistic” powers upon the member States. Post, at 491-493. We perceive no threat to federal supremacy in any of those provisions. See, e. g., Virginia v. Tennessee, supra, at 520.