486 U.S. 269 (1988)
Ethanol, or ethyl alcohol, is usually made from corn.1 In the last decade it has come into widespread use as an automotive fuel, mixed with gasoline in a ratio of 1 to 9 to produce what is called gasohol.2
Ohio first passed such a measure in 1981. It provided Ohio gasohol dealers a credit of so many cents per gallon of ethanol used in their product against the Ohio motor vehicle fuel sales tax payable on both ethanol and gasoline.3 This credit was originally available without regard to the source of the ethanol.4
In 1984, however, Ohio enacted § 5735.145(B), which denies the credit to ethanol coming from States that do not grant a tax credit, exemption, or refund to ethanol from Ohio, or, if a State grants a smaller tax advantage than Ohio’s, granting only an equivalent credit to ethanol from that State.5 This provision was passed in 1984 and took effect on January 1, 1985.6
Appellant New Energy Company of Indiana is an Indiana limited partnership that manufactures ethanol in South Bend, Indiana, for sale in several States, including Ohio.7 Indiana repealed its tax exemption for ethanol, effective July 1, 1985, at which time it also passed legislation providing a direct subsidy to Indiana ethanol producers, the sole one of which was appellant.8 Thus, by reason of Ohio’s reciprocity provision, appellant’s ethanol sold in Ohio became ineligible for the Ohio tax credit.9
Appellant sought declaratory and injunctive relief in the Court of Common Pleas of Franklin County, Ohio, alleging that § 5735.145(B) violated the Commerce Clause by discriminating against out-of-state ethanol producers to the advantage of in-state industry.10 The court denied relief, and the Ohio Court of Appeals affirmed.11 A divided Ohio Supreme Court initially reversed, finding that §5735.145(B) discriminated without adequate justification against products of out-of-state origin, and shielded Ohio producers from out-of-state competition.12 The Ohio Supreme Court then granted appellees’ motion for rehearing and reversed itself, a majority of the court finding that the provision was not protectionist or unreasonably burdensome.13 The decision is reported at 32 Ohio St. 3d 206, 513 N. E. 2d 258 (1987).14 The Supreme Court noted probable jurisdiction in 484 U. S. 984 (1987).15
Whether Ohio Rev. Code Ann. §5735.145(B) discriminates against interstate commerce in violation of the Commerce Clause?16
The Commerce Clause not only grants Congress the authority to regulate commerce among the States but also directly limits the power of the States to discriminate against interstate commerce.17 This negative aspect of the Commerce Clause prohibits economic protectionism, that is, regulatory measures designed to benefit in-state economic interests by burdening out-of-state competitors.18 State statutes that clearly discriminate against interstate commerce are routinely struck down unless the discrimination is demonstrably justified by a valid factor unrelated to economic protectionism.19
Yes. The Ohio statute at issue explicitly deprives products of generally available beneficial tax treatment because they are made in Indiana or other States that do not grant similar tax advantages to Ohio-produced ethanol.20 The provision on its face treats ethanol produced in Indiana less favorably than ethanol produced in Ohio by denying the tax credit solely because Indiana does not grant equivalent advantages to Ohio-produced ethanol.21 This patent discrimination against out-of-state products triggers strict scrutiny under the Commerce Clause and cannot be justified by health or commerce rationales that bear no logical relationship to the reciprocity requirement.22