This section contains the nature of the case and procedural background.

An Ohio statute provides a reduction in sales tax to fuel dealers for each gallon of ethanol (refers to composition of ethyl alcohol and gasoline which is more expensive than gasoline but provides an environmentally sound alternative to gas because it replaces the lead found in gas used for cleaning purposes) sold when the ethanol was either produced in Ohio or distributed in a state that provides the same tax benefit to Ohio ethanol producers. In contrast, an Indiana law subjected all fuel dealers to the same tax upon purchasing ethanol. However, the Indiana statute provided a subsidy to Indiana based ethanol producers. The Appellant - Indiana's New Energy Company, does business in Ohio. However, the appellant is unable to receive reduction in Ohio sales tax for its ethanol sales transactions because it is not an Ohio-based ethanol producer. The Appellant maintains that this violates the Commerce Clause because it discriminates against out of state ethanol producers. In contrast, the Appellees' position is that because the Ohio provision confers tax benefit to states as long as they return the same benefit demonstrates that the Ohio provision does not discriminate against other states but instead stimulates competition. The Ohio state court initially held that the statute lacked justification because it disadvantaged out of state producers and secured Ohio producers profit against external competition. On rehearing, the State court upheld the validity of the statute. The Ohio State of Appeals Court affirmed. The U.S. Supreme Court reversed.

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