Document: 358 U.S. 450 79 S.Ct. 357 3 L.Ed.2d 421 NORTHWESTERN STATES PORTLAND CEMENT COMPANY, Appellant,v.STATE OF MINNESOTA. T. V. WILLIAMS, as State Revenue Commissioner, Petitioner, v. STOCKHAM VALVES AND FITTINGS, INC. Nos. 12, 33. Argued Oct. 14, 15, 1958. Decided Feb. 24, 1959. [Syllabus from pages 450-451 intentionally omitted] Mr. Joseph A. Maun, St. Paul, Minn., for appellant in No. 12. Perry Voldness, appellee Ben F. Johnson, Atlanta, Ga., petitioner John Izard, Jr., respondent Justice CLARK delivered the opinion of Court. 1 These cases concern constitutionality state net income tax laws levying taxes on portion a foreign corporation's earned and fairly apportioned to business activities within taxing when those are exclusively furtherance interstate commerce. No question is raised either case reasonableness apportionment under State's formulas nor amount final assessment made. The Minnesota was upheld by its Supreme Court, 250 Minn. 35, 84 N.W.2d 373, while Court Georgia invalidated statute being violative 'both commerce due-process clauses Federal Constitution * *.' 213 Ga. 713, 101 S.E.2d 197, 202. importance field taxation indicated fact that thirty-five States impose direct corporations. Therefore, we noted jurisdiction appeal case, 1958, 355 911, 78 341, 2 272, granted certiorari other, 356 670, 585. Although were separately briefed, argued, submitted, have, because similarity each consolidated purposes decision. It contended statutes, applied, violates both Due Process Commerce Clauses United Constitution. Article 1, § 8, cl. 3; Amend. 14. We conclude operations corporation may be subjected provided levy not discriminatory properly local forming sufficient nexus support same. 12.—Northwestern Portland Cement Co. Minnesota. This an judgments Minnesota's courts upholding years 1933 through 1948 against appellant, Iowa engaged manufacture sale cement at plant Mason City, Iowa, some forty miles border. levied 290.031 which imposes annual upon taxable residents nonresidents alike. One four classes taxed 'domestic corporations whose this during year consists commerce, or both.' has utilized three ratios determining law.2 first taxpayer's sales assignable total period made everywhere; second, tangible property used wherever situated. third payroll entire like period. As have noted, takes no issue with fairness formula accuracy application here. Appellant's consisted regular systematic course solicitation orders products, order subject acceptance, filling delivery it City. sold only eligible dealers, who lumber building material supply houses, contractors ready-mix companies. A list these dealers maintained would included thereon. Forty-eight percent appellant's manner such For efficient handling activity State, Minneapolis leased office equipped own furniture fixtures supervision employee-salesman known 'district manager.' Two salesmen, including district manager, secretary occupied three-room office. additional salesmen clearing house. Each employee paid straight salary City two cars furnished salesmen. Appellant bank account Minnesota, owned real estate there, warehoused merchandise State. All price basis fixed 'pick ups' permitted there. however, authorized quote customers price. Orders received transmitted daily approved acknowledged directly purchaser copies salesman. 4 In addition also contacted potential users builders, contractors, architects, state, well government purchasing agents. solicited them, special forms directed dealer turn fill them placing appellant. Through system effect secure filled usual manner. Salesmen receive transmit claims loss damage any shipments it, informing company nature thereof requesting instructions concerning 5 returns filed assessments sued upon, aggregating $102,000, penalties interest, Commissioner Taxation information available him. 6 33.—T. Williams, Stockham Valves & Fittings, Inc. 7 here Delaware Corporation principal Birmingham, Alabama. manufactures sells valves pipe fittings established wholesalers jobbers handle products other than respondent's. encouraged carry inventory granting did so concession. However, warehouse storage facilities Georgia. maintain sales-service served five States. headquarters one salesman devoted about one-third his time He salary-plus-commission full-time woman employed there only. She 'a source information' respondent's performed stenographic clerical services 'facilitated communications between home (the) representative customers, prospective (its) products.' Respondent's carried activities, solicitation, receipt forwarding Birmingham promotion good will respondent. taken him, office, approval shipped customer 'f.o.b. warehouse' basis. Other equipment, supplies, advertising literature like, had Georgia, deposited funds stored 8 levies tax3 incomes 'received every corporation, domestic, owning doing State.'4 Act defines latter 'any transactions' 'for purpose financial profit gain' regardless connection To apportion income, applies three-factor ratio based inventory, wages gross receipts. Under assessed collected $1,478.31 1952, 1954 1955, after refund denied suit recover payments. bases right squarely Georgia's 9 That 'need up tangled underbrush past cases' reference power concomitant negative approach resulting case-by-case resolution 'the extremely limited restrictions places states. *' Wisconsin J. C. Penney Co., 1940, 311 435, 445, 61 246, 250, 85 L.Ed. 267. having grown Topsy, Congress meanwhile undertaken regulate understandably persisted their efforts get return substantial benefits they afforded little wonder been end testing out levies. judicial constitutional principles specific statutes leaves much room controversy confusion way precise guides exercise indispensable taxation. alone handed down hundred full-dress opinions spread slightly more number our reports. said Miller Bros. Maryland, 1954, 347 340, 344, 74 535, 538, 98 744, decisions 'not always clear consistent reconcilable. few specifically overruled, others longer fully represent present law.' From quagmire emerge, firm peaks decision remain unquestioned. 10 long doctrine Clause gives exclusive failure act area nevertheless requires shall free impositions Gibbons Ogden, 1824, Wheat. 23. keeping therewith 'cannot persons passing coming into merely temporary purpose' itinerant drummers. Robbins Taxing District, 1887, 120 489, 493—494, 592, 594, 30 694. Moreover, beyond dispute lay 'privilege' engaging Spector Motor Service O'Connor, 1951, 340 602, 71 508, 95 573. Nor discriminates providing commercial advantage business, Memphis Steam Laundry Cleaner Stone, 342 389, 72 424, 96 436; Nippert Richmond, 1946, 327 416, 66 586, 90 760, subjecting burden 'multiple taxation,' Michigan-Wisconsin Pipe Line Calvert, 157, 396, 583; Adams Mfg. Storen, 1938, 304 307, 58 913, 82 1365. Such stricken States, Clause, allowed 'one single tax-worth interference flow commerce.' Freeman Hewit, 329 249, 256, 67 274, 279, 91 265. 11 On hand, since 1918 revenues derived does offend limitations Peck Lowe, 247 165, 38 432, 62 1049, pointed way. There held though true 'No Tax Duty laid Articles exported State,' Art. I, 9, still profits 'laid articles exportation anything inherently usages embraced processes *. At most, affected indirectly remotely.' Id., 174—175, page 434. applying Glue Town Oak Creek, 1918, 321, 499, 1135. distinguished invalid placed charge landmark usually cited announced, i.e., Underwood Typewriter Chamberlain, 1920, 254 113, 41 45, 65 Natural Gas Beeler, 1942, 315 649, 857, 858, 86 1090, dealt domestic (United supra), 'established 'commercial domicile" supra; supra. 12 But presence circumstance controlling shown Bass, Ratcliff Gretton, Ltd. Commission, 1924, 266 271, 45 82, 69 282, Norfolk W.R. North Carolina, 1936, 297 682, 56 625, 80 977. neither taxpayer domiciliary incorporated place activities. Permitting New York's franchise measured proportional British selling ale York Ltd., supra, Company unitary manufacturing ale, series transactions beginning England ending places—the process until ends sales—the justified attributing just proportion business.' 84. Likewise Carolina Virginia mileage stand generated intrastate among utilizing in-state aspects affairs. fact, Gretton conducted loss, part over-all attributed reading reveals further facet designed attribute hauls 13 Any doubt validity position entirely dispelled unanimous per curiam West Publishing McColgan, 328 823, 1378, 1603, citing Interstate Busses Corp. Blodgett, 1928, 276 245, 48 230, 551, International Shoe Washington, 1945, 326 310, 154, 95. involved California's Company, interstate. See 27 Cal.2d 705, 166 P.2d 861, 862. While statement facts recites 'The employees given space offices attorneys use plaintiff's books offices,' significant note qualified do California itself declared arising intrastate. grounded triviality West's soliciters exchange chanceful what hand Rather, recognized arose purely operation. 14 'In relying foregoing proposition solely immune plaintiff (West Co.) overlooks distinction privilege settled conflict clause.' 708—709, 863. (Citations omitted.) 15 believe rationale cases, involving controls issues regulations sense term. Admittedly discriminate undue burden. erect wall around borders preventing entry, axiomatic founders intend immunize carrying fair share costs derives left collect ordinary means. tax, therefore, open objection compels pay 119, 46. Mining 452, 453, 253, 254, 'it too late day find offense (commerce) imposed corporate enterprise attributable earnings 16 economic wisdom policy decision, 'realities' parties possibility multiple exactions question. answer none exist unapportioned very makes bear share. Central Greyhound Lines Mealey, 1948, 334 653, 661, 68 1260, 1265, 92 1633, seeking reach (is) whether exacting constitutionally demand aspect bears relation.' meet requirement 'to prevent prohibit disadvantage relative 1270. Logically impossible, apportioned, same twice. practical operation, are, contrary foreclosed, especially States.5 before us. argued Northwest Airlines 1944, 322 292, 64 S.Ct.950, 952, 88 1283, fleet airplanes result full value thereof. rejected contention now us' even actually 'some proportion' fleet.6 Here records all contrary. nothing show present. cannot deal abstractions. type taxpayers must sense. failed do. 17 509, 573, result. repeatedly emphasized 'imposed Thus, line precedents, mentioned.7 but excise 'exclusively' operations. exception heretofore mentioned, net-income-tax control construe intended impair Beeler problem. here, incidence affords valid 'constitutional channel' 'make way.' avenue unavailable Clause. Spector, 'taxes although payment come petitioner's reasonably related powers (are) nondiscriminatory.' 609, 512. tests. 18 argument contravene scrutiny. arises form 'nexus exaction.' 250. strains reality say, terms decisions, sufficiently events forge definite link, minimum connection' satisfy due requirements. 344—345, 539, 744. Ott Miss. Valley Barge 1949, 336 169, 93 585; 95, record without engage income-producing almost half promoted vigorous continuous campaigns run central located 33 available, conduct largely identical. 'controlling can ask return.' Since operation exerted relation opportunities given, protection afforded, conferred 'is pursue fiscal policies, unembarrassed 444, 19 12—Affirmed. 20 33—Reversed. 21 HARLAN, concurring. 22 joining I deem appropriate make comments strongly views manifested dissenting FRANKFURTER WHITTAKER. preface follows saying my view clearly point to, if indeed compel, sustaining measures. 23 1135, decided uniformly general impact borders, extent See, e.g., Shaffer Carter, 252 37, 57, 40 221, 227, 445; Atlantic Coast R. Daughton, 262 413, 43 620, 621, 1051. 119—120, 46, 165; 282; 24 read existence sometimes adverted never considered essential 'interstate' income. kind cannot, opinion, rest theory taxed, rather simply measure separate, unidentified, truth tax. seems me apparent itself. explicitly could together corporation. careful distinction, drawn once receipts assumed taxation, therefrom, 324, 326, 327, 328, 329, 500, 501, altogether meaningless explained suggested brethren, reason why reached State.1 25 Surely possible score removed where unanimously affirmed, oral argument, 'income intrastate, commerce' applied court deriving 'from 712, 865. 26 Court's summary affirmance went ground found California, view, explanation unacceptable. Apart proceed (see quotation court's set forth 364 S.Ct.), elucidated cast payments delinquent accounts, adjust complaints, lawyers' stored, locations advertised offices. criteria consistently constitute 'California determined With deference, novel unreal analysis; kind, aid sales, commerce; analysis, surely stretching things far say renting complaint adjusting concededly transactions. think governs us.2 28 presently (interstate commerce) source.' If should vote strike unconstitutionally plainly case. demonstrates, scheme reaching individual, corporate, sought portions Northwestern income—interstate commerce—but despite source. thrust hostile discrimination compensation therein, establish 29 'regulation of,' 'burden on,' 'interference with' permit engages therefrom nondiscriminatory therein take categories. Cf. 1049. increase profitability done increases. enterprises allocable borders. today. FRANKFURTER, dissenting. 31 By emphasizing agreement brother WHITTAKER, add observations. 32 sustains essentially precedents. me, today's break new ground. because, hundreds dealing adjudicating situation Concretely, virtue her, wit: '(Northwestern's) integral revenue resulted 34 and, 35 '(W)ithout (Stockham) insofar concerned.' 719, 201. 36 vital realize prior absence pursued advantages severable constitutes 37 argumentatively comes closest 1603.1 too, summarily sustained forth, complete Calfornia began permanent workers localized apart law books. were, legal shorthand, constituting business. exert withheld allowing whereas withhold therefore price, cost license accruing venture decision—I talk dicta—on reliance placed, presented conjoined become operative. difference situations this, matter economics, involves taking going locally revenues, produced sure, nice one, last word necessity distinctions Holmes Galveston, H. S.A.R. Texas, 210 217, 225, 638, 639, 52 1031: 'It admitted, be, affects regulation sense, expected.' 39 Accordingly, adjudicated bar making precedent. history evolution. thing, recognize quite another thing already broken, treated old step. My underlies namely, whatever disadvantages accrue separate free-trade territory outweighed Nation, component am assuming, course, stimulate, Union, so, devise result, burdened hypothetically practically, admonished again matter. actively reasons: 42 First. not, believe, gainsaid thousands relatively small moderate size over several means keep books, returns, store records, counsel, divers variegated forty-nine different times filing structures, modes 'net income,' different, often conflicting, apportionment. involve large increases bookkeeping, accounting, paraphernalia demands. far-flung complying requirements exceed themselves, companies volume States.2 Second. extensive litigation challenged railroads express companies3—challenges addressed natural temptation absorb revenue—will multiplied many infinitely larger businesses division railroad index might expected numerous non-transportation industries suggestion convenience determine construction important balancing considerations relevant mindful questions called adjudicate competence them. Wholly that, elusive non-legal casts businesses, consequently itself, imposed. 44 lead conclusion vast throughout contribute maintaining governments which, matter, necessarily mere governments. problem rests Congress. unmindful federal resources demands increase. conditions far-reaching problems accommodating federal-state policy. determination how common fund hardly wisely smoothly adjudicatory process. solve aggravates difficulties retards proper legislative solution. 46 best, negatively; violation depend routh ready concepts. detailed inquiry diverse burdens necessities national life. Neither standards dividing less abstract law, responsive subtleties interrelated economies Nation 47 calls solution devising congressional provide thorough canvassing multitudinous intricate factors compose freedom needed limits power.4 Congressional committees studies give individual adequate hearing ultimate formulation representatives ought self-serving entitled Nation's resources. formulate policies founded realties, perhaps myriad constituted duly informed administrative agency. whom STEWART join, 49 respectfully dissent. disagreement fundamentals. Constitution, 3, interpreted today, precludes laying on, thereby regulating, 'exclusively today holds so. 50 findings clear, sharp undisputed. (from) commerce'; concerned 51 neighboring character disputed, summarized margin.1 1950 acting statutory 'three factor formula' contained Statutes 1957, 290.19, M.S.A.,2 allocated Northwestern's 1948. Upon allocated, 290.03, M.S.A. pertinent part, provides: '290.03. taxpayers. An year, computed rates hereinafter provided, hereby following taxpayers: 53 '(1) Domestic 54 refusal taxes, brought action defended grounds (1) s hence, regulated (2) violated Fourteenth Amendment. trial, formal following: 55 trial court, nevertheless, entered judgment appealed challenging finding above-quoted, 32, appeal. 272. 57 Inc., Alabama . pipefittings Union. stipulated dispute, margin.3 'Three Factor Ratio' Code 1933, amended, 3113(4),4 Stockham's 1955. amounts 92—3113, 'Corporations, allocation income.—The apply herein defined, Every deemed gain, transaction connected (Emphasis added.) 59 demand, denial timely claim refund, paid, contending that: 60 And thereupon reversed judgment, petition certiorari. submit simple recitals plain terms, purport commerce,' Minnestoa (3) admitted facts. Yet, face veiledly treats involved. says, referring (a) manager,' (b) 'as house,' (c) 'Orders (builders, architects), (and that) (t)hrough manner,' (d) 'Salesmen same.' recitals, true, supported finding, Particularly architects expressly Cheney Brothers Commonwealth Massachusetts, 246 147, 155, 295, 297, 632, amounted dealers. courts. colorable believing desire practice easily ended Northwestern, obtain adjudication statute, seeming disdain 'commerce' frequent use, instead, 'activities' obscure taxed. 'activities,' significance. What consequence Here, 63 So none. thus invoke was, power. Instead prohibited otherwise, 'conclude(s) doctrine, held. refers creating 'quagmire,' says 'there opinions, rightly understood aligned categories, remarkably varied complex, deserve characterizations field—as thihk field—that loose statements isolation, certainly context, seemingly outside law. exists mainly analyze, understand, categorize decisions. least necessary sharply discern resident production, manufacturing, distribution management facilities, (4) or—what equivalent whole measuring uncertain percentage Let us start consideration Of foundation Power Nations, Indian Tribes U.S.Const. 3. clause 'by force created trade States.' 252, 276, '(N)o (T)he belongs congress.' Leloup Port Mobile, 127 640, 648, 1380, 1384, 311. see thirteen quoted text. Brandeis, speaking Sprout South Bend, 277 163, 171, 502, 505, 833, 'in (a State) fee valid, appear business; exacted increased done; imposition; person discontinue withdrawing declaration Butler East Ohio 283 465, 470, 75 1171, Chief Hughes Cooney Mountain Tel. 294 384, 393, 477, 482, 934. seem follow challenged, more. struck character. Chency 153, 296, 632; Alpha 268 203, 916; Ozark Monier, 555, 184, 439; Carter Weekes Stevedoring 330 422, 815, 993; counsel cited, research disclosed, confident exists. recognizes 265.' then 'On point? 1913 Act, imposing 'entire sources preceding calendar years.' Government three-fifths 'buying goods states, shipping countries them.' validly light provides State.' export precluded 'articles exportation,' sources,' source,' levy. 174, S.Ct., 433. (the directly) (exclusively They contend admit Lowe 'point way' finds admits 70 (of case) 1135.' authority Exactly contrary, 'that taxpayer's) transacted 501. town stocks branches Wisconsin, involved, one-seventh four-sevenths made, factory two-sevenths Wisconsin's Laws 1911, c. 658, state.' prescribed statute,' factors. 'This apportioning 'business income' year' substantially exceeding income—the sales. '(U)pon levied.' 323—325, 499. resisted failing relief writ error. concluding 'measured proceeds along imposition sources, state. obvious debate maintains produces production. obvious, manufacturer ones other. Inasmuch thought American lawyers accomplish purpose, most adopted applicable factors, Those unmistakably next relied hold Connecticut manufactured machines dollar remainder Underwood's statute. Connecticut. said: mainly, settled. 1135; 221 (227), 445. Compare typical Legislature attempting put faced impossibility allocating It, method appears record, reached, meant reach, 120—121, 73 1090. purchased gas Louisiana transported Tennessee Light Company. 'That distributes consumers contract joint undertaking whereby furnishes pipeline, service consumers, sale, deduction specified expenses, divided companies.' 652, 860. cent. wholly excluding Ibid. Acting 'was company.' 'if correctly construed establishing profit-sharing adventure taxation.' 653—654, 861. 'constituted participation distributing pipes company,' concluding: 'There showing justly Tennessee.' 656, 657, Stone's contains language 656 U.S., 862 S.Ct.: domicile cf. Wheeling Steel Fox (298 193, 773, 1143), 274; People ex rel. Cohn Graves, 300 308, 466, 81 666, relies. 119—(120), 165. sentence caused Burton 6, 512, case.' mistake near holding Note he spoke 'having domicile' (315 859). connotes maintenance 'principal office' officers duplicate stock ledger capital continuously kept. naturally that's Fox. 76 cites respecting 'carried activities' formula.' exactly Glue, Underwood, cases. sustain 77 percuriam quotes offices.' (27 862) seen considerably 'regularly solicitors (that) adjustments complaints who) (which were) 707, Manufacturing shows 'attributable There, elimination, arriving concluded attached 'solely down, infirmity persists Citing 439, referring, comparison, Oil 337 662, 669, 1264, 1267, 1613; 'Our principle reasonable limits, compute rate 609—610, recent State? 83 demonstration holdings repeat, conviction demonstrated truth, supports 'properly apportioned' consequence, evident enough 'We here.' agree Whereas, circumstances, idle 'on' ended, burden, hence regulate, plainness been, 434, denies vests Direct consent, it. Without Hence, would, reverse affirm 290.03: 'Classes section 290.02 both; 'Business include transportation both, ships navigating waters international navigation treaty party; Minn.Stat.1945, Minn.Stat. (1945) Ga.Code Ann. (1937), 92—3102. 'Rate corporations.—Every annually one-half defined 92—3113: 92—3113. qualifies individuals (§ 92—3101), 92—3102), fiduciaries 92—3103). Standard Peck, 382, 309, 427, Ohio's ad valorem vessels domiciled plying apportioned. abridge 952. 1925, 216, 480, 916, striking Massachusetts '(t)he involved; Furthermore, dissent relies assertion is, forbidden attempt 'regulate' Murdock Pennsylvania, 1943, 319 105, 112—113, 870, 874—875, 87 1292. early 1919 discriminating commentator Thomas Reed Powell commenting supra: granted, then, recipient immaterial elements considering state-wide, all-inclusive partnership, interstate.' Indirect Encroachment Authority Powers VII, Harv.L.Rev. 634, 639. turned happened 366 discussed text noteworthy West, 862, (italics supplied), (citation), (citations), (citing supra). (citations).' opinion. support: L.Ed.551; 1090; Not here; establishment computation. cent mile motor vehicles using highways fell weight viewed scheme. Aside discrimination, instance charging highways. company, retail tather licensed Tennessee, indulged dictum taxable. by-the-way observation, citations writer prone uttering dicta. Amendment Washington exercising frequency company's contacts unemployment contributions Thus interpretation goes actual exposition manifold complex systems Cohen, Allocations Formulas Affect Management Operating Decisions, Jour.Taxation, (July 1954), p. 2. Wallace Hines, 253 66, 67, 436, 782; Pullman's Palace Car 141 18, 876, 613; Express Auditor, 165 194, 305, 683; 185, 604, 965 (opinion denying rehearing). Airlines, 950, 1283. desirability uniform rapidly expanding airline industry. Following Civil Aeronautics Board study report methods eliminating burdensome, airlines. H.R.Doc.No.141, 79th Cong., 1st Sess. 158-page document length content illustrate nonjudicial presentation report, bills introduced H.R. 1241, 80th Sess.; S. 2453, 2d 420, 81st None enacted. Australia resolved conflicting burdensome arrangement allocations mechanism Premiers' Conference—the Prime Minister Premiers qualify, laws, During secretary. Her duties clerical. points worked homes. salesmen's automobiles, salaries reimbursable expenses secretary, rent, telephone took accept contracts payments, accounts claims. mailed credit acceptance rejection. accepted writing, purchasers. Accepted rail carrier, f.o.b. consigned Sales invoices prepared purchasers cement, solicit orders, acquainting merits product advising names purchased. evidence sometimes, effect, for, stocked 632. press object basis, M.S.A., provides, substance, 'partly partly state' equal payrolls totals facilitate keeps public warehouses Chicago, Houston Vernon (California), cities, widely separated industrial centers, qualified, Its Atlanta listed city directories, staffed spends working southeastern calling recommend specify particular supplies work, engineers independent jobbers, endeavoring impress of, induce products. solicits transmits receives rejection, part' Birmingham. purchasers, carrier plant. remit Except 92—3113(4) 'Where manufacture, personal property, arrived by' arithmetical average inventories incurred

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