The St. Louis Republic., 1901-01-05
suPREME COURT on THE
RIGHT TO TAX FRANCHISES.

In this connection, and upon the right TO
tax the franchises Of foreign and domestic
corporations. the utterance of the Federai
Supreme Court will be interesting. With
reference to this right of the state thar
court said: "A State may impose tax up
on a corporation as an entity existing under
its laws as well as upon the capital stock
of the corporation and its separate cor
porate property. And the manner In which
! its value shall be assessed and the rate OF
taxation. however arbitrary and capricious,
are mere matters of legislative discre tion I,
except we may add, as that discretion Is
controlled by the organic law of the state.
1t is not for US to suggest In any
case that n more equitable mode Of assess
ment or rate of taxation might be ADOPTED
than the one prescribed by the Legislature
of the State; our only concern Is with the
validity Of the tax; all else lies beyond the
domain OF our Jurisdiction. The granting
OF the rights or privileges which constitute
the franchise OF a corporation being a
matter resting entirely within the control
OF the Legislature. to be exercised in Its
good pleasure, Il may be accompanied with
any such conditions as the Legislature may
deem most suitable TO the public interests
and policy. II may impose as a condition
to the grant. as well as also TO its COM
tinued exercise the payment OF a specific
sum to the State each year out OF the
profits or gross receipts OF the corpora
tion. and may prescribe such mode In which
the same shall be ascertainod as may be
deemed convenient and Just. There is no
constitutional Inhibition against the Degis-
lature taking any mode TO arrive at the
sum. which II Will exact as a, condition TO
the protection OF the corporation and for
its continued existence. There can be.
therefore no possible objection to the valid
ity of the taxes prescribed by the statute of
a State 50 far as 1t relates to its own cor
porations. Nor can there be any greater OBJ
lection TO the sa ne tax upon a foreign cor
puration doing business by its permission,
within the State. As 70 the foreign cor
poration-and all corporations I'm States
other than the State Of its creation. are
deemed 20 be foreign cOrporations-lt can
not claim the right TO do business in an
other state to any extent unless subject 10
the conditions imposed by its laws. State
may exclude foreign corporation entirely;
II may restrict its business to particular
localities and il may exact such security for
the performance Of its contracts with her
citizens az I'm its Judgment will best pro-
mote the public interests
'Only two exceptions to this right of
clrsion are TecoEnZed--flrst. that a State
cannot exclude from its limits a corporation
engaged In interstate and foreign com
rnerce. The second exception IS where a
corporation is in the employ Of the General
Government. Having. therefore the abso-
lutte power. subject to the above exceptions.
OF excluding a foreign corporation, 2 State
may impose such conditions upon permitting
n corporation to do business within its lin
make grant Of privileges. dcnendent upon
the payment OF n specific license tax or a
sum proportionate to the amount Of it's cap
ital. No corporation can call in question
the validity Of any exaction which a state
NAV require for the grant OF its privileges,
It does not lie In any foreign corporation to
complain that Il is subjected to the same
law with the domestic corporation
There are two legal meanings OF the
word franchise In some States the word
franchise is used in two distinct senses
first, franchise that is taxed afs property
for the privilege enjoyed by a corporation
TO exercise certain powers derived from the
State: and second. a franchise which is
the mere right 20 exist in corporate form.
without reference TO the covers that under
that corporate form the company may ex-
ercise; and some OF the States have taxed
both of these s0-called franchises. and the
latter franchise tax is. In substance. n poll
tax, levied upon a domestic corporation for
the right TO be or exist. Such tax Is not
upon property or assets, and does not in any
way concern tho nature of the business the
company may be authorized to carry on.