Source: https://supreme.justia.com/cases/federal/us/216/1/
Timestamp: 2019-04-24 22:08:06+00:00

Document:
"to the state Treasurer, for the benefit of the permanent school fund, a charter fee of one-tenth of one percent of its authorized capital, upon the first $100,000 of its capital stock, or any part thereof, and upon the next four hundred thousand dollars or any part thereof, one-twentieth of one percent, and for each million or major part thereof over and above the sum of five hundred thousand dollars, $200."
by the states, but a constitutional right of every citizen of the United States, and Congress alone can limit the right of corporations to engage therein. Crutcher v. Kentucky, 141 U. S. 47.
The power of Congress over interstate commerce is as absolute as it is over foreign commerce.
The rule that a state may exclude foreign corporations from its limits or impose such terms and conditions on their doing business therein as it deems consistent with its public policy does not apply to foreign corporations engaged in interstate commerce, and the requirement that the Telegraph Company pay a given percent of all its capital, representing all its business, interests and property everywhere, within and outside of the state, operated as a burden and tax on the interstate business of the company in violation of the commerce clause of the Constitution, as well as a tax on its property beyond the limits of the state, which it could not tax consistently with the due process of law enjoined by the Fourteenth Amendment.
Such a requirement imposed a condition on the Telegraph Company forbidden by the Constitution of the United States and violative of the constitutional rights of the company.
The Telegraph Company was no more bound to assent to the condition required of it in order that it might do local business in Kansas than to a condition requiring it to waive its right to invoke the benefit of the constitutional provision forbidding the denial of the equal protection of the laws or of the provision forbidding the deprivation of property without due process of law.
The disavowal by a state enacting a regulation of intent to burden or regulate interstate commerce cannot conclude the question of fact of whether a burden is actually imposed thereby, and whatever the purpose of a statute, it is unconstitutional if, when reasonably interpreted, it does, directly or by necessary operation, burden interstate commerce.
In determining whether a statute does or does not burden interstate commerce, the Court will look beyond mere form and consider the substance of things.
Consistently with the due process clause of the Fourteenth Amendment, a state cannot tax property located or existing permanently beyond its limits.
A court could not give the relief asked by the state without recognizing or giving effect to a condition that was in violation of the federal Constitution.
This action was brought by the State of Kansas in one of its courts against the Western Union Telegraph Company, a New York corporation, to obtain a decree ousting and restraining that corporation from doing, in Kansas, any telegraphic business that was wholly internal to that state, and not pursuant to some arrangement, or to meet its contracts with, or obligations to, the government of the United States. Upon the petition of the telegraph company, the case was removed to the Circuit Court of the United States for the District of Kansas. But it was thereafter remanded to the state court, where, upon a demurrer to the answer, a final decree was rendered, prohibiting and enjoining the telegraph company from transacting intrastate business in Kansas as a corporation, the decree, however, not to affect the company's duties to or contracts with the United States. From that decree the present writ of error was prosecuted.
The state contends that the decree is in exact conformity with certain provisions of the Kansas statutes to be found in the General Statutes of that State of 1901, Title, "Corporations," p. 280, and the General Statutes of 1905, p. 284. Those provisions, or the ones directly involved here, originated in an act known as the Bush Act, passed at a special session of the legislature in 1898. Laws of Kansas, Special Session, p. 27.
order to determine the solvency of the corporation. The statute further provided that the application should be accompanied by a fee of twenty-five dollars, to be known as an application fee, and that it should be a condition precedent to obtaining authority to transact business in the state that the corporation should file in the office of the Secretary of State its written consent, irrevocable, that actions might be brought against it in the proper court of any county in the state (in which the cause of action arose, or in which the plaintiff resided) by service of process on the Secretary of State, and stipulating that such service should be valid and binding as if due service had been made upon the president or chief officer of the corporation. Every foreign corporation then doing business in the state was required, within thirty days from the taking effect of the act, to file with the Secretary of State the specified written consent. Kan.Gen.Stat. 1901, § 1261. If the Charter Board determined that the foreign company seeking to do business in the state was organized in accordance with the laws under which it was created, that its capital was unimpaired, and that it was organized for a purpose for which a domestic corporation might be organized in Kansas, then the Board was directed to grant the application, and by its secretary issue a certificate, setting forth the granting of the application to engage in business in the state, as provided in the statute. Id., § 1263.
to the charter fee herein provided, the Secretary of State shall collect a fee of two dollars and fifty cents for filing and recording each charter containing not to exceed ten folios, and an additional fee of twenty-five cents for each folio in excess of ten contained in any charter. The fee for filing and recording a charter shall also entitle the corporation to a certified copy of its charter. All the provisions of this act, including the payment of the fees herein provided, shall apply to foreign corporations seeking to do business in this state, except that, in lieu of their charter, they shall file with the Secretary of State a certified copy of their charter, executed by the proper officer of the state, territory, or foreign country under whose laws they are incorporated, and any corporation applying for a renewal of its charter shall comply with all the provisions of this act in like manner, and to the same extent, as is herein provided for the chartering and organizing of new corporations. . . . Any corporation organized under the laws of another state, territory, or foreign country, and authorized to do business in this state, shall be subject to the same provisions, judicial control, restrictions, and penalties, except as herein provided, as corporations organized under the laws of this state."
elected for the ensuing year, together with a certificate of the time and manner in which such election was held. . . . And such failure to file such statement by any corporation doing business in this state, and not organized under the laws of this state, shall work a forfeiture of its right or authority to do business in this state, and the Charter Board may at any time, declare such forfeiture, and shall forthwith publish such declaration in the official state paper. . . . No action shall be maintained or recovery had in any of the courts of this state by any corporation doing business in this state without first obtaining the certificate of the Secretary of State that statements provided for in this section have been properly made."
Section 1283 (L. 1898, c. 10, § 12, as amended by L. 1901, c. 125, § 3).
"It made such written submission to service and paid such application fee voluntarily, and ex gratia, and out of a desire to avoid the appearance of not complying with the reasonable regulations of the State of Kansas, made with reference to its own corporations, but denies that said payment and that said written submission were obligatory upon it, or were necessary or essential as a condition precedent to its continuing to transact business within the State of Kansas, both state and interstate."
"until such applicant shall have paid to the State Treasurer of Kansas, for the benefit of the permanent school fund, the sum of twenty thousand one hundred dollars ($20,100), being the charter fee provided by law necessary to be paid by a foreign corporation having a capital of $100,000,000. It is further understood, ordered, and provided that nothing herein contained shall apply to nor be construed as restricting in any wise the transaction by the said applicant of its interstate business nor its business for the federal government, but that this grant of authority and requirement as to payment relate only to the business transacted wholly within the State of Kansas."
The above fee of $20, 100 was the specified percent of the authorized capital of the company which the statute required it to pay before doing or continuing to do any local business in Kansas.
"be ousted of and from the exercise within the State of Kansas of the said corporate rights and franchises of receiving, transmitting, and delivering within the State of Kansas of telegraphic messages and communications and of receiving compensation therefor."
equitable, and equal treatment required by the Constitution of the State of Kansas in the matter of taxes and other public charges imposed upon it;" 11. that the statute in question, so far as it prevents the company from using its property in the state for all purposes of its business, would operate as a taking of such property without due process of law; 12. that the statute is in contravention of the power of Congress to regulate commerce among the several states and with foreign countries, with its power to establish post offices and post roads, and with its authority to pass all laws necessary and proper to carry into execution the powers vested in the government of the United States.
MR. JUSTICE HARLAN, after making the above statement, delivered the opinion of the Court.
The above extended statement would seem to be justified by the importance of this case.
The contentions of the company, to which particular attention will be directed, are, in substance, that the requirement that it pay, for the benefit of the permanent school fund of the state, a given percent of its authorized capital, wherever and however employed, as a condition of its right to continue to do domestic business in Kansas, is a regulation which, by its necessary operation, directly burdens or embarrasses interstate commerce, and therefore is illegal under the commerce clause of the Constitution; further, that such a requirement involves the taxation not only of the company's interstate business everywhere, but equally the property employed by it beyond the limits of the state -- a thing which could not be done consistently with the due process of law enjoined by the Fourteenth Amendment.
It will be well to inquire at the outset, as to the state of the law in respect of local regulations that materially burden and interfere with the freedom of commerce among the states. A review of some of the cases will throw light on the questions now before us, and enable us the better to ascertain the scope and effect of the statute.
"The object and effect of his soliciting agency were to swell the volume of the business of the road. It was one of the 'means' by which the company sought to increase, and doubtless did increase, its interstate passenger traffic. It was not incidentally or remotely connected with the business of the road, but was a direct method of increasing that business. The tax upon it therefore was, according to the principles established by the decisions of this Court, a tax upon a means or an occupation of carrying on interstate commerce, pure and simple."
At the same time, in Norfolk & Western R. Co. v. Pennsylvania, 136 U. S. 114, the Court held that a license tax exacted by Pennsylvania upon a railroad corporation of another state, engaged in interstate commerce, for keeping an office in Philadelphia was a tax on such commerce, and invalid.
"There is no discrimination made between corporations doing a like business, and the state, although the appellant's company is a foreign corporation, has the right to license the business and calling of this agent as it would that of the lawyer or merchant whose business is confined to the state alone."
The judgment of the Kentucky court was reversed by this Court.
province of the state legislature to exact conditions on which they should carry on their business, nor to require to take out a license therefor. To carry on interstate commerce is not a franchise or a privilege granted by the state; it is a right which every citizen of the United States is entitled to exercise under the Constitution and laws of the United States, and the accession of mere corporate facilities, as a matter of convenience in carrying on their business, cannot have the effect of depriving them of such right, unless Congress should see fit to interpose some contrary regulation on the subject. It has frequently been laid down by this Court that the power of Congress over interstate commerce is as absolute as it is over foreign commerce. Would anyone pretend that a state legislature could prohibit a foreign corporation -- an English or a French transportation company, for example -- from coming into its borders and landing goods and passengers at its wharves, and soliciting goods and passengers for a return voyage, without first obtaining a license from some state officer, and filing a sworn statement as to the amount of its capital stock paid in? And why not? Evidently because the matter is not within the province of state legislation, but within that of national legislation. Inman Steamship Co. v. Tinker, 94 U. S. 238,,"
"As was said by Mr. Justice Lamar in the case last cited:"
"It is well settled by numerous decisions of this Court that a state cannot, under the guise of a license tax, exclude from its jurisdiction a foreign corporation engaged in interstate commerce, or impose any burdens upon such commerce within its limits."
"We have repeatedly decided that a state law is unconstitutional and void which requires a party to take out a license for carrying on interstate commerce, no matter how specious the pretext may be for imposing it,"
"We do not think that the difficulty is at all obviated by the fact that the express company, as incidental to its main business (which is to carry goods between different states), does also some local business by carrying goods from one point to another within the State of Kentucky. This is, probably, quite as much for the accommodation of the people of that state as for the advantage of the company. But whether so or not, it does not obviate the objection that the regulations as to license and capital stock are imposed as conditions on the company's carrying on the business of interstate commerce, which was manifestly the principal object of its organization. These regulations are clearly a burden and a restriction upon that commerce. Whether intended as such or not, they operate as such. But taxes or license fees in good faith imposed exclusively on express business carried on wholly within the state would be open to no such objection."
"are clear to the effect that neither licenses nor indirect taxation of any kind, nor any system of state regulation, can be imposed upon interstate any more than upon foreign commerce, and that all acts of legislation producing any such result are, to that extent, unconstitutional and void. And as, in our judgment, the law of Kentucky now under consideration, as applied to the case of the plaintiff in error, is open to this objection, it necessarily follows that the judgment of the Court of Appeals must be reversed."
"Nor does it make any difference whether such commerce is carried on by individuals or by corporations. Welton v. Missouri, 91 U. S. 275; Mobile County v. Kimball, 102 U. S. 691."
"While it is conceded that the property in a state belonging to a foreign corporation engaged in foreign or interstate commerce may be taxed equally with like property of a domestic corporation engaged in that business, we are clear that a tax or other burden imposed on the property of either corporation because it is used to carry on that commerce, or upon the transportation of persons or property, or for the navigation of the public waters over which the transportation is made, is invalid and void as an interference with, and an obstruction of, the power of Congress in the regulation of such commerce."
"It is hardly necessary to add that the tax on the capital stock of the New Jersey company in that case was decided to be unconstitutional because, as the corporation was a foreign one, the tax could only be construed as a tax for the privilege or franchise of carrying on its business, and that business was interstate commerce."
and between the United States and foreign countries, and which is invested with the powers and privileges conferred by the Act of Congress passed July 24th, 1866, and other acts incorporated in Title LXV of the Revised Statutes. Can a state prohibit such a company from doing such a business within its jurisdiction, unless it will pay a tax and procure a license for the privilege? If it can, it can exclude such companies, and prohibit the transaction of such business altogether. We are not prepared to say that this can be done. Ordinary occupations are taxed in various ways, and in most cases legitimately taxed. But we fail to see how a state can tax a business occupation when it cannot tax the business itself. Of course, the exaction of a license tax as a condition of doing any particular business is a tax on the occupation, and a tax on the occupation of doing a business is surely a tax on the business."
"Neither the state courts nor the legislatures, by giving the tax a particular name or by the use of some form of words, can take away our duty to consider its nature and effect. If it bears upon commerce among the states so directly as to amount to a regulation in a relatively immediate way, it will not be saved by name or form. Stockard v. Morgan, 185 U. S. 27, 185 U. S. 37; Asbell v. Kansas, 209 U. S. 251, 209 U. S. 254-256. "
"We are of opinion that the statute levying this tax does amount to an attempt to regulate commerce among the states. The distinction between a tax 'equal to' one percent of gross receipts and a tax of one percent of the same seems to us nothing, except where the former phrase is the index of an actual attempt to reach the property, and to let the interstate traffic and the receipts from it alone. We find no such attempt or anything to qualify the plain inference from the statute, taken by itself. On the contrary, we rather infer, from the judgment of the state court and from the argument on behalf of the state, that another tax on the property of the railroad is upon a valuation of that property, taken as a going concern. This is merely an effort to reach the gross receipts, not even disguised by the name of an occupation tax, and in no way helped by the words 'equal to.'"
"Of course, it does not matter that the plaintiffs in error are domestic corporations, or that the tax embraces indiscriminately gross receipts from commerce within as well as outside of the state."
"It is clear, therefore, that this license tax is not a mere police regulation, simply inconveniencing one engaged in interstate commerce, and so only indirectly affecting the business, but is a direct charge and burden upon that business, and if a state may lawfully exact it, it may increase the amount of the exaction until all interstate commerce in this mode ceases to be possible. And, notwithstanding the fact that the regulation of interstate commerce is committed by the Constitution to the United States, the state is enabled to say that it shall not be carried on in this way, and to that extent to regulate it."
clause of the Constitution of the United States, or involved the assertion of the right of a state to exercise its powers of taxation beyond its geographical limits, it was void, whatever might be the technical character affixed to the exaction."
To the same effect is Caldwell v. North Carolina, 187 U. S. 622.
in fact on the value of its property situated within the state." Postal Telegraph Co. v. Adams, 155 U. S. 688, 155 U. S. 696; Leloup v. Mobile, 127 U. S. 640, 127 U. S. 649. On the contrary, it is to be deduced from the adjudged cases that a corporation of one state, authorized by its charter to engage in lawful commerce among the state, may not be prevented by another state from coming into its limits for all the legitimate purposes of such commerce. It may go into the state without obtaining a license from it for the purposes of its interstate business, and without liability to taxation there on account of such business.
But it is said that none of the authorities cited are pertinent to the present case, because the state expressly disclaims any purpose by the statute in question to obstruct or embarrass interstate commerce, but seeks only to prevent the telegraph company from entering the field of domestic business in Kansas without its consent and without conforming to the requirements of its statute. But the disavowal by the state of any purpose to burden interstate commerce cannot conclude the question as to the fact of such a burden's being imposed, or as to the unconstitutionality of the statute, as shown by its necessary operation upon interstate commerce. If the statute, reasonably interpreted, either directly or by its necessary operation burdens interstate commerce, it must be adjudged to be invalid, whatever may have been the purpose for which it was enacted, and although the company may do both interstate and local business. This Court has repeatedly adjudged that, in all such matters, the judiciary will not regard mere forms, but will look through forms to the substance of things. Such is an established rule of constitutional construction, as the adjudged cases abundantly show.
"bound by mere forms, nor are they to be misled by mere pretenses. They are at liberty -- indeed, are under a solemn duty -- to look at the substance of things whenever they enter upon the inquiry whether the legislature has transcended the limits of its authority."
"in any form, whether by way of duties laid on the transportation of the subjects of that commerce, or on the receipts derived from that transportation, or on the occupation or business of carrying it on, for the reason that such taxation is a burden on that commerce, and amounts to a regulation of it, which belongs solely to Congress."
"That does not meet the difficulty. Interstate commerce cannot be taxed at all, even though the same amount of tax should be laid on domestic commerce or that which is carried on solely within the state."
"There may be no purpose upon the part of a legislature to violate the provisions of that instrument, and yet a statute enacted by it, under the forms of law, may, by its necessary operation, be destructive of rights granted or secured by the Constitution. In such cases, the courts must sustain the supreme law of the land by declaring the statute unconstitutional and void."
"that a statute may, upon its face, apply equally to the people of all the states, and yet be a regulation of interstate commerce which a state may not establish. A burden imposed by a state upon interstate commerce is not to be sustained simply because the statute imposing it applies alike to the people of all the states, including the people of the state enacting such statute."
"any fresh meats (beef, veal, or mutton) which shall have been slaughtered one hundred miles or over from the place at which it is offered for sale until and except it has been inspected and approved"
"Is the statute now before us liable to the objection that, by its necessary operation, it interferes with the enjoyment of rights granted or secured by the Constitution? This question admits of but one answer. . . . The fees exacted under the Virginia statute for the inspection of beef, veal, and mutton, the product of animals slaughtered one hundred miles or more from the place of sale are, in reality, a tax, and"
"a discriminating tax, imposed by a state, operating to the disadvantage of the products of other states when introduced into the first-mentioned state, is, in effect, a regulation in restraint of commerce among the states, and as such is a usurpation of the powers conferred by the Constitution upon the Congress of the United States."
all the states, including Virginia, for"
"a burden imposed by a state upon interstate commerce is not to be sustained simply because the statute imposing it applies alike to the people of all the states, including the people of the states enacting such statutes."
"Minnesota v. Barber, 136 U. S. 313, 136 U. S. 319; Robbins v. Shelby County Taxing District, 120 U. S. 489, 120 U. S. 497. If the object of Virginia had been to obstruct the bringing into that state, for use as human food, of all beef, veal, and mutton, however wholesome, from animals slaughtered in distant states, that object will be accomplished if the statute before us be enforced."
company's right to transact purely local business in Kansas that it shall contribute, for the benefit of the state school fund, a given percent of its whole authorized capital, representing all of its property and all its business and interests everywhere.
"But that fact does not remove the difficulty. The tax affects the whole business without discrimination. There are sufficient modes in which the internal business, if not already taxed in some other way, may be subjected to taxation, without the imposition of a tax which covers the entire operations of the company."
its property interests in and out of the state. It is important here to observe -- indeed, the contrary could not be asserted -- that the telegraph company lawfully entered Kansas, with the consent of both the territory and state, for the purposes of its business of every kind, long before, and was legally there when, the Bush Act was passed. The state concedes its right to continue in such business in Kansas if it will comply with the statute in question and pay the fee demanded, and only because of such refusal it seeks the aid of the court to oust the company from the state, so far as local business is concerned, unless it shall, by paying such fee, contribute -- that is the proper word -- a given percent of all its capital for the support of the schools of the state. The state knows that the telegraph company, in order to accommodate the general public and make its telegraphic system effective, must do all kinds of telegraphic business. Yet, it seeks to enforce a regulation requiring the company by paying the "fee" in question to assent to its interstate business being burdened and its property outside of Kansas being taxed in order that it may continue to conduct a business concededly beneficial to the public -- a right lawfully acquired from the United States when Kansas was a territory, and exercised consistently with the statutes of the state for many years after Kansas was admitted as a State of the Union.
But it is said to be well settled that a state, in the exercise of its reserved powers, may prescribe the terms on which a foreign corporation, whatever the nature of its business, may enter and do business within its limits.
It is true that, in many cases, the general rule has been laid down that a state may, if it chooses to do so, exclude foreign corporations from its limits, or impose such terms and conditions on their doing business in the state as, in its judgment, may be consistent with the interests of the people. But those were cases in which the particular foreign corporation before the court was engaged in ordinary business, and not directly or regularly in interstate or foreign commerce. In Paul v.
"It is undoubtedly true, as stated by counsel, that the power conferred upon Congress to regulate commerce includes as well commerce carried on by corporations as commerce carried on by individuals. . . . This state of facts forbids the supposition that it was intended in the grant of power to Congress to exclude from its control the commerce of corporations. The language of the grant makes no reference to the instrumentalities by which commerce may be carried on; it is general, and includes alike commerce by individuals, partnerships, associations, and corporations. . . . The defect of the argument lies in the character of their business. Issuing a policy of insurance is not a transaction of commerce. . . . Such contracts are not interstate transactions, though the parties may be domiciled in different states."
"We are aware that, in Paul v. Virginia, supra, this Court decided that a state might exclude a corporation of another state from its jurisdiction, and that corporations are not within the clause of the Constitution which declares that 'the citizens of each state shall be entitled to all privileges and immunities of citizens in the several states.' Art. IV, § 2. That was not, however, the case of a corporation engaged in interstate commerce, and enough was said by the Court to show that, if it had been, very different questions would have been presented."
"A corporation created by Indiana can transact business in Ohio only with the consent, express or implied, of the latter state, 13 Pet. 38 U. S. 519. This consent may be accompanied by such conditions as Ohio may think fit to impose, and these conditions must be deemed valid and effectual by other states and by this Court, provided they are not repugnant to the Constitution or laws of the United States."
"But that statute, requiring the corporation, as a condition precedent to obtaining a permit to do business within the state, to surrender a right and privilege secured to it by the Constitution and laws of the United States, was unconstitutional and void, and could give no validity or effect to any agreement or action of the corporation in obedience to its provisions,"
"As the Iowa statute makes the right to a permit dependent upon the surrender by the foreign corporation of a privilege secured to it by the Constitution and laws of the United States, the statute requiring the permit must to held to be void. . . . In all the cases in which this Court has considered the subject of the granting by a state to a foreign corporation of its consent to the transaction of business in the state, it has uniformly asserted that no conditions can be imposed by the state which are repugnant to the Constitution and laws of the United States."
"Statutes requiring foreign corporations, as a condition of being permitted to do business within the state, to stipulate not to remove into the courts of the United States suits brought against them in the courts of the state have been adjudged to be unconstitutional and void."
business within its limits that the corporation pay a given percent of all fees or commissions received by it in its business, interstate and domestic? There can be but one answer to this question -- namely that such a condition would operate as a direct burden on interstate commerce, and therefore would be unconstitutional and void. Consistently with the Constitution, no court could, by any form of decree, recognize or give effect to or enforce such a condition.
not be trammeled or burdened by local regulations which, under the guise of regulating local affairs, really burden rights secured by the Constitution and laws of the United States. While the general right of the states to regulate their strictly domestic affairs is fundamental in our constitutional system and vital to the integrity and permanence of that system, that right must always be exerted in subordination to the granted or enumerated powers of the general government, and not in hostility to rights secured by the supreme law of the land.
We need not stop to discuss at length the specific question whether the state can by any regulation make the property of the company outside of Kansas contribute directly to the support of its schools, such being the effect of the requirement that it pay into the state treasury, for the benefit of the state school fund, a given percent of all its capital stock as a condition of its doing local business in Kansas. It is firmly established that, consistently with the due process clause of the Constitution of the United States, a state cannot tax property located or existing permanently beyond its limits. Louisville &c. v. Kentucky, 188 U. S. 385, 188 U. S. 398; Union Transit Co. v. Kentucky, 199 U. S. 194, 199 U. S. 209.
It is said that the conclusions here announced are not in harmony with some cases heretofore decided by this Court. This suggestion is one of serious import, and cannot be passed without consideration, although the careful examination of the cases may greatly extend this opinion. In support of the view just stated, reliance is placed particularly on Osborne v. Florida, 164 U. S. 650; Pullman Co. v. Adams, 189 U. S. 420; Allen v. Pullman's Palace Car Co., 191 U. S. 171, and Security Mutual Life Ins. Co. v. Prewitt, 202 U. S. 246, 202 U. S. 248.
"conduct its interstate business without paying the slightest heed to the act, because it does not apply to or in any degree affect the company in regard to that portion of its business which it has the right to conduct without regulation from the state."
"so long as the regulation as to the license or taxation does not refer to and is not imposed upon the business of the company which is interstate, there is no interference with that commerce by the state statute."
above cited, in which it was held that a state tax on the capital stock of the telegraph company was valid when measured, as it was in that case, not by its entire capital, but by the proportion of the company's lines in the state to their entire length throughout the entire country. So, in Osborne v. Florida, the tax was not imposed on the basis of the business of the company, interstate and intrastate, or either separately, but was made to depend alone on the number of inhabitants in the particular city or town where its agency was established. It is manifest that what has been said in the present case is in perfect harmony with the decision in the Osborne case.
"were carried by various railroad companies, and all of them were carried into the state from another state, or out of the state to another state, or both. But such cars in their passage also carried passengers from point to point within the state, and a specific fare was collected by the servants of the Pullman Company."
would seem to be true that the state constitution and the statute combined would impose a burden on commerce between the states analogous to that which was held bad in Crutcher v. Kentucky, 141 U. S. 47. On the other hand, if the Pullman Company, whether called a common carrier or not, had the right to choose between what points it would carry, and therefore to give up the carriage of passengers from one point to another within the state, the case is governed by Osborne v. Florida, supra. The company cannot complain of being taxed for the privilege of doing local business which it is free to renounce. Both parties agree that the tax is a privilege tax. As the validity of the tax is thus bound up with the effect of the section of the state constitution, we think that the Pullman Company was entitled to know how it stood under the latter, and that a judgment against it could not be justified by reasoning which leaves that point obscure . We are somewhat embarrassed in dealing with the case, because we are not quite certain whether we rightly interpret the intimations upon the subject in the judgment under review. If the Constitution of Mississippi should be read as imposing an obligation to take local passengers, the question for us might be which, if not both, the clause of the Constitution or the tax act, is invalid. But we assume that the opinion of the Supreme Court of Mississippi intends to meet the difficulty frankly, and when it says that the argument against the tax drawn from the above interpretation of the Constitution is fallacious, we take it as meaning that no such interpretation will be attempted in the future, and we take it so the more readily that we can see no ground for a different view. If we are right in our understanding, the judgment of the supreme court was correct for the reason sufficiently stated above."
So that what was actually decided in the Adams case was that the company was under no obligation to take local passengers, but, if it chose to do that kind of business, the privilege for doing it could be taxed by the state. The Court did not hold that the state could, in any form, directly burden interstate commerce. It really held to the contrary.
The Adams case differs from the present one in this: that while the Mississippi Code imposed no other condition upon the Pullman Company doing local business in that state than that it should pay a certain license tax on that account -- which tax, it may be observed, is not at all disproportioned to such local business, and therefore not to be regarded as a mere device to reach or burden the interstate commerce of the company -- the statute of Kansas forbids the doing of local business within its limits by a corporation of another state or foreign country except subject to the condition that such corporation first pay to the state a given percent of its entire capitalization representing the value of all its business, property, and interests within and without the state, thereby placing a direct burden on the privilege or franchise of transacting interstate commerce and taxing property rights beyond the jurisdiction of the state for purposes of taxation. That the Western Union Telegraph Company is engaged in both interstate and intrastate commerce is no reason, in itself, why Kansas may not, in good faith, require it to pay a license tax strictly on account of local business done by it in that state. But it is altogether a different thing for Kansas to deny it the privilege of doing such local business, beneficial to the public, except on condition that it shall first pay to the state a given percent of all its capital stock, representing all of its property, wherever situated, and all its business in and outside of the state.
the state, but not confined to its limits. The cars of the Pullman Company run into and beyond the state as well as between points within the state. The act in its terms applies to cars running through the state as well as those whose operation is wholly intrastate. It applies to all alike, and requires payment for the privilege of running the cars of the company, regardless of the fact whether used in interstate traffic or in that which is wholly within the borders of the state. . . . The statute now under consideration requires payment of the sum exacted for the privilege of doing any business, when the principal thing to be done is interstate traffic. We are not at liberty to read into the statute terms not found therein or necessarily implied, with a view to limiting the tax to local business, which the legislature, in the terms of the act, impose upon the entire business of the company. We are of opinion that taxes exacted under the act of 1887 are void as an attempt by the state to impose a burden upon interstate commerce."
"strictly to business done [by sleeping car companies] in the transportation of passengers taken up at one point in the state and transported wholly within the state to another point therein."
"the corresponding right of the state to tax and control the internal business of the state, although thereby foreign or interstate commerce may be indirectly affected has been recognized with equal clearness,"
cars transporting interstate passengers and those transporting local passengers. On that ground, the tax was held to be void. In the present case, the State of Kansas demands, in the form of a fee, a given percent of all the capital of the foreign corporation, without any discrimination between the capital representing the business and property of the telegraph company outside of the state and the capital representing such of its business and property as are wholly local to the state. And it seeks the aid of the court to oust the telegraph company from continuing to do business in the state, so far as local business is concerned, because and only because it will not surrender its immunity from state taxation in reference to its interstate business and its property outside of Kansas.
"As a state has power to refuse permission to a foreign insurance company to do business at all within its confines, and as it has power to withdraw that permission when once given, without stating any reason for its action, the fact that it may give what some may think a poor reason or none for a valid act is immaterial."
"a state has the right to prohibit a foreign corporation from doing business within its borders unless such prohibition is so conditioned as to violate some provision of the federal Constitution,"
company, and subjects its property and business outside of that state to taxation, then the constitutional validity of the statute, in the particulars adverted to, may be here adjudged without any reference whatever to the judgment in the Prewitt case, and without reexamining the grounds upon which that judgment rested. The Court did not intend by its judgment in the Prewitt case to recognize the right of Kentucky, by any regulation as to foreign insurance companies, to burden interstate commerce or to tax property located and used without its limits. It could not have done so without overruling numerous decisions of this Court on that subject. On the contrary, as we have seen, the Court in that case distinctly recognized the principle that a state could not make any prohibition whatever as to a corporation doing business within its limits that would be in violation of the federal Constitution. In respect of the point actually decided in it, we leave the Prewitt case and the objections urged against the doctrine it announces wholly on one side, and go no further now than is indicated in this opinion.
depend upon its submission to a condition prescribed by that state, which was hostile both to the letter and spirit of the Constitution. The company was not bound under any circumstances to surrender its constitutional exemption from state taxation, direct or indirect, in respect of its interstate business and its property outside of the state, any more than it would have been bound to surrender any other right secured by the national Constitution.
There are other aspects of the case involving constitutional questions that might be considered, and which, it is contended, would lead to the same conclusion as is herein indicated. But it is unnecessary to pass on any of the grounds urged by the telegraph company in its defense other than those made the basis of the decision now rendered. In order to dispose of this case, we need not now go further than to hold, as we do, that, for the reasons stated, the state was not entitled to the aid of the court in this case; that the affirmative relief asked by it could not have been granted without practically compelling the telegraph company, as a condition of its doing local business in Kansas, that it should surrender rights belonging to it under the Constitution of the United States and secured by that instrument against hostile state action; that any such condition was unconstitutional and void, and that the right of the telegraph company to continue doing business in Kansas is not, and cannot be, affected by that condition.
MR. JUSTICE MOODY heard the argument in this case, participated in its decision, and approves the opinion of the Court.
The judgment of the Supreme Court of Kansas is reversed, and the cause remanded for such proceedings as may be consistent with this opinion.
well as other business. If the unconstitutional burden be not assumed, local business must cease, and hence the property established for the purpose of doing the local business becomes worthless and is in effect confiscated. If, on the other hand, the unconstitutional burden be borne, a like result takes place.
Nor, I submit, it there force in the suggestion that, under the facts here disclosed, the company cannot be heard to complain, because, as it was in the state without express authority, it must be assumed to have gone into the state and made its investment subject to the exertion by the state of its authority. I concede the proposition to be sound insofar as it includes the right of the state to exert its lawful powers. That is to say, I concede that the corporation, in going in and investing its property within the state, did so subject to the right of the state to exert, as to the property thus in the state, all lawful powers which might be called into play as to property so situated of the character of that under consideration. But I cannot assent to the correctness of the contention insofar as it asserts that the state may suffer a corporation to come into its borders, invest in property therein, and then, after having allowed, by acquiescence or implied invitation, such a situation to arise, the state may treat the corporation as if it had never come in and its property within the state as if it were wholly out of the state, and despoil the corporation of its rights and property upon such false assumption.
It is to be observed that the view taken by me does not deprive the state of power to exert its authority over the corporation and its property in the amplest way, subject to constitutional limitations. It simply prevents the state from driving out the corporation which is in the state by imposing upon it arbitrary and unconstitutional conditions when upon no possible theory could the right to exact them exist except upon the assumption that the corporation is not in the state, and that the illegal exactions are the price of the privilege of allowing it to come in.
Resting, as I do, my concurrence in the decree in this case upon the grounds just previously stated, it becomes unnecessary for me to say anything concerning the wider ground upon which the opinion of the Court proceeds, but I do not wish to be understood as dissenting in any respect from the fundamental principle which the opinion of the Court embodies and applies.
I think that the judgment of the Supreme Court of Kansas was right, and it will not take me long to give my reasons. I assume that a state cannot tax a corporation on commerce carried on by it with another state, or on property outside the jurisdiction of the taxing state, and I assume further that, for that reason, a tax on or measured by the value of the total stock of a corporation like the Western Union Telegraph Company is void. But I also assume that it is not intended to deny or overrule what has been regarded as unquestionable since Bank of Augusta v. Earle, 13 Pet. 519, that, as to foreign corporations seeking to do business wholly within a state, that state is the master, and may prohibit or tax such business at will. Security Mutual Life Ins. Co. v. Prewitt, 202 U. S. 246, 202 U. S. 249; Waters-Pierce Oil Co. v. Texas, 177 U. S. 28; Paul v. Virginia, 8 Wall. 168. I make the same assumption as to what has been decided twice, at least, since I have sat on this bench -- that the right to prohibit, regulate, or tax foreign corporations in respect of business done wholly within a state is not taken away by the fact that they also are engaged there in commerce among the states. Pullman Co. v. Adams, 189 U. S. 420; Allen v. Pullman's Palace Car Co., 191 U. S. 171.
a right to exclude its entry for another, the two rights can coexist. To say that the disappearance of the latter is an incident of the ownership of property there is to declare that what is allowed only for a limited purpose must have general results. I think it more logical and more true to the scheme of the Union to recognize that what comes in only for a special purpose can claim constitutional protection only in its use for that purpose, and for nothing else. That, at all events, has been decided in the cases to which I have referred.
Now what has Kansas done? She has not undertaken to tax the Western Union. She has not attempted to impose an absolute liability for a single dollar. She simply has said to the company that, if it wants to do local business, it must pay a certain sum of money, just as Mississippi said to the Pullman Company that, if it wanted to carry on local traffic, it must pay a certain sum. It does not matter if the sum is extravagant. Even in the law, the whole generally includes its parts. If the state may prohibit, it may prohibit with the privilege of avoiding the prohibition in a certain way. I hardly can suppose that the provision is made any the worse by giving a bad reason for it or by calling it by a bad name. I quite agree that we must look through form to substance. The whole matter is left in the Western Union's hands. If the license fee is more than the local business will bear, it can stop that business and avoid the fee. Whether economically wise or not, I am far from thinking that the charge is inherently vicious or bad. If the imposition were absolute, or if the attempt were to oust the corporation from the state if it did not pay, the arguments that prevail would be apposite. But the state seeks only to oust the corporation from that part of its business that the corporation has no right to do unless the state gives leave.
local business at a loss, for the sake of popularity or other indirect sources of gain. In the last case, the fee would come out of earnings that the state has no right to touch. But these considerations do not reach their aim. To deny the right of Kansas to do as it chooses with the local business is to require the local business to help to sustain that between the states. If the latter does not pay alone, that is no reason for cutting down powers that, up to this time, the states always have possessed. If the telegraph company chooses to pay the fee out of its other earnings, that is its affair. It is master of the situation, and can stop if it sees fit. Exactly this argument was pressed in Pullman Co. v. Adams, 189 U. S. 420, 189 U. S. 421, and was rejected without dissent. See Ashley v. Ryan, 153 U. S. 436, 153 U. S. 444.
"Having the absolute power of excluding the foreign corporation, the state may, of course, impose such conditions upon permitting the corporation to do business within its limits as it may judge expedient, and it may make the grant or privilege dependent upon the payment of a specific license tax, or a sum proportioned to the amount of its capital."
without giving any reason, sees fit simply to prohibit the Western Union Telegraph Company from doing any more local business there, or from doing local business until it has paid $20,100, I shall be curious to see upon what ground that legislation will be assailed. I am aware that the battle has raged with varying fortunes over this matter of unconstitutional conditions, but it appears to me ground for regret that the Court so soon should abandon its latest decision (Security Mut. Life Ins. Co. v. Prewitt, 202 U. S. 246).
204 U. S. 364, 204 U. S. 394. In Horn Silver Mining Co. v. New York, 143 U. S. 305, the corporation showed by its answer that it had employed part of its capital in manufacturing in New York. It had got into the state and was at work there, yet it was held liable to pay a percentage of its entire capital, although the greater part was outside the state. But furthermore, it is a short answer to this part of the argument that, in the present case, according to decisions relied upon by the majority, the state could not have prevented the entry of the corporation, because it entered for the purpose of commerce with other states.
THE CHIEF JUSTICE and MR. JUSTICE McKENNA concur in this dissent.
The late Mr. Justice Peckham took part in the consideration of the case and agreed with the minority.

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