Source: https://supreme.justia.com/cases/federal/us/308/331/
Timestamp: 2019-04-22 20:30:30+00:00

Document:
A state corporate franchise tax on the privilege of doing local business, measured by a charge upon such proportion of the outstanding capital stock, surplus, and undivided profits of the corporation, plus its long-term obligations, as the gross receipts from its local business bear to the gross receipts of its entire business, held constitutional. P. 308 U. S. 334.
taxing State as a base for taxation by the statutory formula would exceed $23,000,000. 100 F.2d 515 affirmed.
Certiorari, 306 U.S. 628, to review the affirmance by the court below of a judgment sustaining a state tax.
The question for determination in this proceeding is the validity, as applied to this petitioner, of a statute of the Texas levying an annual franchise tax on all corporations chartered or authorized to do business in Texas, measured by a graduated charge upon such proportion of the outstanding capital stock, surplus, and undivided profits of the corporation, plus its long-term obligations, as the gross receipts of its Texas business bear to the total gross receipts from its entire business.
By Article 7057b of the Revised Civil Statutes of Texas, Vernon's Ann.Civ.St.Tex. art. 7057b, any corporation which may be required to pay any franchise or other privilege tax may pay it under written protest and bring suit within a limited time thereafter in any court of competent jurisdiction in Travis County, Texas, against the public official charged with the duty of collecting such tax, the State Treasurer, and the Attorney General, for its recovery. This suit was instituted in the District Court of the United States, Western District, Austin Division, against the state officials authorized to be made defendants. Defendants joined in a demurrer on the ground that no cause of action was set out in the petition.
were about $888,000,000. The ratio of Texas receipts to total receipts was 3.85 percent. Petitioner's total taxable capital was $600,000,000. The value of all assets located in Texas was somewhat over $3,000,000, while the value of the capital allocated to Texas as a base for taxation by the statutory formula would be in excess of $23,000,000.
For the taxable year beginning May 1, 1936, a franchise tax was tendered Texas in the sum of $1,224, computed on the actual net book value of all of petitioner's assets in Texas. On demand and under protest, an additional franchise tax and penalty was paid in the sum of $7,529, based on the allocation to Texas of capital as calculated by the statutory formula. This suit was brought to recover the alleged unlawful exaction.
This exaction, petitioner pleads, is calculated from a formula that results in the levy of a tax on assets used in petitioner's interstate business in violation of Article I, Section 8, of the Constitution. It is further alleged that the tax operates to deprive petitioner of its property without due process of law in violation of the Fourteenth Amendment, because it must pay a tax on property neither located nor used within the Texas and on activities beyond the borders of Texas.
of intrastate opportunities under the protection and encouragement of local government offers a basis for taxation as unrestricted as that for domestic corporations. In laying a local privilege tax, the state sovereignty may place a charge upon that privilege for the protection afforded. When that charge, as here, is based upon the proportion of the capital employed in Texas, calculated by the percentage of sales which are within the state, no provision of the Federal Constitution is violated.
"such proportion of the fair cash value of all the shares constituting the capital stock . . . as the value of the assets, both real and personal, employed in any business within the Commonwealth . . . bears to the value of the total assets of the corporation."
other Maine corporations. Their plants were in Massachusetts. On the assumption that the situs of the stock followed the domicile of the owner, the taxpayer challenged the inclusion of the Maine stock in the basis for the local tax. This Court held that Massachusetts was free to use the stock for the calculation of the local tax. Similar methods of determining privilege taxes were left to the states in International Shoe Co. v. Shartel [Footnote 9] and New York v. Latrobe. [Footnote 10] The Constitution recognizes the dual interests of the national and state governments and permits taxes for local privileges upon the intrastate activities of the far-flung enterprises which gain large benefits from the nationwide market, protected by the commerce clause. We reject petitioner's contention that constitutionality of state taxation turns on so narrow an issue as whether local assets, rather than local gross receipts, are used in a taxing formula.
"The law rates the privilege enjoyed in Louisiana according to the nature and extent of that privilege in the light of the advantages, the capacity, and the competitive ability of the chain's stores in Louisiana considered not by themselves, as if they constituted the whole organization, but in their setting as integral parts of a much larger organization. [Footnote 13]"
This same rule applies here. James v. Dravo Contracting Company [Footnote 14] contains nothing contrary to this view. The statute under consideration there levied a privilege tax "equal to two percent of the gross income of the business." Insofar as it was upon receipts in other states for work done in other states, it was conceded to be outside of the taxing power of the statute.
Ford Motor Co. v. Clark, 100 F.2d 515.
"Art. 7084. Amount of Tax -- (A) Except as herein provided, every domestic and foreign corporation heretofore or hereafter chartered or authorized to do business in Texas, shall, . . . each year, pay . . . a franchise tax . . . based upon that proportion of the outstanding capital stock, surplus and undivided profits, plus the amount of outstanding bonds, notes and debentures, other than those maturing in less than a year from date of issue, as the gross receipts from its business done in Texas bears to the total gross receipts of the corporation from its entire business, which tax shall be computed at the following rates for each One Thousand Dollars ($1,000.00) or fractional part thereof; One Dollar ($1.00) to One Million Dollars ($1,000,000.00), sixty cents (60¢). . . ."
Investment Securities Co. v. Meharg, 115 Tex. 441, 282 S.W. 802; United North & South Development Co. v. Heath, 78 S.W.2d 650.
Ficklen v. Shelby County Taxing District, 145 U. S. 1, 145 U. S. 21; American Mfg. Co. v. St. Louis, 250 U. S. 459; Matson Nav. Co. v. State Board, 297 U. S. 441; Western Live Stock v. Bureau of Revenue, 303 U. S. 250; Coverdale v. Arkansas-Louisiana Pipe Line Co., 303 U. S. 604, 303 U. S. 608.
266 U. S. 266 U.S. 271.
Cf. Underwood Typewriter Co. v. Chamberlain, 254 U. S. 113, 254 U. S. 120.
277 U. S. 277 U.S. 413.
279 U. S. 279 U.S. 429.
279 U. S. 279 U.S. 421.
Atlantic Refining Co. v. Virginia, 302 U. S. 22, 302 U. S. 29; cf. Kansas City, Fort Scott & Memphis Ry. v. Botkin, 240 U. S. 227, 240 U. S. 235.
301 U. S. 301 U.S. 412, 301 U. S. 424-425.
301 U. S. 301 U.S. 425.
302 U. S. 302 U.S. 134, 302 U. S. 139.

References: art. 7057
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