Source: https://caselaw.findlaw.com/us-supreme-court/301/148.html
Timestamp: 2019-04-22 05:25:41+00:00

Document:
Appeal from the Supreme Court of the State of Alabama.
Messrs. Forney Johnston and Jos. F. Johnston, both of Birmingham, Ala ., for appellants.
This case presents the question of the validity of a franchise tax assessed pursuant to a statute of the State of Alabama upon the Southern Natural Gas Corporation. The imposition of the tax was assailed as a direct burden upon interstate commerce and as also depriving the corporation of its property without due process of law and denying it the equal protection of the laws contrary to the Fourteenth Amendment of the Federal Constitution. The Supreme Court of the State sustained the tax ( 170 So. 178) and the case comes here on appeal.
The assessment was made by the State Tax Commission for the year 1931 in the sum of $11,047.43 and was said to be based upon capital employed in Alabama amounting to $5,523,715. Appellant resisted the assessment upon the ground that it was not doing business and did not propose to do business in the State of Alabama except in interstate commerce and that the property by which the tax was measured was used exclusively in interstate commerce.
Appellant was organized prior to May 12, 1928, under the laws of Delaware and on that date it qualified to do [301 U.S. 148, 150] business in Alabama. It named a statutory agent and filed in the office of the Secretary of State a copy of its charter which covered a wide range of activities. 1 It has paid annually the required permit fee. At the time of the assessment in question appellant maintained its office and chief place of business in the city of Birmingham, Ala. The entire management, control, and conduct of its business was conducted from that office.
Appellant is engaged in the transmission and distribution of gas which it purchases from the producers in the Louisiana and Mississippi fields. In May, 1929, it began the construction of its pipe lines and by January, 1931, it had constructed its main lines from the Louisiana fields to Atlanta and Columbus, Ga., the Columbus line turning south from the Atlanta line at a point near Tuscaloosa, Ala. In 1931, appellant owned approximately 564 miles of pipe and various items of real and personal property located within Alabama, all constituting part of its general transmission system. It was agreed that in the event that it should be held that all of appellant's property located in the State was subject to the assessment of a franchise tax, the value of that property as of January 1 to May 13, 1931, the date of the final assessment, was $5,500, 000.
Appellant had contracts for the delivery of natural gas in Alabama to only four purchasers. Three were intrastate utilities in Alabama, the Alabama Natural Gas Corporation, the Southern Cities Public Service Com- [301 U.S. 148, 151] pany, and the Birmingham Gas Company. These companies were not consumers but were engaged, either directly or through subsidiaries, in the distribution of natural gas as public utilities in the State of Alabama. The fourth purchaser was the Tennessee Coal, Iron & Railroad Company, a subsidiary of the United States Steel Corporation, which purchased gas for itself and affiliated companies operating steel and industrial plants in the Birmingham district and which were not public utilities but consumers. A majority of orders for gas were received by and cleared through the Birmingham office; all collections for sales were received and disbursements for expenses were made or authorized at that office. The sales to the Tennessee Company and its affiliates were made from time to time upon orders given by the Birmingham office as the needs of the purchasers required.
'The natural gas shall be delivered at a pressure of not less than 30 pounds gauge at some mutually satisfactory location or locations upon the premises of Buyer, and Seller shall there furnish, install, operate and maintain at its own expense regulating and measuring station or stations properly equipped with orifice meters and recording gauges or other type of meter or meters of stand- [301 U.S. 148, 153] ard style as may be mutually agreed upon conformable to the current recommendations of Gas Measurements Committee of American Gas Association, the measurement by which shall fix the total amount of natural gas delivered by Seller to Buyer.
By compliance with the statute appellant obtained the privilege of engaging within the State in any of the activities which its charter authorized.
The facts thus distinguish the instant case from that of Ozark Pipe Line Corporation v. Monier, 266 U.S. 555 , 45 S.Ct. 184. There the corporation operated a pipe line extending from Oklahoma through Missouri to a point in Illinois. Missouri sought to tax the privilege of doing business within the State. But nothing was done in Missouri except in furtherance of transportation. Oil was neither received nor delivered in that State. The business actually carried on 'was exclusively in interstate commerce' and whatever was done within Missouri in the maintenance of an office or otherwise was 'all exclusively in furtherance of its interstate business.' Id., 266 U.S. 5558 at page 565, 45 S.Ct. 184, 186. In Missouri v. Kansas Natural Gas Company, supra, as noted above, the distinction was pointed out. There 'the transportation, sale and delivery' of the gas constituted an 'unbroken chain, fundamentally interstate from beginning to end.' So, [301 U.S. 148, 156] the case of State Tax Commission v. Interstate Natural Gas Company, 284 U.S. 41 , 52 S.Ct. 62, rested upon the conclusion that what was done was wholly incidental to interstate commerce between Louisiana and Mississippi. There were no such local activities as are present here to carry the transactions of the company into the field of state authority.
That authority was held to be properly exerted in the case of Atlantic Lumber Company v. Commissioner, 298 U.S. 553 , 56 S.Ct. 887. The corporation was organized in Delaware but it did not 'function there,' but in Massachusetts. There it established its office for the exercise of its corporate powers. That was the headquarters for salesmen who solicited orders in that and other states. There orders were accepted and remittances received. The corporation was engaged in the wholesale lumber business and owned practically all the stock of three subsidiaries, two of which were engaged in cutting timber and manufacturing lumber in other states, and a third held title to timber lands in Louisiana. The court said that if appellant did nothing but transact interstate business, the excise tax sought to be levied with respect to the doing of business in Massachusetts could not stand, but in view of the activities conducted in Massachusetts and the corporate functions there exercised, the court decided that the privilege tax was valid and that the effect upon interstate commerce, so far as there was any, was 'remote and incidental.' Because of the local activities, the decision in the Ozark Case was held to be inapplicable.
Third.-As Alabama was competent to lay a franchise tax upon appellant for the privilege of doing an intrastate business, it was competent to measure the tax by the capital employed within the State provided the tax was not so laid as to discriminate against interstate commerce or otherwise lay a direct burden upon it. Postal Telegraph Cable Co. v. Adams, 155 U.S. 688, 696 , 15 S.Ct. 268, 360; St. Louis South- [301 U.S. 148, 157] western Railway Co. v. Arkansas, 235 U.S. 350 , 364-367, 35 S.Ct. 99; Underwood Typewriter Co. v. Chamberlain, 254 U.S. 113, 119 , 120 S., 41 S.Ct. 45, 46; St. Louis-San Francisco Railway Co. v. Middlekamp, 256 U.S. 226, 231 , 41 S.Ct. 489, 491; Hump Hairpin Mfg. Co. v. Emmerson, 258 U.S. 290, 294 , 42 S.Ct. 305, 307; International Shoe Company v. Shartel, 279 U.S. 429, 433 , 49 S.Ct. 380, 382; Western Cartridge Co. v. Emmerson, 281 U.S. 511, 513 , 514 S., 50 S.Ct. 383, 384, 385; Atlantic Lumber Co. v. Commissioner, supra.
There is here no attempt to tax property that is beyond the boundaries of the State. The tax was laid only upon property employed within the State, and enforcement is left to the ordinary means of collecting taxes. The rule was thus stated in International Shoe Company v. Shartel, supra: 'A franchise tax imposed on a corporation, foreign or domestic, for the privilege of doing a local business, if apportioned to business done or property owned within the state, is not invalid ... because a part of the property or capital included in computing the tax is used by it in interstate commerce.' There is no showing of any direct burden upon interstate commerce, the effect upon that commerce being incidental and remote, not differing in this respect from the effect of ordinary ad valorem taxation of property within the State. Postal Telegraph Cable Co. v. Adams, supra; St. Louis Southwestern Railway Co. v. Arkansas, supra.
The judgment of the Supreme Court of Alabama is affirmed.
[ Footnote 1 ] The charter authorized appellant to store, transport, buy and sell oil, gas, salt, brine, and other mineral solutions; to manufacture, acquire, distribute, use, and sell artificial gas, with by-products; to mine, produce, buy, use, sell, and distribute natural gas, with by- products; to produce, buy, use, sell, and distribute a mixture of artificial and natural gas; to construct, acquire and operate all works and all pipe lines, mains, plants, systems, etc., for the above purposes, with the power of eminent domain; to acquire, manufacture, and deal in ice.

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