Source: https://supreme.justia.com/cases/federal/us/226/404/
Timestamp: 2019-04-23 02:22:00+00:00

Document:
The privilege given telegraph companies under the Act of July 24, 1866, to use military and post roads of the United States for poles and wire was permissive, and did not create corporate rights and privileges to carry on the business of telegraphy.
The corporate rights and privileges were derived from the laws of the state of incorporation.
taxing the real or personal property of a telegraph company within its borders or from imposing a license tax upon the right to do a local business within the state. West. Un. Tel. Co. v. Kansas, 216 U. S. 1, distinguished.
Unless there is a claim that a federal right is violated, the reasonableness of a municipal license ordinance is for the state to determine.
In determining its validity, this Court must consider a municipal ordinance as it has been construed by the highest court of the state.
An agency of the federal government in the execution of its sovereign power is not subject to the taxing power of the state.
An ordinance which taxes without exemption the privilege of carrying on business, part of which is a governmental agency such as telegraphy, and makes no exemption of that class of the business, includes its transaction and is void as an unconstitutional attempt to tax a federal agency.
Where, as in this case, the part of the license exacted necessarily affects the whole, it makes the entire tax unconstitutional and void.
The facts, which involve the validity of an ordinance of a municipality in Alabama to impose a license fee on telegraph corporations transacting an intrastate business without exempting messages sent by the government, are stated in the opinion.
This is a writ of error to review the judgment of the Supreme Court of the State of Alabama, affirming the judgment of the City Court of Talladega. 164 Ala. 633.
"158. Telegraph company. Each person, firm, or corporation commercially engaged in business sending messages to and from the city to and from points in the State of Alabama for hire or reward, $100."
Section 2 of the ordinance declared that the license was exacted in the exercise of the police power of the city, as well as for the purpose of raising revenue for the city. The fourth section provided that any person, firm, or corporation who engaged in any trade, business, or profession for which a license was required without first having obtained such license should be guilty of an offense, and upon conviction should be fined not less than $1 and not more than $100, and that each day should constitute a separate offense.
company did its intrastate business at a net loss of eighty-six cents.
This case differs from some cases which have been in this Court involving the right to tax the Western Union Telegraph Company in that it places emphasis upon the alleged immunity from taxation of the class herein involved, because, it is contended, by the Act of 1866, Congress, by virtue of the authority given it to establish post roads, conferred federal franchises upon the company, and made the Western Union Telegraph Company an instrumentality of the federal government, endowed with franchises to construct, maintain, and operate telegraph lines on the post roads of the United States, with the duty in the operation of those lines not only to serve the government of the United States, but also to serve the public which might wish to transact business over its lines. This being so, it is now insisted that the attempt to impose a license tax upon the company, either by the State of Alabama or any of its municipalities, is an attempt to impose a tax on the franchises so created by the federal government.
"It is further contended that the ruling of the cited cases does not cover the case of a telegraph company which has constructed its lines along the post roads in the City of Charleston and elsewhere, and which is exercising its functions under the Act of Congress as an agency of the government of the United States. It is obvious that the advantages or privileges that are conferred upon the company by the Act of July 24, 1866 (Rev.Stat. §§ 5263-5268), are in the line of authority to construct and maintain its lines as a means or instrument of interstate commerce, and are not necessarily inconsistent with a right on the part of the state in which business is done and property acquired to tax the same, within the limitations pointed out in the cases heretofore cited."
and post roads of the United States was granted by the Act of Congress, but that the statute was merely permissive, and conferred no exemption from the ordinary burdens of taxation; that the state could not, by any specific statute, prevent a corporation from placing its lines along the post roads, or stop the use of them after they were so placed, but the corporation could be taxed in exchange for the protection it received from the state 'upon its real or personal property, as any other person would be.' And, describing the particular tax imposed it was said:"
" The tax in the present case, though nominally upon the shares of the capital stock of the company, is in effect a tax upon that organization on account of property owned and used by it in the State of Massachusetts, and the proportion of the length of its lines in that state to their entire length throughout the whole country is made the basis for ascertaining the value of that property. We do not think that such a tax is forbidden by the acceptance on the part of the telegraph company of the rights conferred by § 5263 of the Revised Statutes, or by the commerce clause of the Constitution."
operation of lines within the act by injunction for failure to pay taxes. Western Union Telegraph Co. v. Attorney General of Massachusetts, 125 U. S. 530. But, except in this negative sense, the statute is only permissive, not a source of positive rights."
These cases, taken together, establish the proposition that the privilege given under the terms of the act to use the military and post roads of the United States for the poles and wires of the company is to be regarded as permissive in character, and not as creating corporate rights and privileges to carry on the business of telegraphy, which were derived from the laws of the state incorporating the company, and that this permissive grant did not prevent the state from taxing the real or personal property belonging to the company within its borders, or from imposing a license tax upon the right to do a local business within the state. Nor is there anything running counter to the former cases in the case of Western Union Telegraph Co. v. Kansas, 216 U. S. 1, wherein it was held that the attempt to levy a graded charter fee upon the entire capital stock of the Western Union Telegraph Company, a corporation of another state, engaged in commerce among the states, as a condition to the right to do local business within the State of Kansas, was void as an attempt, when the substance of things was reached, to tax the right of the company to do interstate business within the state, and as a tax upon property beyond the limits and jurisdiction of the state.
however, reached the conclusion that the attempted test for eleven months, showing a loss of eighty-six cents, is not a sufficiently accurate representation of the business of the company conducted at Talladega to render the tax void. With this view we agree, and we are not satisfied that the tax is such as to impose a burden upon interstate commerce, and therefore make it subject to attack as a denial of federal right.
"The fact that a part of the business done by the company consists in the sending of messages for the government does not affect the right of the state to impose a reasonable privilege tax. . . ."
General their written acceptance of the restrictions and obligations of the act (Rev.Stat. §§ 5266 and 5268).
"The Western Union Telegraph Company, having accepted the restrictions and obligations of this provision by Congress, occupies in Texas the position of an instrument of foreign and interstate commerce, and of a government agent for the transmission of messages on public business. Its property in the state is subject to taxation the same as other property, and it may undoubtedly be taxed in a proper way on account of its occupation and its business. The precise question now presented is whether the power to tax its occupation can be exercised by placing a specific tax on each message sent out of the state, or sent by public officers on the business of the United States."
void. It was so decided in McCulloch v. Maryland, 4 Wheat. 316, and has never been doubted since."
The ordinance sustained in Postal Telegraph Cable Co. v. Charleston, supra, expressly excluded interstate and government messages.
Were it otherwise, an agency of the federal government, in the execution of its sovereign power, would be at the mercy of the taxing power of the state. It is enough, in this connection, to refer to the cases of McCulloch v. Maryland, supra; 22 U. S. Bank of United States, 9 Wheat. 738; Railroad Co. v. Peniston, 18 Wall. 5; California v. Central Pacific R. Co., 127 U. S. 1; Central Pacific R. Co. v. California, 162 U. S. 91.
"It is urged that a portion of the telegraph company's business is internal to the State of Alabama, and therefore taxable by the state. But that fact does not remove the difficulty. The tax affects the whole business without discrimination."
And see Western Union Co. v. Alabama Assessment Board, 132 U. S. 472, 132 U. S. 477; Allen v. Pullman's Palace Car Co., 191 U. S. 171, 191 U. S. 179.
For this reason, we think the judgment of the Supreme Court of Alabama should be reversed, and the case remanded to that court for further proceedings not inconsistent with this opinion.

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