Source: https://supreme.justia.com/cases/federal/us/122/326/
Timestamp: 2019-04-21 10:13:05+00:00

Document:
A state tax upon the gross receipts of a steamship company incorporated under its laws which are derived from the transportation of persons and property by sea between different states and to and from foreign countries is a regulation of interstate and foreign commerce in conflict with the exclusive powers of Congress under the Constitution.
State Tax on Railway Gross Receipts, 15 Wall. 284, considered and questioned.
The question in this case was whether a state can constitutionally impose upon a steamship company incorporated under its laws a tax upon the gross receipts of such company derived from the transportation of persons and property by sea between different states and to and from foreign countries.
other state and doing business in this commonwealth, and every express company, and any palace car and sleeping car company, incorporated or unincorporated, doing business in this commonwealth, shall pay to the state treasurer, for the use of the commonwealth, a tax of eight-tenths of one percent upon the gross receipts of said company for tolls and transportation, telegraph business, or express business."
A similar act was passed by the same legislature on the 7th of June, 1879.
By the terms of these acts, returns of the gross receipts are required to be made every six months to the Auditor General, upon which the tax is assessed by him and charged against the company.
the laws of the United States for the coasting or foreign trade of the United States, and that the gross receipts so returned to the Auditor General, upon which a tax has been levied by the Commonwealth of Pennsylvania, were received by defendants for freight and passengers carried in the said steamships on the ocean, and on the navigable waters of the United States, between the State of Pennsylvania and other states of the United States, and between the states of the United States and foreign countries, and for the charter and hire of the said steamships to other parties in such trade and business, and that no part of the said gross receipts was received for the transportation of freight and passengers between places within the State of Pennsylvania or for the hire and use of the said steamships within the State of Pennsylvania."
On the trial of the cause, the parties entered into an agreement as to the facts showing the gross receipts for each year in each branch of the company's trade, which facts supported the allegations of the plea. A trial by jury was dispensed with, and the court gave judgment for the commonwealth for the principal of the tax and interest from the time of commencing suit. Exceptions were taken on the ground that the judgment was in conflict with the clause of the Constitution of the United States giving to Congress the power to regulate commerce with foreign nations and among the several states. The judgment, being removed by writ of error to the Supreme Court of Pennsylvania, was affirmed by that court, and its judgment is now before us for review.
by the company from its fares and freights for the transportation of persons and goods between different states and between the states and foreign countries, and from the charter of its vessels, which was for the same purpose. This transportation was an act of interstate and foreign commerce. It was the carrying on of such commerce. It was that and nothing else. In view of the decisions of this Court, it cannot be pretended that the state could constitutionally regulate or interfere with that commerce itself. But taxing is one of the forms of regulation. It is one of the principal forms. Taxing the transportation, either by its tonnage or its distance or by the number of trips performed or in any other way would certainly be a regulation of the commerce, a restriction upon it, a burden upon it. Clearly this could not be done by the state without interfering with the power of Congress. Foreign commerce has been fully regulated by Congress, and any regulations imposed by the states upon that branch of commerce would be a palpable interference. If Congress has not made any express regulations with regard to interstate commerce, its inaction, as we have often held, is equivalent to a declaration that it shall be free in all cases where its power is exclusive, and its power is necessarily exclusive whenever the subject matter is national in its character, and properly admits of only one uniform system. See the cases collected in Robbins v. Shelby Taxing District, 120 U. S. 489, 120 U. S. 492-493. Interstate commerce carried on by ships on the sea is surely of this character.
perform, but we will tax you for what you get for performing it." Such a position can hardly be said to be based on a sound method of reasoning.
no influence on this part of the subject. It is too obvious for controversy that they interfere equally with the power to regulate commerce."
Pp. 25 U. S. 446-448.
The application of this reasoning to the case in hand is obvious. Of what use would it be to the ship owner, in carrying on interstate and foreign commerce, to have the right of transporting persons and goods free from state interference if he had not the equal right to charge for such transportation without such interference? The very object of his engaging in transportation is to receive pay for it. The regulation of the transportation belongs to the power of Congress to regulate commerce, the regulation of fares and freights receivable for such transportation must equally belong to that power, and any burdens imposed by the state on such receipts must be in conflict with it. To apply the language of Chief Justice Marshall, fares and freights for transportation in carrying on interstate or foreign commerce are as much essential ingredients of that commerce as transportation itself.
It is necessary, however, that we should examine what bearing the cases of State Freight Tax and Railway Gross Receipts, reported in the 15th of Wallace, have upon the question in hand. These cases were much quoted in argument, and the latter was confidently relied on by the counsel of the commonwealth. They both arose under certain tax laws of Pennsylvania. The first, which is reported under the title of case of State Freight Tax, 15 Wall. 232, was that of the Reading Railroad Company, and arose under an act passed in 1864 which imposed upon every railroad, steamboat, canal, and slackwater navigation company a tax of a certain rate per ton on every ton of freight carried by or upon the works of said company, with a proviso directing in substance that every company, foreign or domestic, whose line extended partly in Pennsylvania and partly in another state should pay for the freight carried over that portion of its line in Pennsylvania the same as if its whole line were in that state. Under this law, the Reading Railroad Company was charged a tax of $38,000 for freight transported to points within Pennsylvania, and of $46,000 for that exported to points without the state.
"If state taxation of persons passing from one state to another or a state tax upon interstate transportation of passengers is unconstitutional, a fortiori, if possible, is a state tax upon the carriage of merchandise from state to state in conflict with the federal Constitution. Merchandise is the subject of commerce. Transportation is essential to commerce, and every burden laid upon it is pro tanto a restriction. Whatever, therefore, may be the true doctrine respecting the exclusiveness of the power vested in Congress to regulate commerce among the states, we regard it as established that no state can impose a tax upon freight transported from state to state, or upon the transporter because of such transportation."
"The state may tax its internal commerce, but if an act to tax interstate or foreign commerce is unconstitutional, it is not cured by including in its provisions subjects within the jurisdiction of the state. Nor is a rule prescribed for carriage of goods through, out of, or into a state any the less a regulation of transportation because the same rule may be applied to carriage which is wholly internal."
This last observation meets the argument that might be made in the present case -- namely that the law is general in its terms, and taxes receipts for all transportation alike, making no discrimination against receipts for interstate or foreign transportation, and hence cannot be regarded as a special tax on the latter. The decision in the case cited shows that this does not relieve the tax from its objectionable character.
"In addition to the taxes now provided by law, every railroad, canal, and transportation company incorporated under the laws of this commonwealth, and not liable to the tax upon income under existing laws, shall pay to the commonwealth a tax of three-fourths of one percent upon the gross receipts of said company. The said tax shall be paid semiannually."
First, that the tax, being collectible only once in six months, was laid upon a fund which had become the property of the company, mingled with its other property and incorporated into the general mass of its property, possibly expended in improvements or otherwise invested. The case is likened in the opinion to that of taxing goods which have been imported after their original packages have been broken and after they have been mixed with the mass of property in the country, which, it was said, are conceded in Brown v. Maryland to be taxable.
is called upon to pay the tax. They are taxed not only because they are money or its value, but because they were received for transportation. No doubt a ship owner, like any other citizen, may be personally taxed for the amount of his property or estate, without regard to the source from which it was derived, whether from commerce or banking or any other employment. But that is an entirely different thing from laying a special tax upon his receipts in a particular employment. If such a tax is laid, and the receipts taxed are those derived from transporting goods and passengers in the way of interstate or foreign commerce, no matter when the tax is exacted, whether at the time of realizing the receipts or at the end of every six months or a year, it is an exaction aimed at the commerce itself, and is a burden upon it and seriously affects it. A review of the question convinces us that the first ground on which the decision in State Tax on Railway Gross Receipts was placed is not tenable; that it is not supported by anything decided in Brown v. Maryland, but on the contrary that the reasoning in that case is decidedly against it.
"That every company or association whatever, now or hereafter incorporated by or under any law of this commonwealth or now or hereafter incorporated by any other state or territory of the United States or foreign government, and doing business in this commonwealth . . . [with certain exceptions named] shall be subject to and pay into the treasury of the commonwealth annually a tax to be computed as follows, namely. . . ."
the extent of their operations, had become celebrated throughout the commercial world. The grant of power [to Congress] is general in its terms, making no reference to the agencies by which commerce may be carried on. It includes commerce by whomsoever conducted, whether by individuals or corporations."
"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 upon 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 obstruction of the power of Congress in the regulation of such commerce."
114 U.S. 114 U. S. 211. 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.
The decision in this case, and the reasoning on which it is founded, so far as they relate to the taxation of interstate commerce carried on by corporations, apply equally to domestic and foreign corporations. No doubt the capital stock of the former, regarded as inhabitants of the state or their property, may be taxed as other corporations and inhabitants are provided no discrimination be made against them as corporations carrying on foreign or interstate commerce, so as to make the tax in effect a tax on such commerce. But their business as carriers in foreign or interstate commerce cannot be taxed by the state under the plea that they are exercising a franchise.
the incomes of all the inhabitants of the state, but a special tax on transportation companies. Conceding, however, that an income tax may be imposed on certain classes of the community, distinguished by the character of their occupations, this is not an income tax on the class to which it refers, but a tax on their receipts for transportation only. Many of the companies included in it may and undoubtedly do have incomes from other sources, such as rents of houses, wharves, stores, and water power, and interest on moneyed investments. As a tax on transportation, we have already seen from the quotations from the State Freight Tax case that it cannot be supported where that transportation is an ingredient of interstate or foreign commerce, even though the law imposing the tax be expressed in such general terms as to include receipts from transportation which are properly taxable. It is unnecessary, therefore, to discuss the question which would arise if the tax were properly a tax on income. It is clearly not such, but a tax on transportation only.
Moran v. New Orleans, 112 U. S. 69; Walling v. Michigan, 116 U. S. 446; Pickard v. Pullman Co., 117 U. S. 34; Wabash & St. Louis Railroad v. Illinois, 118 U. S. 557; Robbins v. Shelby County, 120 U. S. 489; Fargo v. Michigan, 121 U. S. 230. The cases of Moran v. New Orleans and Fargo v. Michigan are especially apposite to the case now under consideration. As showing the power of the states over local matters incidentally affecting commerce, see Munn v. Illinois, 94 U. S. 123, and other cases in the same volume, viz., Chicago & Burlington Railroad v. Iowa, pp. 94 U. S. 155, 94 U. S. 161; Peik v. Chicago & Northwestern Railway, pp. 94 U. S. 164, 94 U. S. 176; Winona & St. Peter Railroad v. Blake, p. 94 U. S. 180, as explained by Wabash Co. v. Illinois; The Wharfage Cases, viz., Packet Co. v. Keokuk, 95 U. S. 80; Packet Co. v. St. Louis, 100 U. S. 423, 100 U. S. 428; Packet Co. v. Catlettsburg, 105 U. S. 559, 105 U. S. 563; Transportation Co. v. Parkersburg, 107 U. S. 691, 107 U. S. 698; Mobile v. Kimball, 102 U. S. 691; Brown v. Houston, 114 U. S. 622, 114 U. S. 630; Railroad Commission Cases, 116 U. S. 307; Coe v. Errol, 116 U. S. 517.
present system than the deep and general conviction that commerce ought to be regulated by Congress. It is not, therefore, matter of surprise that the grant should be as extensive as the mischief, and should comprehend all foreign commerce and all commerce among the states. To construe the power so as to impair its efficacy would tend to defeat an object in the attainment of which the American public took, and justly took, that strong interest which arose from a full conviction of its necessity."
12 Wheat. 25 U. S. 446.
Nothing can be added to the force of these words.
Our conclusion is that the imposition of the tax in question in this cause was a regulation of interstate and foreign commerce, in conflict with the exclusive powers of Congress under the Constitution.
The judgment of the Supreme Court of Pennsylvania is therefore reversed, and the case is remanded to be disposed of according to law in conformity with this opinion.

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