Source: http://supreme.nolo.com/us/294/384/case.html
Timestamp: 2019-04-21 06:53:35+00:00

Document:
1. To sustain a state occupation tax on one whose business is both interstate and intrastate, it must appear that it is imposed solely on account of the intrastate business; that the amount exacted is not increased because of the interstate business done; that one engaged exclusively in interstate business would not be subject to the tax, and that the one taxed could discontinue intrastate business without withdrawing from the interstate business. P. 294 U. S. 392.
2. A state occupation tax on every corporation engaged in the business of operating or maintaining telephone lines and furnishing telephone service in the State, of so much for each telephone instrument used, controlled, and operated by it in the conduct of such business, held a direct burden on interstate commerce, as applied to a company furnishing both kinds of service, interstate and intrastate, and employing the same telephones, wires, etc., in both as integral parts of its system. P. 294 U. S. 388.
Appeal from a decree of the District Court, constituted of three judges, enjoining the enforcement of a tax, in a suit brought by the Telephone Company against the Governor and other officials of the State of Montana.
Constitution, was sustained by the District Court of three judges (28 U.S.C. § 380), which entered a final decree permanently enjoining enforcement. 7 F.Supp. 12. The defendants, state officers, bring this appeal.
"could not discontinue its intrastate business and operations in Montana without virtually destroying and being compelled to abandon and withdraw from its interstate and foreign business."
Appellants contend that the taxes are imposed solely upon intrastate commerce, and do not burden interstate commerce. They insist that the taxes are laid upon the intrastate business measured by the number of telephones in intrastate use. Appellants challenge the findings that all of appellee's telephones in Montana are instrumentalities of interstate and foreign commerce, and that appellee could not discontinue its intrastate business without being compelled to withdraw from its interstate and foreign business, as being unsupported by the evidence.
"on each telephone instrument used in purely local or intrastate business, and that, as to instruments used in interstate business, it was intended to have no application whatever."
"If, however, the terms of the statute are general, and the license fee a unit charged against the business of the carrier as such, as strictly an occupation tax, and no attempt is made by the language of the statute to discriminate between the local and interstate business, but the license is required as a condition precedent to the carrier's commencing or conducting business, then the imposition of the tax will be deemed an interference with and an attempt to regulate interstate commerce, and for that reason void."
discrimination can be made under any fair construction of the language employed."
Id., p. 427. It is evident that these decisions of the state court do not aid appellants' contention.
"engaged in the business of operating or maintaining telephone lines and furnishing telephone service in the State of Montana . . . shall pay . . . a license tax . . . for each telephone instrument used, controlled and operated by it in the conduct of such business."
The business is the maintaining of telephone lines and the furnishing of telephone service in the state. No distinction is made between interstate and intrastate service. The tax is then stated to be "for each telephone instrument used, controlled, and operated." Again, there is no limitation as to use, control, or operation in intrastate business. The tax is "based upon the number of telephone instruments owned, controlled, and operated" during all or any part of the calendar year. A "telephone instrument" is defined in § 2 of the act as "a transmitter and receiver capable of use in the transmitting and receiving of telephone communications." The tax is thus laid simply by reason of the fact that the company is furnishing telephone service and is based upon the number of telephone instruments used in that service without regard to its character whether intrastate or interstate. The provision of the second tax act, Chapter 54 of the Laws of 1933-34, is in this respect substantially the same.
"shall not be imposed on any telephone instrument where the rate charged the customer therefor does not exceed Two Dollars ($2.00) per month for residence phone, or Three Dollars ($3.00) per month for business house or office phone."
exclusion in the second act. [Footnote 2] But these are merely exempting provisions. They carve out of the statute telephone instruments for which certain monthly rates are paid. The question is not as to the instruments that are not taxed, but as to those which are taxed. All the telephone instruments, not excepted, whether they are used in intrastate or interstate commerce and however the service is paid for, are left subject to the tax. It is urged that monthly rates are charged to the customer for merely local service and are distinct from toll rates or charges for long distance calls which, whether intrastate or interstate, are on a "board to board" basis. But the tax is not laid on revenues. It is not laid on revenue derived from monthly rates, as distinguished from toll charges. It is not imposed with respect either to the nature of the revenue, or to the character of the service from which the revenue is derived, or to the manner in which the charges for the service are fixed.
"potential use, or even an occasional use for interstate or foreign commerce, is too remote, indefinite, and indirect to permit such instruments to be classified as instrumentalities of interstate or foreign commerce, when, in fact, such instruments are used exclusively or almost exclusively for intrastate commerce."
wires, land, buildings, central office equipment, and operating organization are used in common for all services, interstate as well as intrastate. It was in this view that the District Court held that it was not feasible to provide separate statewide systems for intrastate and interstate telephones. But, apart from that question, it appears that in the operation of this unified system, the telephone instruments are the means by which the customers command at their pleasure the service they desire whether intrastate or interstate. And, so far as the instruments are not excepted, the tax is laid indiscriminatory with respect to each of these facilities, regardless of the nature of their use.
either upon the interstate business or upon the whole business without discrimination. Leloup v. Mobile, 127 U. S. 640. There are "sufficient modes" in which the local business may be taxed without the imposition of a tax "which covers the entire operations." Id., p. 127 U. S. 647. See Williams v. Talladega, 226 U. S. 404, 226 U. S. 419. Where the tax is exacted from one doing both an interstate and intrastate business, it must appear that it is imposed solely on account of the letter; that the amount exacted is not increased because of the interstate business done; that one engaged exclusively in interstate commerce would not be subject to the tax, and that the one who is taxed could discontinue the intrastate business without also withdrawing from the interstate business. Sprout v. South Bend, 277 U. S. 163, 277 U. S. 171; East Ohio Gas Co. v. Tax Commission, 283 U. S. 465, 283 U. S. 470.
"But, with the license tax, it is otherwise. If the statute is inseparable, then both by its terms and by its legal operation and effect, this tax is imposed generally upon the entire business conducted, including interstate commerce as well as domestic, and the tax is void."
"is that, since plaintiff, so far as appears, necessarily conducts its interstate and domestic commerce in gasoline indiscriminately at the same stations and by the same agencies, the license tax cannot be enforced at all without interfering with interstate commerce unless it be enforced otherwise than as prescribed by the statute -- that is to say, without authority of law. Hence, it cannot be enforced at all."
"Section 1. Every person, firm, co-partnership, association, joint stock company, syndicate, and corporation engaged in the business of operating or maintaining telephone lines and furnishing telephone service in the State of Montana, whether as owner, lessee, trustee, or receiver or in any other capacity, shall pay in to the State Treasurer on or before the first day of January each year a license tax in the amounts following for each telephone instrument used, controlled, and operated by it in the conduct of such business, based upon the number of telephone instruments owned, controlled, and operated by it during all or any part of the calendar year, to-wit: on the first twenty (20) telephone instruments or less, a license tax of Ten Cents (10�) per telephone; from twenty (20) to seventy-five (75) such instruments, a license tax of Twenty Cents (20�) per phone, and on all above seventy-five (75) a license tax of One Dollar ($1.00) for each such instrument. The license tax so paid shall in no manner affect the rates charged to the patrons and users of such telephone instruments, but shall be borne entirely by the owning and operating concern. Provided, the tax herein provided for shall not be imposed on any telephone instrument where the rate charged the customer therefor does not exceed Two Dollars ($2.00) per month for residence phone, or Three Dollars ($3.00) per month for business house or office phone."
"Section 2. A telephone instrument is hereby defined to be a transmitter and receiver capable of use in the transmitting and receiving of telephone communications."
"Section 3. Any violation of any of the provisions of this Act shall be deemed a misdemeanor and shall be punished by fine of not more than One Thousand Dollars ($1000) or by imprisonment in the county jail not exceeding six (6) months, or by both such fine and imprisonment."
"Section 4. All license fees paid to the State Treasurer under the provisions of this Act shall be by him, before the end of each fiscal year, divided by the counties in this state according to the number of telephone instruments in use from time to time in the respective counties of the state and on each such computation and division the State Treasurer shall transmit the share of each county to the County Treasurer thereof, for the use and benefit of the county general fund."
"Section 5. This Act shall be in full force and effect from and after its passage and approval."
"Section 1. That Section 1, of Chapter 174, of the Session Laws of 1933, be amended to read as follows:"
"Section 1. Every person, firm, co-partnership, association, joint stock company, syndicate and corporation engaged in the business of operating or maintaining telephone lines and furnishing telephone service in the State of Montana, whether as owner, lessee, trustee, or receiver or in any other capacity, shall pay in to the State Treasurer on or before the first day of March each year a license tax in the amounts following for each telephone instrument used, controlled, and operated by it in the conduct of such business:"
"A license tax of Two Dollars ($2.00) for each such instrument."
"No bill, statement or account rendered or given any customer by any telephone company shall set out or contain, as a separate item, any amount on account or by reason of the license tax imposed by this Act. Every person, firm, co-partnership, association, joint stock company, syndicate, or any corporation affected by the provisions of this Act shall be permitted to claim as exempt from the tax imposed by this Act any telephone instrument where the rate charged the customer therefor does not exceed Two Dollars ($2.00) per month for residence phone, or Four Dollars ($4.00) per month for business house or office phone. Provided further, that the provisions of this Act shall not apply to mutual telephone companies or lines not organized or used or operated for private or corporate gain."
"Section 2. That Section 4, of Chapter 174, of the Session Laws of 1933, be amended to read as follows:"
"Section 4. Five percentum (5%) of the license fees paid to the State Treasurer under this Act are hereby appropriated and shall be set aside by him for the purpose of defraying the cost of administering this Act by the State Board of Equalization, and the remaining ninety-five percentum (95%) thereof shall be by him credited to the Emergency Relief Fund until such time as the Governor may issue a proclamation to the effect that the same is no longer required for such Emergency Relief Fund, and after the issuance of such proclamation, said ninety-five percentum (95%) of such license fees shall be by such State Treasurer credited to the General Fund of the State."
"Section 3. No tax which has attached, accrued, or become due or payable under the provisions of Chapter 174, Session Laws, 1933, shall be released or waived by the passage or approval of this Act, but the same shall be paid as provided in said chapter before its amendment by this Act."
"Section 4. This Act shall be in full force and effect from and after its passage and approval."
Retterman v. Western Union Telegraph Co., 127 U. S. 411; Pacific Express Co. v. Seibert, 142 U. S. 339; Lehigh Valley R. Co. v. Pennsylvania, 145 U. S. 192; Postal Telegraph Cable Co. v. Charleston, 153 U. S. 692; Osborne v. Florida, 164 U. S. 650; Pullman Co. v. Adams, 189 U. S. 420; Allen v. Pullman Co., 191 U. S. 171; Kehrer v. Stewart, 197 U. S. 60; Ohio Tax Cases, 232 U. S. 576; St. Louis Southwestern Ry. Co. v. Arkansas, 235 U. S. 350; People ex rel. Cornell Steamboat Co. v. Sohmer, 235 U. S. 549; Postal Telegraph-Cable Co. v. Richmond, 249 U. S. 252; Postal Telegraph-Cable Co. v. Fremont, 255 U. S. 124; Raley & Bros. v. Richardson, 264 U. S. 157; East Ohio Gas Co. v. Tax Commission, 283 U. S. 465.
State Freight Tax Case, 15 Wall. 232; Pickard v. Pullman Southern Car Co., 117 U. S. 34; Robbins v. Shelby County Taxing District, 120 U. S. 489; Philadelphia & Southern S.S. Co. v. Pennsylvania, 122 U. S. 326; Leloup v. Mobile, 127 U. S. 640; Crutcher v. Kentucky, 141 U. S. 47; Adams Express Co. v. New York, 232 U. S. 14; Bowman v. Continental Oil Co., 256 U. S. 642; Sprout v. South Bend, 277 U. S. 163, 277 U. S. 171; New Jersey Bell Telephone Co. v. State Board of Taxes, 280 U. S. 338.

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