Source: https://caselaw.findlaw.com/us-supreme-court/236/178.html
Timestamp: 2019-04-22 19:10:46+00:00

Document:
[236 U.S. 178, 179] Messrs. Carlisle S. Littleton, James J. Lynch, Jesse M. Littleton, and George D. Lancaster for plaintiffs in error.
Mr. Frank M. Thompson, Attorney General of Tennessee, and Mr. J. B. Sizer for defendants in error.
In Tennessee the system of taxation embraces ad valorem property taxes, merchants' taxes by a percentage on their capital, and privilege taxes for the right to engage in business of a prescribed character. In 1909 a privilege tax was imposed upon wholesale and retail liquor dealers. The prohibitory liquor law (the 4 mile law) was held not to embrace a mail- order business, that is, orders by mail from other states and the shipment from Tennessee to such other states by carrier, because such business was interstate commerce not within state control. Ibid. [236 U.S. 178, 183] In 1912 this suit was commenced to enjoin the collection of a county privilege tax for carrying on a wholesale liquor business in 1912, and to recover back the sum of a like tax for the same year which had been collected by the state over protest. It was in substance averred that having on hand in the state a stock of liquors, the complainant firm had found it unprofitable to seek to carry on the business of selling within the state, and therefore had, prior to that time, abstained from all attempts to carry on business in the state by selling any liquor directly or indirectly therein, and had confined its activities to a mail-order business; that is, the soliciting of orders from persons in other states by mail, the receipt of such orders, and the filling of the same by delivering the liquor to a carrier for through transportation out of the state. Averring that such business was purely interstate commerce which the state or county had no right to directly burden, it was alleged that the attempt of the state and county to impose the privilege taxes in question was an unlawful interference with, and a direct burden upon, interstate commerce, and therefore void. The bill was demurred to as stating no case. The demurrer was overruled, and the defendants electing to plead no further, a decree went in favor of the complainants for the repayment of the one tax, and enjoining the enforcement of the other. The supreme court reversed this judgment, and because of the asserted repugnancy of the tax whose validity was thus sustained to the Constitution of the United States, this writ of error was prosecuted.
'But it appears, also, from the bill, not in express terms, but by clear inference from other matters stated, that the complainant has a regularly organized business,-a business house and employees, etc.,-and that he is conducting the business within the state of Tennessee, although he sells all his goods beyond the state.
We must look, then, to Logan v. Brown to ascertain the implied conditions which were found to constitute a local business done in Tennessee which made the privilege taxes valid, although, as admitted, no liquor was sold in Tennessee, but all of it was exclusively sold under mail orders from other states. Without intimating that if here present it would be material, there existed in Logan v. Brown an element not found in this case; that is, that the stock of liquor which was held in Tennessee, and which was exclusively sold under the mail-order system, was constantly replenished by the receipt of liquor from other states, likewise shipped in as the result of mail orders, and in Logan v. Brown the receipt of such goods, the breaking of their bulk, and the commingling with the existing stock, was found to be a business done in Tennessee, independent of the shipping of goods to other states under the mail orders. With such considerations removed from view, carefully analyzing the opinion in Logan v. Brown we find that the only grounds held in that case to establish a business done in the state independent of the sale and shipment of the goods out of the state under the mail-order system were the following: (1) The existence of the goods in the state, held in a warehouse as stock susceptible of being sold in the state if there was a desire to do so, and ready to be shipped in the channels of interstate commerce; (2) the care and attention for the purpose of packing or otherwise which must be given to the goods situated in the state, to enable the interstate commerce shipment to be made; (3) the receipt in the state from other states of the orders; (4) the clerical force or assistance which was required in the state to keep an account of the shipments as made to other states, and the supervision [236 U.S. 178, 186] in Tennessee which was required to conduct the exclusive business of shipping into other states and of receiving the price resulting from such shipments.
But we are of opinion that although it be conceded that such facts were clearly to be implied from the allegations of the complaint that no sales were directly or indirectly made in the state, and that the business was exclusively confined to soliciting mail orders from other states, and the delivery to a carrier in fulfilment of such orders, such assumed facts afford no ground for taking the business out of the protection of the interstate commerce clause, and thus conferring upon the state authority to impose a tax on the privilege of carrying it on. We reach this conclusion because we are of opinion that, giving the fullest effect to the conditions stated, they were but the performance of acts accessory to and inhering in the right to make the interstate commerce shipments, and therefore to admit the power, because of their existence, to burden the right to ship in interstate commerce, would necessarily be to recognize the authority to directly burden such right. In the nature of things the protection against the imposition of direct burdens upon the right to do interstate commerce, as often pointed out by this court, is not a mere abstraction, affording no real protection, but is practical and substantial, and embraces those acts which are necessary to the complete enjoyment of the right protected.
In addition to the foregoing considerations upon which, as we have seen, the conclusion in Logan v. Brown that local business was done in the state was based, it is now urged in argument by the state that the correctness of such conclusion is in addition demonstrated by the fact that the goods embraced by the orders received from other states were delivered to a carrier in Tennessee, and as such carrier was the agent of the buyer, therefore the sales were completed in Tennessee. But this merely denies the interstate commerce character of the mail-order business. [236 U.S. 178, 187] It directly conflicts with the ruling of the state court in State v. J. W. Kelly & Co. 123 Tenn. 556, 36 L.R.A.(N.S.) 171, 133 S. W. 1011, and therefore comes to this: That under the law of the state, such business is interstate commerce for the purpose of allowing it to be done, but when done, a privilege tax may be exacted for doing it because it is not such commerce. It is no answer to suggest that the Kelly Case, while treating the mail-order business as not within the prohibition law, because it was interstate commerce, really was but an expression of a broad rule of interpretation giving effect to the spirit and intent of the prohibition law, since delivery in the state of liquor to be transported to another state could not be said to be a sale or delivery as a beverage. But if this rule of interpretation were to be here applied, it would destroy the distinction which it is advanced to sustain, for it would lead to the conclusion that the act of delivery for the sole purpose of through shipment to another state, in fulfilment of a previous order, was in no practical sense the doing of business within the state. But this is immaterial since it is not open to controversy that substance, and not form, controls in determining whether a particular transaction is one of interstate commerce, and hence that the mere method of delivery is a negligible circumstance if, in substantial effect, the transaction under the facts of a given case is interstate commerce. American Exp. Co. v. Iowa, 196 U.S. 133, 144 , 49 S. L. ed. 417, 422, 25 Sup. Ct. Rep. 182; Savage v. Jones, 225 U.S. 501, 520 , 56 S. L. ed. 1182, 1189, 32 Sup. Ct. Rep. 715.
Some cases1 are pressed in argument as upholding the privilege tax in question under the circumstances here disclosed, but they are inapposite. We do not stop to review them in order to sustain this appreciation of the cases relied on, since, in our opinion, in the nature of things its [236 U.S. 178, 188] accuracy is demonstrated by a mere statement of the proposition to which all the contentions here urged are in their essence reducible, which is as follows: Although the shipment of merchandise from one state to another is interstate commerce, which the states cannot directly burden, nevertheless the states may directly burden such shipments in every case where there is any merchandise kept in the state to be the subject of interstate commerce shipment, or when any of those steps which are essentially prerequisite to the initiation of an interstate commerce shipment are taken by the owner of the merchandise.
[ Footnote 1 ] Nathan v. Louisiana, 8 How. 80, 12 L. ed. 995; Woodruff v. Parham, 8 Wall. 123, 19 L. ed. 382; Wiggins Ferry Co. v. East St. Louis, 107 U.S. 368 , 27 L. ed. 420, 2 Sup. Ct. Rep. 257; New York ex rel. Pennsylvania R. Co. v. Knight, 192 U.S. 21 , 48 L. ed. 325, 24 Sup. Ct. Rep. 202; W. W. Cargill Co. v. Minnesota, 180 U.S. 452 , 45 L. ed. 619, 21 Sup. Ct. Rep. 423.

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