Source: https://supreme.justia.com/cases/federal/us/249/275/
Timestamp: 2019-04-19 14:51:05+00:00

Document:
A state may tax the movables of a foreign corporation, which are regularly and habitually employed therein, although devoted to interstate commerce. P. 249 U. S. 282.
While the valuation must be just, it need not be limited to the mere worth of the articles taken separately, but may include as well the intangible value due to the organic relation of the property in the state to the whole system of which it is part. Id.
To meet the difficulties of appraisement where the tangibles constitute part of a going concern operating in many states, and where absolute accuracy is generally impossible, the court has sustained methods producing results approximately correct -- for example, the mileage basis in the case of a telegraph company and the average amount of property habitually brought in and carried out by a car company. Id., Western Union Telegraph Co. v. Massachusetts, 125 U. S. 530; American Refrigerator Transit Co. v. Hall, 174 U. S. 70.
But if the plan pursued is arbitrary and the consequent valuation grossly excessive, it must be condemned because of conflict with the commerce clause or the Fourteenth Amendment, or both. Id.
over which the cars were run in Georgia to the total mile over which all were run there and elsewhere. Held that the rule adopted had no necessary relation to the real value in Georgia, and that the tax was void. P. 249 U. S. 283. Pullman's Palace Car Co. v. Pennsylvania, 141 U. S. 18, distinguished and limited.
What is said in an opinion upon a point not raised or properly involved cannot control in a subsequent case where the very point is presented for decision. P. 249 U. S. 286.
143 Ga. 765; 146 id. 489, reversed.
This cause requires us to consider the power of a state to lay and collect taxes upon instrumentalities of interstate commerce which move both within and without its jurisdiction.
Union Tank Line -- plaintiff in error -- an equipment company incorporated in New Jersey which has never carried on business or had an office in Georgia, owns 12,000 tank cars suitable for transporting oil over railroads, and rents them to shippers at agreed rates, based on size and capacity. The roads over which they move also pay therefor stipulated compensation. Under definite contract, certain of these cars were furnished to the Standard Oil Company of Kentucky, and all of those which came into Georgia were being operated by the Oil Company under such agreement. They were not permanently within that state, but passed "in and out."
and for Georgia, you then go ahead and assign 57 tank cars for this state and value them at $830 each, making the total for Georgia $47,310. This is an incorrect method. If you were to be allowed to merely assign so many cars to the state for taxation, there would be no need for the mileage figures to be furnished. The valuation to be assigned to Georgia must be in the same proportion to the valuation for the entire company as the mileage in Georgia bears to the entire mileage everywhere. . . . Or, to work it out by percentage, instead of proportion: 6,976.5 the Georgia mileage, is 2.76846 percent of 251,999, the entire mileage. Georgia is therefore entitled to 2.76846 percent of the entire valuation. This percent of $10,518,333 is $291,195.84, or the same sum arrived at by proportion, if we call the 84 cents an even dollar. . . . A franchise value should also be returned. And whatever the valuation you place on the franchise for the entire country, 2.76846 percent of same must be assigned to Georgia. Thus, if you should value your franchise at $1,000,000, the franchise value to be assigned to Georgia would be $27,685."
"The valuation for Georgia was determined by taking 2.76846 percent of the valuation you gave for the entire company, exclusive of franchise. The 2.76846 percent is the ratio the Georgia mileage bears to the entire mileage, as explained in a previous letter. The franchise value was obtained by placing your franchise for the entire country at an even million dollars and giving Georgia 2.76846 percent thereof."
in his office of property and franchise of the plaintiff as shown hereinbefore, he had no other information for any of the years 1907 to 1914 inclusive than was contained in the said return filed by the plaintiff on March 16, 1914, and embraced in this statement and which was refused by the defendant, and did not know what cars defendant had had in Georgia during any of said named years, nor did he ascertain the value of such cars, but his action was taken on such information hereinbefore shown, and that the assessment so entered by the defendant in his office against the plaintiff's property during said period for each of said years embraces the valuation of about three hundred cars in excess of what the plaintiff actually had in the State of Georgia during said years of the approximate value of $250,000.00 each year, and that the true value of a tank car is about eight hundred and thirty ($830.00) dollars per car."
"That, for the year 1914, the assessment entered against plaintiff by defendant covered the value of at least three hundred and fifty cars in excess of the number of cars plaintiff actually had in the State of Georgia for the time said tax was assessed."
"That defendant, in entering said assessment, never undertook to ascertain the actual property of plaintiff's located in the State of Georgia during the said years or to assess its property at its real value for taxation, otherwise than by simply ascertaining the percentage of its entire property shown by the ratio of the railroad traversed by its equipment in Georgia and the railroad mileage traversed by its equipment everywhere, as shown by its said return filed on March 16, 1914."
"The case relates to two matters, namely, a tax assessment against tangible property of the company, and second, a claim of right to assess a franchise tax. . . . The effort was to tax property in this state, and in doing so to apply the statute designed as a rule to ascertain the property so coming into the state and its proper valuation."
physical connection with property beyond the state. . . . It seems to us, therefore, that the case falls within the rule laid down by the Supreme Court of the United States, as above mentioned, and that there are no such circumstances as to bring it within the ruling made in Fargo v. Hart, 193 U. S. 490."
Transit Co. v. Hall, 174 U. S. 70; Union Refrigerator Transit Co. v. Lynch, 177 U. S. 149; Fargo v. Hart, 193 U. S. 490; Cudahy Packing Co. v. Minnesota, 246 U. S. 450, 246 U. S. 453.
In the present case, the comptroller general made no effort to assess according to real value or otherwise than upon the ratio which miles of railroad in Georgia over which the cars moved bore to total mileage so traversed in all states. Real values -- the essential aim -- of property within a state cannot be ascertained with even approximate accuracy by such process; the rule adopted has no necessary relation thereto. During a year, two or three cars might pass over every mile of railroad in one state while hundreds constantly employed in another moved over lines of less total length. Fifty-seven was the average number of cars within Georgia during 1913, and each had a "true" value of $830. Thus, the total there subject to taxation amounted to $47,310 -- the challenged assessment specified $291,196.
We think plaintiff in error's property was appraised according to an arbitrary method which produced results wholly unreasonable, and that to permit enforcement of the proposed tax would deprive it of property without due process of law and also unduly burden interstate commerce.
it were adopted by all the states through which these cars ran, the company would be assessed upon the whole value of its capital stock, and no more."
But the point therein spoken of was unnecessary to determination of the cause, and, so far as the quoted passage sanctions the specified rule for ascertaining values as generally appropriate, just, unobjectionable and productive of conclusive results, it must be regarded as obiter dictum, and we cannot now approve or follow it.
as represented by the coaches and cars owned and used by it here. . . . Determining the amount of the tax on the principle above stated, it is as follows: tax for years 1870 to 1880, inclusive, $16,321.89."
"While the tax on the capital stock of the company 'is a tax on its property and assets,' yet the capital stock of a company and its property and assets are not identical. The coaches of the company are its property. They are operated within this state. They are daily passing from one end of the state to the other. They are used in performing the functions for which the corporation was created. The fact that they also are operated in other states cannot wholly exempt them from taxation here. It reduces the value of property in this state justly subject to taxation here. This was recognized in the court below, and we think the [proportion] preference was fixed according to a just and equitable rule."
In 1870, the Pullman Company's capital stock amounted to $3,000,000; in 1880, it had grown to $6,000,000. All cars actually owned by the company (leased ones not included) during 1871 numbered 241, and in 1880, 472, their total value being $4,334,000 and $8,588,000 respectively; 100 cars were operated within Pennsylvania during each of the 11 years; total miles of track everywhere passed over by the company cars during 1880 amounted to 57,099; within Pennsylvania, 5, 127, and these figures adequately represent the proportion for other years; total tax held due for the 11 years amounted to $16,321.89. While the record does not disclose the precise valuations upon which taxes were computed, enough does appear to show that they were far below (perhaps not one-third) the actual worth of 100 cars.
and had no taxable situs in Pennsylvania. The appraisement was not challenged as excessive; if the property was taxable in Pennsylvania, the rule adopted may have been decidedly favorable to the owner, and the assessment a moderate one. Having failed to challenge amount of the assessment, the company could not well complain of the rule under which this was fixed. In such circumstances, reasonableness of the rule was not really in question, and what was said of it cannot control here, where the very point is presented for decision. Cohens v. Virginia, 6 Wheat. 264, 19 U. S. 399; McCormick Machine Co. v. Aultman, 169 U. S. 606, 169 U. S. 611. See also Adams Express Co. v. Ohio, supra.
In other opinions of this Court cited below to support the conclusion there reached, we upheld the power of a state to tax property actually within its jurisdiction upon a fair valuation considered as part of a going concern -- they give no sanction to arbitrary and inflated valuations. Taxes must follow realities, not mere deductions from inadequate or irrelevant data.
In Fargo v. Hart, supra, we condemned an assessment ostensibly proportioned to mileage where property without the state and unnecessary to the express company's actual business had been included, and we pointed out that under no formula can a state tax things wholly beyond its jurisdiction.
The same considerations which establish invalidity of the assessment of plaintiff in error's property for 1913 apply to like ones made by the comptroller general for all other years in question.
Judgment of the court below must be reversed, and the cause remanded for further proceedings not inconsistent with this opinion.
MR. JUSTICE DAY, in view of the undisputed facts of this case, concurs in the result.
* Civil Code of Georgia.
"Sec. 989. Each nonresident person or company whose sleeping cars are run in this state shall be taxed as follows: ascertain the whole number of miles of railroad over which such sleeping cars are run, and ascertain the entire value of all sleeping cars of such person or company, then tax such sleeping cars at the regular tax rate imposed upon the property of this state in the same proportion to the entire value of such sleeping cars that the length of lines in this state over which such cars are run bears to the length of lines of all railroads over which such sleeping cars run. The returns shall be made to the comptroller general by the president, general agent, or person in control of such cars in this state. The comptroller general shall frame such questions as will elicit the information sought, and answers thereto shall be made under oath. If the officers above referred to in the control of said sleeping cars shall fail or refuse to answer, under oath, the questions so propounded, the comptroller general shall obtain the information from such sources as he may, and he shall assess a double tax on such sleeping cars. If the taxes herein provided for are not paid, the comptroller general shall issue executions against the owners of such cars, which may be levied by the sheriff of any county of this state upon the sleeping car or cars of the owner who has failed to pay the taxes."
"Sec. 990. Any person or persons, copartnership, company, or corporation, wherever organized or incorporated, whose principal business is furnishing or leasing any kind of railroad cars except dining, buffet, chair, parlor, palace, or sleeping cars or in whom the legal title in any such cars is vested, but which are operated or leased or hired to be operated on any railroads in this state, shall be deemed an equipment company. Every such company shall be required to make returns to the comptroller general under the same laws of force in reference to the rolling stock owned by the railroads making returns in this state, and the assessment of taxes thereon shall be levied and the taxes collected in the same manner as provided in the case of sleeping cars in § 989."
"Sec. 1031. Railroad companies operating railroads lying partly in this state and partly in other states shall be taxed as to the rolling stock thereof and other personal property appurtenant thereto, and which is not permanently located in any of the states through which said railroads pass, on so much of the whole value of rolling stock and personal property as is proportional to the length of the railroad in this state without regard to the location of the head office of such railroad companies."
MR. JUSTICE PITNEY, with whom concurred MR. JUSTICE BRANDEIS and MR. JUSTICE CLARKE, dissenting.
During the period in controversy the Union Tank Line, plaintiff in error, a New Jersey corporation, was the owner of many tank cars, aggregating in value more than $10,000,000, and was engaged in the business of renting them out to be employed in transporting oil and similar fluids over railroads throughout the United States extending to more than 250,000 miles. In the course of its business, it made a contract with the Standard Oil Company of Kentucky to furnish to that corporation cars for use in the transportation of oils and like fluids from depots at Savannah, Georgia, and Jacksonville, Florida. The oils were brought to those depots chiefly in vessels by sea, and were shipped thence in the Tank Line cars to various destinations within and without the State of Georgia, plaintiff in error being compensated in part by rentals paid by the Standard Oil Company, based on size and capacity of cars, and in part by payments received from the railroad companies over whose lines the cars were run, those companies, in lieu of providing their own tank cars, paying to plaintiff in error three-fourths of a cent per mile per car for the car movements.
were run was 6,976.5, and the total number of miles of railroad lines over which its cars were run in Georgia and elsewhere was 251,999, and that the total value of its cars and other personal property in Georgia and elsewhere was $10,518,333.16, the comptroller general assigned to the State of Georgia for taxation the same proportion of the property value of the system of cars that the Georgia rail mileage bore to the total mileage. This gave a valuation of $291,195.84, whereas plaintiff in error had returned that, during the same year it had an average of only 57 tank cars in Georgia, amounting, at a valuation of $830 per car, to $47,310.
The Supreme Court of Georgia sustained the tax on the authority of numerous decisions of this Court cited for the purpose. 143 Ga. 765. This Court reverses the judgment, and holds the taxing law unconstitutional upon reasoning to which I am unable to yield assent.
In my opinion, the Georgia system of taxing movable property of this character when habitually employed in the state, and the decision of the state supreme court sustaining the particular taxes in question, are based upon a correct view of the powers of the state under the federal Constitution, and are in entire harmony with principles laid down in authoritative decisions of this Court which have remained unchallenged for more than a quarter of a century. Western Union Tel. Co. v. Massachusetts, 125 U. S. 530, 125 U. S. 552; Marye v. Baltimore & Ohio R. Co., 127 U. S. 117, 127 U. S. 123; Pullman's Palace Car Co. v. Pennsylvania, 141 U. S. 18, 141 U. S. 22, 141 U. S. 26, et seq.; Cleveland, etc., Ry. Co. v. Backus, 154 U. S. 439, 154 U. S. 445; Western Union Tel. Co. v. Taggart, 163 U. S. 1, 163 U. S. 14; Adams Express Co. v. Ohio, 165 U. S. 194, 165 U. S. 221; Adams Express Co. v. Ohio, 166 U. S. 185; American Refrigerator Transit Co. v. Hall, 174 U. S. 70, 174 U. S. 75 et seq.; Union Refrigerator Transit Co. v. Lynch, 177 U. S. 149, 177 U. S. 152; Cudahy Packing Co. v. Minnesota, 246 U. S. 450, 246 U. S. 453.
The case presents no question of taxing a foreign corporation with respect to personal property that never has come within the borders of the state. According to the agreed state of facts and the petition of the Union Tank Line which is to be read with it, any and all cars of the company were liable to be used indiscriminately, as occasion required, in the transportation of oil within the State of Georgia, and there is nothing to show how many were so used during either of the taxing years in question. Fifty-seven cars simply represent the average number within the state at one and the same time within the year, and is not representative of the number of cars used in the state during the year. This Court has declared that a state may lay hold of the average habitual use of movable railroad equipment as a basis of taxation (Marye v. Baltimore & Ohio R. Co., 127 U. S. 117, 127 U. S. 123), but there is nothing in the Constitution of the United States to confine the state to that particular method. It is but a method of approximation. Nor is the state obliged to ignore the special value that rolling stock has because of its organic relation to, and its customary use in connection with, the railroad tracks upon which it runs. Although the equipment be held in separate ownership, it may be regarded in fact as an appurtenance of the railroad, and valued in that relation. It is admitted that the revenue derived by plaintiff in error from the use of its cars is in part paid by the railroad companies and proportioned to the mileage covered by the run of the cars.
special value attributable to their organic relation to the entire system; that fair appraisal, in a case like this, where the cars constitute part of a system operating in many states, is a matter of serious difficulty, but that absolute accuracy usually is impossible, and therefore is not required by the Constitution, and it seems to be intimated that a valuation based upon the aggregate car mileage within the state during the taxable year would be permissible. But, even assuming that such a basis could be adopted without in effect regulating interstate commerce by varying the burden of taxation in direct proportion to the volume of such commerce, it still is obvious that a valuation according to aggregate car mileage would virtually ignore the particular value due to the relation of the cars to the rail system, would in effect be equivalent to a valuation according to average use, and would be open to the same objection, viz., that its ascertainment would lie wholly within the breast of the taxpayer. For, if the state authorities were required to keep a check either upon the average use or the aggregate mileage covered by the movements of rolling stock within the state, and to supplement this with observations in other states in order to arrive at the due proportion, the cost of administration easily might consume the tax.
It is because of difficulties such as these that so many of the states have resorted to track mileage -- readily ascertained and little subject to change -- as an equitable method of ascertaining the proportionate value taxable by a single state out of the aggregate value of the movables of an equipment company that does business in several states.
states, have been based upon that decision, and I regard it as most unfortunate that at this late date its authority should be overthrown.
for which these taxes were levied, carried on business in Pennsylvania, and had about one hundred cars within the state."
"The mode which the stage of Pennsylvania adopted to ascertain the proportion of the company's property upon which it should be taxed in that state was by taking as a basis of assessment such proportion of the capital stock of the company as the number of miles over which it ran cars within the state bore to the whole number of miles, in that and other states, over which its cars were run. This was a just and equitable method of assessment, and, if it were adopted by all the states through which these cars ran, the company would be assessed upon the whole value of its capital stock, and no more. [Italics mine.] The validity of this mode of apportioning such a tax is sustained by several decisions of this Court,"
set aside without more cogent reasons than any that are here adduced. Certainly the fact that the established rule of taxation may operate with hardship or even with apparent injustice in a particular case is not sufficient to condemn it.
The decision referred to, Pullman's Palace Car Co. v. Pennsylvania, supra, has always been regarded as a leading case, and cited with uniform approval in repeated decisions of this Court not only upon the point that property employed in interstate commerce, and in the ordinary use of it situate sometimes within and sometimes without a state, is subject to state taxation without regard to the place of the owner's domicile, but also and especially in support of the proposition that the mileage basis of apportionment as between the different states may be resorted to in order to determine what tax each state shall lay upon rolling stock used upon interstate railroads, just as it often is resorted to in apportioning the tax upon a railroad as between different taxing districts in the same state.
199 U. S. 194, 199 U. S. 206; Galveston, Harrisburg & San Antonio Ry. Co. v. Texas, 210 U. S. 217, 210 U. S. 225; Pullman Co. v. Kansas, 216 U. S. 56, 216 U. S. 63-64; Louisville & Nashville R. Co. v. Greene, 244 U. S. 522, 244 U. S. 548; Cudahy Packing Co. v. Minnesota, 246 U. S. 450, 246 U. S. 453. In Fargo v. Hart, 193 U. S. 490, 193 U. S. 499, the Court recognized the authority of Pullman's Palace Car Co. v. Pennsylvania as supporting the acknowledged doctrine of organic unity and the reasonableness and constitutionality of the mileage proportion, but found in the particular case an exception to the rule.
I can see nothing arbitrary or unreasonable in the general rule of mileage apportionment adopted by the State of Georgia, upon the authority of these repeated decisions of this Court, for the taxation of railroad cars and other equipment habitually operated on lines extending within and without the state, and hence am convinced that the statute is not repugnant to the federal Constitution. If, for any reason that does not appear, the rule operated unfairly in this particular case and imposed an unjust and inequitable burden of taxation upon plaintiff in error, it was incumbent upon plaintiff in error to show this by calling for an arbitration upon the question of true value, as permitted by the Georgia statutes (Civil Code, §§ 1045-1046, 1050-1054), or by some appropriate proceeding for relief against the excessive part of the taxes. Having failed to do this although properly notified, it cannot in justice be heard to say that the valuation of its property, made according to a statutory rule that in its general application is just and reasonable, is in the particular case so excessive as to amount to a deprivation of property without due process of law, or an undue burden upon interstate commerce.
MR. JUSTICE BRANDEIS and MR. JUSTICE CLARKE concur in this dissent.

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