Source: http://supreme.nolo.com/us/421/100/case.html
Timestamp: 2019-10-14 15:37:53
Document Index: 662019696

Matched Legal Cases: ['§ 8', '§ 12', '§ 47', '§ 601', '§ 8', '§ 601', '§ 601', '§ 601', '§ 601', '§ 601', '§ 601', '§ 12', '§ 601', '§ 601', '§ 601', '§ 601', '§ 12']

COLONIAL PIPELINE CO. V. TRAIGLE, 421 U. S. 100 - Volume 421 - 1975 - Full Text - US Supreme Court Center - USSC Cases - Nolo
US Supreme Court Center > Volume 421 > COLONIAL PIPELINE CO. V. TRAIGLE, 421 U. S. 100 (1975) > Full Text
We have once again a case that presents "the perennial problem of the validity of a state tax for the privilege of carrying on, within a state, certain activities" related to a corporation's operation of an interstate business. Memphis Gas Co. v. Stone, 335 U. S. 80, 335 U. S. 85 (1948). [Footnote 1] The issue is whether Louisiana, consistent with the Commerce Clause, Art. I, § 8, cl. 3, may impose a fairly apportioned and nondiscriminatory corporation franchise tax on appellant, Colonial Pipeline Co., a corporation engaged exclusively in interstate business, upon the "incident" of its "qualification to carry on or do business in this state or the actual doing of business within this state in a corporate form." No question is raised as to the reasonableness of the apportionment of appellant's capital deemed to have been employed in Louisiana, and it is not claimed that the tax is discriminatory. The Supreme Court of Louisiana sustained the validity of the tax. 289 So.2d 93 (1974). We noted probable jurisdiction, 417 U.S. 966 (1974). We affirm.
On May 9, 1962, appellant voluntarily qualified to do business in Louisiana, although it could have carried on its interstate business without doing so. La.Rev.Stat.Ann. § 12:302 H (1969); see n 8, infra. Thereupon, the Collector of Revenue imposed the Louisiana franchise tax on appellant's activities in the State during 1962. At that time, La.Rev.Stat.Ann. § 47:601, the Louisiana Franchise Tax Act, expressly provided:
"The tax levied herein is due and payable for the privilege of carrying on or doing business, the exercising of its charter or the continuance of its charter within this state, or owning or using any part or all of its capital or plant in this state. [Footnote 2]"
Appellant paid the tax and sued for a refund. The Louisiana Court of Appeal, First Circuit, held that, in that form, § 601 was unconstitutional as applied to appellant because, being imposed directly upon "the privilege of carrying on or doing [interstate] business," it violated the Commerce Clause, Art. I, § 8, cl. 3. Colonial Pipeline Co. v. Mouton, 228 So.2d 718 (1969). The Supreme Court of Louisiana refused review. 255 La. 474, 231 So.2d 393 (1970). [Footnote 3]
were carried forward from the earlier version of the statute. [Footnote 4] See n 2, supra.
289 So.2d at 97. But the court attached controlling significance to the omission from the amended statute of the "primary operating incident [of the former version], i.e., the privilege of carrying on or doing business,'" id. at 96, and the substitution for that incident of doing business in the corporate form. The court held:
Id. at 97. Accordingly, the court concluded that amended § 601 applied the franchise tax to foreign corporations doing only an interstate business in Louisiana, not as a tax upon
Id. at 100. Upon that premise, the court validated the levy as a
Id. at 100-101. [Footnote 5]
Memphis Steam Laundry v. Stone, 342 U. S. 389, 342 U. S. 392 (1952). We therefore turn to the question whether the tax imposed upon appellant under amended § 601, as construed by the Louisiana Supreme Court, is or is not a tax on interstate commerce.
Western Live Stock v. Bureau of Revenue, 303 U. S. 250, 303 U. S. 254 (1938). Accordingly, decisions of this Court, particularly during recent decades, have sustained nondiscriminatory, properly apportioned state corporate taxes upon foreign corporations doing an exclusively interstate business when the tax is related to a corporation's local activities and the State has provided benefits and protections for those activities for which it is justified in asking a fair and reasonable return. [Footnote 6] General Motors Corp. v. Washington, 377 U. S. 436 (1964); Memphis Gas Co. v. Stone, 335 U. S. 80 (1948). Cf. Spector Motor Service v. O'Connor, 340 U. S. 602 (1951). General Motors Corp., supra, states the controlling test:
State is exacting a constitutionally fair demand for that aspect of interstate commerce to which it bears a special relation. For our purposes, the decisive issue turns on the operating incidence of the tax. In other words, the question is whether the State has exerted its power in proper proportion to appellant's activities within the State and to appellant's consequent enjoyment of the opportunities and protections which the State has afforded. . . . As was said in Wisconsin v. J. C. Penney Co., 311 U. S. 435, 311 U. S. 444 (1940), '[t]he simple but controlling question is whether the state has given anything for which it can ask return.'"
377 U.S. at 377 U. S. 440-441. Amended § 601, as applied to appellant, satisfies this test. First, the Supreme Court of Louisiana held that the operating incidences of the franchise tax are the three localized alternative incidences provided in § 601: (1) doing business in Louisiana in the corporate form; (2) the exercise of a corporation's charter or the continuance of its charter within the State; and (3) the owning or using any part of its capital, plant, or other property in Louisiana in a corporate capacity. We necessarily accept this construction of amended § 601 by Louisiana's highest court. 289 So.2d at 97. Second, the court found that the powers, privileges, and benefits Louisiana bestows incident to these activities were sufficient to support a tax on doing business in the corporate form in that State. We perceive no basis upon which we can say that this is not, in fact, the case. Our pertinent precedents therefore require affirmance of the State Supreme Court's judgment.
Memphis Gas Co. v. Stone, supra, sustained a similar franchise tax imposed by Mississippi on a foreign pipeline corporation engaged exclusively in an interstate business even though the company had not qualified in Mississippi.
Memphis Natural Gas Co., a Delaware corporation, owned and operated a natural gas pipeline extending from Louisiana, through Arkansas and Mississippi, to Memphis and other parts of Tennessee. Approximately 135 miles of the pipeline were located in Mississippi, and two of the corporation's compressing stations were located in that State. The corporation engaged in no intrastate commerce in Mississippi, and had only one customer there. It had not qualified under the corporation laws of Mississippi. It had neither an agent for the service of process nor an office in that State, and its only employees there were those necessary for the maintenance of the pipeline. The corporation paid all ad valorem taxes assessed against its property in Mississippi. In addition to these taxes, however, Mississippi imposed a "franchise or excise tax" upon all corporations "doing business" within the State. The statute defined "doing business" in terms that suggest it may have been the model for § 601, that is,
335 U.S. at 335 U. S. 82. [Footnote 7] The Supreme Court of Mississippi held, as did the Supreme Court of Louisiana here, 289 So.2d at 101, that the tax was
335 U.S. at 335 U. S. 84. In affirming the judgment of that court, Mr. Justice Reed, in a plurality opinion, said:"
Id. at 335 U. S. 96.
This conclusion is even more compelled in the instant case, since appellant voluntarily qualified under Louisiana law, and therefore enjoys the same rights and privileges as a domestic corporation. La.Rev.Stat.Ann. § 12:306(2) (Supp. 1975). [Footnote 8] The Louisiana Supreme Court defined
289 So.2d at 100. These privileges obviously enhance the value to appellant of its activities within Louisiana. See Southern Gas Corp. v. Alabama, 301 U. S. 148, 301 U. S. 153 (1937); Stone v. Interstate Natural Gas Co., 103 F.2d 544 (CA5), aff'd, 308 U.S. 522 (1939). Cf. Railway Express Agency v. Virginia (Railway Express II), 358 U. S. 434 (1959).
Nevertheless, appellant contends that Spector Motor Service v. O'Connor, 340 U. S. 602 (1951), and Railway Express Agency v. Virginia (Railway Express I), 347 U. S. 359 (1954), require the conclusion that § 601 is unconstitutional as applied to appellant. The argument is without merit. Spector held invalid under the Commerce Clause a Connecticut tax based expressly "upon [the corporation's] franchise for the privilege of carrying on or doing business within the state. . . ." Similarly, Railway Express I invalidated Virginia's "annual license tax" imposed on express companies expressly "for the privilege of doing business" in the State. Thus both taxes, as express imposts upon the privilege of carrying on an exclusively interstate business, contained the same fatal constitutional law that led the Louisiana Court of Appeal to strike down the levy against appellant
under § 601 before its amendment in 1970. "A tax is [an unconstitutional] direct burden, if laid upon the operation or act of interstate commerce." Ozark Pipe Line v. Monier, 266 U. S. 555, 266 U. S. 569 (1925) (Brandeis, J., dissenting). The 1970 amendment, however, repealed that unconstitutional basis for the tax, and made § 601 constitutional by limiting its application to operating incidences of activities within Louisiana for which the State affords privileges and protections that constitutionally entitle Louisiana to exact a fairly apportioned and nondiscriminatory tax. Spector expressly recognized:
340 U.S. at 340 U. S. 608-609. [Footnote 9]
Of course, an otherwise unconstitutional tax is not made the less so by masking it in words cloaking its actual thrust. Railway Express II, supra, at 358 U. S. 441; Railway Express I, supra, at 347 U. S. 363; Galveston, H. & S. A. R. Co. v. Texas, 210 U. S. 217, 210 U. S. 227 (1908). "It is not a matter of labels." Spector, supra at 340 U. S. 608. Here, however, the Louisiana Legislature amended § 601 purposefully to remove any basis of a levy upon the privilege of carrying on an interstate business and narrowly to confine
Northwestern Cement Co. v. Minnesota, 358 U. S. 450, 358 U. S. 457-458 (1959).
Louisiana does not require foreign corporations to qualify as a condition to carrying on their interstate business. Louisiana Rev.Stat.Ann. § 12:302 (Supp. 1975) expressly exempts foreign corporations that transact "any business in interstate or foreign commerce" from its requirement that foreign corporations obtain a certificate of authority from the Secretary of State before they transact business within the State. Crutcher v. Kentucky, 141 U. S. 47 (1891), therefore, is inapposite. There, Kentucky provided that an agent of an express company not incorporated under the laws of Kentucky could not carry on business in that State without first obtaining a license from the State. The Court held that this mandatory license requirement was unconstitutional, because to
Id. at 141 U. S. 57-58. See Graham Mfg. Co. v. Rolland, 191 La. 757, 186 So. 93 (1939); State v. American. Railway Express Co., 159 La. 1001, 106 So. 544 (1924). An important consequence of qualification, of course, is the facilitation of the assessment and collection of state franchise taxes. Comment, Foreign Corporation State Boundaries for National Business, 59 Yale L.J. 737, 746 (1950).
Nor is this tax on carrying on business in the corporate form a "local obstruction to the flow of interstate commerce that cannot stand under the Commerce Clause." Memphis Steam Laundry v. Stone, 342 U. S. 389, 342 U. S. 395 (1952). Unlike the situation in Memphis Steam Laundry, Louisiana did not "carve out" an "incident from the integral economic process of interstate commerce," id. at 342 U. S. 393, and then proceed to tax that incident. There was and is no requirement that appellant assume the corporate form to do interstate business in Louisiana, and, indeed, state law specifically exempts foreign corporations engaging in interstate commerce from the certificate requirement. See n 8, supra.
I am not at all satisfied that this Court's decisions of the past 30 years, some of them by sharply divided votes, are so plain and so analytically consistent as the Court's opinion would seem to imply. Thus, I find it difficult to reconcile Spector Motor Service v. O'Connor, 340 U. S. 602 (1951), with today's holding. And if the present case had gone the other way, I would find it difficult to reconcile the judgment with Memphis Gas Co. v. Stone, 335 U. S. 80 (1948). If, however, the Court' decisions of the past are consistent -- and if there is consistency between what the Louisiana Legislature and that
I therefore feel that the Court should face the issue and make the choice. I would make that choice in favor of Memphis Gas, as buttressed by the philosophy and holding of Northwestern Cement Co. v. Minnesota, 358 U. S. 450 (1959), and against Spector. Spector, it seems to me, is a derelict and an aberration, and I would discard it. I would hold that, in this day, when the realities of "Our Federalism" * have become apparent, and when the ability of our States and of the Federal Government to coexist have matured, a state franchise tax that does not threaten interstate commerce by being discriminatory, or unfairly apportioned, or devoid of sufficient nexus, passes constitutional muster under the Commerce Clause, and may be imposed in the
* Younger v. Harris, 401 U. S. 37, 401 U. S. 44 (1971).
All agree that the appellant is engaged exclusively in interstate commerce. Yet the Court says that Louisiana can nonetheless impose this franchise tax upon the appellant because it is for the privilege of engaging in interstate commerce "in [the] corporate form."* Under this reasoning, the State could impose a like franchise tax for the privilege of carrying on an exclusively interstate business "in the partnership form" -- or, for that matter, in the form of an individual proprietorship. For whatever its form, the exclusively interstate business would still be "owning or using [a] part of its capital, plant or other property in Louisiana," ante at 421 U. S. 109, and would still be "furnished" equivalent "protection and benefits" by the State, ante at 421 U. S. 114.
The fact is that Louisiana has imposed a franchise tax upon the appellant for the privilege of carrying on an exclusively interstate business. Under our established precedents, such a tax is constitutionally impermissible. Spector Motor Service v. O'Connor, 340 U. S. 602; Railway Express Agency v. Virginia, 347 U. S. 359. I could understand if the Court today were forthrightly to overrule these precedents and hold that a state franchise tax upon interstate commerce is constitutionally valid, so long as it is not discriminatory. But I cannot understand how the Court can embrace the wholly specious reasoning of the Supreme Court of Louisiana in this case.