Court Opinion

ID: 6257033
Source: CourtListenerOpinion
Date Created: 2022-02-17 21:46:09.789529+00
Date Added: 2024-06-11T08:59:34.886791
License: Public Domain

*463Dissenting Opinion by
Mr. Justice Bell:
Can a State tax interstate commerce by pretending that the tax is imposed as compensation for the use of its highways when not one cent of the tax (receipts) is used directly or indirectly for the highways — that is the basic question. Expressed in other words, when an act wears a false face shouldn’t the Courts look underneath the masquerade to sée whether the hands and body are really Esau’s even though the voice is Jacob’s?
The lower Court sustained defendants’ preliminary objections in the nature of a demurrer. Accordingly, all of the facts which are averred in the bill in equity are, for the purpose of this appeal, considered to be true and correct; but the correctness and truth of the pleaders’ conclusions or averments of law are not admitted: Narehood v. Pearson, 374 Pa. 299, 96 A. 2d 895; Carlin v. Pennsylvania Power & Light Co., 363 Pa. 543, 70 A. 2d 349.
Can a State lawfully tax carriers engaged in interstate commerce and if so, what are. its powers and limitations? This question raises several constitutional questions which are so inter-related that they may be considered together.
“It long has been settled that a State cannot lay a tax on interstate commerce in any form, whether on the transportation of subjects of commerce, the receipts derived therefrom, or the occupation or business of carrying it on. Leloup v. Port of Mobile, 127 U. S. 640, 648; Kansas City Ry. Co. v. Kansas, 240 U. S. 227, 231, and cases cited:” Ozark Pipe Line Corp. v. Morder, 266 U. S. 555, 562. This principle has been reiterated in Alpha Portland Cement Company v. Massachusetts, 268 U. S. 203, 217; Freeman v. Hewit, 329 U. S. 249; Joseph v. Carter & Weekes Stevedoring Co., 330 U. S. 422; Spector Motor Service, Inc. v. O’Con-*464nor, 340 U. S. 602; Keystone Metal Company v. City of Pittsburgh, 374 Pa. 323, 97 A. 2d 797; Dixie Ohio Express Co. v. State Revenue Commission, 306 U. S. 72; Sprout v. South Bend, 277 U. S. 163; Interstate Transit, Inc. v. Lindsey, 283 U. S. 183; Gwin et al. v. Henneford, 305 U. S. 434; Norfolk & Western Railroad Co. v. Pennsylvania, 136 U. S. 114.
. Expressed in another way it is well settled, as the majority admit, that a State does not have the power to tax interstate commerce as such. In Dixie Ohio Express Co. v. State Revenue Commission, 306 U. S., supra, the Court said (page 76) : “It is elementary that a State may not impose a tax on the privilege of engaging in interstate commerce.* Sprout v. South Bend, 277 U. S. 163, 171. Interstate Transit, Inc., v. Lindsey, 283 U. S. 183, 185. Gwin, White & Prince, Inc. v. Henneford, 305 U. S. 434, . . .”.
However, it is now equally well settled that a state may impose a fair, reasonable and non-diseriminatory tax upon carriers who use its highways for the cost, maintenance, and other proper highway expenses as compensation for the use of its highways even though such carrier is engaged partly or exclusively in interstate commerce: Interstate Busses Corporation v. Blodgett, 276 U. S. 245; Dixie Ohio Express Co. v. State Revenue Commission, 306 U. S. 72; Clark v. Gray, Inc., 306 U. S. 583; Capitol Greyhound Lines v. Brice, 339 U. S. 542; Aero Transit Co. v. Commissioners, 332 U. S. 495; Hendrick v. Maryland, 235 U. S. 610.
Both the title and sec. 2 of the Act of June 22, 1931, as amended December 27, 1951, declare that the tax is an excise tax on gross receipts levied (as compensation) for the “use” of the highways. This declaration is entitled to weight, but if in reality, i.e., in its prac*465tical operation and effect, the tax is not what it purports to be, the realities control: Interstate Transit, Inc. v. Lindsey, 283 U. S. 183; Spector Motor Service, Inc. v. O’Connor, 340 U. S. 602, 608; Arrott’s Estate, 322 Pa. 367, 185 A. 697; Armour & Co. v. Pittsburgh, 363 Pa. 109, 69 A. 2d 405; Murray v. Philadelphia, 364 Pa. 157, 71 A. 2d 280.
In Sprout v. South Bend, 277 U. S., supra, a city tax (duly authorized by the legislature) prescribing an annual license fee (varying with the seating capacity of the bus) on all vehicles using the city streets, was declared unconstitutional as to interstate carriers because the facts did not show that the proceeds of the license fees were to be in any part applied to the construction or maintenance of the city streets and hence the ordinance could not be justified as an excise tax for the use of the city streets.
In Joseph v. Carter & Weekes Stevedoring Co., 330 U. S. 422, a New York City tax was declared invalid and unconstitutional as to persons engaged in interstate commerce, where the ordinance provided: “Imposition of tax. a. For the privilege of carrying on . . . within the city any trade, ... or commercial activity .. ., every person shall pay an excise tax . . . upon all receipts received in and/or allocable to the city from such . . . trade, ... or commercial activity . . . carried on by him . . .”. The Court said (pages 429-430-433) : “A power in a state to tax interstate commerce or its gross proceeds, unhampered by the Commerce Clause, would permit a multiple burden upon that commerce. This has been noted as ground for their invalidation. Western Live Stock v. Bureau, 303 IT. S. 250, 255 .... The actual effect on the cost of carrying on the commerce does not differ from that imposed by any other tax exaction — ad valorem, net income or excise. Cf. Western Live Stock v. Bureau, supra, 254.
*466“. . . in Gwinn, White & Prince, Inc. v. Henneford, . . . a state gross receipts tax on income from marketing fruit interstate was invalidated under the Commerce Clause, . . .
“. . . Stevedoring, we conclude, is essentially a part of the commerce itself and therefore a tax upon its gross receipts or upon the privilege of conducting the business of stevedoring for interstate and foreign commerce, measured by those gross receipts, is invalid. We affirm the rule of Puget Sound Stevedoring Company. What makes the tax invalid is the fact that there is interference by a State with the freedom of interstate commerce.’ Freeman v. Hewit, supra, p. 256.”
To summarize: A State cannot tax directly or by subterfuge interstate commerce as such, nor can it tax a person or corporation for the privilege of engaging in interstate commerce.
Moreover, the burden of proving that the tax on interstate commerce is imposed as compensation or reimbursement for the cost of the construction or maintenance or use of its highways is upon the State: Ingels v. Morf, 300 U. S. 290, 294; Sprout v. South Bend, 277 U. S. 163, 169, 170; Interstate Transit, Inc. v. Lindsey, 283 U. S. 183, 186; Postal Telegraph-Cable Co. v. Richmond, 249 U. S. 252, 259; Clyde Mallory Lines v. Alabama, 296 U. S. 261, 267.
As the majority opinion admits: “Where a tax is imposed by a State upon carriers engaged in interstate commerce it must affirmatively appear that it is levied only as compensation for the use of its highways.” How can it “affirmatively appear that the tax is levied only as compensation for the use of its highways” when the demurrer admits that none of the tax (or tax receipts) are used directly or indirectly for the cost, maintenance- or use of the' State’s highways.
*467Under the majority opinion, a State can tax interstate commerce at will and constitutionally justify it merely by reciting in the Act that the tax is imposed for use of the highways, even though not a penny is used directly, indirectly, or in practical operation and effect, for use of the highways. This makes a mockery of the interstate commerce clause and is likewise, in our judgment, contrary to the decisions of the Supreme Court.
Ingels v. Morf, 300 U. S. 290, is so similar on its facts to the instant case, i.e., in its disposition of the tax receipts, that its language is equally applicable to and governs it. In that ease a California caravan act imposed a fee of $15.00 for the transportation or towing from without the state of any vehicle for the purpose of offering the same for sale to a purchaser within the state. The act directed the fees collected should he paid into the general fund of the state treasury to reimburse the treasury for the expense of administration and enforcement of the act and the added expense of policing the highways. The act was declared unconstitutional. Mr. Justice Stone, delivering the opinion for a unanimous Court, said (page 294) : “To justify the exaction by a state of a money payment burdening interstate commerce, it must affirmatively appear that it is demanded as reimbursement for the expense of providing facilities, or of enforcing regulations of the commerce which are within its constitutional power. Sprout v. South Bend, 277 U. S. 163, 169, 170; Interstate Transit, Inc. v. Lindsey, 283 U. S. 183, 186; Postal Telegraph-Cable Co. v. Richmond, 249 U. S. 252, 259; Clyde Mallory Lines v. Alabama, 296 U. S. 261, 267. This may appear from the statute itself, Morf v. Bingaman, supra; Clark v. Poor, 274 U. S. 554, 557, or from the use of the money collected, to defray such expense. Hicklin v. Coney, *468290 U. S. 169, 173; see Kane v. New Jersey, 242 U. S. 160, 168, 169; Aero Mayflower Transit Co. v. Georgia Public Service Comm’n, 295 U. S. 285, 289; compare Interstate Busses Corp. v. Blodgett, supra, 249.
“Here appellant does not shoio that the fees collected are used to meet the cost of the construction or maintenance of its highways. Section 6 of the challenged act, which directs that the permit fees he paid into the general fund of the state treasury, is to be contrasted with other California statutes relating to motor vehicles, which exact license fees and taxes and direct that they be paid, at least in part, into special funds devoted to highway purposes. Motor Fuel License Act, sec. 13, Cal. Stat. 1923, c. 267, as amended, Cal. Stat. 1935, c. 264; Vehicle Code, sec. 776, 781, Cal. Stat. 1935, c. 27; Cal. Stat. 1935, c. 362, sec. 9 (a), 9 (d). See Interstate Transit, Inc. v. Lindsey, supra, 188-190. Appellants point to no statute appropriating any part of the general fund of the state treasury for highway purposes, . . .”.
This is exactly the factual situation that exists in Pennsylvania under the 1951 Amendment and Justice Stone's opinion is, we repeat, equally applicable to the instant case.
Another case which is so close on its facts to the instant case that it directly rules it, is Interstate Transit, Inc. v. Lindsey, 283 U. S. 183. In that case Tennessee imposed a “privilege” tax of |500.00 upon interstate motor buses graduated according to carrying capacity. The highways were maintained by the State out of its general funds and there was no discrimination between intra and inter state operators. The Court held the Act was unconstitutional because a detailed ewamination of the statute showed that the tax imposed was not compensation for the use of the highways, but for the privilege of doing an interstate *469bus business. Justice Brandéis, delivering the opinion of the Court, said (pages 185-186-188-189-190) : “While a State may not lay a tax on the privilege of engaging in interstate commerce, Sprout v. South Bend, 277 U. S. 163, it may impose even upon motor vehicles engaged exclusively in interstate commerce a charge, as compensation for the use of the public highways, which is a fair contribution to the cost of constructing and maintaining them and of regulating the traffic thereon. Kane v. New Jersey, 242 U. S. 160, 168-169; Clark v. Poor, 274 U. S. 554; Sprout v. South Bend, supra, pp. 169-170. As such a charge is a direct burden on interstate commerce, the tax cannot be sustained unless it appears affirmatively, in some way, that it is levied only as compensation for use of the highways or to defray the expense of regulating motor traffic .... Hendrick v. Maryland, 235 U. S. 610, 612; Interstate Busses Corp. v. Blodgett, 276 U. S. 245, 250-252. Compare Interstate Busses Corp. v. Holyoke Street Ry., 273 U. S. 45, 51. But the mere fact that the tax falls upon one who uses the highway is not enough to give it presumptive validity. . . .
“The conclusion that the tax challenged is laid for the privilege of doing business and not as compensation for the use of the highways is confirmed by contrasting §4 of the 1927 Act with those statutes which admittedly provide for defraying the cost of constructing and maintaining highways and regulating traffic thereon. The former declai*es specifically in connection with the privilege tax on interstate busses that the proceeds 'shall go and belong exclusively to the General Funds of the State.’ On the other hand, in the legislation by which Tennessee has provided for defraying the cost of constructing and maintaining the state highways and regulating motor traffic, it has been *470tlie consistent practice to prescribe that moneys raised for this purpose shall be segregated and go into the Highway Fund. The present system of motor regulations was inaugurated in 1915. At the same session, the legislature created a - State Highway Commission with power to construct and maintain highways. In these statutes and in many later ones — prescribing additional fees for the registration and licensing of motor vehicles, imposing gasoline taxes, laying a one mill road tax, and authorizing the issue of bonds for the construction of highways and bridges, — the legislature provided that the proceeds of the fees, taxes, and bonds, and of the tolls collected on bridges, should be set apart as staite highway and bridge funds to be expended by the Commission exclusively for the construction and maintenance of highways or bridges. The absence in §4 of this provision, which characterizes almost every other Tennessee statute relating to the construction and maintenance of highways or the regulation of motor vehicle traffic, is additional evidence that the present tax was not exacted for such purposes, but merely as a privilege tax on the carrying on of interstate business.
“. . . But since a State may demand of one carrying on an interstate bus business only fair compensation for what it gives, such imposition, although termed a tax, cannot be tested by standards which generally determine the validity of taxes. Being valid only if compensatory, the charge must he necessarily predicated upon the use made, or to be made, of the highways of the State. Clark v. Poor, supra .... We need not therefore consider whether the tax exacted from this appellant is unreasonably large or unjustly discriminatory.”
The original Act of 1931 was undoubtedly, as it purported to be, a tax imposed as compensation for *471the use of the highways. The Amendatory Act of 1951 eliminated the credits allowed in the 1931 Act for vehicle registration fees paid to the State and for city taxes paid for use of highways. But far more important, is the fact that until the act of 1951, sec. 9 of the Act of 1931 provided that taxes collected from intrastate operators should be credited to the general fund of the Commonwealth, while taxes collected from companies doing an interstate business should be credited to the Motor License Fund. Moreover, prior to the recent constitutional amendment of 1945, Art. IX, sec. 18, the legislature appropriated money for use of the highways and for the expenses of the highway department out of its general fund; and likewise used revenue derived from taxes on its highways for both highway purposes and general revenue purposes. This condition has been radically changed by the Act of 1951 and by the Constitutional Amendment of 1945 and by the greatly altered condition of the general fund and the highway fund. Section 9 of the Act of 1931, as amended by the Act of (December 27) 1951, now provides that all taxes collected under the amendatory act shall be paid into or credited to the General Fund.
Defendants’ demurrer admits (1) that the highway fund has an enormous balance which is more than amply sufficient to pay for the cost and expense of constructing and maintaining roads, as well as the expenses of the highway department; and (2) that the legislature has not appropriated and does not appropriate any moneys out of the general fund for highway purposes; and (3) that the funds used for highway purposes are derived solely from registration fees, gasoline and other motor fuel excise taxes and similar fees and taxes, all of which go into the motor license fund and/or may be used solely for public highways and costs and expenses incident thereto.
*472This is not a case where a part of the taxes collected from interstate carriers under the 1951 Amendatory Act are used for highway purposes; it is not a case where the taxes collected from interstate carriers are paid into a general fund or state treasury, out of which the legislature appropriates moneys for highway and other purposes; this is not a casé where taxes collected from non-highway users are used for highway purposes and vice versa. This is a case where admittedly not one cent of the taxes levied upon and collected from interstate carriers under this Amendatory Act of 1951 are used, directly, indirectly, or in practical operation and effect, for hightoay purposes or for the expenses of the highway department;* — this is a case where the hands' are the hands of Esau but the voice is the voice of Jacob.
To hold under the facts which have been pleaded and admitted, that this tax is Constitutionally applicable to a bus carrier engaged solely in interstate commerce would be to nullify and make meaningless the Interstate Commerce Clause of the Federal Constitution and the numerous decisions which maintain and support it. I would therefore hold, under the authority of Interstate Transit, Inc. v. Lindsey, 283 U. S.; Ingels v. Morf, 300 U. S., supra; Joseph v. Carter & Weekes Stevedoring Co., 330 U. S., supra; and Spector Motor Service, Inc. v. O’Connor, 340 U. S. supra, that the Amendatory Act of 1951 violates the Commerce Clause of the Constitution and as to interstate carriers is unconstitutional and void.

 Italics throughout, ours.

 The Commonwealth must have believed that the Amendment of 1951 was unconstitutional because on August 21, 1953, the Act was amended and changed to provide that the tax receipts from intrastate commerce were to be paid into the State Treasury and credited to the General Fund, while all taxes paid by and tax receipts from interstate commerce were to be thereafter credited to the Motor License Fund.