Court Opinion

ID: 9418770
Source: CourtListenerOpinion
Date Created: 2023-08-02 22:38:45.585863+00
Date Added: 2024-06-11T17:22:09.916423
License: Public Domain

Mr. Justice Cardozo,
dissenting.
This case does not present the question that would be here if the appellant had not sought for and obtained a privilege or franchise to do a local business in the state of Alabama. There is nothing in the Alabama decisions, and little in her statutes, to indicate that the tax would have been sustained in the absence of such a grant, or that there would have been even an attempt to levy it. Ewart Lumber Co. v. American Cement Co., 9 Ala. App. 152, 156; 62 So. 560; Citizens National Bank v. Buckheit, 14 Ala. App. 511, 517, 519; 71 So. 82; Tyson v. Jennings Produce Co., 16 Ala. App. 374, 375; 77 So. 986; Ware v. Hamilton Brown Shoe Co., 92 Ala. 145, 149; 9 So. 136; Cook v. Rome Brick Co., 98 Ala. 409, 413; 12 So. 918; Stratford v. City Council of Montgomery, 110 Ala. 619; 20 So. 127; Alabama Code of 1928, § 7217, limiting the application of §§ 7209 to 7220. Indeed the Attorney General informed us on the argument that this would have been the position of - his department of the Govern*230ment, charged, as it is, with the collection of the revenues of the state. Alabama has said by her courts that it is' beyond the power of the legislature to restrict by conditions the exercise or enjoyment-of a privilege that has its origin and sanction in the constitution of the nation. See cases supra. Alabama has said by her statutes (Code, § 7217), that the'permits and franchise taxes exacted-of foreign corporations by article 26 of the Alabama Code do not apply to corporations “engaging in or transacting business of interstate commerce only,” if the privilege they ask for is that and nothing more. The act.now in question (§ 54 of Act No. 163, approved July 22, 1927, Alabama General Acts, 1927, p. 176) was passed in fulfilment' of a mandate laid upon the legislature by § 232 of the Alabama Constitution. By that section it is pro- ' vided that no foreign corporation shall do business in that state “ without having at least one known place of business and an authorized agent or agents therein, and without filing with the secretary of state a certified copy of. its articles of incorporation or association.” By the same section: “ the legislature shall, by general law, provide for the payment to the State of Alabama of a franchise tax by such corporation, but such franchise tax shall be based upon the actual amount of capital-employed in this state.” It is this section that the courts of Alabama have adjudged to be inapplicable to interstate business. See cases supra. If that is' the construction to be given to' the command whereby the legislature was -to establish a franchise tax. and measure it in a certain way, there can be no doubt that the same construction must be given to the statute passed thereafter to give effect to the command. The power abjured in one breath was not exerted in the next.
With this .approach to the problem, the pathway is made open. When the legislature of Alabama said in 1927 that an annual tax was imposed upon the fran*231chise of every foreign corporation, it meant to lay the burden upon those franchises and those only which there was powejr in Alabama to grant or to withhold. If the corporation was there by virtue of a dual right, the one created by the state, and no other, was to be subjected to the charge. The presumption of that intention is hardly to be escaped in view of past disclaimers of a purpose more pretentious. True there'is another section of the same act whereby a written permit is exacted for “ the purpose of registration and to prevent the duplication of .names and in order to secure for the public record, for taxation, and for other purposes, the names and addresses of the corporation,” and its officers (Act. No. 163, § 42). True also that for such a permit there is to be paid an annual tax varying from $5, the minimum, to $100, the maximum. The statute provides, however, that thé tax imposed by that section shall be “ in addition to other license or privilege taxes required to be paid by law.” There is thus a tax in the nature of a fee to be paid in instalments as compensation for the permit, and another tax, measured by the capital in use within the state, upon the underlying franchise. The fee for the permit does not rebut the inference that there is not to be a tax upon the franchise unless, user is a privilege that issues from the state. Doubt,' if there is any, will be resolved in favor of the construction that keeps the act alive.
The appellant was not satisfied to stand upon its federal right, though the state had made it plain that the claim of right would be respected. It was seeking something more, the privilege of going over thé line that marks the federal immunity; and to that end it asked for and obtained a license or franchise, the name is unimportant, to do a local business as well as one related to interstate or foreign commerce. By the grant thus pro*232cured, it became free, at its unfettered will, to sell at wholesale or at retail, in the original packages or in others, unhampered by. the restrictions that would have limited its capacity if it had been there as an importer and with the powers of an. importer only. This.franchise or privilege, this grant of benefits beyond any conferred by the federal constitution, the state of Alabama was competent to tax. Home Ins. Co. v. New York, 134 U. S. 594; Ashley v. Ryan, 153 U. S. 436, 440; Kansas City, F. S. & M. Ry. Co. v. Botkin, 240 U. S. 227; Lusk v. Botkin, 240 U. S. 236; St.Louis, S. W. Ry. Co. v. Arkansas, 235 U. S. 350; Kansas City, M. & B. R. Co. v. Stiles, 242 U. S. 111, 117; Flint v. Stone Tracy Co., 220 U. S. 107; Educational Films Corp. v. Ward, 282 U. S. 379; Pacific Co. v. Johnson, 285 U. S. 480, 489; Detroit International Bridge Co. v. Corp. Tax Appeal Board, 287 U. S. 295. There being competence to tax, there was competence to measure the burden of the payment by capital employed, irrespective of the use to which employment is directed. Educational Films Corp. v. Ward, supra; Pacific Co. v. Johnson, supra; Flint v. Stone Tracy Co., supra; Home Ins. Co. v. New York, supra. There may be a wrong to the taxpayer if the standard of measurement is oppressive and unreasonable. Western Union v. Kansas, 216 U. S. 1. There is none where the standard bears a fair and natural relation, in its normal or average workings, to the privilege conferred.
The argument is made, however, that the tax though declared by the express terms of the statute to be a tax upon the “ franchise,” is confined to corporations “ doing business ”, in Alabama, and hence is to be viewed- as a tax upon the kind of business actually conducted, and not upon the franchise to conduct it in that or other ways. More than once a like argument directed to statutes phrased in the same way has been urged upon this court, only to be rejected as unsound. Home Life Ins. Co. v. New York, supra; St. Louis, S. W. Ry. Co. v. Arkansas, *233supra; Louisville & N. R. Co. v. Alabama, 248 U. S. 533; 201 Ala. 317; 78 So. 93 (involving a statute of Alabama similar to this one); Kansas City, M. & B. R. Co. v. Stiles, 242 U. S. 111, affirming 182 Ala. 138; 62 So. 734; Flint v. Stone Tracy Co., 220 U. S. 107, 145, 146. Thus, in Home Life Ins. Co. v. N. Y., supra, a statute provided that every corporation then or thereafter incorporated under any law of the state or of any other state or country, “ and doing business in the state,” should be subject to a tax “ upon its corporate franchise or business,” measured by its dividends. The court held that the tax was one upon the privilege “ of doing business in a corporate capacity,” and not upon the business or activities that were the outcome of the privilege. Cf. Flint v. Stone Tracy Co., supra, pp. 145, 146; Michigan v. Michigan Trust Co., 286 U. S. 334, Detroit International Bridge Co. v. Corp. Tax Appeal Board, supra. There would be greater force in the appellant’s argument if its construction of the tax as one upon the activity or the business had support in anything decided by the courts of Alabama. To the contrary, the highest court of the state has put ‘that meaning aside by its opinion in this very case. Adopting the reasoning of .this court in Flint v. Stone Tracy Co., supra, it has said that “ the tax is an excise upon the particular privilege of doing business in a corporate capacity, and with the advantages derived therefrom. State v. Anglo-Chilean Nitrate Sales Corp., 142 So. 87, 91; cf. Louisville & N. R. Co. v. State, 201 Ala; 317, 318; 78 So. 93; Ellis v. Handley Mfg. Co., 214 Ala. 539; 108 So. 343; Kansas City, M. & B. R. Co. v. Stiles, 182 Ala. 138; 62 So. 734. True indeed it is that the corporation will be relieved of the burden if no business is transacted and no capital employed (State v. National Cash Credit Ass’n, 224 Ala. 629; 141 So. 541), but so was the corporation in the Home Life Insurance case, and SO' also were the corporations in many other cases. Flint v. Stone Tracy Co., St. Louis, S. W. *234Ry. Co. v. Arkansas, Louisville & N. R. Co. v. Alabama, Kansas City, M. & B. R. R. Co. v. Stiles, supra. If the state has conferred a privilege which it is competent to tax, the competence is not lost,' and the validity of the tax destroyed, because the privilege is to' be free when the ’ corporation is inactive. There is a requirement in the Alabama constitution, repeated in the statute, that the tax upon the franchise shall be measured by the capital employed within the state, a measure obviously inapplicable to dormant corporations. In such circumstances, activity is an event that conditions liability, but the privilege, not the event, is still the subject of the burden. To resume the matter in a few words: the tax is not imposed upon those capacities and privileges that emanate by implication from the power of the nation. The tax is laid upon those privileges, and those only, that emanate either expressly or by implication from the power of the state. Business, it is true, must have been done, for without the doing of business there can be no capital employed. Even so, capital and business are by-pr.oducts and incidents, like dividends or income. Flint v. Stone Tracy Co. They are the yardstick by which the state measures the value of the privilege. They are not the privilege itself.
The argument is made that “capital employed ” is an illegal and arbitrary measure because the appellant has made no use of the taxable franchise emanating from the state, but has confined its activities to interstate or foreign commerce. What has been said in recent cases (Educational Films Corp. v. Ward, supra, and Pacific Co. v. Johnson, supra), goes far to give the answer. There was no attempt here as there was in Western Union Telegraph Co. v. Kansas, supra, or in Looney v. Crane Co., 245 U. S. 178, or in International Paper Co. v. Massachusetts, 246 U. S. 135, or in other cases of that type, to burden a local privilege in close association with one not local by a levy upon values beyond the confines of the state. *235Cf. Kansas City M. & B. R. Co. v. Stiles, 242 U. S. 111, 119; Baltic Mining Co. v. Massachusetts, 231 U. S. 68; Wallace v. Hines, 253 U. S. 66; Cudahy Packing Co. v. Hinkle, 278 U. S. 460; Educational Films Corp. v. Ward, supra, at p. 391. The measure here was capital employed in Alabama (St. Louis, S. W. Ry. v. Arkansas, supra; Louisville & N. R. Co. v. Alabama, supra); and it was a mere fortuity that in this instance the capital was made up of imports still intact. Moreover, what was done under the franchise one day might not be done under it the next. Another franchise tax would not be owing for a year. In the meantime the appellant might transact its business as it . pleased. If some of its sales, however few and trifling, had been made in broken packages, there would be no denial by any one that the privilege of making them would be subject to taxation by one measure or another. This court has never Held that the measure in such circumstances would be arbitrary and unlawful because determined by the value of all the local capital, and not merely the proportion necessary for sales in broken lots. In principle the situation would then be governed by the ruling in Hump Hairpin Co. v. Emmerson, 258 U. S. 290, and Western Cartridge Co. v. Emmerson, 281 U. S. 511, where an apportionment very similar had the approval of this court. Especially must the standard hold when the statute is directed against foreign corporations generally, and not particularly against such of them as are engaged in interstate or foreign commerce. If the standard is a valid one when the privilege is used, it does not cease to be valid because user is abandoned or postponed. Very likely the statute might have been read in a different way. It might have been read as imposing two conditions, first that business should have been done, and second that what was done , could be attributed, at least in part, to the actual exercise of the privileges granted by the state. As to such matters of construction the *236courts of the state may speak the final word. All that concerns us here is capacity or power. Here was no covert effort by the state to extend its taxing jurisdiction into an area denied to it. The burden upon interstate business in Western Union v. Kansas and the other cases cited, was an outcome inherent in the statutory scheme; it was the very event intended. The burden here, if there was any, was unforeseen and adventitious. Cf. Plummer v. Coler, 178 U. S. 115; Kansas City, M. & B. R. Co. v. Stiles, supra.
None of the decisions cited by the appellant controls the case at hand.
Ozark Pipe Line Corp. v. Monier, 266 U. S. 555, is invoked with special confidence. There are obvious distinctions. The statute of Missouri there held to be invalid in its application to a corporation engaged in interstate commerce was very similar in form to the statute of Alabama in controversy here. The conduct of the aggrieved corporation was, however, very different. Its business was the operation of a pipe line from oil wells in Oklahoma passing through Missouri to a destination in Illinois. Nothing was done in Missouri, or so the court interpreted the evidence, except in furtherance of transportation. Oil was neither received nor delivered in that state. In these circumstances the corporation asked for and obtained from Missouri a license to “ engage exclusively in the business of transporting crude petroleum by pipe line.” 266 U. S. at pp. 561, 567. This, however, was the very business that was incidental to.the federal right. The privilege to transport upon the interstate journey was an essential incident of commerce, and so an emanation from the federal power. The 'court did not hold that the tax would have been unlawful if laid üpon a franchise emanating from the power of the state, The court condemned the *237tax for the reason that it read the statute as designed to lay a burden on the franchise to do business as an interstate carrier. The imputation of that design was borne out in a measure by the remedy, for the state, had brought a suit not only to impress a lien upon the property, but to revoke the license altogether (p. 561), limited though it was. Cf. Underwood Typewriter Co. v. Chamberlain, 254 U. S. 113, 119; Southern Ry. Co. v. Watts, 260 U. S. 519, 530. If there had been decisions in Missouri, as there are in Alabama, disclaiming a purpose to affect the federal privilege, and if the state and federal privileges had varied substantially from each other in. meaning and in function, the parallel would be closer between the Ozark c^se and this. But if those conditions had been present, the result must have been changed.
Other cases, emphasized in the' briefs, are still more faintly applicable.
Crew-Levick Co. v. Pennsylvania, 245 U. S. 292, brought before us a tax upon the business of foreign commerce, whether conducted by natural persons or by corporations. Its measure was the gross receipts. “ It bears no semblance of a property tax or ,a franchise tax in the proper sense; nor is it an occupation tax except as it is imposed upon the very carrying on of the business of exporting merchandise.”' 245 U. S. 297. Cf. Phila. & Sou. S. S. Co. v. Pennsylvania, 122 U. S. 326. The conclusion would have been different if net income, and not gross, had been adopted as the measure. U. S. Glue Co. v. Oak Creek, 247 U. S. 321, 328; Peck & Co. v. Lowe, 247 U. S. 165; Shaffer v. Carter, 252 U. S. 37, 52. The case has no relation to the validity of a tax to be measured by local capital and imposed upon a privilege.
Alpha Portland Cement Co. v. Massachusetts, 268 U. S. 203, dealt with a statute of Massachusetts, different in *238form from this, and interpreted as one laid directly upon the operations of the business. Cf. Gloucester Ferry Co. v. Pennsylvania, 114 U. S. 196. No license or franchise to engage in a local business had been, granted by the state.
Brown v. Maryland, 12 Wheat. 419, was a case of a discriminatory tax upon the business of importers, and Cook v. Pennsylvania, 97 U. S. 566, a case of a discriminatory tax upon an auctioneer selling for importers. In neither was there a franchise, or a tax upon a franchise, or a reference to capital as a standard of measurement. In each the presence of imported packages to be subjected to a burden was an event considered and intended, not an adventitious circumstance developing unexpectedly in the application of the tax to one taxpayer out of many.
The tax imposed by . this statute does not discriminate between domestic and foreign corporations to the prejudice of the latter. Domestic corporations pay a franchise tax that is measured by their whole capital; foreign corporations one that is measured by “ the actual amount of capital employed ” within the state. It does not discriminate between foreign corporations engaged in interstate or foreign commerce and other foreign corporations. It lays a burden on all impartially. Finally, it is not oppressive in amount, nor framed in such a form as to suggest a furtive purpose to stifle activities not covered by its terms. The tax is $2 per thousand dollars until 1932, and $1 per thousand afterwards. General Acts of Alabama, 1927, § 56, p. 177.
The appellant is in the enjoyment of a privilege of value which .it solicited and received from the state of Alabama, and for that privilege it should pay.
Mr. Justice Brandéis and Mr. Justice Stone join in this dissent.