Court Opinion

ID: 9419000
Source: CourtListenerOpinion
Date Created: 2023-08-02 22:44:38.608183+00
Date Added: 2024-06-11T17:22:14.226805
License: Public Domain

*435Mr. Justice Stone
delivered the opinion of the Court.
This appeal raises the single question whether a Washington tax measured by the gross receipts of appellant from its business of marketing fruit shipped from Washington to the places of sale in various states and in foreign countries is a burden on interstate and foreign commerce prohibited by the commerce clause of the Federal Constitution.
Appellant, a Washington corporation licensed to do business there, brought this suit in the State Superior Court to restrain appellees, comprising the State Tax Commission, from collecting the “business activities” tax laid by Chapter 180 of Washington Laws of 1935, amending Chapter 191 of Washington Laws of 1933, on the ground that it infringes the commerce clause. By stipulation after demurrer to the bill of complaint the cause was tried and decided on the merits, upon facts stated in the complaint and certain others specified in the stipulation. Judgment of the trial court for appellees was affirmed by the Supreme Court of Washington, 193 Wash. 451; 75 P. 2d 1017, and the case comes here on appeal under § 237 (a) of the Judicial Code as amended, 28 U. S. C. § 344.
Sections 4(e), 5(g), (m) of Tit. II, c. 180 of Washington Laws of 1935 lay “a tax for the act or privilege of engaging in business activities” upon every person (including corporations) “engaging within this state in any business activity,” with exceptions not now material, at the rate of one-half of 1% of the “gross income of the business.” As the record discloses, appellant has a place of business in the state of Washington from which it carries on its operations in marketing, in other states and foreign countries, apples and pears grown in Washington and Oregon. Its entire business is that of marketing agent *436for fruit growers and growers’ cooperative organizations in those states. As such it makes sales and deliveries of the fruit in other states and in foreign countries, collects the sales prices and remits the proceeds to its principals after deducting transportation charges, certain expense allowances and its own compensation. In the course of the business the fruit is shipped from the states of origin— approximately 25% from Oregon — to other states and foreign countries, sometimes directly to the purchasers, but more often it is consigned to appellant at extra-state points from which it is diverted by appellant to purchasers who buy the fruit while in transit, or where it is stored pending sale. Representatives of appellant at numerous points without the state negotiate sales of the fruit on behalf of appellant and on its approval execute written contracts of sale, effect delivery of the shipments to purchasers, collect the purchase price and remit it to appellant in Washington, where it is accounted for to the shippers. In conducting the business appellant sends to its representatives without the state daily bulletins listing the fruit, some of which is in transit interstate and some of which has already been placed in storage without the state, and it expends large amounts for communications by telephone, telegraph and cable between itself in Washington and its representatives outside the state.
The entire Washington business is carried on by appellant under contract with an incorporated federation of twelve state cooperative growers’ organizations. By this contract appellant is given exclusive authority to sell all apples and pears coming into the possession and control of the federation as agent for its members and to collect the proceeds of sale. Appellant undertakes to sell these products at prices fixed by the federation, to obtain their widest possible distribution, to attend to all traffic matters pertaining to shipment and transportation of the fruit, to effect delivery to purchasers and to collect and *437remit the sales prices. The stipulated compensation for the entire service is at the rate of 8 cents a box for apples sold and 10 cents a box for pears. According to the bill of complaint appellees assert that appellant is subject to the tax upon its entire gross revenue from the business, and they threaten to collect the tax and to impose penalties for its nonpayment. But on the trial it was stipulated that “the state makes no claim” to the tax upon appellant’s Oregon business, and we treat the decision and decree of the state court as concerned only with the validity of the tax measured by the amount of fruit shipped from Washington.
The Supreme Court of Washington, conceding that the shipment of the fruit from the state of origin to points outside, and its sale there, involve interstate commerce, held nevertheless that appellant’s activities in Washington in promoting the commerce were a local business, subject to state taxation as is other business carried on in the state, and it sustained the present levy, against attack under the commerce clause, as a tax upon those activities, citing Ficklen v. Shelby County Taxing District, 145 U. S. 1, and American Manufacturing Co. v. St. Louis, 250 U. S. 459.
We need not stop to consider which, if any, of appellant’s activities in carrying on its business are in themselves transportation of the fruit in interstate or foreign commerce. For the entire service for which the compensation is paid is in aid of the shipment and sale of merchandise in that commerce. Such services are within the protection of the commerce clause, Robbins v. Shelby County Taxing District, 120 U. S. 489; Caldwell v. North Carolina, 187 U. S. 622; Real Silk Mills v. Portland, 268 U. S. 325; and the only question is whether the taxation of appellant’s gross receipts derived from them is such an interference with interstate commerce as to bring the tax within the constitutional prohibition.
*438While appellant is engaged in business within the state, and the state courts have sustained the tax as laid on its activities there, the interstate commerce service which it renders and for which the taxed compensation is paid is not wholly performed within the state. A substantial part of it is outside the state where sales are negotiated and written contracts of sale are executed, and where deliveries and collections are made. Both the compensation and the tax laid upon it are measured by the amount of the commerce — the number of boxes of fruit transported from Washington to purchasers elsewhere; so that the tax, though nominally imposed upon appellant’s activities in Washington, by the very method of its measurement reaches the entire interstate commerce service rendered both within and without the state and burdens the commerce in direct proportion to its volume.
The constitutional effect of a tax upon gross receipts derived from participation in interstate commerce and measured by the amount or extent of the commerce itself has been so recently and fully considered by this Court that it is unnecessary now to elaborate the applicable principles. Western Live Stock v. Bureau of Revenue, 303 U. S. 250; Adams Manufacturing Co. v. Storen, 304 U. S. 307; cf. Coverdale v. Arkansas-Louisiana Pipe Line Co., 303 U. S. 604.
It has often been recognized that “even interstate business must pay its way” by bearing its share of local tax burdens, Postal Telegraph-Cable Co. v. Richmond, 249 U. S. 252, 259, and that in consequence not every local tax laid upon gross receipts derived from participation in interstate commerce is forbidden. See Western Live Stock v. Bureau of Revenue, supra, 254 et seq., and cases cited. But it is enough for present purposes that under the commerce clause, in the absence of Congressional action, state taxation, whatever its form, is precluded if it discriminates against interstate commerce or *439undertakes to lay a privilege tax measured by gross receipts derived from' activities in such commerce which extend beyond the territorial limits of the taxing state. Such a tax, at least when not apportioned to the activities carried on within the state, see Maine v. Grand Trunk Ry. Co., 142 U. S. 217; Wisconsin & M. Ry. Co. v. Powers, 191 U. S. 379; Cudahy Packing Co. v. Minnesota, 246 U. S. 450; United States Express Co. v. Minnesota, 223 U. S. 335; cf. Ficklen v. Shelby County Taxing District, supra; American Manufacturing Co. v. St. Louis, supra, burdens the commerce in the same manner and to the same extent as if the exaction were for the privilege of engaging in interstate commerce and would, if sustained, expose it to multiple tax burdens, each measured by the entire amount of the commerce, to which local commerce is not subject.
Here the tax, measured by the entire volume of the interstate commerce in which appellant participates, is not apportioned to its activities within the state. If Washington is free to exact such a tax, other states to which the commerce extends may, with equal right, lay a tax similarly measured for the privilege of conducting within their respective territorial limits the activities there which contribute to the service. The present taxs though nominally local, thus in its practical operation discriminates against interstate commerce, since it imposes upon it, merely because interstate commerce is being done, the risk of a multiple burden to which local commerce is not exposed. Adams Manufacturing Co. v. Storen, supra, 310, 311; cf. Fargo v. Michigan, 121 U. S. 230; Philadelphia & Southern S. S. Co. v. Pennsylvania, 122 U. S. 326; Galveston, H. & S. A. Ry. Co. v. Texas, 210 U. S. 217, 225, 227; Meyer v. Wells, Fargo & Co., 223 U. S. 298; Crew Levick Co. v. Pennsylvania, 245 U. S. 292; Fisher’s Blend Station v. State Tax Commission, 297 U. S. 650; see Western Live Stock v. Bureau of *440Revenue, supra, 260. Such a multiplication of state taxes, each measured by the volume of the commerce, would reestablish the barriers to interstate trade which it was the object of the commerce clause to remove, Unlawfulness of the burden depends upon, its nature, measured in terms of its capacity to obstruct interstate commerce, and not on the contingency that some other state may first have subjected the commerce to a like burden.
Ficklen v. Shelby County Taxing District, supra, which the Washington Supreme Court thought sustained its decision, upheld a state license tax imposed upon the privilege of doing a brokerage business within the state and measured by the gross receipts of commissions from sales of merchandise shipped into the state for delivery after the sales were made. Although the tax, measured by gross receipts, to some extent burdened the commerce, it was held that the burden did not infringe the commerce clause. Since it was apportioned exactly to the activities taxed, all of which were intrastate, the tax was fairly measured by the value of the local privilege or franchise. New York, L. E. & W. R. Co. v. Pennsylvania, 158 U. S. 431; American Manufacturing Co. v. St. Louis, supra; Utah Power & Light Co. v. Pfost, 286 U. S. 165; Coverdale v. Arkansas-Louisiana Pipe Line Co., supra. Neither the tax in the Ficklen case nor that upheld in American Manufacturing Co. v. St. Louis, supra, was open to the objection directed here to the present tax and sustained in Adams Manufacturing Co. v. Storen, supra, 311, that the tax is measured by gross receipts from activities in interstate commerce conducted both within and without the taxing state and that the exaction is of such a character that if lawful it might be laid to the fullest extent by the states in which the merchandise is sold as well as by those from which it is shipped. See Western Live Stock v. Bureau of Revenue, supra, 260.
*441For more than a century, since Brown v. Maryland, 12 Wheat. 419, 445, it has been recognized that under the commerce clause, Congress not acting, some protection is afforded to interstate commerce against state taxation of the privilege of engaging in it. Webber v. Virginia, 103 U. S. 344; Telegraph Co. v. Texas, 105 U. S. 460; Robbins v. Shelby County Taxing District, supra; Leloup v. Mobile, 127 U. S. 640; Brennan v. Titusville, 153 U. S. 289; International Text Book Co. v. Pigg, 217 U. S. 91; Fisher’s Blend Station v. State Tax Commission, supra; Adams Manufacturing Co. v. Storen, supra. For half a century, following the decision in Philadelphia & Southern S. S. Co. v. Pennsylvania, 122 U. S. 326, it has not been doubted that state taxation of local participation in interstate commerce, measured by the entire volume of the commerce, is likewise foreclosed. During that period Congress has not seen fit to exercise its constitutional power to alter or abolish the rules thus judicially established. Instead, it has left them undisturbed, doubtless because it has appreciated the destructive consequences to the commerce of the nation if their protection were withdrawn. Meanwhile Congress has accommodated its legislation, as have the states, to these rules as an established feature of our constitutional system. There has been left to the states wide scope for taxation of those engaged in interstate commerce, extending to the instruments of that commerce, to net income derived from it, and to other forms of taxation not destructive of it. See Western Live Stock v. Bureau of Revenue, supra, 254, et seq., and cases cited.

Reversed.