Court Opinion

ID: 9418538
Source: CourtListenerOpinion
Date Created: 2023-08-02 22:30:17.206737+00
Date Added: 2024-06-11T17:22:05.206205
License: Public Domain

*560Mr. Justice Sutherland
delivered the opinion of the Court.
Appellant is a Maryland corporation. It owns and operates a pipe line extending from within Oklahoma through Missouri to a point in Illinois, together with certain gathering lines in Oklahoma. Through this line crude petroleum is conducted to Illinois and there delivered. Oil is neither received nor delivered in the State of Missouri. Since it began operations appellant has been assessed and has paid general property taxes upon that portion of its line, and upon its other assets, in Missouri. It maintains its principal office in Missouri where it keeps its books and bank accounts and from which it pays its employees within and without the State, purchases supplies, employs labor, maintains telephone and telegraph lines, enters into contracts for transportation of crude oil, and carries on various other activities connected with and in furtherance of its pipe line operations. Along the pipe line in Missouri there are three pumping stations the sole use of which is to accelerate the passage of the oil through the line. It owns and operates passenger and truck automobiles, but these as well as its other property in Missouri are used exclusively in the *561prosecution of its interstate business. In compliance with the laws of Missouri applicable to corporations formed in other States desirous of transacting business in Missouri, appellant filed with the Secretary of State its articles of incorporation, and amended articles showing an increase in its capital stock, paid license taxes aggregating $6,401.50, and obtained a license and authority to engage “ exclusively in the business of transporting crude petroleum by pipe line.” It thereby acquired the right of eminent domain under the laws of the State.
The controversy arises over an attempt on the part of the State authorities to collect from appellant an annual franchise tax under §§ 9836-9848, Rev. Stats. Mo. 1919, pp. 3015-3020. The statute requires every corporation not organized under the laws of Missouri but engaged in business therein, to pay an annual franchise tax equal to one-tenth of one per cent, of the par value of its capital stock and surplus employed in business in the State. For the purpose of the tax the corporation is de'emed to have employed in the State “ that proportion of its entire capital stock and surplus that its property and assets in this State bears to all its property and assets wherever located.” The corporation is required to make an annual report in writing to the State Tax Commission in such form as may be prescribed, giving the amount of its authorized and subscribed capital stock, the par value and market value thereof and other specified information, as a basis, with other things, for the computation of the tax. Appellant, having failed to furnish this report, was threatened by appellees with an action in the name of the State to revoke its license and with such proceedings as would cause the amount of the tax, together with penalties, damages, and interest, to become a lien upon its property and thereby create a serious cloud upon the title thereto. Upon these facts suit was brought to enjoin appellees from going forward *562with such action and proceedings, upon the ground that the statute, as applied to appellant, contravenes the commerce clause of the Constitution of the United States. After a hearing the court below rendered a final decree against appellant dismissing its bill.
The tax is one upon the privilege or right to do business, State ex rel. v. State Tax Commission, 282 Mo. 213, 234; and if appellant is engaged only in interstate commerce it is conceded, as it must be, that the tax, so far as appellant is concerned, constitutionally cannot be imposed. 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. Plainly, the operation of appellant’s pipe line is interstate commerce and beyond the power of State taxation. Eureka Pipe Line Co. v. Hallanan, 257 U. S. 265, 272; United Fuel Gas. Co. v. Hallanan, 257 U. S. 277. But the contention in justification of the tax is that appellant is also engaged in doing local business, the basis of such contention being the facts concerning its ownership and use of property, other than the pipe line, and its various acts and activities within the State herein-before recited; and, further, that the purposes for which it is incorporated, as declared in its articles, comprehend other activities than that of transporting petroleum,, namely, the acquisition and operation of telegraph and telephone lines, dealing in and transporting merchandise, etc.
An extended review of the decisions of this Court dealing with this phase of the subject is not necessary. All proceed from the same principles, but range themselves on one side or the other of the line as the facts do or do not demonstrate that the tax as a practical matter con*563stitutes a burden upon interstate commerce. The facts upon which these former decisions rest, therefore, must be borne in mind in applying them to other and alleged similar cases. If the business taxed is in fact separate local business, not so connected with interstate commerce as to render the tax a burden upon such commerce, the tax is good. An illustration of such a tax is found in Pennsylvania R. R. Co. v. Knight, 192 U. S. 21, where this Court upheld a state franchise tax upon a cab service maintained wholly within the State of New York by the railroad company to convey passengers to and from its terminus in New York City, for which service the charges were separate from other transportation charges. The principle announced (p. 27) was: “Wherever a separation in fact exists between transportation service wholly within the State and that between the States a like separation may be recognized between the control of the State and that of the Nation. Osborne v. Florida, 164 U. S. 650; Pullman Co. v. Adams, 189 U. S. 420.” On the other hand, in Norfolk, etc. R. R. Co. v. Pennsylvania, 136 U. S. 114,120, a Pennsylvania tax of similar character sought to be imposed upon a Virginia railroad corporation was held bad. The railroad company maintained an office in Pennsylvania for the use of its officers, stockholders, agents and employees and expended large sums of money in that State in the purchase of materials and supplies for its railroad. It owned a small amount of property in the State. In holding that the tax contravened the commerce clause the Court said:
“ Was the tax assessed against the company for keeping an office in Philadelphia, for the use of its officers, stockholders, agents and employés, a tax upon the business of the company? In other words, was such tax a tax upon any of the means or instruments by which the company was enabled to carry on its business of interstate commerce? We have no hesitancy in answering *564that question in the affirmative. What was the purpose of the company in establishing an office in the city of Philadelphia? Manifestly for the furtherance of its business interests in the matter of its commercial relations. . . . Again, the plaintiff in error does not exercise, or seek to exercise, in Pennsylvania any privilege or franchise not immediately connected with interstate commerce and required for the purposes thereof. Before establishing its office in Philadelphia it obtained from the secretary of the Commonwealth the certificate required by the act of the State legislature of 1874 enabling it to maintain an office in the State. That office was maintained because of the necessities of the interstate business of the company, and for no other purpose. A tax upon it was, therefore, a tax upon one of the means or instrumentalities of the company’s interstate commerce; and as such was in violation of the commercial clause of the Constitution of the United States.”
Heyman v. Hays, 236 U. S. 178, 185-186, involved a county privilege tax for carrying on a liquor business. The complainant was a liquor merchant who sold no liquor directly or indirectly within the State but conducted a mail order business, with persons in other States exclusively. The effort to sustain the tax was upon the grounds that complainant had a stock of goods within the State susceptible of being sold therein, that care and attention for the purpose of packing and otherwise must necessarily be given these goods, that orders for shipment were received in the State, and that a clerical force or other assistance was maintained within the State to keep accounts, supervise the business, receive the price resulting from shipments, and so on. This Court said that assuming these facts they did not take the business out of the protection of the commerce clause (p. 186): “ We reach this conclusion because we are of opinion that giving the fullest effect to the conditions stated they *565were but the performance of acts accessory to and inhering in the right to make the interstate commerce shipments and therefore to admit the power because of their existence to burden the right to ship in interstate commerce would necessarily be to recognize the authority to directly burden such right.”
The present case comes within the reasoning of the two decisions last cited. The business actually carried on by appellant was exclusively in interstate commerce. The maintenance of an office, the purchase of supplies, employment of labor, maintenance and operation of telephone and telegraph lines and automobiles, and appellant’s other acts within the State, were all exclusively in furtherance of its interstate business; and the property itself, however extensive or of whatever character, was likewise devoted only to that end. They were the means and instrumentalities by which that business was done and in no proper sense constituted, or contributed to, the doing of a local business. The protection against imposition of burdens upon interstate commerce is practical and substantial and extends to whatever is necessary to the complete enjoyment of the right protected. Heyman v. Hays, supra, p. 186.
The court below grounded its decision chiefly upon Cheney Brothers Co. v. Massachusetts, 246 U. S. 147; but a review of that case will clearly demonstrate that it cannot be given the effect thus ascribed to it. Seven foreign corporations sought to avoid a Massachusetts excise tax: on the ground, among others, that, as imposed, it contravened the commerce clause of the Constitution. This Court held the tax invalid as to one of the corporations and sustained it as to the other six. The first of the six kept a stock of machine parts in the State which were sold both within and without the State, and the court simply held that the portion of the business which was purely local was subject to local taxation. The *566second did an extensive local business in repairing cars of its own make and in selling second-hand cars. The third employed salesmen who took orders for its product from local retailers and turned them over to be filled by the nearest wholesaler, and this amounted, as the Court said, simply to one local merchant buying from another. The fourth and fifth were mining companies operating mines in Michigan with offices in Boston where their directors met, declared and paid dividends, etc. Interstate commerce was not affected. Indeed, it does not affirmatively appear that there was any such commerce to be affected. In the case of the sixth the commerce clause was not involved. The remaining case, (Cheney Bros. Co.), in which the tax was held bad, was that of a Connecticut corporation engaged in manufacturing and selling silk fabrics. It maintained in Boston a selling office with an office salesman and four traveling salesmen who solicited and took orders subject to approval by the home office from which shipments were made directly to the purchasers. The Court held that this did not constitute doing a local business, and said (p. 153): “ The maintenance of the Boston office and the display therein of a supply of samples are in furtherance of the company’s interstate business and have no other purpose. Like the employment of the salesmen, they are among the means by which that business is carried on and share its immunity from State taxation.” It will thus be seen that there is nothing in this decision upon which the decree under review can properly rest. Its effect is entirely the other way.
Some stress is laid upon the fact that the objects and purposes specified in appellant’s articles of incorporation are not confined to the transportation of petroleum but include the doing of other business local in character. As to this, it is enough to say that none of these powers were in fact exercised in the State of Missouri; and so *567far as this case is concerned the power to tax depends upon what was done and not upon what might have been done. Moreover, the license issued by the State authorized appellant to engage “ exclusively in the business of transporting crude petroleum by pipe line.”
Nor is it material that appellant applied for and received a Missouri license or that it had the power thereunder to exercise the right of eminent domain. These facts could not have the effect of conferring upon the State an authority, denied by the Federal Constitution, to regulate interstate commerce. The State has no such power even in the case of domestic corporations. See Philadelphia S. S. Co. v. Pennsylvania, 122 U. S. 326, 342. The statute as applied to appellant is unconstitutional.

Reversed.