Court Opinion

ID: 9421065
Source: CourtListenerOpinion
Date Created: 2023-08-02 22:56:51.582412+00
Date Added: 2024-06-11T17:22:28.429099
License: Public Domain

Mr. Justice Clark,
whom The Chief Justice, Mr. Justice Black and Mr. Justice Douglas join, dissenting.
The tax in question is nondiscriminatory, fairly apportioned, and not excessive. That much is conceded by appellant. Whatever the Court’s mathematics may prove, it does not establish that the tax is unfair in any respect. In Spector Motor Service, Inc. v. O’Connor, 340 U. S. 602, 610-615 (1951), I reasoned that a state tax with such attributes may properly be levied against a corporation which obviously could not engage in interstate commerce in the state without using the facilities and services of the state. I would uphold the tax here on the same grounds. But even accepting the Court’s approach in Spector, the instant tax is valid.
*370Spector held that a state tax imposed on a foreign corporation engaged solely in interstate commerce for “the privilege of carrying on or doing business in the state” violates the Commerce Clause of the United States Constitution. The “operating incidence” of the tax— “the privilege of carrying on or doing business in the state” — was determined by the state court and not questioned by this Court. That label formed the nub of the Court’s rationale in striking down the tax. That decision did not purport to cover a tax bearing a different name. In fact, the Court there specifically noted that the tax was not “collected in lieu of an ad valorem property tax” ; presumably had such been the case the tax would have been upheld. Id., at 607.
The Supreme Court of Appeals of Virginia has held that the instant tax is an ad valorem tax on intangible property; the “operating incidence” of the tax has been labeled the “going concern” value of appellant’s physical assets in Virginia. The state court specifically held that the tax “is not a tax upon the privilege of carrying on a business exclusively interstate in character. . . .” 194 Va. 757, 760-761, 75 S. E. 2d 61, 63. Hence, if we accept the determination of the state court, there is little question but that the tax is valid even under Spector.
This Court, however, refuses to accept the Virginia court’s determination and assigns to the Virginia tax the same “privilege” label that condemned the tax in Spector. Although the Court refused to pierce the label in Spector, I do not dispute its right to re-examine a label affixed by a state court. In some cases the label may be wholly inconsistent with the state’s taxing scheme; or it may be true— though I doubt it — that a state court might deliberately misbrand a tax to avoid decisions of this Court. But neither fact justifies the Court’s refusal to accept the determination of the state court in this case. The name given the tax by the Virginia court meshes with the state’s *371taxing scheme. And I do not believe that the Virginia court deliberately mislabeled the tax. Indeed, the holding of the state court is perfectly consistent with its earlier expressions on the subject and those of the State Corporation Commission, some antedating Spector. Commonwealth v. Baltimore Steam Packet Co., 193 Va. 55, 68 S. E. 2d 137 (1951), appeal dismissed, 343 U. S. 923 (1952); City of Richmond v. Commonwealth, 188 Va. 600, 50 S. E. 2d 654 (1948). Moreover, this Court does not question the existence of a going-concern value aside from the value of a business unit’s physical assets. Nor does appellant; in its brief appellant “freely admits that a going business, if operated at a profit or if there is a reasonable expectation of earning a profit on future operations, may have a going concern or what is sometimes called an ‘organization’ value.” Since appellant does not contend that it is not operating at a profit or that it has no reasonable expectation of earning a profit in the future, even it would be forced to admit, as must the majority of this Court, that a substantial element of property values is being immunized from the reach of Virginia’s current taxes which are neither excessive nor unfair.
From 1942 until Spector, appellant had recognized the validity of the tax and paid it. As a result of the immunity given by today’s decision, appellant and others similarly situated receive a windfall in the form of a valid claim for tax refunds extending back as far as limitations will permit. This is the result of today’s twist to the Spector doctrine. If the label makes the tax invalid, the label is accepted; if the label validates the tax, the Court will pierce the label. This approach is rather hard on the states and creates additional obstacles for them in their continuing effort to make purely interstate business units pay a fair share of the cost of state facilities and services essential to the functioning of these enterprises.
*372In sum, Virginia’s tax should not be held unconstitutional merely because of the name the state’s legislature gave it. Since no one asserts that the amount of the tax is unfair or discriminatory, presumably the same tax assessed under a different name by the use of different words would be upheld. The constitutionality of a state’s tax laws should not depend on the ability of state legislatures to foresee what tax language would most likely meet this Court’s approval.