No. 29.

142 U.S. 217 (1891)


Supreme Court of United States.

Decided December 14, 1891.

Attorney(s) appearing for the Case

Mr. Charles E. Littlefield, Attorney General of the State of Maine, for plaintiff in error.

Mr. A.A. Strout for defendant in error.

MR. JUSTICE FIELD, after stating the case, delivered the opinion of the court.

The tax, for the collection of which this action is brought, is an excise tax upon the defendant corporation for the privilege of exercising its franchises within the State of Maine. It is so declared in the statute which imposes it; and that a tax of this character is within the power of the State to levy there can be no question. The designation does not always indicate merely an inland imposition or duty on the consumption of commodities, but often denotes an impost for a license to pursue certain callings, or to deal in special commodities, or to exercise particular franchises. It is used more frequently, in this country, in the latter sense than in any other. The privilege of exercising the franchises of a corporation within a State is generally one of value, and often of great value, and the subject of earnest contention. It is natural, therefore, that the corporation should be made to bear some proportion of the burdens of government. As the granting of the privilege rests entirely in the discretion of the State, whether the corporation be of domestic or foreign origin, it may be conferred upon such conditions, pecuniary or otherwise, as the State in its judgment may deem most conducive to its interests or policy. It may require the payment into its treasury, each year, of a specific sum, or may apportion the amount exacted according to the value of the business permitted, as disclosed by its gains or receipts of the present or past years. The character of the tax, or its validity, is not determined by the mode adopted in fixing its amount for any specific period or the times of its payment. The whole field of inquiry into the extent of revenue from sources at the command of the corporation, is open to the consideration of the State in determining what may be justly exacted for the privilege. The rule of apportioning the charge to the receipts of the business would seem to be eminently reasonable, and likely to produce the most satisfactory results, both to the State and the corporation taxed.

The court below held that the imposition of the taxes was a regulation of commerce, interstate and foreign, and therefore in conflict with the exclusive power of Congress in that respect; and on that ground alone it ordered judgment for the defendant. This ruling was founded upon the assumption that a reference by the statute to the transportation receipts and to a certain percentage of the same in determining the amount of the excise tax, was in effect the imposition of the tax upon such receipts, and therefore an interference with interstate and foreign commerce. But a resort to those receipts was simply to ascertain the value of the business done by the corporation, and thus obtain a guide to a reasonable conclusion as to the amount of the excise tax which should be levied; and we are unable to perceive in that resort any interference with transportation, domestic or foreign, over the road of the railroad company, or any regulation of commerce which consists in such transportation. If the amount ascertained were specifically imposed as the tax, no objection to its validity would be pretended. And if the inquiry of the State as to the value of the privilege were limited to receipts of certain past years instead of the year in which the tax is collected, it is conceded that the validity of the tax would not be affected; and if not, we do not see how a reference to the results of any other year could affect its character. There is no levy by the statute on the receipts themselves, either in form or fact; they constitute, as said above, simply the means of ascertaining the value of the privilege conferred.

This conclusion is sustained by the decision in Home Insurance Co. v. New York, 134 U.S. 594. The Home Insurance Company was a corporation created under the laws of New York, and a portion of its capital stock was invested in bonds of the United States. By an act of the legislature of that State, of 1881, it was declared that every corporation, joint stock company or association, then or thereafter incorporated under any law of the State, or of any other State or country, and doing business in the State, with certain designated exceptions not material to the question involved, should be subject to a tax upon its corporate franchise or business, to be computed as follows: if its dividend or dividends made or declared during the year ending the first day of November, amounted to six per centum or more upon the par value of its capital stock, then the tax was to be at the rate of one-quarter mill upon the capital stock for each one per cent of the dividends. A less rate was provided where there was no dividend or a dividend less than six per cent. The purpose of the act was to fix the amount of the tax each year upon the franchise or business of the corporation by the extent of dividends upon its capital stock, or, where there were no dividends, according to the actual value of the capital stock during the year. The tax payable by the company, estimated according to its dividends, under that law, aggregated seven thousand five hundred dollars. The company resisted its payment, asserting that the tax was, in fact, levied upon the capital stock of the company, contending that there should be deducted from it a sum bearing the same ratio thereto that the amount invested in bonds of the United States bore to its capital stock, and that the law requiring a tax, without such reduction, was unconstitutional and void. It was held that the tax was not upon the capital stock of the company nor upon any bonds of the United States composing a part of that stock, but upon the corporate franchise or business of the company, and that reference was only made to its capital stock and dividends for the purpose of determining the amount of the tax to be exacted each year. And the court said: "The validity of the tax can in no way be dependent upon the mode which the State may deem fit to adopt in fixing the amount for any year which it will exact for the franchise. No constitutional objection lies in the way of a legislative body prescribing any mode of measurement to determine the amount it will charge for the privileges it bestows."

The case of Philadelphia and Southern Steamship Co. v. Pennsylvania, 122 U.S. 326, in no way conflicts with this decision. That was the case of a tax, in terms, upon the gross receipts of a steamship company, incorporated under the laws of the State, derived from the transportation of persons and property between different States and to and from foreign countries. Such tax was held, without any dissent, to be a regulation of interstate and foreign commerce, and, therefore, invalid. We do not question the correctness of that decision, nor do the views we hold in this case in any way qualify or impair it.

It follows from what we have said, that the judgment of the court below must be

Reversed, and the cause remanded, with directions to enter judgment in favor of the State for the amount of the taxes demanded; and it is so ordered.


JUSTICE HARLAN, LAMAR, BROWN and myself dissent from the judgment of the court in this case. We do so both on principle and authority. On principle, because, whilst the purpose of the law professes to be to lay a tax upon the foreign company for the privilege of exercising its franchise in the State of Maine, the mode of doing this is unconstitutional. The mode adopted is the laying of a tax on the gross receipts of the company, and these receipts, of course, include receipts for interstate and international transportation between other States and Maine, and between Canada and the United States. Now, if after the previous legislation1 which has been adopted with regard to admitting the company to carry on business within the State, the legislature has still the right to tax it for the exercise of its franchises, it should do so in a constitutional manner, and not (as it has done) by a tax on the receipts derived from interstate and international transportation. The power to regulate commerce among the several States (except as to matters merely local) is just as exclusive a power in Congress as is the power to regulate commerce with foreign nations and with the Indian tribes. It is given in the same clause and couched in the same phraseology; but if it may be exercised by the States, it might as well be expunged from the Constitution. We think it a power not only granted to be exercised, but that it is of first importance, being one of the principal moving causes of the adoption of the Constitution. The disputes between the different States in reference to interstate facilities of intercourse, and the discriminations adopted to favor each its own maritime cities, produced a state of things almost intolerable to be borne. But, passing this by, the decisions of this court for a number of years past have settled the principle that taxation (which is a mode of regulation) of interstate commerce, or of the revenues derived therefrom, (which is the same thing,) is contrary to the Constitution. Going no further back than Pickard v. Pullman's Southern Car Co., 117 U.S. 34, we find that principle laid down. There a privilege tax was imposed upon Pullman's Palace Car Company, by general legislation it is true, but applied to the company, of $50 per annum on every sleeping car going through the State. It was well known, and appeared by the record, that every sleeping car going through the State carried passengers from Ohio and other northern States, to Alabama, and vice versa, and we held that Tennessee had no right to tax those cars. It was the same thing as if they had taxed the amount derived from the passengers in the cars. So also in the case of Leloup v. The Port of Mobile, 127 U.S. 640, we held that the receipts derived by the telegraph company from messages sent from one State to another could not be taxed. So in the case of the Norfolk and Western Railroad v. Pennsylvania, 136 U.S. 114, where the railroad was a link in a through line by which passengers and freight were carried into other States, the company was held to be engaged in the business of interstate commerce, and could not be taxed for the privilege of keeping an office in the State. And in the case of Crutcher v. Kentucky, 141 U.S. 47, we held that the taxation of an express company for doing an express business between different States was unconstitutional and void. And in the case of Philadelphia &c. Steamship Co. v. Pennsylvania, 122 U.S. 326, we held that a tax upon the gross receipts of the company was void because they were derived from interstate and foreign commerce. A great many other cases might be referred to, showing that in the decisions and opinions of this court this kind of taxation is unconstitutional and void.

We think that the present decision is a departure from the line of these decisions. The tax, it is true, is called a tax on a franchise. It is so called, but what is it in fact? It is a tax on the receipts of the company derived from international transportation.

This court and some of the state courts have gone a great length in sustaining various forms of taxes upon corporations. The train of reasoning upon which it is founded may be questionable. A corporation, according to this class of decisions, may be taxed several times over. It may be taxed for its charter; for its franchises; for the privilege of carrying on its business; it may be taxed on its capital; and it may be taxed on its property. Each of these taxations may be carried to the full amount of the property of the company. I do not know that jealousy of corporate institutions could be carried much further. This court held that the taxation of the capital stock of the Western Union Telegraph Company in Massachusetts, graduated according to the mileage of lines in that State compared with the lines in all the States, was nothing but a taxation upon the property of the company; yet it was in terms a tax upon its capital stock, and might as well have been a tax upon its gross receipts. By the present decision it is held that taxation may be imposed upon the gross receipts of the company for the exercise of its franchise within the State, if graduated according to the number of miles that the road runs in the State. Then it comes to this: A State may tax a railroad company upon its gross receipts in proportion to the number of miles run within the State, as a tax on its property; and may also lay a tax upon these same gross receipts, in proportion to the same number of miles, for the privilege of exercising its franchise in the State! I do not know what else it may not tax the gross receipts for. If the interstate commerce of the country is not, or will not be, handicapped by this course of decision, I do not understand the ordinary principles which govern human conduct.

We dissent from the opinion of the court.


1. The "previous legislation" referred to in the dissenting opinion is stated in the record as follows:

"The court found the facts as follows: By an act of the Legislature of this State approved Feb'y 10, 1845, the Atlantic and St. Lawrence Railroad Company was incorporated, with power to construct and maintain a railroad from some point in the city of Portland to the boundary line of the State of Maine `at such place as will best connect with a railroad to be constructed from said boundary to Montreal, in Canada.'

"Section 14 of the act of incorporation further provided `said corporation is vested with power and authority to continue and prolong said railroad beyond the line of this State to the boundary of Canada, and to purchase, take and hold lands or the right of way over lands for the purpose of constructing said railroad in continuation, without the limits of this State, on and over said lands to the said boundary of Canada:

"`Provided the same can be done consistently with the laws and regulations of the State or States in which said lands lie and through and over the territory of which such railroad in continuation would pass.'

"The necessary authority for such continuation of the railroad was obtained from the States of New Hampshire and Vermont, and the road was constructed from Portland to Island Pond, in Vermont. In the State of Maine are 82½ miles of this railroad; in New Hampshire 52 miles, and in Vermont 15 miles.

"By section 16 it was enacted:

"`All real estate purchased by said corporation for the use of the same, under the fifth section of this act, shall be taxable to said corporation by the several towns, cities and plantations in which said lands lie, in the same manner as lands owned by private persons, and shall in the valuation list be estimated the same as other real estate of the same quality in such town, city or plantation, and not otherwise, and the shares owned by the respective stockholders shall be deemed personal estate and be taxable as such to the owners thereof in the places where they reside and have their home; and whenever the net income of said corporation shall have amounted to ten per centum per annum upon the cost of the road and its appendages and incidental expenses, the directors shall make a special report of the fact to the Legislature, from and after which time one moiety, or such other portion as the Legislature may from time to time determine, of the net income from said railroad accruing thereafter over and above ten per centum per annum, first to be paid to the stockholders, shall annually be paid over by the treasurer of said corporation, as a tax, into the treasury of the State for the use of the State, and the State may have and maintain an action against said corporation therefor to recover the same; but no other tax than herein is provided shall ever be levied or assessed on said corporation or any of their privileges or franchises."

"Section 18 gives to the Legislature the right to inquire into the doings of the corporation and its use and employment of the privileges and franchises granted to it, with power `to correct and prevent abuses of the same, and to pass any laws imposing fines and penalties upon said corporation which may be necessary more effectually to compel a compliance with the provisions, liabilities and duties hereinbefore set forth and enjoined, but not to impose any other or further duties, liabilities or obligations; and this charter shall not be revoked, annulled, altered, limited or restrained without the consent of the corporation, except by due process of law.'

"The Grand Trunk Railway Company of Canada is a foreign corporation, incorporated under the laws of the Province of Canada, and has its principal place of business at Montreal, in the Dominion of Canada, and possessed in the year 1853, and from that time to the present has continually possessed, a railroad connecting with and in extension of the railroad of the Atlantic and St. Lawrence Railroad Company at Island Pond, in the State of Vermont, and extending to Montreal. It also, at and long before the date of the assessment of taxes demanded in this action, possessed a line of railroad connecting with the before-mentioned railroad at Montreal and extending through the Dominion of Canada to Detroit, in the State of Michigan.

"On the 29th day of March, 1853, by an act of the Legislature of the State of Maine, approved that day, the Atlantic and St. Lawrence Railroad Company was authorized to `enter into and execute such a lease of the railroad of said company, or contract in the nature of a lease, as will enable the lessee thereof to maintain and operate, by means of said railroad and other roads in extension of the same, a connected line of railroads from the Atlantic Ocean at Portland to the city of Montreal, in the Province of Canada, and thence to the western part of said province.'

"Under the authority thus conferred the Atlantic and St. Lawrence Railroad Company and the Grand Trunk Railway Company entered into a preliminary agreement for a lease to the latter company; but inasmuch as the proposed lessee had not `the legal competency to enter into and execute such lease for want of the requisite legislative authority therefor,' a lease was on the 5th day of August, A.D. 1853, entered into and executed by the Atlantic and St. Lawrence Railroad Company as lessors and certain individuals as lessees and trustees for the Grand Trunk Railway Co., the lessees to hold until the Railway Co. should obtain requisite authority, and then to transfer to it the said lease and all right, title and interest under the same.

"The trustees and lessees, on the ninth day of February, A.D. 1855, formally assigned the above-mentioned lease to the defendants, who had, in the meantime, procured the requisite legislative authority, and thereupon the property was delivered to and taken possession of by the defendants, who have ever since possessed, managed, controlled and operated the railroad leased, with all its appurtenances, as a part of their line, from Portland through the States of Maine, New Hampshire and Vermont and the Dominion of Canada to Detroit, in the State of Michigan.

"Feb. 10, 1872, the Lewiston and Auburn Railroad Company was incorporated by the Legislature of Maine, with authority to locate and construct a railroad `from some point in the city of Lewiston to some point on the Atlantic and St. Lawrence railroad, otherwise known as the Grand Trunk railway, within the limits of the city of Auburn.'

"Under this authority a line some five and one-half miles in length was constructed, and on the 25th of March, A.D. 1874, was leased to the defendants, who have since been constantly in the control, management and possession of the same.

"One clause in this lease is: `All taxes which may lawfully be assessed upon the corporate property or franchise of the lessors during the period of their lease may be paid by the lessee, and if so paid shall be deducted from the rent herein covenanted to be paid by said lessee.'

"The charter of the Lewiston & Auburn R.R. Co. contains nothing in respect to taxation nor any exemption from or restriction of legislative control.

"The Norway Branch Railroad Company was incorporated by the Legislature of this State Feb. 22, 1872, to construct and maintain a railroad `from some point in or near the village of Norway, thence to South Paris, connecting at that point with the Grand Trunk railroad.'

"This road is about one and one-half miles in length, and after its construction by permission of the Legislature was leased, prior to the time covered by these assessments, to the defendant company, in whose possession, management and control it has since been.

"Nothing is found in its charter about taxes, nor is the general control of the Legislature in anywise restricted or limited.

"The Atlantic & St. Lawrence Railroad Company was duly constituted a corporation in New Hampshire and Vermont by the legislatures of those States, and its lease to the Grand Trunk Company was by the same authority confirmed and approved."


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