Ficklen v. Shelby County Taxing Dist.
145 U.S. 1 (1892)

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U.S. Supreme Court

Ficklen v. Shelby County Taxing Dist., 145 U.S. 1 (1892)

Ficklen v. Shelby County Taxing District

No. 97

Argued March 18, 21, 1892

Decided April 11, 1892

145 U.S. 1

ERROR TO THE SUPREME COURT

OF THE STATE OF TENNESSEE

Syllabus

F. and C. & Co. were commercial agents or brokers, having an office in Shelby County, Tennessee, where they carried on that business. In 1887, they took out licenses for their said business under the provisions of the statute of Tennessee of April 4, 1881, Sess.Laws 1881, c. 96, § 9, 111, 113, imposing a tax upon factors, brokers, buyers or sellers on commission, or otherwise, doing business within the state, or, if no capital be so invested, then upon the gross yearly commissions, charges or compensation for said business. During the year for which they took out licenses, all the sales negotiated by F. were made on behalf of principals residing in other states, and the goods so sold were, at the times of the sales, in other states, to be shipped to Tennessee as sales should be effected. During the same time, a large part of the commissions of C. & Co. were derived from similar sales. They had no capital invested in their business. At the expiration of the year, they applied for a renewal of their license. As they had made no return of sales, and no payment of percentage on their commission, the application was denied. They filed a bill to restrain the collection of the percentage tax for the past year, and also to restrain any interference with their current business, claiming that the tax was a tax on interstate commerce. Held

(1) that if the tax could be said to affect interstate commerce in any way, it did so incidentally, and so remotely as not to amount to a regulation of such commerce;

Page 145 U. S. 2

(2) That under the circumstances, the complainants could not resort to the court simply on the ground that the authorities had refused to issue a new license without the payment of the stipulated tax.

Robbins v. Shelby County Taxing District,120 U. S. 489, examined and distinguished from this case.

This case having been submitted on briefs, the submission was set aside by the court and an oral argument ordered. When the case was reached neither party appeared by counsel, but an offer was again made to submit on the briefs. The court thereupon ordered the case dismissed for want of prosecution in the manner directed by its previous order, but subsequently this dismissal was set aside on motion, and argument was heard.

This case was submitted January 4, 1889, under the 20th rule. On the 4th of February, 1889, the submission was set aside, and the case was restored to the docket, to stand for oral argument. On the 6th of November, 1891, it was assigned for argument. When reached on the 24th of that month, an offer was again made to submit on the briefs. The Court thereupon ordered the case dismissed for failure to prosecute it in the manner directed by the court.

Page 145 U. S. 3

This was a bill filed in the Chancery Court of Shelby County, Tennessee, by C. L. Ficklen and Cooper & Company against the taxing district of Shelby county and Andrew J. Harris, County Trustee.

The bill alleged that complainants were

"commercial agents or merchandise brokers, located within the taxing district of Shelby County, where their respective firms rent a room for the purpose of keeping and at times exhibiting their samples and carrying on their correspondence with their respective principals. That they use no capital in their business. That they handle or deal in no merchandise, and are neither buyers nor sellers; they only engage in negotiating sales for their respective principals. They do precisely the same business that commercial drummers do, the only difference being that they are stationary, while the commercial drummers are transitory and go from place to place and secure a temporary room at each town or city in which to exhibit their samples. That each solicits orders for the sales of the merchandise of their respective principals, and forwards the same to them, when such orders are filled by shipping the goods direct to the purchasers thereof in the County of Shelby."

It was then averred that all of the sales negotiated by complainant Ficklen were exclusively for nonresident firms, who resided and carried on business in other states than Tennessee,

Page 145 U. S. 4

and all the merchandise so sold was in other states than Tennessee, where the sales were made, and was shipped into Tennessee, when the orders were forwarded and filled.

That at least nine-tenths of the sales negotiated and effected by complainants Cooper & Co., and at least nine-tenths of their gross commissions, were derived from merchandise of nonresident firms or persons, and which merchandise was shipped into Tennessee from other states after the sales were effected.

That section 9, chapter 96, of the Act of 1881 of Tennessee (Sess.Laws of 1881, pp. 111, 113), made subsection 17 of section 22 of the Taxing District Acts (Taxing District Digest 50), provides:

"Every person or firm dealing in cotton, or any other article whatever, whether as factor, broker, buyer, or seller on commission or otherwise, ($50) fifty dollars per annum, and, in addition, every such person or firm shall be taxed ad valorem (10 cts.) ten cents on everyone hundred dollars of amount of capital invested or used in such business, provided, however, that if such person or firm carry on the cotton or other business in connection with the grocery or any other business, the capital invested in both shall only be taxed once; but such person or firm must pay the privilege tax for both occupations, and provided further that if the persons taxed in this subsection have no capital invested, they shall pay 2 1/2 percent on their gross yearly commissions, charges, or compensations for said business, and at the time of taking out their said license they shall give bond to return said gross commissions, charges, or compensation to the trustee at the end of the year, and at the end of the year they shall make return to said trustee accordingly, and pay to him the said 2 1/2 percent."

Complainants charged that, as they were neither dealers, buyers, nor sellers, but only engaged in negotiating sales for buyers, they were not embraced within the meaning of said section, and further stated that they had each heretofore paid the privilege tax and the income tax, except for the year 1887, and had tendered the privilege tax of $50 and costs of issuing license for the year 1888, to the trustee, who refused to accept

Page 145 U. S. 5

the same unless complainants would also pay the income tax for the year 1887.

From the bill and exhibits attached, it appeared that complainants, in January, 1887, each paid the sum of $50 for the use of the taxing district, and executed bonds agreeably to the requirements of the law in that behalf, and received licenses as merchandise brokers within the limits of the district for the year 1887, and that in January, 1888, they tendered, as commercial brokers, to the trustee $50.25 each, as their privilege tax and charges for the year 1888, which he refused to accept because they refused to pay for the year 1887 2 1/2 percent upon their gross commissions derived from their business for the year 1887, although they executed bonds in January, 1887, to report said gross commissions.

Complainants charged that the law in question was in violation of the commerce clause of the Constitution of the United States, and also of the Constitution of Tennessee, and prayed as follows:

"That an injunction issue to restrain the defendants, or either of them, from instituting any suit or proceeding against them, or either of them, for the collection of said 2 1/2 percent tax upon their respective gross commissions from their said business, or from issuing any warrant for their arrest for their failure to pay the same for the year 1887, and that defendants be also restrained from in any way interfering with them in the carrying on their said business for the year 1888, and upon final hearing they (the defendants) be restrained perpetually from collecting from them, or either of them, said 2 1/2 percent tax upon their said gross commissions from their said business, and from collecting said privilege tax of $50, and they pray for general relief, and will ever pray,"

etc.

To this bill the defendants filed a demurrer, which was overruled by the Chancellor, and, the defendants electing to stand by it, a final decree was entered, making the injunction perpetual in behalf of Ficklen as to the entire tax, including the $50; and, as to Cooper & Co., adjudging that they were legally bound to pay the sum of $50 and the tax of two

Page 145 U. S. 6

and one-half percent on their commissions, to the extent that those commissions were upon sales of property owned by residents of Tennessee, and perpetuating the injunction in all other respects.

From this decree the defendants prayed an appeal to the supreme court of the state, and that court decided that the act of the legislature in question was not in violation of the state constitution, and further that

"inasmuch as it appears from the bill that the complainants at the beginning of the year 1887 applied for and received, respectively, license to carry on the business of commission brokers without qualification, and that they, the complainants, held said license throughout the year 1887, complainants were chargeable with the privilege tax, as fixed by the act aforesaid, without regard to the amount or character of the business carried on under said licenses or the places of residence of their principals, and that complainants must have reported and paid 2 1/2 percent on the gross commissions received by them during the year 1887 before they could have become entitled to licenses for the year 1888. . . . That when at the beginning of the year 1888, the complainants applied for license as merchandise brokers, they were rightfully required (1) to report and pay 2 1/2 percent on their commissions received during 1887, and (2) to pay the fixed charge of $50, and give bond to report their gross commissions at the end of the year 1888. . . . That the said act is not, as to these complainants, violative of Article I, Section 8, of the Constitution of the United States, by which the power to regulate commerce between the states is conferred upon the Congress of the United States, and . . . that complainants, having applied for, accepted, and held for and during the year 1887 unqualified license as commission brokers, and having applied for the same unqualified license for the year 1888, cannot question the validity of the said act as being in conflict with said provisions of the Constitution of the United States, for that the said complainants were not entitled to the said license upon the facts stated in the bill, whether the business actually done and theretofore conducted by them was or was not exonerated from said

Page 145 U. S. 7

privilege tax under the said provision of the federal Constitution."

The decree of the Chancellor was accordingly reversed, and the demurrer sustained, and the bill dismissed, whereupon a writ of error was taken out from this Court.

Page 145 U. S. 19

MR. CHIEF JUSTICE FULLER, after stating the facts in the foregoing language, delivered the opinion of the Court.

In Robbins v. Shelby County Taxing District,120 U. S. 489,

Page 145 U. S. 20

it was held that section 16 of chapter 96 of the laws of Tennessee of 1881, enacting that

"All drummers and all persons not having a regular licensed house of business in the taxing district of 'Shelby County,' offering for sale or selling goods, wares, or merchandise therein by sample, shall be required to pay to the county trustee the sum of $10 per week, or $25 per month, for such privilege,"

so far as it applied to persons soliciting the sale of goods on behalf of individuals or firms doing business in another state, was a regulation of commerce among the states, and violated the provision of the Constitution of the United States which grants to Congress the power to make such regulations. The question involved was stated by Mr. Justice Bradley, who delivered the opinion of the Court, to be

"whether it is competent for a state to levy a tax or impose any other restriction upon the citizens or inhabitants of other states for selling or seeking to sell their goods in said state before they are introduced therein,"

and it was decided that it was not. At the same time, it was conceded that commerce among the states might be legitimately incidentally affected by state laws when they, among other things, provided for

"the imposition of taxes upon persons residing within the state, or belonging to its population, and upon avocations and employments pursued therein not directly connected with foreign or interstate commerce, or with some other employment or business exercised under authority of the Constitution and laws of the United States."

And it was further stated:

"To say that the tax, if invalid as against drummers from other states, operates as a discrimination against the drummers of Tennessee, against whom it is conceded to be valid, is no argument, because the state is not bound to tax its own drummers, and if it does so whilst having no power to tax those of other states, it acts of its own free will, and is itself the author of such discrimination. As before said, the state may tax its own internal commerce; but that does not give it any right to tax interstate commerce."

In the case at bar, the complainants were established and did business in the taxing district as general merchandise brokers, and were taxed as such under section nine of chapter ninety-six

Page 145 U. S. 21

of the Tennessee Laws of 1881, which embraced a different subject matter from section sixteen of that chapter. For the year 1887, they paid the $50 tax charged, gave bond to report their gross commissions at the end of the year, and thereupon received, and throughout the entire year held, a general unrestricted license to do business as such brokers. They were thereby authorized to do any and all kinds of commission business, and became liable to pay the privilege tax in question, which was fixed in part and in part graduated according to the amount of capital invested in the business or, if no capital were invested, by the amount of commissions received. Although their principals happened during 1887 as to the one party to be wholly nonresident and as to the other largely such, this fact might have been otherwise then and afterwards, as their business was not confined to transactions for nonresidents.

In the case of Robbins, the tax was held in effect not to be a tax on Robbins, but on his principals, while here the tax was clearly levied upon complainants in respect of the general commission business they conducted, and their property engaged therein, or their profits realized therefrom.

No doubt can be entertained of the right of a state legislature to tax trades, professions, and occupations in the absence of inhibition in the state constitution in that regard, and where a resident citizen engages in general business subject to a particular tax, the fact that the business done chances to consist, for the time being, wholly or partially in negotiating sales between resident and nonresident merchants of goods situated in another state does not necessarily involve the taxation of interstate commerce forbidden by the Constitution.

The language of the Court in Lyng v. Michigan,135 U. S. 161, 135 U. S. 166, was:

"We have repeatedly held that no state has the right to lay a tax on interstate commerce in any form, whether by way of duties laid on the transportation of the subjects of that commerce, or on the receipts derived from that transportation, or on the occupation or business of carrying it on, for the reason that such taxation is a burden on that commerce, and amounts to a regulation of it, which belongs

Page 145 U. S. 22

solely to Congress."

But here the tax was not laid on the occupation or business of carrying on interstate commerce or exacted as a condition of doing any particular commission business, and complainants voluntarily subjected themselves thereto in order to do a general business.

In McCall v. California,136 U. S. 104, it was held that

"an agency of a line of railroad between Chicago and New York, established in San Francisco for the purpose of inducing passengers going from San Francisco to New York to take that line at Chicago, but not engaged in selling tickets for the route, or receiving or paying out money on account of it, is an agency engaged in interstate commerce, and a license tax imposed upon the agent for the privilege of doing business in San Francisco is a tax upon interstate commerce, and is unconstitutional."

This was because the business of the agency was carried on with the purpose to assist in increasing the amount of passenger traffic over the road, and was therefore a part of the commerce of the road, and hence of interstate commerce.

In Philadelphia & Southern Steamship Co. v. Pennsylvania,122 U. S. 326, 122 U. S. 345, Mr. Justice Bradley, speaking for the Court, said:

"The corporate franchises, the property, the business, the income of corporations created by a state, may undoubtedly be taxed by the state, but in imposing such taxes, care should be taken not to interfere with or hamper, directly or by indirection, interstate or foreign commerce or any other matter exclusively within the jurisdiction of the federal government."

And this, of course, is equally true of the property, the business, and the income of individual citizens of a state. It is well settled that a state has power to tax all property having a situs within its limits, whether employed in interstate commerce or not. It is not taxed because it is so employed, but because it is within the territory and jurisdiction of the state. Pullman's Palace Car Co. v. Pennsylvania,141 U. S. 18; Gloucester Ferry Co. v. Pennsylvania,114 U. S. 196.

And it has been often laid down that the property of corporations holding their franchises from the government of the United States is not exempt from taxation by the states of its situs. 85 U. S. Peniston, 18 Wall. 5; 76 U. S. S. 23

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