Ohio Tax Cases
232 U.S. 576 (1914)

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U.S. Supreme Court

Ohio Tax Cases, 232 U.S. 576 (1914)

Ohio Tax Cases

Nos. 642, 643

Argued January 7, 1914

Decided February 24, 1914

232 U.S. 576

Syllabus

Where the federal jurisdiction does not depend upon diversity of citizenship, but on federal questions presented by the record, it extends to the determination of all questions presented, irrespective of the disposition made of the federal questions.

Page 232 U. S. 577

Where the statute specifically makes the tax a lien upon real estate and the bill alleges that enforcement of penalties would work irreparable injury, equity jurisdiction is properly invoked.

The federal court may examine the opinion of the state court as well as the syllabus to ascertain the scope of the decision, notwithstanding the state rules of practice require the syllabus to be prepared by the judge preparing the opinion and to be confined to the points of law arising from the facts that have been determined.

The franchise of a railroad company is not necessarily to be regarded as valueless merely because its present earnings are not sufficient to pay more than high grade investments or even to pay operating expenses. State Railroad Tax Cases,92 U. S. 575.

A state statute imposing a tax on railroads is not unconstitutional as denying equal protection of the law. The classification rests upon a reasonable and sufficient basis of distinction.

In the absence of a construction by the state court to that effect, the federal court should not, if it can avoid doing so, place such a construction upon a state statute as would render it unconstitutional.

"Interstate," as used in a state tax statute, can fairly be construed as including all commerce other than "intrastate" when the evident purpose is to tax only the earnings subject to state taxation.

In a state statute imposing a tax on intrastate earnings, it is reasonable to suppose that the exclusion of interstate earnings from taxation extended to earnings from foreign commerce when another construction would render the statute unconstitutional.

The reasonableness of an excise or privilege tax, unless some federal right is involved, is within the discretion of the state legislature.

Where a state statute does not on its face manifest a purpose to interfere with interstate commerce, this Court cannot accept historical facts in connection with its enactment as evidence of a sinister purpose on the part of the legislature to evade obligations of the federal Constitution, without a more substantial basis than appears in this case.

Double taxation does not exist in a legal sense unless the double tax is levied upon the same property within the same jurisdiction, and an excise tax measured on earnings from operating the property is not a double tax because the property itself is taxed.

These actions do not involve enforcement of penalties, and the penalty provisions of this statute, if unconstitutional, are severable by the express terms of the statute itself.

The Ohio statute of 1911 imposing an excise tax of four percent on gross intrastate earnings of railroad companies, is not unconstitutional

Page 232 U. S. 578

either as denying equal protection of the law or as depriving the railroad of their property without due process of law, or as interfering with interstate commerce, or a being an attempt to indirectly tax total gross receipts of the railroad, or a double taxation.

203 F. 537 affirmed.

These suits were brought in the United States District Court for the Southern District of Ohio (Eastern Division) by appellants, which are Ohio railroad corporations, to enjoin the certification and collection by appellees of a tax which the state was seeking to enforce upon the privilege of carrying on business in that state. This tax appellants claimed to be in violation of the due process and equal protection clauses of the Fourteenth Amendment, and of the commerce clause of the federal Constitution, and also of the preamble and sections two and nineteen of the Ohio Constitution.

A restraining order was allowed by the district court, and afterwards appellants' motions for temporary injunctions came on for hearing before three judges, of whom one was a circuit judge, pursuant to § 266 of the Judicial Code (36 Stat. 1162, c. 231), which went into effect shortly after the bills were filed. The two cases were argued and considered together upon the facts averred in the bills, which were, for the purposes of the motions, conceded to be true by appellees, and, after consideration, the temporary injunctions were refused. 203 F. 537.

Appellants come direct to this Court, under the same section of the Code.

The tax law in question, the validity of which is attacked generally, and also specially in its application to appellants, was enacted in its present form May 31, 1911. 102 Ohio Laws 224.

It created a tax Commission with defined powers, and prescribed various taxes, some upon property and others upon franchises and privileges, with sundry provisions, penal and otherwise, for the collection thereof. Some of

Page 232 U. S. 579

these taxes were new in Ohio law, others were carried over from previously existing statutes.

The tax here in question is limited in its operation to certain lines of quasi-public business specifically named in the act and therein referred to as "public utilities," including railroads.

As applied to railroads, the act requires the filing with the tax Commission, by each railroad doing business in the state, of a statement, on or before September 1, setting forth, among other things, its

"entire gross earnings, including all sums earned or charged, whether actually received or not, for the year ending on the 30th day of June next preceding, from whatever source derived, for business done within this state, excluding therefrom all earnings derived wholly from interstate business or business done for the federal government. Such statement shall also contain the total gross earnings of such company for such period in this state from business done within this state."

Sections 81 and 83 of Act; §§ 5470 and 5472, General Code of Ohio.

It is further provided that, on the first Monday of October, the Commission

"shall ascertain and determine the gross earnings as herein provided, of each railroad company whose line is wholly or partially within this state, for the year ending on the thirtieth day of June next preceding, excluding therefrom all earnings derived wholly from interstate business or business done for the federal government. The amount so ascertained by the Commission shall be the gross earnings of such railroad company for such year."

Section 88 of Act; § 5477, Gen.Code.

The act further provides that, on the first Monday of November, the Commission shall certify to the auditor of state the amount of the "gross earnings so determined" (§ 93 of Act; § 5482, Gen.Code), and that

"in the month of November, the Auditor of State shall charge for

Page 232 U. S. 580

collection, from each railroad company, a sum in the nature of an excise tax, for the privilege of carrying on its intrastate business, to be computed on the amount so fixed and reported to him by the Commission, as the gross earnings of such company on its intrastate business for the year . . . by taking four percent of all such gross earnings."

Section 97 of Act; § 5486, Gen.Code. The tax is imposed equally and alike on corporations, partnerships, and individuals. Section 39 of Act; § 5415, Gen.Code.

Page 232 U. S. 586

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