Case of the State Freight Tax
82 U.S. 232

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U.S. Supreme Court

Case of the State Freight Tax, 82 U.S. 15 Wall. 232 232 (1872)

Case of the State Freight Tax

82 U.S. (15 Wall.) 232

Syllabus

1. The transportation of freight, or of the subjects of commerce, is a constituent part of commerce itself.

2. A tax upon freight transported from state to state is a regulation of commerce among the states.

3. Whenever the subjects in regard to which a power to regulate commerce is asserted are in their nature national or admit of one uniform system or plan of regulation, they are exclusively within the regulating control of Congress.

4. Transportation of passengers or merchandise through a state or from one state to another is of this nature.

5. Hence, a statute of a state imposing a tax upon freight taken up within the state and carried out of it or taken up without the state and brought within it is repugnant to that provision of the Constitution of the United States which ordains that "Congress shall have power to regulate commerce with foreign nations and among the several states and with the Indian tribes."

On the 25th of August, 1864, the Legislature of Pennsylvania passed an act entitled "An act to provide additional revenue for the use of the Commonwealth." It enacted:

"SECTION 1. That the president, treasurer, cashier, or other financial officer of every railroad company, steamboat company, canal company, and slack water navigation company, and all other companies now or hereafter doing business within this state and upon whose works freight may be transported, whether by such company or by individuals and whether such company shall receive compensation for transportation, for transportation and toll, or shall receive tolls only, except turnpike companies, plank road companies, and bridge companies, shall, within thirty days after the first days of January, April, July, and October of every year, make return in writing to the auditor-general, under oath or affirmation, stating fully and particularly the number of tons of freight carried over through or upon the works of said company for the three months immediately preceding each of

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the above-mentioned days, and each of the companies, except as aforesaid, shall at the time of making such return pay to the state treasurer, for the use of the Commonwealth, on each two thousand pounds of freight so carried, tax at the following rates, viz.:"

"First, on the product of mines, quarries, and clay beds, in the condition in which said products may be taken therefrom, 2 cents."

"Second, on hewn timber, animal food, including livestock; also, on the products of the forest, vegetable, and other agricultural products, the value of which has not been increased by labor, 3 cents."

"Third, on all other articles, 5 cents."

"Where the same freight shall be carried over and upon different but continuous lines, said freight shall be chargeable with tax as if it had been carried but upon one line, and the whole tax shall be paid by such one of said companies as the state treasurer may select and notify thereof. Corporations whose lines of improvements are used by others for the transportation of freight and whose only earnings arise from tolls charged for such use are authorized to add the tax hereby imposed to said tolls and collect the same therewith, but in no case shall tax be twice charged on the same freight carried on or over the same line of improvements, provided that every company now or hereafter incorporated by this Commonwealth whose line extends into any other state, and every corporation, company, or individual of any other state holding and enjoying any franchises, property, or privileges whatever in this state by virtue of the laws thereof shall make returns of freight and pay for the freight carried over, through, and upon that portion of their lines within this state as if the whole of their respective lines were in this state."

[It is a fact that is referred to in the argument, and which may therefore well enough be here noted, that the roads of some railroad companies in Pennsylvania traverse the whole of that great state. That is the case with the railroad of the Pennsylvania Railroad Company (the great "Pennsylvania Central"); also of the Philadelphia & Erie. Other roads are very short -- hardly Pennsylvania roads at all. This is the case with the Lake Shore Road in what is known in Pennsylvania as "the Triangle" -- the small part of the state which borders on Lake Erie. The east terminus of the road

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receives converging roads from the whole State of New York, from New Jersey, and from all New England, and from its western end roads diverge again over the whole West. So the New York & Erie Railroad, whose line for its main great extent runs along the south line of New York but which, from a necessity of the soil in New York, had to make a small curvature which brings it for a few miles into Pennsylvania. So the Philadelphia, Wilmington & Baltimore, in its chief length in Maryland and Delaware, its northern terminus only in Pennsylvania. So other roads.]

On the 25th of October, 1866, the accounting officers of Pennsylvania stated an account under the statute already quoted between the Commonwealth and the Reading Railroad Company "for tax on tonnage for the quarters ending December 31, 1865, and March 31 and June 30, 1866." The company named is a corporation created under the laws of Pennsylvania, and is engaged in the sole business of transporting freights for hire, and carrying no commodities of its own. An important part of its business is carrying coal from the mountains of Pennsylvania to a place called Port Richmond, near Philadelphia, a distance of about one hundred miles, the whole road being in Pennsylvania. A portion of the coal transported to Port Richmond is sold there to consumers, but by far the larger portion is intended for exportation to points beyond the limits of Pennsylvania, and is transferred at Port Richmond into vessels destined for such points. A considerable quantity of coal is also transported by the railroad company to a point on the Schuylkill Canal, where it is loaded in barges and exported beyond the state. The company was charged by the state:

For freight transported to points within the State of

Pennsylvania . . . . . . . . . . . . . . . . . . . . $38,361

For that exported to points without the state. . . . . 46,520

-------

$84,881

The latter sum the railroad company refused to pay. It set up that the statute of 1864, to the extent that it imposed a tax on freight other than that both received and delivered

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within the State of Pennsylvania, was unconstitutional and void because, among other reasons, it was in conflict with the Constitution of the United States, which ordains that "Congress shall have power to regulate commerce with foreign nations, and among the several states."

Suit being brought in the Common Pleas of Dauphin County, the jury found that the freight in question was originally destined for exportation beyond the boundaries of Pennsylvania, and that it was actually exported, in a continuous course of transportation, in the cars of the defendants to points on the River Delaware or the Schuylkill Canal, and thence in vessels. Being instructed by the court (Pearson, J.) that such a finding should be followed by a verdict for the defendants, verdict and judgment so went.

The charge of the judge was but a reiteration of the opinion which he had previously expressed in other cases on the constitutional point in question, and which appeared to have been acquiesced in by the Commonwealth of Pennsylvania, since, although writs of error were taken to the judgments in those cases, he observed that they were never argued, "as they were considered correctly decided by the then Attorney General of Pennsylvania, the Honorable W. M. Meredith." However a writ of error was taken from the Supreme Court of Pennsylvania to the judgment entered on the verdict in the present cause, and it resulted in the judgment of the court of common pleas' being reversed by the higher tribunal, [Footnote 1] that court admitting the force of the argument that could be made against their view, but conceiving that "a case of simple doubt should be resolved favorably to the state act, leaving the correction of the error, if there was any, to the federal judiciary."

To understand the full force of the argument in the opinion of that court, the reader must refer to the opinion itself. Among other grounds on which it rested the reversal were these:

That the products carried from points within the state to

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points without, or from points without to points within, were not discriminated against and required to pay more than other products carried wholly within the state, all paid the same exact freight -- a charge for transportation simply.

That this tax was not imposed as or intended to be a regulation of commerce -- in other words, a rule by which commerce was to be governed -- but was a tax to raise money for the support of government, and made therefore in the exercise of an authority which flowed from the power to tax for revenue. Adverting to the case of Brown v. Maryland, [Footnote 2] and to the question put there by Chief Justice Marshall, as about a thing plainly unconstitutional --

"What restrains a state from taxing any article passing through it from one state to another for the purpose of traffic? Or from taxing the transportation of articles passing from the state itself to another state for commercial purposes?"

the Supreme Court of Pennsylvania said:

"The Chief Justice had reference to specific burdens. These subjects must not be singled out and taxed, for this would be discrimination affecting intercourse, invidious and inviting retaliation from other states or foreign powers. But he did not mean by these illustrations that those who use the artificial works constructed by the state or under their franchise might so do without compensation because they transported their goods on them for such purposes, or that they are not bound to share with our citizens the equal burdens, which is the price they must pay for availing themselves of these facilities."

That in virtue of her unquestioned power to improve her own resources and to regulate her internal affairs, the state had built up a network of railways and canals and had improved natural channels, and that in virtue of her right of eminent domain and her power to legislate on her internal affairs and the creations of her own sovereignty, she had a right to exact tolls, charges, and fares for their use, and that whether this was done by a direct charge on the tonnage or

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by a tax on the corporations who used the franchise was unimportant.

The court stated that it would not rest the case on the debatable ground of state power to regulate interstate commerce in the absence of Congressional legislation on the same subject. The case, having been brought here, was twice argued.

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