United States Supreme Court Cases & Opinions

U.S. Supreme Court

Shaffer v. Carter, 252 U.S. 37 (1920)

Shaffer v. Carter

Nos. 531, 580

Argued December 11, 12, 1919

Decided March 1, 1920

252 U.S. 37

Syllabus

When, upon application for a preliminary injunction, the district court not only refuses the injunction but dismisses the bill, appeal to this Court should be under Jud.Code, § 238, from the final decree, and not under § 266. P. 252 U. S. 44.

Equity may be resorted to for relief against an unconstitutional tax lien, clouding the title to real property, if there be no complete remedy at law. P. 252 U. S. 46.

Quaere whether the Oklahoma laws afford an adequate legal remedy in a case where the constitutionality of the state income tax law is in question. Id.

The Oklahoma taxing laws afford no legal remedy for removing a cloud caused by an invalid lien for an income tax. P. 252 U. S. 48.

Having acquired jurisdiction, equity affords complete relief. Id.

Governmental jurisdiction in matters of taxation depends upon the power to enforce the mandate of the state by action taken within its borders either in personam or in rem. P. 252 U. S. 49.

Page 252 U. S. 38

A state may tax income derived from local property and business owned and managed from without by a citizen and resident of another state (pp. 252 U. S. 49-55); such power is consistent with Const., Art. IV, § 2, guaranteeing privileges and immunities and the equal protection Clause of the Fourteenth Amendment. Pp. 252 U. S. 53-56.

The constitutionality of such a tax depends on its practical operation and effect, and not on mere definitions or theoretical distinctions respecting its nature and quality. P. 252 U. S. 54.

The fact that the Oklahoma income tax law permits residents to deduct from their gross income losses sustained without as well as those sustained within the state, while nonresidents may deduct only those occurring within it, does not make the law obnoxious to the privileges and immunities clause, supra, or the equal protection clause of the Fourteenth Amendment. P. 252 U. S. 56.

Net income derived from interstate commerce is taxable under a state law providing for a general income tax. P. 252 U. S. 57.

The Oklahoma gross production tax, imposed on oil and gas producing companies, was intended as a substitute for the ad valorem property tax, and payment of it does not relieve the producer from taxation under the state income tax law. Id.

The Constitution, including the Fourteenth Amendment, does not forbid double taxation by the states. P. 252 U. S. 58.

Without deciding whether it would be consistent with due process to enforce a tax on the income derived by a nonresident from part of his property within a state by imposing a lien on all his property, real and personal, there situate, held that, in this case, the state was justified in treating the various properties and business of a producer of oil and natural gas, who went on with their operation after the income tax law was enacted, as an entity, producing the income and subject to the lien. Id.

No. 531, appeal dismissed.

No. 580, decree affirmed.

The case is stated in the opinion.

Page 252 U. S. 43