A single tax, assessed under the laws of a state upon receipts
of a telegraph company which were partly derived from interstate
commerce and partly from commerce within the state, and which were
capable of separation but were returned and assessed in gross and
without separation or apportionment, is invalid in proportion to
the extent that such receipts were derived from interstate
commerce, but is otherwise valid, and while a circuit court of the
United States should enjoin the collection of the tax upon the
portion of the receipts derived from interstate commerce,
Page 127 U. S. 412
it should not interfere with those derived from commerce
entirely within the state.
The decisions of this Court respecting the taxation of telegraph
companies reviewed.
The case, as stated by the court, was as follows:
These are cross-appeals from a decree of the Circuit Court for
the Southern District of Ohio, Western Division.
The suit was begun by a bill of complaint, filed by the Western
Union Telegraph Company against Frank Ratterman, Treasurer of
Hamilton County, in the State of Ohio. As the bill is not very
long, it is here presented in full:
"To the judges of the Circuit Court of the United States for the
Southern District of Ohio, Western Division:"
"The Western Union Telegraph Company, a corporation duly
organized and existing under the laws of the New York and a citizen
of said state, brings this its bill against Frank Ratterman,
Treasurer of Hamilton County, Ohio, and a citizen of the Ohio."
"And thereupon your orator complains and says:"
"That its principal office is, and during the times hereinafter
mentioned was, in the City of New York; that during said time, it
had been and now is engaged in the business of receiving and
transmitting for hire telegraph messages between different points
in the United States, and in the carrying on of said business has
offices in the City of Cincinnati and at other points in the County
of Hamilton and in the State of Ohio, and has been engaged in the
transmission of messages between said offices and other points both
within and without the State of Ohio."
"That prior to 1869, your orator accepted in writing the
provisions of the act of Congress of July 4, 1866, 14 Stat. 221;
that your orator's wires, poles, batteries, office furniture, and
other property in the Ohio have been and are taxed like other
property in said state; that your orator's telegraph lines cross
nearly all of the states of the union and occupy portions of
British America, and that a large amount of the
Page 127 U. S. 413
commercial transactions, business, and intercourse of the people
is carried on by means of their wires; that in the month of May,
1887, your orator, under protest, delivered to the auditor of said
county a statement, as required by Rev.Stat. Ohio, § 2778, showing
the entire receipts of your orator in said county for the year next
preceding, which said gross receipts amounted to the sum of
$175,210.88, and were principally for business between points in
the State of Ohio and points outside the State of Ohio -- that is
to say, the receipts of your orator for messages and business
pertaining to commerce between the states, and not for messages
between different points within the State of Ohio; that thereupon
said auditor assessed a tax thereon amounting to five thousand two
hundred and six and 90/100 dollars."
"Your orator says that said tax is illegal and void, and in
violation of the Constitution of the United States."
"Your orator has offered to the defendant, and is ready and
willing to pay to him, the taxes chargeable against its personal
property within said county, but the defendant refuses to accept
payment thereof unless your orator also at the same time pays said
total assessment for all of said gross receipts, and unless
restrained, the defendant will impose and enforce the penalties for
nonpayment of said tax provided for by Revised Statutes of Ohio, §
2843, to the interference, stoppage, and destruction of your
orator's business."
"Wherefore your orator prays that the defendant may be required
to accept payment of so much of said tax assessment as covers the
property of your orator in the said county, and that he may be
enjoined by preliminary injunction and by final decree from levying
or collecting the balance of said assessment."
"Your orator prays that a writ of subpoena may issue against the
defendant, and that your orator may have such other and further
relief as it is in equity and good conscience entitled to."
To this bill a general demurrer was filed, which was overruled
by the court. The record then proceeds as follows:
Page 127 U. S. 414
"And thereupon it was agreed by and between the complainant and
the defendant that the cause be submitted to the court on the bill
without further pleading to the same by the defendant, upon the
following facts:"
"That of the entire receipts mentioned in the bill $142,154.18
were for business done by the plaintiff between its offices in said
county and points outside of the State of Ohio -- that is, for
messages and business pertaining to commerce between the states,
and not for messages between different points within the State of
Ohio -- and that the balance of said receipts, to-wit, $33,056.70,
was for business between the offices of the plaintiff in said
county and other points within the State of Ohio, and that, if said
receipts had been so separated and apportioned, and said tax had
been separately assessed on the basis of such separation and
apportionment, the amount of said total tax of $5,206.90,
apportionable to said receipts for interstate commerce, would be
$3,931.51, and the amount apportionable to said receipts for
business between the offices of the complainant in said county and
other points within the State of Ohio would have been $910.40, and
that the remainder of said sum of $5,206.90,
viz.,
$364.99, was for tax assessed upon the personal property of the
said complainant within the said County of Hamilton aforesaid,
namely, upon its instruments, wires, poles, and other chattel
property which were returned by said complaint to the auditor of
said county at a valuation of $18,059."
"That Exhibit A, hereto annexed, and made a part of this
stipulation, is a copy of the return made by complainant to the
auditor of said county in pursuance of the law of the State of
Ohio, and that said complainant made no other return, and furnished
no other information to said auditor at the time of said return,
save what is contained in said return."
"That Exhibit B, hereto annexed, and made a part hereof, is a
copy of the return of the chattel property of said complainant made
at the same time to said auditor."
"It is further agreed that the auditor of said county placed on
the tax duplicate of said county said sums of $175,210.88 and
$18,059 as the personal property of said complainant, to
Page 127 U. S. 415
be assessed for taxation in said County of Hamilton, and that
the rate of taxation assessed thereupon was the same as was
assessed against the personal property listed for taxation by the
citizens of said county."
"It is further agreed that complainant, prior to December 20,
1887, offered to pay the tax properly assessable against said
return of $18,059 for personal property, but the defendant refused
to accept payment of said assessment of $5,206.90 unless the whole
were paid. The plaintiff did not disclose to said auditor at the
time it made said return what portion, if any, of the gross
receipts of its said offices in said county was for interstate
commerce."
"It is further agreed that neither said auditor nor said
treasurer had any actual knowledge that any portion of the returns
of said gross receipts was for interstate commerce business, but
said officers knew that plaintiff's said business included
interstate commerce."
"And the only knowledge said auditor and said treasurer had of
the business of said company, and what said receipts were derived
from, was from the returns hereto annexed, marked 'Exhibit A,' and
from their knowledge as aforesaid of the plaintiff's business."
"The cause being thus submitted to the court on the foregoing
stipulation of facts and the argument of counsel, the court is of
the opinion that said receipts and tax may be separated and
apportioned, and that said tax, so far as so separated and
apportioned to said receipts derived from the interstate commerce,
is unconstitutional and void, but valid apportionable to said
receipts derived from state business."
"It is thereupon ordered by the court, adjudged, and decreed
that the defendant is hereby forever enjoined from collecting on
said assessment of $5,206.90 more than the sum of $1,275.39, and an
injunction is refused as to the balance of said tax. It is further
ordered that the defendant pay the costs of this suit."
The judges of the circuit court, upon this state of facts, made
the following certificate of a difference of opinion:
"This is to certify that at the hearing of the
above-entitled
Page 127 U. S. 416
cause before Hon. Howell E. Jackson, Circuit Judge, and George
R. Sage, District Judge, said judges differed in opinion upon the
following questions of law, to-wit:"
"Whether a single tax, assessed under the Revised Statutes of
Ohio, § 2778, upon the receipts of a telegraph company, which
receipts were derived partly from interstate commerce and partly
from commerce within the state, but which were returned and
assessed in gross and without separation or apportionment, is
wholly invalid, or invalid only in the proportion and to the extent
that said receipts were derived from interstate commerce. And the
district judge being of the opinion that such a tax is wholly
invalid, and the circuit judge being of the opinion that it is
invalid only to the extent and in the proportion that the receipts
upon which it is based were derived from interstate commerce, said
question is hereby certified to the Supreme Court of the United
States for its opinion."
"HOWELL E. JACKSON,
Circuit Judge"
"GEO. R. SAGE,
District Judge"
Page 127 U. S. 423
MR. JUSTICE MILLER, after stating the case, delivered the
opinion of the Court.
The case has been very fully argued before us upon all the
matters properly presented by the record, and it seems probable
from the amicable nature of the proceedings and the agreement as to
a statement of facts upon which the case was to be tried, without
any answer being filed to the bill, that the purpose was to obtain
the judgment of this Court upon the general subject of the
liability of the corporation to taxation upon the amount of its
receipts, and that the certificate of a difference of opinion has
been used for that purpose.
With regard to the question which is certified to us dividing
the opinions of the judges of the circuit court, we do not think
that there is any difficulty, and can hardly see how it arose in
the present case. That question is
"Whether a single tax, assessed under the Revised Statutes of
Ohio, § 2778, upon the receipts of a telegraph company, which
receipts were derived partly from interstate commerce and partly
from commerce within the state, but which were returned and
assessed in gross, and without separation or apportionment, is
wholly invalid, or invalid only in the proportion and to the extent
that said receipts were derived from interstate commerce."
We do not think this particular question is material in
Page 127 U. S. 424
this case, because the state of facts agreed upon by the parties
makes this separation, and presents the matter to the court freed
from the point raised by the question that the tax was not
separable. Nor do we believe, if there were allegations either in
the bill or answer setting up that part of the tax was from
interstate commerce and part from commerce wholly within the state,
that there would have been any difficulty in securing the evidence
of the amount of receipts chargeable to these separate classes of
telegrams, by means of the appointment of a referee or master to
inquire into that fact, and make report to the court. Neither are
we of opinion that there is any real question, under the decisions
of this Court, in regard to holding that so far as this tax was
levied upon receipts properly appurtenant to interstate commerce,
that it was void, and that so far as it was only upon commerce
wholly within the state that it was valid.
This precise question was adjudged in the case of
The State Freight
Tax, 15 Wall. 232. That was a case in which a
statute of the State of Pennsylvania was examined which provided
for a tax upon every ton of freight transported by any railroad or
canal in that state at certain rates -- two cents fro one class of
freight, three cents for another, and five cents for still another
class. The payment of this tax was resisted by the Reading Railroad
Company upon the ground that it was levied on interstate commerce.
The company made returns to the accounting officers of the
commonwealth in which they stated separately the amount of freight
whose transportation was wholly within the state, and also the
amount of the transportation of freight brought into or carried out
of that state. This Court held that the tax upon the former class,
being upon commerce wholly within the state, was valid under the
law of Pennsylvania by which it was imposed, but that the latter
classes, being commerce among the states, were not subject to such
taxation.
This ruling shows that where the subjects of taxation can be
separated so that that which arises from interstate commerce can be
distinguished from that which arises from commerce wholly within
the state, the Court will act upon this
Page 127 U. S. 425
distinction and will restrain the tax on interstate commerce
while permitting the state to collect that arising upon commerce
solely within its own territory.
In
Pensacola Telegraph Company v. Western Union Telegraph
Company, 96 U. S. 1, it was
decided by this Court that the telegraph was an instrument of
commerce; that telegraph companies were subject to the regulating
power of Congress in respect to their foreign and interstate
business, and that such a company occupies the same relation to
commerce as a carrier of messages that a railroad company does as a
carrier of goods.
In
Telegraph Company v. Texas, 105 U.
S. 460, the same question presented in this case was
before the Court -- that of the power of the state to tax
telegraphic messages received and delivered by the same corporation
which is now before us. In that case no distinction was made by the
statute between what we now call interstate messages and those
exclusively within the state. This Court therefore, in reviewing
the decision of the Supreme Court of the State of Texas, which had
allowed no deduction for taxes on messages sent out of the state or
by government officers on government business, said:
"It follows that the judgment, so far as it includes the tax on
messages sent out of the state or for the government on public
business, is erroneous. The rule that the regulation of commerce
which is confined exclusively within the jurisdiction and territory
of a state, and does not affect other nations or states or the
Indian tribes -- that is to say, the purely internal commerce of a
state -- belongs exclusively to the state is as well settled as
that the regulation of commerce which does affect other nations or
states or the Indian tribes belongs to Congress. Any tax,
therefore, which the state may put on messages sent by private
parties, and not by the agents of the government of the United
States, from one place to another exclusively within its own
jurisdiction will not be repugnant to the Constitution of the
United States. Whether the law of Texas in its present form can be
used to enforce the collection of such a tax is a question entirely
within the jurisdiction of the courts of the state, and as to which
we have no power of review. "
Page 127 U. S. 426
The Court reversed the judgment of the Supreme Court of Texas
and remanded the cases with instructions for such further
proceedings as justice might require. Evidently the purpose of this
was to permit the supreme court of that state, if it could separate
the taxes upon the two classes of telegrams, to do so and to render
judgment accordingly.
In the recent case of
Western Union Telegraph Co. v.
Commonwealth, 125 U. S. 530,
decided at this term, a tax was levied upon that corporation,
apportioned under the laws of Massachusetts upon the taxable value
of its capital stock. The ratio which should have been allotted to
that commonwealth may be supposed to have been properly apportioned
to it, ascertaining that portion by means of the length of the
lines of the company in relation to the entire mileage of its lines
in the United States. The payment of the tax was resisted, however,
partly upon the ground that it was levied upon interstate commerce,
but mainly because it was asserted to be a violation of the rights
conferred on the company by the Act of July 24, 1866, now Title
LXV, §§ 5263-5269 of the Revised Statutes. It was alleged that the
defendant company, having accepted the provisions of that law, was
entirely exempt from taxation by the state. This Court, however,
held that this exemption only extended under that law to so much of
the lines of the telegraph company as were, in the language of §
5263,
"through and over any portion of the public domain of the United
States, over and along any of the military or post roads of the
United States which have been or may hereafter be declared such by
law, and over, under, or across the navigable streams or waters or
the United States."
It was shown in that case that of the 2,833.05 miles of the
lines of the defendant corporation within the boundaries of
Massachusetts, more than 2,334.55 miles came within the terms of
that section, being over or along post roads, made such by the
United States, or over, under, or across its navigable streams or
waters, leaving only 498.50 miles not within such description, on
which the company offered to pay the proportion of the tax assessed
against it, according to mileage, by the state authorities.
Page 127 U. S. 427
We refer to this now only for the purpose of showing how easily
the subject of taxation which is forbidden by the Constitution may
be separated from that which is permissible in this class of cases.
The Court held in that case that this tax, being in effect levied
upon the capital stock or property of the company in the State of
Massachusetts, which was ascertained upon the basis of the
proportion which the length of its lines in that state bore to
their entire length throughout the whole country, and not upon its
messages or upon the receipts for such messages, was a valid tax.
The question of interstate commerce as affecting the tax in that
action was very little pressed by counsel for the company, but they
relied upon the privilege granted by § 5263, already cited, to
companies which accepted its provisions, and upon the fact that a
large proportion of the lines of the defendant telegraph company
were over or along post roads or over, under, or across the
navigable streams or water of the United States.
In the present case, counsel for the telegraph company have
argued that this statute secures the corporation from taxation of
any kind whatever, and especially as to receipts arising from
messages sent over its lines; but that question does not arise in
this action, because there is no allegation or averment, either in
the bill itself or in the statement of facts, that any part of the
lines of the telegraph company in the State of Ohio is built over
or along a post road or comes within the provisions of § 5263. The
only reference to this subject is in the following allegation of
the bill: "That prior to 1869, your orator accepted in writing the
provisions of the act of Congress of July 24, 1866, 14 Stat. 221."
Under this allegation, the complainant can, of course, claim no
benefit from the provisions of that section, for it does not appear
that any part of the company's line comes within the description of
this section of the Revised Statutes.
Under these views, we answer the question in regard to which the
judges of the circuit court divided in opinion by saying that a
single tax, assessed under the Revised Statutes of Ohio upon the
receipts of a telegraph company, which were derived partly from
interstate commerce and partly from commerce
Page 127 U. S. 428
within the state, but which were returned and assessed in gross
and without separation or apportionment, is not wholly invalid, but
is invalid only in proportion to the extent that such receipts were
derived from interstate commerce. Concurring, therefore, with the
circuit judge in his action enjoining the collection of the taxes
on that portion of the receipts derived from interstate commerce
and permitting the treasurer to collect the other tax upon property
of the company and upon receipts derived from commerce entirely
within the limits of the state, this decree is
Affirmed.