Pullman's Palace Car Co. v. Pennsylvania, 141 U.S. 18 (1891)
U.S. Supreme CourtPullman's Palace Car Co. v. Pennsylvania, 141 U.S. 18 (1891)
Pullman's Palace Car Company v. Pennsylvania
Argued October 18, 1888
Reargument ordered November 5, 1888
Reargued March 6, 1890
Decided May 25, 1891
141 U.S. 18
A statute of a state, imposing a tax on the capital stock of all corporations engaged in the transportation of freight or passengers within the state, under which a corporation of another state, engaged in running railroad cars into, through, and out of the state, and having at all times a large number of such cars within the state, is taxed by taking as the basis of assessment such proportion of its capital stock as the number of miles of
railroad over which its cars are run within the state bears to the whole number of miles in this and other states over which its cars are run, does not, as applied to such a corporation, violate the clause of the Constitution of the United States granting to Congress the power to regulate commerce among the several states.
This was an action brought by the State of Pennsylvania against Pullman's Palace Car Company, a corporation of Illinois, in the Court of Common Pleas of the County of Dauphin in the State of Pennsylvania, to recover the amount of a tax settled by the auditor general and approved by the treasurer of that state for the years 1870 to 1880, inclusive, on the defendant's capital stock, taking as the basis of assessment such proportion of its capital stock as the number of miles of railroad over which cars were run by the defendant in Pennsylvania bore to he whole number of miles in this and other states over which its cars were run. All these taxes were levied under successive statutes of Pennsylvania imposing taxes on capital stock of corporations incorporated by the laws of Pennsylvania or of any other state, and doing business in Pennsylvania, computed on a certain percentage of dividends made or declared. The taxes for 1870-1874 were levied under the statute of May 1, 1868, No. 69, § 5, which applied to corporations of every kind, with certain exceptions not material to this case, and fixed the amount of the tax at half a mill on every one percent of dividend. Penn.Laws 1868, p. 109. The taxes for 1875-1877 were levied under the statute of April 24, 1874, No. 31, § 4, which applied to all corporations in any way engaged in the transportation of freight or passengers, and fixed the tax at ninetenths of a mill on every one percent of dividend. Penn.Laws 1874, p. 70. The taxes for 1878-1880 were levied under the statutes of March 20, 1877, No. 5, § 3, and of June 7, 1879, No. 122, § 4, applicable to all corporations except building associations, banks, savings institutions, and foreign insurance companies, and fixing the tax at half a mill on each one percent of dividend of six percent or more on the par value of the capital stock, and, when the dividend was less, at three mills on a valuation of the capital stock. Penn.Laws 1877, p. 8; Penn.Laws 1879, p. 114.
A trial by jury was waived and the case submitted to the decision of the court, which found the following facts:
"The defendant is a corporation of the State of Illinois having its principal office in Chicago. Its business was, during all the time for which tax is charged, to furnish sleeping coaches and parlor and dining room cars to the various railroad companies, with which it contracted on the following terms: the defendant furnished the coaches and cars, and the railroad companies attached and made them part of their trains, no charge being made by either party against the other. The railroad companies collected the usual fare from passengers who traveled in their coaches and cars, and the defendant collected a separate charge for the use of the seats, sleeping berths, and other conveniences. Business has been carried on continuously by the defendant in this way in Pennsylvania since February 17, 1870, and it has had about one hundred coaches and cars engaged in this way in the state during that time. The cars used in this state have, during all the time for which tax is charged, been running into, through, and out of this state."
Upon these facts, the court held
"that the proportion of the capital stock of the defendant invested and used in Pennsylvania is taxable under these acts, and that the amount of the tax may be properly ascertained by taking as a basis the proportion which the number of miles operated by the defendant in this state bears to the whole number of miles operated by it, without regard to the question whether any particular car or cars were used,"
and therefore gave judgment for the state. That judgment was affirmed upon writ of error by the supreme court of the state for reasons stated in its opinion as follows:
"We think it very clear that the plaintiff in error is engaged in carrying on such a business within this commonwealth as to subject it to the statutes imposing taxation. While the tax on the capital stock of a company is a tax on its property and assets, yet the capital stock of a company and its property and assets are not identical. The coaches of the company are its property. They are operated within this state. They are daily passing from one end of the state to the other. They are used in performing the functions for
which the corporation was created. The fact that they also are operated in other states cannot wholly exempt them from taxation here. It reduces the value of the property in this state justly subject to taxation here. This was recognized in the court below, and we think the proportion was fixed according to a just and equitable rule."
107 Penn.St. 156, 160.
Pullman's Palace Car Company sued out a writ of error from this Court and filed six assignments of error, the substance of which was summed up in the brief of its counsel as follows:
"The court erred in holding that any part of the capital stock of the Pullman Company was subject to taxation by the State of Pennsylvania by reason of its running any of its cars into, out of, or through the State of Pennsylvania in the course of their employment in the interstate transportation of railway passengers."