F. and C. & Co. were commercial agents or brokers, having an
office in Shelby County, Tennessee, where they carried on that
business. In 1887, they took out licenses for their said business
under the provisions of the statute of Tennessee of April 4, 1881,
Sess.Laws 1881, c. 96, § 9, 111, 113, imposing a tax upon factors,
brokers, buyers or sellers on commission, or otherwise, doing
business within the state, or, if no capital be so invested, then
upon the gross yearly commissions, charges or compensation for said
business. During the year for which they took out licenses, all the
sales negotiated by F. were made on behalf of principals residing
in other states, and the goods so sold were, at the times of the
sales, in other states, to be shipped to Tennessee as sales should
be effected. During the same time, a large part of the commissions
of C. & Co. were derived from similar sales. They had no
capital invested in their business. At the expiration of the year,
they applied for a renewal of their license. As they had made no
return of sales, and no payment of percentage on their commission,
the application was denied. They filed a bill to restrain the
collection of the percentage tax for the past year, and also to
restrain any interference with their current business, claiming
that the tax was a tax on interstate commerce.
Held
(1) that if the tax could be said to affect interstate commerce
in any way, it did so incidentally, and so remotely as not to
amount to a regulation of such commerce;
Page 145 U. S. 2
(2) That under the circumstances, the complainants could not
resort to the court simply on the ground that the authorities had
refused to issue a new license without the payment of the
stipulated tax.
Robbins v. Shelby County Taxing District, 120 U.
S. 489, examined and distinguished from this case.
This case having been submitted on briefs, the submission was
set aside by the court and an oral argument ordered. When the case
was reached neither party appeared by counsel, but an offer was
again made to submit on the briefs. The court thereupon ordered the
case dismissed for want of prosecution in the manner directed by
its previous order, but subsequently this dismissal was set aside
on motion, and argument was heard.
This case was submitted January 4, 1889, under the 20th rule. On
the 4th of February, 1889, the submission was set aside, and the
case was restored to the docket, to stand for oral argument. On the
6th of November, 1891, it was assigned for argument. When reached
on the 24th of that month, an offer was again made to submit on the
briefs. The Court thereupon ordered the case dismissed for failure
to prosecute it in the manner directed by the court.
Page 145 U. S. 3
This was a bill filed in the Chancery Court of Shelby County,
Tennessee, by C. L. Ficklen and Cooper & Company against the
taxing district of Shelby county and Andrew J. Harris, County
Trustee.
The bill alleged that complainants were
"commercial agents or merchandise brokers, located within the
taxing district of Shelby County, where their respective firms rent
a room for the purpose of keeping and at times exhibiting their
samples and carrying on their correspondence with their respective
principals. That they use no capital in their business. That they
handle or deal in no merchandise, and are neither buyers nor
sellers; they only engage in negotiating sales for their respective
principals. They do precisely the same business that commercial
drummers do, the only difference being that they are stationary,
while the commercial drummers are transitory and go from place to
place and secure a temporary room at each town or city in which to
exhibit their samples. That each solicits orders for the sales of
the merchandise of their respective principals, and forwards the
same to them, when such orders are filled by shipping the goods
direct to the purchasers thereof in the County of Shelby."
It was then averred that all of the sales negotiated by
complainant Ficklen were exclusively for nonresident firms, who
resided and carried on business in other states than Tennessee,
Page 145 U. S. 4
and all the merchandise so sold was in other states than
Tennessee, where the sales were made, and was shipped into
Tennessee, when the orders were forwarded and filled.
That at least nine-tenths of the sales negotiated and effected
by complainants Cooper & Co., and at least nine-tenths of their
gross commissions, were derived from merchandise of nonresident
firms or persons, and which merchandise was shipped into Tennessee
from other states after the sales were effected.
That section 9, chapter 96, of the Act of 1881 of Tennessee
(Sess.Laws of 1881, pp. 111, 113), made subsection 17 of section 22
of the Taxing District Acts (Taxing District Digest 50),
provides:
"Every person or firm dealing in cotton, or any other article
whatever, whether as factor, broker, buyer, or seller on commission
or otherwise, ($50) fifty dollars per annum, and, in addition,
every such person or firm shall be taxed
ad valorem (10
cts.) ten cents on everyone hundred dollars of amount of capital
invested or used in such business,
provided, however, that
if such person or firm carry on the cotton or other business in
connection with the grocery or any other business, the capital
invested in both shall only be taxed once; but such person or firm
must pay the privilege tax for both occupations,
and provided
further that if the persons taxed in this subsection have no
capital invested, they shall pay 2 1/2 percent on their gross
yearly commissions, charges, or compensations for said business,
and at the time of taking out their said license they shall give
bond to return said gross commissions, charges, or compensation to
the trustee at the end of the year, and at the end of the year they
shall make return to said trustee accordingly, and pay to him the
said 2 1/2 percent."
Complainants charged that, as they were neither dealers, buyers,
nor sellers, but only engaged in negotiating sales for buyers, they
were not embraced within the meaning of said section, and further
stated that they had each heretofore paid the privilege tax and the
income tax, except for the year 1887, and had tendered the
privilege tax of $50 and costs of issuing license for the year
1888, to the trustee, who refused to accept
Page 145 U. S. 5
the same unless complainants would also pay the income tax for
the year 1887.
From the bill and exhibits attached, it appeared that
complainants, in January, 1887, each paid the sum of $50 for the
use of the taxing district, and executed bonds agreeably to the
requirements of the law in that behalf, and received licenses as
merchandise brokers within the limits of the district for the year
1887, and that in January, 1888, they tendered, as commercial
brokers, to the trustee $50.25 each, as their privilege tax and
charges for the year 1888, which he refused to accept because they
refused to pay for the year 1887 2 1/2 percent upon their gross
commissions derived from their business for the year 1887, although
they executed bonds in January, 1887, to report said gross
commissions.
Complainants charged that the law in question was in violation
of the commerce clause of the Constitution of the United States,
and also of the Constitution of Tennessee, and prayed as
follows:
"That an injunction issue to restrain the defendants, or either
of them, from instituting any suit or proceeding against them, or
either of them, for the collection of said 2 1/2 percent tax upon
their respective gross commissions from their said business, or
from issuing any warrant for their arrest for their failure to pay
the same for the year 1887, and that defendants be also restrained
from in any way interfering with them in the carrying on their said
business for the year 1888, and upon final hearing they (the
defendants) be restrained perpetually from collecting from them, or
either of them, said 2 1/2 percent tax upon their said gross
commissions from their said business, and from collecting said
privilege tax of $50, and they pray for general relief, and will
ever pray,"
etc.
To this bill the defendants filed a demurrer, which was
overruled by the Chancellor, and, the defendants electing to stand
by it, a final decree was entered, making the injunction perpetual
in behalf of Ficklen as to the entire tax, including the $50; and,
as to Cooper & Co., adjudging that they were legally bound to
pay the sum of $50 and the tax of two
Page 145 U. S. 6
and one-half percent on their commissions, to the extent that
those commissions were upon sales of property owned by residents of
Tennessee, and perpetuating the injunction in all other
respects.
From this decree the defendants prayed an appeal to the supreme
court of the state, and that court decided that the act of the
legislature in question was not in violation of the state
constitution, and further that
"inasmuch as it appears from the bill that the complainants at
the beginning of the year 1887 applied for and received,
respectively, license to carry on the business of commission
brokers without qualification, and that they, the complainants,
held said license throughout the year 1887, complainants were
chargeable with the privilege tax, as fixed by the act aforesaid,
without regard to the amount or character of the business carried
on under said licenses or the places of residence of their
principals, and that complainants must have reported and paid 2 1/2
percent on the gross commissions received by them during the year
1887 before they could have become entitled to licenses for the
year 1888. . . . That when at the beginning of the year 1888, the
complainants applied for license as merchandise brokers, they were
rightfully required (1) to report and pay 2 1/2 percent on their
commissions received during 1887, and (2) to pay the fixed charge
of $50, and give bond to report their gross commissions at the end
of the year 1888. . . . That the said act is not, as to these
complainants, violative of Article I, Section 8, of the
Constitution of the United States, by which the power to regulate
commerce between the states is conferred upon the Congress of the
United States, and . . . that complainants, having applied for,
accepted, and held for and during the year 1887 unqualified license
as commission brokers, and having applied for the same unqualified
license for the year 1888, cannot question the validity of the said
act as being in conflict with said provisions of the Constitution
of the United States, for that the said complainants were not
entitled to the said license upon the facts stated in the bill,
whether the business actually done and theretofore conducted by
them was or was not exonerated from said
Page 145 U. S. 7
privilege tax under the said provision of the federal
Constitution."
The decree of the Chancellor was accordingly reversed, and the
demurrer sustained, and the bill dismissed, whereupon a writ of
error was taken out from this Court.
Page 145 U. S. 19
MR. CHIEF JUSTICE FULLER, after stating the facts in the
foregoing language, delivered the opinion of the Court.
In
Robbins v. Shelby County Taxing District,
120 U. S. 489,
Page 145 U. S. 20
it was held that section 16 of chapter 96 of the laws of
Tennessee of 1881, enacting that
"All drummers and all persons not having a regular licensed
house of business in the taxing district of 'Shelby County,'
offering for sale or selling goods, wares, or merchandise therein
by sample, shall be required to pay to the county trustee the sum
of $10 per week, or $25 per month, for such privilege,"
so far as it applied to persons soliciting the sale of goods on
behalf of individuals or firms doing business in another state, was
a regulation of commerce among the states, and violated the
provision of the Constitution of the United States which grants to
Congress the power to make such regulations. The question involved
was stated by Mr. Justice Bradley, who delivered the opinion of the
Court, to be
"whether it is competent for a state to levy a tax or impose any
other restriction upon the citizens or inhabitants of other states
for selling or seeking to sell their goods in said state before
they are introduced therein,"
and it was decided that it was not. At the same time, it was
conceded that commerce among the states might be legitimately
incidentally affected by state laws when they, among other things,
provided for
"the imposition of taxes upon persons residing within the state,
or belonging to its population, and upon avocations and employments
pursued therein not directly connected with foreign or interstate
commerce, or with some other employment or business exercised under
authority of the Constitution and laws of the United States."
And it was further stated:
"To say that the tax, if invalid as against drummers from other
states, operates as a discrimination against the drummers of
Tennessee, against whom it is conceded to be valid, is no argument,
because the state is not bound to tax its own drummers, and if it
does so whilst having no power to tax those of other states, it
acts of its own free will, and is itself the author of such
discrimination. As before said, the state may tax its own internal
commerce; but that does not give it any right to tax interstate
commerce."
In the case at bar, the complainants were established and did
business in the taxing district as general merchandise brokers, and
were taxed as such under section nine of chapter ninety-six
Page 145 U. S. 21
of the Tennessee Laws of 1881, which embraced a different
subject matter from section sixteen of that chapter. For the year
1887, they paid the $50 tax charged, gave bond to report their
gross commissions at the end of the year, and thereupon received,
and throughout the entire year held, a general unrestricted license
to do business as such brokers. They were thereby authorized to do
any and all kinds of commission business, and became liable to pay
the privilege tax in question, which was fixed in part and in part
graduated according to the amount of capital invested in the
business or, if no capital were invested, by the amount of
commissions received. Although their principals happened during
1887 as to the one party to be wholly nonresident and as to the
other largely such, this fact might have been otherwise then and
afterwards, as their business was not confined to transactions for
nonresidents.
In the case of Robbins, the tax was held in effect not to be a
tax on Robbins, but on his principals, while here the tax was
clearly levied upon complainants in respect of the general
commission business they conducted, and their property engaged
therein, or their profits realized therefrom.
No doubt can be entertained of the right of a state legislature
to tax trades, professions, and occupations in the absence of
inhibition in the state constitution in that regard, and where a
resident citizen engages in general business subject to a
particular tax, the fact that the business done chances to consist,
for the time being, wholly or partially in negotiating sales
between resident and nonresident merchants of goods situated in
another state does not necessarily involve the taxation of
interstate commerce forbidden by the Constitution.
The language of the Court in
Lyng v. Michigan,
135 U. S. 161,
135 U. S. 166,
was:
"We have repeatedly held that no state has the right to lay a
tax on interstate commerce in any form, whether by way of duties
laid on the transportation of the subjects of that commerce, or on
the receipts derived from that transportation, or on the occupation
or business of carrying it on, for the reason that such taxation is
a burden on that commerce, and amounts to a regulation of it, which
belongs
Page 145 U. S. 22
solely to Congress."
But here the tax was not laid on the occupation or business of
carrying on interstate commerce or exacted as a condition of doing
any particular commission business, and complainants voluntarily
subjected themselves thereto in order to do a general business.
In
McCall v. California, 136 U.
S. 104, it was held that
"an agency of a line of railroad between Chicago and New York,
established in San Francisco for the purpose of inducing passengers
going from San Francisco to New York to take that line at Chicago,
but not engaged in selling tickets for the route, or receiving or
paying out money on account of it, is an agency engaged in
interstate commerce, and a license tax imposed upon the agent for
the privilege of doing business in San Francisco is a tax upon
interstate commerce, and is unconstitutional."
This was because the business of the agency was carried on with
the purpose to assist in increasing the amount of passenger traffic
over the road, and was therefore a part of the commerce of the
road, and hence of interstate commerce.
In
Philadelphia & Southern Steamship Co. v.
Pennsylvania, 122 U. S. 326,
122 U. S. 345,
Mr. Justice Bradley, speaking for the Court, said:
"The corporate franchises, the property, the business, the
income of corporations created by a state, may undoubtedly be taxed
by the state, but in imposing such taxes, care should be taken not
to interfere with or hamper, directly or by indirection, interstate
or foreign commerce or any other matter exclusively within the
jurisdiction of the federal government."
And this, of course, is equally true of the property, the
business, and the income of individual citizens of a state. It is
well settled that a state has power to tax all property having a
situs within its limits, whether employed in interstate commerce or
not. It is not taxed because it is so employed, but because it is
within the territory and jurisdiction of the state.
Pullman's
Palace Car Co. v. Pennsylvania, 141 U. S.
18;
Gloucester Ferry Co. v. Pennsylvania,
114 U. S. 196.
And it has been often laid down that the property of
corporations holding their franchises from the government of the
United States is not exempt from taxation by the states of its
situs.
85 U. S. Peniston,
18 Wall. 5; 76 U. S. S.
23� v. Pacific Railroad,
9 Wall. 579; Western Union
Tel. Co. v. Attorney General,@
125 U. S. 530.
So in
Wiggins Ferry Co. v. East St. Louis, 107 U.
S. 365,
107 U. S. 374,
where an annual license fee was imposed on the ferry company by the
City of East St. Louis, the company having been chartered by the
State of Illinois and being domiciled in East St. Louis, its boats
plying between that place and St. Louis, Missouri, the Court
said:
"The exaction of a license fee is an ordinary exercise of the
police power by municipal corporations. When, therefore, a state
expressly grants to an incorporated city, as in this case, the
power 'to license, tax, and regulate ferries,' the latter may
impose a license tax on the keepers of ferries, although their
boats ply between landings lying in two different states, and the
act by which this exaction is authorized will not be held to be a
regulation of commerce."
Again, in
Maine v. Grand Trunk Railway Co.,
142 U. S. 217, we
decided that a state statute which required every corporation,
person, or association operating a railroad within the state to pay
an annual tax for the privilege of exercising its franchise
therein, to be determined by the amount of its gross transportation
receipts, and further provided that, when applied to a railroad
lying partly within and partly without a state, or to one operated
as a part of a line or system extending beyond the state, the tax
should be equal to the proportion of the gross receipts in the
state, to be ascertained in the manner provided by the statute, did
not conflict with the Constitution of the United States. It was
held that the reference by the statute to the transportation
receipts, and to a certain percentage of the same, in determining
the amount of the excise tax was simply to ascertain the value of
the business done by the corporation and thus obtain a guide to a
reasonable conclusion as to the amount of the excise tax which
should be levied. In this respect, the tax was unlike that levied
in
Philadelphia Steamship Co. v. Pennsylvania, supra,
where the specific gross receipts for transportation were taxed as
such -- taxed "not only because they are money, or its value, but
because they were received for transportation."
Page 145 U. S. 24
Since a railroad company engaged in interstate commerce is
liable to pay an excise tax according to the value of the business
done in the state, ascertained as above stated, it is difficult to
see why a citizen doing a general business at the place of his
domicile should escape payment of his share of the burdens of
municipal government because the amount of his tax is arrived at by
reference to his profits. This tax is not on the goods, nor on the
proceeds of the goods, nor is it a tax on nonresident merchants;
and, if it can be said to affect interstate commerce in any way, it
is incidentally, and so remotely as not to amount to a regulation
of such commerce.
We presume it would not be doubted that if the complainants had
been taxed on capital invested in the business, such taxation would
not have been obnoxious to constitutional objection, but because
they had no capital invested, the tax was ascertained by reference
to the amount of their commissions, which, when received, were no
less their property than their capital would have been. We agree
with the supreme court of the state that the complainants, having
taken out licenses under the law in question to do a general
commission business, and having given bond to report their
commissions during the year, and to pay the required percentage
thereon, could not, when they applied for similar licenses for the
ensuing year, resort to the courts because the municipal
authorities refused to issue such licenses without the payment of
the stipulated tax. What position they would have occupied if they
had not undertaken to do a general commission business, and had
taken out no licenses therefor, but had simply transacted business
for nonresident principals, is an entirely different question which
does not arise upon this record.
The judgment of the supreme court is
Affirmed.
MR. JUSTICE HARLAN, dissenting.
It seems to me that the opinion and judgment in this case are
not in harmony with numerous decisions of this Court. I do not
assume that the court intends to modify or overrule any of those
cases, because no such purpose is expressed; and
Page 145 U. S. 25
yet I feel sure that the present decision will be cited as
having that effect.
In
Robbins v. Shelby County Taxing District,
120 U. S. 489,
120 U. S.
496-497, it was held that Tennessee could not require,
even from its own people, a drummer's license for soliciting the
sale of goods there on behalf of individuals or firms doing
business in another state. This rule, the Court said,
"will only prevent the levy of a tax, or the requirement of a
license for making negotiations for the conduct of interstate
commerce, and it may well be asked where the state gets authority
for imposing burdens on that branch of business any more than for
imposing a tax on the business of importing from foreign countries,
or even on that of postmaster or United States marshal. The mere
calling the business of a drummer a privilege cannot make it so.
Can the state legislature make it a Tennessee privilege to carry on
the business of importing goods from foreign countries? If not, has
it any better right to make it a state privilege to carry on
interstate commerce? It seems to be forgotten in argument that the
people of this country are citizens of the United States, as well
as of the individual states, and that they have some rights under
the Constitution and laws of the former independent of the latter,
and free from any interference or restraint from them."
Again:
"It is strongly urged, as if it were a material point in the
case, that no discrimination is made between domestic and foreign
drummers -- those of Tennessee and those of other states; that all
are taxed alike. But that does not meet the difficulty. Interstate
commerce cannot be taxed at all, even though the same amount of tax
should be laid on domestic commerce, or that which is carried on
solely within the state. This was decided in the case of
State
Freight Tax, 15 Wall. 232. The negotiation of sales
of goods which are in another state for the purpose of introducing
them into the state in which the negotiation is made is interstate
commerce. A New Orleans merchant cannot be taxed there for ordering
goods from London or New York, because in the one case it is an act
of foreign, and in the other of interstate, commerce, both of which
are subject to regulation by Congress alone. "
Page 145 U. S. 26
In
Philadelphia & Southern Steamship Co. v.
Pennsylvania, 122 U. S. 326, a
tax imposed in Pennsylvania upon the gross receipts of a steamship
company incorporated under the laws of that state, such gross
receipts being derived from the transportation of persons and
property by sea, between different states, and to and from foreign
countries, was held to be a regulation of interstate and foreign
commerce, and therefore unconstitutional.
In
Leloup v. Port of Mobile, 127 U.
S. 640,
127 U. S. 648,
an ordinance of that port requiring a license tax from telegraph
companies was held to be invalid in its application to a company,
having a place of business in Mobile, and being engaged there in
the occupation of transmitting messages from and to points in
Alabama to and from points in other states. This Court, overruling
Osborne v.
Mobile, 16 Wall. 479, said that
"no state has the right to lay a tax on interstate commerce in
any form, whether by way of duties laid on the transportation of
the subjects of that commerce, or on the receipts derived from that
transportation, or on the occupation or business of carrying it on,
and the reason is that such taxation is a burden on that commerce,
and amounts to a regulation of it, which belongs solely to
Congress."
In
Asher v. Texas, 128 U. S. 129, a
state law exacting a license tax to enable a person within the
state to solicit orders and make sales there for a person residing
in another state, was held to be repugnant to the commerce clause
of the Constitution.
In
Stoutenburgh v. Hennick, 129 U.
S. 141,
129 U. S. 147,
the question was whether an act passed in 1871 by the Legislative
Assembly of the District of Columbia requiring commercial agents
engaged in offering merchandise by sample to take out and pay for a
license was invalid when applied to persons soliciting in the
District the sale of goods on behalf of individuals or firms doing
business outside of the District. Referring to the particular
clause of the act upon which it was attempted to sustain the case,
this Court said:
"This provision was manifestly regarded as a regulation of a
purely municipal character, as is perfectly obvious, upon the
principle of
noscitur
Page 145 U. S. 27
a sociis, if the clause be taken, as it should be, in
connection with the other clauses and parts of that act. But it is
indistinguishable from that held void in
Robbins v. Shelby
County Taxing District and
Asher v. Texas,
128 U. S.
129, as being a regulation of interstate commerce so far
as applicable to persons soliciting, as Hennick was, the sale of
goods on behalf of individuals or firms doing business outside of
the District."
In
McCall v. California, 136 U.
S. 104, it was held that a license tax imposed by an
ordinance enacted by the Board of Supervisors of the City and
County of San Francisco upon an agent engaged at that city in the
business of soliciting travel for a line of railroad between
Chicago and New York, was invalid under the commerce clause of the
Constitution.
In
Norfolk &c. Railroad Co. v. Pennsylvania,
136 U. S. 114, a
tax imposed by Pennsylvania upon a railroad company incorporated in
another state, and whose line extended from Philadelphia into other
states, for the privilege of keeping an office in Pennsylvania to
be used by its officers, stockholders, agents, and employees was a
tax upon commerce among the states, and therefore void.
In
Crutcher v. Kentucky, 141 U. S.
47, the Court adjudged to be void an act of the
Legislature of Kentucky so far as it forbade foreign express
companies from carrying on business between points in that state
and points in other states without first obtaining a license from
the state.
The principles announced in these cases if fairly applied to the
present case, ought, in my judgment, to have led to a conclusion
different from that reached by the Court. Ficklen took out a
license as merchandise broker, and gave bond to make a return of
the gross commissions earned by him. His commissions in 1887 were
wholly derived from interstate business -- that is, from mere
orders taken in Tennessee for goods in other states, to be shipped
into that state, when the orders were forwarded and filled. He was
denied a license for 1888 unless he first paid two and a half
percent on his gross commissions. And the Court holds that it was
consistent with the Constitution of the United States for the local
authorities of the taxing district of Shelby County to make it a
condition
Page 145 U. S. 28
precedent of Ficklen's right to a license for 1888 that he
should pay the required percent of the gross commissions earned by
him in 1887 in interstate business. This is a very clever device to
enable the taxing district of Shelby County to sustain its
government by taxation upon interstate commerce. If the ordinance
in question had, in express terms, made the granting of a license
as merchandise broker depend upon the payment by the applicant of a
given percent upon his earnings in the previous year in interstate
business, the court, I apprehend, would not have hesitated to
pronounce it unconstitutional. But it seems that if the local
authorities are discreet enough not to indicate in the ordinances
under which they act their purpose to tax interstate business, they
may successfully evade a constitutional provision designed to
relieve commerce among the states from direct local burdens. The
bond which Ficklen gave should not, in my opinion, be construed as
embracing his commissions earned in business upon which no tax can
be constitutionally imposed by a state.
The result of the present decision is that while, under
Robbins v. Shelby County Taxing District, a license tax
may not be imposed in Tennessee upon drummers for soliciting there
the sale of goods to be brought from other states; while, under
Leloup v. Port of Mobile, a local license tax cannot be
imposed in respect to telegrams between points in different states,
and while, under
Stoutenburgh v. Hennick, commercial
agents cannot be taxed in the District of Columbia for soliciting
there the sale of goods to be brought into the District from one of
the states, the Taxing District of Shelby County may require, as a
condition of granting a license as merchandise broker, that the
applicant shall pay a license fee, and, in addition, 2 1/2 percent
upon the gross commissions received, not only in the business
transacted by him that is wholly domestic, but in that which is
wholly interstate.
For these reasons I am constrained to dissent from the opinion
and judgment of the court in this case.
