Giving to the statute of Tennessee the same meaning that was
given to it by the Supreme Court of that state, which this Court is
bound to do, it is
held that it violates the interstate
commerce clause of the Constitution of the United States.
All the cases cited in the opinion of the court deny the right
of a state to tax people representing owners of property outside
the state for the privilege of soliciting orders within it, as
agents of such owners, for property to be shipped to persons within
the state.
Ficklen v. Shelby County Taxing District, 145 U. S.
1, distinguished from this case.
Although a state has general power to tax individuals and
property within its jurisdiction, yet it has no power to tax
interstate commerce, even in the person of a resident of the
state.
This is a writ of error to the Supreme Court of the State of
Tennessee, brought to review a judgment of that court reversing a
judgment of the Court of Chancery of Hamilton County in favor of
complainants, and dismissing their bill.
The complainants sought to enjoin the collection of a tax
imposed upon them under a statute of Tennessee upon the ground that
they were not liable for the tax because they were agents and
brokers exclusively for the sale of the property of nonresident
principals, and did no business of any kind for residents of the
state. They also averred that the state statute, properly
construed, did not include their business, but if it did, it was
void as contravening the federal Constitution in its interstate
commerce clause.
The defendants by answer averred that they sought to collect the
tax under the authority of the statute of the State of Tennessee
providing for the collection of a privilege tax on the occupation
of the complainants as merchandise brokers, and that such statute
was valid.
Other parties similarly situated commenced suits against the
Page 185 U. S. 28
defendants to obtain like relief. By an agreement which was
approved by the court, all the cases were consolidated under the
style of
Stockard & Jones v. Morgan and Others, under
which title it was agreed that they should thereafter proceed as
one case.
The case came to trial in the chancery court upon the following
agreed statement of facts:
"In this consolidated cause, the following agreement is made as
to the facts relating to the matters in controversy,
viz.:"
"It is agreed that the several complainants in the original
bills, to-wit, J. H. McReynolds, Stockard & Jones, W. G.
Oehmig, T. M. Carothers, and J. H. Allison are residents of
Hamilton County, Tennessee."
"That said J. H. McReynolds has been carrying on business in
Chattanooga, said county and state, during the present year, 1900;
that said Stockard & Jones, W. G. Oehmig, T. M. Carothers, and
J. H. Allison have been carrying on business in said city during
the years 1897, 1898, 1899 and 1900."
"That the character of said business so carried on by the
respective complainants, or the manner of conducting the business
of each, is and has been as follows:"
"The complainant, as the representative of nonresident parties,
firms, or corporations, solicits orders for goods from jobbers or
wholesale dealers in Chattanooga, Tennessee, and when such orders
are obtained sends them to his nonresident principal or principals.
If an order is accepted, the goods are shipped by such nonresident
principal or principals to the local jobber or wholesale dealer. Up
to the time of the sale, the goods in all instances belong to the
nonresident principal or principals, and are shipped to the State
of Tennessee from another state."
"In making sales or soliciting orders for the goods, the
complainant sometimes exhibits samples to the local jobber or
wholesale dealer, and sometimes takes the orders without showing a
sample."
"Unless complainant has been previously authorized by the
principal or principals to sell at a fixed price, the orders are
taken subject to acceptance or rejection by such nonresident
principal or principals, who own the goods. "
Page 185 U. S. 29
"At the end of each month, or at stated periods, the complainant
is paid a commission by such nonresident principal or principals
for goods previously sold on accepted orders. No commission is paid
on orders taken but rejected. Complainant does not receive for his
services any pay or salary from any local jobber or dealer or
resident of Tennessee, nor does he assume to represent or represent
or hold himself out as representing, any resident of Tennessee, or
negotiate any sales of goods for residents of Tennessee. His
principals are all residents of other states of the United States,
and the goods sold are shipped from such other state to the State
of Tennessee for delivery to buyers who reside in Tennessee."
"The complainant has an office or 'headquarters' in Chattanooga,
Tennessee, where he keeps samples, stationery, and other articles,
but he travels around on foot daily or frequently in drumming or
soliciting orders for goods, as before stated. His principals are
specific parties, firms, or corporations, all nonresidents of
Tennessee and residents of other states in the United States, and
he does not represent or hold himself out as representing the
public in general, or negotiate or sell for any resident of
Tennessee."
"The defendants and solicitors for the State of Tennessee and
Hamilton County contend that, under the facts, the complainants are
'merchandise brokers,' and each of them is bound for privilege
taxes under the laws of Tennessee."
"That J. H. McReynolds should pay a privilege tax for 1900 to
the State of $20.00, and to the County of $20.00."
"That Stockard & Jones should pay to the state $20.00 for
each of the years 1897, 1898, 1899, and 1900, and a like sum for
each of said years to the County of Hamilton."
"That each of the other complainants owe the same sums as
Stockard & Jones."
"That all of the complainants should be held for proper
penalties, costs, and attorneys' fees if they are held liable for
such taxes."
"The complainants contend that they are engaged exclusively in
interstate commerce, and are not bound for such privilege taxes;
further, that the revenue laws of Tennessee applicable
Page 185 U. S. 30
to 'merchandise brokers' do not include these complainants so as
to make them subject to privilege taxes, but even if such laws do
include complainants, yet they are inoperative and void as against
complainants, who are engaged solely in interstate commerce."
By agreement of the parties, two questions only were argued in
the state court: (1) whether or not complainants were merchandise
brokers and subject by statute to tax as such; (2) whether or not
their business constituted interstate commerce, and therefore was
beyond the reach of the state's taxing power.
The chancellor held that the complainants were not liable for
the privilege tax, and enjoined its collection perpetually and
adjudged the costs against Hamilton County. From the judgment so
entered, the defendants appealed to the supreme court of the state,
which, as stated, reversed the judgment and dismissed the bill,
holding the complainant's business was covered by the statute, and
that it did not violate the Constitution of the United States.
MR. JUSTICE PECKHAM, after making the foregoing statement of
facts, delivered the opinion of the Court.
In this case, we are bound to give the same meaning to the state
statute that was given to it by the supreme court of the state, and
the question which remains for us to decide is whether, as so
construed, the statute violates any provision of the federal
Constitution.
We think it violates the interstate commerce clause of the
Constitution of the United States, and that this Court has in
several cases decided the principle which invalidates the statute
so far as it affects the business of the complainants. The
principle is contained in the cases of
Brown v.
Maryland, 12 Wheat.
Page 185 U. S. 31
419, and
Welton v. Missouri, 91 U. S.
275. Subsequently the case of
Robbins v. Shelby
County Taxing District, 120 U. S. 489, was
decided, which is one of the leading cases upon the subject now in
hand, and we think that it is decisive of the case before us. That
case was tried upon an agreed statement of facts as follows:
"Sabine Robbins is a citizen and resident of Cincinnati, Ohio,
and on the ___ day of _____, 1884, was engaged in the business of
drumming in the taxing district of Shelby County, Tennessee --
i.e., soliciting trade by the use of samples for the house
or firm for which he worked as a drummer, said firm being the firm
of 'Rose, Robbins & Co.,' doing business in Cincinnati, and all
the members of said firm being citizens and residents of
Cincinnati, Ohio. While engaged in the act of drumming for said
firm, and for the claimed offense of not having taken out the
required license for doing said business, the defendant, Sabine
Robbins, was arrested by one of the Memphis or taxing district
police force, and carried before the Hon. D. P. Hadden, president
of the taxing district, and fined for the offense of drumming
without a license. It is admitted the firm of 'Rose, Robbins &
Co.' are engaged in the selling of paper, writing materials, and
such articles as are used in the book stores of the taxing district
of Shelby County, and that it was a line of such articles for the
sale of which the said defendant herein was drumming at the time of
his arrest."
The Court held upon these facts that the statute 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,"
was void as against Robbins.
The opinion of the Court was delivered by Mr. Justice Bradley,
in the course of which be said (p.
120 U. S.
494):
"In a word, it may be said that, in the matter of interstate
commerce, the United States are but one country, and are and must
be subject to one system of regulations, and not to a multitude of
systems. The doctrine of the freedom of that commerce,
Page 185 U. S. 32
except as regulated by Congress, is so firmly established that
it is unnecessary to enlarge further upon the subject. In view of
these fundamental principles, which are to govern our decision, we
may approach the question submitted to us in the present case and
inquire 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 such state
before they are introduced therein. Do not such restrictions affect
the very foundation of interstate trade? How is a manufacturer or a
merchant of one state to sell his goods in another state without in
some way obtaining orders therefor? Must he be compelled to send
them at a venture, without knowing whether there is any demand for
them? This may undoubtedly be safely done with regard to some
products for which there is always a market and a demand, or where
the course of trade has established a general and unlimited demand.
A raiser of farm produce in New Jersey or Connecticut, or a
manufacturer of leather or woodenware, may perhaps safely take his
goods to the City of New York and be sure of finding a stable and
reliable market for them. But there are hundreds, perhaps
thousands, of articles which no person would think of exporting to
another state without first procuring an order for them. It is
true, a merchant or manufacturer in one state may erect or hire a
warehouse or store in another state in which to place his goods and
await the chances of being able to sell them. But this would
require a warehouse or store in every state with which he might
desire to trade. Surely he cannot be compelled to take this
inconvenient and expensive course. In certain branches of business,
it may adopt it with advantage. Many manufacturers do open houses
or places of business in other states than those in which they
reside, and send their goods there to be kept on sale. But this is
a matter of convenience, and not of compulsion, and would neither
suit the convenience nor be within the ability of many others
engaged in the same kind of business, and would be entirely
unsuited to many branches of business. In these cases, then, what
shall the merchant or manufacturer do who wishes to sell his goods
in other states? Must he sit still in his factory or warehouse,
and
Page 185 U. S. 33
wait for the people of those states to come to him? This would
be a silly and ruinous proceeding. The only other way, and the one,
perhaps, which most extensively prevails, is to obtain orders from
persons residing or doing business in those other states. But how
is the merchant or manufacturer to secure such orders? If he may be
taxed by such states for doing so, who shall limit the tax? It may
amount to prohibition. To say that such a tax is not a burden upon
interstate commerce is to speak at least unadvisedly and without
due attention to the truth of things."
And again, at p.
120 U. S.
496:
"But it will be said that a denial of this power of taxation
will interfere with the right of the state to tax business pursuits
and callings carried on within its limits, and its rights to
require licenses for carrying on those which are declared to be
privileges. This may be true to a certain extent, but only in those
cases in which the states themselves, as well as individual
citizens, are subject to the restraints of the higher law of the
Constitution. And this interference will be very limited in its
operation. It will only prevent the levy of a tax, or the
requirement of a license, for making negotiations in 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."
Other cases followed the
Robbins case, among them,
Philadelphia & Southern
Steamship Co. v. Pennsylvania, 122 U.S.
Page 185 U. S. 34
326;
Leloup v. Port of Mobile, 127 U.
S. 640;
Asher v. Texas, 128 U.
S. 129;
Stoutenburgh v. Hennick, 129 U.
S. 141;
McCall v. California, 136 U.
S. 104;
Norfolk & Western Railroad Co. v.
Pennsylvania, 136 U. S. 114;
Crutcher v. Kentucky, 141 U. S. 47. These
cases exhibit different phases of the same general principle, but
all follow that principle as announced in the
Robbins
case, and deny the right of the state to tax people representing
the owners of property outside of the state for the privilege of
soliciting orders within it as agents of such owners for property
to be shipped to persons within the state. We think they cover the
facts of the case at bar, and render the statute as construed by
the state court invalid so far as it affects the business of the
complainants described in the agreed statement of facts above set
forth.
The defendants in error, admitting the finality of the decisions
above referred to in regard to the questions therein decided, claim
that they do not in truth cover the case before us, and they urge
that it is controlled by
Ficklen v. Shelby County Taxing
District, 145 U. S. 1. A
reference to that case shows important and material distinctions of
fact which render it unlike the one now before us. The opinion of
the Court was delivered by the present Chief Justice, who, while
recognizing and approving the
Robbins and other similar
cases, distinguished them from the one then under review. In the
course of his opinion, he said (p.
145 U. S.
20):
"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 9 of chapter 96 of the Tennessee
Laws of 1881, which embraced a different subject matter from
section 16 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 and 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
Page 185 U. S. 35
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."
And again, at p.
145 U. S. 24, it
was said:
"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."
From these extracts from the opinion, it is seen that a material
fact in the case was that Ficklen had taken out a general and
unrestricted license to do business as a broker, and he was thereby
authorized to do any and all kinds of commission business, and
therefore became liable to pay the privilege tax exacted. Although
Ficklen's principals happened in the year 1887 to be wholly
nonresidents, the fact might have been otherwise, as was stated by
the Chief Justice, because his business was not confined to
transactions for nonresidents.
In this case, the complainants did not represent or assume to
represent any residents of the State of Tennessee, and each of the
complainants represented only certain specific parties, firms, or
corporation, all of whom were nonresidents of Tennessee. They did
no business for a general public. We attach no importance to the
fact that, in the
Robbins case, the individual
Page 185 U. S. 36
taxed resided outside of the state. He was taxed by reason of
his business or occupation while within it, and the tax was held to
be a tax upon interstate commerce. Nor does the fact that the
complainants acted for more than one person residing outside of the
state affect the question. If, while so acting and soliciting
orders within the state for the sale of property for one
nonresident of the state, the person so soliciting was exempt from
taxation on account of that business because the tax would be upon
interstate commerce, we do not see how he could become liable for
such tax because he did business for more than one individual,
firm, or corporation, all being nonresidents of the State of
Tennessee. The fact that the state or the court may call the
business of an individual, when employed by more than one person
outside of the state to sell their merchandise upon commission, a
"brokerage business" gives no authority to the state to tax such a
business as complainants.' The name does not alter the character of
the transaction nor prevent the tax thus laid from being a tax upon
interstate commerce. As was said by Mr. Justice Bradley in the
Robbins case,
supra:
"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 is still a carrying on of interstate commerce, whether the
party is acting for one or more principals residing outside of the
state and selling their goods through his procurement, acting for
them as their agent.
We cannot see that the
Ficklen case rules the one
before us. Although it is plain from the opinion of the Chief
Justice that there was not the slightest intention of casting any
doubt upon the correctness of the decisions in the
Robbins
and other cases above cited, it is subsequently stated in
Brennan v. Titusville, 153 U. S. 289,
that the case of
Ficklen "is no departure from the rule of
decision so firmly established by the prior cases." In speaking of
the distinguishing features of the
Ficklen case, MR.
JUSTICE BREWER, in delivering the opinion of the Court in
Brennan v. Titusville, said at p.
153 U. S.
307:
"In other words, the
Page 185 U. S. 37
tax imposed was for the privilege of doing a general commission
business within the state, and whatever were the results
pecuniarily to the licensees, or the manner in which they carried
on business, the fact remained unchanged that the state had, for a
stipulated price, granted them this privilege. It was thought by a
majority of the court that to release them from the obligations of
their bonds on account of the accidental results of the year's
business was refining too much, and that the plaintiffs who had
sought the privilege of engaging in a general business should be
bound by the contracts which they had made with the state
therefor."
Although it is said in the opinion of the state court herein
that the thing taxed is the occupation of merchandise brokerage,
and not the business of those employing the brokers, yet we have
seen from the cases already cited that, when the tax is applied to
an individual within the state selling the goods of his principal
who is a nonresident of the state, it is in effect a tax upon
interstate commerce, and that fact is not in anywise altered by
calling the tax one upon the occupation of the individual residing
within the state while acting as the agent of a nonresident
principal. The tax remains on upon interstate commerce, under
whatever name it may be designated.
That such a tax amounts to an invasion of the commerce clause of
the Constitution of the United States is held in
Stratford v.
Montgomery, 110 Ala. 619, in a most satisfactory opinion by
Chief Justice Brickell. In speaking of the tax under the Alabama
statute, he said (p. 628):
"While, as we have shown, the business of the defendant was
general, so as to constitute him a broker, it by no means follows
that it required he should also take local business. He might, as
he did, confine himself to interstate business and still be a
'broker,' without becoming liable to the tax."
The statute of Alabama is similar to the one in Tennessee, and
the facts in the above case are almost identical with those agreed
upon herein.
Although the state has general power to tax individuals and
property within its jurisdiction, yet it has no power to tax
interstate commerce, even in the person of a resident of the
state.
Page 185 U. S. 38
We regard this case as within the
Robbins and other
similar cases above referred to, and it follows that the judgment
of the Supreme Court of Tennessee, holding the complainants liable
to pay the tax demanded, was erroneous.
The judgment of that court is therefore reversed, and the
case remanded for further proceedings not inconsistent with the
opinion of this Court.
MR. JUSTICE GRAY took no part in the decision of this case.
