A state may not impose a tax which is in any way a burden upon
interstate commerce; but it may impose a privilege tax upon
corporations engaged in interstate commerce for carrying on that
part of their business which is wholly within the taxing state and
which tax does not affect their interstate business or their right
to carry it on in that state.
The provision of the tax law of the Tennessee of 1887 that
sleeping car companies doing business in the state pay a certain
sum per annum per car and which, by its terms, applies to cars
running through the state
Page 191 U. S. 172
as well as to those operated wholly within the state, is
repugnant to the commerce clause of the federal Constitution.
Pickard v. Pullman. Co., 117 U. S. 34.
The provision of the tax law of the State of Tennessee of 1889
that sleeping car companies pay a tax of $3,000 per annum in lieu
of all other except
ad valorem tax for one or more
passengers taken up at one point within the state and delivered at
another and transported wholly within the state, and which does not
refer to or affect the interstate business of the companies, is not
repugnant to the commerce clause of the federal Constitution.
Osborne v. Florida, 164 U. S. 650.
Such tax will not be regarded as a disguised attempt to tax the
privilege of engaging in interstate commerce if, under the laws of
the taxing state, it is not compulsory for a corporation engaged in
interstate commerce to carry on that part of its business which is
wholly within that state.
Pullman Co. v. Adams,
189 U. S. 420.
This is a writ of error to review the judgment of the Circuit
Court for the Middle District of Tennessee in suits brought by the
Pullman's Palace Car Company to recover from the State of Tennessee
moneys paid under protest for taxes levied and collected by virtue
of certain laws of the state requiring the payment of sums for the
years 1887 to 1893, inclusive. These statutes are set forth in the
opinion. The cases were tried to the court without the intervention
of a jury, and separate findings of fact and law were made. From
the findings of fact, it appears that the Pullman Company, a
sleeping car company, operated its cars in Tennessee under a
contract with railroad companies traversing the state. These
contracts required the Pullman Company to furnish the cars, keep
the same in order, and to hire the porters and conductors. The
railroad companies paid the Pullman Company for the privileges
afforded, furnishing light, heat, and water for the cars, and
repairing damages due to accident and casualty. The special finding
of facts as to the manner of operation in transporting the cars of
the Pullman Company sets forth:
During the years 1887 and 1888, the company operated sleeping
cars, as follows: a car left Nashville and went to Memphis nightly,
and on this car tickets were sold to passengers from Nashville to
Memphis, and not beyond. This car remained in Memphis during the
day, returning to Nashville the following
Page 191 U. S. 173
night, and going no further. The next night, it went from
Nashville by way of Chattanooga to Atlanta, Georgia. It remained in
Atlanta during the day, and returned the next night from Atlanta to
Memphis. On the trip from Memphis, tickets were sold from Nashville
to Atlanta and to intermediate points in the State of Tennessee. On
the nights, the cars left Nashville for Memphis and Atlanta for
Nashville, a car left Memphis for Nashville and another left
Nashville for Atlanta, selling tickets from Memphis to Nashville
and intermediate points, and no further, and from Atlanta and
intermediate points to Nashville and no further. The car from
Memphis to Nashville went on the trip to Atlanta before making a
return trip to Memphis, and the car making the trip from Atlanta to
Nashville went on the trip the following night to Memphis before
making a return trip to Atlanta. The same cars were not used
continuously in this service, but were changed from time to time,
there being four cars performing the service at all times.
During the year 1887, the East Tennessee, Virginia & Georgia
Railroad Company ran two sleepers of its own, doing a business
between Knoxville and Chattanooga, Tennessee. During the years
1889, 1890, 1891, 1892, and 1893, the company has operated sleeping
cars between Nashville and Memphis and Atlanta and Nashville, as
above set forth. From 1887, continuously, the Pullman Company has
operated its cars on the lines of the Nashville, Chattanooga &
St. Louis Railway, the Louisville & Nashville Railroad, East
Tennessee, Virginia & Georgia Railroad, now the Southern
Railway, the Newport News & Mississippi Valley Railroad,
Illinois Central Railroad, and Cincinnati Southern Railroad, and
all other railroads within the State of Tennessee whereon sleeping
cars are used, and has taken up, carried, and put down passengers
within the state.
In 1887, sleeping cars were operated during a portion of the
year between Nashville and Memphis, and did not pass beyond the
limits of the state. It was agreed that, without either party's
waiving any rights, the plaintiff's claim would be abated
$1,234.
Page 191 U. S. 174
The gross receipts of the plaintiff per year from lines running
into the State of Tennessee was about $500,000. The gross receipts
per year from passengers carried locally in Tennessee was about
$25,000.
The cars actually used on all these lines during each year would
number over one hundred.
Page 191 U. S. 177
MR. JUSTICE DAY, after making the foregoing statement, delivered
the opinion of the Court.
The taxes in controversy were levied under certain revenue laws
of the State of Tennessee. Those for the years 1887 and 1888
provided:
"That the rate of taxation on the following
Page 191 U. S. 178
privileges shall be as follows: Sleeping cars: Each company
doing business in the state, on each car, per annum, $500."
Section eight of the act provided:
"That any and all parties, firms, or corporations exercising any
of the foregoing privileges must pay this tax, as set forth in this
act, for the exercise of such privilege, whether they make a
business of it or not."
The Tennessee act of 1877, imposing a tax upon the running of
sleeping cars, was before this Court for consideration in the case
of
Pickard v. Pullman Co., 117 U. S.
34. That act provided:
"That the running or using of sleeping cars or coaches on
railroads in Tennessee not owned by the railroads upon which they
are run or used is declared to be a privilege, and the companies
shall be required to pay to the comptroller by the first day of
July following fifty dollars ($50) for each and every said cars or
coaches used or run over said roads, and if the said privilege tax
herein assessed be not paid as aforesaid, the comptroller shall
enforce the payment of the same by distress warrant."
It was held that the tax was a burden upon interstate commerce,
and void because of the exclusive power of Congress to regulate
commerce between the states. Unless the statute now under
consideration can be distinguished from the one then construed, the
Pickard case is decisive of the present case. Both taxes
were imposed under the power granted by the Constitution of
Tennessee to lay a privilege tax. This power is held by the supreme
court of the state to give a wide range of legislative discretion.
Any occupation, business, employment, or the like affecting the
public may be classed and taxed as a privilege.
K. & O.
Railroad Co. v. Harris, 99 Tenn. 684. In the act of 1877, the
running and using of sleeping cars on railroads in the state, when
the cars are not owned by the railroads upon which they are run, is
declared to be a privilege. Under the act of 1887, the tax is
specifically imposed upon a privilege. Under the act of 1877, the
tax imposed was fifty dollars for each car or coach used or run
over the road. Under the act of 1887, each company doing business
in the state is
Page 191 U. S. 179
required to pay five hundred dollars per annum for the same
privilege. The distinction, except in the amount of annual tax
exacted, is without substantial difference. Under the earlier act,
the tax is required for the privilege of running and using sleeping
cars on railroads not owning the cars. In the later act, it is
enacted for the privilege of doing business in the state. This
business consists of running sleeping cars upon railroads not
owning the cars, and is precisely the privilege to be paid for
under the first act, neither more nor less. In neither act is any
distinction attempted between local or through cars or carriers of
passengers. The railroads upon which the cars are run are lines
traversing the state but not confined to its limits. The cars of
the Pullman Company run into and beyond the state, as well as
between points within the state. The act, in its terms, applies to
cars running through the state as well as those whose operation is
wholly intrastate. It applies to all alike, and requires payment
for the privilege of running the cars of the company, regardless of
the fact whether used in interstate traffic or in that which is
wholly within the borders of the state. There is no decision of the
Supreme Court of Tennessee limiting the act in its operation to
intrastate traffic. It is true that the comptroller has sought to
restrain the operation of the law by imposing the tax for two years
upon cars running between Nashville and Memphis and between
Nashville and Chattanooga for two years, and fixing one car in each
year as the proportion of local business done on interstate cars
for two years. But this action does not conclude the state in
taxing for other years, and the action taken by the comptroller
does not limit the terms of the law affecting interstate
commerce.
In
Leloup v. Mobile, 127 U. S. 640,
127 U. S. 647,
it was sought to recover a penalty imposed upon an agent of the
Western Union Telegraph Company for failure to pay an annual
license tax as required by an ordinance of Mobile. In the course of
the opinion denying the right to exact the license fee, Mr. Justice
Bradley said:
"But it is urged that a portion of the telegraph
Page 191 U. S. 180
company's business is internal to the State of Alabama, and
therefore taxable by the state. But that fact does not remove the
difficulty. The tax affects the whole business without
discrimination. There are sufficient modes in which the internal
business, if not already taxed in some other way, may be subjected
to taxation without the imposition of a tax which covers the entire
operations of the company."
In
Osborne v. Florida, 164 U.
S. 650, a license tax upon express companies was
sustained, in view of the decision of the supreme court of that
state that it affected only business of the company within the
state. The statute now under consideration requires payment of the
sum exacted for the privilege of doing any business when the
principal thing to be done is interstate traffic. We are not at
liberty to read into the statute terms not found therein or
necessarily implied, with a view to limiting the tax to local
business, which the legislature, in the terms of the act, impose
upon the entire business of the company. We are of opinion that
taxes exacted under the act of 1887 are void as an attempt by the
state to impose a burden upon interstate commerce.
Other considerations apply in the construction of the act of
1889, under which, or acts identical in terms, taxes were collected
from 1889 to 1893, inclusive. It provides:
"SEC. 4. The rate of taxation on the following privileges shall
be as follows, per annum: . . . Sleeping car companies (in lieu of
all other taxes except
ad valorem tax) for one or more
passengers taken up at one point in this state and delivered at
another point in this state, and transported wholly within the
state, per annum, $3,000."
Its terms apply strictly to business done in the transportation
of passengers taken up at one point in the state and transported
wholly within the state to another point therein. It is not
necessary to review the numerous cases in this Court in which
attempts by the states to control or regulate interstate commerce
have been the subject of consideration. While they show a zealous
care to preserve
Page 191 U. S. 181
the exclusive right of Congress to regulate interstate traffic,
the corresponding right of the state to tax and control the
internal business of the state, although thereby foreign or
interstate commerce may be indirectly affected, has been recognized
with equal clearness. In the late case of
Osborne v.
Florida, 164 U. S. 650, MR.
JUSTICE PECKHAM, speaking for the Court, said:
"It has never been held, however, that, when the business of the
company which is wholly within the state is but a mere incident to
its interstate business, such fact would furnish any obstacle to
the valid taxation by the state of the business of the company
which is entirely local. So long as the regulation as to the
license or taxation does not refer to, and is not imposed upon, the
business of the company which is interstate, there is no
interference with that commerce by the state statute."
Granting that the right exists whereby a state may impose
privilege or license fees upon business carried on wholly within
the state, it is argued that the tax of three thousand dollars per
annum, collected for carrying one or more local passengers on cars
operating within the state, is assessed upon traffic which bears
such small proportion to the entire business of the company within
the state that it could not have been levied in good faith upon
purely local business, and is but a thinly disguised attempt to tax
the privilege of interstate traffic. If the payment of this tax was
compulsory upon the company before it could do a carrying business
within the state, and the burden of its payment, because of the
minor character of the domestic traffic, rested mainly upon the
receipts from interstate traffic, there would be much force in this
objection. Upon this proposition, we are unable to distinguish this
case from
Pullman Co. v. Adams, 189 U.
S. 420, decided at the last term, wherein it was held
that the privilege tax imposed by the State of Mississippi upon
each car carrying passengers from one point in the state to another
therein was a valid tax notwithstanding the fact that the company
offered to show that its receipts from the carrying of the
passengers named did not equal the
Page 191 U. S. 182
expenses chargeable against such receipts. This conclusion was
based upon the right of the company to abandon the business if it
saw fit. It was urged that, under the Constitution of Mississippi,
the Pullman Company was a common carrier, required to carry
passengers, and therefore could not be taxed for the privilege of
doing that which it was compelled to do; but, in view of a decision
of the Supreme Court of Mississippi sustaining the tax, it was
assumed that no such objection existed under the state
constitution. Speaking upon this subject, MR. JUSTICE HOLMES,
delivering the opinion of the Court, said:
"If the clause of the state constitution referred to were held
to impose the obligation supposed, and to be valid, we assume
without discussion that the tax would be invalid. For then it would
seem to be true that the state constitution and the statute
combined would impose a burden on commerce between the states
analogous to that which was held bad in
Crutcher v.
Kentucky, 141 U. S. 47. On the other hand,
if the Pullman Company, whether called a common carrier or not, had
the right to choose between what points it would carry, and
therefore to give up the carriage of passengers from one point to
another within the state, the case is governed by
Osborne v.
Florida, 164 U. S. 650. The company
cannot complain of being taxed for the privilege of doing a local
business which it is free to renounce. Both parties agree that the
tax is a privilege tax."
There is additional reason for holding that the Pullman Company
may transact its business in Tennessee without paying this
privilege tax and continue its interstate business, declining local
business, thereby escaping the attempt to tax it upon business
wholly within the state. The statute of Tennessee, enacted in 1875,
provides:
"The rule of the common law giving a right of action to any
person excluded from any hotel or public means of transportation or
place of amusement is hereby abrogated, and hereafter no keeper of
any hotel or public house, or carrier of passengers for hire, or
conductors, drivers, or employees of such carrier or keeper, shall
be bound
Page 191 U. S. 183
or under any obligation to entertain, carry, or admit any person
whom he shall, for any reason whatever, choose not to entertain,
carry, or admit to his house, hotel, carriage, or means of
transportation, or place of amusement, nor shall any right exist in
favor of any such person so refused admission, but the right of
such keepers of hotels and public houses, carriers of passengers,
and keepers of places of amusement and their employees to control
the access and admission or exclusion of persons to or from public
houses, means of transportation, and places of amusement shall be
as perfect and complete as that of any private person over his
private house, carriage, or private theater or places of amusements
for his family."
Shannon's Code, ยง 3046.
Under this act, no carrier is required to admit any passenger to
his car or means of transportation. While the Pullman Company may
not be technically a common carrier, still we think it comes within
the scope and meaning of this act. A sleeping car is obviously a
public means of transportation. Under this act, the carrier is not
obliged to afford its privileges to those making application
therefor. Mr. Justice Blatchford, speaking of the character of the
service afforded by sleeping cars in
Pickard v. Pullman
Co., 117 U. S. 34,
said:
"The car was equally a vehicle of transit as if it had been a
car owned by the railroad company, and the special conveniences or
comforts furnished to the passenger had been furnished by the
railroad company itself."
It follows that a tax imposed upon domestic business, under the
circumstances shown, cannot be a burden upon interstate commerce in
such sense as will invalidate it.
Under the judgment of the court below, the Pullman Company was
permitted to recover for license taxes levied under both acts.
Insofar as it permitted a recovery for taxes under the act of 1889
and identical laws of other years, the judgment should be
modified.
For that purpose, and for further proceedings in accordance
with this opinion, the case is remanded to the Circuit
Court.
