The privilege given telegraph companies under the Act of July
24, 1866, to use military and post roads of the United States for
poles and wire was permissive, and did not create corporate rights
and privileges to carry on the business of telegraphy.
The corporate rights and privileges were derived from the laws
of the state of incorporation.
The permission given by the Act of 1866 does not prevent a state
from
Page 226 U. S. 405
taxing the real or personal property of a telegraph company
within its borders or from imposing a license tax upon the right to
do a local business within the state.
West. Un. Tel. Co. v.
Kansas, 216 U. S. 1,
distinguished.
Unless there is a claim that a federal right is violated, the
reasonableness of a municipal license ordinance is for the state to
determine.
In determining its validity, this Court must consider a
municipal ordinance as it has been construed by the highest court
of the state.
An agency of the federal government in the execution of its
sovereign power is not subject to the taxing power of the
state.
An ordinance which taxes without exemption the privilege of
carrying on business, part of which is a governmental agency such
as telegraphy, and makes no exemption of that class of the
business, includes its transaction and is void as an
unconstitutional attempt to tax a federal agency.
Where, as in this case, the part of the license exacted
necessarily affects the whole, it makes the entire tax
unconstitutional and void.
164 Ala. 633 reversed.
The facts, which involve the validity of an ordinance of a
municipality in Alabama to impose a license fee on telegraph
corporations transacting an intrastate business without exempting
messages sent by the government, are stated in the opinion.
Page 226 U. S. 411
MR. JUSTICE DAY delivered the opinion of the Court.
This is a writ of error to review the judgment of the Supreme
Court of the State of Alabama, affirming the judgment of the City
Court of Talladega. 164 Ala. 633.
D. G. Williams, the plaintiff in error, was convicted of doing
business in the City of Talladega, as agent of the Western Union
Telegraph Company, from October 1, 1908, to December 31, 1908,
without taking out and paying for a license, in violation of an
ordinance of the city. The ordinance contained a schedule of
licenses for divers businesses, vocations, occupations, and
professions carried on in the city, among others, the
following:
"158. Telegraph company. Each person, firm, or corporation
commercially engaged in business sending messages to and from the
city to and from points in the State of Alabama for hire or reward,
$100."
Section 2 of the ordinance declared that the license was exacted
in the exercise of the police power of the city, as well as for the
purpose of raising revenue for the city. The fourth section
provided that any person, firm, or corporation who engaged in any
trade, business, or profession for which a license was required
without first having obtained such license should be guilty of an
offense, and upon conviction should be fined not less than $1 and
not more than $100, and that each day should constitute a separate
offense.
The record discloses that the corporation was organized
Page 226 U. S. 412
under the laws of the State of New York, and had accepted the
provisions of the Act of Congress of July 24, 1866, 14 Stat. 221,
c. 230 (Rev.Stat. §§ 5263-5268), and for several years theretofore
and during the years 1907 and 1908 had had an office in the City of
Talladega, and was engaged in the business of transmitting messages
between private parties and between the departments and agencies of
the United States government from Talladega to other points in the
State of Alabama, and also from other points in the State of
Alabama to Talladega; that, during the months of October, November,
and December, 1908, Williams was employed by the Western Union
Telegraph Company as manager of its office at Talladega; that a
license fee of $25 was demanded of him for the quarter ending
December 31, 1908, which was refused, and that he was fined $25 and
costs, and in the event of his failure to pay the fine and costs he
was sentenced to labor on the streets for fifty days. It also
appears that the Western Union Telegraph Company pays taxes on its
property in the state. In addition to the agreed facts, from which
the above statement is taken, it is shown by the testimony of the
defendant that the lines of the Western Union Telegraph Company
enter and leave the city over the right of way of the Southern
Railroad and the Louisville & Nashville Railroad, both of which
are public railroads, and that within the City of Talladega the
company has lines which leave the right of way of the railroad
companies and proceed along public streets to the office of the
company, and also that government messages were relayed daily at
the Talladega office; that it received messages between the
different departments of the government of the United States at
this office from points within the state, and that government
messages were given a preference and were sent at reduced rates.
From the testimony, the Supreme Court of Alabama found that, for
the year 1908, not including the month of January, the
Page 226 U. S. 413
company did its intrastate business at a net loss of eighty-six
cents.
This case differs from some cases which have been in this Court
involving the right to tax the Western Union Telegraph Company in
that it places emphasis upon the alleged immunity from taxation of
the class herein involved, because, it is contended, by the Act of
1866, Congress, by virtue of the authority given it to establish
post roads, conferred federal franchises upon the company, and made
the Western Union Telegraph Company an instrumentality of the
federal government, endowed with franchises to construct, maintain,
and operate telegraph lines on the post roads of the United States,
with the duty in the operation of those lines not only to serve the
government of the United States, but also to serve the public which
might wish to transact business over its lines. This being so, it
is now insisted that the attempt to impose a license tax upon the
company, either by the State of Alabama or any of its
municipalities, is an attempt to impose a tax on the franchises so
created by the federal government.
The question made upon this point was considered in
Postal
Telegraph Cable Co. v. Charleston, 153 U.
S. 692. In that case, the Postal Telegraph Cable Company
had accepted the provisions of the Act of 1866, and the state
statute imposed a license of $500 upon the telegraph company for
business done exclusively within the city of Charleston, not
including any business done to or from points without the state,
and not including any business done by the officers of the United
States. It was contended for the telegraph company that the license
required by the ordinance was a tax upon it for the privilege of
exercising its franchise within the City of Charleston; that the
telegraph company having constructed its lines along post roads in
the city of Charleston and elsewhere, no state or municipal
authority could collect a license fee
Page 226 U. S. 414
from it for the privilege of conducting its business, "
thus
restraining the powers possessed by it under its franchises and
under the Acts of Congress," and furthermore that the
ordinance in question was in interference with interstate commerce,
and therefore void. It will thus be seen that in that case not only
was the contention made as to the interstate commerce feature of
the telegraph company's business, but it was specifically claimed
that to exact such a license would restrain the powers possessed by
it under the franchises created by the Act of Congress. After
reviewing a number of cases, Mr. Justice Shiras, who delivered the
opinion of the Court, said:
"It is further contended that the ruling of the cited cases does
not cover the case of a telegraph company which has constructed its
lines along the post roads in the City of Charleston and elsewhere,
and which is exercising its functions under the Act of Congress as
an agency of the government of the United States. It is obvious
that the advantages or privileges that are conferred upon the
company by the Act of July 24, 1866 (Rev.Stat. §§ 5263-5268), are
in the line of authority to construct and maintain its lines as a
means or instrument of interstate commerce, and are not necessarily
inconsistent with a right on the part of the state in which
business is done and property acquired to tax the same, within the
limitations pointed out in the cases heretofore cited."
In
Western Union Telegraph Co. v. Gottlieb,
190 U. S. 412,
this Court, again considering the Act of 1866, quoting from the
opinion of Mr. Justice Miller in
Western Union Telegraph Co. v.
Massachusetts, 125 U. S. 530,
said, speaking by MR. JUSTICE McKENNA:
"These propositions were laid down: that the company owed its
existence as a corporation and its right to exercise the business
of telegraphy to the laws of the state under which it was
organized; that the privilege of running the lines of its wires
over and along the military
Page 226 U. S. 415
and post roads of the United States was granted by the Act of
Congress, but that the statute was merely permissive, and conferred
no exemption from the ordinary burdens of taxation; that the state
could not, by any specific statute, prevent a corporation from
placing its lines along the post roads, or stop the use of them
after they were so placed, but the corporation could be taxed in
exchange for the protection it received from the state 'upon its
real or personal property, as any other person would be.' And,
describing the particular tax imposed it was said:"
" The tax in the present case, though nominally upon the shares
of the capital stock of the company, is in effect a tax upon that
organization on account of property owned and used by it in the
State of Massachusetts, and the proportion of the length of its
lines in that state to their entire length throughout the whole
country is made the basis for ascertaining the value of that
property. We do not think that such a tax is forbidden by the
acceptance on the part of the telegraph company of the rights
conferred by § 5263 of the Revised Statutes, or by the commerce
clause of the Constitution."
In the latest utterance of this Court upon the subject under
consideration,
Western Union Telegraph Co. v. Richmond,
224 U. S. 160, MR.
JUSTICE HOLMES, delivering the opinion of the Court, said:
"The act of Congress, of course, conveyed no title, and did not
attempt to found one by delegating the power to take by eminent
domain.
Western Union Telegraph Co. v. Pennsylvania Railroad
Co., 195 U. S. 540,
195 U. S.
574. It made the erection of telegraph lines free to all
submitting to its conditions, as against an attempt by a state to
exclude them because they were foreign corporations, or because of
its wish to erect a monopoly of its own.
Pensacola Telegraph
Co. v. Western Union Telegraph Co., 96 U. S. 1. It
has been held to prevent a state from stopping the
Page 226 U. S. 416
operation of lines within the act by injunction for failure to
pay taxes.
Western Union Telegraph Co. v. Attorney General of
Massachusetts, 125 U. S. 530. But, except in
this negative sense, the statute is only permissive, not a source
of positive rights."
These cases, taken together, establish the proposition that the
privilege given under the terms of the act to use the military and
post roads of the United States for the poles and wires of the
company is to be regarded as permissive in character, and not as
creating corporate rights and privileges to carry on the business
of telegraphy, which were derived from the laws of the state
incorporating the company, and that this permissive grant did not
prevent the state from taxing the real or personal property
belonging to the company within its borders, or from imposing a
license tax upon the right to do a local business within the state.
Nor is there anything running counter to the former cases in the
case of
Western Union Telegraph Co. v. Kansas,
216 U. S. 1, wherein
it was held that the attempt to levy a graded charter fee upon the
entire capital stock of the Western Union Telegraph Company, a
corporation of another state, engaged in commerce among the states,
as a condition to the right to do local business within the State
of Kansas, was void as an attempt, when the substance of things was
reached, to tax the right of the company to do interstate business
within the state, and as a tax upon property beyond the limits and
jurisdiction of the state.
It is further contended that the tax is unreasonable and unjust
because of its effect upon interstate business. The reasonableness
of the ordinance, unless some federal right set up and claimed is
violated, is a matter for the state to determine. It is contended
that the result of the tax upon the intrastate business conducted
at a loss is to impose a burden upon the other business of the
company, and is therefore void. The Supreme Court of Alabama
Page 226 U. S. 417
however, reached the conclusion that the attempted test for
eleven months, showing a loss of eighty-six cents, is not a
sufficiently accurate representation of the business of the company
conducted at Talladega to render the tax void. With this view we
agree, and we are not satisfied that the tax is such as to impose a
burden upon interstate commerce, and therefore make it subject to
attack as a denial of federal right.
It is further contended that this ordinance is void because it
makes no exception as to the sending of government messages. In
this respect, it is suggested in the brief of the defendant in
error that the ordinance may be construed as not to include
business transacted by the company as an agency of the government,
and as applying only to commercial business of a different
character; but, in view of the construction which the Supreme Court
of Alabama has placed upon it, we must consider the ordinance as
construed by that court. Upon the authority of a previous case
(
Moore v. Eufaula, 97 Ala. 670), it held the ordinance
valid, although it does not exclude messages sent for the
government of the United States. In this connection, it said:
"The fact that a part of the business done by the company
consists in the sending of messages for the government does not
affect the right of the state to impose a reasonable privilege tax.
. . ."
We therefore have to consider whether a license tax by a state
on the doing of business within the state, including the
transmission of government messages, by a telegraph company which
has accepted the terms in the Act of 1866 can be lawfully imposed.
By the Act of 1866, government messages are given priority over all
other business, and are transmitted at the rates annually fixed by
the Postmaster General, and before the telegraph companies exercise
any of the powers or privileges conferred by the law, they are
required to file with the Postmaster
Page 226 U. S. 418
General their written acceptance of the restrictions and
obligations of the act (Rev.Stat. §§ 5266 and 5268).
This Court has had occasion to consider the effect of this
legislation and the acceptance of its terms by the telegraph
company, so far as the transmission of government telegrams and the
transaction of government business is concerned. In the case of
Western Union Telegraph Co. v. Texas, 105 U.
S. 460, an ordinance was held void which required the
company to pay a tax of one cent for all full rate messages sent,
and one-half cent for every message less than full rate. This was
in addition to taxes paid by the company on real and personal
property in the state. The ordinance was held void as levying a tax
upon interstate messages, and also void insofar as it undertook to
tax the transaction of government business. After declaring that,
as to such business, companies which had accepted the terms of the
act became government agencies, this Court, speaking by Mr. Chief
Justice Waite, said:
"The Western Union Telegraph Company, having accepted the
restrictions and obligations of this provision by Congress,
occupies in Texas the position of an instrument of foreign and
interstate commerce, and of a government agent for the transmission
of messages on public business. Its property in the state is
subject to taxation the same as other property, and it may
undoubtedly be taxed in a proper way on account of its occupation
and its business. The precise question now presented is whether the
power to tax its occupation can be exercised by placing a specific
tax on each message sent out of the state, or sent by public
officers on the business of the United States."
And, after dealing with the interstate commerce feature of the
law, said:
"As to the government messages, it is a tax by the state on the
means employed by the government of the United States to execute
its constitutional powers, and therefore
Page 226 U. S. 419
void. It was so decided in
McCulloch v. Maryland, 4
Wheat. 316, and has never been doubted since."
The ordinance sustained in
Postal Telegraph Cable Co. v.
Charleston, supra, expressly excluded interstate and
government messages.
Were it otherwise, an agency of the federal government, in the
execution of its sovereign power, would be at the mercy of the
taxing power of the state. It is enough, in this connection, to
refer to the cases of
McCulloch v. Maryland, supra;
22 U. S. Bank of
United States, 9 Wheat. 738;
Railroad Co.
v. Peniston, 18 Wall. 5;
California v. Central
Pacific R. Co., 127 U. S. 1;
Central Pacific R. Co. v. California, 162 U. S.
91.
We have, then, an ordinance which taxes, without exemption, the
privilege of carrying on a business a part of which is that of a
governmental agency constituted under a law of the United States
and engaged in an essential part of the public business --
communication between the officers and departments of the federal
government. The ordinance, making no exception of this class of
business, necessarily includes its transaction within the privilege
tax levied. This part of the license exacted necessarily affects
the whole, and makes the tax unconstitutional and void. In
Leloup v. Mobile, 127 U. S. 640, Mr.
Justice Bradley, speaking for the Court, said:
"It is urged that a portion of the telegraph 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."
And see Western Union Co. v. Alabama Assessment Board,
132 U. S. 472,
132 U. S. 477;
Allen v. Pullman's Palace Car Co., 191 U.
S. 171,
191 U. S.
179.
For this reason, we think the judgment of the Supreme Court of
Alabama should be reversed, and the case remanded to that court for
further proceedings not inconsistent with this opinion.
Reversed.