The denial to the states of the power to tax articles actually
moving in interstate commerce rests upon the supremacy of the
federal power to regulate that commerce, and its postulate is
necessary freedom of that commerce from the burden of local
taxation.
The state cannot impose a tax upon articles moving in interstate
commerce on the ground that such articles belong to its own
citizens.
Page 227 U. S. 505
They, a well a others, are under the protection of the commerce
clause of the Constitution.
The test of exemption from state taxation is not citizenship of
the owner, but whether or not the articles attempted to be taxed
are actually moving in interstate commerce.
Property brought from another state and withdrawn from the
carrier and held by the owner with full power of disposition become
subject to the local taxing power notwithstanding the owner may
intend to ultimately forward it to a destination beyond the
state.
Goods within the state may be made the subject of a
nondiscriminatory tax though bought from another state and held by
the consignee in the original package.
Woodruff
v. Parham, 8 Wall. 123.
243 Ill. 313 affirmed.
This is a writ of error to review a judgment of the Supreme
Court of the State of Illinois which affirmed a judgment for the
amount of a tax assessed against the plaintiff in error for
personal property in the year 1907. The contention that the
assessment was in violation of article I, § 8, clause 3, of the
federal Constitution, in that it was laid upon a subject of
interstate commerce, was overruled by the state court. 243 Ill.
313.
The facts were agreed to, as follows:
"That the defendant, E. R. Bacon, had, on the first day of
April, 1907, and for many years prior to said date, his residence
and domicil in the Town of Lake View, in the County of Cook, and
State of Illinois; that the defendant, E. R. Bacon, on the first
day of April, 1907, and prior thereto, occupied and controlled a
certain private grain elevator known as Wabash Elevator, and that
the said grain elevator was located at 33d and Waterville Streets
in the Town of South Town, in the City of Chicago, County of Cook,
and State of Illinois; that the only personal property in the Town
of South Town owned by the defendant on the first day of April,
1907, was certain grain stored in the said elevator above
mentioned, and certain personal property used by him in his
business office located at 234 La Salle Street, in the City of
Chicago,
Page 227 U. S. 506
Illinois, and that the said business office and the said
personal property used by said defendant therein was not then a
part of or in any way connected with said grain elevator; that the
said defendant, E. R. Bacon, has paid the tax assessed on April
1st, 1907, on all the personal property used by him in his said
business office located at 234 La Salle Street, in the City of
Chicago, Illinois; that the said defendant, E. R. Bacon, has paid
the tax assessed on April 1st, 1907, on all his personal property
located in the Town of South Town except the tax assessed on the
grain which was stored in the said Wabash Elevator on the 1st day
of April, 1907; that all of said grain stored in the said Wabash
Elevator on the 1st of April, 1907, was sold to the defendant, E.
R. Bacon, by various persons domiciled in and residents of various
states in the southern and western portions of the United States,
and that the said persons who sold the said grain to the said
defendant, E. R. Bacon, did, prior to the said sale and the
shipment of said grain, as hereinafter mentioned, enter into
certain contracts with certain railroad companies for the
transportation of said grain to the Cities of New York and
Philadelphia and various other cities in the eastern portions of
the United States, all of said cities being outside of the State of
Illinois, in and by which said contracts the said persons reserved
the right to the owners of the said grain to remove said grain from
the cars of the said railroad companies at the City of Chicago,
Illinois, for the mere temporary purposes of inspecting, weighing,
cleaning, clipping, drying, sacking, grading, or mixing, or
changing the ownership, consignee, or destination of said grain;
that, after the making of the said contracts by the original
vendors of the said grain and the said railroad companies, the said
original vendors delivered to the said railroad companies, under
and in accordance with the said contracts, the said grain for
transportation to said Cities of New York, Philadelphia and the
said divers other cities specified in the said contracts of
shipment."
"That the said E. R. Bacon was, prior to and on April 1st, 1907,
represented in the Cities of New York, Philadelphia, and the
said
Page 227 U. S. 507
divers other cities in the said eastern portions of the United
States by various agents, by and through whom he disposed of grain
and other commodities on the eastern markets, and that all of the
said grain above mentioned was purchased by him as aforesaid for
the sole and only purpose of being sold and disposed of by and
through his said agents in the aforesaid eastern cities, and that
the said grain or any portion thereof was not at any time intended,
by said original owners nor by said E. R. Bacon, for use, sale, or
disposition in the State of Illinois."
"That, at the time the said grain was sold to the said
defendant, E. R. Bacon, by the said original vendors thereof,
domiciled in and residents of said southern and western portions of
the United States, his sole and only intention regarding the said
grain was that all of the said grain should be transported and
carried from the place of its said original consignment to said
railroad companies to the said points of destination named in the
said contracts of shipment entered into between the said original
vendors of said grain and the said railroad companies, as
hereinbefore mentioned."
"That the said grain was sold to the defendant, E. R. Bacon, by
the original vendors of said grain, along with the existing
contracts of shipment between the said original vendors and the
said railroad companies, and along with the said privilege of
removing said grain from the said cars of the said railroad
companies, which said privilege was reserved to the owner of the
said grain in the manner and for the purposes hereinbefore
mentioned; that, in pursuance of the privilege which the defendant,
E. R. Bacon, was entitled to under said contracts of shipment
Page 227 U. S. 508
as the owner of said grain, he removed said grain from the said
railroad cars and placed the same in his said private Wabash
Elevator for the sole purposes of inspecting, weighing, cleaning,
clipping, drying, sacking, grading, and mixing, as specified in
said contracts of shipment, and not for the purposes of changing
the ownership, consignee, or destination of said grain, and that
said grain remained in said elevator for only such time as was
reasonably necessary for the purposes of inspecting, weighing,
cleaning, clipping, drying, sacking, grading, and mixing, and that,
immediately after said grain had been inspected, weighed, cleaned,
clipped, dried, sacked, graded, and mixed, it was turned over again
to the said railroad companies for shipment to the said eastern
cities in accordance with the said provisions of the said original
contracts of shipment entered into between the said original
vendors of said grain and the said railroad companies, and that the
said grain was thereupon forwarded by said railroad companies to
its said original points of destination."
"That the said grain so placed and contained in the said
elevator was not, nor was any part thereof at any time on, before,
or after the 1st day of April, 1907, sold or disposed of or
consumed in the State of Illinois, but that said grain and each and
every part thereof was transported out of said state to the points
of destination, and in the manner and form aforesaid;"
"That, on the 1st day of April, 1907, the Board of Assessors of
Cook County, Illinois, assessed a tax against the said E. R. Bacon
on the said grain contained in the said Wabash Elevator on the said
1st day of April, 1907, on a valuation of $5,000, which was
established by the board of review, and which was equalized by the
State Board of Equalization, and that the tax levied thereon
against the defendant, E. R. Bacon, for the year 1907, amounts to
$360, which is the tax to recover which the suit is brought; that
the defendant owns certain personal
Page 227 U. S. 509
property in the Town of Lake View, County of Cook and State of
Illinois, and that said personal property is contained in his said
domicil and residence, and that the said defendant has heretofore
paid all the taxes assessed on the said personal property on the
said 1st day of April, 1907, and that the said defendant, E. R.
Bacon, owned, on the 1st day of April, 1907, no other personal
property taxable by the taxing bodies of the State of Illinois
other than that above mentioned. "
Page 227 U. S. 510
MR. JUSTICE HUGHES, after making the above statement, delivered
the opinion of the Court.
Page 227 U. S. 511
Did the enforcement of the local tax upon the grain in the
elevator of the plaintiff in error amount to an unconstitutional
interference with interstate commerce?
The Supreme Court of Illinois was of the view that, if the grain
was in transit in interstate commerce, it was exempt from local
taxation. In its opinion, that court said:
"The sole question presented by this record is, was the grain
upon which the tax was levied in transit on April 1, 1907? If it
was so in transit, it was not liable to be taxed while passing
through the state to its destination. On the other hand, if it was
not in transit, but had a situs in this state, it was subject to
taxation under state authority."
In this view of the issue, the court sustained the recovery of
the amount of the tax.
It is now contended, however, by the defendant in error, that
the question thus defined was an immaterial one -- that, even if
the property was in transit, and was the subject of interstate
commerce, it was nevertheless liable to assessment, in common with
the other personal property of the plaintiff in error, because he
was a resident of the state, and the property was within the limits
of the county where the assessment was made.
This argument proceeds upon a misconception of the ground upon
which the power to tax articles actually moving in interstate
transportation is denied to the states. That denial rests upon the
supremacy of the federal power to regulate interstate commerce. Its
postulate is the necessary freedom of that commerce from the burden
of such local exactions as are inconsistent with the control and
protection of that power. The fact that such a burden is sought to
be imposed by the state of the domicil of the owner, upon property
moving in interstate commerce, creates no exception. That state
enjoys no prerogative to make levy upon such property passing
through it because it may belong to its citizens. They, as well as
others, are under the shelter of the commerce
Page 227 U. S. 512
clause. The question is determined not by the residence of the
owner, but by the nature and effect of the particular state action
with respect to a subject which has come under the sway of a
paramount authority.
This is clearly shown by the reasoning of the decisions which
define the limits of the state taxing power with respect to
property about to leave the state of its origin, or while it is on
its way to its destination in another state. In
Coe v.
Errol, 116 U. S. 517, the
question was whether the products of a state (in that case, timber
cut in the forests of New Hampshire), though intended for
exportation to another state and partially prepared for that
purpose by being deposited at a place or port of shipment, was
liable to be taxed like other property within the state. The claim
of immunity by reason of the fact that it was owned by nonresidents
was at once disposed of. "If not exempt from taxation for other
reasons," said the Court (
id., p.
116 U. S.
524),
"it cannot be exempt by reason of being owned by nonresidents of
the state. We take it to be a point settled beyond all
contradiction or question that a state has jurisdiction of all
persons and things within its territory which do not belong to some
other jurisdiction."
The case was put upon the same basis as though the timber had
been owned by residents of New Hampshire, and the question was
treated as being one with respect to the point of time at which
goods produced within the state, which are the subject of
exportation to another state, cease to be liable to state taxation.
It was concluded that these articles could be taxed by the state
until, but not after, they had been actually started in the course
of transportation to another state, or had been committed to a
carrier for that purpose.
The Court said:
"This question does not present the predicament of goods in
course of transportation through a state, though detained for a
time within the state by low water or other causes of delay, as was
the case of the
Page 227 U. S. 513
logs cut in the State of Maine, the tax on which was abated by
the Supreme Court of New Hampshire. Such goods are already in the
course of commercial transportation, and are clearly under the
protection of the Constitution. And so, we think, would the goods
in question be when actually started in the course of
transportation to another state, or delivered to a carrier for such
transportation."
(
Id., p.
116 U. S.
525.)
After pointing out the importance of clearly defining, so as to
avoid all question, the time when state jurisdiction over the
commodities of commerce begins and ends, and after commenting on
the established rule as to the power of taxation with respect to
goods which had come to their place of rest within the state for
disposal and use (
Woodruff v.
Parham, 8 Wall. 123;
Brown v. Houston,
114 U. S. 622),
the Court thus restated its conclusion in language applicable
generally to the products of the state without distinction with
respect to ownership by residents or nonresidents:
"But no definite rule has been adopted with regard to the point
of time at which the taxing power of the state ceases as to goods
exported to a foreign country or to another state. What we have
already said, however, in relation to the products of a state
intended for exportation to another state will indicate the view
which seems to us the sound one on that subject -- namely, that
such goods do not cease to be part of the general mass of property
in the state, subject, as such, to its jurisdiction and to taxation
in the usual way, until they have been shipped or entered with a
common carrier for transportation to another state or have been
started upon such transportation in a continuous route or journey.
We think that this must be the true rule on the subject. It seems
to us untenable to hold that a crop or a herd is exempt from
taxation merely because it is, by its owner, intended for
exportation. If such were the rule in many states, there would be
nothing but the lands and real
Page 227 U. S. 514
estate to bear the taxes. Some of the Western states produce
very little except wheat and corn, most of which is intended for
export, and so of cotton in the Southern states. Certainly, as long
as these products are on the lands which produce them, they are
part of the general property of the state. And so we think they
continue to be until they have entered upon their final journey for
leaving the state and going into another state."
(
Id., pp.
116 U. S.
527-528.)
In
General Oil Co. v. Crain, 209 U.
S. 211, the owner of the property, which was sought to
be subjected to an inspection tax in Tennessee, was a Tennessee
corporation. The property was oil contained in the company's tanks
at Memphis. It was contended that the oil in these tanks was in
transit from the place of manufacture in Pennsylvania to the place
of sale in Arkansas, and that the holding of it in Memphis was
merely for the purpose of separation, distribution, and reshipment,
and was for no longer time than required by the nature of the
business and the exigencies of transportation. The Court considered
the question from the standpoint of the general power of the state
to tax. The oil was held to be taxable, but not upon the ground
that its owner was domiciled in Tennessee. It was recognized that,
if the oil were actually in transit, it would not be taxable. But
it was found not to be in movement through the state; it had
reached the destination of its first shipment, and was held at
Memphis for the business purposes and profits of the company. The
principle applied was that announced in
American Steel &
Wire Co. v. Speed, 192 U. S. 500.
See Kelley v. Rhoads, 188 U. S. 1,
188 U. S. 5-7;
Diamond Match Co. v. Ontonagon, 188 U. S.
82,
188 U. S.
93-96.
We come, then, to the question whether the grain here involved
was moving in interstate commerce, so that the imposition of the
local tax may be said to be repugnant to the federal power.
Page 227 U. S. 515
The following facts are shown by the agreed statement: the grain
had been shipped by the original owners, who were residents of
southern and western states, under contracts for its transportation
to New York, Philadelphia, and other eastern cities, which reserved
to the owners the right to remove it from the cars at Chicago
"for the mere temporary purposes of inspecting, weighing,
cleaning, clipping, drying, sacking, grading, or mixing, or
changing the ownership, consignee, or destination"
thereof. While the grain was in transit, it was purchased by
Bacon, the plaintiff in error, who succeeded to the rights of the
vendors under the contracts of shipment. He was represented at the
points of destination by agents through whom he disposed of grain
and other commodities on the eastern markets, and the grain in
question was purchased by him solely for the purpose of being sold
in this way, and with the intention to forward it according to the
shipping contracts; it was not his intention to dispose of it in
Illinois. Upon the arrival of the grain in Chicago, Bacon availed
himself of the privilege reserved and removed it from the cars to
his private elevator. This removal, it is said in the agreed
statement of facts, was for the sole purposes of inspecting,
weighing, grading, mixing, etc., and not for the purpose of
changing its ownership, consignee, or destination. It is added that
the grain remained in the elevator only for such time as was
reasonably necessary for the purposes above mentioned, and that,
immediately after these had been accomplished, it was turned over
to the railroad companies, and was forwarded by them to the eastern
cities in accordance with the original contracts of transportation.
No part of the grain was sold or consumed in Illinois. It was while
it was in Bacon's elevator in Chicago that it was included in the
assessment as a part of his personal property.
But neither the fact that the grain had come from outside the
state nor the intention of the owner to send it to
Page 227 U. S. 516
another state, and there to dispose of its, can be deemed
controlling when the taxing power of the State of Illinois is
concerned. The property was held by the plaintiff in error in
Chicago for his own purposes and with full power of disposition. It
was not being actually transported, and it was not held by carriers
for transportation. The plaintiff in error had withdrawn it from
the carriers. The purpose of the withdrawal did not alter the fact
that it had ceased to be transported and had been placed in his
hands. He had the privilege of continuing the transportation under
the shipping contracts, but of this he might avail himself or not,
as he chose. He might sell the grain in Illinois or forward it, as
he saw fit. It was in his possession, with the control of absolute
ownership. He intended to forward the grain after it had been
inspected, graded, etc., but this intention, while the grain
remained in his keeping,\ and before it had been actually committed
to the carriers for transportation, did not make it immune from
local taxation. He had established a local facility in Chicago for
his own benefit, and while, through its employment, the grain was
there at rest, there was no reason why it should not be included
with his other property within the state in an assessment for
taxation which was made in the usual way, without discrimination.
Woodruff v.
Parham, 8 Wall. 123;
Brown v. Houston,
114 U. S. 622;
Coe v. Errol, 116 U. S. 517;
Pittsburg & Southern Coal Co. v. Bates, 156 U.
S. 577;
Diamond Match Co. v. Ontonagon, supra;
American Steel & Wire Co. v. Speed, supra; General Oil Co. v.
Crain, supra.
The question, it should be observed, is not with respect to the
extent of the power of Congress to regulate interstate commerce,
but whether a particular exercise of state power, in view of its
nature and operation, must be deemed to be in conflict with this
paramount authority.
American Steel & Wire Co. v. Speed,
supra, pp.
192 U. S.
521-522. Thus, goods within the state may be made the
subject of a
Page 227 U. S. 517
nondiscriminatory tax, though brought from another state and
held by the consignee for sale in the original packages.
Woodruff v. Parham, supra. In
Brown v. Houston,
supra, the coal on which the local tax was sustained had not
been unloaded, but was lying in the boats in which it had been
brought into the state, and from which it was offered for sale. In
Pittsburg & Southern Coal Co. v. Bates, supra, coal
had been shipped from Pittsburg to Baton Rouge in barges which, to
accommodate the owner's business, had been moored about nine miles
above the point of destination. The coal, while remaining on the
barges under these conditions, was held subject to taxation. In
General Oil Co. v. Crain, supra, the oil which had been
brought from Pennsylvania to Memphis, a distributing point, was
held in tanks, one of which was kept for oil for which orders had
been received from Arkansas, Louisiana, and Mississippi prior to
the shipment from Pennsylvania, and which had been shipped
especially to fill such orders. The tank was marked, "Oil Already
Sold in Arkansas, Louisiana, and Mississippi." The local tax upon
this oil, which remained in Tennessee only long enough (a few days)
to be properly distributed according to the orders, was
sustained.
In the present case, the property was held within the state for
purposes deemed by the owner to be beneficial; it was not in actual
transportation, and there was nothing inconsistent with the federal
authority in compelling the plaintiff in error to bear with respect
to it, in common with other property in the state, his share of the
expenses of the local government.
Judgment affirmed.
