A state may lay an excise or privilege tax on conducting
commercial agencies unless it has the effect of directly violating
a federal right, such as burdening interstate commerce.
Courts will not interfere with the exercise of the taxing power
of a state on the ground that it violates the commerce clause of
the federal Constitution unless it appears that the burden is
direct and substantial.
The license tax imposed by § 4224, Kentucky Statutes, 1909, on
persons or corporations having representatives in the state engaged
in the business of inquiring into and reporting upon the credit and
standing of persons engaged in business in the state is not
unconstitutional as a burden on interstate commerce as applied to a
nonresident engaged in publishing and distributing a selected list
of guaranteed attorneys throughout the United States and having a
representative in that state. In this case,
held that the
service rendered in furnishing a list of guaranteed attorneys did
not, except incidentally and fortuitously, affect interstate
commerce, and that it was within the power of the state to subject
the business to a license tax.
Fickln v. Shelby
County,
Page 231 U. S. 395
145 U. S. 1
followed.
International Textbook Co. v. Pigg, 217 U. S.
91, distinguished.
13 Ky. 27 affirmed.
The facts, which involve the constitutionality under the
commerce clause of the federal Constitution of a license tax
imposed by § 4224 of the Kentucky statutes on commercial agencies,
as applied to nonresident agencies, are stated in the opinion.
MR. JUSTICE PITNEY delivered the opinion of the Court.
Section 4224 of the Kentucky Statutes (Carroll's ed.1909)
provides as follows:
"Before engaging in any occupation or selling any article named
in this subdivision of article 12 of this act, the person desiring
to do so shall procure license and pay the tax thereon as follows:
. . . Commercial agencies. Each and every person, partnership, or
corporation having representatives in this state who engage in the
business of inquiring into and reporting upon the credit and
standing of persons engaged in business in this state, shall pay a
license tax of $100."
Plaintiff in error was indicted for failing to pay the license
tax required by this provision, and, upon trial, was convicted and
fined. The trial court, and, on appeal, the Court of Appeals of
Kentucky (139 Ky. 27), overruled the contention that the business
done by plaintiff in error was interstate commerce within the
meaning
Page 231 U. S. 396
of § 8 of Article I of the federal Constitution, and for that
reason not subject to the taxing power of the state.
The indictment was based upon the employment by plaintiff in
error of a firm of attorneys at Maysville, Kentucky, as its
representatives for inquiring into and reporting upon the credit
and standing of persons engaged in business in that state.
Plaintiff in error is a corporation of the State of Maryland, and
is engaged in the publication and distribution of a list of
selected attorneys in the United States. With the several attorneys
upon the list, plaintiff in error has an arrangement by which, in
consideration of a fee paid by them to it, their names are
inserted, and plaintiff in error guarantees to merchants and other
persons sending claims to the attorneys that they will promptly and
faithfully pay over all moneys collected. It furnishes the list of
attorneys to businessmen and merchants throughout the United
States. It provides the attorneys, and also the subscribers to or
purchasers of the book, with blank forms upon which information
respecting the business and financial standing of persons with whom
a subscribing merchant desires to deal may be furnished, and the
attorneys, upon request, make replies to inquiries of this
character when received from subscribing members. The attorneys do
not make reports to the plaintiff in error, but send them direct to
the person or firm making the inquiry. The attorneys are not the
agents for either buyer or seller in the sense that any goods are
bought or sold through their instrumentality. Such was the business
that was done by the Maysville attorneys, as representatives of the
plaintiff in error. They did not sell or offer to sell any goods,
nor deliver or offer to deliver any, and had nothing to do with
buying, selling, transporting, delivering, or handling any
merchandise. If any commercial transaction took place between the
merchant whose standing was reported and the merchant to whom the
report was sent, it was due entirely to negotiations
Page 231 U. S. 397
between them, with which the reporting attorney had nothing to
do. Correspondence in which the Maysville attorneys furnished
nonresident dealers with information was only desultory and
occasional, and was not followed by the making of any contract or
the transportation of any goods between the parties to the
correspondence.
The contention of plaintiff in error is that the Maysville
attorneys and its other representatives of the same kind are,
through the means of the system employed, acting in fact as agents
of merchants engaged in interstate commerce to furnish them with
information through the mails or by telephone or telegraph as a
result of which merchandise may be transported in interstate
commerce, or withheld from such transportation, according to the
character of the information reported, and that the service thus
rendered is so connected with interstate commerce as to preclude
the State of Kentucky from enacting a statute imposing a license
tax whose tendency is or may be to prevent plaintiff in error from
operating in that state.
The tax in question is an excise or privilege tax, and
undoubtedly within the power of the state unless it has the effect
of directly burdening interstate commerce. It is only one of a
great number of license taxes dealt with in a single section of the
statute, and including a great variety of occupations. In the case
of commercial agencies, the thing that is laid hold of as the
subject of the excise is a business carried on within the state. If
it have consequences extending beyond the borders of the state and
affecting interstate commerce, these are only incidental and
fortuitous. The case is, we think, easily to be distinguished from
McCall v. California, 136 U. S. 104, and
International Textbook Co. v. Pigg, 217 U. S.
91, relied upon by plaintiff in error. In the
McCall case, the local instrumentality that was held to be
exempt from
Page 231 U. S. 398
interference by state taxation was an agent whose business was
the direct solicitation of passengers for interstate journeys by
rail. This was clearly within the reasoning and authority of
Robbins v. Shelby Taxing District, 120 U.
S. 489, and other cases of that class. In the case of
the International Textbook Company, there was a systematic and
continuous interstate traffic in instruction papers, textbooks, and
illustrative apparatus for courses of study pursued by means of
correspondence, and this was held to be, in its essential
characteristics, commerce among the states within the meaning of
the federal Constitution, and entitled thereunder to exemption from
any direct burden imposed by state legislation.
In the present case, it appears that there is not even
systematic or continuous correspondence, much less interstate
commerce resulting therefrom. There is no direct or necessary
connection between the service performed by plaintiff in error
through its representatives and the making or fulfillment of
commercial contracts. The most that can be said is that inquiries
received by those representatives in Kentucky with respect to the
credit and standing of persons engaged in business in that state
may be received from merchants without the state in anticipation of
commercial transactions between them in the future. But, on the
other hand, similar inquiries may be received from merchants in
Kentucky, and may have reference alone to intrastate, and not to
interstate, transactions. Or the information may be desired as an
aid in extending or refusing to extend credit for past
transactions, as well as to lay the basis for future dealings. The
circumstance that, in a substantial number of cases -- even if in
the greater number -- there is correspondence, by letter or
otherwise, from state to state which may perhaps have an effect
upon the conduct of other parties about entering or not entering
into transactions of interstate commerce is not controlling.
Page 231 U. S. 399
The present case has no close parallel in former decisions, but
in some of its aspects it bears a resemblance to the case of a tax
imposed upon a resident citizen engaged in a general business that
happens to include a considerable share of interstate business.
Ficklen v. Shelby County, 145 U. S.
1. Or the business of the livestock exchange that was
under consideration in
Hopkins v. United States,
171 U. S. 578,
171 U. S. 592.
Or the business of a cotton broker dealing in futures or options.
Ware v. Mobile County, 209 U. S. 405.
To warrant interference with the exercise of the taxing power of
a state on the ground that it obstructs or hampers interstate
commerce, it must appear that the burden is direct and substantial.
We do not think the present is such a case.
Judgment affirmed.