While this Court is concluded as to the mere construction of a
state tax statute by the decision of the highest court of the
state, it is not concluded by the state court's characterization of
the scheme of taxation in determining whether it deprives a party
of rights secured by the federal Constitution.
In determining the nature of a state tax and constitutionality
of the statute imposing it, this Court must regard substance,
rather than form, and the controlling test is found in the
operation and effect of the statute as applied and enforced.
A state statute imposing an annual franchise tax upon the right
to exist as a corporation or to exercise corporate powers within
the state, the amount being fixed solely by reference to the
property of the corporation within that state and used in
intrastate business and excluding any imposition upon or
interference with interstate commerce, does not run counter to, and
is not unconstitutional under, either the commerce clause of, or
the Fourteenth Amendment to, the federal Constitution, and so
as to those provisions of the Annual Franchise Tax
Statute of Arkansas of 1911, involved in this case.
Such a tax is not repugnant to the due process clause on the
ground of being in effect a tax upon property beyond the state as
it is measured by reference to property situate wholly within the
Property in a state belonging to a corporation, whether foreign
or domestic, engaged in foreign or interstate commerce may be
taxed, and may take the form of a tax for privilege of exercising
its franchise within the state, if measured on value of property
wholly within the state, and provided payment of the tax be not
made a condition precedent to carrying on business including
interstate business, but the enforcement of the tax left to
ordinary means for collection of taxes. Postal Tel. Co. v.
Adams, 155 U. S. 688
Nothing in the Fourteenth Amendment imposes an iron-clad rule
upon states with respect to internal taxation or prevents double
taxation or any other form of unequal taxation, so long as the
inequality is not based on arbitrary distinctions.
Page 235 U. S. 351
A provision in a state statute forfeiting the right of a foreign
corporation engaged in interstate commerce to transact interstate
commerce within the state on account of nonpayment of a tax imposed
on such corporations as to their intrastate business might render
the statute unconstitutional as a regulation of interstate commerce
unless it could be treated as separable.
This Court will not regard such a provision of the statute as
inseparable, and strike down the entire statute in advance of such
a construction by the state court in a case to collect the tax as a
debt and not to forfeit the franchise for nonpayment.
In exercising jurisdiction under § 237, Judicial Code, this
Court should wait until the state court has construed the statute
attacked, rather than to assume that the state court will construe
it so as to make it repugnant to the federal Constitution.
If a statute will bear two constructions, one within and the
other beyond constitutional limitations, the courts should adopt
the former, as legislatures are presumed to act within their
In construing the Arkansas Annual Franchise Tax Statute of 1911,
this Court will assume, until the state places a different
construction upon it, that the provision for forfeiture for
nonpayment is limited in its operation to intrastate commerce, or
else, if construed as applying to interstate commerce, it will be
treated as void for unconstitutionality under the commerce clause,
and severable from the other provisions of the statute.
106 Ark. 321 affirmed.
The attorney general of Arkansas, proceeding under Act No. 112,
approved March 23, 1911, entitled, "An Act for an Annual Franchise
Tax on Corporations Doing Business in the Arkansas" (Acts of
Arkansas, 1911, p. 67), brought this suit in one of the courts of
the state to recover a tax levied against the St. Louis
Southwestern Railway Company by the State Tax Commission under the
provisions of that act for the year 1911, amounting to the sum of
$6,798.26, besides a penalty and interest.
The act is one of three that were passed by the general assembly
during the same year, designed for the purpose of obtaining revenue
from corporations doing business in the state. The first of these
is Act No. 87, approved March 8 (Acts 1911, p. 48), which
prescribes the fees to
Page 235 U. S. 352
be paid by domestic corporations for the filing of their
articles of incorporation, and by foreign corporations for the
privilege of doing intrastate business in Arkansas. Its eighth
section requires railroad and other transportation companies
organized under the laws of the state to pay incorporation fees
based upon the mileage of their lines, and, by § 9,
"All foreign railroad, street, interurban, or other
transportation companies now doing intrastate business, or desiring
to engage in intrastate business, or authorized to engage in
intrastate business, shall, before being permitted to continue to
do intrastate business, or authorized to engage in intrastate
business, shall pay the same fees as are required of such domestic
Act No. 112 provides for what are called "annual franchise
taxes" on corporations doing business in the state. The first three
sections refer to domestic corporations doing business for profit.
Sections 4 and 5 require each foreign corporation for profit doing
business in the state, and owning or using a part or all of its
capital or plant in the state, to make an annual return to the tax
Commission, showing, among other things, the total amount of its
capital stock, the market value of the same, and the value of
property owned and used by it, within and without the state,
respectively. Section 6 provides that the Commission, from the
facts thus reported and any other facts bearing upon the question,
shall determine "the proportion of the authorized capital stock of
the company represented by its property and business in this
state," and shall report the same to the auditor, who shall charge
and certify to the treasurer for collection annually from such
"in addition to the initial fee otherwise provided by law, for
the privilege of exercising its franchise in this state,
one-twentieth of one percent each year thereafter upon the
proportion of the outstanding capital stock of the corporation
represented by property owned and used in
Page 235 U. S. 353
business transacted in this state."
Section 12 requires the attorney general to collect the tax with
an added penalty for delinquency in payment, by suit to be brought
in the name of the state. By § 14, the tax and penalty are made a
first lien upon all property of the corporation. By § 15, if a
corporation "organized under the laws of Arkansas or any foreign
country authorized to do business in this state for profit" fails
or neglects to make the report or pay the tax prescribed for thirty
days after the expiration of the time limited by the act, and the
default is willful and intentional, an action may be brought by the
attorney general or prosecuting attorney to forfeit and annul the
charter of the corporation, and "if the court is satisfied that
such default is willful and intentional, it shall revoke and annul
such charter." By § 20, when any corporation shall have paid the
franchise tax prescribed by the act, the tax Commission, or the
secretary of state if the Commission be abolished, is required to
issue to it a certificate authorizing it to do business in the
state for the term of five years, upon condition that it pay
annually the franchise tax prescribed by the act, and such
certificate is made evidence in all the courts of the State of the
right of the corporation to do business in the state during the
term of the certificate. And
"in case any corporation shall fail to pay the franchise tax
prescribed by this Act when it becomes due during the term of said
certificate, the said tax Commission shall cancel said certificate,
and said corporation shall forfeit its right to do business in this
state, in addition to the other penalties prescribed in this
By act No. 313, approved May 26, 1911, Act No. 112 was amended
with respect to the time of its taking effect, and in another
particular not now pertinent.
On May 4, the legislature passed Act No. 251, entitled
"An Act to Provide the Manner of Assessing for Taxation the
Property of Railroads, Express, Sleeping Car, Telegraph,
Page 235 U. S. 354
Telephone, and Pipe Lines Companies."
(Acts of Arkansas 1911, p. 233.) This provides that the property
of railroad corporations, and of the others named in the title,
shall be assessed by the Tax Commission. Section 2 is as
"Section 2. The franchise (other than the right to be a
corporation) of all railroads, express, telegraph, and telephone
companies are declared to be property for the purpose of taxation,
and the value of such franchises shall be considered by the
assessing officers when assessing the property of such
corporations. In valuing for assessment purposes the property of
such corporations, the Arkansas Tax Commission shall determine the
total value of the entire property of the corporation, tangible and
Section 9 requires railroad companies to file with the Tax
Commission statements showing their physical property in the state.
Section 10 requires that the statement shall show
"the aggregate value of the whole railroad, and there shall be
taken into consideration in fixing said value the entire
right-of-way as given by the charter of the company or statutes of
the state, the franchises, privileges, and everything of any
character whatever situated upon the right-of-way of the road,
connected with or appertaining to it in any way which adds to its
earning power or gives the railroad value as an entire going
The defendant, a Missouri corporation, owning and operating
lines of railroad in the States of Missouri, Arkansas, and other
states, over which it carries both intrastate and interstate
commerce, made its report for the year 1911 in accordance with Act
No. 112, but under protest, reserving the right to contest the
validity of the act. This report, among other things, showed that
the total amount of authorized capital stock was $55,000,000 and
the total amount of issued and outstanding capital stock was
$36,249,750. The Commission found the
Page 235 U. S. 355
proportion of the outstanding capital stock represented by
property owned and used by defendant in business transacted in the
State of Arkansas for the year 1911 to be $13,596,520, on which the
franchise tax amounted to $6,798.26.
The complaint filed in behalf of the state herein set forth the
making of the report by defendant as mentioned, and the taking of
the necessary proceedings to fix its responsibility under the
provisions of Act No. 112.
Defendant's answer, besides setting up its status as a railway
corporation incorporated under the laws of Missouri owning and
operating a railway line in Arkansas and several other states, and
engaged as a common carrier in interstate business in those states,
and also doing intrastate business in the State of Arkansas
pursuant to its laws, averred that its property in that state was
assessed for the purposes of general taxation for the year 1910 at
the value of $9,155,965, and the tax levied thereon amounted to
$191,713.95, which defendant paid, and that, under Act No. 251,
approved May 4, 1911, the State Tax Commission assessed its
property within the state for tax purposes for the latter year at
the value of $11,260,240, upon which assessment taxes had been
levied in the sum of $239,388.84, which defendant offered to pay
(and has since paid), and averred that the tax sued on
"is a tax upon the privilege and right of this defendant to do
both an interstate and intrastate business in the State of
Arkansas, and is a tax upon the interstate business, property, and
income of the defendant, and is a tax placed and imposed upon
defendant for the privilege of engaging in interstate commerce, and
an attempt to regulate interstate commerce, and a burden thereon,
and that, if said act is enforced, defendant will be deprived of
its right to engage in an interstate business in and through the
State of Arkansas."
The answer also challenged the validity of Act No. 112 as
applied and attempted to be enforced against
Page 235 U. S. 356
defendant on the ground that it amounted to a taking of its
property without due process of law and a denial of the equal
protection of the laws.
The attorney general's demurrer to this answer was sustained,
and, the defendant declining to plead further, judgment was entered
for the tax and penalty sued for.
The supreme court of the state affirmed the judgment (106 Ark.
321), and the present writ of error was sued out.
Page 235 U. S. 360
MR. JUSTICE PITNEY, after making the foregoing statement,
delivered the opinion of the Court.
The validity of Act No. 112, and of the tax that, pursuant to
its provisions, has been levied against plaintiff in error is
questioned on the ground of repugnancy to the commerce clause of
the Constitution of the United States and the "due process" and
"equal protection" clauses of the Fourteenth Amendment.
The act is entitled, "An Act for an Annual Franchise Tax on
Corporations Doing Business in the Arkansas" (Acts of Arkansas,
1911, p. 67). Its fourth, fifth, and sixth sections require each
foreign corporation for profit, doing business in the state and
owning or using a part or all of its capital or plant in the state,
"for the privilege of exercising its franchise in this state
one-twentieth percent each year thereafter upon the proportion of
the outstanding capital stock of the corporation represented by
property owned and used in business transacted in this state."
On the other hand, Act No. 251, approved May 4, 1911 (Acts of
Arkansas, p. 233), is entitled, "An Act to Provide the Manner of
Assessing for Taxation the Property of Railroads, Express, Sleeping
Car, Telegraph, Telephone, and Pipe Lines Companies." By its second
section, the franchises (other than the right to be a corporation)
of all railroad, express, telegraph, and telephone companies are
declared to be
Page 235 U. S. 361
property for the purpose of taxation, and the values of such
franchises are to be considered by the assessing officers when
assessing the property of such corporations.
The supreme court of the state, in its opinion herein, after
reciting the pertinent provisions of the state constitution, went
on to say (106 Ark. 326):
"Our court has held that a corporation owes its existence to the
state, and the right to enjoy this privilege is a subject of
taxation, and that, upon the power of the legislature to impose
such a tax there exists no restriction in our Constitution. In the
case of a foreign corporation, the tax or license is paid for the
privilege of exercising its corporate powers in the state.
Baker v. State,
44 Ark. 138, and cases cited. [P. 327.] In
the passage of the act in question [Act No. 112], no doubt the
legislature had in mind the fact that the right or privilege to be
or exist as a corporation, although a matter of value to the
stockholders of the corporation, is not an asset of the
corporation, and transferable as such, and that its value cannot,
under ordinary rules, be ascertained for the purpose of taxation as
property, but, since it is a privilege or right granted by the
state, a franchise tax may be imposed upon this right or privilege
for the purpose of raising revenue. We think it plain, then, under
our Constitution and decisions, that the act in question is valid
unless it be held a burden upon interstate commerce."
And, after citing certain decisions of this Court bearing upon
the latter question, the court proceeded (p. 329):
"In the case at bar, the gross receipts from all sources of the
railway company have not been used as a means for ascertaining the
value of the property in the state. By the express provision of Act
No. 251, enacted for the purpose of providing the manner for
assessing for taxation the property of railroad companies, the
right to be or exist as a corporation was expressly excluded from
the items which go to make up the value of the property of the
corporation. As we have
Page 235 U. S. 362
already seen, the right or privilege to be or exist as a
corporation is the subject of taxation, and this right or privilege
is not considered in fixing the value of the property of
corporations under Act No. 251, the general tax act. Our state has
fixed a franchise tax based solely 'upon the proportion of
outstanding capital stock of corporations represented by property
owned and used in business transacted in this state.'"
The act in question seems to have been drawn with great care and
with the evident purpose to exclude any contention that the tax was
made upon interstate commerce. The framers of the act evidently
considered the cases of Ludwig v. West. Un. Tel. Co.,
216 U. S. 146
West. Un. Tel. Co. v. Kansas, 216 U. S.
, and therefore intended to pass an act that would not
be contrary to the principles therein announced. We think it has
done so. It will be noted, in the Ludwig
case, the statute
required a foreign corporation engaged in interstate commerce to
pay as a license tax for doing intrastate business a given amount
on its capital stock, whether employed within the state or
elsewhere, and the court held that, on the authority of the Kansas
case, the statute in question was unconstitutional and void because
it directly burdened interstate commerce and imposed a tax on
property beyond the jurisdiction of the state.
Upon the mere question of construction, we are, of course,
concluded by the decision of the state court of last resort. But
when the question is whether a tax imposed by a state deprives a
party of rights secured by the federal Constitution, the decision
is not dependent upon the form in which the taxing scheme is cast,
nor upon the characterization of that scheme as adopted by the
state court. We must regard the substance, rather than the form,
and the controlling test is to be found in the operation and effect
of the law as applied and enforced by the state. Henderson v.
New York, 92 U. S. 259
92 U. S. 268
Page 235 U. S. 363
v. Mississippi, 170 U. S. 213
170 U. S. 225
Smith v. St. Louis & Southwestern Ry., 181 U.
, 181 U. S. 257
Stockard v. Morgan, 185 U. S. 27
185 U. S. 37
Reid v. Colorado, 187 U. S. 137
187 U. S. 151
Galveston, Harrisburg &c. Ry. v. Texas, 210 U.
, 210 U. S. 227
West. Un. Tel. Co. v. Kansas, 216 U. S.
, 216 U. S. 27
Ludwig v. West. Un. Tel. Co., 216 U. S.
46, 216 U. S. 162
Sioux Remedy Co. v. Cope, ante,
p. 235 U. S. 197
We therefore accept the construction of Act No. 112 that we have
quoted from the opinion of the state court, which is, in short,
that it imposes an annual franchise tax upon the right to exist as
a corporation or to exercise corporate powers within the state, the
amount of the tax being fixed solely by reference to the property
of the corporation that is within the state and used in business
transacted within the state, and excluding any imposition upon or
interference with interstate commerce. By this we understand that
the franchise of a foreign corporation that is intended to be taxed
is that which relates solely to intrastate business, and this
exposition of Act No. 112 brings it into harmony with Act No. 87
(quoted in the prefatory statement), which requires foreign
corporations to pay initial fees only for the privilege of doing
intrastate business, and renders it harmonious, also, with Act No.
251, under which the franchise of corporate existence is excluded
from the assessment.
And we proceed to consider whether, in view of the construction
thus placed upon Act No. 112, the franchise tax imposed upon
plaintiff in error pursuant to its terms runs counter to the
commerce clause or the Fourteenth Amendment.
The tax, as will be observed, is not in any wise based upon the
receipts of the railroad company from interstate commerce, either
taken alone or in connection with the receipts from its intrastate
business. Since, therefore, the amount of the imposition is not
made to fluctuate with the
Page 235 U. S. 364
volume or the value of the business done, we are relieved from
those difficulties that arise where state taxes are based upon the
earnings of interstate carriers, as in Maine v. Grand Trunk
Ry., 142 U. S. 217
Wisconsin & Michigan Ry. v. Powers, 191 U.
; Galveston, Harrisburg & San Antonio Ry.
v. Texas, 210 U. S. 217
Meyer v. Wells, Fargo & Co., 223 U.
, and United States Express Co. v.
Minnesota, 223 U. S. 335
And we have no hesitation in overruling the contention that the
tax is repugnant to the "due process" clause on the ground of being
in effect based on property located beyond the limits of the state,
as in West. Un. Tel. Co. v. Kansas, 216 U. S.
, 216 U. S. 30
in Ludwig v. West. Un. Tel. Co., 216 U. S.
46, 216 U. S. 162
for this tax is measured by reference to property situate wholly
within the confines of the state.
So far as the commerce clause is concerned, it seems to us that
the principles upon whose application the present decision must
depend are those set forth in Postal Tel. Cable Co. v.
Adams, 155 U. S. 688
155 U. S. 695
where the Court, by Mr. Chief Justice Fuller, said:
"It is settled that where, by way of duties laid on the
transportation of the subjects of interstate commerce, or on the
receipts derived therefrom, or on the occupation or business of
carrying it on, a tax is levied by a state on interstate commerce,
such taxation amounts to a regulation of such commerce, and cannot
be sustained. But property in a state belonging to a corporation,
whether foreign or domestic, engaged in foreign or interstate
commerce may be taxed, or a tax may be imposed on the corporation
on account of its property within a state, and may take the form of
a tax for the privilege of exercising its franchises within the
state, if the ascertainment of the amount is made dependent in fact
on the value of its property situated within the state (the
exaction therefore not being susceptible of exceeding the sum which
might be leviable directly
Page 235 U. S. 365
thereon), and if payment be not made a condition precedent to
the right to carry on the business, but its enforcement left to the
ordinary means devised for the collection of taxes."
So, in Atlantic &c. Tel. Co. v. Philadelphia,
190 U. S. 160
Court, reviewing numerous previous cases, laid down certain
propositions as well established, and among them the following: (a)
no state can compel a party, individual, or corporation, to pay for
the privilege of engaging in interstate commerce; (b) this immunity
does not prevent a state from imposing ordinary property taxes upon
property having a situs within its territory, although it be
employed in interstate commerce, and (c) the franchise of a
corporation, although that franchise is the business of interstate
commerce, is, as a part of its property, subject to state taxation,
provided at least, the franchise is not derived from the United
Applying these principles, we have no difficulty in sustaining
the tax in question as a legitimate imposition upon a foreign
corporation with respect to its exercise of the privilege of
transacting intrastate business in corporate form, the tax being
based upon the amount and value of its property within the state.
It is fixed at a definite percentage (one-twentieth of one percent)
of "the proportion of the outstanding capital stock of the
corporation represented by property owned and used in business
transacted in this state," and the act provides machinery for
ascertaining the market value of the entire capital stock, and
striking a proportion between the value of the property owned and
used by the corporation in the state and that owned and used by it
outside of the state. In its essence, the tax is not
distinguishable from that which was sustained by this Court in
Western Union Tel. Co. v. Massachusetts, 125 U.
, and in another case between the same parties,
141 U. S. 141
40. See also Pittsburgh &c. Ry v. Backus, 154 U.
, 154 U. S. 430
154 U. S. 435
Page 235 U. S. 366
R. Co. v. Backus, 154 U. S. 438
Cleveland &c. Ry. v. Backus, 154 U.
, 154 U. S.
-445; Western Union Telegraph Co. v.
Taggart, 163 U. S. 1
163 U. S. 18
Western Union Tel. Co. v. Missouri, 190 U.
, 190 U. S.
It is insisted that Act No. 112, as construed by the state court
in connection with Act No. 251, subjects the property of plaintiff
in error to double taxation, and that this contravenes the
constitutional guaranties respecting due process of law and the
equal protection of the laws. No attempt is made to show that the
classification of corporations adopted in Act No. 112 is not a
reasonable one, or that in any respect corporations of the class to
which plaintiff in error belongs are discriminated against in favor
of domestic corporations, as was the case in Southern Railway
Co. v. Greene, 216 U. S. 400
Under the first three sections of this act, each corporation
organized and doing business under the laws of the state for profit
is required to pay a tax of one-twentieth of one percent upon "that
part of its subscribed or issued and outstanding capital employed
in Arkansas," with an exception not now pertinent, whereas, by the
next three sections, each foreign corporation for profit doing
business in the state and owning or using a part or all of its
capital or plant in the state is required to pay according to the
"upon the proportion of the outstanding capital stock of the
corporation represented by property owned and used in business
transacted in this state."
It is not contended that there is here any substantial
discrimination. The gist of the criticism seems to be that the two
acts in question subject the property of plaintiff in error, as
well as that of all other corporations that are within the
operation of those acts, to double taxation, and that this is a
denial of "equal protection" in favor of other classes of
taxpayers. Reference is made to an extract from the opinion in the
case, 155 U. S. 696
where the Court said:
"Doubtless no state could add to the taxation of property
Page 235 U. S. 367
according to the rule of ordinary property taxation the burden
of a license or other tax on the privilege of using, constructing,
or operating an instrumentality of interstate or international
commerce, or for the carrying on of such commerce, but the value of
property results from the use to which it is put, and varies with
the profitableness of that use, and by whatever name the exaction
may be called, if it amounts to no more than the ordinary tax upon
property, or a just equivalent therefor, ascertained by reference
thereto, it is not open to attack as inconsistent with the
Constitution. Cleveland &c. Ry. v. Backus,
154 U. S.
, 154 U. S. 445
This, however, does not mean, as is contended, that because of
the Fourteenth Amendment, a state may not, in addition to the
imposition of an ordinary property tax upon an instrumentality of
interstate or international commerce, impose a franchise tax
ascertained by reference to the property of the corporation within
the state, including that employed in interstate commerce. The
Court was dealing only with the commerce clause, and the language
quoted means that, by whatever name the tax or taxes may be called
that are fixed by reference to the value of the property, if they
are not imposed because of its use in interstate or foreign
commerce, and if they amount to no more than would be legitimate as
an ordinary tax upon the property, valued with reference to the use
in which it is employed, they are not open to attack, and that it
is permissible to value the property at what it is worth in view of
its use in interstate commerce so long as no added burden is
imposed as a condition of such use. This is evident from a reading
of the context and from the reference made to the opinion in 154
U.S. at p. 154 U. S.
Nothing in the Fourteenth Amendment imposes any iron-clad rule
upon the states with respect to their internal taxation, or
prevents them from imposing double taxation, or any other form of
unequal taxation, so long as the inequality
Page 235 U. S. 368
is not based upon arbitrary distinctions. Davidson v. New
Orleans, 96 U. S. 97
96 U. S.
-106; Bell's Gap R. Co. v. Pennsylvania,
134 U. S. 232
134 U. S. 237
Pacific Express Co. v. Seibert, 142 U.
, 142 U. S. 351
Adams Express Co. v. Ohio, 165 U.
, 165 U. S. 228
Merchants Bank v. Pennsylvania, 167 U.
, 167 U. S. 464
Magoun v. Illinois Trust & Savings Bank, 170 U.
, 170 U. S. 295
Armour Packing Co. v. Lacy, 200 U.
, 200 U. S. 235
Michigan Central R. Co. v. Powers, 201 U.
, 201 U. S.
Thus far, we have dealt only with the authority of the state to
levy a tax of this character, and with the mode in which the amount
of the tax is ascertained. But the case presents another question
that is more serious. By § 20 of Act No. 112, it is enacted:
"In case any corporation shall fail to pay the franchise tax
prescribed by this act when it becomes due during the term of said
certificate, the said, Tax Commission shall cancel said
certificate, and said corporation shall forfeit its right to do
business in this state, in addition to the other penalties
prescribed in this Act."
If this must needs be construed to mean that, for nonpayment of
the franchise tax, a foreign railroad corporation engage in
business as a common carrier of intrastate and interstate commerce
is to forfeit its right to do business in the state not only with
respect to intrastate, but also with respect to interstate
commerce, the effect would be to impose a condition upon its right
to transact interstate commerce, and the act would be invalid as
amounting in effect to a regulation of that commerce unless,
indeed, § 20 could be treated as separable. This result would
follow from the principles laid down in Western Union Tel. Co.
v. Massachusetts, 125 U. S. 530
125 U. S. 554
Leloup v. Mobile, 127 U. S. 640
127 U. S. 644
127 U. S. 647
Western Union Telegraph Co. v. Alabama; Allen v. Pullman's
Palace Car Co., 191 U. S. 171
191 U. S. 179
and many other cases.
But the state court has not as yet construed the section
Page 235 U. S. 369
as calling for the forfeiture of the privilege of doing
interstate business in the event of nonpayment of the franchise
tax; nor is the state here insisting upon such a construction. The
present is an ordinary action to collect the tax as a debt, and not
to forfeit the franchise for its nonpayment. Non constat
but that the state court will hold, when confronted with the
question, that the franchise to be forfeited pursuant to § 20 is
confined to intrastate commerce. Such a construction is clearly
foreshadowed by what the Court has in this case held with respect
to the general purpose of the act. And, in exercising the
jurisdiction conferred by § 237, Judicial Code, it is proper for
this Court to wait until the state court has adopted a construction
of the statute under attack, rather than to assume in advance that
such a construction will be adopted as to render the law repugnant
to the federal Constitution. Bachtel v. Wilson,
204 U. S. 36
204 U. S. 40
Adams v. Russell, 229 U. S. 353
229 U. S. 360
Plymouth Coal Co. v. Pennsylvania, 232 U.
, 232 U. S. 546
And see Ohio Tax Cases, 232 U. S. 576
232 U. S. 591
At present, therefore, we have merely to consider whether § 20 so
clearly requires a forfeiture of the interstate franchise for
nonpayment of the tax in question that it is not reasonable to
anticipate that the state court will put another construction upon
it. And, in doing this, we ought not to indulge the presumption
either that the legislature intended to exceed the limits imposed
upon state action by the federal Constitution or that the courts of
the state will so interpret the legislation as to lead to that
result. No canon of construction is better established or more
universally observed than this: that, if a statute will bear two
constructions, one within and the other beyond the constitutional
power of the lawmaking body, the courts should adopt that which is
consistent with the Constitution, because it is to be presumed that
the legislature intended to act within the scope of its authority.
United States v.
12 Pet. 72, 37 U. S. 76
Page 235 U. S. 370
v. Brogden, 112 U. S. 261
112 U. S. 269
The Japanese Immigrant Case, 189 U. S.
, 189 U. S. 101
It hardly needs to be said that the Supreme Court of Arkansas
recognizes and applies this fundamental rule of construction.
State v. Lancashire Ins. Co.,
66 Ark. 466, 477;
Waterman v. Hawkins,
75 Ark. 120, 126; State v.
76 Ark.197, 201.
It does not seem to us that § 20, when taken in connection with
the context, requires to be so construed as to interfere with
interstate commerce. The taxing provisions of the act apply to all
corporations doing business in the state for profit, whether
organized under its laws, or under the laws of other states, or of
foreign countries, and entirely irrespective of the question
whether they are engaged in commerce. Therefore it was natural
that, in such a provision as is contained in § 20, language having
upon its face a general scope should be adopted, but it need not be
indiscriminately applied to all the several kinds of corporations
that are subject to the act. The forfeiture in terms is of "the
right of such corporation to do business in this state." This does
not necessarily include the right to transact business that is done
partly within and partly without the state. The section does not
call for an annulment of the charter. That topic is covered by § 15
of the same act, which applies, however, only to corporations
organized under the laws of Arkansas or of foreign countries, and
not to corporations of other states, to which class plaintiff in
In view of all these considerations, we ought to assume, until
the state, through its judicial or administrative officers, places
a different construction upon the act, that § 20 will be limited in
its operation to forfeiting for nonpayment of the franchise tax
only the privilege of doing intrastate business, or else that the
section, being void for unconstitutionality, will be treated as
severable from the other provisions of the act. Under either view,
it is obvious
Page 235 U. S. 371
from what has been already said that the tax does not amount to
a regulation of or a burden upon interstate commerce.
MR. JUSTICE McREYNOLDS took no part in the consideration or
decision of this case.