A state tax on transmission and transportation corporations of
the state imposing the tax for the privilege of carrying on such
business in a corporate capacity within the state, based on the
gross earnings on transportation originating and terminating within
the state, and
Page 235 U. S. 550
expressly excluding earning derived from business of an
interstate character, is not violative of the commerce clause of
the federal Constitution, and so held as to § 184 of the Tax Laws
of New York.
Such a tax is not, as to a corporation transporting merchandise
on navigable waters, a license tax for the privilege of navigating
public waters of the United States, which is granted by federal
law, but merely a privilege for carrying on the business in a
corporate capacity.
Harman v. Chicago, 147 U.
S. 39, distinguished.
While a state may not require a navigation license except in
exceptional cases, as for compensation for improvements made by
itself, it may, as to its own corporations having property within
its borders, enforce its usual and customary system of taxation
without infraction of the superior authority and law of the United
States concerning navigation.
Transportation between ports of a state is not interstate
commerce to the extent of being excluded from the taxing power of
the state because a part of the journey is over the territory of
another state, and so
held as to tows for various points
in the State of New York from the harbor of New York and made up
for convenience at a point in the Hudson River below Weehawken in
New Jersey.
206 N.Y. 651 affirmed.
The facts, which involve the constitutionality of § 184 of the
Tax Law of New York imposing a tax on corporations based on gross
earnings from transportation or transmission business originating
and terminating within the state and the determination of what
constitutes such interstate business, are stated in the
opinion.
Page 235 U. S. 555
MR. JUSTICE DAY delivered the opinion of the Court.
The proceeding which resulted in the judgment here complained of
originated in an application by the Cornell Steamboat Company to
review by certiorari a decision of the Comptroller of New York
denying a petition for revision and readjustment of taxes imposed
by the Comptroller on the steamboat company for the years 1902 and
1903. These taxes were imposed under § 184 of the Tax Laws of New
York, which, so far as it is pertinent here, reads:
"Section 184. Additional franchise tax on transportation
Page 235 U. S. 556
and transmission corporations and associations. -- Every
corporation . . . formed for . . . navigation . . . purposes . . .
shall pay for the privilege of exercising its corporate franchises
or carrying on its business in such corporate or organized capacity
in this state, an annual excise tax or license fee which shall be
equal to five-tenths of one percentum upon its gross earnings
within this state, which shall include its gross earnings from its
transportation or transmission business originating and terminating
within this state, but shall not include earnings derived from
business of an interstate character."
In the years 1902 and 1903, the Comptroller of the state imposed
upon the steamboat company taxes on its earnings for those years,
and denied the application for a revision and readjustment. The
writ of certiorari was afterwards issued from the Supreme Court of
New York upon petition to review and correct the determination of
the Comptroller. The matter was heard in the Appellate Division of
the Supreme Court of New York, and that court affirmed the
determination of the Comptroller. Appeal was taken to the Court of
Appeals of New York, and that court affirmed the order appealed
from and remitted the case to the supreme court of the state. 206
N.Y. 651. This writ of error is sued out to reverse the
judgment.
Taxes were assessed upon the return of the steamboat company for
the year 1902: "Gross earnings, not interstate business, derived
from all sources during the above period, $377,146.33;" also on the
return for the year 1903:
"Gross earnings on business commenced and terminated in the
territorial limits of New York, derived from towing charges upon
the Hudson River (navigable waters of the United States), earned
with vessels enrolled and licensed by the U.S. government,
i.e., business which is regulated by the U.S. government,
and which it is claimed is not taxable by the State of New York,
$394,505.59,"
which
Page 235 U. S. 557
return was followed by a supplemental return:
"New York, County of Ulster, ss. George Coykendall, being duly
sworn, says that he is the vice-president of the Cornell Steamboat
Company; that the report of gross earnings in the State of New York
of the Cornell Steamboat Company for the year ending June 30th,
1903, verified by me on September 17th, 1903, should be amended as
follows: that the statement in such report of business commenced
and terminated within the territorial limits of the State of New
York, derived from towing charges upon the Hudson River, is made up
largely of towing done in the following manner, as deponent knows
from personal knowledge and information derived from the
superintendent of the company, to-wit: tows for up-river points on
the Hudson River are made up at a stakeboat located at Weehawken,
within the territorial limits of the State of New Jersey; that
there are two stakeboats anchored in the river just below Weehawken
ferry; that vessels and boats reported for the up-river tows are
taken to the stakeboats and there made fast, and the tow is there
made up, the towing vessels are attached, and the course pursued by
the steamers in going up the river is in the territory of New York
and New Jersey; that tows coming down the river pursue a like
course, going into the territory of both states, and when the tow
arrives in New York harbor, the entire tow, or the greater part
thereof, is, as a usual thing, turned in the river, going into the
territory of New Jersey and making the turn. Deponent further says
that nearly all earnings of the company are from business done
within the territorial limits of New York and New Jersey, to such
extent as the State of New Jersey is included in the Hudson River
and New York Bay, and that it is absolutely impossible to state
just when the vessels are within the territorial limits of either
state. Deponent further says that he desires to file this affidavit
as a correction of the report verified September 17th, 1903, by
him, which report
Page 235 U. S. 558
was filed with the State Comptroller on or about the 17th day of
September, 1903."
These returns may be supplemented by a statement from the brief
of plaintiff in error, derived from the record, as to the manner in
which the towing business of the company was done:
"The tows were made up in the Hudson River at Albany, New York,
or its vicinity, and the steamboat company, the plaintiff in error,
thereupon attached a towing line connecting the tows with its tugs
or steamers, and moved the tows down or up the river, leaving the
tows up-bound in the river at Albany or its immediate vicinity, and
those bound down the river in the bay at New York city or in the
waters adjacent thereto."
It is apparent from a consideration of § 184 that the tax here
imposed upon transmission and transportation corporations is for
the privilege of carrying on the business in a corporate capacity
within the State of New York, for which an annual excise tax or
license fee is exacted equal to five-tenths of one percentum upon
the gross earnings on transportation originating and terminating in
the State of New York. By its express terms, the statute provide
that the tax shall not include earnings derived from business of an
interstate character.
It is contended that, as the business of towing carried on by
the plaintiff company is done upon the navigable waters of the
United States and under authority of a license granted by the
United States, the state has no jurisdiction or authority to levy
the tax in question, and that it is in reality and substance an
attempt to enforce a license tax for the privilege of navigating
the public waters of the United States -- a privilege already
granted under the general government. (
See §§ 4400 and
4401 of the Revised Statutes of the United States, and also §§
4438-4443, providing for the license of officers of vessels.)
The right of the federal government to regulate commerce
Page 235 U. S. 559
under Article I, § 8, subdivision 3, of the federal
Constitution, giving Congress control over interstate commerce,
confers the supreme authority over navigable rivers and streams for
the purpose of regulating navigation, and all that pertains
thereto, and under this authority the federal government is
supreme, and may not be interfered with by the laws of the states.
The subject is fully discussed in
United States v.
Chandler-Dunbar Water Power Co., 209 U.
S. 447. The tax here in question does not impose a
license tax as a prerequisite to the navigation of the river, as
was the case in
Harman v. Chicago, 147 U.
S. 396, cited and relied upon by the plaintiff in error,
where an ordinance of the City of Chicago, imposing a license tax
for the privilege of navigating the Chicago River and its branches
by steam tugs licensed under the federal authority was held an
unconstitutional exaction, as it required payment for a privilege
which had already been granted within the authority of the federal
government.
In the case now before the court, the tax, as was said by Chief
Judge Cullen in delivering an opinion in the Court of Appeals in
New York in this case concurring in the order affirming the court
below without opinion, is levied upon the corporation for the
privilege of carrying on its business in a corporate or organized
capacity. As the Chief Judge says, if the parties beneficially
interested in the company are dissatisfied with the price exacted
by the state for this privilege, they may carry on the business as
individuals without paying any charge. In other words, the charge
is not upon the navigation of the river, but is upon the doing of
business as a corporation of the state within the state. While the
state may not require a navigation license except in very
exceptional cases, as for compensation for improvements which the
state has made (a situation not presented here), it may, certainly
as to a corporation of its own creation, having
Page 235 U. S. 560
property within its borders, enforce its usual and customary
systems of taxation without infraction of the superior authority
and laws of the United States concerning the navigation of
rivers.
With this view of the tax now under consideration, we think the
state did not exceed its authority in its imposition of a tax for
the purpose stated.
But it is urged that this is a tax upon interstate commerce, and
therefore beyond the power of the state notwithstanding the statute
undertakes to exempt the proceeds of interstate commerce from
taxation. That interstate commerce is necessarily taxed is said to
arise from the fact that the business of the company is in fact
interstate commerce, as shown by its additional return, from which
it appears that vessels for up-river points on the Hudson River are
taken by tows, which are made up at a stakeboat located at
Weehawken, which is within the territorial limits of New Jersey;
that these stakeboats are anchored in the river just below
Weehawken ferry, and that the course up the river is in territory
of New York and New Jersey. But transportation between the ports of
the state in not interstate commerce, excluded from the taxing
power of the state, because, as to a part of the journey, the
course is over the territory of another state.
Lehigh Valley
Railroad v. Pennsylvania, 145 U. S. 192;
Ewing v. Leavenworth, 226 U. S. 464,
and see Cincinnati, Packet Co. v. Bay, 200 U.
S. 179,
200 U. S. 183.
Weehawken is opposite New York harbor, and the business upon which
the tax is here imposed is all done between New York ports, and the
record shows distinctly that no earnings were returned for tugs
operated in New York harbor and ports outside the state. Such
business was deducted as interstate business, and not taxable under
the terms of the statute. It is evident that the making up of the
tows for the state ports in the river below Weehawken was for
convenience in conducting domestic transportation.
Page 235 U. S. 561
We are of the opinion that commerce thus carried on is not
interstate commerce, beyond the taxing power of the state, and that
the return on which the tax was assessed did not involve the
revenues of commerce among the states, and this contention must be
rejected.
It follows that the decision of the Supreme Court of New York
must be
Affirmed.