Kansas City, M. & B. R. Co. v. Stiles,
242 U.S. 111 (1916)

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U.S. Supreme Court

Kansas City, M. & B. R. Co. v. Stiles, 242 U.S. 111 (1916)

Kansas City, Memphis & Birmingham

Railroad Company v. Stiles

No. 212

Submitted October 17, 1916

Decided December 4, 1916

242 U.S. 111


Three corporations, formed, and operating railways, in Alabama, Tennessee, and Mississippi, respectively, consolidated themselves under the laws of each of those states. The consolidated company succeeded to all the property of the constituents, and issued its shares in lieu of theirs. As construed by the court below, the law of Alabama, under which the consolidation was there effected, constituted the new company a domestic corporation of that state and, treating it as such, the state has imposed a franchise tax, not unreasonable in amount, based upon its entire paid-up capitalization.


(1) That, subject to the limitations of the federal Constitution, the existence and status of the consolidated corporation in Alabama were dependent on the Alabama laws.

(2) That, the tax being a franchise tax imposed equally upon all corporations of the state, consolidated or otherwise, and based in each instance on the entire paid-up capitalization, no arbitrary classification emerges either (a) because the consolidated corporation has, and a purely intrastate corporation might not have, property outside of the state, or (b) because foreign corporations are taxed only on

Page 242 U. S. 112

the basis of their property within the state. Southern Railway Co. v. Greene, 216 U. S. 400, distinguished.

A state may tax foreign corporations for the privilege of doing business within her limits at a different rate than that which she applies to her own corporations in taxing the franchises by which she creates them.

While a state may not tax property beyond her borders, she may measure a franchise tax within her authority by capital stock which stands in part for property beyond her taxing power. Kansas City &c. Railway Co. v. Kansas, 240 U. S. 227, applied, and Western Union Telegraph Co. v. Kansas, 216 U. S. 1, distinguished.

Whether a tax is a burden on interstate commerce depends on the nature of the tax; a tax which in kind is within the state authority may properly be measured by capital which, in part, is used for interstate commerce where the circumstances do not indicate a purpose to burden such commerce, or that such will be the necessary effect.

182 Ala. 138 affirmed.

The case is stated in the opinion.

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