This Court determines the constitutionality of a state tax upon
its own judgment of the actual operation and effect of the tax,
irrespective of its form and of how it is characterized by the
state courts.
A state tax on the business of selling goods in foreign
commerce, measured by a percentage of the entire business
transacted, is both a regulation of foreign commerce and an impost
or duty on exports, and is therefore void.
Ficklen v. Shelby
Couny Taxing District, 145 U. S. 1,
distinguished.
256 Pa.St. 508 reversed.
The case is stated in the opinion.
MR. JUSTICE PITNEY delivered the opinion of the Court.
The State of Pennsylvania, by an Act of May 2, 1899, P.L., p.
184, [
Footnote 1] imposes an
annual mercantile license tax
Page 245 U. S. 293
of $3 upon each wholesale vender of or dealer in goods, wares,
and merchandise, and "one-half mill additional on each dollar of
the whole volume, gross, of business transacted annually," and like
taxes at another rate upon retail venders, and at still another
upon venders at an exchange or board of trade. In the year 1913
plaintiff in error sold and delivered at wholesale, from a
warehouse located in that state, merchandise to the value of about
$47,000 to purchasers within the state, and merchandise to the
value of about $430,000 to customers in foreign countries, the
latter sales usually having been negotiated by agents abroad who
took orders and transmitted them to plaintiff in error at its
office in the State of Pennsylvania, subject to its approval, while
in some cases orders were sent direct by the customers in foreign
countries to plaintiff in error, and the goods thus ordered, upon
the acceptance of the orders, having been shipped direct by
plaintiff in error from its warehouse in Pennsylvania to its
customers in the foreign countries. Under the Act of 1899, a
mercantile license tax was imposed upon plaintiff in error, based
upon the amount of its gross annual receipts. Plaintiff in error
protested against the assessment of so muct of the tax as was based
upon the
Page 245 U. S. 294
gross receipts from merchandise shipped to foreign countries.
The Court of Common Pleas of Philadelphia, and, upon appeal, the
supreme court of the state (256 Pa. 508) sustained the tax,
overruling the contention that it amounted to a regulation of
foreign commerce and also was an impost or duty on exports levied
without the consent of Congress, contrary to §§ 8 and 10 of Article
I of the Constitution of the United States. [
Footnote 2]
Whether there was error in the disposition of the federal
question is the only subject with which we have to deal.
As in other cases of this character, we accept the decision of
the state court of last resort respecting the proper construction
of the statute, but are in duty bound to determine the questions
raised under the federal Constitution upon our own judgment of the
actual operation and effect of the tax, irrespective of the form it
bears or how it is characterized by the state courts.
Galveston, Harrisburg, & San Antonio Ry. Co. v. Texas,
210 U. S. 217,
210 U. S. 227;
St. Louis Southwestern Ry. Co. v. Arkansas, 235 U.
S. 350,
235 U. S. 362;
Kansas City &c. Ry. v. Kansas, 240 U.
S. 227,
240 U. S.
231.
In this case, however, the characterization of the tax by the
state court of last resort is a fair index of its actual operation
and effect upon commerce. Soon after the passage of the act, in
Knisely v. Cotterel, 196 Pa. 614, 630,
Page 245 U. S. 295
that court was called upon to construe it and to answer
objections raised under the constitution of the state and the
Fourth, Fifth, and Fourteenth Amendments to the Constitution of the
United States, and, in the course of an elaborate opinion, declared
(p. 630):
"An examination of the details of the provisions of the present
act makes it clear that the tax, as held by the learned judge
below, is upon the business of vending merchandise, and that the
classification is based on the manner of sale, and within each
class the tax is graduated according to the gross annual volume of
business transacted. This is apparent from the fact that the amount
of the tax over the small fixed license fee is determined in every
case by the volume of business, measured in dollars, and the rate
at which it is to be levied is according to the manner of
sale."
The bare question, then, is whether a state tax imposed upon the
business of selling goods in foreign commerce, insofar as it is
measured by the gross receipts from merchandise shipped to foreign
countries, is, in effect, a regulation of foreign commerce or an
impost upon exports within the meaning of the pertinent clauses of
the federal Constitution. Although dual in form, the question may
be treated as a single one, since it is obvious that, for the
purposes of this case, an impost upon exports and a regulation of
foreign commerce may be regarded as interchangeable terms. And
there is no suggestion that the tax is limited to the necessities
of inspection, or that the consent of Congress has been given.
We are constrained to hold that the answer must be in the
affirmative. No question is made as to the validity of the small
fixed tax of $3 imposed upon wholesale venders doing business
within the state in both internal and foreign commerce, but the
additional imposition of a percentage upon each dollar of the gross
transactions in foreign commerce seems to us to be, by its
necessary effect, a tax upon such commerce, and therefore a
regulation of
Page 245 U. S. 296
it, and, for the same reason, to be in effect an impost or duty
upon exports. This view is so clearly supported by numerous
previous decisions of this Court that it is necessary to do little
more than refer to a few of the most pertinent.
Case of
the state Freight Tax, 15 Wall. 232,
82 U. S.
276-277;
Robbins v. Shelby County Taxing
District, 120 U. S. 489;
Fargo v. Michigan, 121 U. S. 230,
121 U. S. 244;
Philadelphia & Southern Steamship Co. v. Pennsylvania,
122 U. S. 326,
122 U. S. 336;
Leloup v. Port of Mobile, 127 U.
S. 640,
127 U. S. 648;
McCall v. California, 136 U. S. 104,
136 U. S. 109;
Galveston, Harrisburg & San Antonio Ry. Co. v. Texas,
210 U. S. 217,
210 U. S.
227.
Most of these cases related to interstate commerce, but there is
no difference between this and foreign commerce so far as the
present question is concerned.
The principal reliance of the Commonwealth is upon
Ficklen
v. Shelby County Taxing District, 145 U. S.
1. Undoubtedly that case is near the borderline, but we
think its authority would have to be stretched in order to sustain
such a tax as is here in question. Consistently with due regard for
the constitutional provisions, we are unable thus to extend it. In
that case, the complaining parties were established in business
within the taxing district as general merchandise brokers, and had
taken out general and unrestricted licenses to do business of all
kinds, both internal and interstate. As it happened, one of them
(Ficklen), during the year in question, did an interstate business
exclusively, and the other (Cooper & Co.) did a business
nine-tenths of which was interstate. And the Court, by Mr. Chief
Justice Fuller, said (p.
145 U. S.
21):
Where a resident citizen engages in general business subject to
a particular tax, the fact that the business done chances to
consist, for the time being, wholly or partially in negotiating
sales between resident and nonresident merchants of goods situated
in another state does not necessarily involve the taxation of
interstate commerce, forbidden by the Constitution,
and again (p.
145 U. S.
24):
"What position
Page 245 U. S. 297
they [the plaintiffs in error] would have occupied if they had
not undertaken to do a general commission business, and had taken
out no licenses therefor, but had simply transacted business for
nonresident principals, is an entirely different question, which
does not arise upon this record."
Besides, the tax imposed in the
Ficklen case was not
directly upon the business itself or upon the volume thereof, but
upon the amount of commissions earned by the brokers, which,
although probably corresponding with the volume of the
transactions, was not necessarily proportionate thereto. For these
and other reasons, the case has been deemed exceptional.
In
Postal Telegraph Cable Co. v. Adams, 155 U.
S. 688,
155 U. S. 695,
the Court, again speaking 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."
The tax now under consideration, so far as it is challenged,
fully responds to these tests. It bears no semblance of a property
tax or a franchise tax in the proper sense, nor is it an occupation
tax, except as it is imposed upon the very carrying on of the
business of exporting merchandise. It operates to lay a direct
burden upon every transaction in commerce by withholding, for the
use of the state, a part of every dollar received in such
transactions. That it applies to internal as well as to foreign
commerce cannot save it, for, as was said in
Case of
the state Freight Tax, 15 Wall. 232, 277 (21 L.ed.
146):
"The state may tax its internal commerce, but if an act to tax
interstate or foreign commerce is unconstitutional, it is not cured
by including in its provisions subjects within the domain of the
state."
That portion of the tax which is measured by the receipts from
foreign commerce necessarily varies in proportion to the
Page 245 U. S. 298
volume of that commerce, and hence is a direct burden upon
it.
So obvious is the distinction between this tax and those that
were sustained in
Maine v. Grand Trunk Ry. Co.,
142 U. S. 217,
U.S. Express Co. v.
Minnesota, 223 U. S. 335,
223 U. S. 347,
Baltic Mining Co. v. Massachusetts, 231 U. S.
68,
231 U. S. 87,
Kansas City &c. Ry. v. Kansas, 240 U.
S. 227,
240 U. S. 232,
240 U. S. 235,
and some other cases of the same class that no time need be spent
upon it.
The judgment under review must be
Reversed.
[
Footnote 1]
"Section 1. Be it enacted, etc., that from and after the passage
of this act, each retail vender of or retail dealer in goods,
wares, and merchandise shall pay an annual mercantile license tax
of two dollars, and all persons so engaged shall pay one mill
additional on each dollar of the whole volume, gross, of business
transacted annually. Each wholesale vender of or wholesale dealer
in goods, wares, and merchandise shall pay an annual mercantile
license tax of three dollars, and all persons so engaged shall pay
one-half mill additional on each dollar of the whole volume, gross,
of business transacted annually. Each dealer in or vender of goods,
wares, or merchandise at any exchange or board of trade shall pay a
mercantile license tax of twenty-five cents on each thousand dollar
worth, gross, of goods so sold."
"Section 2. And it is provided that all persons who shall sell
to dealers in or venders of goods, wares, and merchandise, and to
no other person or persons, shall be taken under the provisions of
this act [to] be wholesalers, and all other venders of or dealers
in goods, wares and merchandise shall be retailers, and shall pay
an annual license tax as provided in this act for retailers."
[
Footnote 2]
Literally, the objection was that a tax based upon the gross
receipts for merchandise shipped to foreign countries would be
"a tax levied by the United States of America upon commerce with
foreign nations, in violation of Article I, § 8, of the
Constitution of the United States, and would also be an impost or
duty on exports levied by the State of Pennsylvania without the
authority of an act of Congress in violation of Aricle I, § 10, of
the Constitution of the United States."
The description of the tax as "levied by the United States of
America" evidently was a slip, and so understood by both courts, as
appears from the opinion of the court of common pleas (unreported),
of which only the conclusion is quoted in the opinion of the
supreme court.