A small license tax, imposed by a city on a telegraph company
for the privilege of doing intrastate business is not to be
declared an unconstitutional burden on its interstate business,
merely because the local business is unprofitable, where the tax
ordinance was in force when the company entered the place and the
tax was paid without objection for a series of years, the
circumstances thus repelling any intent to invade interstate
commerce in levying it, and where the state law affords means to
prevent the tax from burdening the interstate business through an
application to increase intrastate rates, of which the company has
not sought to avail itself. P.
255 U. S.
127.
103 Neb. 476 affirmed.
The case is stated in the opinion.
MR. JUSTICE McKENNA delivered the opinion of the Court.
The City of Fremont is a city of Nebraska of the first class,
having more than 5,000 and less than 25,000 inhabitants. By an
ordinance duly enacted in 1903 and reenacted in 1907, there was
levied a license tax upon businesses and occupations within the
city, including telegraph offices. Upon these offices it levied a
tax of $60.00 per year on the business and occupation of
sending
Page 255 U. S. 125
messages from the city to anyplace in the state, and receiving
messages transmitted from any place in the state, and receiving
messages transmitted from anyplace in the state to the city, except
messages received from or transmitted to any department, agency, or
agent of the United States, and except messages which were
interstate commerce.
Plaintiff in error, herein called the Postal Company, is a
corporation engaged in such business within the city, it having
been in December, 1881, permitted by the constituted authorities of
the city, in the manner provided by its ordinance to occupy and use
the streets of the city for that purpose, the ordinance providing
that it was "subject to such regulations as have been or may be
provided by ordinance," and that nothing in the article granting
such consent to the use and occupation of the streets should
"be construed to prevent said city from further regulating,
licensing or taxing any person, company or corporation owning,
using or operating any telephone or telegraph lines within the
corporate limits of said city."
The Postal Company, in accordance with the ordinance, paid a
license tax of $60.00 a year for the years 1903 to 1914, each
inclusive, but did not pay for the years 1915 and 1916, and this
action was brought for the recovery of the same with interest at
7%.
The defenses of the Postal Company set up in its answer are that
it is compelled by the charter of its organization to do intrastate
as well as interstate telegraphing, that it paid the license tax
for the years alleged inadvertently and without recognition of its
legality; that it has accepted the terms of the Post Road Act of
July 24, 1866, and is entitled to its benefits; that the tax is
confiscatory and prohibitive, and deprives the company of its
property without due process of law in violation of the Fourteenth
Amendment of the Constitution of the United States. In
specification of this defense, it is alleged that the receipts of
the company for 1914 on its
Page 255 U. S. 126
intrastate business were only $108.28, and for the year 1915,
$83.96, and that the expenses properly chargeable against these
years respectively, exclusive of the tax, were $185.56 and $154.26,
and that its loss on intrastate business would have to be made up
from interstate business; that the city is under no expense by
reason of the poles and wires of the company being in the city, and
that $60.00 a year is in excess of a rental charge upon them, and
that the streets are post roads within the meaning of the Post Road
Act of 1866. In further defense, the answer alleges that the tax is
one on interstate commerce; that it deprives the company of the
equal protection of the laws and impairs the obligation of a
contract, both in violation of the Constitution of the United
States.
The case was tried to a jury, which, after evidence taken, was
instructed by the court to return a verdict for the city in the sum
of $135.00.
A motion for new trial was denied, and judgment was rendered
upon the verdict. It was affirmed by the supreme court of the
state, the supreme court deciding: (1) the tax was "not a mere
license or regulation measure, but one designed for revenue
purposes," and that its extent was "a matter for the judgment and
discretion of the municipal government, subject only to the
restriction that it must not be prohibitory," citing 2 Cooley on
Taxation, 3rd ed., 1139, 1440; (2) the tax was not prohibitive;
that proof of loss for two years without showing what volume of
business was available in the municipality, or what portion was
done by the company or what its facilities were for handling the
business was not sufficient to show that a tax of $60.00 imposed
for revenue purposes on the privilege of doing an intrastate
business in a city of over 8,000 inhabitants was unreasonable; (3)
in imposing an occupation tax for revenue purposes, a municipality
acts as the agent of the state, and where a tax is imposed upon a
telegraph company doing an intrastate
Page 255 U. S. 127
and an interstate business and the revenue derived from its
intrastate business as a whole becomes insufficient and the tax may
become a burden on its interstate business, "Section 7409, Rev.St.
1913, provides a remedy."
The only contention that the Postal Company makes here is that
the tax "is in effect an imposition upon its interstate business."
It has this effect, is the assertion, because its "intrastate
business at Fremont is insufficient to pay the tax which if
compelled, must be paid from the company's interstate business,"
because it is required to do an intrastate business by § 7408 of
the state statutes, and its charges are prescribed by the section.
For the contention and its supporting assertions the company relies
on
Postal Telegraph-Cable Co. v. City of Richmond,
249 U. S. 252.
We cannot assign to that case the determining force that counsel
attribute to it. The case clearly declares that a license tax may
be lawfully imposed on a telegraph company for the right to do
business within the borders of the municipalities of a state. The
power, of course, has its limitations, and must be exercised with
due relation to the company's interstate business. That relation is
always to be considered, but it is not disposed of by the simple
assertion of a loss. The cause of it or the condition of it is to
be considered. In this case, the tax is $60.00 a year. It certainly
cannot be said that it is repellant from its amount, and there is
no pretense that its imposition "is a disguised attempt to tax
interstate commerce." The Postal Company, when it entered the city,
the ordinance levying the tax then being in existence, did not
declare against its legality or complain of its detrimental
operation. Indeed, for the privilege of entering the city, it
subjected itself to further regulation, licensing, and taxing. And
it paid the tax from that time until 1914. The allegation in its
answer that it paid the
Page 255 U. S. 128
tax "through the mistake and inadvertence of" its "clerical
force" we are not disposed to accept, without more, as an
explanation.
The supreme court expressed the view that mere proof of loss for
two years, which may have been exceptional, determined nothing in
the absence of a showing what business was available to the company
or what facilities it had or used, and also held that, the city
being an agent of the state, any deficit arising from the tax
imposed on the intrastate business of the company can be prevented
from becoming a burden upon the company's interstate business by an
application to the State Railway Commission under the provisions of
§ 7409 for an increase of its intrastate rates. And the suggestion
is pertinent. The company, as we have seen, cites § 7408 as a
compulsion upon it to engage in intrastate business and at
designated rates. From the rigor of the requirement § 7409 provides
a mode of relief, and until it is denied, the company cannot
complain under the circumstances presented by this record. In other
words, if § 7408 is imperative upon the company to continue
intrastate business, § 7409 affords a means of obtaining relief
from burdensome obedience. The sections are counterparts. If
submission to § 7408 results in insufficient revenue and a burden
upon interstate commerce, it is made the duty of the Railway
Commission, by § 7409, upon complaint of the Postal Company, to
raise the intrastate rate "fixed" in § 7408. No attempt to secure
relief under § 7409 appears to have been made.
Judgment affirmed.