A North Carolina statute (Laws 1917, c. 231) provided that every
manufacturer of automobiles engaged in the business of selling them
in the state must pay a license tax of $500 before selling or
offering for sale, and made like requirement of every person or
corporation there engaged in selling automobiles of a manufacturer
who had not paid such tax, but further provided that, if an officer
or representative of such manufacturer should file a sworn
statement showing that at least three-fourths of the entire assets
of the manufacturer were invested in bonds of the state or its
municipalities or in property therein situate and returned for
taxation, the license tax should be reduced to $100. As applied to
two corporations of other states which made automobiles outside of
North Carolina and a third which distributed them there through
local agencies to which the automobiles were consigned for
sale,
Held:
(1) That, assuming the corporations were doing business in North
Carolina and were subject to her jurisdiction, the statute worked a
discrimination against them, contrary to the Fourteenth Amendment.
P.
256 U. S.
424.
(2) That, without such assumption, it discriminated against
their products, in violation of the commerce clause. P.
256 U. S.
426.
178 N.Car. 399 reversed.
Error to a judgment of the Supreme Court of North Carolina
sustaining a state license tax in a suit to restrain its
enforcement. The facts are stated in the opinion.
Page 256 U. S. 422
MR. JUSTICE McKENNA delivered the opinion of the Court.
The defendants in error are, respectively, sheriffs of Forsyth
and Guilford Counties, North Carolina. Under the laws of the state,
for the nonpayment of a license tax, the former levied on a motor
truck belonging to the Bethlehem Corporation (referred to as the
Pennsylvania corporation), the latter levied on a car belonging to
the National Motor Car & Vehicle Corporation (referred to as
the Indiana corporation). The trucks are manufactured in
Pennsylvania, the cars in Indiana, and they are distributed in
North Carolina and other states through W. Irving Young & Co.
(referred to as the Delaware corporation), a corporation of the
state of Delaware, which conducts its business in North Carolina by
the Liberty Motors Corporation and the National Motors Company,
these companies being corporations of North Carolina. And it is the
finding or conclusion of the trial court that "both corporations
thereupon were and became the agents" of the three other
corporations "for the purpose of selling and delivering said trucks
and automobiles." They were consigned to the two latter companies,
and were sold direct by them from their storage warehouse, being
consigned to them for that purpose and not to be used exclusively
as samples or for demonstration purposes, nor used or intended to
be used, simply for the purpose of soliciting orders to be filled
by shipment from the place of their manufacture.
Plaintiffs in error brought this suit in the Superior Court of
Forsyth County to restrain the defendants in error from selling the
truck and car. A preliminary restraining order was granted. It was
subsequently dissolved. The order of dissolution was affirmed by
the supreme court, thereby sustaining the license tax and the levy
upon the automobiles made to enforce it.
Page 256 U. S. 423
A summary of the act by which a license is required is
necessary. It provides in ยง 72 of c. 231, Laws 1917, that every
manufacturer of automobiles
"engaged in the business of selling the same in this state, or
every person or persons or corporation engaged in selling
automobiles in this state, the manufacturer of which has not paid
the license tax provided for in this section, before selling or
offering for sale any such machine, shall pay to the state
treasurer a tax of $500 and obtain a license for conducting such
business."
The name of the machine must accompany the application for a
license, which must be in writing. A licensee may employ an
unlimited number of agents, but each county of the state may levy a
tax on each agent. Besides some other provisions, there is one (and
it is of special pertinence in the case)
"that, if any officer, agent, or representative of such
manufacturer shall file with the state treasurer a sworn statement
showing that at least three-fourths of the entire assets of the
said manufacturer of automobiles are invested"
in the bonds of the state or any of its counties, cities, or
towns, or in property situated therein, and returned for taxation,
the taxes named in the section shall be one-fifth of those named.
Upon the renewal of a license that shall have been in force less
than six months, a rebate of $250 is allowed on the new
license.
Two contentions are made by the plaintiffs in error:
(1) That the act imposing the tax offends the equal protection
of the laws clause of the Fourteenth Amendment of the Constitution
of the United States.
(2) That the act attempts to regulate interstate commerce in
contravention of the commerce clause of the Constitution.
The contentions depend upon different considerations. The basis
of the first is that they, the corporations, are discriminated
against; the basis of the second is that their products are. The
contentions therefore should not be
Page 256 U. S. 424
confused. They fall under two heads: (1) If the Pennsylvania
corporation and the Indiana corporation and the Delaware
corporation are doing business in the state, and therefore within
its jurisdiction, they undoubtedly can complain of a discrimination
against them that is offensive to the Fourteenth Amendment.
Southern Railway Co. v. Greene, 216 U.
S. 400,
216 U. S. 415.
(2) If, however, they are not in the state and subject to its
jurisdiction, and seek to enter, the tax may be considered a
condition which the statute may impose.
Paul v.
Virginia, 8 Wall. 168, and a number of subsequent
cases, including
Southern Railway Co. v. Greene, supra.
Unless, as plaintiffs in error contend, the tax is a discrimination
against their products.
These contentions we will consider in their order, keeping them
as separate as possible.
(a) This Court has decided too often to need citation of the
cases that corporations doing business in a state and having an
agent there are within the jurisdiction of the state for the
purpose of suit against them, and we may assume that the principle
is applicable here, and that the Pennsylvania corporation, the
Indiana corporation, and the Delaware corporation are within the
jurisdiction of the state and subject to its laws equally with the
corporations of the state. It will be observed, however, that the
act under review applies to all manufacturers and persons engaged
in selling automobiles in the state. The act makes no distinctions
between nonresident and resident manufacturers. Wherein, then, is
there discrimination? It is contended to be in the provision which
reduces the tax to one-fifth of its amount -- from $500 to $100 --
if the manufacturer of the automobiles has three-fourths of his
assets invested in the bonds of the state or some of its
municipalities, or in other property situated therein and returned
for taxation. The provision is declared to be impossible of
performance, and its effect to be that a manufacturer not having
such investment of property is
Page 256 U. S. 425
charged $500 for a license and one having such investment of
property is charged only $100. And plaintiffs in error, it is
asserted, are necessarily in the $500 class . The contrasting
assertion is that local manufacturers are in the $100 class, and
that therefore there is illegal discrimination in their favor.
In explicit specification of such discrimination, plaintiffs in
error assert that the provision, as applied to them, is "contrary
to all common sense," and that the supreme court conceded the
improbability of compliance with it by the manufacturer of another
state.
The Attorney General of the state seems to concur in the
denunciation, and adds to it the declaration that the insistence of
the act is of an "utterly futile project," but adds, in order to
remove or palliate its discrimination, it is as "futile" to
manufacturers of the state as to manufacturers of other states, and
considers it nugatory. His words are, "from nothing, nothing can
arise," and that "discrimination cannot be predicated upon any
scheme which is not workable." He therefore dismisses the provision
as not applicable.
May we accept his view of it -- that is, regard the condition as
a mere
brutum fulmen, imposing no condition or burden,
against the decision of the supreme court of the state? The court
has assumed its efficacy and regarded it as a legal condition upon
the Pennsylvania corporation, the Indiana corporation, and the
Delaware corporation, doing business in the state. We are unable to
concur in this conclusion. It is a perilous power to concede to the
state, and it is immediately manifest that it can be exerted to
prevent all commerce of those corporations (or other corporations)
with the state except as the commerce might be through direct
personal purchases and importations. In other words, the power can
be exerted to exclude the products of those corporations, and every
other corporation, if they have, or it has, agents in the
state.
Page 256 U. S. 426
But if that provision can be dismissed as nugatory, as the
Attorney General asserts, we encounter the alternative provision
which requires the investment of a like proportion of assets of
foreign manufacturers in other property in the state returned for
taxation. In resistance to the assertion that the provision
discriminates against nonresident manufacturers, the Attorney
General contends that it is as applicable to resident manufacturers
as to nonresident manufacturers, and, of course, his inference is
that its condition can be performed as easily by one as by the
other, and discriminates against neither.
To this we cannot assent. The condition can be satisfied by a
resident manufacturer, his factory and its products in the first
instance being within the state; it cannot be satisfied by a
nonresident manufacturer, his factory necessarily being in another
state, some of its products only at a given time being within the
state. Therefore, there is a real discrimination, and an offense
against the Fourteenth Amendment, if we assume that the
corporations are within the state.
(b) If they are not within the state, their second contention is
that the act is an attempt to regulate interstate commerce. If it
have that effect, it is illegal for a tax on an agent of a foreign
corporation for the sale of a product is a tax on the product, and
if the product be that of another state, it is a tax on commerce
between the states.
Welton v. Missouri, 91 U. S.
275;
Webber v. Virginia, 103 U.
S. 344;
Darnell & Son v. Memphis,
208 U. S. 113.
This is the assertion of plaintiffs in error; defendants in error
oppose a denial to the assertion, and the denial is supported by
the supreme court on the authority of
Brown v. Houston,
114 U. S. 622;
Sewing Machine Co. v. Brickell, 233 U.
S. 304. The basis of the denial and its support by the
Supreme Court is that the automobiles had passed out of interstate
commerce and had reached repose in the state, and blend with the
other things of the
Page 256 U. S. 427
state, and became subject to intrastate regulation. It is
doubtful if that be a justifiable deduction from the findings of
the trial court. But comment is not necessary. It is the finding of
the court that the automobiles were in the hands of the agents of
the consigning corporations, and therefore a tax against them was
practically a tax on their importation into the state. It is not
necessary to say it would be useless to send them to the state if
their sale could be prevented by a prohibitive tax or one so
discriminating that it would prevent competition with the products
of the state. This is the ruling of the cases which we have cited.
It is especially the ruling in
Darnell & Son v. Memphis,
supra. The imposition of such a tax is practically the
usurpation of the power of Congress over interstate commerce, and
therefore illegal.
Judgment reversed and cause remanded for further proceedings
not inconsistent with this opinion.
MR. JUSTICE PITNEY and MR. JUSTICE BRANDEIS dissent.