A state license tax cannot be laid upon the business of a
corporation employed as agent by owners of vessels engaged
exclusively in interstate and foreign commerce where its business
is confined to, and is a necessary adjunct of, their commerce,
consisting in the soliciting and engaging of cargo, nominating
vessels to carry it, arranging for delivery on wharf and for
stevedores, issuing bills of lading, collecting freight charges,
paying ships' disbursements, and other incidental matters.
McCall v. California, 136 U. S. 104,
followed.
Ficklen v. Shelby County Taxing District,
145 U. S. 1,
distinguished.
152 La. 497 reversed.
Page 264 U. S. 151
Error to a judgment of the Supreme Court of Louisiana, which
affirmed a judgment for the City of New Orleans in an action for a
license tax.
MR. JUSTICE SUTHERLAND delivered the opinion of the Court.
The City of New Orleans brought this action in a Louisiana state
court to recover from defendant (plaintiff in error here) a license
tax of $400, imposed for the year 1922, upon its business of
steamship agent. The demand was resisted on the ground that the tax
was in contravention of the commerce clause of the Constitution of
the United States in that it was an interference with and tax upon
interstate and foreign commerce. Defendant was regularly employed
as agent for four steamship lines under a contract fixing its
compensation on the basis of commissions, calculated upon the gross
amount of freight charges collected by it for each company. In
addition, defendant occasionally represented other shipowners. All
were exclusively engaged in interstate or foreign commerce, and
defendant's business was confined solely to representing principals
so engaged in such commerce. The service rendered consisted of
soliciting and engaging cargo, nominating ships for carrying it,
arranging for its delivery on the wharf, issuing bills of lading
under the name of shipowner or charterer, arranging for stevedores
for loading and discharging cargo, collecting freight charges,
paying ships' disbursements, attending to immigration service, and
assisting generally in matters of local customs and
regulations.
Page 264 U. S. 152
Freight moneys collected, after deducting commissions, were
remitted to the owners or charterers. As such agent, defendant was
authorized to solicit cargo and quote freight rates and to issue
receipts in the name of its principal for cargo delivered on the
wharf.
Upon these facts, the trial court held that defendant's business
was local in character, and subject to the tax. Upon appeal, this
judgment was affirmed by the state supreme court. 152 La. 498.
The state supreme court thus stated the necessity and character
of the agent's duties:
"The business of steamship agents is an extensive business in
New Orleans, as it is in every large seaport. As a separate or an
independent business, it is a result of the development of the
country's commerce with foreign nations and among the several
states. In the early days, when time was not so much the object or
subject of economy as it is today, every ship's captain, for his
own ship, discharged the duties and rendered the services for which
local steamship agents are employed nowadays. But it would be
impracticable now for a ship's captain to remain with his ship in
port long enough to attend to the many matters which the local
steamship agents can and do attend to for a ship at sea or in a
foreign port. The business of steamship agents is therefore a
necessary adjunct to commerce on the high seas."
This Court has had frequent occasion to consider and determine
the effect of taxes of the same general character as that here
involved, and, for present purposes, we find it unnecessary to do
more than refer to the general and well established rule, which is
that a state or state municipality is powerless to impose a tax
upon persons for selling or seeking to sell the goods of a
nonresident within the state prior to their introduction therein,
Stockard v. Morgan, 185 U. S. 27, or to
impose a tax upon persons for securing or seeking to secure the
transportation
Page 264 U. S. 153
of freight or passengers in interstate or foreign commerce,
McCall v. California, 136 U. S. 104. The
latter decision controls the present case. There, the agent of a
railroad company was engaged in San Francisco in the business of
soliciting and inducing persons to travel from the State of
California into and through other states to New York City, over the
line of railroad which he represented. It was held that the
business of the agent constituted a method of securing passenger
traffic for the company, and therefore (p.
136 U. S. 109)
the tax was one "upon a means or an occupation of carrying on
interstate commerce, pure and simple." The only difference between
that case and this is that there, the agent was engaged in seeking
interstate passenger business, while here, the agent was engaged in
seeking interstate and foreign freight business. Plainly, as
pointed out in the
McCall (p.
136 U. S.
109), the principle is the same.
Ficklen v. Shelby County, 145 U. S.
1, is relied upon to justify the tax, but quite clearly
it does not do so. The facts of that case differ materially from
those of the
McCall case and those with which we are here
dealing. In the
Ficklen case, complainants were general
merchandise brokers. They paid the initial tax imposed by the
Tennessee law for the year 1887 and received and held throughout
the year a general and unrestricted license to do business as such.
They thereby became liable, under the statute, to pay an additional
privilege tax in part graduated according to the amount of
commissions received. It happened that, during 1887, the principals
of one complainant were wholly nonresident, and those of the other
largely so. The opinion pointed out that the fact might have been
otherwise then and afterward, since their business was not confined
to transactions for nonresidents. At the expiration of the year,
complainants applied for a renewal of their licenses, which was
refused because they had made no return of their commissions
Page 264 U. S. 154
and no payment of the tax, as required. In deciding the case,
stress was laid upon the fact that they had taken out a license
under the law to do a general commission business, had given bond
to report their commissions during the year and to pay the required
percentage thereon, and, agreeing with the state court, it was said
that resort to a judicial remedy could not be had because the
authorities had refused to issue a license for the ensuing year
without payment of the stipulated tax. Concluding the opinion, it
was said:
"What position they 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."
The decision rests largely upon the elements above stated, as
was pointed out by Mr. Justice Brewer in
Brennan v.
Titusville, 153 U. S. 289,
153 U. S.
307:
"It was held that the tax was an entirety, and was not effected
by the variable and adventitious results of business from year to
year. . . . In other words, the tax imposed was for the privilege
of doing a general commission business within the state, and
whatever were the results pecuniarily to the licensees, or the
manner in which they carried on business, the fact remained
unchanged that the state had, for a stipulated price, granted them
this privilege. It was thought by a majority of the court that to
release them from the obligations of their bonds on account of the
accidental results of the year's business was refining too much,
and that the plaintiffs who had sought the privilege of engaging in
a general business should be bound by the contracts which they had
made with the state therefor."
The case is near the borderline, and has been deemed
exceptional.
Crew Levick Co. v. Pennsylvania, 245 U.
S. 292,
245 U. S. 296;
Stockard v. Morgan, supra, pp.
185 U. S.
34-37.
Page 264 U. S. 155
The present case is sufficiently differentiated by the fact that
the agent here neither did nor held itself out as ready to do a
general business, partly local and partly interstate and foreign,
but confined itself exclusively to the latter.
Reversed.
MR. JUSTICE BRANDEIS dissenting, with whom MR. JUSTICE HOLMES
concurs.
From the multitude of cases, this general rule may be educed.
* The validity of
a state tax under the commerce clause does not depend upon its
character or classification. It is not void merely because it
affects or burdens interstate commerce. The tax is void only if it
directly burdens such commerce, or (where the burden is indirect)
if the tax discriminates against or obstructs interstate commerce.
In this case, there is no claim that interstate commerce is
discriminated against or obstructed. The contention is that the tax
imposes a direct burden. Whether the burden should be deemed direct
depends upon the character of plaintiff's occupation and its
relation to interstate transactions.
The occupation tax laid by New Orleans is fixed in amount,
business being classified into several grades according to the
amount of business done. The Texas Transport & Terminal Company
falls within the highest grade -- those whose receipts exceed
$100,000 a year -- and thus it is taxed $400 a year. The business
is what is called a steamship agency. The main office is in New
York City. It has branches in New Orleans and in five other ports
of the United States. It is a wholly independent concern. No
shipowner has an interest in it, and it has no interest in any ship
which it serves. Some
Page 264 U. S. 156
of these are regular ocean liners; others are casual tramp
ships. The services rendered include, among other things, arranging
with independent stevedore concerns for discharging and loading
cargoes; arranging with independent dealers for bunkering -- that
is, buying fuel and oil; making provision for fitting ships for any
special or peculiar cargo; making provision for compliance with the
immigration and customs laws, and paying the ship's disbursements.
For these, and the other services of soliciting cargoes, arranging
for their delivery, and collecting payment for freight, the company
is compensated. Usually the compensation is measured by a
percentage on the gross freight charges collected. Sometimes it is
a lump sum for each ship served. These comprehensive services
require, for their efficient performance, the employment of a
steamship agency, or its equivalent, whatever the home port of the
ship or the principal place of its owner's business.
It is settled law that interstate commerce is not directly
burdened by a tax imposed upon property used exclusively in
interstate commerce,
Transportation Co. v. Wheeling,
99 U. S. 273,
99 U. S. 284;
Dominion Steamship Co. v. Virginia, 198 U.
S. 299,
198 U. S. 306;
or by a tax upon net income derived exclusively from interstate
commerce,
United States Glue Co. v. Oak Creek,
247 U. S. 321;
Shaffer v. Carter, 252 U. S. 37,
252 U. S. 57
(
compare Peck & Co. v. Lowe, 247 U.
S. 165); or by an occupation tax, fixed in amount,
although the business consists exclusively of selling goods brought
from another state,
Wagner v. City of Covington,
251 U. S. 95. On
the other hand, the burden is deemed direct, where the tax is upon
property moving in interstate commerce,
Champlain Realty Co. v.
Brattelboro, 260 U. S. 366; or
where it lays, like a gross receipts tax, a burden upon every
transaction in such commerce "by withholding for the use of the
state part of every dollar received in such transactions,"
Page 264 U. S. 157
Crew-Levick Co. v. Pennsylvania, 245 U.
S. 292,
245 U. S. 297;
or where an occupation tax is laid upon one who, like a drummer or
delivery agent, is engaged exclusively in inaugurating or
completing his own or his employer's transaction in interstate
commerce,
Robbins v. Shelby County Taxing District,
120 U. S. 489;
Davis v. Virginia, 236 U. S. 697.
The New Orleans tax is obviously not laid upon property moving
in interstate commerce. Nor does it, like a gross receipts tax, lay
a burden upon every transaction. It is simply a tax upon one of the
instrumentalities of interstate commerce. It is no more a direct
burden than is the tax on the other indispensable
instrumentalities; upon the ship; upon the pilot boat, which she
must employ; upon the wharf at which she must load and unload; upon
the office which the owner would have to hire for his employees,
if, instead of engaging the services of an independent contractor,
he had preferred to perform those duties himself. The fact that, in
this case, the services are performed by an independent contractor
having his own established business, and the fact that the services
rendered are not limited to soliciting differentiate this case from
McCall v. California, 136 U. S. 104. If
these differences are deemed insufficient to distinguish that case
from the one at bar, it should be frankly overruled as inconsistent
with the general trend of later decisions.
*
Compare Thomas Reed Powell, "Indirect Encroachment on
Federal Authority by the Taxing Powers of the states," 31 Harv.Law
Rev. 321, 572, 721, 932; 32 Harv.Law Rev. 234, 374, 634, 902.