1. A foreign corporation whose sole business in a state consists
in landing, storing and selling in the original packages goods
imported by it from abroad cannot constitutionally be subjected by
the state to an annual "franchise" tax on the doing of such
business measured by the value of the goods on hand. Pp.
288 U. S. 221,
288 U.S. 229.
2. The tax is repugnant to both the imports clause and the
commerce clause of the Constitution. P.
288 U. S.
225.
Page 288 U. S. 219
3. The tax under Alabama Gen.Laws, 1917, No. 163, § 54, as
construed by the supreme court of the state, is a tax on the doing
of business, as distinguished from a tax on the authorization,
right, or privilege to do business, and is invalid, under the
above-stated principle, as applied to the facts of this case. P.
288 U. S.
223.
4. The fact that the foreign corporation qualified to do
business in Alabama does not sustain the tax. P.
288 U. S.
224.
5. The power of a state to withhold from a foreign corporation
permission to exercise its franchise to do business therein does
not enable it, when granting the privilege, to burden by taxation
the foreign commerce carried on by the corporation within the
state. P.
288 U. S.
228.
225 Ala. 141, 142 So. 87, reversed.
Appeal from a judgment sustaining a tax assessment, and
reversing a judgment to the contrary, in a suit by the Nitrate
Company to set the tax aside.
Page 288 U. S. 220
MR. JUSTICE BUTLER delivered the opinion of the Court.
Appellant is a New York corporation having its principal office
in that state. October 10, 1927, it qualified to do business in
Alabama, and March 14, 1930, made and sent to the state tax
Commission a return showing that its
Page 288 U. S. 221
only property in Alabama on December 31, 1929, the date as of
which the statute required the statement to be made, was 33,455,763
pounds of nitrate of soda which had been imported by it from Chile
into Alabama and stored in the original packages, the book value of
which was $712,846.72. March 31, 1930, the Commission, under § 54
of No. 163, General Acts 1927, [
Footnote 1] assessed against appellant for that year a
franchise tax of $1,425.69, being at the rate of $2 on each $1,000
of the value so reported.
Conformably to state practice, appellant appealed to the Circuit
Court of Montgomery County. The case was submitted on an agreed
statement of facts, the abridged substance of which follows.
From the date of its qualification in Alabama to the time of the
assessment, appellant was engaged in the business of importing
nitrate through the Port of Mobile and other ports. The nitrate, in
bags containing about 100 pounds each, was brought into Mobile and
there stored
Page 288 U. S. 222
by appellant in a public warehouse and kept in the original
packages until sold and delivered to the ultimate consumers. All
was sold upon orders through a salesman who, paying his own
expenses, was compensated by commissions on his sales. The orders
were taken subject to approval, and were not effective until
approved by appellant in its New York office. When so accepted,
directions were given that the nitrate be forwarded to the
customers. These directions were given to and carried out by the
Walsh Stevedoring Company at Mobile, an independent contractor,
having an arrangement with appellant to handle its importations of
nitrate, store it in a public warehouse, and forward it as
directed.
All transactions were for cash. The customers received the
nitrate only upon payment of the purchase price when they took up
the shipping documents through a bank of collection by paying the
drafts attached. Such payments were sent to the Merchants' National
Bank at Mobile, and by it immediately transferred to appellant in
New York. Appellant had no bank account in Alabama, and paid all
expenses there by remittances from New York. On the date as of
which appellant's return was made, it had no accounts or bills
receivable in Alabama, and had no money there at any time except
during the brief intervals that the funds were being so
transmitted. It did not have or employ any capital in that state
unless the importation through the port of Mobile, the storage, and
sale of nitrate in the manner above described constitutes capital
and its employment there.
Section 54, under which the assessment was made, declares that
every corporation organized under the laws of any other state and
doing business in Alabama shall pay to the state an annual
franchise tax of $2 on each $1,000 of the actual amount of capital
employed therein. Appellant maintained below, and here insists,
that the section, construed to impose the tax in question,
Page 288 U. S. 223
is repugnant to the declarations of the federal
Constitution:
"No state shall, without the consent of the Congress, lay any
imposts or duties on imports or exports except what may be
absolutely necessary for executing its inspection laws,"
Art. I, § 10, cl. 2, and, "The congress shall have power . . .
to regulate commerce with foreign nations, and among the several
states . . ." Art. I, § 8.
The Alabama statute in question was enacted in pursuance of §
232 of the state constitution, which declares:
"No foreign corporation shall do any business in the State
without having a place of business and an authorized agent therein
and without filing with the Secretary of State a certified copy of
its articles of incorporation."
"The Legislature shall, by general law, provide for the payment
to the State of Alabama of a franchise tax by such corporation, but
such franchise tax shall be based on the actual amount of capital
employed in this State."
As to the meaning and purpose of the statute, we are governed by
the construction put upon it by the state supreme court.
Its decisions clearly show that the exaction is laid not upon
the authorization, right, or privilege to do business in Alabama,
but upon the actual doing of business. While the case at bar was
pending on appeal there, the state supreme court, in
State v.
National Cash Credit Assn., 224 Ala. 629, 632, 141 So. 541,
544, held that the mere investment in or ownership of property in
the state by a foreign corporation does not subject it to the
franchise tax. Adverting to the language of the statute, it
declared that the "property must be employed in a corporate
business done in this state." On rehearing, May 19, 1932, and after
its decision in the case before us, that court said:
"We merely hold a franchise tax to be what it purports to be --
a tax upon the exercise or use of its franchise in Alabama for the
purposes of such franchise, and that,
Page 288 U. S. 224
if no corporate activity is conducted in Alabama during the
period covered by the tax, the corporation does not owe a franchise
tax."
And, in the case at bar the court said:
"The defendant duly qualified as a foreign corporation to do
business in this state, appointed a resident agent, and that it
actually engaged in business in Alabama by selling its nitrate
through a salesman both within and without the state appears as an
uncontroverted fact. It seeks to be relieved from this franchise
tax solely upon the theory the imported nitrate, the sale of which
constituted its business, was immune from state taxation. . . . The
statute here under review has no reference to imports, but is
merely of a general character relating to the fixation of the
amount of a franchise tax upon foreign corporations doing business
in this state."
142 So. 87, 89. And, after referring to the manner of
appellant's acceptance of orders and the collections and
remittances, the court said: "These details go to show the
corporation was actually engaged in business in this state. . . ."
142 So. 87, 91. As appellant did no local business in the state,
that decision plainly rests upon the assumption that Alabama had
power to tax appellant's sales in original packages of the nitrate
it imported into that state only for sale and that such sales
constituted a business that is taxable under § 54. The Alabama
statute is unlike that of Michigan examined here in
Detroit
International Bridge Co. v. Michigan, 287 U.
S. 295, and
Michigan v. Michigan Trust Co.,
286 U. S. 334,
286 U. S. 342.
There, the tax upon a domestic corporation was imposed for the mere
right to transact business.
The fact that appellant qualified to do business in Alabama was
not, and rightly cannot be, held to sustain the tax. In
Ozark
Pipe Line v. Monier, 266 U. S. 555, we
condemned as repugnant to the commerce clause a Missouri statute
that required every foreign corporation engaged in business in that
state to pay an annual franchise tax upon the privilege or right to
do business.
Page 288 U. S. 225
The company's business there consisted in the operation of a
pipeline for interstate transportation of oil and in the ownership
of property, the keeping of its principal office, purchase of
supplies, employment of labor, maintenance and operation of
telephone and telegraph line -- all in furtherance of such
interstate commerce and constituting the means and instruments by
which it was conducted. We held that the tax could not be
constitutionally exacted, and that the facts that the foreign
corporation was organized for local business and had applied for
and received a local license conferring the power of eminent domain
did not enable the state to tax its right to carry on interstate
commerce. We said (p.
266 U. S.
567):
"The state has no such power even in the case of domestic
corporations.
See Philadelphia Steamship Co. v.
Pennsylvania, 122 U. S. 326,
122 U. S.
342."
The question whether, consistently with the imports and commerce
clauses, the Alabama statute may be construed to require appellant
to pay the specified franchise tax is dual in form, but single in
substance, for, upon the facts of this case, it is clear that, if
the exaction is a tax on imports, it necessarily burdens foreign
commerce.
Crew Levick Co. v. Pennsylvania, 245 U.
S. 292,
245 U. S.
295.
The stipulation of the parties shows that the only transactions
in Alabama in which appellant is concerned are the landing,
storage, and sale of the nitrate in the form and packages in which
it was put up abroad and transported into the United States. The
bags were kept intact, no nitrate was removed therefrom, and, prior
to the delivery of the same to those who bought from appellant, it
was not in any manner commingled with, and did not become a part
of, the general mass of property within the state. The right to
import the nitrate included the right to sell it in the original
bags while it remained the property of appellant and before it lost
its distinctive character as an import. State prohibition of such
sales
Page 288 U. S. 226
would take from appellant the very rights in respect of
importation that are conferred by the Constitution and laws of the
United States. Alabama was powerless, without the consent of
Congress, to tax the nitrate before such sales, or to require
appellant, by the payment of occupation or franchise tax or
otherwise, to purchase from it the privilege of selling goods so
imported and handled.
Brown v.
Maryland, 12 Wheat. 419,
25 U. S. 436,
25 U. S.
442-444. In that case, a state license fee imposed on an
importer selling imported goods in the original bales or packages
was condemned as repugnant to the imports and commerce clauses.
Chief Justice Marshall said (p.
25 U. S.
444):
"All must perceive that a tax on the sale of an article imported
only for sale, is a tax on the article itself. . . . A tax on the
occupation of an importer is . . . a tax on importation. It must
add to the price of the article, and be paid by the consumer or by
the importer himself in like manner as a direct duty on the article
itself would be made. This the state has not a right to do, because
it is prohibited by the Constitution."
In
Cook v. Pennsylvania, 97 U. S.
566, the Court held offensive to the same provisions a
tax on the amount of the sales of imported goods in the original
packages made by an auctioneer for the importer. In
May &
Co. v. New Orleans, 178 U. S. 496, the
Court, at p.
178 U. S. 507,
formally reaffirmed and succinctly stated the propositions
established in
Brown v. Maryland, but held that the city
tax there involved did not violate the imports or commerce clause
because the imported goods were not sold in the original package.
[
Footnote 2] And recently, in
Willcuts v. Bunn, 282 U. S. 216, we
said (p.
228 U. S.
228):
"When the Constitution prohibits states from laying duties on
imports, the prohibition not
Page 288 U. S. 227
only extends to a tax upon the act of importing, but also to one
upon the occupation of the importer or upon the articles imported.
A tax on the sale of an article imported only for sale is a tax on
the article itself.
Brown v. Maryland, 12 Wheat.
419,
25 U. S. 444."
And see 65 U. S.
California, 24 How. 169;
Fairbank v. United States,
181 U. S. 283;
Selliger v. Kentucky, 213 U. S. 200;
United States v. Hvoslef, 237 U. S.
1;
Thames & Mersey Ins. Co. v. United
States, 237 U. S. 19;
Crew Levick Co. v. Pennsylvania, supra; Sonneborn Bros. v.
Cureton, 262 U. S. 506,
262 U. S. 509.
The constitutional protection extends to corporations, as well as
to individuals.
Crutcher v. Kentucky, 141 U. S.
47,
141 U. S. 57;
International Text-Book Co. v. Pigg, 217 U. S.
91,
217 U. S.
108.
In support of its conclusion, the state court cited and appellee
relies upon
New York v. Roberts, 171 U.
S. 658. The question for decision in the case now before
us was not involved, presented, or decided there. The statute of
New York considered there imposed a tax on the business or
franchise of domestic and foreign corporations except, among
others, those wholly engaged in carrying on manufacture in the
state. The taxpayer, Parke, Davis & Co., was a Michigan
corporation. It had its factory in Detroit and a warehouse and
depot in New York. It had a manager and over fifty employees there.
It did local business, and also sold in original packages goods
received from its factory and goods imported for it from foreign
countries. The tax rate was graded by the statute according to
dividends (presumably paid out of net earnings).
Cf.
247 U. S. S. Glue
Co. v. Oak Creek, 247 U. S. 321. The
tax base was the amount of capital employed within the state, and
the comptroller fixed that amount at $90,000. The corporation,
seeking to have the assessment set aside, took the case to the
state supreme court. It sustained the assessment against the
contention that the statute, as construed by the comptroller, was
repugnant to
Page 288 U. S. 228
the privileges and immunities clause, Art. IV, § 2, and held
that the business was "not interstate commerce, which will prevent
the corporation carrying it on from being taxed. . . ." 91 Hun,
158, 162, 36 N.Y.S. 368, 371. No other federal question was
considered. The court of appeals affirmed without opinion. In this
Court, the corporation's principal insistence was that the statute
was repugnant to the equal protection clause of the Fourteenth
Amendment in that it exempted domestic corporations manufacturing
and selling in New York while imposing upon the Michigan
corporation a discriminatory tax for selling in New York in
original packages products manufactured in its Detroit factory. The
Court overruled that contention. The opinion shows that, as to the
amount of its capital employed in New York, no federal question was
presented. And, as admittedly the corporation did a local business
in that state --
i.e., business not included in interstate
or foreign commerce (171 U.S. 659, 91 Hun, 160, 36 N.Y.S. 368),
that case is essentially different from this one.
The decisions here since
New York v. Roberts, supra,
definitely show that the power of the state to withhold from a
foreign corporation permission to exercise its franchise to do
business therein does not enable it, when granting the privilege,
to burden by taxation interstate commerce carried on by such
corporation within the state. And, quite recently, in
Fidelity
& Deposit Co. v. Tafoya, 270 U. S. 426, we
said (p.
270 U. S.
434):
"Thus, the right to exclude a foreign corporation cannot be used
to prevent it from resorting to a federal Court.
Terral v.
Burke Construction Co., 257 U. S. 529, or to tax it upon
property that, by established principles, the state has no power to
tax,
Western Union Telegraph Co. v. Kansas, 216 U. S. 1,
and other cases in the same volume and later that have followed it;
or to interfere with interstate commerce,
Sioux Remedy Co. v.
Cope, 235 U. S. 197,
235 U. S.
203;
Looney
Page 288 U. S. 229
v. Crane Co., 245 U. S. 178,
245 U. S.
188;
Western Union Telegraph Co. v. Foster,
247 U. S.
105,
247 U. S. 114."
See Ozark Pipe Line v. Monier, supra; Alpha Cement Co. v.
Massachusetts, 268 U. S. 203;
Frost Trucking Co. v. Railroad Comm'n, 271 U.
S. 583,
271 U. S. 593,
et seq. Sprout v. South Bend 277 U.
S. 163,
277 U. S.
170-171;
New Jersey Tel. Co. v. Tax Board,
280 U. S. 338,
280 U. S. 346;
East Ohio Gas Co. v. Tax Comm'n, 283 U.
S. 465,
283 U. S.
470.
It follows that the Alabama statute, construed to impose a tax
upon appellant for selling in that state in the original packages
the nitrate imported by it from Chile, is repugnant to the imports
and commerce clauses above quoted. And, as it did no other business
in that state, it is not liable for any part of the tax that the
state Commission assessed against it.
Judgment reversed.
[
Footnote 1]
Section 54 of Act No. 163, Alabama General Acts 1927, p. 176,
provides:
"That every corporation organized under the laws of any other
state, nation, or territory and doing business in this state,
except strictly benevolent, educational, or religious corporations,
shall pay annually to the state an annual franchise tax of Two
Dollars ($2.00) on each One Thousand Dollars of the actual amount
of capital employed in this state. In ascertaining the annual
franchise tax which shall be paid by any foreign corporation doing
business in this state under this section, there shall be deducted
from the amount of the capital employed by such corporation in this
state the aggregate amount of loans of money made by such
corporations in this state, and which shall be secured by existing
mortgage or mortgages to it on real estate in this state, and upon
which mortgages there shall have been paid the recording privilege
tax provided by law."
For the derivation of this section,
see § 16 of Act No.
464, General Acts 1915, p. 397; § 16 of Act No. 328, General Acts
1919, p. 291; § 11 of Act No. 172, General Acts 1923, p. 164, as
amended by Act No. 263, General Acts 1923, p. 267.
[
Footnote 2]
Cf. Austin v. Tennessee, 179 U.
S. 343,
179 U. S. 359;
Cook v. Marshall County, 196 U. S. 261,
196 U. S. 270;
Kirmeyer v. Kansas, 236 U. S. 568,
236 U. S. 573;
Price v. Illinois, 238 U. S. 446,
238 U. S. 454;
Hebe Co. v. Shaw, 248 U. S. 297,
248 U. S.
304.
MR. JUSTICE CARDOZO, dissenting.
This case does not present the question that would be here if
the appellant had not sought for and obtained a privilege or
franchise to do a local business in the State of Alabama. T here is
nothing in the Alabama decisions, and little in her statutes, to
indicate that the tax would have been sustained in the absence of
such a grant, or that there would have been even an attempt to levy
it.
Ewart Lumber Co. v. American Cement Co., 9 Ala.App.
152, 156, 62 So. 560;
Citizens' National Bank v. Buckheit,
14 Ala.App. 511, 517, 519, 71 So. 82;
Tyson v. Jennings Produce
Co., 16 Ala.App. 374, 375, 77 So. 986;
Ware v. Hamilton
Brown Shoe Co., 92 Ala. 145, 149, 9 So. 136;
Cook v. Rome
Brick Co., 98 Ala. 409, 413, 12 So. 918;
Stratford v. City
Council of Montgomery, 110 Ala. 619, 20 So. 127; Alabama Code
of 1928, § 7217, limiting the application of §§ 7209 to 7220.
Indeed, the Attorney General informed us on the argument that this
would have been the position of his department of the
government,
Page 288 U. S. 230
charged, as it is, with the collection of the revenues of the
state. Alabama has said by her courts that it is beyond the power
of the legislature to restrict by conditions the exercise or
enjoyment of a privilege that has its origin and sanction in the
Constitution of the nation.
See cases,
supra.
Alabama has said by her statutes (Code, § 7217) that the permits
and franchise taxes exacted of foreign corporations by article 26
of the Alabama Code do not apply to corporations "engaging in or
transacting business of interstate commerce only," if the privilege
they ask for is that, and nothing more. The act now in question
(Section 54 of Act No. 163, approved July 22, 1927, Alabama General
Acts 1927, p. 176) was passed in fulfillment of a mandate laid upon
the legislature by § 232 of the Alabama Constitution. By that
section, it is provided that no foreign corporation shall do
business in that state
"without having at least one known place of business and an
authorized agent or agents therein, and without filing with the
secretary of state a certified copy of its articles of
incorporation or association."
By the same section:
"The legislature shall, by general law, provide for the payment
to the State of Alabama of a franchise tax by such corporation, but
such franchise tax shall be based on the actual amount of capital
employed in this state."
It is this section that the courts of Alabama have adjudged to
be inapplicable to interstate business.
See cases,
supra. If that is the construction to be given to the
command whereby the legislature was to establish a franchise tax
and measure it in a certain way, there can be no doubt that the
same construction must be given to the statute passed thereafter to
give effect to the command. The power abjured in one breath was not
exerted in the next.
With this approach to the problem, the pathway in made open.
When the Legislature of Alabama said in 1927 that an annual tax was
imposed upon the franchise
Page 288 U. S. 231
of every foreign corporation, it meant to lay the burden upon
those franchises and those only which there was power in Alabama to
grant or to withhold. If the corporation was there by virtue of a
dual right, the one created by the state, and no other, was to be
subjected to the charge. The presumption of that intention is
hardly to be escaped in view of past disclaimers of a purpose more
pretentious. True, there is another section of the same act whereby
a written permit is exacted for
"the purpose of registration and to prevent the duplication of
names and in order to secure for the public record, for taxation,
and for other purposes, the names and addresses of the said
corporations,"
and its officers (Act No. 163, p. 171, § 42). True also that,
for such a permit, there is to be paid an annual tax varying from
$5, the minimum, to $100, the maximum. The statute provides,
however, that the tax imposed by that section shall be "in addition
to other license and privilege taxes required to be paid by law."
There is thus a tax in the nature of a fee to be paid in
installments as compensation for the permit, and another tax,
measured by the capital in use within the state, upon the
underlying franchise. The fee for the permit does not rebut the
inference that there is not to be a tax upon the franchise unless
user is a privilege that issues from the state. Doubt, if there is
any, will be resolved in favor of the construction that keeps the
act alive.
The appellant was not satisfied to stand upon its federal right,
though the state had made it plain that the claim of right would be
respected. It was seeking something more -- the privilege of going
over the line that marks the federal immunity -- and, to that end,
it asked for and obtained a license or franchise -- the name is
unimportant -- to do a local business as well as one related to
interstate or foreign commerce. By the grant thus procured,
Page 288 U. S. 232
it became free, at its unfettered will, to sell at wholesale or
at retail, in the original packages or in others, unhampered by the
restrictions that would have limited its capacity if it had been
there as an importer and with the powers of an importer only. This
franchise or privilege -- this grant of benefits beyond any
conferred by the federal Constitution -- the State of Alabama was
competent to tax.
Home Life Ins. Co. v. New York,
134 U. S. 594;
Ashley v. Ryan, 153 U. S. 436,
153 U. S. 440;
Kansas City Ry. v. Kansas, 240 U.
S. 227;
Lusk v. Botkin, 240 U.
S. 236;
St. Louis, S.W. Ry. Co. v. Arkansas,
235 U. S. 350;
Kansas City Ry. v. Stiles, 242 U.
S. 111,
242 U. S. 117;
Flint v. Stone Tracy Co., 220 U.
S. 107;
Educational Films Corp. v. Ward,
282 U. S. 379;
Pacific Co. v. Johnson, 285 U. S. 480,
285 U. S. 489;
Detroit International Bridge Co. v. Corp. Tax Appeal
Board, 287 U. S. 295.
There being competence to tax, there was competence to measure the
burden of the payment by capital employed, irrespective of the use
to which employment is directed.
Educational Films Corp. v.
Ward, supra; Pacific Co. v. Johnson, supra; Flint v. Stone Tracy
Co., supra; Home Ins. Co. v. N.Y. supra. There may be a wrong
to the taxpayer if the standard of measurement is oppressive and
unreasonable.
Western Union v. Kansas, 216 U. S.
1. There is none where the standard bears a fair and
natural relation, in its normal or average workings, to the
privilege conferred.
The argument is made, however, that the tax, though declared by
the express terms of the statute to be a tax upon the "franchise,"
is confined to corporations "doing business" in Alabama, and hence
is to be viewed as a tax upon the kind of business actually
conducted, and not upon the franchise to conduct it in that or
other ways. More than once, a like argument directed to statutes
phrased in the same way has been urged upon this Court, only to be
rejected as unsound.
Home Life Ins. Co. v. New York, supra; St.
Louis, S.W. Ry. Co. v. Arkansas,
Page 288 U. S. 233
supra; Louisville & N. R. Co. v. Alabama, 248 U.S.
533; 201 Ala. 317 (involving a statute of Alabama similar to this
one);
Kansas City, M, & B. R. Co. v. Stiles,
242 U. S. 111,
aff'g 182 Ala. 138, 62 So. 734;
Flint v. Stone Tracy
Co., 220 U. S. 107,
220 U. S.
145-146. Thus, in
Home Life Ins. Co. v. N.Y.
supra, a statute provided that every corporation then or
thereafter incorporated under any law of the state or of any other
state or country, "and doing business in the state," should be
subject to a tax "upon its corporate franchise or business,"
measured by its dividends. The Court held that the tax was one upon
the privilege "of doing business in a corporate capacity," and not
upon the business or activities that were the outcome of the
privilege.
Cf. Flint v. Stone Tracy Co., supra, pp.
220 U. S.
145-146;
Michigan v. Michigan Trust Co.,
286 U. S. 334;
Detroit International Bridge Co. v. Tax Appeal Board,
supra. There would be greater force in the appellant's
argument if its construction of the tax as one upon the activity or
the business had support in anything decided by the courts of
Alabama. To the contrary, the highest court of the state has put
that meaning aside by its opinion in this very case. Adopting the
reasoning of this Court in
Flint v. Stone Tracy Co.,
supra, it has said that "the tax is an excise upon the
particular privilege of doing business in a corporate capacity, and
with the advantages derived therefrom."
State v. Anglo-Chilean
Nitrate Sales Corp., 142 So. 87, 91;
cf. Louisville &
N. R. Co. v. State, 201 Ala. 317, 318, 78 So. 93;
Ellis v.
Handley Mfg. Co., 214 Ala. 539, 108 So. 343;
Kansas City
Ry. Co. v. Stiles, 182 Ala. 138, 62 So. 734. True indeed it is
that the corporation will be relieved of the burden if no business
is transacted and no capital employed (
State v. National Cash
Credit Association, 224 Ala. 629, 141 So. 541), but so was the
corporation in the
Home Insurance case, and so also were
the corporations in many other cases.
Flint v. Stone Tracy Co.,
St. Louis, S.W.
Page 288 U. S. 234
Ry. Co. v. Arkansas, Louisville & N. R. Co. v. Alabama,
Kansas City Ry. Co. v. Stiles, supra. If the state has
conferred a privilege which it is competent to tax, the competence
is not lost, and the validity of the tax destroyed, because the
privilege is to be free when the corporation is inactive. There is
a requirement in the Alabama Constitution, repeated in the statute,
that the tax upon the franchise shall be measured by the capital
employed within the state, a measure obviously inapplicable to
dormant corporations. In such circumstances, activity is an event
that conditions liability, but the privilege, not the event, is
still the subject of the burden. To resume the matter in a few
words: the tax is not imposed upon those capacities and privileges
that emanate by implication from the power of the nation. The tax
is laid upon those privileges, and those only, that emanate either
expressly or by implication from the power of the state. Business,
it is true, must have been done, for without the doing of business
there can be no capital employed. Even so, capital and business are
byproducts and incidents, like dividends or income.
Flint v.
Stone Tracy Co. They are the yardstick by which the state
measures the value of the privilege. They are not the privilege
itself.
The argument is made that "capital employed" is an illegal and
arbitrary measure because the appellant has made no use of the
taxable franchise emanating from the state, but has confined its
activities to interstate or foreign commerce. What has been said in
recent cases (
Educational Films Corp. v. Ward, supra, and
Pacific Co. v. Johnson, supra) goes far to give the
answer. There was no attempt here as there was in
Western Union
Telegraph Co. v. Kansas, supra, or in
Looney v. Crane
Co., 245 U. S. 178, or
in
International Paper Co. v. Massachusetts, 246 U.
S. 135, or in other cases of that type, to burden a
local privilege in close association with one not local by a levy
upon values beyond the confines of the state.
Page 288 U. S. 235
Cf. Kansas City Ry. Co. v. Stiles, 242 U.
S. 111,
242 U. S. 119;
Baltic Mining Co. v. Massachusetts, 231 U. S.
68;
Wallace v. Hines, 253 U. S.
66;
Cudahy Packing Co. v. Hinkle, 278 U.
S. 460;
Educational Films Corp. v. Ward, supra
at p.
282 U. S. 391.
The measure here was capital employed in Alabama (
St. Louis,
S.W. Ry. v. Arkansas, supra; Louisville & N. R. Co. v. Alabama,
supra), and it was a mere fortuity that, in this instance, the
capital was made up of imports still intact. Moreover, what was
done under the franchise one day might not be done under it the
next. Another franchise tax would not be owing for a year. In the
meantime, the appellant might transact its business as it pleased.
If some of its sales, however few and trifling, had been made in
broken packages, there would be no denial by anyone that the
privilege of making them would be subject to taxation by one
measure or another. This Court has never held that the measure in
such circumstances would be arbitrary and unlawful because
determined by the value of all the local capital, and not merely
the proportion necessary for sales in broken lots. In principle,
the situation would then be governed by the ruling in
Hump
Hairpin Co. v. Emmerson, 258 U. S. 290, and
Western Cartridge Co. v. Emmerson, 281 U.
S. 511, where an apportionment very similar had the
approval of this Court. Especially must the standard hold when the
statute is directed against foreign corporations generally, and not
particularly against such of them as are engaged in interstate or
foreign commerce. If the standard is a valid one when the privilege
is used, it does not cease to be valid because user is abandoned or
postponed. Very likely the statute might have been read in a
different way. It might have been read as imposing two conditions
-- first that business should have been done, and second that what
was done could be attributed at least in part, to the actual
exercise of the privileges granted by the state. As to such matters
of construction, the
Page 288 U. S. 236
courts of the state may speak the final word. All that concerns
us here is capacity or power. Here was no covert effort by the
state to extend its taxing jurisdiction into an area denied to it.
The burden upon interstate business in
Western Union v.
Kansas and the other cases cited was an outcome inherent in
the statutory scheme; it was the very event intended. The burden
here, if there was any, was unforeseen and adventitious.
Cf.
Plummer v. Coler, 178 U. S. 115,
Kansas City Ry. Co. v. Stiles, supra.
None of the decisions cited by the appellant controls the case
at hand.
Ozark Pipe Line Corp. v. Monier, 266 U.
S. 555, is invoked with special confidence. There are
obvious distinctions. The statute of Missouri there held to be
invalid in its application to a corporation engaged in interstate
commerce was very similar in form to the statute of Alabama in
controversy here. The conduct of the aggrieved corporation was,
however, very different. Its business was the operation of a
pipeline from oil wells in Oklahoma passing through Missouri to a
destination in Illinois. Nothing was done in Missouri, or so the
court interpreted the evidence, except in furtherance of
transportation. Oil was neither received nor delivered in that
state. In these circumstances, the corporation asked for and
obtained from Missouri a license to "engage
exclusively in the
business of transporting crude petroleum by pipeline.'" 266 U.S. at
266 U. S. 561,
266 U. S. 567.
This, however, was the very business that was incidental to the
federal right. The privilege to transport upon the interstate
journey was an essential incident of commerce, and so an emanation
from the federal power. The Court did not hold that the tax would
have been unlawful if laid upon a franchise emanating from the
power of the state. The Court condemned the
Page 288 U. S.
237
tax for the reason that it read the statute as designed to
lay a burden on the franchise to do business as an interstate
carrier. The imputation of that design was borne out in a measure
by the remedy, for the state had brought a suit not only to impress
a lien upon the property, but to revoke the license altogether (p.
266 U. S.
561), limited though it was. Cf. Underwood
Typewriter Co. v. Chamberlain, 254 U.
S. 113, 254 U. S. 119;
Southern Ry. Co. v. Watts, 260 U.
S. 519, 260 U. S. 530.
If there had been decisions in Missouri, as there are in Alabama,
disclaiming a purpose to affect the federal privilege, and if the
state and federal privileges had varied substantially from each
other in meaning and in function, the parallel would be closer
between the Ozark case and this. But if those conditions
had been present, the result must have been changed.
Other cases, emphasized in the briefs, are still more faintly
applicable.
Crew Levick Co. v. Pennsylvania, 245 U.
S. 292, brought before us a tax upon the business of
foreign commerce, whether conducted by natural persons or by
corporations. Its measure was the gross receipts.
"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."
245 U.S.
245 U. S. 297.
Cf. Phila. & Sou. S.S. Co. v. Pennsylvania,
122 U. S. 326. The
conclusion would have been different if net income, and not gross,
had been adopted as the measure.
United States Glue Co. v. Oak
Creek, 247 U. S. 321,
247 U. S. 328;
Peck & Co. v. Lowe, 247 U. S. 165;
Shaffer v. Carter, 252 U. S. 37,
252 U. S. 52.
The case has no relation to the validity of a tax to be measured by
local capital and imposed upon a privilege.
Alpha Portland Cement Co. v. Massachusetts,
268 U. S. 203,
dealt with a statute of Massachusetts, different in
Page 288 U. S. 238
form from this, and interpreted as one laid directly upon the
operations of the business.
Cf. Gloucester Ferry Co. v.
Pennsylvania, 114 U. S. 196. No
license or franchise to engage in a local business had been granted
by the state.
Brown v.
Maryland, 12 Wheat. 419, was a case of a
discriminatory tax upon the business of importers, and
Cook v.
Pennsylvania, 97 U. S. 566, a
case of a discriminatory tax upon an auctioneer selling for
importers. In neither was there a franchise, or a tax upon a
franchise, or a reference to capital as a standard of measurement.
In each, the presence of imported packages to be subjected to a
burden was an event considered and intended, not an adventitious
circumstance developing unexpectedly in the application of the tax
to one taxpayer out of many.
The tax imposed by this statute does not discriminate between
domestic and foreign corporations to the prejudice of the latter.
Domestic corporations pay a franchise tax that is measured by their
whole capital; foreign corporations one that is measured by "the
actual amount of capital employed" within the state. It does not
discriminate between foreign corporations engaged in interstate or
foreign commerce and other foreign corporations. It lays a burden
on all impartially. Finally, it is not oppressive in amount, nor
framed in such a form as to suggest a furtive purpose to stifle
activities not covered by its terms. The tax is $2 per thousand
dollars until 1932, and $1 per thousand afterwards. General Acts of
Alabama, 1927, § 56, p. 177.
The appellant is in the enjoyment of a privilege of value which
it solicited and received from the State of Alabama, and for that
privilege it should pay.
MR. JUSTICE BRANDEIS and MR. JUSTICE STONE join in this
dissent.