1. Cotton produced locally, shipped into a warehouse, and there
held at the exclusive disposition of its owners, the holders of
negotiable warehouse receipts, retains its local status, although,
in the usual course, the owners will ultimately order that it be
compressed and delivered to a rail carrier for shipment to
ultra-state destinations of their selection. P.
291 U. S.
21.
2. The business of storing and compressing the cotton in such
circumstances is local, and a nondiscriminatory state tax upon it
is consistent with the commerce clause of the Constitution. P.
291 U. S.
21.
Page 291 U. S. 18
3. The fact that a contract between the warehouseman and the
interstate rail carrier by which the cotton has been brought to
storage and by which, in the ordinary course, it ultimately will be
transported beyond the state at a single rate from point of origin
to point of destination designates the warehouseman as the
carrier's agent, and the warehouse as the carrier's depot, cannot
convert what is a local business into an interstate business. P.
291 U. S.
22.
4. Licensing of a warehouse under the United states Warehousing
Act does not make of it a federal instrumentality or withdraw its
business from state taxation. P.
291 U. S.
22.
5. The mere extension of control over a business by the National
Government does not withdraw it from a local tax which presents no
obstacle to the execution of the national policy. P.
291 U. S.
23.
166 Miss. 739, 147 So. 325, affirmed.
Appeal from the affirmance of a judgment in favor of a tax
collector, based on a directed verdict, in an action seeking to
recover moneys collected by him as privilege taxes.
MR. JUSTICE STONE delivered the opinion of the Court.
This case comes here on appeal, under § 237 of the Judicial
Code, for review of a judgment of the Supreme Court of Mississippi
upholding a state excise tax assailed as a forbidden imposition
upon a federal instrumentality, and as infringing the commerce
clause of the Federal Constitution. 166 Miss. 739, 147 So. 325.
Sections 3, 57, 220, 221, 225, 242, of cc. 88, of the General Laws
of Mississippi of 1930, exact an annual license tax for the
privilege of operating a cotton compress which is graduated
according to the number of bales of cotton compressed per
annum.
Page 291 U. S. 19
Sections 3 and 63 levy a similar additional tax upon each person
operating a warehouse, whether in conjunction with a compress or
not, which is graduated according to the storage capacity of the
warehouse.
Appellant, a Delaware corporation, which maintains and operates
a cotton warehouse and compress at Cleveland, Mississippi, brought
the present suit to recover taxes imposed with respect to both
classes of business, paid under protest to appellee, the tax
collector, in 1932. The case was tried on an agreed statement of
facts, from which it appears that the appellant is licensed by the
Secretary of Agriculture to conduct a warehouse for the storage of
agricultural products under the provisions of the United States
Warehouse Act of August 11, 1916, c. 313, 39 Stat. 486, as amended,
c. 10, § 241
et seq. Appellant has given a bond for the
faithful performance of the duties which are exacted of a licensed
warehouseman by the act and by the rules and regulations of the
Secretary of Agriculture, and its business as a warehouseman is
subject to his inspection and control as the statutes and
regulations provide.
Cleveland is a shipping point for baled cotton in interstate and
foreign commerce, and is a market in which cotton is purchased by
brokers and dealers from those who produce it within the state. The
purchases are made for resale or to fulfill contracts for sale of
cotton without the state. In the usual course of business, the
purchased cotton, after it is ginned, is transported to appellant's
warehouse for storage and compression, about 25% arriving by
automobile truck or wagon and the remainder by rail over the line
of the single railroad serving Cleveland. Upon delivery, appellant
issues its negotiable warehouse receipts for the cotton, in the
form and manner provided by the United States Warehouse Act. The
right to demand delivery of the cotton or otherwise control its
Page 291 U. S. 20
disposition is reserved to the holders of the receipts. A small
part of the stored cotton, from 1% to 10%, is resold within the
state to buyers, who sell it to purchasers without the state, but
all except a negligible part of it is ultimately shipped to points
outside the state. Upon shipping orders given by the holders of the
warehouse receipts, appellant compresses the cotton into bales of
standard weight and size, suitable for shipment, and delivers them
to the rail carrier for interstate transportation. The movement of
the cotton out of the warehouse is directed by the owners of its
who hold the warehouse receipts. Its destination is not determined
until the owner gives shipping instructions to appellant, and
shipment is not made until surrender of the warehouse receipts. The
compress charges are paid by the carrier, which it adds to the
charge for carriage, and, in the case of cotton brought to the
warehouse by rail carriage, the through interstate rail rate is
applied from the point of origin to destination instead of the
combination rate which is the sum of the intrastate rate to
Cleveland and the interstate rate from that point to destination.
The identity of the cotton is not preserved in reshipping it, and
substitution is permitted with the understanding that the through
rate from point of origin to destination without the state shall
not be affected.
By written agreement with the railroad company, appellant is
designated as the agent of the railroad to receive the cotton from
and deliver it to the railroad and to load and unload cotton upon
and from its cars. The agreement also provides for the use of the
warehouse by the railroad as a cotton depot.
Upon this state of facts, appellant argues that the tax upon the
business both of warehousing and of compressing the cotton is a
forbidden burden on interstate commerce, and that the warehouse tax
is unconstitutional
Page 291 U. S. 21
because a direct tax upon a business conducted by appellant as a
federal instrumentality, designated as such by its license under
the United States Warehouse Act.
1. It is clear that, by all accepted tests. the cotton, while in
appellant's warehouse, has not begun to move in interstate
commerce, and hence is not a subject of interstate commerce immune
from local taxation. When it comes to rest there, its intrastate
journey, whether by truck or by rail, comes to an end, and,
although in the ordinary course of business the cotton would
ultimately reach points outside the state, its journey interstate
does not begin, and so it does not become exempt from local tax,
until its shipment to points of destination outside the state.
Before shipping orders are given, it has no ascertainable
destination without the state, and in the meantime, until surrender
of the warehouse receipts, it is subject to the exclusive control
of the owner. Property thus withdrawn from transportation, whether
intrastate or interstate, until restored to a transportation
movement interstate, has often been held to be subject to local
taxation.
Coe v. Errol, 116 U. S. 517;
Bacon v. Illinois, 227 U. S. 504;
General Oil Co. v. Crain, 209 U.
S. 211;
Susquehanna Coal Co. v. South Amboy,
228 U. S. 665,
228 U. S. 669;
Minnesota v. Blasius, 290 U. S. 1;
cf.
Arkadelphia Milling Co. v. St. Louis Southwestern R. Co.,
249 U. S. 134.
A nondiscriminatory tax upon the business of storing and
compressing the cotton, which is not itself the subject of a
movement in interstate commerce, is not forbidden. Most articles,
before their shipment in interstate commerce, have had work done
upon them which adapts them to the needs of commerce and prepares
them for sale and convenient transportation, but that fact has
never been thought to immunize from local taxation either the
articles themselves or those who have manufactured or otherwise
prepared them for interstate transportation.
American
Page 291 U. S. 22
Manufacturing Co. v. St. Louis, 250 U.
S. 459;
Crescent Cotton Oil Co. v. Mississippi,
257 U. S. 129;
Oliver Iron Mining Co. v. Lord, 262 U.
S. 172;
Hope Natural Gas Co. v. Hall,
274 U. S. 284;
Utah Power & Light Co. v. Pfost, 286 U.
S. 165. Here, the privilege taxed is exercised before
interstate commerce begins; hence the burden of the tax upon the
commerce is too indirect and remote to transgress constitutional
limitations.
See Nashville, C. & St.L. Ry. Co. v.
Wallace, 288 U. S. 249. The
case therefore stands on a footing different from those in which
local regulations of the business of purchasing a commodity within
and shipping it without the state have been deemed to impede or
embarrass interstate commerce in those commodities.
Dahnke-Walker Milling Co. v. Bondurant, 257 U.
S. 282;
Lemke v. Farmers' Grain Co.,
258 U. S. 50.
The fact that appellant's contract with the interstate rail
carrier has designated appellant as the carrier's agent and
appellant's warehouse as the carrier's depot cannot alter the legal
consequences of what is actually done with the cotton by its owners
or of their power of control over it, or of the actual course of
dealing with it by appellant. It is not within the power of the
parties, by the descriptive terms of their contract, to convert a
local business into an interstate commerce business protected by
the interstate commerce clause.
See Merchants' Warehouse Co. v.
United States, 283 U. S. 501,
283 U. S.
507-508;
Superior Oil Co. v. Mississippi,
280 U. S. 390;
Browning v. Waycross, 233 U. S. 16,
233 U. S.
23.
2. Appellant's license under the United States Warehouse Act did
not confer upon it immunity from state taxation, for neither the
appellant nor its business was, by force of the license, converted
into an agency or instrumentality of the federal government. The
Warehouse Act confers upon licensees certain privileges, and
Page 291 U. S. 23
"secures to the national government, by means of the licensing
provisions, a measure of control over those engaged in the business
of storing agricultural products who find it advantageous to apply
for the license. The government exercise that control in the
furtherance of a governmental purpose to secure fair and uniform
business practices. But the appellant, in the enjoyment of the
privilege, is engaged in its own behalf, not the government's, in
the conduct of a private business for profit. It can no longer be
thought that the enjoyment of a privilege conferred by either the
national or a state government upon the individual, even though to
promote some governmental policy, relieves him from the taxation by
the other of his property or business used or carried on in the
enjoyment of the privilege or of the profits derived from it.
Susquehanna Power Co. v. state Tax Commission,
283 U. S.
291;
Fox Film Corp. v. Doyal, 286 U. S.
123;
Broad River Power Co. v. Query,
288 U. S.
178,
288 U. S. 180."
The fact that the license is used also as a means of government
control of appellant's business does not call for a different
conclusion. The national government has not assumed to tax the
business or to exercise any control over the taxation of it by the
state. The state does not tax the license itself, and the tax upon
petitioner's business, applied without discrimination to all
similar businesses, whether licensed or not, does not impair the
control which the federal authority has chosen to exert. The mere
extension of control over a business by the national government
does not withdraw it from a local tax which presents no obstacle to
the execution of the national policy.
Compare Susquehanna Power
Co. v. state Tax Commission, supra; Broad River Power Co. v. Query,
supra. See Willcuts v. Bunn, 282 U.
S. 216,
282 U. S. 226,
282 U. S.
230.
Affirmed.