1. New York City levied an excise tax on the gross receipts of a
stevedoring corporation engaged wholly within the territorial
limits of the City in loading and unloading vessels moving in
interstate and foreign commerce.
Held: such a tax is invalid, since it would burden
interstate and foreign commerce in violation of the Commerce Clause
of the Constitution. Pp.
330 U.S.
427,
330 U. S.
433-434.
2. Loading and unloading are essential parts of transportation
itself. Therefore, stevedoring is essentially a part of interstate
and foreign commerce, and cannot be separated therefrom for
purposes of local taxation. Pp.
330 U.S. 427,
330 U. S.
433.
3.
Puget Sound Stevedoring Co. v. State Tax Comm'n,
302 U. S. 90,
reaffirmed. P.
330 U. S.
433.
Page 330 U. S. 423
4.
Western Live Stock v. Bureau of Revenue,
303 U. S. 250;
Southern Pacific Co. v. Gallagher, 306 U.
S. 167;
McGoldrick v. Berwind-White Coal Mining
Co., 309 U. S. 33;
Department of Treasury v. Wood Preserving Corp.,
313 U. S. 62,
distinguished. Pp.
330 U. S.
430-433.
294 N.Y. 906, 908, 63 N.E.2d 112, affirmed.
The Comptroller of the City of New York determined that certain
stevedoring companies were liable for taxes on their gross receipts
under the general business tax laws of New York City. On review,
the Comptroller's determinations were annulled by the Supreme Court
of New York, Appellate Division. 269 App.Div. 685, 54 N.Y.S.2d 380,
383. The New York Court of Appeals affirmed. 294 N.Y. 906, 908, 63
N.E.2d 112. This Court granted certiorari. 326 U.S. 713.
Affirmed, p.
330 U. S.
434.
MR. JUSTICE REED delivered the opinion of the Court.
These two writs of certiorari bring before this Court
contentions in regard to the application to the respective
respondents, Carter & Weekes Stevedoring Company and John T.
Clark & Son, of New York City, of the general
Page 330 U. S. 424
business tax laws covering, when both cases are considered, the
years 1937 to 1941, inclusive. [
Footnote 1] The character of the taxes in issue will
appear from a section, set out below, of a local law imposing the
tax for 1939 and 1940. [
Footnote
2] The respective taxpayers are liable also for the general
income and
ad valorem taxes of the State and City of New
York. Both respondents are corporations engaged in the business of
general stevedoring. For these cases, the business of respondents
may be considered as consisting only of taking freight from a
convenient place on the pier or lighter wholly within the
territorial limits of New York City and
Page 330 U. S. 425
storing it properly for safety and for handling in or on the
outgoing vessel alongside, or of similarly unloading a vessel on
its arrival. The vessels moved in interstate or foreign commerce,
without a call at any other port of New York. We do not find it
necessary to consider separately interstate and foreign commerce.
The Commerce Clause covers both.
Through statutory proceedings unnecessary to particularize, the
Comptroller of the City of New York determined that the respondents
were liable for percentage taxes upon the entire gross receipts
from the above activities for the years in question under the
provisions of the respective local laws to which reference has been
made. Review of these determinations was had by respondents in the
Supreme Court of New York County, Appellate Division. The
determinations of the Comptroller were annulled on the authority of
Puget Sound Stevedoring Company v. Tax Commission,
302 U. S. 90;
Matter of Clark & Son v. McGoldrick, 269 App.Div. 685,
54 N.Y.S.2d 380, 383. These orders were affirmed by the Court of
Appeals,
Carter & Weekes Stevedoring Co. v.
McGoldrick, 294 N.Y. 906, 908, 63 N.E.2d 112, and remittiturs
issued stating that the Court of Appeals affirmed on the ground
that the local laws as applied in these cases were in violation of
Article I, § 8, Clause 3, of the Constitution of the United States.
[
Footnote 3] Writs of
certiorari to his Court were sought and granted on the issue of
whether or not this tax on these respondents constituted an
unconstitutional burden on commerce.
Petitioners recognize the force of the
Puget Sound case
as a precedent. Their argument is that subsequent holdings of this
Court have indicated that the reasons which underlay the decision
are no longer controlling in judicial examination of the
constitutionality of state taxation of
Page 330 U. S. 426
the gross proceeds derived from commerce, subject to federal
regulation. They cite, among others, these later decisions:
Western Live Stock v. Bureau of Internal Revenue,
303 U. S. 250;
Southern Pacific Co. v. Gallagher, 306 U.
S. 167;
McGoldrick v. Berwind-White Coal Mining
Co., 309 U. S. 33;
Department of Treasury v. Wood Preserving Corp.,
313 U. S. 62.
In the
Puget Sound case a state tax on gross receipts,
indistinguishable from that laid by New York City in this case, was
held invalid as applied to stevedoring activities exactly like
those with which we are here concerned. The
Puget Sound
opinion pointed out, 302 U.S. at
302 U. S. 92
et seq., that transportation by water is impossible
without loading and unloading. Those incidents to transportation
occupy the same relation to that commerce whether performed by the
crew or by stevedore contracting independently to handle the cargo.
The movement of cargo off and on the ship is substantially a
continuation of the transportation.
Cf. Baltimore & O.S.W.
R. Co. v. Burtch, 263 U. S. 540.
It is trite to repeat that the want of power in the
confederation to regulate commerce was a principal reason for the
adoption of the Constitution. The Commerce Clause bears no
limitation of power upon its face and, when the Congress acts under
it, interpretation has suggested none, except such as may be
prescribed by the Constitution.
Gibbons v.
Ogden, 9 Wheat. 1,
22 U. S. 196;
United States v. Carolene Products Co., 304 U.
S. 144,
304 U. S. 147;
North American Co. v. Securities and Exchange Commission,
327 U. S. 686,
327 U. S. 704.
On the other hand, the Constitution, by words, places no limitation
upon a state's power to tax the things or activities or persons
within its boundaries. What limitations there are spring from
applications to state tax situations of general clauses of the
Constitution.
E.g., Art. I § 10, Cl. 2 and 3;
New York
Indians, 5 Wall. 761;
Board of County
Commissioners v. United States, 308 U.
S. 343;
Bell's Gap R. Co. v. Pennsylvania,
134 U. S. 232,
134 U. S. 237;
Lawrence
v.
Page 330 U. S. 427
State Tax Commission, 286 U. S. 276,
286 U. S. 284;
Henderson Bridge Co. v. Henderson City, 173 U.
S. 592,
173 U. S.
614-15;
New York Rapid Transit Corp. v. City of New
York, 303 U. S. 573,
303 U. S.
581-82. From the Commerce Clause itself, there comes,
also, an abridgment of the state's power to tax within its
territorial limits. This has arisen from long continued judicial
interpretation that, without congressional action, the words
themselves of the Commerce Clause forbid undue interferences by the
states with interstate commerce, [
Footnote 4] and that this rule applies in full force to an
unapportioned [
Footnote 5] tax
on the gross proceeds from interstate business, [
Footnote 6] where the taxes were not in lieu
of
ad valorem taxes on property. [
Footnote 7]
We do not think that a tax on gross income from stevedoring,
obviously a "continuation of the transportation," is a tax
apportioned to income derived from activities within the taxing
state. The transportation in commerce, at the least, begins with
loading and ends with unloading. Loading and unloading has effect
on transportation
Page 330 U. S. 428
outside the taxing state because those activities are not only
preliminary to, but are an essential part of, the safety and
convenience of the transportation itself.
When we come to weigh the burden or interference of this tax on
the gross receipts from interstate commerce, the purposes of that
portion of the Commerce Clause -- the freeing of business from
unneighborly regulations that inhibit the intercourse which
supplies reciprocal wants by commerce [
Footnote 8] -- is a significant factor for consideration.
An interpretation of the text to leave the states free to tax
commerce until Congress intervened would have permitted intolerable
discriminations.
Nippert v. City of Richmond, 327 U.
S. 416, and cases collected in notes 13, 14, 15 and 16.
Nevertheless, a proper regard for the authority of the states and
their right to require interstate commerce to contribute by taxes
to the support of the state governments which make their interstate
commerce possible has led Congress, over a long period, to leave
intact the judicial rulings, referred to above, that apportioned,
nondiscriminatory gross receipt taxes or those fairly levied in
lieu of property taxes conformed to the requirements of the
Commerce Clause. As the power lies in Congress under the Clause to
make any desired adjustment in the taxation area, its acquiescence
in our former rulings on state taxation indicates its agreement
with the adjustments of the competing interests of commerce and
necessary state revenues. [
Footnote
9] There is another reason that may be the basis for the
acceptance, almost
Page 330 U. S. 429
complete, by Congress of the judicial interpretations in this
field. This is that a wide latitude exists for permissible state
taxation. This term, in an effort to show that the reach of the
Circuit Court did not destroy the state's power to make commerce
pay its way, we elaborated the fact that taxes on the commerce
itself was not the sole source of state revenue from that commerce.
Freeman v. Hewit supra, p.
329 U. S. 254;
see also Adams Mfg. Co. v. Storen, supra, 304 U. S.
310.
A power in a state to tax interstate commerce or its gross
proceeds unhampered by the Commerce Clause would permit a multiple
burden upon that commerce. This has been noted as ground for their
invalidation.
Western Live Stock v. Bureau of Revenue,
303 U. S. 250,
303 U. S. 255.
The selection of an intrastate incident as the taxable event
actually carries a similar threat to the commerce, but, where the
taxable event is considered sufficiently disjoined from the
commerce, it is thought to be a permissible state levy. [
Footnote 10] This result generally
is reached because the local incident selected is one that is
essentially local, and is not repeated in each taxing unit. In the
present case, the threat of a multiple burden, except in the few
instances in the record of interstate, in distinction to foreign,
commerce, is absent. The multiple burden on interstate
transportation from taxation of the gross receipts from stevedoring
arises from the possibility of a similar tax for unloading. The
actual effect on the cost of carrying on the commerce does not
differ from that imposed by any other tax exaction --
ad
valorem, net income, or excise.
Cf. Western Live Stock v.
Bureau of Revenue, supra, at
303 U. S. 254.
We need consider only whether or not the loading and unloading is
distinct enough from the commerce to permit the tax on the
gross.
Page 330 U. S. 430
On precedent, the
Puget Sound case is controlling. It
was promptly and recently cited with approval. [
Footnote 11] It appears in
Adams Mfg.
Co. v. Storen [
Footnote
12] in support of the possible double tax argument against
levies on interstate commerce. In
Western Live Stock v. Bureau
of Revenue, supra, 303 U. S. 258,
it was adverted to as a case for comparison with a ruling that
"preparing, printing, and publishing magazine advertising is
peculiarly local and distinct from its circulation, whether or not
that circulation be interstate commerce."
The case was not included in the Court's opinion in
Gwin,
White & Prince, Inc. v. Henneford, [
Footnote 13] where a state gross receipts tax on
income from marketing fruit interstate was invalidated under the
Commerce Clause, or in
McGoldrick v. Berwind-White Coal Mining
Co., [
Footnote 14]
though relied upon in the concurring opinion in the first at p.
305 U. S. 442,
and the dissent in the second at
309 U. S. 62.
Upon examination, this history gives an impression that there has
been a doubt as to the continued vitality of
Puget Sound.
We come now face to face with the problem of overruling or
approving the case.
Since
Puget Sound, there has been full consideration of
how far a state may go in taxing intrastate incidents closely
related in time and movement to the interstate commerce. The cases
that lend strongest support to petitioners' argument for overruling
the
Puget Sound decision have been referred to above. We
comment further upon them. The 2% excise tax levied by New Mexico
on the gross receipts of publishers from advertising, upheld in
Western Live Stock, was found to be an exaction
Page 330 U. S. 431
for carrying on a local business. [
Footnote 15] The
Gallagher case turns expressly
on our conclusion that a use tax is validly levied on an intrastate
event, "separate and apart from interstate commerce," 306 U.S. at
306 U. S. 176,
and the
Wood Preserving case [
Footnote 16] reached a similar result by reason of the
fact that the taxpayer sold and delivered its ties intrastate
before transportation began, 313 U.S. at
313 U. S. 67.
This is likewise true of
American Mfg. Co. v. City of St.
Louis, 250 U. S. 459, as
explained in the
Storen case. [
Footnote 17] When we examine the
Page 330 U. S. 432
Berwind-White tax on the purchasers of tangible
personal property for consumption, there is the same reliance upon
the local character of the sale, pp.
309 U. S. 43,
309 U. S. 47,
309 U. S. 49,
58. [
Footnote 18] We there
said, p.
309 U. S.
48:
"Certain types of tax may, if permitted at all, so readily be
made the instrument of impeding or destroying interstate commerce
as plainly to call for their condemnation as forbidden regulations.
Such are the taxes already noted which are aimed at or discriminate
against the commerce or impose a levy for the privilege of doing
it, or tax interstate transportation or communication or their
gross earnings, or levy an exaction on merchandise in the course of
its interstate journey. "
Page 330 U. S. 433
Though all of these cases were closely related to transportation
in commerce both in time and movement, it will be noted that, in
each, there can be distinguished a definite separation between the
taxable event and the commerce itself. We have no reason to doubt
the soundness of their conclusions.
Stevedoring is more a part of the commerce than any of the
instances to which reference has just been made. Although state
laws do not discriminate against interstate commerce or, in
actuality or by possibility, subject it to the cumulative burden of
multiple levies, those laws may be unconstitutional because they
burden or interfere with commerce.
See Southern Pacific Co. v.
Arizona, 325 U. S. 761,
325 U. S. 767.
Stevedoring, we conclude, is essentially a part of the commerce
itself, and therefore a tax upon its gross receipts or upon the
privilege of conducting the business of stevedoring for interstate
and foreign commerce, measured by those gross receipts, is invalid.
We reaffirm the rule of
Puget Sound Stevedoring Company.
"What makes the tax invalid is the fact that there is interference
by a State with the freedom of interstate commerce."
Freeman v.
Hewit, supra, p.
329 U. S. 256.
Such a rule may, in practice, prohibit a tax that adds no more to
the cost of commerce than a permissible use or sales tax. What
lifts the rule from formalism is that it is a recognition of the
effects of state legislation and its actual or probable
consequences. Not only does it follow a line of precedents
outlawing taxes on the commerce itself, but it has reason to
support it in the likelihood that such legislation will flourish
more luxuriantly where the most revenue will come from foreign or
interstate commerce. Thus, in port cities and transportation or
handling centers, without discrimination against out-of-state, as
compared with local, business, larger proportions of necessary
revenue could be obtained from the flow of commerce. The avoidance
of such a local
Page 330 U. S. 434
toll on the passage of commerce through a locality was one of
the reasons for the adoption of the Commerce Clause.
Affirmed.
MR. JUSTICE BLACK dissents.
* Together with No. 30,
Joseph, Comptroller, et al . v. John
T. Clark & Son, also on certiorari to the same Court.
[
Footnote 1]
The taxes in question were levied by the City of New York by a
series of local laws, No. 22 of 1937, p. 255, No. 20 of 1938, p.
253, No. 103 of 1939, p. 240, No. 78 of 1940, p. 342, No. 47 of
1941. The local laws were passed pursuant to authorization by the
New York.
See Laws of New York 1940, Ch. 245. There is no
dispute as to the general validity of the local laws.
See
McGoldrick v. Berwind-White Coal Mining Co., 309 U. S.
33 and
New York Rapid Transit Corp. v. City of New
York, 303 U. S. 573.
These cases involved other phases of these local laws.
Certiorari granted, 326 U.S. 713, argued March 1, 1946; restored
to the docket for reargument April 22, 1946.
[
Footnote 2]
Local Laws of the City of New York 1940, No. 78:
"§ R41-2.0. Imposition of tax. a. For the privilege of carrying
on or exercising for gain or profit within the city any trade,
business, profession, vocation, or commercial activity other than a
financial business, or of making sales to persons within such city,
for each of the periods of one year, or any part thereof, beginning
on July first of the years nineteen hundred thirty-nine and
nineteen hundred forty, every person shall pay an excise tax which
shall be equal to one-tenth of one percentum upon all receipts
received in and/or allocable to the city from such profession,
vocation, trade, business, or commercial activity exercised or
carried on by him during the calendar year in which such period
shall commence. . . ."
No problem of allocation or apportionment is involved.
See § b. No question is raised by petitioner that any part
of the tax is allocable to receipts properly attributable to doing
business in New York City, if all of the receipts are not subject
to the local act. § R41-3.0.
[
Footnote 3]
"The Congress shall have Power . . . To regulate Commerce with
foreign Nations, and among the several States, and with the Indian
Tribes. . . ."
[
Footnote 4]
Southern Pacific Co. v. Arizona ex rel. Sullivan,
325 U. S. 761,
325 U. S.
767-69, and cases cited;
Morgan v. Virginia,
328 U. S. 373,
328 U. S. 379,
and cases cited n. 17;
Freeman v. Hewit, 329 U.
S. 249;
Richfield Oil Corp. v. State Board of
Equalization, 329 U. S. 69.
[
Footnote 5]
Compare Maine v. Grand Trunk R. Co., 142 U.
S. 217;
Meyer v. Wells, Fargo & Co.,
223 U. S. 298,
223 U. S. 301;
Underwood Typewriter Co. v. Chamberlain, 254 U.
S. 113;
Hans Rees' Sons v. North Carolina,
283 U. S. 123;
Illinois Central R. Co. v. Minnesota, 309 U.
S. 157.
[
Footnote 6]
Fargo v. Michigan, 121 U. S. 230;
Ratterman v. Western Union Telegraph Co., 127 U.
S. 411,
127 U. S. 428;
Leloup v. Port of Mobile, 127 U.
S. 640;
Western Union Telegraph Co. v. Alabama,
132 U. S. 472;
Galveston, Harrisburg & San Antonio R. Co. v. Texas,
210 U. S. 217;
Meyer v. Wells, Fargo & Co., 223 U.
S. 298,
223 U. S. 300;
Minnesota Rate Cases. 230 U. S. 352,
230 U. S. 400;
Crew Levick Co. v. Pennsylvania, 245 U.
S. 292,
245 U. S. 295;
Fisher's Blend Station v. Tax Commission, 297 U.
S. 650,
297 U. S. 655;
Adams Mfg. Co. v. Storen, 304 U.
S. 307,
304 U. S. 312;
Freeman v. Hewit, supra.
[
Footnote 7]
Postal Telegraph Cable Co. v. Adams, 155 U.
S. 688,
155 U. S. 698;
United States Express Co. v. Minnesota, 223 U.
S. 335,
223 U. S.
346-48.
[
Footnote 8]
Federalist 7, 22, 42;
Baldwin v. G.A.F. Seelig,
294 U. S. 511,
294 U. S.
523.
[
Footnote 9]
See Clark Distilling Co. v. Western Maryland R. Co.,
242 U. S. 311,
242 U. S. 326;
United States v. Hill, 248 U. S. 420;
Whitfield v. Ohio, 297 U. S. 431;
Kentucky Whip & Collar Co. v. Illinois Central R. Co.,
299 U. S. 334;
Prudential Ins. Co. v. Benjamin, 328 U.
S. 408,
328 U. S. 430;
Southern Pacific Co. v. Arizona, 325 U.
S. 761,
325 U. S. 769;
Freeman v. Hewit, 329 U. S. 249,
329 U. S.
253.
[
Footnote 10]
Western Live Stock v. Bureau of Revenue, supra,
303 U. S.
258-260;
Southern Pacific Co. v. Gallagher,
306 U. S. 167,
306 U. S. 176;
McGoldrick v. Berwind-White Coal Mining Co., 309 U. S.
33,
309 U. S. 48;
Department of Treasury v. Wood Corp., 313 U. S.
62.
[
Footnote 11]
Coverdale v. Arkansas-Louisiana Pipe Line Co.,
303 U. S. 604,
303 U. S. 609;
Southern Pacific Co. v. Gallagher, 306 U.
S. 167,
306 U. S. 178;
Freeman v. Hewit, supra, p.
329 U. S.
257.
[
Footnote 12]
304 U. S. 304 U.S.
307,
304 U. S.
312.
[
Footnote 13]
305 U. S. 305 U.S.
434.
[
Footnote 14]
309 U. S. 309 U.S.
33.
[
Footnote 15]
303 U.S. at
303 U. S.
257.
"All the events upon which the tax is conditioned -- the
preparation, printing, and publication of the advertising matter
and the receipt of the sums paid for it -- occur in New Mexico, and
not elsewhere,"
P.
303 U. S.
260.
"So far as the advertising rates reflect a value attributable to
the maintenance of a circulation of the magazine interstate, we
think the burden on the interstate business is too remote and too
attenuated to call for a rigidly logical application of the
doctrine that gross receipts from interstate commerce may not be
made the measure of a tax. . . . Practical, rather than logical,
distinctions must be sought."
P.
303 U. S.
259.
The alternate ground, 303 U.S. at
303 U. S. 260
-- that such a local tax cannot be taxed elsewhere -- is inapposite
in such a foreign commerce situation as this.
[
Footnote 16]
See International Harvester Co. v. Department of
Treasury, 322 U. S. 340,
322 U. S.
348.
[
Footnote 17]
304 U.S. at
304 U. S.
312-313:
"The State court and the appellees rely strongly upon
American Mfg. Co. v. St. Louis, 250 U. S.
459, as supporting the tax on appellant's total gross
receipts derived from commerce with citizens of the State and those
of other states or foreign countries. But that case dealt with a
municipal license fee for pursuing the occupation of a manufacturer
in St. Louis. The exaction was not an excise laid upon the
taxpayer's sales or upon the income derived from sales. The tax on
the privilege for the ensuing year was measured by a percentage of
the past year's sales. The taxpayer had, during the preceding year,
removed some of the goods manufactured to a warehouse in another
state, and, upon sale, delivered them from the warehouse. It
contended that the city was without power to include these sales in
the measure of the tax for the coming year. The court held,
however, that the tax was upon the privilege of manufacturing
within the state, and it was permissible to measure the tax by the
sales price of the goods produced, rather than by their value at
the date of manufacture. If the tax there under consideration had
been a sales tax, the city could not have measured it by sales
consummated in another state."
Cf. Freeman v. Hewit, 329 U. S. 249,
329 U. S.
252.
[
Footnote 18]
309 U.S. at
309 U. S.
49:
"Its only relation to the commerce arises from the fact that,
immediately preceding transfer of possession to the purchaser
within the state, which is the taxable event regardless of the time
and place of passing title, the merchandise has been transported in
interstate commerce and brought to its journey's end. Such a tax
has no different effect upon interstate commerce than a tax on the
'use' of property which has just been moved in interstate commerce,
sustained in
Monamotor Oil Co. v. Johnson, 292 U. S.
86;
Henneford v. Silas Mason Co., supra;
Felt & Tarrant Mfg. Co. v. Gallagher, 306 U. S.
62;
Southern Pacific Co. v. Gallagher,
306 U. S.
167, or the tax on storage or withdrawal for use by the
consignee of gasoline, similarly sustained in
Gregg Dyeing Co.
v. Query, 286 U. S. 472;
Nashville, C.
& St.L. Ry. Co. v. Wallace, 288 U. S.
249;
Edelman v. Boeing Air Transport Co.,
289 U. S.
249, or the familiar property tax on goods by the state
of destination at the conclusion of their interstate journey.
Brown v. Houston, supra; American Steel & Wire Co. v.
Speed, 192 U. S. 500."
MR. JUSTICE DOUGLAS, with whom MR. JUSTICE RUTLEDGE concurs,
dissenting in part.
First. I think the tax is valid insofar as it reaches
the gross receipts from loading and unloading vessels engaged in
interstate commerce.
Puget Sound Stevedoring Co. v. Tax Commission,
302 U. S. 90, makes
clear that respondents' activities in loading and unloading the
vessels are interstate commerce. That case followed a long line of
decisions [
Footnote 2/1] when it
held in 1937 that a State could not tax the privilege of engaging
in interstate or foreign commerce by exacting a percentage of the
gross receipts.
Those cases, like the present one, involved no exaction by the a
license to engage in interstate commerce on the payment of flat
license tax or otherwise.
Cf. Leloup v. Port of Mobile,
127 U. S. 640;
Crutcher v. Kentucky, 141 U. S. 47;
Bowman v. Continental Oil Co., 256 U.
S. 642;
Cooney v. Mountain States Telephone &
Telegraph Co., 294 U. S. 384;
Murdock v. Pennsylvania, 319 U. S. 105,
319 U. S. 114.
Nor did they, any more than the present case, concern legislation
which expressed hostility to interstate commerce by discriminating
against it.
Cf. Best & Co. v. Maxwell, 311 U.
S. 454;
Nippert v. City of Richmond,
327 U. S. 416.
Although all or like business of a local nature was subject
Page 330 U. S. 435
to the same tax, the interstate business was granted immunity.
The theory, as expressed in
Philadelphia & Southern S.S.
Co. v. Pennsylvania, 122 U. S. 326,
122 U. S. 336,
was that taxation was one form of regulation, and a tax on the
gross receipts from interstate transportation would be
"a regulation of the commerce, a restriction upon it, a burden
upon it. Clearly, this could not be done by the state without
interfering with the power of Congress."
The tax in that case was a tax on the gross receipts from fares
and freight for the transportation of persons and goods in
interstate and foreign commerce. It was unapportioned. As we shall
see, the holding in the
Philadelphia & Southern S.S.
Co. case has not been impaired. But the principle it announced
-- that a tax on the gross receipts was forbidden because it was a
regulation of interstate or foreign commerce -- was not given full
scope. For soon, gross receipts taxes on businesses engaged in
interstate commerce (including transportation or communication)
were sustained where they were not discriminatory and where they
were fairly apportioned to the commerce carried on in the taxing
state. [
Footnote 2/2]
Maine v.
Grand Trunk R. Co., 142 U. S. 217.
Their validity was established whether they were employed as a
measure of the value of a local franchise (
Maine v. Grand Trunk
R. Co., supra; Wisconsin & M. R. Co. v. Powers,
191 U. S. 379) or
were used in lieu of all other property taxes to measure the value
of the property in the State.
United States Express Co. v.
Minnesota, 223 U. S. 335;
Cudahy Packing Co. v. Minnesota, 246 U.
S. 450;
Illinois Central R. Co. v. Minnesota,
309 U. S. 157.
The distinction between an apportioned gross receipts tax and a
tax on all the gross receipts of an interstate business,
Page 330 U. S. 436
such as was involved in
Philadelphia & S. M. Southern S.
Co. v. Pennsylvania, supra, pp.
122 U. S.
335-336, was explained in
Western Live Stock v.
Bureau of Revenue, 303 U. S. 250,
303 U. S. 256,
which was decided in 1938. The Court stated that the latter type of
tax could be imposed or added to
"with equal right by every state which the commerce touches,
merely because interstate commerce is being done, so that, without
the protection of the commerce clause, it would bear cumulative
burdens not imposed on local commerce. . . . The multiplication of
state taxes measured by the gross receipts from interstate
transactions would spell the destruction of interstate commerce,
and renew the barriers to interstate trade which it was the object
of the commerce clause to remove."
This explanation of the vice of the unapportioned gross receipts
tax had been earlier suggested in
Case of
the State Freight Tax, 15 Wall. 232,
82 U. S. 280,
and has been accepted by our decisions since the
Western Live
Stock case.
Adams Mfg. Co. v. Storen, 304 U.
S. 307,
304 U. S. 311;
Gwin, White & Prince, Inc. v. Henneford, 305 U.
S. 434,
305 U. S.
438-440;
McGoldrick v. Berwind-White Coal Mining
Co., 309 U. S. 33,
309 U. S. 45-46.
In both
Adams Mfg. Co. v. Storen, supra, and
Gwin,
White & Prince Inc. v. Henneford, supra, unapportioned
gross receipts taxes as applied to the receipts from interstate
sales were held invalid. It was said that the vice of such a tax
was that interstate commerce would be subjected "to the risk of a
double tax burden to which intrastate commerce is not exposed. . .
."
Adams Mfg. Co. v. Storen, supra, p.
304 U. S. 311.
Or, as stated in
Gwin, White & Prince, Inc. v. Henneford,
supra, p.
305 U. S.
439:
"Here, the tax, measured by the entire volume of the interstate
commerce in which appellant participates, is not apportioned to its
activities within the state. If Washington is free to exact such a
tax, other states to which the commerce extends may, with equal
right,
Page 330 U. S. 437
lay a tax similarly measured for the privilege of conducting
within their respective territorial limits the activities there
which contribute to the service. The present tax, though nominally
local, thus, in its practical operation, discriminates against
interstate commerce, since it imposes upon it, merely because
interstate commerce is being done, the risk of a multiple burden to
which local commerce is not exposed."
As was later stated in
Southern Pacific Co. v.
Gallagher, 306 U. S. 167,
306 U. S. 175,
as respects taxes on gross receipts from interstate transactions or
interstate transportation, "The measurement of a tax by gross
receipts where it cannot result in a multiplication of the levies
is upheld."
Under that view, the
Philadelphia & Southern S.S.
Co. case would be decided one way, and the
Puget Sound
Stevedoring Co. case the other. As we have noted, the tax in
the
Philadelphia & Southern S.S. Co. case was a gross
receipts tax on fares and freight for the transportation of persons
and goods in interstate and foreign commerce. It was unapportioned.
And there was the risk of multiple taxation to which local
transportation, though also taxed, was not subjected. The same was
true of
Ratterman v. Western Union Tel. Co., 127 U.
S. 411;
Western Union Telegraph Co. v. Alabama,
132 U. S. 472, and
Meyer v. Wells Fargo & Co., 223 U.
S. 298.
But, in the
Puget Sound case, any risk of multiple
taxation was absent. The same is true of the present case. For, in
each, the activity of loading and unloading was confined
exclusively to the State that imposed the tax. No other State could
tax the same activity. [
Footnote
2/3] The tax
Page 330 U. S. 438
therefore is, in its application, nothing more than a gross
receipts tax apportioned to reach only income derived from
activities within the taxing State. The gross receipts reflect
values attributed to the business or property wholly within the
taxing state. Under the test of our recent decisions (
Western
Live Stock v. Bureau of Revenue, supra; Adams Mfg. Co. v. Storen,
supra; Gwin, White & Prince, Inc. v. Henneford, supra),
the tax would therefore seem to be unobjectionable.
It is true, however, that taxes on gross receipts of
transportation companies and other interstate enterprises were held
invalid in cases prior to the
Puget Sound case, even
though all of the activities were confined to the taxing state and
could not be taxed by any other state.
Galveston, Harrisburg
& S.A. Ry. Co. v. Texas, 210 U. S. 217;
New Jersey Bell Tel. Co. v. State Board, 280 U.
S. 338.
Cf. Fargo v. Michigan, 121 U.
S. 230. The explanation given in the
Galveston
case was that a tax on the gross receipts was a regulation of
commerce, as the
Philadelphia & Southern S.S. Co. case
held. It distinguished
Maine v. Grand Trunk R. Co., supra,
and the other apportionment cases on the ground that they involved
taxes on property, the gross receipts being taken as the measure of
the value of the property. The Court said (210 U.S., p.
210 U. S.
227):
"It appears sufficiently, perhaps, from what has been said, that
we are to look for a practical, rather than a logical or
philosophical, distinction. The state must be allowed to tax the
property, and to tax it at its actual value as a going concern. On
the other hand, the state cannot tax the interstate business.
Page 330 U. S. 439
The two necessities hardly admit of an absolute logical
reconciliation. Yet the distinction is not without sense. When a
legislature is trying simply to value property, it is less likely
to attempt to or effect injurious regulation than when it is aiming
directly at the receipts from interstate commerce. A practical line
can be drawn by taking the whole scheme of taxation into account.
That must be done by this Court as best it can. Neither the state
courts nor the legislatures, by giving the tax a particular name or
by the use of some form of words, can take away our duty to
consider its nature and effect. If it bears upon commerce among the
states so directly as to amount to a regulation in a relatively
immediate way, it will not be saved by name or form."
The
Galveston case, like the
Philadelphia &
Southern S.S. Co. case, involved a tax applicable to
transportation companies alone. [
Footnote 2/4] Whatever may be said for the
proposition
Page 330 U. S. 440
that a gross receipts tax, applicable only to transportation
companies, may readily become the instrument for impeding or
destroying interstate commerce, that consideration has no relevancy
here. For, in the present case, as in the
Puget Sound
case, all businesses are taxed alike. There is equality throughout,
and interstate commerce is taxed no heavier than local business.
Political restraints, perhaps lacking when a particular type of
business is singled out for special taxation, would not be absent
here.
Moreover, the difference between a tax on property measured by
gross receipts and a tax on the gross receipts does not appear
significant in constitutional terms when the issue is one of undue
burden on interstate commerce. Either might be an instrument to
that end. The apportioned gross receipts tax in
Maine v. Grand
Trunk R. Co., supra, was, in terms "an annual excise tax for
the privilege of exercising" the corporation's franchises in the
State. 142 U.S. p.
142 U. S. 219.
The Court stated, p.
142 U. S.
228,
"a resort to those receipts was simply to ascertain the value of
the business done by the corporation, and thus obtain a guide to a
reasonable conclusion as to the amount of the excise tax which
should be levied. . . ."
As much can be said of the present case, and of the
Puget
Sound case. While the tax is, in terms, one on the privilege
of doing business, resort is made to the gross receipts merely to
ascertain the value of the business. No vice of extraterritoriality
or multiple taxation is involved. The value taxed is attributable
to business within the taxing State, and may not be reached by any
other State. That value
Page 330 U. S. 441
is, of course, augmented by the interstate character of the
business. But the same is true in any apportionment case.
Galveston, Harrisburg & S.A. R. Co. v. Texas, supra,
p.
210 U. S. 225;
Cudahy Packing Co. v. Minnesota, supra, p.
246 U. S.
455-456.
Respondents pay other taxes to New York City, including the
usual property taxes. But, so long as a tax does not discriminate
against interstate commerce and is fairly apportioned to the
activities in the taxing state, taxing the business twice is, for
constitutional purposes, no different than doubling a single tax.
If the whole scheme of taxation adopted by a particular State were
taken into account, it might be that a case of discrimination
against interstate commerce could be made out. But there is no
suggestion that this is such a case. Nor can we say that the system
which has been adopted here bids fair to be more harmful to
interstate commerce than a system designed to raise the same amount
of revenue by the use of a gross receipts tax in lieu of property
taxes.
Moreover, as noted in
Gwin, White & Prince, Inc. v.
Henneford, supra, p.
305 U. S. 438,
and in
Adams Mfg. Co. v. Storen, supra, p.
304 U. S.
312-313, there have been other cases sustaining a gross
receipts tax on interstate enterprises where the gross receipts tax
fairly measured the value of a local privilege or franchise and all
risk of multiple taxation was absent.
Ficklen v. Taxing
District of Shelby Co., 145 U. S. 1, upheld
a state license tax imposed upon the privilege of doing a brokerage
business within the State and measured by the gross receipts from
sales of merchandise shipped into the State for delivery after
sales were made.
American Mfg. Co. v. St. Louis,
250 U. S. 459,
upheld a municipal license tax on the gross receipts of a
manufacturer who was producing goods for interstate commerce. The
tax was sustained as an excise upon the conduct of a manufacturing
enterprise. Those taxes, like property taxes or taxes on activities
confined solely to
Page 330 U. S. 442
the taxing state (
New York, Lake Erie & W. R. Co. v.
Pennsylvania, 158 U. S. 431;
Utah Power & Light Co. v. Pfost, 286 U.
S. 165;
Coverdale v. Arkansas-Louisiana Pipe Line
Co., 303 U. S. 604),
have no cumulative effect caused by the interstate character of the
business. They are apportioned to the activities taxed, all of
which are intrastate. Plainly, the loading and unloading involved
in the present case are activities as local in character as the
brokerage activities in the
Ficklen case or the
manufacturing business in the
American Mfg. Co. case. One
has as close and as immediate a relationship to interstate commerce
as the other.
Cf. United States v. Darby, 312 U.
S. 100. If one gives rise to a taxable event for which
the State may exact a portion of the gross receipts, it is
difficult to see why the other does not. The practical effect on
interstate commerce is the same in each.
In
McGoldrick v. Berwind-White Coal Mining Co., supra,
p.
309 U. S. 52, we
held that a sales tax on the purchase of property at the end of its
interstate journey was not to be distinguished from a tax on the
property itself. For taxation of the sale was merely taxation of
the exercise of one of the constituent elements of the property.
Unless formal doctrine is to be restored to this field, the label
which the tax bears should not be controlling, and the tax should
be sustained unless it evinces hostility to interstate commerce or
in practical operation obstructs or impedes it. Either result may
obtain whether the tax be called a property tax or a gross receipts
tax. As
McGoldrick v. Berwind-White Coal Mining Co.,
supra, p.
309 U. S. 48,
states:
"Certain types of tax may, if permitted at all, so readily be
made the instrument of impeding or destroying interstate commerce
as plainly to call for their condemnation as forbidden regulations.
Such are the taxes already noted which are aimed at or discriminate
against the commerce or impose a levy for the privilege of doing
it, or tax interstate transportation
Page 330 U. S. 443
or communication or their gross earnings, or levy an exaction on
merchandise in the course of its interstate journey. Each imposes a
burden which intrastate commerce does not bear, and merely because
interstate commerce is being done places it at a disadvantage in
comparison with intrastate business or property in circumstances
such that, if the asserted power to tax were sustained, the states
would be left free to exert it to the detriment of the national
commerce."
Measured by that test, the present tax is not invalid. "Even
interstate business must pay its way. . . ."
Postal
Telegraph-Cable Co. v. Richmond, 249 U.
S. 252,
249 U. S. 259.
A nondiscriminatory gross receipts tax, apportioned to local
activity in the taxing state, is to be judged by its practical
effect. As we stated in
Wisconsin v. J. C. Penney Co.,
311 U. S. 435,
311 U. S.
444:
"The Constitution is not a formulary. It does not demand of
states strict observance of rigid categories nor precision of
technical phrasing in their exercise of the most basic power of
government -- that of taxation. For constitutional purposes, the
decisive issue turns on the operating incidence of a challenged
tax. A state is free to pursue its own fiscal policies,
unembarrassed by the Constitution, if, by the practical operation
of a tax, the state has exerted its power in relation to
opportunities which it has given, to protection which it has
afforded, to benefits which it has conferred by the fact of being
an orderly, civilized society."
All local taxes on interstate businesses affect to some degree
the commerce and increase the cost of doing it. Matters of form
should not be decisive if the tax threatens no harm to interstate
commerce.
Prior to
McGoldrick v. Berwind-White Coal Mining Co.,
supra, it had long been said that
"Interstate commerce cannot be taxed
Page 330 U. S. 444
at all, even though the same amount of tax should be laid on
domestic commerce or that which is carried on solely within the
state."
Robbins v. Shelby County Taxing District, 120 U.
S. 489,
120 U. S. 497.
That was the philosophy of the
Philadelphia & Southern S.S.
Co. case.
And see Fargo v. Michigan, supra, pp.
121 U. S.
246-247. But
McGoldrick v. Berwind-White Coal Mining
Co., supra, did not adhere to that formal doctrine. It
followed
Wiloil Corp. v. Pennsylvania, 294 U.
S. 169, and upheld a
"nondiscriminatory tax on the sale to a buyer within the taxing
state of a commodity shipped interstate in performance of the sales
contract not upon the ground that the delivery was not a part of
interstate commerce . . . , but because the tax was not a
prohibited regulation of or burden on that commerce."
Illinois Natural Gas Co. v. Central Illinois Public Service
Co., 314 U. S. 498,
314 U. S. 505.
The test adopted was whether the tax on the local activity, as a
practical matter, was being used to place interstate commerce at a
competitive disadvantage or obstruct or impede it. That should be
the approach here; "the logic of words should yield to the logic of
realities." Mr. Justice Brandeis, dissenting,
Di Santo v.
Pennsylvania, 273 U. S. 34,
273 U. S. 43.
The failure of the Court to adhere to the philosophy of our recent
cases corroborates the impression which some of us had that
Freeman v. Hewit, 329 U. S. 249,
marked the end of one cycle under the Commerce Clause, and the
beginning of another.
Second. I think the tax is unconstitutional insofar as
it reaches the gross receipts from loading and unloading vessels
engaged in foreign commerce. Such a tax is repugnant to Article I,
§ 10, Clause 2 of the Constitution, which provides that
"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 it's inspection Laws. . . .
"
Page 330 U. S. 445
Loading and unloading are a part of "the exporting process"
which the Import-Export Clause protects from state taxation.
See Thames & Mersey Marine Ins. Co. v. United States,
237 U. S. 19,
237 U. S. 27.
Activity which is a "step in exportation" has that immunity.
Spalding & Bros. v. Edwards, 262 U. S.
66,
262 U. S. 68. As
the Court says, loading and unloading cargo are "a
continuation
of the transportation.'" Indeed, the commencement of exportation
would occur no later. See Richfield Oil Corp. v. State
Board, 329 U. S. 69. And
the gross receipts tax is an impost on an export within the meaning
of the Clause, since the incident "which gave rise to the accrual
of the tax was a step in the export process." Richfield Oil
Corp. v. State Board of Equalization, supra.
As we pointed out in that case, the Commerce Clause and the
Import-Export Clause, "though complementary, serve different ends."
Since the Commerce Clause does not expressly forbid any tax, the
Court has been free to balance local and national interests. Taxes
designed to make interstate commerce bear a fair share of the cost
of local government from which it receives benefits have been
upheld; taxes which discriminate against interstate commerce, which
impose a levy for the privilege of doing it, or which place an
undue burden on it, have been invalidated. But the Import-Export
Clause is written in terms which admit of no exception but the
single one it contains. Accordingly, a state tax might survive the
tests of validity under the Commerce Clause, and fail to survive
the Import-Export Clause. For me, the present tax is a good
example.
MR. JUSTICE MURPHY joins in this dissent except as to the second
part, as to which he is of the opinion that the tax in relation to
the gross receipts from loading and unloading vessels engaged in
foreign commerce is constitutional.
[
Footnote 2/1]
Philadelphia & Southern S.S. Co. v. Pennsylvania,
122 U. S. 326;
Ratterman v. Western Union Tel. Co., 127 U.
S. 411;
Western Union Tel. Co. v. Alabama,
132 U. S. 472;
Galveston, Harrisburg & S.A. R. Co. v. Texas,
210 U. S. 217;
Meyer v. Wells Fargo & Co., 223 U.
S. 298.
[
Footnote 2/2]
In
Baltimore & O. Railroad
Co. v. Maryland, 21 Wall. 456, the payment of a
percentage of gross receipts was upheld as a condition of the
corporate franchise.
[
Footnote 2/3]
The Court suggests that the fact that similar stevedoring
activity will be required at the destination creates a risk of
multiple taxation, since the destination would be as free to tax
the unloading as New York to tax the loading. This is only multiple
in the sense that each State taxes what occurs within its borders;
the two taxes would not be on the same activity. It is no more
relevant that stevedoring is involved in both cases than is the
fact that two States may impose property taxes on terminals or
trackage within their respective borders.
[
Footnote 2/4]
Moreover, the tax in the
Philadelphia & Southern S.S.
Co. case was restricted not only to transportation companies,
but also to receipts from transportation. Those facts were
emphasized by Mr. Justice Bradley (122 U.S. pp.
122 U. S.
344-345):
"Can the tax in this case be regarded as an income tax? and, if
it can, does that make any difference as to its constitutionality?
We do not think that it can properly be regarded as an income tax.
It is not a general tax on the incomes of all the inhabitants of
the state, but a special tax on transportation companies.
Conceding, however, that an income tax may be imposed on certain
classes of the community, distinguished by the character of their
occupations, this is not an income tax on the class to which it
refers, but a tax on their receipts for transportation only. Many
of the companies included in it may, and undoubtedly do, have
incomes from other sources, such as rents of houses, wharves,
stores, and water power, and interest on moneyed investments. As a
tax on transportation, we have already seen from the quotations
from the
State Freight Tax Case that it cannot be
supported where that transportation is an ingredient of interstate
or foreign commerce, even though the law imposing the tax be
expressed in such general terms as to include receipts from
transportation which are properly taxable. It is unnecessary,
therefore, to discuss the question which would arise if the tax
were properly a tax on income. It is clearly not such, but a tax on
transportation only."
Cf. United States Glue Co. v. Oak Creek, 247 U.
S. 321, which sustained as against an interstate
enterprise a net income tax of general application.