1. A Virginia statute provides a separate system of taxation for
express companies. In lieu of all taxes on their other intangible
property and rolling stock, it levies on express companies a
"franchise tax" measured by gross receipts from their operations
within Virginia, including receipts derived from transportation
within the State of express transported through, into or out of the
State.
Held: as applied to appellant, a foreign corporation
doing an exclusively interstate business in Virginia and owning
property there, this tax does not violate the Commerce Clause of
the Federal Constitution. Pp.
358 U. S.
435-443.
(a)
Railway Express Agency v. Virginia, 347 U.
S. 359, distinguished. Pp.
358 U. S.
438-439.
(b) The descriptive words used by a state legislature in
labeling a tax statute have no magic effect upon its validity or
invalidity, but, where the plain language of the statute shows that
the legislature intended to levy the tax upon intangible property
and "going concern" value, and that interpretation is buttressed by
a unanimity of opinion of all state agencies, including the State's
highest court, great weight must be given to the descriptive words
so used in determining the natural and reasonable effect of the
statute. Pp.
358 U. S.
440-441.
(c) When measuring "going concern" value, the State has the
right to use any fair formula which would give effect to the
intangible factors which influence real values, and that is exactly
what the State has done here. Pp.
358 U.S. 441-442.
(d) The exclusive express privileges enjoyed by appellant on the
railroads, admittedly valuable contract rights, cannot be said to
have no value because all of appellant's net income is paid over to
the railroads for the specific purpose of precluding it from having
any net taxable income, thus frustrating the collection of an
otherwise fair tax. P.
358 U. S.
442.
(e) The fact that Virginia could not prevent appellant from
engaging in its exclusively interstate business does not prevent
Virginia from taxing the "goodwill" or "going concern" value built
up by such interstate business. Pp.
358 U. S.
442-443.
Page 358 U. S. 435
2. In its tax return, appellant failed to furnish information
showing its gross receipts allocated to Virginia, which was called
for under the statute and requested by the tax authorities. This
prevented the tax authorities from obtaining the correct amount
except by some method of approximation, and they used a formula
which, in effect, ascribed to Virginia such proportion of
appellant's gross receipts as the mileage of carriers within
Virginia bore to the total national mileage of the same
carriers.
Held: in these circumstances, this method of
calculating the tax was not so palpably unreasonable as to deprive
appellant of its property without due process of law in violation
of the Fourteenth Amendment. Pp.
358 U. S.
443-445.
199 Va. 589, 100 S.E. 785, affirmed.
MR. JUSTICE CLARK delivered the opinion of the Court.
Once again, the effort of the Commonwealth of Virginia to levy a
tax against express agencies is before us for decision. Nearly five
years ago, this Court struck down as a "privilege tax" violative of
the Commerce Clause of the Federal Constitution its tax statute
under which was laid an assessment on appellant's "privilege of
doing business" in Virginia. [
Footnote 1]
Railway Express Agency v. Virginia,
347 U. S. 359
(1954). Subsequently, the Virginia General Assembly enacted the Act
here involved, levying a "franchise tax" on express companies,
measured by gross receipts from operations within Virginia, in lieu
of all other property taxes on intangibles and rolling stock. In
due course, an assessment against appellant was made thereunder for
1956. Both the State Corporation Commission,
Page 358 U. S. 436
which has jurisdiction of such levies in Virginia, and the
Commonwealth's highest court have upheld the validity of the new
law, as well as the assessment made thereunder,
Railway Express
Agency v. Virginia, 199 Va. 589, 100 S.E.2d 785. Appellant
levels a dual attack, the first being that the statute is a
"privilege tax," and, like the former one, violates the Commerce
Clause; or, secondly, that, in any event, the assessment under it
is calculated in such a manner as to deprive appellant of its
property without due process of law in violation of the Fourteenth
Amendment. On appeal, we noted probable jurisdiction, 356 U.S. 929
(1958). We believe that Virginia has eliminated the Commerce Clause
objections sustained against its former tax law. While the tax is
in lieu of other property taxes which Virginia can legally assess,
and should be their just equivalent in amount,
Postal Telegraph
Cable Co. v. Adams, 155 U. S. 688,
155 U. S. 696
(1895), we will not inquire into the exactitudes of the formula
where appellant has not shown it to be so baseless as to violate
due process.
Nashville, C. & St. L. R. v. Browning,
310 U. S. 362
(1940). The failure of the appellant to furnish, in its return,
certain necessary information showing its gross receipts allocated
to Virginia, called for under the statute and requested by the
Commonwealth, has left the correct amount unobtainable by the
latter except by some method of approximation, and places the
burden on appellant to come forward with affirmative evidence of
extraterritorial assessment.
BACKGROUND AND ACTIVITY OF APPELLANT IN VIRGINIA
Since the opinion in the former appeal,
supra at pp.
358 U. S.
360-361, relates the factual details concerning
appellant's operations in Virginia, we believe it sufficient to say
here that it is a Delaware corporation, owned by 68 of the
railroads of the United States. It is engaged in both an
interstate
Page 358 U. S. 437
and intrastate express business throughout the Nation, save in
Virginia, where a constitutional provision bars foreign
corporations from possessing or exercising any of the powers or
functions of public service corporations. There, it operates a
wholly owned subsidiary, a Virginia corporation, which carries on
its intrastate functions within the Commonwealth. Appellant's
Virginia business is thus of an exclusively interstate nature.
Through exclusive contract arrangements with 177 of the railroads
of the Nation, appellant is the sole operator of express facilities
on their lines, including Virginia. It pays therefor all of its net
income, thus achieving one of the stated purposes of the agreement
-- that appellant " . . . shall have no net taxable income." In
turn, appellant's Virginia subsidiary pays all of its net income
over to it for the privilege of exercising appellant's exclusive
contracts in intrastate business in the Commonwealth. Appellant
owns property within Virginia, its return filed with the
Commonwealth for tax purposes showing $120,110.70 in cash on
deposit; automotive equipment and trucks $262,719.63; real estate
of the value of $32,850; and office equipment listed at
$42,884.83.
VI
RGINIA'S GENERAL TAXING SYSTEM
The Commonwealth has a comprehensive tax structure covering
public service corporations. [
Footnote 2] It empowers local governments to levy
ad
valorem taxes on the "dead" value of all real property and
tangible personal property, except rolling stock, located within
their respective jurisdictions. This leaves free for state purposes
taxes on rolling stock, money, and other intangibles, and the
"live" or "going concern" value of the business in Virginia. We are
concerned only with the state tax which is levied on
Page 358 U. S. 438
the franchises of express companies. It provides [
Footnote 3] in pertinent part that
"[e]ach express company . . . shall . . . pay to the State a
franchise tax which shall be in lieu of taxes upon all of its other
intangible property and in lieu of property taxes on its rolling
stock."
The franchise tax is measured by "the gross receipts derived
from operations within" Virginia, which is deemed
"to be all receipts on business beginning and ending within this
State and all receipts derived from the transportation within this
State of express transported through, into, or out of this
State."
The State Corporation Commission is directed, after notice, to
assess the franchise tax on the basis of a report to be filed by
the company involved, or, in case of its failure to file such
report, the Commission is to base the assessment "upon the best and
most reliable information that it can procure."
THE ISSUES UNDER THE STATUTE
First, let us clear away the dead underbrush of the old law. The
new tax is not denominated a license tax laid on the "privilege of
doing business in Virginia"; nor is it "in addition to the property
tax" levied against appellant, nor a condition precedent to its
engaging in interstate commerce in the Commonwealth. The General
Assembly has made crystal clear that the tax is now a franchise tax
laid on the intangible property of appellant, and is levied "in
lieu of taxes upon all of its other intangible property and . . .
rolling stock." The measure of the tax is on gross receipts, fairly
apportioned, and, as to appellant, is laid only on those "derived
from the transportation
Page 358 U. S. 439
within this State of express transported through, into, or out
of this State."
Appellant concedes that the Commerce Clause does not prohibit
the States from levying a tax on property owned by a concern doing
an interstate business. It agrees that it has rolling stock and
money in the Commonwealth, as well as intangibles, including its
exclusive express privileges with the railroads. It readily admits
that the latter agreements are "valuable contract rights," and
contribute a principal element to the "going concern value" of its
business in the Commonwealth. Subsuming that a valid tax levy might
be levied on such intangibles, it argues, however, that the
incidence of the tax is on appellant's privilege to carry on an
exclusively interstate business in Virginia, rather than on
intangible property. Our sole question under the Commerce Clause is
whether the tax, in practical operation, is on property or on
privilege.
The due process issue is entangled with appellant's failure to
file, in its report, data covering its gross receipts allocated to
Virginia. [
Footnote 4] Failing
to do this, the State Corporation
Page 358 U. S. 440
Commission used a formula which, in effect, ascribed to Virginia
the proportion of such receipts as the mileage of carriers within
Virginia bore to the total national mileage of the same lines.
[
Footnote 5] Appellant contends
that the assessment made in this manner is violative of due
process, and that the resulting amount of tax levied was
confiscatory.
In any event, appellant argues, the "in lieu" provisions of the
law, as applied to it, are invalid. Admitting that it had cash,
intangibles and rolling stock that were subject to a state tax, but
which suffered none because of the "in lieu" provisions of this
law, it contends that the tax assessed under the latter was no just
equivalent of the "in lieu" taxes, but was greatly in excess
thereof, and violative of due process.
V
ALIDITY OF THE LAW UNDER THE COMMERCE CLAUSE
As we have pointed out, the statute levies a franchise tax in
lieu of all taxes on "
other intangible property" and
rolling stock. (Emphasis added.) This leaves no room for doubt that
the General Assembly intended to levy a tax upon appellant's
intangibles. Moreover, supporting this interpretation, both the
State Commission and the Supreme Court of Appeals have construed it
as a tax on appellant's intangible property and "going concern"
value. This trinity of agreement by three state agencies, though
not conclusive, has great weight in our determination of the
natural and reasonable effect of the statute.
Railway Express
Agency v. Virginia, supra; Spector Motor Service v. O'Connor,
340 U. S. 602
(1951);
Cudahy Packing Co. v. Minnesota, 246 U.
S. 450 (1918);
United States
Express
Page 358 U. S. 441
Co. v. Minnesota, 223 U. S. 335,
223 U. S. 346
(1912). This is not to say that a legislature may effect a
validation of a tax, otherwise unconstitutional, by merely changing
its descriptive words.
Lawrence v. State Tax Commission,
286 U. S. 276,
286 U. S. 280
(1932);
Galveston, H. & San Antonio R. Co. v. Texas,
210 U. S. 217,
210 U. S. 227
(1908). One must comprehend, however, the difference between the
use of magic words or labels validating an otherwise invalid tax
and their use to disable an otherwise constitutional levy. The
latter, this Court has said may sometimes be done.
Railway
Express Agency v. Virginia, supra, at
347 U. S. 364;
Spector Motor Service v. O'Connor, supra, at
340 U. S. 607;
McLeod v. J. E. Dilworth Co., 322 U.
S. 327,
322 U. S. 330
(1944).
Appellant buttresses its argument with reasoning that a tax on
"going concern" value just cannot be measured by fairly apportioned
gross receipts. While it may be true that gross receipts are not
the best measure, it is too late now to question its
constitutionality.
Illinois Cent. R. Co. v. Minnesota,
309 U. S. 157
(1940);
Great Northern R. Co. v. Minnesota, 278 U.
S. 503 (1929);
Pullman Co. v. Richardson,
261 U. S. 330
(1923);
Cudahy Packing Co. v. Minnesota, 246 U.
S. 450 (1918);
United States Express Co. v.
Minnesota, 223 U. S. 335
(1912);
Wisconsin & M. R. Co. v. Powers, 191 U.
S. 379 (1903). These decisions are still in good
standing on our books. Even on the former appeal, this Court used
the following language:
"Of course, we have held, and it is but common sense to hold,
that a physical asset may fluctuate in value according to the
income it can be made to produce. A live horse is worth more than a
dead one, though the physical object may be the same, and a
smooth-going automobile is worth more than an unassembled
collection of all its parts. The physical facilities used in
carrying on a prosperous business are worth more than the same
assets in
Page 358 U. S. 442
bankruptcy liquidation or on sale by the sheriff. No one denies
the right of the State, when assessing tangible property, to use
any fair formula which will give effect to the intangible factors
which influence real values.
Adams Express Co. v. Ohio State
Auditor, [
Footnote 6]
166 U. S.
185. But Virginia has not done this."
347 U.S. at
347 U. S. 364.
We feel that Virginia has now done just that.
We are not convinced by appellant's "bootstrap" argument that
the express privileges it enjoys have no value to it, because all
of its net income by agreement with the railroads is paid over to
them. We believe it more accurate to rely on its admission that "No
one would question the fact that Appellant's exclusive express
privileges on the railroads are valuable contract rights." This
concession, when taken in the light of the expressed purpose of
appellant that the payment of its net income for the use of the
express privileges was solely to make certain "that the Express
Company shall have no net taxable income," exposes the frivolous
nature of this contention. We are not so blinded to business
realities as to permit such a manipulation of the finances of
appellant, the railroads' wholly owned subsidiary, to frustrate the
Commonwealth in its effort to collect an otherwise fair tax.
Nor is there any substance to the contention that, since
Virginia could not prohibit appellant from engaging in its
exclusively interstate business, it therefore may not tax
"goodwill" or "going concern" value which is built up thereby. We
need only cite some of the cases of this Court holding to the
contrary:
Great Northern R. Co. v. Minnesota, 278 U.
S. 503 (1929);
Pullman Co. v. Richardson,
261 U. S. 330
(1923);
Cudahy Packing Co. v.
Minnesota,
Page 358 U. S. 443
246 U. S. 450
(1918);
United States Express Co. v. Minnesota,
223 U. S. 335
(1912);
Adams Express Co. v. Ohio, 165 U.
S. 194 (rehearing
166 U. S. 185
(1897));
Western Union Telegraph Co. v. Taggart,
163 U. S. 1 (1896);
Cleveland, C., C. & St.L. R. Co. v. Backus,
154 U. S. 439
(1894).
VALIDITY OF THE TAX UNDER THE DUE PROCESS CLAUSE
In view of the fact that appellant failed to file the required
information as to its gross receipts, thus placing an almost
insurmountable burden on the Commonwealth to ascertain them, it is
necessary that appellant make an affirmative showing that the
mileage method used by Virginia is so palpably unreasonable that it
violates due process. This is has failed to do. Appellant rests its
argument not on facts and figures covering its actual gross income
in Virginia, but on comparative statistics based on tangible
assets. It points out that, during the taxable year, the value of
its tangible assets in Virginia ($475,065) was only 0.6% of its
total assets ($79,700,426), while the amount of gross receipts
apportioned to Virginia by the State Corporation Commission was
1.7% ($6,499,519) of its total gross receipts ($387,241,764).
The difference in the two percentages, appellant contends, must
represent intangible values on which Virginia cannot operate
because located outside of its jurisdiction. This syllogism does
not take into account the facts of business life. Tangible assets
in Virginia may produce much more income than like assets
elsewhere. Death Valley Scotty generated much less gross from his
desert sightseeing wagon than did his counterpart in Central Park.
The utter fallacy of using tangible assets as the test of going
concern value here is demonstrated by the fact that appellant's
tangible assets in Virginia depend entirely on whether it elects to
retain title to tangible property or place it in the name of its
subsidiary,
Page 358 U. S. 444
the Virginia company. By placing them in the Virginia company,
it could thus, on a tangible asset formula, escape all tax on its
intangibles.
There is nothing in the record even to indicate that the
tangible assets that appellant carries in its own name in Virginia
did not actually generate the amount of gross receipts attributed
to it by the State Corporation Commission. In this connection, we
note that 1.9% of appellant's total contract mileage was located
there. Even where taxpayers have attempted to show through
evidence, as this appellant has not, that a given apportionment
formula effected an appropriation of more than that to which the
State was entitled, this Court has required "
clear and cogent
evidence' that it results in extraterritorial values' being taxed."
Butler Bros. v. McColgan, 315 U.
S. 501, 315 U. S. 507
(1942); Norfolk & Western R. Co. v. North Carolina,
297 U. S. 682,
297 U. S. 688
(1936); cf. Bass, Ratcliff & Gretton Ltd. v. State Tax
Comm'n, 266 U. S. 271,
266 U. S.
282-284 (1924). As this Court said in Nashville, C.
& St.L. R. v. Browning, 310 U. S. 362,
365-366 (1940):
"In basing its apportionment on mileage, the Tennessee
Commission adopted a familiar and frequently sanctioned formula.
Pullman's Palace-Car Co. v. Pennsylvania, 141 U. S.
18;
Maine v. Grand Trunk Ry. Co., 142 U. S.
217;
Pittsburgh, C., C. & St.L. Ry. Co. v.
Backus, 154 U. S. 421;
Branson v.
Bush, 251 U. S. 182.
See 2
Cooley on Taxation, pp. 1660-1664. Its asserted inapplicability to
the particular situation is rested on petitioner's evidence as to
the comparative revenue-producing capacity of its lines in and out
of Tennessee. But both the Commission and the Supreme Court of the
state thought that this evidence, however weighty, was insufficient
to displace the relevance of the formula.
In a matter where
exactness is concededly unobtainable and the feel of judgment so
important a factor, we must be on guard lest,
Page 358 U. S.
445
unwittingly, we displace the tax officials' judgment with
our own. Certainly we cannot say that the combined judgment of
Commission, Board, and state courts is baseless."
(Emphasis added.)
Appellant's final argument is to the effect that the tax in
question, in the amount of $139,739.66, is "no just equivalent" of
the tax "in lieu of which" it was levied, and therefore violates
the Due Process Clause. This argument is based upon a false premise
which can be quickly disposed of. Appellant states that, under
Virginia's system of segregation of property for state and local
taxation, the only property which the Commonwealth had the power to
tax was cash on hand and on deposit and appellant's rolling stock,
which, under the old rates, would have yielded a tax of $679.77.
Appellant is clearly in error. As we read the Virginia statutes,
and as they were construed below, the Commonwealth (as contrasted
with the local) government also had the power to tax the "going
concern" value of
all of appellant's Virginia property, as
well as its other intangible property rights, such as its valuable
express privileges. Thus, the new tax is not only in lieu of the
previous tax on rolling stock and cash on hand, but also reaches
intangible rights of great value which, since
Railway Express,
supra, had escaped taxation altogether.
It follows from what we have said that the tax is valid, and the
judgment below is therefore
Affirmed.
MR. JUSTICE FRANKFURTER concurs in the result.
[
Footnote 1]
Va.Code, 1950, § 58-547.
[
Footnote 2]
See Va.Const. § 170; and Va.Code 1950, §§ 58-9,
58-10.
[
Footnote 3]
Va.Code 1950, § 58-546
et seq., as amended by Va.Acts
1956, c. 612.
[
Footnote 4]
In its return, appellant stated that it was "unable" to
ascertain its gross receipts from express transported "through,
into or out of" the Commonwealth. The record contains testimony to
this effect by one of appellant's officers. The record also shows,
from one of appellant's own exhibits, that, since 1931, the tax
year in question is the only year in which appellant has been
"unable" to report this information. From 1931 to 1953, appellant
managed to find a way of compiling or computing and reporting such
data, and in only 7 of these 23 years did the Commonwealth disagree
with appellant's figures. Due to the downfall of the old tax in
Railway Express Agency v. Virginia, supra, there was no
reporting requirement for 1954 and 1955. Under the new tax, for
1956, appellant made no attempt to present evidence to show what
reductions should be made in the Commission's figures, nor did it
explore the possibility of an agreement about it as it apparently
had in prior years.
Cf. Cohan v. Commissioner of Internal
Revenue, 39 F.2d 540, 543-544 (C.A. 2d Cir. 1930). Instead, it
relied completely upon its claim that the tax was
unconstitutional.
[
Footnote 5]
Actually, the amounts paid to such carriers for Virginia traffic
were ascertained by that method. Since the carrier payments
represent only net receipts, the Virginia gross receipts were
determined by applying to the Virginia carrier payments the ratio
that its total gross receipts bore to its total carrier
payments.
[
Footnote 6]
Parenthetically, it might be noted that the
Adams case
involved a "going concern" valuation of $488,265 as compared to a
"dead" valuation of property in the amount of $28,438.
165 U. S. 165 U.S.
194,
165 U. S.
237.
MR. JUSTICE HARLAN, concurring.
I share the reservations of MR. JUSTICE BRENNAN as to the
propriety of considering the tax described in the opinion of the
Court as a property tax. I find myself unable, however, to
distinguish in any constitutional
Page 358 U. S. 446
sense the "in lieu" tax here involved from similar levies the
validity of which has been sustained as applied to interstate
enterprises in the line of cases cited in the Court's opinion, and
therefore join the opinion.
MR. JUSTICE BRENNAN, concurring.
While I join the opinion and judgment of the Court, I must admit
to some reservations whether the tax at bar can fairly be thought
of as a property tax. The discussion of the Court in this case's
predecessor,
Railway Express Agency, Inc. v. Virginia,
347 U. S. 359,
347 U. S.
364-367, cast serious doubt on the propriety of viewing
Virginia's former tax as a property tax, and I share that doubt.
The only modification in the mathematical demonstration of the
prior decision necessitated by the revision of the tax statute is
brought about by the new statute's provision that the tax is in
lieu of other taxes on the appellant's intangible property and
rolling stock. In practical effect, this means that payment of this
$139,739.66 tax is "in lieu" of a 1/5% tax on $120,110.70 of cash,
amounting to $240.22; a tax, amounting to $427.56, on the value,
apportioned to the State, of the appellant's refrigerator cars; and
a 2 1/2% tax on its trucks,
* valued at
$262,719, amounting to $6,567.98. These taxes, in lieu of which the
$139,739.66 tax at bar is payable, aggregate $7,235.76. It seems to
me doubtful whether this makes a significant
Page 358 U. S. 447
alteration in the demonstration the Court made on the prior
appeal with respect to the status as a property tax of the gross
receipts tax on express companies. While the tax may be a rough
equivalent of some sort of property tax that Virginia might
conceivably levy on express companies, I do not see that it has
been made clear that it bears any equivalence to any sort of
property tax that she in fact levies on other sorts of businesses,
or has in fact previously levied on express companies.
Cf.
Pullman Co. v. Richardson, 261 U. S. 330,
261 U. S. 339.
On the other hand, I cannot deny that this Court has, in decisions
cited by the Court's opinion, frequently admitted gross receipts
taxes to the characterization of "property taxes" in situations
where their equivalence with any actual property tax was somewhat
tenuous.
See, e.g., Illinois Central R. Co. v. Minnesota,
309 U. S. 157.
To me, the more realistic way of viewing the tax and evaluating
its constitutional validity is to take it as what it is in
substance, a levy on gross receipts fairly apportionable to the
taxing State. Virginia has a comprehensive scheme of state income
and gross receipts taxes on business corporations, with net income
taxes the standard in the case of ordinary businesses and gross
receipts taxes in the case of most categories of utility or "public
service" corporations. The gross receipts taxing structure does not
single out this interstate transportation company, or discriminate
against it, but, rather, requires it only to pay its share at a tax
rate comparable to the rates on the gross receipts of other
categories of public service corporations, and, in fact, lower than
those an many important ones. To restrict the gross receipts
subject to the tax to an amount representing that part of
appellant's interstate movements which takes place within the
State, the State has employed an apportionment formula. That
formula is not, on its face, unfair or discriminatory toward
interstate commerce or indicative of an imposition on
out-of-state
Page 358 U. S. 448
activities, and the opinion of the Court amply demonstrates that
this appellant cannot maintain a challenge to the details of its
application here. The label of the tax as a "privilege" or
"license" tax, proscribed by this case's predecessor, has been
eliminated, as the Court's opinion shows. This Court's decisions
sustain the application of a fairly apportioned general gross
receipts tax to an interstate transportation company.
Canton R.
Co. v. Rogan, 340 U. S. 511,
340 U. S.
515-516;
Central Greyhound Lines, Inc. v.
Mealey, 334 U. S. 653,
334 U. S.
663-664.
Cf. Western Live Stock v. Bureau of
Revenue, 303 U. S. 250,
303 U. S. 256.
In my view, the most compelling reason for affirming the judgment
of the Supreme Court of Appeals of Virginia is the application of
the principles of these cases here.
* The State informs us that the appellant's trucks have been
ruled to be "rolling stock," and therefore shielded by the "in
lieu" provision of the new statute. While the Virginia Code does
not, in terms, set forth a rate of taxation for the rolling stock
of express companies, the rates provided for the rolling stock of
railway and of freight car companies are 2 1/2%
ad
valorem. Va.Code §§ 58-515, 58-560. This rate would appear
appropriate for exploring the equivalence of this "in lieu" tax to
a corresponding property tax, and in fact the rate, as established
by the latter section, has been used before the "in lieu" provision
as a basis for the taxation of appellant's refrigerator cars.
MR. JUSTICE WHITTAKER, with whom MR. JUSTICE STEWART joins,
dissenting.
I cannot agree. Let me very briefly put the case in perspective,
as I see it. Taxation of the property of appellant's Virginia
subsidiary, which does an intrastate business in Virginia, is not
at all involved here. The Court properly observes the fact that
"Appellant's Virginia business is . . . of an exclusively
interstate nature." In the year involved, it owned in Virginia
tangible real and personal property which was taxed by Virginia
under other statutes, and is not involved in this case. Virginia
also claims that appellant had intangible property in Virginia. It
is upon those intangibles, so claimed to have been present in the
State, that Virginia sought to lay its "franchise tax," said by it
to be a "property tax" measured by appellant's gross receipts,
allocable to Virginia, from "exclusively" interstate commerce.
Admittedly appellant had a bank account and some "rolling stock" in
Virginia, upon which, doubtless, Virginia validly could lay an
ad valorem tax. But the dispute is over the following.
Virginia claims that appellant should be deemed to have
Page 358 U. S. 449
had in Virginia, and subject to the taxing statute here
involved, substantially that percentage of the value of its
national "goodwill," and of its exclusive express carriage contract
with the railroads, which the ratio of the mileage of carriers
which it uses in interstate commerce in Virginia bears to the total
mileage of the same carriers which it uses everywhere in such
commerce. Appellant contends that Virginia's claim in these
respects is unconstitutional. Which of them is right? I think it is
appellant. I think so for two reasons. First, the exclusive
carriage contract which appellant has with the railroads requires
it, as the Court observes, to pay "all of its net income" to the
railroads. Therefore, as a matter of both fact and law, that
contract can have no dollar value to
appellant,
distinguished from the railroads, to be taxed to it anywhere.
Second, appellant's "goodwill," if any, does not consist of
anything localized in Virginia, but inheres solely in its
"exclusively" interstate business -- a business that Virginia
cannot reach or regulate, by direct taxation or otherwise, because
it is prohibited from doing so by the Commerce Clause of the
Constitution, Art. I, § 8, cl. 3. My views on that subject are
fully stated in my dissenting opinion in No. 12,
Northwestern
States Portland Cement Co. v. Minnesota, and No. 33,
Williams v. Stockham Valves & Fittings, Inc., post, at
358 U. S. 477.
I would therefore reverse the judgment of the Supreme Court of
Appeals of Virginia.