Louisiana's fairly apportioned and nondiscriminatory corporation
franchise tax upon the "incident" of the "qualification to carry on
or do business in this state or the actual doing of business within
this state in a corporate form" does not violate the Commerce
Clause as applied to appellant, an interstate carrier of liquefied
petroleum products incorporated in Delaware with its principal
place of business in Atlanta, Georgia, which does no intrastate
business in petroleum products in Louisiana, but has employees
there to inspect and maintain its pipeline, pumping stations, and
related facilities in that State. "[T]he decisive issue turns on
the operating incidence of the tax,"
General Motors Corp. v.
Washington, 377 U. S. 436,
377 U. S. 441,
and "[t]he simple but controlling question is whether the state has
given anything for which it can ask return,"
Wisconsin v. J. C.
Penney Co., 311 U. S. 435,
311 U. S. 444.
Because appellant, as a foreign corporation qualified to carry on,
and carrying on, its business in Louisiana in corporate form,
gained benefits and protections from that State of value and
importance to its business, it can be required through the
franchise tax to pay its just share.
Memphis Gas Co. v.
Stone, 335 U. S. 80. Pp.
421 U. S.
108-114.
289
So. 2d 93, affirmed.
BRENNAN, J., delivered the opinion of the Court, in which
BURGER, C.J., and WHITE, MARSHALL, and POWELL, JJ., joined.
BLACKMUN, J., filed an opinion concurring in the judgment, in which
REHNQUIST, J., joined,
post, p.
421 U. S. 114.
STEWART, J., filed a dissenting opinion,
post, p. 116.
DOUGLAS, J., took no part in the consideration or decision of the
case.
Page 421 U. S. 101
MR. JUSTICE BRENNAN delivered the opinion of the Court.
We have once again a case that presents "the perennial problem
of the validity of a state tax for the privilege of carrying on,
within a state, certain activities" related to a corporation's
operation of an interstate business.
Memphis Gas Co. v.
Stone, 335 U. S. 80,
335 U. S. 85
(1948). [
Footnote 1] The issue
is whether Louisiana, consistent with the Commerce Clause, Art. I,
§ 8, cl. 3, may impose a fairly apportioned and nondiscriminatory
corporation franchise tax on appellant, Colonial Pipeline Co., a
corporation engaged exclusively in interstate business, upon the
"incident" of its "qualification to carry on or do business in this
state or the actual doing of business within this state in a
corporate form." No question is raised as to the reasonableness of
the apportionment of appellant's capital deemed to have been
employed in Louisiana, and it is not claimed that the tax is
discriminatory. The Supreme Court of Louisiana sustained the
validity of the tax.
289 So.
2d 93 (1974). We noted probable jurisdiction, 417 U.S. 966
(1974). We affirm.
I
Appellant is a Delaware corporation with its principal place of
business in Atlanta, Ga. It is a common carrier of liquefied
petroleum products, and owns and operates a pipeline system
extending from Houston, Tex., to the New York City area. This
3,400-mile pipeline links the oil refining complexes of Texas and
Louisiana with the population centers of the Southeast and
Page 421 U. S. 102
Northeast. Appellant daily delivers more than one million
gallons of petroleum products to 14 States and the District of
Columbia. Approximately 258 miles of the pipeline are located in
Louisiana. Over this distance within Louisiana, appellant owns and
operates several pumping stations which keep the petroleum products
flowing at a sustained rate, and various tank storage facilities
used to inject or withdraw petroleum products into or from the
line. A workforce of 25 to 30 employees -- mechanics, electricians,
and other workers -- inspect and maintain the line within the
State. During the tax years in question, 1970 and 1971, appellant
maintained no administrative offices or personnel in Louisiana,
although it had once maintained a division office in Baton Rouge.
Appellant does no intrastate business in petroleum products in
Louisiana.
On May 9, 1962, appellant voluntarily qualified to do business
in Louisiana, although it could have carried on its interstate
business without doing so. La.Rev.Stat.Ann. § 12:302 H (1969);
see n 8,
infra. Thereupon, the Collector of Revenue imposed the
Louisiana franchise tax on appellant's activities in the State
during 1962. At that time, La.Rev.Stat.Ann. § 47:601, the Louisiana
Franchise Tax Act, expressly provided:
"The tax levied herein is due and payable for
the privilege
of carrying on or doing business, the exercising of its
charter or the continuance of its charter within this state, or
owning or using any part or all of its capital or plant in this
state. [
Footnote 2]"
(Emphasis supplied.)
Page 421 U. S. 103
Appellant paid the tax and sued for a refund. The Louisiana
Court of Appeal, First Circuit, held that, in that form, § 601 was
unconstitutional as applied to appellant because, being imposed
directly upon "the privilege of carrying on or doing [interstate]
business," it violated the Commerce Clause, Art. I, § 8, cl. 3.
Colonial Pipeline Co. v. Mouton, 228 So. 2d 718 (1969).
The Supreme Court of Louisiana refused review. 255 La. 474, 231 So.
2d 393 (1970). [
Footnote 3]
Following this decision, the Louisiana Legislature amended
La.Rev.Stat.Ann. § 47:601 by Act 325 of 1970. The amendment excised
from § 601 the words: "The tax levied herein is due and payable for
the privilege of carrying on or doing business," and substituted:
"The qualification to carry on or do business in this state or the
actual doing of business within this state in a corporate form," as
one of three "alternative incidents" upon which the tax might be
imposed. The other two "incidents" -- the exercise of the corporate
charter in the State, and the employment there of its capital,
plant, or other property --
Page 421 U. S. 104
were carried forward from the earlier version of the statute.
[
Footnote 4]
See
n 2,
supra.
The Collector of Revenue then renewed his efforts to impose a
tax on appellant, this time for doing business "in a corporate
form" during 1970 and 1971. Again, appellant paid the tax and sued
for a refund. The Louisiana District Court and the Court of Appeal,
First Circuit, concluded that the 1970 amendment made no
substantive
Page 421 U. S. 105
change in § 601, which it construed as still imposing the tax
directly upon the privilege of carrying on or doing an interstate
business, and held that amended § 601 was therefore
unconstitutional as applied to appellant. 275 So. 2d 834
(1973).
The Supreme Court of Louisiana reversed. The court recognized
that
"[t]he pertinent Constitutional question is whether, as applied
to a corporation whose exclusive business carried on within the
State is interstate, this statute violates the Commerce Clause of
the United States Constitution."
289 So. 2d at 97. But the court attached controlling
significance to the omission from the amended statute of the
"primary operating incident [of the former version],
i.e.,
the privilege of carrying on or doing business,'" id.
at 96, and the substitution for that incident of doing business in
the corporate form. The court held:
"The thrust of the [amended] statute is to tax not the
interstate business done in Louisiana by a foreign corporation, but
the doing of business in Louisiana in a corporate form, including
'each and every act, power, right, privilege or immunity exercised
or enjoyed in this state, as an incident to or by virtue of the
powers and privileges acquired by the nature of such organizations.
. . .'"
Id. at 97. Accordingly, the court concluded that
amended § 601 applied the franchise tax to foreign corporations
doing only an interstate business in Louisiana, not as a tax
upon
"the general privilege of doing interstate business, but simply
[as a tax upon] the corporation's privilege of enjoying in a
corporate capacity the ownership or use of its capital, plant or
other property in this state, the corporation's privilege of
exercising and continuing its corporate character in the State of
Louisiana, and the corporation's use of its corporate form to do
business in the State."
Id. at 100. Upon that premise, the court validated the
levy as a
Page 421 U. S. 106
constitutional exaction for privileges enjoyed by corporations
in Louisiana and for benefits furnished by the State to enterprises
carrying on business, interstate or local, in the corporate form,
whether as domestic or foreign corporations. The court
reasoned:
"The corporation, including the foreign corporation doing only
interstate business in Louisiana, enjoys under our laws many
privileges separate and apart from simply doing business, such for
instance as the legal status to sue and be sued in the Courts of
our State, continuity of business without interruption by death or
dissolution, transfer of property interests by the disposition of
shares of stock, advantages of business controlled and managed by
corporate directors, and the general absence of individual
liability, among others."
"
* * * *"
"The fact that the corporate form of doing business is
inextricably interwoven in a foreign corporation's doing interstate
business in the State does not, in our view, detract from the fact
that the local incident taxed is the form of doing business, rather
than the business done by that corporation. And it is our view that
the local incident is real and sufficiently distinguishable so that
taxation thereof does not, under the controlling decisions of the
United States Supreme Court, violate the Commerce Clause."
"The statute does not discriminate between foreign and local
corporations, being applicable, as it is, to both. Nor do we
believe that the State's exercise of its power by this taxing
statute is out of proportion to Colonial's activities within the
state and their consequent enjoyment of the opportunities and
protection which the state has afforded them."
"Furthermore we believe that the State has given
Page 421 U. S. 107
something for which it can ask return. The return, tax levy in
this case, is an exaction which the State of Louisiana requires as
a recompense for its protection of lawful activities carried on in
this state by Colonial, activities which are incidental to the
powers and privileges possessed by it by the nature of its
organization, here, . . . the local activities in maintaining,
keeping in repair, and otherwise in manning the facilities of their
pipeline system throughout the 258 miles of its pipeline in the
State of Louisiana."
Id. at 100-101. [
Footnote 5]
This Court is, of course, not bound by the state court's
determination that the challenged tax is not a tax on interstate
commerce.
"The State may determine for
Page 421 U. S. 108
itself the operating incidence of its tax. But it is for this
Court to determine whether the tax, as construed by the highest
court of the State, is or is not 'a tax on interstate
commerce.'"
Memphis Steam Laundry v. Stone, 342 U.
S. 389,
342 U. S. 392
(1952). We therefore turn to the question whether the tax imposed
upon appellant under amended § 601, as construed by the Louisiana
Supreme Court, is or is not a tax on interstate commerce.
II
It is a truism that the mere act of carrying on business in
interstate commerce does not exempt a corporation from state
taxation.
"It was not the purpose of the commerce clause to relieve those
engaged in interstate commerce from their just share of state tax
burden even though it increases the cost of doing the
business."
Western Live Stock v. Bureau of Revenue, 303 U.
S. 250,
303 U. S. 254
(1938). Accordingly, decisions of this Court, particularly during
recent decades, have sustained nondiscriminatory, properly
apportioned state corporate taxes upon foreign corporations doing
an exclusively interstate business when the tax is related to a
corporation's local activities and the State has provided benefits
and protections for those activities for which it is justified in
asking a fair and reasonable return. [
Footnote 6]
General Motors Corp. v. Washington,
377 U. S. 436
(1964);
Memphis Gas Co. v. Stone, 335 U. S.
80 (1948).
Cf. Spector Motor Service v.
O'Connor, 340 U. S. 602
(1951).
General Motors Corp., supra, states the
controlling test:
"[T]he validity of the tax rests upon whether the
Page 421 U. S. 109
State is exacting a constitutionally fair demand for that aspect
of interstate commerce to which it bears a special relation. For
our purposes, the decisive issue turns on the operating incidence
of the tax. In other words, the question is whether the State has
exerted its power in proper proportion to appellant's activities
within the State and to appellant's consequent enjoyment of the
opportunities and protections which the State has afforded. . . .
As was said in
Wisconsin v. J. C. Penney Co., 311 U. S.
435,
311 U. S. 444 (1940), '[t]he
simple but controlling question is whether the state has given
anything for which it can ask return.'"
377 U.S. at
377 U. S.
440-441. Amended § 601, as applied to appellant,
satisfies this test. First, the Supreme Court of Louisiana held
that the operating incidences of the franchise tax are the three
localized alternative incidences provided in § 601: (1) doing
business in Louisiana in the corporate form; (2) the exercise of a
corporation's charter or the continuance of its charter within the
State; and (3) the owning or using any part of its capital, plant,
or other property in Louisiana in a corporate capacity. We
necessarily accept this construction of amended § 601 by
Louisiana's highest court. 289 So. 2d at 97. Second, the court
found that the powers, privileges, and benefits Louisiana bestows
incident to these activities were sufficient to support a tax on
doing business in the corporate form in that State. We perceive no
basis upon which we can say that this is not, in fact, the case.
Our pertinent precedents therefore require affirmance of the State
Supreme Court's judgment.
Memphis Gas Co. v. Stone, supra, sustained a similar
franchise tax imposed by Mississippi on a foreign pipeline
corporation engaged exclusively in an interstate business even
though the company had not qualified in Mississippi.
Page 421 U. S. 110
Memphis Natural Gas Co., a Delaware corporation, owned and
operated a natural gas pipeline extending from Louisiana, through
Arkansas and Mississippi, to Memphis and other parts of Tennessee.
Approximately 135 miles of the pipeline were located in
Mississippi, and two of the corporation's compressing stations were
located in that State. The corporation engaged in no intrastate
commerce in Mississippi, and had only one customer there. It had
not qualified under the corporation laws of Mississippi. It had
neither an agent for the service of process nor an office in that
State, and its only employees there were those necessary for the
maintenance of the pipeline. The corporation paid all
ad
valorem taxes assessed against its property in Mississippi. In
addition to these taxes, however, Mississippi imposed a "franchise
or excise tax" upon all corporations "doing business" within the
State. The statute defined "doing business" in terms that suggest
it may have been the model for § 601, that is,
"[to] mean and [to] include each and every act, power or
privilege exercised or enjoyed in this State, as an incident to, or
by virtue of the powers and privileges acquired by the nature of
such organization."
335 U.S. at
335 U. S. 82.
[
Footnote 7] The Supreme Court
of Mississippi held, as did the Supreme Court of Louisiana here,
289 So. 2d at 101, that the tax was
"'an exaction . . . as a recompense for . . . protection of . .
. the local activities in maintaining, keeping in repair, and
otherwise manning the facilities of the system throughout the 135
miles of its line in this State.'
Page 421 U. S. 111
335 U.S. at
335 U. S. 84. In affirming the
judgment of that court, Mr. Justice Reed, in a plurality opinion,
said:"
"We think that the state is within its constitutional rights in
exacting compensation under this statute for the protection it
affords the activities within its borders. Of course, the
interstate commerce could not be conducted without these local
activities. But that fact is not conclusive. These are events apart
from the flow of commerce. This is a tax on activities for which
the state, not the United States, gives protection, and the state
is entitled to compensation when its tax cannot be said to be an
unreasonable burden or a toll on the interstate business."
Id. at
335 U. S.
96.
This conclusion is even more compelled in the instant case,
since appellant voluntarily qualified under Louisiana law, and
therefore enjoys the same rights and privileges as a domestic
corporation. La.Rev.Stat.Ann. § 12:306(2) (Supp. 1975). [
Footnote 8] The Louisiana Supreme Court
defined
Page 421 U. S. 112
appellant's powers and privileges as including
"the legal status to sue and be sued in the Courts of our State,
continuity of business without interruption by death or
dissolution, transfer of property interests by the disposition of
shares of stock, advantages of business controlled and managed by
corporate directors, and the general absence of individual
liability. . . ."
289 So. 2d at 100. These privileges obviously enhance the value
to appellant of its activities within Louisiana.
See Southern
Gas Corp. v. Alabama, 301 U. S. 148,
301 U. S. 153
(1937);
Stone v. Interstate Natural Gas Co., 103 F.2d 544
(CA5),
aff'd, 308 U.S. 522 (1939).
Cf. Railway Express
Agency v. Virginia (Railway Express II), 358 U.
S. 434 (1959).
III
Nevertheless, appellant contends that
Spector Motor Service
v. O'Connor, 340 U. S. 602
(1951), and
Railway Express Agency v. Virginia (Railway Express
I), 347 U. S. 359
(1954), require the conclusion that § 601 is unconstitutional as
applied to appellant. The argument is without merit.
Spector held invalid under the Commerce Clause a
Connecticut tax based expressly "upon [the corporation's] franchise
for the privilege of carrying on or doing business within the
state. . . ." Similarly,
Railway Express I invalidated
Virginia's "annual license tax" imposed on express companies
expressly "for the privilege of doing business" in the State. Thus
both taxes, as express imposts upon the privilege of carrying on an
exclusively interstate business, contained the same fatal
constitutional law that led the Louisiana Court of Appeal to strike
down the levy against appellant
Page 421 U. S. 113
under § 601 before its amendment in 1970. "A tax is [an
unconstitutional] direct burden, if laid upon the operation or act
of interstate commerce."
Ozark Pipe Line v. Monier,
266 U. S. 555,
266 U. S. 569
(1925) (Brandeis, J., dissenting). The 1970 amendment, however,
repealed that unconstitutional basis for the tax, and made § 601
constitutional by limiting its application to operating incidences
of activities within Louisiana for which the State affords
privileges and protections that constitutionally entitle Louisiana
to exact a fairly apportioned and nondiscriminatory tax.
Spector expressly recognized:
"The incidence of the tax provides the answer. . . . The State
is not precluded from imposing taxes upon other activities or
aspects of this business which, unlike the privilege of doing
interstate business, are subject to the sovereign power of the
State."
340 U.S. at
340 U. S.
608-609. [
Footnote
9]
Of course, an otherwise unconstitutional tax is not made the
less so by masking it in words cloaking its actual thrust.
Railway Express II, supra, at
358 U. S. 441;
Railway Express I, supra, at
347 U. S. 363;
Galveston, H. & S. A. R. Co. v. Texas, 210 U.
S. 217,
210 U. S. 227
(1908). "It is not a matter of labels."
Spector, supra at
340 U. S. 608.
Here, however, the Louisiana Legislature amended § 601 purposefully
to remove any basis of a levy upon the privilege of carrying on an
interstate business and narrowly to confine
Page 421 U. S. 114
the impost to one related to appellant's activities within the
State in the corporate form. Since appellant, a foreign corporation
qualified to carry on its business in corporate form and doing
business in Louisiana in the corporate form, thereby gained
benefits and protections from Louisiana of value and importance to
its business, the application of that State's fairly apportioned
and nondiscriminatory levy to appellant does not offend the
Commerce Clause. The tax cannot be said to be imposed upon
appellant merely or solely for the privilege of doing interstate
business in Louisiana. It is, rather, a fairly apportioned and
nondiscriminatory means of requiring appellant to pay its just
share of the cost of state government upon which appellant
necessarily relies and by which it is furnished protection and
benefits.
Affirmed.
MR. JUSTICE DOUGLAS took no part in the consideration or
decision of this case.
[
Footnote 1]
"This Court alone has handed down some three hundred full-dress
opinions spread through slightly more than that number of our
reports. . . . [T]he decisions have been 'not always clear . . . ,
consistent, or reconcilable.'"
Northwestern Cement Co. v. Minnesota, 358 U.
S. 450,
358 U. S.
457-458 (1959).
[
Footnote 2]
Louisiana Rev.Stat.Ann. § 47:601 provided in 1963:
"Every domestic corporation and every foreign corporation,
exercising its charter, authorized to do or doing business in this
state, or owning or using any part or all of its capital or plant
in this state, subject to compliance with all other provisions of
law, except as otherwise provided for in this chapter, shall pay a
tax at the rate of one dollar and 50/100 ($1.50) for each one
thousand dollars ($1,000.00), or major fraction thereof on the
amount of its capital stock, surplus, undivided profits, and
borrowed capital, determined as hereinafter provided; the minimum
tax shall not be less than ten dollars ($10.00) in any case. The
tax levied herein is due and payable for the privilege of carrying
on or doing business, the exercising of its charter or the
continuance of its charter within this state, or owning or using
any part or all of its capital or plant in this state."
[
Footnote 3]
Refusal of review was not tantamount to an affirmance. The
Louisiana Supreme Court stated in its opinion in the instant
case:
"This Court's refusal in 1969 to grant writs upon application by
the State in that earlier case, while normally persuasive, does not
carry the same weight as a precedent as it would had that case been
decided by this Court after the granting of a writ. . . . This
Court is not bound by its refusal of writs, to adopt law expressed
in appellate court opinions."
289
So. 2d 93, 96 (1974).
[
Footnote 4]
Section 601 (Supp. 1975) provides in pertinent part:
"§ 601. Imposition of tax"
"Every domestic corporation and every foreign corporation,
exercising its charter, or qualified to do business or actually
doing business in this state, or owning or using any part or all of
its capital, plant or any other property in this state, subject to
compliance with all other provisions of law, except as otherwise
provided for in this Chapter shall pay an annual tax at the rate of
$1.50 for each $1,00.00, or major fraction thereof on the amount of
its capital stock, surplus, undivided profits, and borrowed
capital, determined as hereinafter provided; the minimum tax shall
not be less than $10.00 per year in any case. The tax levied herein
is due and payable on any one or all of the following alternative
incidents:"
"(1) The qualification to carry on or do business in this state
or the actual doing of business within this state in a corporate
form. The term 'doing business' as used herein shall mean and
include each and every act, power, right, privilege, or immunity
exercised or enjoyed in this state, as an incident to or by virtue
of the powers and privileges acquired by the nature of such
organizations, as well as the buying, selling or procuring of
services or property."
"(2) The exercising of a corporation's charter or the
continuance of its charter within this state."
"(3) The owning or using any part or all of its capital, plant
or other property in this state in a corporate capacity."
"It being the purpose of this section to require the payment of
this tax to the State of Louisiana by domestic corporations for the
right granted by the laws of this state to exist as such an
organization, and by both domestic and foreign corporations for the
enjoyment, under the protection of the laws of this state, of the
powers, rights, privileges and immunities derived by reason of the
corporate form of existence and operation. The tax hereby imposed
shall be in addition to all other taxes levied by any other
statute."
[
Footnote 5]
The taxes levied against appellant for 1970 were $80,835.02,
including interest, and, for 1971, were $69,884.78, including
interest. These amounts were fixed by applying the $1.50 rate to an
allocated figure computed according to a general allocation formula
provided in La.Rev.Stat.Ann. § 47:606 as follows:
"A. General allocation formula."
"For the purpose of ascertaining the tax imposed in this
Chapter, every corporation subject to the tax is deemed to have
employed in this state the proportion of its entire issued and
outstanding capital stock, surplus, undivided profits and borrowed
capital, computed on the basis of the ratio obtained by taking the
arithmetical average of the following ratios:"
"(1). . . . "
"(2) The ratio that the value of all of the taxpayer's property
and assets situated or used in Louisiana bears to the value of all
of its property and assets wherever situated or used. . . ."
The State Supreme Court found that appellant was liable only for
the minimum amount specified in amended § 601 for 1970, and reduced
the tax for that year to $10. The levy for 1971 was sustained in
the full amount, 289 So. 2d at 101.
Appellant also pays
ad valorem taxes to Louisiana and
10 of its parishes, as well as state income taxes. For the years
1970 and 1971,
ad valorem taxes totaled $743,561.34 and
income taxes totaled $196,621.
[
Footnote 6]
"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."
Wisconsin v. J. C. Penney Co., 311 U.
S. 435,
311 U. S. 444
(1940).
[
Footnote 7]
Like § 601, the Mississippi statute, Code Ann. § 9313 (1943),
provided in part:
"It being the purpose of this section to require the payment to
the state of Mississippi, this tax for the right granted by the
laws of this state to exist as such organization, and enjoy, under
the protection of the laws of this state, the powers, rights,
privileges and immunities derived from the state by the form of
such existence."
[
Footnote 8]
Louisiana does not require foreign corporations to qualify as a
condition to carrying on their interstate business. Louisiana
Rev.Stat.Ann. § 12:302 (Supp. 1975) expressly exempts foreign
corporations that transact "any business in interstate or foreign
commerce" from its requirement that foreign corporations obtain a
certificate of authority from the Secretary of State before they
transact business within the State.
Crutcher v. Kentucky,
141 U. S. 47
(1891), therefore, is inapposite. There, Kentucky provided that an
agent of an express company not incorporated under the laws of
Kentucky could not carry on business in that State without first
obtaining a license from the State. The Court held that this
mandatory license requirement was unconstitutional, because to
"carry on interstate commerce is not a franchise or a privilege
granted by the State. . . . We have repeatedly decided that a state
law is unconstitutional and void which requires a party to take out
a license for carrying on interstate commerce, no matter how
specious the pretext may be for imposing it."
Id. at
141 U. S. 57-58.
See Graham Mfg. Co. v. Rolland, 191 La. 757, 186 So. 93
(1939);
State v. American. Railway Express Co., 159 La.
1001, 106 So. 544 (1924). An important consequence of
qualification, of course, is the facilitation of the assessment and
collection of state franchise taxes. Comment, Foreign Corporation
State Boundaries for National Business, 59 Yale L.J. 737, 746
(1950).
[
Footnote 9]
Nor is this tax on carrying on business in the corporate form a
"local obstruction to the flow of interstate commerce that cannot
stand under the Commerce Clause."
Memphis Steam Laundry v.
Stone, 342 U. S. 389,
342 U. S. 395
(1952). Unlike the situation in
Memphis Steam Laundry,
Louisiana did not "carve out" an "incident from the integral
economic process of interstate commerce,"
id. at
342 U. S. 393,
and then proceed to tax that incident. There was and is no
requirement that appellant assume the corporate form to do
interstate business in Louisiana, and, indeed, state law
specifically exempts foreign corporations engaging in interstate
commerce from the certificate requirement.
See n 8,
supra.
MR. JUSTICE BLACKMUN, with whom MR. JUSTICE REHNQUIST joins,
concurring in the judgment.
I share the misgivings that are suggested by MR. JUSTICE STEWART
in his dissent, but I join the judgment of the Court.
I am not at all satisfied that this Court's decisions of the
past 30 years, some of them by sharply divided votes, are so plain
and so analytically consistent as the Court's opinion would seem to
imply. Thus, I find it difficult to reconcile
Spector Motor
Service v. O'Connor, 340 U. S. 602
(1951), with today's holding. And if the present case had gone the
other way, I would find it difficult to reconcile the judgment with
Memphis Gas Co. v. Stone, 335 U. S.
80 (1948). If, however, the Court' decisions of the past
are consistent -- and if there is consistency between what the
Louisiana Legislature and that
Page 421 U. S. 115
State's courts have done in Colonial's 1969 case and in the
present one -- then, for me, the legal distinctions this Court and
the Louisiana courts (under the compulsion of our decisions) have
drawn are too fine-spun and far too gossamer. They fail to provide
what taxpayers and the lawyers who advise them have a right to
expect, namely, a firm and solid basis of differentiation between
that which runs afoul of the Commerce Clause and that which is
consistent with that Clause. It makes little constitutional sense
-- and certainly no practical sense -- to say that a State may not
impose a fairly apportioned, nondiscriminatory franchise tax with
an adequate nexus upon the conduct of business in interstate
commerce, but that it may impose that same tax upon the conduct of
business in interstate commerce "in a corporate form" or, for that
matter, in partnership or individual form. Tr. of Oral Arg. 28-31.
Certainly to the lay mind, or to any mind other than the purely
legal, these are distinctions with little substantive difference
and this is taxation by semantics.
I therefore feel that the Court should face the issue and make
the choice. I would make that choice in favor of
Memphis
Gas, as buttressed by the philosophy and holding of
Northwestern Cement Co. v. Minnesota, 358 U.
S. 450 (1959), and against
Spector.
Spector, it seems to me, is a derelict and an aberration,
and I would discard it. I would hold that, in this day, when the
realities of "Our Federalism"
* have become
apparent, and when the ability of our States and of the Federal
Government to coexist have matured, a state franchise tax that does
not threaten interstate commerce by being discriminatory, or
unfairly apportioned, or devoid of sufficient nexus, passes
constitutional muster under the Commerce Clause, and may be imposed
in the
Page 421 U. S. 116
absence of congressional proscription. On this record,
Louisiana's corporation franchise tax meets that standard.
*
Younger v. Harris, 401 U. S. 37,
401 U. S. 44
(1971).
MR. JUSTICE STEWART, dissenting.
All agree that the appellant is engaged exclusively in
interstate commerce. Yet the Court says that Louisiana can
nonetheless impose this franchise tax upon the appellant because it
is for the privilege of engaging in interstate commerce "in [the]
corporate form."* Under this reasoning, the State could impose a
like franchise tax for the privilege of carrying on an exclusively
interstate business "in the partnership form" -- or, for that
matter, in the form of an individual proprietorship. For whatever
its form, the exclusively interstate business would still be
"owning or using [a] part of its capital, plant or other property
in Louisiana,"
ante at
421 U. S. 109,
and would still be "furnished" equivalent "protection and benefits"
by the State,
ante at
421 U. S.
114.
The fact is that Louisiana has imposed a franchise tax upon the
appellant for the privilege of carrying on an exclusively
interstate business. Under our established precedents, such a tax
is constitutionally impermissible.
Spector Motor Service v.
O'Connor, 340 U. S. 602;
Railway Express Agency v. Virginia, 347 U.
S. 359. I could understand if the Court today were
forthrightly to overrule these precedents and hold that a state
franchise tax upon interstate commerce is constitutionally valid,
so long as it is not discriminatory. But I cannot understand how
the Court can embrace the wholly specious reasoning of the Supreme
Court of Louisiana in this case.
* The appellant is not, of course, incorporated in
Louisiana.