1. A railroad 455 miles long, 42 miles of which were in a state
other than that by which it was incorporated, held to be "doing
business" within the state where the 42 miles were, within the
meaning of an act taxing all railroad companies "doing business
within the state and upon whose road freight may be
2. It being settled law that the language by which a state
surrenders its right of taxation, must be clear and unmistakable, a
grant by one state to a corporation of another state to exercise a
part of its franchise within the limits of the state making the
grant, as above said, and laying a tax upon it at the time of the
grant, does not of itself preclude a right of further taxation by
the same state.
The question in this case was that of the right and intention of
the State of Pennsylvania to impose tax upon the gross receipts of
the Erie Railway Company, a corporation created by the State of New
York and having a portion of its road in Pennsylvania. The case was
In May, 1868, the Legislature of Pennsylvania passed an act, by
the seventh and eighth sections of which there was imposed a tax of
three-fourths of one percent upon the
Page 88 U. S. 493
"of every railroad company, steamboat company, now or hereafter
doing business in the state, and upon whose works freight may be
transported, whether by such company or individuals."
Under this section, the accounting officers of the State of
Pennsylvania settled an account against the Erie Railway Company.
From this settlement an appeal was taken, in pursuance of the
practice of that state, by the company to the Dauphin County Court,
where a verdict for $76,788 was rendered in favor of the state,
which, upon an appeal to the supreme court of the state, was
sustained. From this judgment of the Supreme Court, a writ of error
brought the case to this Court.
It was decided by this Court, as the reader will remember, in
the case of the State Tax on Railway Gross Receipts,
] that a tax upon
the gross receipts of a railroad company is such a tax as it is
within the power of the state to impose.
Not denying the effect of this decision, the Erie Railway
Company still contended that the tax in question was not legal, for
two reasons: 1st., because this company was not intended by the
legislature to be embraced within the terms of the Act of 1868, and
2d, because the terms and conditions of former acts of the
legislature had created an agreement with the company that it
should be exempt from taxation except to a limited extent and in a
specified manner, which was not the manner in which it was now
To understand these positions, it is necessary to give a short
statement both about the company and about the acts of
Pennsylvania, whose meaning was under consideration.
The Erie Railroad Company was chartered by an act of the
Legislature of the State of New York, April 24, 1832, with power to
construct a railroad from the City of New York to Lake Erie,
through the southern tier of counties of the State of New York. By
an act passed in 1846 it was authorized to locate a certain portion
of its road in the State of Pennsylvania. By subsequent foreclosure
Page 88 U. S. 494
the present Erie Railway Company was formed, with all the rights
and authorities conferred upon the Erie Railroad Company.
On the 16th of February, 1841, the Legislature of Pennsylvania,
by an act in which it is recited that for the purpose of avoiding
certain engineering difficulties in one of the counties of New
York, through which the straightest course of the road of the Erie
Railroad Company lay, it was desirable that the road should be
located for a distance of about fifteen miles through the County of
Susquehanna, a county on the north line of Pennsylvania, enacted
that the said road might be located upon such route through said
Susquehanna County as the company should find to be expedient. The
Company was authorized to enter upon and take the lands of
individuals; also gravel, stone, or wood, for the purpose of
constructing the road; paying for the same if the amount was agreed
upon; if not, to be ascertained by an appraisement of the damages
as in the act is prescribed. Nothing of any sort was said in this
act about taxation.
By a second act, an Act of March 27, 1846, authority was further
given to this company to construct its road through another of the
northern counties of Pennsylvania -- the County of Pike -- for a
distance not exceeding thirty miles, with the same general powers
and under the same general restrictions.
This act contained two provisions in reference to taxation.
One was in section five of the act, by which it was enacted
that, after the road should be completed through the Counties of
Pike and Susquehanna, an accurate account of the cost of that
portion of the road should be filed in the office of the auditor
general, and that, after the road should be completed to Dunkirk,
or extended by any other improvement to Lake Erie, the company
should annually pay into the Treasury the sum of $10,000.
The other was in the sixth section, which provided that the
stock of the company to an amount equal to the cost of the
construction of that part of their road situate in Pennsylvania
Page 88 U. S. 495
"shall be subject to taxation by this Commonwealth in the same
manner and at the same rate as other similar property is or may be
subject; . . . and the company shall annually make a statement of
its affairs . . . and of the business done upon said road during
the previous year, said statement to contain a full and accurate
account of the number of passengers, amount and weight of produce,
merchandise, lumber, coal, and minerals transferred on said road
east of Dunkirk and west of Piermont."
But in neither section five nor section six was there any
engagement in terms not to tax the road in any other way than by
them was done.
The whole length of the Erie railroad is 455 miles, 42 1/2 miles
of which are in the State of Pennsylvania, in Pike and Susquehanna
The gross receipts of the company upon its main line (of which
this 42 1/2 miles were a part) in the year 1869 were $9,266,349.33.
Of this sum, 42.5/455ths, viz.,
$884,988.38, was adjudged
to be the portion taxable in Pennsylvania under the statute
imposing the tax in question. Upon this sum, three-fourths of one
percent was imposed as a tax, and in this manner the sum of the tax
for several years, with interest and expenses, was made up.
Page 88 U. S. 497
MR. JUSTICE HUNT delivered the opinion of the Court.
It is argued, in the first place, that the Erie company is not
doing business in the state, in the sense intended by the Act of
1868. To this argument the answer is twofold:
First. The supreme court of that state has held that this
"company was doing business in the state in the sense of that act."
This construction of a state statute by the supreme court of the
state, involving no question under the laws or Constitution of the
United States, is conclusive upon us. We accept the construction of
state statutes by the state courts, although we may doubt the
correctness of such construction. We accept and adopt it, although
we may have already accepted and adopted a different construction
of a similar statute of another state, in deference to the Supreme
Court of that state. [Footnote
Second. We are of the opinion that the Supreme Court of
Pennsylvania was right in its construction of the statute of
Construing together the seventh and eighty sections of the act,
it is enacted
"that every railroad company, steamboat company &c., now or
hereafter doing business in this state, and upon whose works
freight may be transported, whether by such company or by
&c., shall be liable to the tax in question.
It can scarcely be doubted that this company is doing business
in the State of Pennsylvania when it receives gross earnings to an
amount exceeding nine millions per annum for transportation over
its road, of which forty-two miles lie within that state. The
statute does not limit the amount of business done, or the length
of road upon which it is done, as fixing its liability to taxation.
The legal effect of the appellant's argument would be the same if
four hundred and
Page 88 U. S. 498
thirteen miles of its road were within the limits of the State
of Pennsylvania and forty-two miles only were in the State of New
York, instead of lying as it now does.
We see no such difficulty in the machinery for the collection of
the tax as should make us doubt the intention of the legislature.
That in fact the state at once proceeded to and has constantly
persisted in its exercise affords strong evidence of its intention
and of its understanding of its effect.
If it intended to impose the tax and had the power to do it, the
extent and the proportion to which it is carried belongs to the
judgment and discretion of the state only. It is beyond our
examination. [Footnote 3
That it has the power to enforce the tax by direct action upon
that part of the road within its territory would seem to be
reasonably certain, and that it would attempt to lay taxation to an
extravagant or oppressive extent has not yet appeared. That it has
exercised less than the full extent of its power, and has
apportioned the tax according to the length of the road within the
state, is not a just subject of complaint by the company.
The second objection is that the Act of 1868 impairs the
obligation of the state not to impose such a tax upon the Erie
It has been held many times in this Court that a state may make
a valid contract that a corporation or its property within its
territory shall be exempt from taxation, or shall be subject to a
limited and specified taxation. [Footnote 4
The court has, however, in the most emphatic terms, and
Page 88 U. S. 499
on every occasion, declared that the language in which the
surrender is made must be clear and unmistakable. The covenant or
enactment must distinctly express that there shall be no other or
further liability to taxation. A state cannot strip itself of this
most essential power by doubtful words. It cannot, by ambiguous
language, be deprived of this highest attribute of sovereignty.
This principle is distinctly laid down in each of the cases
referred to. It has never been departed from.
Tested by this rule, the contention of the appellant must
On the occasion of the first act referred to, to-wit, in 1841,
by which the Erie Railroad Company was permitted to take lands and
lay its tracks and run its cars through the County of Susquehanna,
nothing was said in the act upon the subject of taxation. The value
created or transferred to that county remained there like any other
property of a corporation, and, like all other property, subject to
the operation of the laws of the state.
The act of 1846, authorizing the building of the road through
the county of Pike, contained two provisions in reference to
taxation. But we find in neither any intimation of an intention to
limit or to surrender the taxing power of the state. Two subjects
of taxation are specified, and reports and details are required,
from which it may be inferred that the legislature looked to other
taxation thereafter. They taxed as far as was then thought proper,
leaving the future to provide for the future. There is no
suggestion of a release of any power or surrender of any authority
possessed by the state. None of the cases decided by this Court
would justify a decision that, by the language we are considering,
the general power of taxation was agreed to be surrendered by the
Nor do we find in New York and Erie Railway v. Sabin,
cited by the appellant, anything in hostility to this construction.
It was there held merely, as the state had imposed a tax upon the
stock of the company to the extent of the cost of construction in
that state, that implied an exemption
Page 88 U. S. 500
from the ordinary taxation for state and county purposes. It was
said that to hold otherwise would be to subject the same property
to double taxation, which it cannot be supposed was intended. The
remarks of Mr. Justice Woodward, in Erie Railway v.
give a full explanation of the meaning of the language employed in
In Easton Bank v. The Commonwealth,
] it was held that the designation
in the charter of the bank of the payment of taxes on its dividends
at a fixed rate was a mere designation of a tax then to be paid,
and did not affect the power to impose other or greater taxes. The
decisions of the state courts of Pennsylvania are quite in harmony
with our own on this subject.
None of the objections are well taken, and the judgment must
82 U. S. 15
7 Wall. 523, 530 [argument of counsel --
omitted]; Williams v.
13 Wall. 306; Tioga Railroad Co. v.
Blossburg Railroad Co., 20 id.
State Tax on Railway Gross
15 Wall. 296; The
Delaware Railroad Tax,
18 Wall. 206.
New Jersey v.
7 Cranch 164; Gordon v.
Appeal Tax Court,
3 How. 133; Achison v.
12 How. 293; Bank v.
16 How. 369; Dodge v.
18 How. 331; Bank v.
1 Black 436; McGee v.
4 Wall. 143; Van
Hoffman v. City of Quincy,
4 Wall. 535;
Home of the Friendless v.
8 Wall. 430; Washington
University v. Rouse,
8 Wall. 439; Wilmington
Railroad v. Reid,
13 Wall. 264; Tomlinson
15 Wall. 460; Humphrey
16 Wall. 244.
66 Pa.St. 84.
451, cited and approved in 85 U. S. 18