A state tax upon the gross receipts of a steamship company
incorporated under its laws which are derived from the
transportation of persons and property by sea between different
states and to and from foreign countries is a regulation of
interstate and foreign commerce in conflict with the exclusive
powers of Congress under the Constitution.
State Tax on Railway Gross
Receipts, 15 Wall. 284, considered and
questioned.
The question in this case was whether a state can
constitutionally impose upon a steamship company incorporated under
its laws a tax upon the gross receipts of such company derived from
the transportation of persons and property by sea between different
states and to and from foreign countries.
By an Act of the Legislature of Pennsylvania passed March 20,
1877, it was, amongst other things, enacted as follows, to wit:
"That every railroad company, canal company, steamboat company,
slackwater navigation company, transportation company, street
passenger railway company, and every other company now or hereafter
incorporated by or under any law of this commonwealth, or now or
hereafter incorporated by any
Page 122 U. S. 327
other state and doing business in this commonwealth, and every
express company, and any palace car and sleeping car company,
incorporated or unincorporated, doing business in this
commonwealth, shall pay to the state treasurer, for the use of the
commonwealth, a tax of eight-tenths of one percent upon the gross
receipts of said company for tolls and transportation, telegraph
business, or express business."
A similar act was passed by the same legislature on the 7th of
June, 1879.
By the terms of these acts, returns of the gross receipts are
required to be made every six months to the Auditor General, upon
which the tax is assessed by him and charged against the
company.
Under and by virtue of these acts, the Auditor General of the
state, in October, 1882, charged the appellant, the Philadelphia
and Southern Mail Steamship Company, taxes upon its gross receipts
for the years 1877, 1878, 1879, 1880, and 1881, all of which
receipts were derived from freight and passage money between the
ports of Philadelphia and Savannah, and in foreign trade from New
Orleans, and a small amount for charter parties in the like trade.
The tax thus charged against the company for the five years in
question amounted to about $6,500, and, with accumulated interest
and penalties, to over $9,000. After serving the account upon the
company, an action was brought for its recovery in the Common Pleas
of Dauphin County at Harrisburg. The defendant pleaded that it was
a steamship company
"operating seagoing steamships engaged in the business of ocean
transportation between different states of the United States and
between the United States and foreign countries, and that all the
said steamships of the said defendant were duly enrolled or
registered under
Page 122 U. S. 328
the laws of the United States for the coasting or foreign trade
of the United States, and that the gross receipts so returned to
the Auditor General, upon which a tax has been levied by the
Commonwealth of Pennsylvania, were received by defendants for
freight and passengers carried in the said steamships on the ocean,
and on the navigable waters of the United States, between the State
of Pennsylvania and other states of the United States, and between
the states of the United States and foreign countries, and for the
charter and hire of the said steamships to other parties in such
trade and business, and that no part of the said gross receipts was
received for the transportation of freight and passengers between
places within the State of Pennsylvania or for the hire and use of
the said steamships within the State of Pennsylvania."
On the trial of the cause, the parties entered into an agreement
as to the facts showing the gross receipts for each year in each
branch of the company's trade, which facts supported the
allegations of the plea. A trial by jury was dispensed with, and
the court gave judgment for the commonwealth for the principal of
the tax and interest from the time of commencing suit. Exceptions
were taken on the ground that the judgment was in conflict with the
clause of the Constitution of the United States giving to Congress
the power to regulate commerce with foreign nations and among the
several states. The judgment, being removed by writ of error to the
Supreme Court of Pennsylvania, was affirmed by that court, and its
judgment is now before us for review.
Page 122 U. S. 335
MR. JUSTICE BRADLEY, after stating the case as above reported,
delivered the opinion of the Court.
The question which underlies the immediate question in the case
is whether the imposition of the tax upon the steamship company's
receipts amounted to a regulation of, or an interference with,
interstate and foreign commerce and was thus in conflict with the
power granted by the Constitution to Congress. The tax was levied
directly upon the receipts derived
Page 122 U. S. 336
by the company from its fares and freights for the
transportation of persons and goods between different states and
between the states and foreign countries, and from the charter of
its vessels, which was for the same purpose. This transportation
was an act of interstate and foreign commerce. It was the carrying
on of such commerce. It was that and nothing else. In view of the
decisions of this Court, it cannot be pretended that the state
could constitutionally regulate or interfere with that commerce
itself. But taxing is one of the forms of regulation. It is one of
the principal forms. Taxing the transportation, either by its
tonnage or its distance or by the number of trips performed or in
any other way would certainly 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.
Foreign commerce has been fully regulated by Congress, and any
regulations imposed by the states upon that branch of commerce
would be a palpable interference. If Congress has not made any
express regulations with regard to interstate commerce, its
inaction, as we have often held, is equivalent to a declaration
that it shall be free in all cases where its power is exclusive,
and its power is necessarily exclusive whenever the subject matter
is national in its character, and properly admits of only one
uniform system.
See the cases collected in
Robbins v.
Shelby Taxing District, 120 U. S. 489,
120 U. S.
492-493. Interstate commerce carried on by ships on the
sea is surely of this character.
If, then, the commerce carried on by the plaintiff in error in
this case could not be constitutionally taxed by the state, could
the fares and freights received for transportation in carrying on
that commerce be constitutionally taxed? If the state cannot tax
the transportation, may it nevertheless tax the fares and freights
received therefor? Where is the difference? Looking at the
substance of things, and not at mere forms, it is very difficult to
see any difference. The one thing seems to be tantamount to the
other. It would seem to be rather metaphysics than plain logic for
the state officials to say to the company: "We will not tax you for
the transportation you
Page 122 U. S. 337
perform, but we will tax you for what you get for performing
it." Such a position can hardly be said to be based on a sound
method of reasoning.
This Court did not so reason in the case of
Brown v.
Maryland, 12 Wheat. 419. The State of Maryland
required all importers of foreign goods and other persons selling
the same by wholesale, bale, or package to take out a license and
pay $50 therefor, subject to a penalty and forfeiture for selling
without such license. It was contended on the part of the state
that this was a mere tax on the occupation of selling foreign
goods, affecting only the person, and not the importation of the
goods themselves or the occupation of importing them. Chief Justice
Marshall met this objection by showing that the attempt to regulate
the sale of imported goods was as much in conflict with the power
of Congress to regulate commerce as a regulation of their
importation itself would be. "If this power," said he (referring to
the power of Congress),
"reaches the interior of a state and may be there exercised, it
must be capable of authorizing the sale of those articles which it
introduces. Commerce is intercourse. One of its most ordinary
ingredients is traffic. It is inconceivable that the power to
authorize this traffic, where given in the most comprehensive
terms, with the intent that its efficacy should be complete, should
cease at the point when its continuance is indispensable to its
value. To what purpose should the power to allow importation be
given unaccompanied with the power to authorize a sale of the thing
imported? Sale is the object of importation, and is an essential
ingredient of that intercourse, of which importation constitutes a
part. It is as essential an ingredient, as indispensable to the
existence of the entire thing, then, as importation itself. It must
be considered as a component part of the power to regulate
commerce. Congress has a right not only to authorize importation,
but to authorize the importer to sell. . . . Any penalty inflicted
on the importer for selling the article in his character of
importer must be in opposition to the act of Congress which
authorizes importation. . . . The distinction between a tax on the
thing imported and on the person of the importer can have
Page 122 U. S. 338
no influence on this part of the subject. It is too obvious for
controversy that they interfere equally with the power to regulate
commerce."
Pp.
25 U. S.
446-448.
The application of this reasoning to the case in hand is
obvious. Of what use would it be to the ship owner, in carrying on
interstate and foreign commerce, to have the right of transporting
persons and goods free from state interference if he had not the
equal right to charge for such transportation without such
interference? The very object of his engaging in transportation is
to receive pay for it. The regulation of the transportation belongs
to the power of Congress to regulate commerce, the regulation of
fares and freights receivable for such transportation must equally
belong to that power, and any burdens imposed by the state on such
receipts must be in conflict with it. To apply the language of
Chief Justice Marshall, fares and freights for transportation in
carrying on interstate or foreign commerce are as much essential
ingredients of that commerce as transportation itself.
It is necessary, however, that we should examine what bearing
the cases of
State Freight Tax and Railway Gross Receipts,
reported in the 15th of Wallace, have upon the question in hand.
These cases were much quoted in argument, and the latter was
confidently relied on by the counsel of the commonwealth. They both
arose under certain tax laws of Pennsylvania. The first, which is
reported under the title of case of
State
Freight Tax, 15 Wall. 232, was that of the Reading
Railroad Company, and arose under an act passed in 1864 which
imposed upon every railroad, steamboat, canal, and slackwater
navigation company a tax of a certain rate per ton on every ton of
freight carried by or upon the works of said company, with a
proviso directing in substance that every company, foreign or
domestic, whose line extended partly in Pennsylvania and partly in
another state should pay for the freight carried over that portion
of its line in Pennsylvania the same as if its whole line were in
that state. Under this law, the Reading Railroad Company was
charged a tax of $38,000 for freight transported to points within
Pennsylvania, and of $46,000 for that exported to points without
the state.
Page 122 U. S. 339
The latter sum the company refused to pay, and the question in
this Court was whether that portion of the tax was constitutional,
and we held that it was not. Mr. Justice Strong delivered the
opinion of the Court. It was held that this was not a tax upon the
franchises of the companies, or upon their property, or upon their
business, measured by the number of tons of freight carried, but
was a tax upon the freight carried, and because of its carriage;
that transportation is a constituent of commerce; that the tax was
therefore a regulation of commerce, and a regulation of commerce
among the states; that the transportation of passengers or
merchandise from one state to another is, in its nature, a matter
of national importance admitting of a uniform system or plan of
regulation, and therefore, under the rule established by
Cooley v. Port
Wardens, 12 How. 299, exclusively subject to the
legislation of Congress. The inevitable conclusion was that the tax
then in question was in conflict with the exclusive power of
Congress to regulate commerce among the states, and was therefore
unconstitutional. Referring to the decision in
Crandall v.
Nevada, 6 Wall. 35, in which this Court had decided
that a state cannot tax persons for passing through or out of it,
Justice Strong said:
"If state taxation of persons passing from one state to another
or a state tax upon interstate transportation of passengers is
unconstitutional,
a fortiori, if possible, is a state tax
upon the carriage of merchandise from state to state in conflict
with the federal Constitution. Merchandise is the subject of
commerce. Transportation is essential to commerce, and every burden
laid upon it is
pro tanto a restriction. Whatever,
therefore, may be the true doctrine respecting the exclusiveness of
the power vested in Congress to regulate commerce among the states,
we regard it as established that no state can impose a tax upon
freight transported from state to state, or upon the transporter
because of such transportation."
The Court in its opinion took notice of the fact that the law
was general in its terms, making no distinction between freight
transported wholly within the state and that which was destined to
or came from another state. But it was held
Page 122 U. S. 340
that this made no difference. The law might be valid as to one
class and unconstitutional as to the other. On this subject,
Justice Strong said:
"The state may tax its internal commerce, but if an act to tax
interstate or foreign commerce is unconstitutional, it is not cured
by including in its provisions subjects within the jurisdiction of
the state. Nor is a rule prescribed for carriage of goods through,
out of, or into a state any the less a regulation of transportation
because the same rule may be applied to carriage which is wholly
internal."
This last observation meets the argument that might be made in
the present case -- namely that the law is general in its terms,
and taxes receipts for all transportation alike, making no
discrimination against receipts for interstate or foreign
transportation, and hence cannot be regarded as a special tax on
the latter. The decision in the case cited shows that this does not
relieve the tax from its objectionable character.
If this case stood alone, we should have no hesitation in saying
that it would entirely govern the one before us, for, as before
said, a tax upon fares and freights received for transportation is
virtually a tax upon the transportation itself. But at the same
time that the case of
State Freight Tax was decided, the
other case referred to, namely that of
State Tax on Railway
Gross Receipts, was also decided, and the opinion was
delivered by the same member of the Court.
82 U. S. 15 Wall.
284. This was also a case of a tax imposed upon the Reading
Railroad Company. It arose under another act of assembly of
Pennsylvania passed in February, 1866, by which it was enacted
that
"In addition to the taxes now provided by law, every railroad,
canal, and transportation company incorporated under the laws of
this commonwealth, and not liable to the tax upon income under
existing laws, shall pay to the commonwealth a tax of three-fourths
of one percent upon the gross receipts of said company. The said
tax shall be paid semiannually."
Under this statute, the accounting officers of Pennsylvania
stated an account against the Reading Railroad Company for tax on
gross receipts of the company for the half year ending December 31,
1867. These receipts were derived partly from the freight of goods
transported wholly within
Page 122 U. S. 341
the state and partly from the freight of goods exported to
points without the state, which latter were discriminated from the
former in the reports made by the company. It was the tax on the
latter receipts which formed the subject of controversy. The same
line of argument was taken at the bar as in the other case. This
Court, however, held the tax to be constitutional. The grounds on
which the opinion was based, in order to distinguish this case from
the preceding one, were two:
First, that the tax, being collectible only once in six months,
was laid upon a fund which had become the property of the company,
mingled with its other property and incorporated into the general
mass of its property, possibly expended in improvements or
otherwise invested. The case is likened in the opinion to that of
taxing goods which have been imported after their original packages
have been broken and after they have been mixed with the mass of
property in the country, which, it was said, are conceded in
Brown v. Maryland to be taxable.
This reasoning seems to have much force. But is the analogy to
the case of imported goods as perfect as is suggested? When the
latter become mingled with the general mass of property in the
state, they are not followed and singled out for taxation as
imported goods and by reason of their being imported. If they were,
the tax would be as unconstitutional as if imposed upon them while
in the original packages. When mingled with the general mass of
property in the state, they are taxed in the same manner as other
property possessed by its citizens, without discrimination or
partiality. We held in
Welton v. Missouri, 91 U. S.
275, that goods brought into a state for sale, though
they thereby become a part of the mass of its property, cannot be
taxed by reason of their being introduced into the state or because
they are the products of another state. To tax them as such was
expressly held to be unconstitutional. The tax in the present case
is laid upon the gross receipts for transportation as such. Those
receipts are followed and caused to be accounted for by the company
dollar for dollar. It is those specific receipts, or the amount
thereof (which is the same thing), for which the company
Page 122 U. S. 342
is called upon to pay the tax. They are taxed not only because
they are money or its value, but because they were received for
transportation. No doubt a ship owner, like any other citizen, may
be personally taxed for the amount of his property or estate,
without regard to the source from which it was derived, whether
from commerce or banking or any other employment. But that is an
entirely different thing from laying a special tax upon his
receipts in a particular employment. If such a tax is laid, and the
receipts taxed are those derived from transporting goods and
passengers in the way of interstate or foreign commerce, no matter
when the tax is exacted, whether at the time of realizing the
receipts or at the end of every six months or a year, it is an
exaction aimed at the commerce itself, and is a burden upon it and
seriously affects it. A review of the question convinces us that
the first ground on which the decision in
State Tax on Railway
Gross Receipts was placed is not tenable; that it is not
supported by anything decided in
Brown v. Maryland, but on
the contrary that the reasoning in that case is decidedly against
it.
The second ground on which the decision referred to was based
was that the tax was upon the franchise of the corporation granted
to it by the state. We do not think that this can be affirmed in
the present case. It certainly could not have been intended as a
tax on the corporate franchise, because, by the terms of the act,
it was laid equally on the corporations of other states doing
business in Pennsylvania. If intended as a tax on the franchise of
doing business -- which in this case is the business of
transportation in carrying on interstate and foreign commerce -- it
would clearly be unconstitutional. It was held by this Court in the
case of
Gloucester Ferry Company v. Pennsylvania,
114 U. S. 196,
that interstate commerce carried on by corporations is entitled to
the same protection against state exactions which is given to such
commerce when carried on by individuals. In that case, the tax was
laid upon the capital stock of a ferry company incorporated by New
Jersey, and engaged in the business of transporting passengers and
freight between Camden, in New Jersey,
Page 122 U. S. 343
and the City of Philadelphia. The law under which the tax was
imposed was passed by the Legislature of Pennsylvania on the 7th of
June, 1879, and declared
"That every company or association whatever, now or hereafter
incorporated by or under any law of this commonwealth or now or
hereafter incorporated by any other state or territory of the
United States or foreign government, and doing business in this
commonwealth . . . [with certain exceptions named] shall be subject
to and pay into the treasury of the commonwealth annually a tax to
be computed as follows, namely. . . ."
The amount of tax is then rated by the dividends declared and
imposed upon the capital stock of the company at the rate of so
many mills or fractions of a mill for every dollar of such capital
stock. It was contended that the ferry company could not hold
property in Philadelphia for the purpose of carrying on its
ferrying business, and could not carry on its said business there
without a franchise, express or implied from the State of
Pennsylvania. But this Court held in its opinion, delivered by MR.
JUSTICE FIELD, that the business of landing and receiving
passengers and freight at the wharf in Philadelphia was a necessary
incident to and a part of their transportation across the Delaware
River from New Jersey; that without it, that transportation would
be impossible; that a tax upon such receiving and landing of
passengers and freight is a tax upon their transportation -- that
is, upon the commerce between the two states involved in such
transportation -- and that Congress alone can deal with such
transportation, its nonaction being equivalent to a declaration
that it shall remain free from burdens imposed by state
legislation. The opinion proceeds as follows:
"Nor does it make any difference whether such commerce is
carried on by individuals or corporations.
Welton v.
Missouri, 91 U. S. 275;
Mobile v.
Kimball, 102 U. S. 691. As was said in
Paul v.
Virginia, 8 Wall. 168, at the time of the forming
of the Constitution, a large part of the commerce of the world was
carried on by corporations, and the East India Company, the Hudson
Bay Company, the Hamburgh Company, the Levant Company, and the
Virginia Company were mentioned as among the corporations which,
from
Page 122 U. S. 344
the extent of their operations, had become celebrated throughout
the commercial world. The grant of power [to Congress] is general
in its terms, making no reference to the agencies by which commerce
may be carried on. It includes commerce by whomsoever conducted,
whether by individuals or corporations."
114 U.S.
114 U. S. 204.
Again:
"While it is conceded that the property in a state belonging to
a foreign corporation engaged in foreign or interstate commerce may
be taxed equally with like property of a domestic corporation
engaged in that business, we are clear that a tax or other burden
imposed upon the property of either corporation because it is used
to carry on that commerce, or upon the transportation of persons or
property, or for the navigation of the public waters over which the
transportation is made, is invalid and void as an interference with
and obstruction of the power of Congress in the regulation of such
commerce."
114 U.S.
114 U. S. 211.
It is hardly necessary to add that the tax on the capital stock of
the New Jersey Company in that case was decided to be
unconstitutional because, as the corporation was a foreign one, the
tax could only be construed as a tax for the privilege or franchise
of carrying on its business, and that business was interstate
commerce.
The decision in this case, and the reasoning on which it is
founded, so far as they relate to the taxation of interstate
commerce carried on by corporations, apply equally to domestic and
foreign corporations. No doubt the capital stock of the former,
regarded as inhabitants of the state or their property, may be
taxed as other corporations and inhabitants are provided no
discrimination be made against them as corporations carrying on
foreign or interstate commerce, so as to make the tax in effect a
tax on such commerce. But their business as carriers in foreign or
interstate commerce cannot be taxed by the state under the plea
that they are exercising a franchise.
There is another point, however, which may properly deserve some
attention. 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
Page 122 U. S. 345
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.
The corporate franchises, the property, the business, the income
of corporations created by a state may undoubtedly be taxed by the
state, but in imposing such taxes, care should be taken not to
interfere with or hamper, directly or by indirection, interstate or
foreign commerce or any other matter exclusively within the
jurisdiction of the federal government. This is a principle so
often announced by the courts, and especially by this Court, that
it may be received as an axiom of our constitutional jurisprudence.
It is unnecessary, therefore, to review the long list of cases in
which the subject is discussed. Those referred to are abundantly
sufficient for our purpose. We may add, however, that since the
decision of the
Railway Tax cases now reviewed, a series
of cases has received the consideration of this Court the decisions
in which are in general harmony with the views here expressed and
show the extent and limitations of the rule that a state cannot
regulate or tax the operations or objects of interstate or foreign
commerce. We may refer to the following:
Railroad Co. v.
Husen, 95 U. S. 465;
Cook v. Pennsylvania, 97 U. S. 566;
Guy v. Baltimore, 100 U. S. 434;
Webber v. Virginia, 103 U. S. 344;
Page 122 U. S. 346
Moran v. New Orleans, 112 U. S. 69;
Walling v. Michigan, 116 U. S. 446;
Pickard v. Pullman Co., 117 U. S. 34;
Wabash & St. Louis Railroad v. Illinois, 118 U.
S. 557;
Robbins v. Shelby County, 120 U.
S. 489;
Fargo v. Michigan, 121 U.
S. 230. The cases of
Moran v. New Orleans and
Fargo v. Michigan are especially apposite to the case now
under consideration. As showing the power of the states over local
matters incidentally affecting commerce,
see Munn v.
Illinois, 94 U. S. 123,
and other cases in the same volume,
viz., Chicago &
Burlington Railroad v. Iowa, pp.
94 U. S. 155,
94 U. S. 161;
Peik v. Chicago & Northwestern Railway, pp.
94 U. S. 164,
94 U. S. 176;
Winona & St. Peter Railroad v. Blake, p.
94 U. S. 180, as
explained by
Wabash Co. v. Illinois; The Wharfage Cases, viz.,
Packet Co. v. Keokuk, 95 U. S. 80;
Packet Co. v. St. Louis, 100 U. S. 423,
100 U. S. 428;
Packet Co. v. Catlettsburg, 105 U.
S. 559,
105 U. S. 563;
Transportation Co. v. Parkersburg, 107 U.
S. 691,
107 U. S. 698;
Mobile v. Kimball, 102 U. S. 691;
Brown v. Houston, 114 U. S. 622,
114 U. S. 630;
Railroad Commission Cases, 116 U.
S. 307;
Coe v. Errol, 116 U.
S. 517.
It is hardly within the scope of the present discussion to refer
to the disastrous effects to which the power to tax interstate or
foreign commerce may lead. If the power exists in the state at all,
it has no limit but the discretion of the state, and might be
exercised in such a manner as to drive away that commerce, or to
load it with an intolerable burden, seriously affecting the
business and prosperity of other states interested in it, and if
those states, by way of retaliation or otherwise, should impose
like restrictions, the utmost confusion would prevail in our
commercial affairs. In view of such a state of things which
actually existed under the Confederation, Chief Justice Marshall,
in the case before referred to, said:
"Those who felt the injury arising from this state of things,
and those who are capable of estimating the influence of commerce
of the prosperity of nations, perceived the necessity of giving the
control over this important subject to a single government. It may
be doubted whether any of the evils proceeding from the feebleness
of the federal government contributed more to that great revolution
which introduced the
Page 122 U. S. 347
present system than the deep and general conviction that
commerce ought to be regulated by Congress. It is not, therefore,
matter of surprise that the grant should be as extensive as the
mischief, and should comprehend all foreign commerce and all
commerce among the states. To construe the power so as to impair
its efficacy would tend to defeat an object in the attainment of
which the American public took, and justly took, that strong
interest which arose from a full conviction of its necessity."
12 Wheat.
25 U. S.
446.
Nothing can be added to the force of these words.
Our conclusion is that the imposition of the tax in question in
this cause was a regulation of interstate and foreign commerce, in
conflict with the exclusive powers of Congress under the
Constitution.
The judgment of the Supreme Court of Pennsylvania is
therefore reversed, and the case is remanded to be disposed of
according to law in conformity with this opinion.