The privilege conferred upon telegraph companies by Rev.Stat. §
5263 carries with it no exemption from the ordinary burdens of
taxation in a state within which they may own or operate lines of
telegraph.
The laws of Massachusetts impose a tax upon the Western Union
Telegraph Company on account of the property owned and used by it
within that state, the value of which is to be ascertained by
comparing the length of its lines in that state with the length of
its entire lines, and such a tax is essentially an excise tax, and
is not forbidden by the fact of the acceptance on the part of the
company of the rights conferred on telegraph companies by Rev.Stat.
§ 5263, nor by the commerce clause of the Constitution.
The principles established by the statutes of Massachusetts for
regulating the taxation of corporations doing business within its
limits, whether domestic or foreign, do not appear to be unfair or
unjust.
A state statute which authorizes an injunction to be issued to
restrain a corporation organized under the laws of another state,
whose taxes are in arrears, from prosecuting its business within
the state until the taxes are paid is void so far as it assumes to
confer power upon a court to so restrain a telegraph company which
has accepted the provisions of Rev.Stat. § 5263 from operating its
lines over military and post roads of the United States.
In equity. The bill was filed by the Attorney General of the
Commonwealth of Massachusetts, at the relation of the
Page 125 U. S. 531
Treasurer of that state, and on behalf of the Commonwealth, in
the Supreme Judicial Court of that state on the 27th April, 1886.
It averred that certain proceedings had been taken in accordance
with law and under the statutes of that state, to assess taxes in
that state in the year 1885 upon the capital stock of the Western
Union Telegraph Company, a corporation owning, controlling, and
using, under lease, or otherwise, lines of telegraph within that
Commonwealth for purposes of business or profit. The provisions in
the Constitution and laws of Massachusetts which were relied upon
are printed in the margin. [
Footnote 1] The nature of the proceeding, in the valuation
of the
Page 125 U. S. 532
property of the company for the purposes of the assessment of
the tax are sufficiently stated in the Report of the Examiner,
infra.
Page 125 U. S. 533
The bill averred that the taxes had not been paid, and were
still due and owing to the commonwealth, and prayed the
Page 125 U. S. 534
court "to order and decree that said sum due for taxes as
aforesaid shall be paid to said Commonwealth" by the said
corporation,
Page 125 U. S. 535
with interest thereon, together with the costs of this
information, and to grant unto your informant a writ of injunction,
issuing out of and under the seal of this honorable court, to be
directed to the said corporation and its officers, agents, and
servants, commanding them and each of them absolutely to desist and
refrain from the further prosecution of the business of said
corporation until said sums due to the said commonwealth as
aforesaid for taxes as aforesaid shall have been fully paid, with
interest and costs,
and for further and other relief.
On motion of the defendant, the cause was, on May 13, 1886,
removed to the circuit court of the United States, and on the 29th
day of the same May, the answer of the defendant was filed in that
court.
The answer set forth that the defendant was a corporation
organized in the New York and under the laws of that state; that it
owned, controlled, and used many lines of telegraph in various
parts of the United States, and in the State of Massachusetts,
largely in that state over and along the post roads of the United
States which had been declared to be such and over, under, and
across navigable waters of the United States in or adjoining that
state, and that on the 5th of June, 1867, it had accepted the
provisions and obligations of the Act of July 24, 1866, 14 Stat.
221, c. 230 [now Rev.Stat. § 5263 [
Footnote 2]]; that thereby it became entitled to construct
and maintain its lines over the post roads and over, under, and
across the navigable waters of the United States, and became bound
to transmit the telegrams of the United States over its lines at
rates to be fixed by the Postmaster General, and that no state
legislation could prevent its occupation of post roads for that
purpose; that its lines extend to and from Massachusetts to other
states, and to Washington, and connect with the lines of other
companies doing business
Page 125 U. S. 536
in this country and outside of the United States and beyond the
seas; that while it was operating its lines in Massachusetts, it
was called upon to make returns of its capital stock &c. to the
tax commissioner of the state according to the provisions of §§ 38,
39, 40, 41, and 42 of c. 13 of the Public Statutes of the state,
and made a return as follows:
"
WESTERN UNION TELEGRAPH COMPANY"
"TREASURER'S OFFICE, NEW YORK, June 25, 1585"
"Hon. Daniel A. Gleason, Tax Commissioner of the Commonwealth of
Massachusetts."
"SIR: I, Roswell H. Rochester, Treasurer of the Western Union
Telegraph Company, hereby return that on the first day of May,
1885, said corporation held its principal place of business at the
City of New York."
Its capital stock was . . . . . . . . . . . . . .
$80,000,000.00
The whole number of its shares was 800,000.
The par value of each share was . . . . . . . . . 100.00
The market value of each share was . . . . . . . 59.37 1/2
The value of the real estate owned by the
corporation without the State of
Massachusetts was . . . . . . . . . . . . . . . 3,058,933.82
The value of the real estate owned by
the corporation within the State of
Massachusetts was nothing.
The total number of miles of line owned or
leased was 146,052.60.
Of which the number of miles (not on post
roads of the United States and excluding
2,334.55 miles which were on post roads
of the United States) within the State
of Massachusetts was 498.50.
Total property, 800,000 shares at
$59.37 1/2 per share. . . . . . . . . . . . . .
47,500,000.00
This includes --
Real estate . . . . . . . . . . . . . . . . . . .
3,058,933.82
Two hundred and nine three-fourth shares
held by this company unissued at $59.37 1/2 . . 12,453.90
Page 125 U. S. 537
Stocks in other companies outside of our
system, not included in above statement
of miles of line. . . . . . . . . . . . . . . . $
8,773,622.70
Balance value of 146,052.60 miles of line . . . .
35,654,989.58
Value at same rate of said 498.50 miles as
the valuation of the corporate franchise of
said company for taxation under the laws
of Massachusetts. . . . . . . . . . . . . . . . 121,695.97
"This return includes the lines and property of the American
union Telegraph Company, the Franklin Telegraph Company, the Mutual
union Telegraph Company, and the Gold and Stock Telegraph Company
as part of the Western Union lines."
"Respectfully yours,"
"R. H. ROCHESTER,
Treasurer"
The answer then set forth the action of the tax commissioner
upon this return and respecting the valuation of the property of
the company for the purposes of taxation, [
Footnote 3] and continued:
"And this respondent does not deny, but admits, that its
property in said State of Massachusetts is subject to taxation the
same as other property, and that it may be taxed in a proper way
thereon, yet it respectfully submits and avers that this respondent
does not derive its existence from the laws of said state, or
derive the right to have and exercise its said franchises, rights,
and privileges from said state, or hold them subject to its
control, and that said franchise tax is clearly not a tax on its
property in any legal sense, and cannot be held valid as such; that
it is in the nature of an excise on the exercise of all the
franchises, rights, and privileges enjoyed by this respondent in
the conduct of its business, and a tax on its operations in such
exercise; that while it is claimed by the officers of said state
and by said Attorney General that the laws imposing said tax are
founded on the alleged right of said state to refuse to this
respondent the right or permission
Page 125 U. S. 538
to transact its business or exercise its functions, franchises,
rights, and privileges within said state except for such price and
on such terms and conditions, including the payment of such taxes
as said state may see fit to prescribe and assess and to compel the
performance of, and to exclude this respondent from such
transaction or exercise if the same are not performed and
obeyed."
"Yet this respondent avers that said franchise tax has not and
cannot have this or any legal foundation, and that it includes and
is a tax or assessment on the rights, privileges, and franchises
granted and secured to this respondent by the United States by the
said act of Congress, and on the use thereof by this respondent as
an instrument of commerce and as a government agent for the
transmission of public business by means thereof, and on its
operation in said state, which said state cannot limit, control,
refuse, or tax."
"That even if said tax could in any form be so properly levied
and assessed on the use of such rights and privileges for other
purposes, which this respondent denies, it is not only impossible
in this case to indicate or designate the portion of the burden of
said franchise tax on said use as an instrument of commerce and as
a government agent or on any use for other purposes, but that the
mode of valuation thereof specifically prescribed by said act does
in terms include and designate as a subject of taxation the
franchise exercised on that portion of this respondent's lines
constructed, maintained, and used in the exercise and enjoyment of
said rights and privileges, and that the said tax bears upon the
whole machine without distinction and indistinguishably as well
upon the faculty of receiving and transmitting the messages of the
government of said United States as on that of receiving and
transmitting messages of individuals, and as well upon the faculty
of receiving and transmitting through said state messages sent and
received in and for the purposes of foreign and interstate
commerce, as upon that of receiving and transmitting other messages
wholly within said state."
"And this respondent further avers that if said franchise tax
could in form be legally so levied and assessed as to operate
Page 125 U. S. 539
upon only something legally subject to taxation by said state by
any mode of estimate or valuation resembling that prescribed by
said laws, based upon a valuation of its shares, deducting real
estate locally taxed in said state, it would be and is unjust and
not proportional not to deduct from said valuation the amount of
real estate owned by and subject to local taxation and actually
taxed out of said state, both because the laws of said state allow
such deduction from the valuation under said laws for like taxation
of the franchises of other corporations organized or chartered
within and doing business within and without said state, and
because otherwise said state would assume and does assume in effect
to tax and assess real estate situated in and subject to taxation
and actually taxed by other states and jurisdictions."
The plaintiff filed a replication to this answer, whereupon the
cause was referred to Francis S. Fiske, Esq., "as Examiner, to take
and report the evidence of both parties therein, and such questions
of law arising thereon as either party shall desire." The
Examiner's report was filed May 4, 1887, as follows:
"I, Francis S. Fiske, having been appointed by the court a
special examiner in the above-named case, report --"
"That the information was filed in the Supreme Judicial Court of
the state April 27, 1886, and removed to this court by the
defendant; that the defendant is a telegraph company organized
under the laws of the New York before the passage of the Act of the
Congress of the United States of July twenty-fourth, eighteen
hundred and sixty-six, entitled 'An act to aid in the construction
of telegraph lines and to secure to the government the use of the
same for postal, military, and other purposes' (Rev.Stat. § 5263,
et seq.), and is a corporation organized for purposes of
business and profit, having a capital stock divided into shares,
which filed with the Postmaster General of the United States its
written acceptance of the restrictions and obligations required by
law in accordance with said act on or about the twelfth day of
June, 1867, and has ever since been in existence and operation.
"
Page 125 U. S. 540
"That on and before and since the first day of May, 1885, it has
owned, controlled, and used, under lease or otherwise, a line or
lines of telegraph within said commonwealth as part of a system of
146,052 and 60/100 miles of line extending throughout the United
States, part of Canada, and to Cuba and England by submarine ocean
cable, connecting with lines owned and established by the
government of the United States for public purposes."
"That on the sixteenth day of September in said year 1885, after
notice had been given to said filing and of other matters mentioned
in the notice hereto appended, as below stated, and a return made
by said company under section 42 of chapter 13 of the Public
Statutes of said Commonwealth, copies of which notice and return
are appended [
see pp.
125 U. S.
536-537,
supra], the tax commissioner of said
Commonwealth, in the manner required by its laws, estimated the
fair cash valuation of all the shares constituting the capital
stock of said corporation on said first day of May at $47,500,000,
and allowed as credits to said corporation out of said $47,500,000
the sum or value of $8,786,076."
For 209 shares held by the company unissued,
at $59.37 1/2 . . . . . . . . . . . . . . . . $ 12,453.90
For stock in other companies outside of its
system not included in above statement of
miles of line . . . . . . . . . . . . . . . . 8,773,622.70
-------------
$8,786,076.60
"And determined the total number (or whole length) of the miles
of line of said defendant to be 146,052.60 as aforesaid and
143,219.55 miles thereof, which included said cables, to be beyond
the limits of said Commonwealth."
"That the rate determined under the fortieth section of said
thirteenth chapter of said Public Statutes, for the taxation of the
corporate franchises therein mentioned was, in and for the year
1885, $14.14 for each $1,000 of valuation."
"That said commissioner, being of opinion that the valuation of
the corporate franchise of said defendant for taxation
Page 125 U. S. 541
by said Commonwealth was to be ascertained by deducting from
said $47,500,000.00 the said $8,786,076.00, thus leaving
$38,713,924.00, and then taking as the total number of"
said line or lines 146,052.60, and as the number thereof in said
Commonwealth 2,833.05, without regard to the question whether any
thereof were or were not on post roads, declared such by law, or
navigable streams or waters of the United States, considered that
the valuation of the corporate franchise of said defendant subject
to be taxed in said Commonwealth at said rate was
2,833.05/140,052.60 of said $38,713,924, or in all ($750,952) seven
hundred and fifty thousand nine hundred and fifty-two dollars, and
assessed a tax thereon of ($10,618.46) ten thousand six hundred and
eighteen and 46/100 dollars to said company.
"That in fact more than 2334.55 miles of said line within said
Commonwealth, part of said 2,833.05 miles, were on, over, under, or
across said post roads -- that is to say, railroads or highways
made by law such post roads -- or such streams or waters."
"That before and during said year and since, said defendant has
continually transmitted over said lines on said post roads,
streams, or waters between the several departments of the United
States government and their officers and agents or as provided by §
221 of the Revised Statutes of the United States at rates fixed by
the Postmaster General, as required by said act of Congress or
title LXV of said section, telegraphic communications and messages
for the government of the United States, including those for the
signal service relating to the weather, storms, etc., and also
commercial and business messages for purposes of foreign and
interstate commerce from and to, into, through, and over and
between said Massachusetts and all the other states and territories
of the United States, the City of Washington, and the District of
Columbia, and to and from foreign countries by ocean submarine
Page 125 U. S. 542
cables both for said government and for many private individuals
and corporations resident and located as well out of as in said
state."
"That it is impossible for said company to determine what
portion of any sums received by it was received for services
performed in said state in the transmission through the same or any
part thereof of messages or communications received or delivered
out of it or not on lines over said post roads, streams, or waters,
but that the largest part, or approximately seventy percent, of
said sums was for messages received or delivered out of said
state."
"That said defendant, on said first day of May, 1885, owned a
large amount of real estate located and subject to local taxation
out of said Massachusetts, on which there was assessed and paid by
it a large amount (over $48,000) of taxes, besides other
taxes."
"That the amount or value of said real estate was not clearly
shown, but it was shown that the cost of land and buildings thereon
owned by the defendant and of buildings so owned on land not so
owned out of said state was over $3,000,000, and it was agreed by
the said parties that if it appeared and became material upon any
final decision in this case to fix the amount or value of said real
estate, or the taxes thereon, or the amount received for any class
of messages, and it was not agreed upon by them, the same should be
determined on further hearing by the examiner."
"That no deduction or allowance was made in assessing said tax
or in ascertaining the valuation of said franchise for taxation as
aforesaid on account of said real estate, land, or buildings, or
the taxes paid thereon, or for anything not above specifically
stated."
"That notice was duly given to said defendant of said tax, and
demand made therefor as required by said chapter, but said
defendant protested against said assessment and tax and declined to
pay the same; whereupon this information was filed."
The cause was heard on these pleadings and upon the report of
the examiner, and the court, on the 28th November, 1887, made a
final decree therein:
Page 125 U. S. 543
"That the facts set forth in the examiner's report filed in this
cause are true."
"That on those facts the method of valuation, assessment, and
taxation provided by the laws of Massachusetts upon the franchise
of the defendant corporation is not, as was claimed and contended
by said defendant, illegal and unconstitutional under the
Constitution and laws either of the State of Massachusetts or the
United States -- that is to say, either under the Constitution of
the United States, Article I, Section 8; Article III, Section 2;
Article VI; Amendments V and XIV; Revised Statutes of the United
States, sections 5263, 5264, 5265, 5266, 5267, 5268, 5269,
including a revision and consolidation of the Act of July 24, 1866,
chapter 230, accepted by the defendant before the revision of
section 221; or under the Constitution of said state, part I, art.
X; part II, chapter I, Section IV; or chapter 13 of its Public
Statutes, but was and is in conformity with and authorized by said
constitutions and laws, and that therefore the sum claimed by the
plaintiff to be due for taxes, to-wit, $10,618.46, be paid to said
state by said corporation, with interest thereon, and that an
injunction shall be issued out of and under the seal of this court,
directed to said corporation and its officers, agents, and
servants, commanding them and each of them absolutely to desist and
refrain from the further prosecution of the business of said
corporation until said sums due to the said Commonwealth as
aforesaid for taxes as aforesaid shall have been fully paid, with
interest and costs, unless the said sum is paid by said defendant
as aforesaid within thirty days from the entry hereof."
From this decree the defendant appealed.
Page 125 U. S. 545
MR. JUSTICE MILLER delivered the opinion of the Court.
This is a writ of error to the Circuit Court of the United
States for the District of Massachusetts. The action was commenced
in the Supreme Judicial Court of Massachusetts, sitting in equity,
by an information on behalf of the commonwealth, by its Attorney
General at the relation of the treasurer thereof, Alanson W. Beard.
It was afterwards removed, upon motion of the defendant, the
Western Union Telegraph Company, into the circuit court of the
United States. The object of the information was to enforce the
collection of tax levied by the proper authorities of the state
upon the telegraph company, and to enjoin it from the further
operation of its telegraph lines within the territorial limits of
the commonwealth until that tax was paid. The defendant company is
a corporation organized under the laws of the State of New York,
having its capital stock divided into shares. The tax assessed by
the treasurer of the Commonwealth of Massachusetts was based upon
an estimate of $750,952 as the taxable value of the shares of the
corporation apportioned to that state, the rate of taxation
having
Page 125 U. S. 546
been determined for that year, 1885 at $14.14 for and upon each
$1,000 of valuation. The mode by which this taxable valuation was
arrived at was this:
The treasurer ascertained from the officers of the telegraph
company that the valuation of its entire capital stock was
$47,500,000, from which was deducted the credits proper to be
allowed in determining the assessable value, leaving $38,713,924 as
the total valuation of said stock liable to taxation. It was then
ascertained that the total number of miles of line of said
corporation in all the states and territories of this country was
146,052.60, of which 143,219.55 were without the limits of the
Commonwealth of Massachusetts, leaving 2,833.05 miles within its
boundaries. Taking these figures, the treasurer of the state
assessed the value of that portion of the capital stock of this
company which, under this calculation, would fall within the
Commonwealth of Massachusetts at the sum of $750,952. The amount
thus arrived at at the rate of $14.14 upon each $1,000 of
valuation, produced the sum of $10,618.46 as the amount of the tax
claimed to be due and payable to the treasurer of said commonwealth
by that corporation. This sum was demanded of the telegraph
company, but it refused to pay the same.
The answer of the defendant corporation set up that of its
2,833.05 miles of line within the State of Massachusetts, more than
2,334.55 miles were over, under, or across post roads, made such by
the United States, leaving only 498.50 miles not over or along such
post roads, on which the company offered to pay the proportion of
the tax assessed according to mileage by the state authorities.
The main ground on which the telegraph company resisted the
payment of the tax alleged to be due, and on which probably the
case was removed from the state court into the circuit court of the
United States, is that it is a violation of the rights conferred on
the company by the Act of July 24, 1866, now Title LXV, §§
5263-5269 of the Revised Statutes. The defendant alleges that it
had accepted the provisions of that law and filed a notification of
such acceptance with the Postmaster General of the United States
June 8, 1867. The argument is therefore that, by virtue of § 5263,
the company has a
Page 125 U. S. 547
right to exercise its functions of telegraphing over so much of
its lines as is connected with the military and post roads of the
United States which have been declared to be such by law without
being subject to taxation therefor by the state authorities. That
section reads as follows:
"SEC. 5263. Any telegraph company now organized or which may
hereafter be organized under the laws of any state shall have the
right to construct, maintain, and operate lines of telegraph
through and over any portion of the public domain of the United
States, over and along any of the military or post roads of the
United States which have been or may hereafter he declared such by
law, and over, under, or across the navigable streams or waters of
the United States; but such lines of telegraph shall be so
constructed and maintained as not to obstruct the navigation of
such streams and waters, or interfere with the ordinary travel on
such military or post roads."
It is urged that this section, upon its acceptance by this
corporation or any of like character, confers a right to do the
business of telegraphing which is transacted over the lines so
constructed over or along such post roads without liability to
taxation by the state. The argument is very much pressed that it is
a tax upon the franchise of the company, which franchise, being
derived from the United States by virtue of the statute above
recited, cannot be taxed by a state, and counsel for appellant
occasionally speak of the tax authorized by the law of
Massachusetts upon this as well as all other corporations doing
business within its territory, whether organized under its laws or
not, as a tax upon their franchises. But by whatever name it may be
called, as described in the laws of Massachusetts, it is
essentially an excise upon the capital of the corporation. The laws
of that commonwealth attempt to ascertain the just amount which any
corporation engaged in business within its limits shall pay as a
contribution to the support of its government upon the amount and
value of the capital so employed by it therein. The telegraph
company, which is the defendant here, derived its franchise to be a
corporation and to exercise the function
Page 125 U. S. 548
of telegraphing from the State of New York. It owes its
existence, its capacity to contract, its right to sue and be sued,
and to exercise the business of telegraphy, to the laws of the
state under which it is organized. But the privilege of running the
lines of its wires
"through and over any portion of the public domain of the United
States, over and along any of the military or post roads of the
United States, . . . and over, under, or across the navigable
streams or waters of the United States"
is granted to it by the act of Congress. This, however, is
merely a permissive statute, and there is no expression in it which
implies that this permission to extend its lines along roads not
built nor owned by the United States, or over and under navigable
streams, or over bridges not built or owned by the federal
government carries with it any exemption from the ordinary burdens
of taxation.
While the state could not interfere by any specific statute to
prevent a corporation from placing its lines along these post
roads, or stop the use of them after they were placed there,
nevertheless the company receiving the benefit of the laws of the
state for the protection of its property and its rights is liable
to be taxed upon its real or personal property as any other person
would be. It never could have been intended by the Congress of the
United States, in conferring upon a corporation of one state the
authority to enter the territory of any other state and erect its
poles and lines therein, to establish the proposition that such a
company owed no obedience to the laws of the state into which it
thus entered, and was under no obligation to pay its fair
proportion of the taxes necessary to its support.
In the case of
Telegraph Company v. Texas, 105 U.
S. 460, this question was very fully considered, and
while a tax imposed upon every telegram passing over its lines,
whether entirely within the state or coming from without its limits
or going from the state out of it, was held to be void so far as
related to messages passing through more than one state, as an
interference with or a regulation of commerce and with the act of
Congress we have just been considering, it was distinctly pointed
out that if it could be ascertained what telegrams
Page 125 U. S. 549
were confined wholly within the state, a tax on those might be
imposed by it. In that case, the Chief Justice, delivering the
opinion of the Court, said:
"The Western Union Telegraph Company, having accepted the
restrictions and obligations of this provision by Congress,
occupies in Texas the position of an instrument of foreign and
interstate commerce and of a government agent for the transmission
of messages on public business. Its property in the state is
subject to taxation the same as other property, and it may
undoubtedly be taxed in a proper may on account of its occupation
and its business. The precise question now presented is whether the
power to tax its occupation can be exercised by placing a specific
tax on each message sent out of the state or sent by public
officers on the business of the United States."
This authority of the government gives to this telegraph
company, as well as to all others of a similar character who accept
its provisions, the right to run their lines over the roads and
bridges which have been declared to be post roads of the United
States. If the principle now contended for be sound, every railroad
in the country should be exempt from taxation, because they have
all been declared to be post roads, and the same reasoning would
apply with equal force to every bridge and navigable stream
throughout the land. And if they were not exempt from the burden of
taxation simply because they were post roads, they would be so
relieved whenever a telegraph company chose to make use of one of
these roads or bridges along or over which to run its lines. It was
to provide against the recognition of such a principle that this
Court, in the case above cited, while holding that telegrams
themselves coming from without a state or sent out of it as a part
of their conveyance could not be taxed by the state specifically,
nevertheless used the language that
"its property in the state is subject to taxation the same as
other property, and it may undoubtedly be taxed in a proper way on
account of its occupation and its business."
A still stronger case in the same direction is that of
Railroad
Page 125 U. S. 550
Company v. Peniston, 18 Wall. 5. The plaintiff in that
action, the Union Pacific Railroad Company, was incorporated under
a law of the United States. The State of Nebraska, under a revenue
law passed by its legislature, undertook to lay a tax upon the
property of that company which was used or embraced within the
limits of its territory, upon a valuation of $16,000 per mile. The
property thus rated and taxed consisted of its roadbed, depots,
stations, telegraph poles, wires, bridges, etc. It will be here
observed that a part of the valuation on which this tax was levied
was made up of the telegraph poles and wires belonging to the
company. The argument was pressed in that case that the railroad
company held its franchises from the government of the United
States, and that its property could not be taxed by the state, but
this Court held otherwise, and in the opinion used this
language:
"It is often a difficult question whether a tax imposed by a
state does in fact invade the domain of the general government or
interfere with its operations to such an extent or in such a manner
as to render it unwarranted. It cannot be that a state tax which
remotely affects the efficient exercise of a federal power is for
that reason alone inhibited by the Constitution. To hold that would
be to deny to the states all power to tax persons or property.
Every tax levied by a state withdraws from the reach of federal
taxation a portion of the property from which it is taken, and to
that extent diminishes the subject upon which federal taxes may be
laid. The states are, and they must ever be, coexistent with the
national government. Neither may destroy the other. Hence the
federal Constitution must receive a practical construction. Its
limitations and its implied prohibitions must not be extended so
far as to destroy the necessary powers of the states or prevent
their efficient exercise."
The case of
Thomson v.
Railroad, 9 Wall. 579, is then cited, where it was
held that the property of that company was not exempt from state
taxation though their railroad was a part of a system of roads
constructed under the authority and direction of the United States
and largely
Page 125 U. S. 551
for the uses and to serve the purposes of the general
government. The Court further said:
"A very large proportion of the property within the states is
employed in execution of the powers of the government. It belongs
to governmental agents, and it is not only used, but it is
necessary for their agencies. United States mails, troops, and
munitions of war are carried upon almost every railroad.
Telegraph lines are employed in the national service. So
are steamboats, horses, stagecoaches, foundries, shipyards, and
multitudes of manufacturing establishments. They are the property
of natural persons or of corporations who are agents or instruments
of the general government, and they are the hands by which the
objects of the government are attained. Were they exempt from
liability to contribute to the revenue of the state, it is manifest
the state governments would be paralyzed. While it is of the utmost
importance that all the powers vested by the Constitution of the
United States in the general government should be preserved in full
efficiency, and while recent events have called for the most
unembarrassed exercise of many of those powers, it has never been
decided that state taxation of such property is impliedly
prohibited."
In
National Bank v.
Commonwealth, 9 Wall. 353, which was a case of a
tax levied upon the shares of a national bank, the same objection
in regard to a tax by state authority was pressed upon the Court,
but this Court said that the principle of exemption of federal
agencies from state taxation has a limitation growing out of the
necessity upon which the principle is founded.
"That limitation is that the agencies of the federal government
are only exempted from state legislation so far as that legislation
may interfere with or impair their efficiency in performing the
functions by which they are designed to serve that government. Any
other rule would convert a principle founded alone in the necessity
of securing to the government of the United States the means of
exercising its legitimate powers into an unauthorized and
unjustifiable invasion of the rights of the states. . . . So of the
banks. They are subject to the laws of the state, and are
Page 125 U. S. 552
governed in their daily course of business far more by the laws
of the state than of the nation. All their contracts are governed
and construed by state laws. Their acquisition and transfer of
property, their right to collect their debts, and their liability
to be sued for debts are all based on state law. It is only when
the state law incapacitates the banks from discharging their duties
to the government that it becomes unconstitutional. We do not see
the remotest probability of this in their being required to pay the
tax which their stockholders owe to the state for the shares of
their capital stock when the law of the federal government
authorizes the tax. P.
76 U. S. 362."
The tax in the present case, though nominally upon the shares of
the capital stock of the company, is in effect a tax upon that
organization on account of property owned and used by it in the
State of Massachusetts, and the proportion of the length of its
lines in that state to their entire length throughout the whole
country is made the basis for ascertaining the value of that
property. We do not think that such a tax is forbidden by the
acceptance on the part of the telegraph company of the rights
conferred by § 5263 of the Revised Statutes, or by the commerce
clause of the Constitution.
It is urged against this tax that in ascertaining the value of
the stock, no deduction is made on account of the value of real
estate and machinery situated and subject to local taxation outside
of the Commonwealth of Massachusetts. The report of Examiner Fisk,
to whom the matter was referred to find the facts, states that the
amount of the value of said real estate outside of its jurisdiction
was not clearly shown, but it did appear that the cost of land and
buildings belonging to the company and entirely without that state
was over three million dollars. In the statement of the treasurer
of the company, it is said that the value of real estate owned by
the company within the State of Massachusetts was nothing. Since
the corporation was only taxed for that proportion of its shares of
capital stock which was supposed to be taxable in that state on the
calculation above referred to, and since no real estate of the
corporation was owned or taxed within
Page 125 U. S. 553
its limits, we do not see why any deduction should be made from
the proportion of the capital stock which is taxed by its
authorities. But if this were otherwise, we do not feel called upon
to defend all the items and rules by which they arrived at the
taxable value on which its ratio of percentage of taxation should
be assessed, and even in this case, which comes from the circuit
court and not from that of the state, we think it should appear
that the corporation is injured by some principle or rule of the
law not equally applicable to other objects of taxation of like
character. Since, therefore, this statute of Massachusetts is
intended to govern the taxation of all corporations therein and
doing business within its territory, whether organized under its
own laws or those of some other state, and since the principle is
one which we cannot pronounce to be an unfair or an unjust one, we
do not feel called upon to hold the tax void because we might have
adopted a different system had we been called upon to accomplish
the same result.
It is very clear to us, when we consider the limited territorial
extent of Massachusetts and the proportion of the length of the
lines of this company in that state to its business done therein,
with its great population and business activity, that the rule
adopted to ascertain the amount of the value of the capital engaged
in that business within its boundaries, on which the tax should be
assessed, is not unfavorable to the corporation, and that the
details of the method by which this was determined have not
exceeded the fair range of legislative discretion. We do not think
that it follows necessarily, or as a fair argument from the facts
stated in the case, that there was injustice in the assessment for
taxation. The result of these views is that the tax assessed
against the plaintiff in error is a valid tax; that the judgment of
the court below "that the sum claimed by the plaintiff [below] to
be due for taxes, to-wit, $10,618.46, be paid to said state by said
corporation, with interest thereon" is without error, and so much
of said judgment is hereby affirmed.
The decree or judgment, however, proceeds and awards an
injunction against the company in the following language,
Page 125 U. S. 554
added to that above extracted:
"and that an injunction shall be issued out of and under the
seal of this Court, directed to said corporation and its officers,
agents, and servants, commanding them and each of them absolutely
to desist and refrain from the further prosecution of the business
of said corporation until said sums due to the said commonwealth
for taxes as aforesaid shall have been fully paid, with interest
and costs, unless the said sum is paid by said defendant within
thirty days from the entry hereof."
The effect of this injunction, if obeyed, is to utterly suspend
the business of the telegraph company and defeat all its operations
within the State of Massachusetts. The act of Congress says that
the company accepting its provisions
"shall have the right to construct, maintain, and operate lines
of telegraph through and over any portion of the public domain of
the United States, over and along any of the military or post roads
of the United States."
It is found in this case that 2,334.55 miles of the company's
line, out of 2,833.05 on which this tax is assessed, are along and
over such post roads, and, of course, the injunction prohibits the
operation of the defendant's telegraph over these lines, nearly all
it has in the state.
If the Congress of the United States had authority to say that
the company might construct and operate its telegraph over these
lines, as we have repeatedly held it had, the state can have no
authority to say it shall not be done. The injunction in this case,
though ordered by a circuit court of the United States, is only
granted by virtue of section 54 of chapter 13 of the Public
Statutes of Massachusetts. If this statute is void, as we think it
is, so far as it prescribes this injunction as a remedy to enforce
the collection of its taxes by the decree of the court awarding it,
the injunction is erroneous.
In holding this portion of section 54 of chapter 13 of the
Massachusetts Statutes to be void as applicable to this case, we do
not deprive the state of the power to assess and collect the tax.
If a resort to a judicial proceeding to collect it is deemed
expedient, there remains to the court all the ordinary means of
enforcing its judgment -- executions, sequestration, and any other
appropriate remedy in chancery.
Page 125 U. S. 555
That part of the decree of the circuit court which awards
the injunction is therefore reversed, and the case is remanded to
that court for further proceedings in conformity to this
opinion.
MR. JUSTICE BRADLEY was not present at the argument of this
case, and took no part in its decision.
[
Footnote 1]
1. Extract from the Constitution of
Massachusetts
Part 2, Ch. 1, Sect. 1, Art. 4, of the Constitution gives the
legislature power
"to impose and levy proportional and reasonable assessments,
rates and taxes, upon all the inhabitants of, and persons resident,
and estates lying within the said Commonwealth,"
and also
"to impose and levy reasonable duties and excises upon any
produce, goods, wares, merchandise and commodities whatsoever
brought into, produced, manufactured, or being within the
same."
2. Extracts from the Public Statutes of
Massachusetts
"CHAPTER 13, SECT. 38. Every corporation chartered by the
commonwealth, or organized under the general laws, for purposes of
business or profit, having a capital stock divided into shares,
excepting banks whose shares are otherwise taxable under this
chapter, and except those specified in §§ forty-three and
forty-six, shall annually, between the first and the tenth day of
May, return to the tax commissioner, under the oath of its
treasurer, a complete list of its shareholders, with their places
of residence, the number of shares belonging to each on the first
day of May, the amount of the capital stock of the corporation, its
place of business, the par value and market value of the shares on
said first day of May. Such return shall, in the case of stock held
as collateral security, state not only the name of the person
holding the same, but also the name of the pledger and his
residence. The returns shall also contain a statement in detail of
the works, structures, real estate and machinery owned by said
corporation and subject to local taxation within the commonwealth,
and of the location and value thereof. Railroad and telegraph
companies shall return the whole length of their lines, and the
length of so much of their lines as is without the commonwealth;
other corporations required to make a return under this section
shall also return the amount, value, and location of all works,
structures, real estate, and machinery owned by them and subject to
local taxation without the commonwealth,
provided that
nothing herein contained shall exempt any corporation from making
all returns required by its charter."
"SECT. 39. The tax commissioner shall ascertain, from the
returns or otherwise, the true market value of the shares of each
corporation included in the provisions of the preceding section,
and shall estimate therefrom the fair cash valuation of all of said
shares constituting its capital stock on the first day of May next
preceding, which shall be taken as the true value of its corporate
franchise for the purposes of this chapter. He shall also ascertain
and determine the value and amount of all real estate and machinery
owned by each corporation and subject to local taxation, and of the
deductions provided in the following section, and for this purpose
he may take the amount or value at which such real estate and
machinery are assessed at the place where the same are located as
the true amount or value; but such local assessment shall not be
conclusive of the true amount or value thereof."
"SECT. 40. Every corporation embraced in the provisions of
section thirty-eight shall annually pay a tax upon its corporate
franchise at a valuation thereof equal to the aggregate value of
the shares in its capital stock, as determined in the preceding
section, after making the deductions provided for in this section
at a rate determined by an apportionment of the whole amount of
money to be raised by taxation upon property in the commonwealth
during the same current year, as returned by the assessors of the
several cities and towns under section eighty-six of chapter
eleven, upon the aggregate valuation of all the cities and towns
for the preceding year, as returned under sections fifty-four and
fifty-five of said chapter,
provided that in case the
return from any city or town is not received prior to the twentieth
day of August, the amount raised by taxation in said city or town
the preceding year, as certified to the secretary of the
commonwealth, may be adopted for the purpose of this determination,
and provided further that the amount of tax assessed upon
polls the preceding year, as certified to the secretary, may be
taken as the amount of poll tax to be deducted from the whole
amount to be raised by taxation, for the purpose of ascertaining
the amount to be raised by taxation upon property. From the
valuation, ascertained and determined as aforesaid, there shall be
deducted
first, in case of railroad and telegraph
companies whose lines extend beyond the limits of the commonwealth,
such portion of the whole valuation of their capital stock,
ascertained as aforesaid, as is proportional to the length of that
part of their line lying without the commonwealth, and also an
amount equal to the value, as determined by the tax commissioner,
of their real estate and machinery located and subject to local
taxation within the commonwealth;
second, in case of other
corporations included in section thirty-eight of this chapter, an
amount equal to the value, as determined by the tax commissioner,
of their real estate and machinery, subject to local taxation,
wherever situated,
provided that whenever the charter of a
corporation provides a different method of ascertaining the
valuation of its corporate franchise for the purposes of this
chapter, the same shall be ascertained in the method provided in
such charter."
"SECT. 42. Every corporation or association chartered or
organized elsewhere which owns or controls and uses, under lease or
otherwise, a line of telegraph within this commonwealth shall make
all the returns prescribed in section thirty-eight to be made by
telegraph companies within the commonwealth, excepting the list of
its shareholders, and shall annually pay a tax at the same rate,
and to be ascertained and determined in the same manner as is
provided in section forty, and all telegraph lines within the
commonwealth controlled and used by such corporation or
association, shall, for the purposes of this chapter, be taken and
considered as part of its own lines."
"SECT. 53. The tax commissioner shall, as soon as may be after
the first Monday in August in each year, notify the treasurer of
each corporation, company, co-partnership, or association liable
thereto of the amount of its tax under sections twenty-five, forty,
forty-two, forty-five, forty-seven, fifty, and fifty-two, to become
due and payable to the treasurer of the commonwealth within thirty
days from the date of such notice,
provided that it shall
not be due and payable earlier than the first day of November. Such
notice shall also state that within ten days after the date
thereof, the said corporation, company, co-partnership, or
association may apply for a correction of said tax, and be heard
thereon before the board of appeal hereinafter established."
"SECT. 54. Any corporation, company, co-partnership, or
association taxable under the provisions of sections forty,
forty-two, forty-three, forty-five, forty-seven, fifty, and
fifty-two, neglecting to make the returns required by this chapter,
or refusing or neglecting, when required thereto, to submit to the
examinations provided for therein shall forfeit two percent upon
the par value of its capital stock, all which penalties may be
recovered by an action of tort, brought in the name of the
commonwealth either in the County of Suffolk or in the county where
the corporation is located. If any corporation, company,
co-partnership, or association fails to pay the taxes required to
be paid to the treasurer of the commonwealth under the provisions
of said sections forty, forty-two, forty-three, forty-five,
forty-seven, fifty, fifty-one, and fifty-two, he may forthwith
commence an action of contract in his own name, as treasurer, for
the recovery of the same, with interest at the rate of twelve
percent per annum until the same are paid. All penalties under this
section and under sections seven, forty-seven, fifty, and fifty-two
may also be enforced, and all taxes under said sections forty,
forty-two, forty-three, forty-five, forty-seven, fifty, fifty-one,
and fifty-two, may also be collected by information brought in the
Supreme Judicial Court at the relation of the treasurer of the
commonwealth, and upon such information the court may issue an
injunction restraining the further prosecution of the business of
the corporation, company, co-partnership, or association, until all
such taxes due or penalties incurred shall be paid, with interest
at the rate aforesaid and costs. In any proceeding under this
section, the certificate of the tax commissioner or his deputy
shall be competent evidence of all determinations made and notices
given by him, and of all values, amounts, and other facts required
to be fixed or ascertained by him under this chapter."
"SECT. 61. Any party aggrieved by the decision of the tax
commissioner arising under the provisions of sections twenty-five
to fifty-eight inclusive, excepting corporations named in section
forty-six, may apply to the board of appeal constituted under the
provision's of the following section for a correction of the
same."
"SECT. 62. The treasurer and the auditor of the commonwealth,
together with one member of the council to be named by the
governor, shall constitute a board of appeal, to which board any
party aggrieved by a decision of the tax commissioner upon any
matter arising under this chapter, from his decision upon which an
appeal is given, may apply within ten days after notice of such
decision for a correction of the same. Upon such appeal, said board
shall, as soon as may be, give a hearing to such party, and shall
thereupon decide the matter in question and notify the tax
commissioner and the party appealing, and such decision shall be
final and conclusive as to the rights of the parties affected,
although payments may have been made as required by the decision of
the tax commissioner appealed from. Any overpayment of tax,
determined by the decision of said board of appeal, shall be
reimbursed from the treasury of the commonwealth."
"CHAPTER 109, SECTION 1. Every company incorporated for the
transmission of intelligence by electricity shall possess the
powers and privileges, and be subject to the duties, restrictions,
and liabilities, prescribed in this chapter."
"SECT. 2. Each company may, under the provisions of the
following section, construct lines of electric telegraph upon and
along the highways and public roads, and across any waters within
the commonwealth, by the erection of the posts, piers, abutments,
and other fixtures (except bridges) necessary to sustain the wires
of its lines, but shall not incommode the public use of highways or
public roads nor endanger or interrupt the navigation of any
waters."
"SECT. 3. The mayor and aldermen or selectmen of a place through
which the lines of a company are to pass shall give the company a
writing specifying where the posts may be located, the kind of
posts, and the height at which and the places where the wires may
run. After the erection of the lines, having first given the
company or its agents opportunity to be heard, they may direct any
alteration in the location or erection of the posts, piers, or
abutments, and in the height of the wires. Such specifications and
decisions shall be recorded in the records of the city or
town."
[
Footnote 2]
See infra, page
125 U. S. 547,
for this statute.
[
Footnote 3]
For these proceedings,
see the Report of the Examiner,
infra, pp.
125 U. S. 539,
125 U. S.
542.
