A state tax against a railroad corporation, incorporated under
its laws on account of transportation done by it from one point
within the state to another point within it, but passing during the
transportation without the state and through part of another state,
is not a tax upon interstate commerce, and does not infringe the
provisions of the Constitution of the United States.
The Court stated the case as follows:
April 28, 1887, the Auditor General of Pennsylvania settled an
account with the Lehigh Valley Railroad Company, in accordance with
the Act of June 7, 1879, of that commonwealth, for its taxes on
gross receipts for the six months ending December 31, 1866, as
follows:
Gross receipts. . . . . . . . . . . . . . . . . . . .
$4,798,933.54
Proportion taxable in Pennsylvania, 26069/32661 . . .
3,835,926.60
Tax at rate of eight tenths of one percent. . . . . .
30,642.88
-------------
Due commonwealth. . . . . . . . . . . . . . . . . . $
30,642.88
This settlement was approved by the state treasurer June 3,
1887. The Lehigh Company thereupon prayed an appeal to the Court of
Common Pleas of Dauphin County, Pennsylvania, where a declaration
and copy of account were filed and the case tried under stipulation
by the court without a jury. Upon the trial, it appeared from the
affidavit of the treasurer of the Lehigh Company, given November
10, 1887, that he had made to the Auditor General for the six
months ending December 31, 1886, the report of gross receipts upon
which the account for taxes had been settled, and further that
"the main line of railroad operated by the Lehigh Valley
Railroad Company extends from Perth Amboy, in the State of New
Page 145 U. S. 193
Jersey, to Wilkes Barre, in the State of Pennsylvania, with
numerous branches in Pennsylvania and New Jersey. The company has
also running arrangements with other companies whereby it runs its
own trains, both passenger and freight, on a through line from
Jersey City, New Jersey, to Buffalo, New York. A very large portion
of its business consists of the transportation of freight,
passengers, etc., from points in Pennsylvania to points in other
states, or from points in other states to points in Pennsylvania,
or from points in other states to points in other states passing
through the State of Pennsylvania, about one-half of its entire
receipts being derived from the transportation of anthracite coal
from Pennsylvania into other states."
The affidavit gave a detailed statement showing the several
classes of transportation from which the receipts returned were
derived, being from transportation of coal, freight other than
coal, passengers, express, and mail, distributed as in a summary,
with which the statement concluded, and which was as follows:
(1) Total receipts from transportation
from points in Pennsylvania to other
points in Pennsylvania, without passing
out of the state . . . . . . . . . . . . . . $1,353,441.50
(2) Total receipts from transportation by
continuous carriage from points in
Pennsylvania to other points in Penn-
sylvania, but over lines partly in
Pennsylvania, that is to say, passing
out of Pennsylvania into other states and
back again into Pennsylvania in course
of transportation. . . . . . . . . . . . . . 207,660.42
(3) Total receipts from transportation by
continuous carriage from points in a
foreign state to other points in the same
state, passing through the state of
Pennsylvania . . . . . . . . . . . . . . . . 50,494.25
(4) Total receipts from transportation
Page 145 U. S. 194
by continuous carriage from points in other
states to points in Pennsylvania . . . . . . 292,422.00
(5) Total receipts from transportation by contin-
uous carriage from points in Pennsylvania to
points in other states . . . . . . . . . . . 2,569,514.58
(6) Total receipts from transportation by contin-
uous carriage from points in a foreign state,
passing through Pennsylvania and ending in
a third state. . . . . . . . . . . . . . . . 267,868.59
(7) Total receipts from transportation from
points in foreign states to other points
in foreign states not touching
Pennsylvania . . . . . . . . . . . . . . . . 57,532.19
-------------
Total receipts . . . . . . . . . . . . . . $4,798,933.53
In another affidavit, under date January 20, 1888, the same
official stated:
"Wherever in the said statement of November 10, 1887, I used the
term 'continuous transportation' or 'continuous carriage,' the
freight or passengers from the transportation of which the receipts
were derived were carried between the points mentioned for a single
sum or charge, and upon a single waybill or ticket, and were, when
taken upon the cars of this company, destined to be carried, and
were actually carried, from point to point as in said statement set
forth. The Lehigh Valley Railroad Company has no railroad of its
own reaching the City of Philadelphia, but transports coal and
other merchandise, and sometimes passengers, from Mauch Chunk and
other points in Pennsylvania over its own line to Phillipsburg, in
the State of New Jersey, from which point it is carried upon the
Belvidere and Delaware Railroad to Trenton, and thence by the
Pennsylvania Railroad lines to the City of Philadelphia. So far as
the Lehigh Valley Railroad line is concerned, the transportation is
from Mauch Chunk, or the other points in Pennsylvania, to
Phillipsburg, in New Jersey; but by arrangements between this
company and the corporations owning the other roads, the
transportation is continuous from Mauch Chunk and the other points
in Pennsylvania to Philadelphia. The receipts
Page 145 U. S. 195
mentioned in my statement of November tenth, in the second
paragraph, in each instance under the respective heads of 'coal,'
'freight other than coal,' and 'passenger, express, and mail,' and
also in the second item in the summary, were derived in the manner
above explained. Some of the trains, and in many instances the same
cars, which carried the freight and passengers indicated between
the points in Pennsylvania and the City of Philadelphia, carried
also freight and passengers destined and carried from points in
Pennsylvania to points in New Jersey and New York, and
vice
versa. The various items of receipts shown in my statement of
November tenth, and classified in the third paragraph of the
summary as"
"receipts from transportation by continuous carriage from points
in a foreign state to other points in the same state, passing
through the State of Pennsylvania,"
"were derived from transportation of freight and passengers
billed or ticketed from the City of New York to other points in the
State of New York, and
vice versa. The same trains and the
same cars which carried the said freight and passengers carried
also freight and passengers destined and carried from points in
Pennsylvania to points in other states, and from points in other
states to points in Pennsylvania."
It was admitted that the Lehigh Company was originally
incorporated by the State of Pennsylvania, and that it owned and
operated, as part of its main line, about sixty-six miles of
railroad in New Jersey.
The fraction of the entire gross receipts given in the
settlement represented the Lehigh Company's mileage within the
state.
The court of common pleas found the facts, and held, for the
reasons given in
Commonwealth v. Delaware & Hudson Canal
Co., 21 Weekly Notes of Cases (Penn.) 406, and
Commonwealth v. New York, Lake Erie & Western Railroad
Company, ib., 410, that the commonwealth could only recover
taxes upon the two items of $1,353,441.50 and $207,660.42 (classes
one and two), being the amount received for transportation between
points both of which were in the state, and directed judgment
accordingly, which, exceptions thereto having been overruled,
Page 145 U. S. 196
was thereupon entered. The case was carried by writ of error to
the Supreme Court of Pennsylvania, and the judgment affirmed upon
the opinion of the court below. A writ of error was then sued out
from this Court.
The company, conceding its liability to taxation in respect of
the receipts contained in class one, questions by its assignment of
errors the validity of the tax as to the receipts in class two.
Page 145 U. S. 199
MR. CHIEF JUSTICE FULLER, after stating the facts in the
foregoing language, delivered the opinion of the Court.
The Lehigh Valley Railroad Company is a Pennsylvania
corporation, which owns and operates an extensive system of
railroads in that state, but has no line of its own to
Philadelphia. For the traffic from Mauch Chunk to Philadelphia it
makes use of two routes, one by the way of the Philadelphia &
Reading road, being wholly within the state, and the other by its
own line connecting with the lines of the Pennsylvania Railroad at
Phillipsburg, New Jersey, and thence via Trenton, in that state, to
Philadelphia. Detailed reports of its receipts show that the
passenger traffic of the Lehigh Company to Philadelphia from Mauch
Chunk is almost wholly taken over the Philadelphia & Reading,
while its coal and general freight traffic reaches Philadelphia by
the other road. Phillipsburg, New Jersey, lies across the Delaware
River, opposite Easton, Pennsylvania. By the running
arrangements
Page 145 U. S. 200
between the Lehigh and Pennsylvania Companies, the
transportation of through freight and passengers is continuous from
Mauch Chunk to Philadelphia.
The receipts named in class two are confined to that part of the
transportation from Mauch Chunk to Phillipsburg, and the taxation
to the mileage wholly within the State of Pennsylvania, and the
question is whether this taxation in respect of such receipts from
freight and passengers carried by continuous transportation to
Philadelphia from Mauch Chunk by way of Trenton, New Jersey,
amounts to a regulation of interstate commerce.
The conflict between the commercial regulations of the several
states was destructive to their harmony, and fatal to their
commercial interests abroad, and this was the mischief intended to
be obviated by the grant to the Congress of the power to regulate
commerce with foreign nations and among the states. But, as was
said by Chief Justice Marshall, the words of the grant do not
embrace that commerce which is completely internal, which is
carried on between man and man in a state, or between different
parts of the same state, and which does not extend to nor affect
other states. "Commerce," observed the Chief Justice,
"undoubtedly is traffic, but it is something more -- it is
intercourse. It describes the commercial intercourse between
nations and parts of nations in all its branches, and is regulated
by prescribing rules for carrying on that intercourse."
Gibbons v.
Ogden, 9 Wheat. 189. This is no more than an
expansion of its simplest signification -- that of an exchange of
goods, the bringing of them from the seller to the buyer, however
vast the range now comprehended by the term in the progress of
society.
Taxation is undoubtedly one of the forms of regulation, but the
power of each state to tax its own internal commerce, and the
franchises, property, or business of its own corporations engaged
in such commerce, has always been recognized, and the particular
mode of taxation in this instance is conceded to be, in itself, not
open to objection. And while interstate commerce cannot be
regulated by a state by the laying of taxes thereon in any form,
yet whenever the subjects of taxation
Page 145 U. S. 201
can be separated, so that that which arises from interstate
commerce and be distinguished from that which arises from commerce
wholly within the state, the distinction will be acted upon by the
courts, and the state permitted to collect that arising upon
commerce solely within its own territory.
Ratterman v. Western
Union Tel. Co., 127 U. S. 411,
127 U. S.
424.
The tax under consideration here was determined in respect of
receipts for the proportion of the transportation within the state,
but the contention is that this could not be done, because the
transportation was an entire thing, and in its course passed
through another state than that of the origin and destination of
the particular freight and passengers. There was no breaking of
bulk or transfer of passengers in New Jersey. The point of
departure and the point of arrival were alike in Pennsylvania. The
intercourse was between those points, and not between any other
points. Is such intercourse, consisting of continuous
transportation between two points in the same state, made
interstate because in its accomplishment some portion of another
state may be traversed? Is the transmission of freight or messages
between two places in the same state made interstate business by
the deviation of the railroad or telegraph line onto the soil of
another state?
If it has happened that through engineering difficulties, as the
interposition of a mountain or a river, the line is deflected so as
to cross the boundary, and run for the time being in another state
than that of its principal location, does such detour, in itself,
impress an external character on internal intercourse? For example,
the Nashville, Chattanooga and St. Louis Railway Company is a
corporation created under the laws of Tennessee, and through
freight and passengers transported from Nashville to Chattanooga
pass over a few miles in Alabama, and perhaps two miles in Georgia,
but we had not supposed that that circumstance would render the
taxation of that company, in respect of such business, by the State
of Tennessee invalid.
So as to the traffic of the Erie Railway between the cities of
New York and Buffalo, we do not understand that that company
escapes taxation in respect of that part of its business
Page 145 U. S. 202
because some miles of its road are in Pennsylvania, while the
New York Central is taxed as to its business between the same
places because its rails are wholly within the State of New
York.
It should be remembered that the question does not arise as to
the power of any other state than the state of the termini, nor as
to taxation upon the property of the company situated elsewhere
than in Pennsylvania, nor as to the regulation by Pennsylvania of
the operations of this or any other company elsewhere, but it is
simply whether, in the carriage of freight and passengers between
two points in one state, the mere passage over the soil of another
state renders that business foreign which is domestic. We do not
think such a view can be reasonably entertained, and are of opinion
that this taxation is not open to constitutional objection by
reason of the particular way in which Philadelphia was reached from
Mauch Chunk.
Nor is the contrary conclusion supported by
Coe v.
Errol, 116 U. S. 517, and
Lord v. Steamship Company, 102 U.
S. 541, much relied on by plaintiff in error.
In
Coe v. Errol, logs cut in Maine and detained at
Errol, New Hampshire, on their way down the Androscoggin River to
Lewiston, Maine, were held by the Supreme Court of New Hampshire
not taxable at Errol, while logs cut in New Hampshire, and hauled
down to that town for similar transportation, were held taxable,
and this Court sustained the judgment of the state court in
reference to the New Hampshire logs upon the ground that they were
still part of the general mass of property of the state, and had
not commenced "their final movement for transportation from the
State of their origin to that of their destination." The Maine logs
had never been part of the property of New Hampshire, and had no
situs there. They were therefore not taxable, though whether they
were or not was not drawn into decision. These logs were also in
course of transportation from the place of cutting to another place
likewise in Maine, and, as that transportation required them to
arrive and remain for a time in New Hampshire, the predicament in
that regard was referred to in the
Page 145 U. S. 203
opinion by way of argument as being such that New Hampshire
could not impose a burden on that transportation. But the right of
Maine to tax them was not disputed.
The single question in
Lord v. Steamship Company was,
as stated by Mr. Chief Justice Waite, delivering the opinion of the
Court, whether Congress had power to regulate the liability of the
owners of vessels navigating the high seas, but engaged only in the
transportation of goods and passengers between ports and places in
the same state, it being conceded that the voyages of the steamship
in respect of whose loss the question arose were always ocean
voyages. The argument was that
"while on the ocean, her national character only was recognized,
and she was subject to such laws as the commercial nations of the
world had, by usage or otherwise, agreed on for the government of
the vehicles of commerce occupying this common property of all
mankind. She was navigating among the vessels of other nations, and
was treated by them as belonging to the country whose flag she
carried. True, she was not trading with them, but she was
navigating with them, and consequently, with them, was engaged in
commerce. If in her navigation she inflicted a wrong on another
country, the United States, and not the State of California, must
answer for what was done. In every just sense, therefore, she was,
while on the ocean, engaged in commerce with foreign nations, and
as such she and the business in which she was engaged was subject
to the regulating power of Congress."
But it was unnecessary to invoke the power to regulate commerce
in order to find authority for the law in question. As stated by
Mr. Justice Bradley in
In re Garnett, 141 U. S.
1,
141 U. S. 12:
"The act of Congress which limits the liability of shipowners
was passed in amendment of the maritime law of the country, and the
power to make such amendments is coextensive with that law. It is
not confined to the boundaries or class of subjects which limit and
characterize the power to regulate commerce; but, in maritime
matters, it extends to all matters and places to which the maritime
law extends."
In that case, the limited liability act was applied to a steamer
engaged in commerce on the Savannah River.
Page 145 U. S. 204
In
Ex Parte Boyer, 109 U. S. 629, it
was decided that the admiralty jurisdiction extended to a steam
canal boat, in case of collision between her and another canal
boat, while the two boats were navigating the Illinois and Lake
Michigan Canal, although the libelant's boat was bound from one
place in Illinois to another place in the same state.
The principle is well settled, and the cases are largely
referred to, in In re Garnett.
In
Pacific Coast Steamship Co. v. Board of Railroad
Commissioners, 18 F. 10, the Circuit Court for the District of
California held, MR. JUSTICE FIELD delivering the opinion, that the
California state board of railroad commissioners had no power to
regulate or interfere with the transportation of persons or
merchandise by a steamship company between ports within the state
if they were in transit to or from other states or if the
transportation consisted of voyages upon the ocean, bringing the
steamships under the exclusive control of Congress.
But that case involved the direct regulation by a state of
transportation which had passed beyond the jurisdiction of the
state, and did not decide the question of the power of a state to
tax its own corporations in respect of transactions within it in
the course of a continuous carriage from one point to another in
the state, in accomplishing which a part of another state was
incidentally traversed.
This Pennsylvania company was not taxed in respect of its
receipts from transportation from points in foreign states to other
points in foreign states not touching Pennsylvania, nor from
transportation by continuous carriage from points in a foreign
state passing through Pennsylvania, and ending in a third state,
nor from transportation by continuous carriage from points in
Pennsylvania to points in other states, nor from transportation by
continuous carriage from points in other states to points in
Pennsylvania, nor from transportation by continuous carriage from
points in another state to other points in the same state, passing
through Pennsylvania, but only in respect of receipts from
transportation from points in Pennsylvania to other points in
Pennsylvania without passing
Page 145 U. S. 205
out of the state, and from transportation by continuous carriage
from points in Pennsylvania to other points therein, but passing
out of Pennsylvania into another state and back again in the course
of transportation.
We do not deem it necessary to continue the discussion. We
concur with the state court in sustaining the validity of the tax
herein involved, and the judgment is
Affirmed.
