An ordinance requiring agents soliciting orders on behalf of
manufacturers of goods to take out a license and pay a tax
therefor, made by a municipal corporation under authority conferred
by a statute of the state granting to such corporations power to
levy and collect license taxes on hawkers, peddlers, and merchants
of all kinds, is an exercise not of the police power, but of the
taxing power, and when it is enforced against an agent, sent by a
manufacturer of goods in another state to solicit orders for the
products of his manufactory, it imposes a tax upon interstate
commerce in violation of the provisions of the Constitution of the
United States.
This Court is not bound by the decision of the highest court of
the state in which such a tax is authorized and imposed, that its
authorization and imposition are an exercise of the police power,
and not of the taxing power.
On May 12, 1890, plaintiff in error was convicted in the Court
of the City Recorder of the City of Titusville, Pennsylvania, of a
violation of an ordinance entitled "An ordinance to provide for the
levy and collection for general revenue purposes of annual license
taxes in the City of Titusville," and sentenced to pay a fine of
$25 and costs. From that sentence he appealed to the Court of
Common Pleas of Crawford County. In that court, the case was tried
upon the following agreed statement of facts:
"1. J. A. Shephard is a manufacturer of picture frames and maker
of portraits, residing in Chicago, in the State of Illinois, of
which state he is a citizen, and in which city he has his
manufactory and place of business. "
Page 153 U. S. 290
"2. In the prosecution of said business, he employs agents who,
under his direction, solicit orders for pictures and picture frames
in the State of Pennsylvania and in other states of the union by
going personally to residents and citizens of said State of
Pennsylvania and other states and exhibiting samples of his
pictures and frames, going, when necessary, from house to house, in
said State of Pennsylvania and other states."
"3. The defendant, J. W. Brennan, was an agent of the said J. A.
Shephard, employed by him to travel and solicit orders for said
pictures and frames in the manner stated, upon a salary, and also
upon commission upon the amount of his sales at the time of his
arrest, May 25, 1889, upon a warrant issued by the authorities of
the City of Titusville, in the State of Pennsylvania."
"4. Upon receiving orders for pictures and picture frames, the
agents of the said J. A. Shephard forwarded the same to him at
Chicago, in the State of Illinois, where the goods were made, and
from there shipped by said J. A. Shephard to the purchasers in
Titusville, in the State of Pennsylvania, by railroad freight and
express, and the price of said goods was collected and forwarded by
the express companies and sometimes by the agents to said Shephard
at Chicago, in the State of Illinois. J. W. Brennan, the agent
employed by J. A. Shephard, was engaged in conducting the business
in the manner stated at the time of his arrest, May 25, 1889. The
said J. W. Brennan at the time of his arrest and before, had not
been otherwise employed than as stated, and was acting solely for
the said Shephard."
"5. The City of Titusville had enacted an ordinance, in force at
the date of the arrest of said J. W. Brennan, which, in the twelfth
section thereof, provides in words and figures as follows:"
" That all persons canvassing or soliciting within said city
orders for goods, books, paintings, wares, or merchandise of any
kind, or persons delivering such articles under orders so obtained
or solicited, shall be required to procure from the mayor a license
to transact said business, and shall pay to the said treasurer
therefor the following sums, according to
Page 153 U. S. 291
the time for which said license shall be granted,
viz.:
for one day, one dollar and fifty cents; one week, $5.00; three
months, $10.00; one year, twenty-five dollars; provided, that the
provisions of this ordinance shall not apply to persons selling by
sample to manufacturers or licensed merchants or dealers residing
and doing business in said city."
"And the said ordinance further provides, in the eighteenth §
thereof, as follows:"
" That any person or persons failing to obtain a license as
required by this ordinance shall, upon conviction thereof before
any magistrate, alderman, or justice of the peace of said city,
forfeit and pay a fine not exceeding one hundred dollars, nor less
than the amount required for a license to such person or persons,
together with twenty percent added as a penalty, with costs of
suit, and in default of payment thereof shall undergo a confinement
in the city or county prison for a period not exceeding ninety
days, or perform hard labor on the streets or elsewhere in said
city not exceeding such period."
"6. At the time of his arrest, the defendant, Brennan, was not
and had not been selling by sample to manufacturers or licensed
merchants or dealers residing in said City of Titusville, and was
not, within the provision of the twelfth section of said ordinance,
soliciting to such excepted persons."
"7. The defendant J. W. Brennan, at the time of his arrest, had
not obtained a license as required by said ordinance, and had not
paid to the Treasurer of the City of Titusville the license fee
provided by said ordinance."
"8. The defendant was arrested, tried, convicted, and sentenced
to pay a fine of $25 and costs of suit under said ordinance on the
29th day of May, 1889, before W. M. Dame, City Recorder of the City
of Titusville."
"If the court should be of opinion upon the facts stated that
the defendant, J. W. Brennan, was liable to take out a license, and
pay the license fee provided by said ordinance, then judgment to be
entered for the plaintiff, the City of Titusville, for $25 and
costs of suit. If the court should be of opinion that said Brennan
was not so liable, then judgment to be entered for the defendant,
with costs of suit. "
Page 153 U. S. 292
Upon these facts, on May 20th, that court entered judgment
against him for $25 and costs. From that judgment he appealed to
the supreme court of the state, which court, on October 5, 1891,
affirmed the judgment. Thereupon he sued out a writ of error from
this Court.
Page 153 U. S. 297
MR. JUSTICE BREWER, after stating the facts, in the foregoing
language, delivered the opinion of the Court.
The question in this case is whether a manufacturer of goods,
which are unquestionably legitimate subjects of commerce, who
carries on his business of manufacturing in one
Page 153 U. S. 298
state can send an agent into another state to solicit orders for
the products of his manufactory without paying to the latter state
a tax for the privilege of thus trying to sell his goods.
It is true, in the present case the tax is imposed only for
selling to persons other than manufacturers and licensed merchants,
but if the state can tax for the privilege of selling to one class,
it can for selling to another, or to all. In either case, it is a
restriction on the right to sell, and a burden on lawful commerce
between the citizens of two states. It is as much a burden upon
commerce to tax for the privilege of selling to a minister as it is
for that of selling to a merchant. It is true also that the tax
imposed is for selling in a particular manner, but a regulation as
to the manner of sale, whether by sample or not, whether by
exhibiting samples at a store or at a dwelling house, is surely a
regulation of commerce. It must be borne in mind that the goods
which the defendant was engaged in selling, to-wit, pictures and
picture frames, are open to no condemnation, and are unchallenged
subjects of commerce. There is no charge of dealing in obscene or
indecent pictures, or that the pictures or the frames were in any
manner dangerous to the health, morals, or general welfare of the
community. It must also be borne in mind that the ordinance is not
one designed to protect from imposition and wrong either minors,
habitual drunkards, or persons under any other affliction or
disability. There is no discrimination except between manufacturers
and licensed merchants, on the one hand, and the rest of the
community, on the other, and unless it be a matter of just police
regulation to tax for the privilege of selling to manufacturers and
merchants, it cannot be to tax for the privilege of selling to the
rest of the community. The same observation may also be made in
respect to the places and manner in which the sales were charged to
have been made. It is as much within the scope of the police power
to restrain parties from going to a store or manufactory as from
going to a dwelling house for the purposes of making a sale. We do
not mean to say that none of these matters to which we have
referred is
Page 153 U. S. 299
within the reach of the police power, but simply that the
conditions on the one side are no more within its reach than those
on the other, so that if, under the excuse of an exercise of the
police power, this ordinance can be sustained, and sales in the
manner therein named be restricted, by an equally legitimate
exercise of that power, almost any sale could be prevented.
But again, this license does not purport to be exacted in the
exercise of the police, but rather of the taxing, power. The
statute under which the ordinance in question was passed is found
in Laws of Pennsylvania of 1874, pp. 230-271. Clause 4 of section
20, p. 239, grants authority "to levy and collect license tax on .
. . hawkers, peddlers, . . . merchants of all kinds, . . . and
regulate the same by ordinance."
The ordinance itself is entitled "An ordinance to provide for
the levy and collection for general revenue purposes of annual
license taxes in the City of Titusville," and the special section
requires a license for transacting business, the license being
graded in amount by the time for which it is obtained. This
license, therefore, the failure to take out which is the offense
complained of and for which defendant was sentenced, is a license
for "general revenue purposes" within the very declarations of the
ordinance. Even if those declarations had been the reverse, and the
license in terms been declared to be exacted as a police
regulation, that would not conclude this question, for whatever may
be the reason given to justify or the power invoked to sustain the
act of the state, if that act is one which trenches directly upon
that which is within the exclusive jurisdiction of the national
government, it cannot be sustained. Thus, in
New Orleans Gas
Co. v. Louisiana Light Co., 115 U. S. 650,
115 U. S. 661,
this Court, by MR. JUSTICE HARLAN, said:
"Definitions of the police power must, however, be taken subject
to the condition that the state cannot, in its exercise, for any
purpose whatever, encroach upon the powers of the general
government, or rights granted or secured by the supreme law of the
land."
"Illustrations of interference with the rightful authority of
the general government by state legislation which was defended
Page 153 U. S. 300
upon the ground that it was enacted under the police power are
found in cases where enactments concerning the introduction of
foreign paupers, convicts, and diseased persons were held to be
unconstitutional, as conflicting, by their necessary operation and
effect, with the paramount authority of Congress to regulate
commerce with foreign nation and among the several states. In
Henderson &c. v. Mayor of New York, 92 U. S.
259, the Court, speaking by Mr. Justice Miller, while
declining to decide whether, in the absence of action by Congress,
the states can, or how far they may, by appropriate legislation
protect themselves against actual paupers, vagrants, criminals, and
diseased persons arriving from foreign countries, said that no
definition of the police power and"
"no urgency for its use can authorize a state to exercise it in
regard to a subject matter which has been confided exclusively to
the discretion of Congress by the Constitution."
P.
92 U. S. 271.
Chy Lung v. Freeman, 92 U. S. 275. And
in
Railroad Co. v. Husen, 95 U. S.
465, Mr. Justice Strong, delivering the opinion of the
Court, said that
"the police power of a state cannot obstruct foreign commerce or
interstate commerce beyond the necessity for its exercise. and,
under color of it, objects not within its scope cannot be secured
at the expense of the protection afforded by the federal
Constitution."
In
Walling v. Michigan, 116 U.
S. 446,
116 U. S. 460,
in the opinion delivered by Mr. Justice Bradley, it was said:
"The police power cannot be set up to control the inhibitions of
the federal Constitution, or the powers of the United States
government created thereby."
In
Leisy v. Hardin, 135 U. S. 100,
135 U. S. 108,
MR. CHIEF JUSTICE FULLER commenced the opinion of the Court with
this general statement of the law applicable to questions of this
kind:
"The power vested in Congress 'to regulate commerce with foreign
nations and among the several states and with the Indian tribes' is
the power to prescribe the rule by which that commerce is to be
governed, and is a power complete in itself, acknowledging no
limitations other than those prescribed in the Constitution. It is
coextensive with the subject on which it acts, and cannot be
stopped at the external boundary
Page 153 U. S. 301
of a state, but must enter its interior, and must be capable of
authorizing the disposition of those articles which it introduces,
so that they may become mingled with the common mass of property
within the territory entered.
Gibbons v. Ogden, 9 Wheat. 1;
Brown v.
Maryland, 12 Wheat. 419."
"And while, by virtue of its jurisdiction over persons and
property within its limits, a state may provide for the security of
the lives, limbs, health, and comfort of persons and the protection
of property so situated, yet a subject matter which has been
confided exclusively to Congress by the Constitution is not within
the jurisdiction of the police power of the state unless placed
there by congressional action."
And in the still later case of
Crutcher v. Kentucky,
141 U. S. 47,
141 U. S. 59,
Mr. Justice Bradley referred to the matter in these words:
"But the main argument in support of the decision of the Court
of Appeals is that the act in question is essentially a regulation
made in the fair exercise of the police power of the state. But it
does not follow that everything which the legislature of a state
may deem essential for the good order of society and the wellbeing
of its citizens can be set up against the exclusive power of
Congress to regulate the operations of foreign and interstate
commerce."
So in the case of
Minnesota v. Barber, 136 U.
S. 313, in which a law of the State of Minnesota --
ostensibly a law for inspection of meats -- was declared
unconstitutional, the Court distinguished in the opinion by MR.
JUSTICE HARLAN between that which is mere inspection and in the
legitimate exercise of the police power, and that which, under the
guise of inspection, is a direct burden upon and obstruction to
interstate commerce. Very similar to this was the case of
Brimmer v. Rebman, 138 U. S. 78, in
which also an inspection statute of the State of Virginia was set
aside for the same reason.
Because a license may be required in the exercise of the police
power, it does not follow that every license rests for its validity
upon such police power. A state may legitimately make a license for
the privilege of doing a business one means of taxation, and that
such was the purpose of this ordinance is
Page 153 U. S. 302
obvious not merely from the fact that in the title it is
declared to be for "general revenue purposes," but also from the
further fact that, so far as we are informed by any quotations from
or references to any part of the ordinance, there is no provision
for any supervision, control, or regulation of any business for
which by the ordinance a license is required. In other words, so
far as this record discloses, this ordinance sought simply to make
the various classes of business named therein pay a certain tax for
the general revenue of the city.
Even if it be that we are concluded by the opinion of the
supreme court of the state that this ordinance was enacted in the
exercise of the police power, we are still confronted with the
difficult question as to how far an act held to be a police
regulation, but which in fact affects interstate commerce, can be
sustained. It is undoubtedly true that there are many police
regulations which do affect interstate commerce, but which have
been and will be sustained as clearly within the power of the
state; but we think it must be considered, in view of a long line
of decisions, that it is settled that nothing which is a direct
burden upon interstate commerce can be imposed by the state without
the assent of Congress, and that the silence of Congress in respect
to any matter of interstate commerce is equivalent to a declaration
on its part that it should be absolutely free.
That this license tax is a direct burden on interstate commerce
is not open to question. In the early and leading case of
Brown v.
Maryland, 12 Wheat. 419,
25 U. S. 444,
in which a state law requiring an importer to take out a license
and pay $50 before he should be permitted to sell a package of
imported goods was adjudged in conflict with the commerce clause in
the national Constitution, Chief Justice Marshall said:
"But if it should be proved that a duty on the article itself
would be repugnant to the Constitution, it is still argued that
this is not a tax upon the article, but on the person. The state,
it is said, may tax occupations, and this is nothing more."
"It is impossible to conceal from ourselves that this is varying
the form without varying the substance. It is treating a
prohibition which is general as if it were confined to a
particular
Page 153 U. S. 303
mode of doing the forbidden thing. All must perceive that a tax
on the sale of an article imported only for sale is a tax on the
article itself. . . . So a tax on the occupation of an importer is
in like manner a tax on importation. It must add to the price of
the article, and be paid by the consumer or by the importer
himself, in like manner as a direct duty on the article itself
would be made."
In
Welton v. Missouri, 91 U. S.
275,
91 U. S. 278,
MR. JUSTICE FIELD said:
"Where the business or occupation consists in the sale of goods,
the license tax required for its pursuit is in effect a tax upon
the goods themselves."
In
Leloup v. Mobile, 127 U. S. 640,
127 U. S. 645,
are these words from Mr. Justice Bradley:
"Of course, the exaction of a license tax as a condition of
doing any particular business is a tax on the occupation, and a tax
on the occupation of doing a business is surely a tax on the
business."
It is clear, therefore, that this license tax is not a mere
police regulation, simply inconveniencing one engaged in interstate
commerce, and so only indirectly affecting the business, but is a
direct charge and burden upon that business, and if a state may
lawfully exact it, it may increase the amount of the exaction until
all interstate commerce in this mode ceases to be possible. And
notwithstanding the fact that the regulation of interstate commerce
is committed by the Constitution to the United States, the state is
enabled to say that it shall not be carried on in this way, and to
that extent to regulate it.
These questions of interference by state regulations with
interstate commerce have been frequently before this Court, and it
may not be unwise to examine a few of them.
Welton v.
Missouri, 91 U. S. 275,
presented these facts: Welton was indicted and convicted for acting
as a peddler under a statute defining a peddler to be one "going
from place to place to sell" goods not the growth, produce, or
manufacture of the state, and prohibiting anyone from peddling
without a license. The conviction was set aside by this Court.
Page 153 U. S. 304
It is true that the case turned largely upon the fact of
discrimination between products of other states and those of
Missouri, but nevertheless the decision is an adjudication that the
imposition of a license tax on the peddling of goods is a
regulation of commerce.
Robbins v. Shelby Taxing District, 120 U.
S. 489, was a case closely in point. Robbins was engaged
in soliciting in the City of Memphis, Tennessee, the sales of goods
for a Cincinnati firm, exhibiting samples for the purpose of
effecting such sales, his employment being that which is usually
denominated that of a drummer. This business was declared by a
statute of Tennessee to be a privilege for which a license tax was
required. Robbins was convicted of a violation of that statute. The
statute made no discrimination between those who represented
business houses out of the state and those representing like houses
within the state. There was therefore no element of discrimination
in the case, but nevertheless the conviction was set aside by this
Court on the ground that whatever the state might see fit to enact
with reference to a license tax upon those who acted as drummers
for houses within the state, it could not impose upon those who
acted as drummers for business houses outside of the state (and who
were therefore engaged in interstate commerce) any burden by way of
a license tax. The opinion by Mr. Justice Bradley is elaborate, and
enters fully into a discussion of the question, citing many
authorities. It affirms in the strongest language the exclusive
power of Congress over interstate commerce; that its failure to
make express regulations indicates its will that the subject shall
be left free from any restrictions or impositions, and that,
whatever may be the extent to which the police power of the state
can go, it cannot go so far as to uphold any regulations directly
affecting interstate commerce.
In the case of
Leloup v. Mobile, 127 U.
S. 640, a license tax sought to be imposed by the state
upon a telegraph company engaged in interstate commerce was
declared beyond the powers of the state.
Asher v. Texas, 128 U. S. 129. In
that case, a statute requiring from "every commercial traveler,
drummer, salesman,
Page 153 U. S. 305
or solicitor of trade, by sample or otherwise, an annual
occupation tax of $35" was declared inoperative so far as it
affected one soliciting orders for a business house in another
state, and the case of
Robbins v. Shelby Taxing District
was expressly reaffirmed.
The same doctrine was applied in
Stoutenburgh v.
Hennick, 129 U. S. 141, to
the case of an agent of a Maryland business house soliciting orders
in the District of Columbia without having taken out a license
there, as required by an act of the Legislative Assembly of the
District of Columbia.
In
Lyng v. Michigan, 135 U. S. 161,
135 U. S. 166,
it was said:
"We have repeatedly held that no state has the right to lay a
tax on interstate commerce in any form, whether by way of duties
laid on the transportation of the subjects of that commerce, or on
the receipts derived from that transportation, or on the occupation
or business of carrying it on, for the reason that such taxation is
a burden on that commerce, and amounts to a regulation of it, which
belongs solely to Congress."
In
McCall v. California, 136 U.
S. 104,
136 U. S.
111,it appeared that McCall was an agent in San
Francisco, California, engaged in soliciting business for an
eastern railroad corporation, but not engaged in selling tickets
for that company or receiving or paying out money on its account;
yet it was held that he was engaged in interstate commerce, and the
license tax imposed upon him for the privilege of doing such
business was unconstitutional. Mr. Justice Lamar, reviewing the
prior cases and replying to the objection that this only indirectly
affected the commerce of the road, said:
"The test is was this business a part of the commerce of the
road? Did it assist, or was it carried on with the purpose to
assist, in increasing the amount of passenger traffic on the road?
If it did, the power to tax it involves the lessening of the
commerce of the road to an extent commensurate with the amount of
business done by the agent."
In
Crutcher v. Kentucky, 141 U. S.
47,
141 U. S. 61, an
act of the State of Kentucky which forbade the agent of an express
company not incorporated by the laws of that state from carrying on
business without first obtaining a license from the
Page 153 U. S. 306
state, and, as preliminary thereto, that he should satisfy the
auditor of the state that the company he represented was possessed
of an actual capital of at least $150,000, was held to be a
regulation of commerce, and invalid. Mr. Justice Bradley, speaking
for the Court, observed:
"The character of police regulation claimed for the requirements
of the statute in question is certainly not such as to give them a
controlling force over the regulations of interstate commerce which
may have been expressly or impliedly adopted by Congress, or such
as to exempt them from nullity when repugnant to the exclusive
power given to Congress in relation to that commerce. This is
abundantly shown by the decisions to which we have already
referred, which are clear to the effect that neither licenses nor
indirect taxation of any kind, nor any system of state regulation,
can be imposed upon interstate any more than upon foreign commerce,
and that all acts of legislation producing any such result are to
that extent unconstitutional and void."
Within the reasoning of these cases, it must be held that the
license tax imposed upon the defendant was a direct burden on
interstate commerce, and was therefore beyond the power of the
state.
The case of
Ficklen v. Shelby County, 145 U. S.
1, is no departure from the rule of decision so firmly
established by the prior cases. At least no departure was intended,
though, as shown by the division in the Court and by the dissenting
opinion of MR. JUSTICE HARLAN, the case was near the boundary line
of the state's power. In that case, the plaintiffs were in a
general commission business, not acting for any particular firm
within or without the state. Of the power of a state to impose a
license tax upon such a general business there can be no question.
The license required by the statute was $50 per annum, plus .10 on
every $100 of capital invested, or, if no capital was invested, 2
1/2 percent on the gross yearly commissions, and at the time of
taking out the license, the licensees were required to give bond to
make return and pay such 2 1/2 percent at the end of the year. The
plaintiffs, for the year 1887, paid each the sum of $50, and,
having no capital, executed
Page 153 U. S. 307
bonds for the return and payment of the 2 1/2 percent. At the
end of the year 1887, they failed to make such return and payment,
and the authorities refused to issue new licenses for the
succeeding year until that was done. Plaintiffs' contention was
that, as to one of them all, and as to the others most, of their
commissions were received on sales of goods forwarded by
nonresident parties. On that ground, they refused to perform the
stipulations of their bonds. It was held that the tax was an
entirety, and was not affected by the variable and adventitious
results of business from year to year. It could hardly be contended
that if the license tax exacted in advance for the privilege of
engaging in such business was a fixed sum, a party paying the tax
could, on a failure to secure and do any business, recover the tax
so paid, for the tax is not for the business done, but for the
privilege of engaging in business. So when the plaintiffs in that
case applied for their licenses at the beginning of the year, they
assumed the whole liability imposed by the state. That all of it
was not paid at once did not affect the measure of liability.
Suppose the tax, a fixed sum, had been payable one-half at the
commencement and the other half at the close of the year, would it
be thought that, having paid the first half at the commencement of
the year, they could resist payment of the second half on the
ground that half of their commissions were received on goods
shipped from outside the state? In other words, the tax imposed was
for the privilege of doing a general commission business within the
state, and whatever were the results pecuniarily to the licensees
or the manner in which they carried on business, the fact remained
unchanged that the state had, for a stipulated price, granted them
this privilege. It was thought by a majority of the Court that to
release them from the obligations of their bonds on account of the
accidental results of the year's business was refining too much,
and that the plaintiffs who had sought the privilege of engaging in
a general business should be bound by the contracts which they had
made with the state therefor. In the opinion in that case, by THE
CHIEF JUSTICE, the authorities which are referred to in this
opinion were cited, and the general rule is
Page 153 U. S. 308
announced as is here stated. We only refer thus at length to
that case to show the distinction between it and this case, and to
notice that in the opinion was reaffirmed the proposition that
"no state can levy a tax on interstate commerce in any form,
whether by way of duties laid on the transportation of the subjects
of that commerce, or on the receipts derived from that
transportation, or on the occupation or business of carrying it
on."
For these reasons, the judgment of the Supreme Court of the
State of Pennsylvania is
Reversed, and the case remanded for further proceedings in
conformity with this opinion.