A statute of Pennsylvania imposing a tax upon the tolls received
by the New York, Lake Erie and Western Railroad Company from other
railroad companies, for the use by them respectively of so much of
its railroad and tracks as lies in the State of Pennsylvania, for
the passage over them of trains owned and hauled by such companies
respectively, is a valid tax, and is not in conflict with the
interstate commerce clause of the Constitution when applied to
goods so transported from without the State of Pennsylvania.
The New York, Lake Erie and Western Railroad Company, a
corporation of the State of New York doing business in the State of
Pennsylvania, appealed from a settlement of account made by the
auditor general of the latter state, assessing
Page 158 U. S. 432
certain taxes, to the Court of Common Pleas of Dauphin County,
Pennsylvania. The case was heard by agreement without a jury, the
court finding both the law and the facts.
The following were the finding of fact:
"1. The defendant is a corporation of the State of New York,
engaged in the business of transporting freight and passengers. Its
railroad runs through the County of Susquehanna in this state."
"2. It leases and operates as one of its branches a railroad,
lying wholly within this state, known as the 'Jefferson Branch,'
which extends from Carbondale to a connection with the defendant's
main line in said County of Susquehanna. At Carbondale, the
Jefferson Branch connects with the railroad of the Delaware and
Hudson Canal Company, a corporation engaged in mining and
transporting coal, and also in transporting freight and
passengers."
"3. The canal company makes use of the Jefferson Branch in the
manner, for the purposes, and upon the terms specified in an
agreement made April 7, 1885. This agreement is made a part of this
finding."
"4. Under the eighth clause of said agreement, the canal company
paid to the defendant, for the transportation of coal and
merchandise during the six months ending June 30, 1889, the sum of
$69,462.11. Of this amount, $69,100 was in respect of coal and
merchandise transported by the canal company over the said
Jefferson Branch in transit to points in other states; the said
coal and merchandise, when taken upon the cars and upon said
Jefferson Branch, being destined and intended for shipment by
continuous transportation upon a single waybill from points in
Pennsylvania to points in other states, and having been actually so
transported to, and delivered at, points in other states, and
$362.11 was paid in respect of coal and merchandise taken up and
put down within the State of Pennsylvania. The canal company has
paid to the state a tax upon its gross receipts for the
transportation of the coal and merchandise in respect of which it
paid to the defendant the said sum of $362.11."
"5. Under the sixteenth clause of said agreement, the canal
Page 158 U. S. 433
company paid to the defendant the sum of $2,000, of which $1,000
was made up of half fares collected from local passengers taken up
and put down within the State of Pennsylvania, and $1,000 was in
respect of passengers carried interstate by continuous
transportation into, out of, or through the State of
Pennsylvania."
"6. The defendant also leases and operates as one of its
branches a railroad known as the 'Buffalo, Bradford and Pittsburgh
Branch,' extending from Buttsville or Gilesville, Pennsylvania, to
a connection with defendant's main line at Carrollton, in the State
of New York. At Crawford Junction, Pennsylvania, a point on this
branch, the railroad of the Buffalo, Rochester and Pittsburgh
Railway Company (formerly the Rochester and Pittsburgh Railroad
Company) connects with said branch. This last-mentioned corporation
is engaged in the transportation of freight and passengers."
"7. The Buffalo, Rochester and Pittsburgh Railway Company makes
use of part of the Buffalo, Bradford and Pittsburgh Branch in the
manner, for the purpose, and upon the terms specified in an
agreement made October 20, 1882, which agreement is made a part of
this finding. The part used lies partly in this state and partly in
the State of New York."
"8. Under this agreement, the amount paid to the defendant by
the Buffalo, Rochester and Pittsburgh Railway Company during the
six months ending June 30, 1889, was $2,700, being one semiannual
payment. For the same period, the Buffalo, Rochester and Pittsburgh
Railway Company paid to the state a tax upon its gross receipts, so
far as the same were derived from transportation between points
both of which are within the State of Pennsylvania."
"9. This settlement taxes the entire gross receipts of the
defendant from its business in Pennsylvania for the six months
ending June 30, 1889, under § 7 of the act of 1879, and includes
therein the sums paid by the canal company and by the Buffalo,
Rochester and Pittsburgh Railway Company."
"10. On February 10, 1890, the defendant paid to the state the
whole amount demanded, except the tax upon said sums of $71,402.11
and $2,700. "
Page 158 U. S. 434
The conclusions of law were as follows:
"1. The rentals paid to the defendant by the canal company and
by the Buffalo, Rochester and Pittsburgh Railway Company are
'receipts for tolls,' within the meaning of section 7 of the act of
1879."
"2. The taxation of such receipts does not offend against
article 9, section 1, of the Pennsylvania Constitution, or against
the commerce clause of the federal Constitution."
"3. Such taxation is not, in the case before us, double
taxation."
"4. The toll received by the defendant from the Buffalo,
Rochester and Pittsburgh Railway Company should be apportioned, and
only so much thereof be taxed as represents the sum paid for the
use of that part of defendant's branch which lies within the
state."
The sum due the commonwealth is as follows:
Tax eight-tenths of 1 percent upon
$71,402.11, paid by the Delaware and
Hudson Canal Company . . . . . . . . . . . . $571.69
And upon $1,350 paid by the Buffalo,
Rochester and Pittsburgh Railway Company . . 10.60
Interest . . . . . . . . . . . . . . . . . . . 31.63
Attorney general's commission. . . . . . . . . 29.11
-------
Total . . . . . . . . . . . . . . . . . . $643.03
For which amount judgment is directed to be entered.
Upon exception, the court made an additional finding as
follows:
"That portion of defendant's railroad known as the 'Buffalo,
Bradford and Pittsburgh Branch,' extending from Buttsville or
Gilesville, Pennsylvania, to a connection with defendant's main
line at Carrollton, in the State of New York, as shown in findings
of fact No. 6, is used by the Buffalo, Rochester and Pittsburgh
Railway Company for the purposes of interstate transportation
exclusively."
Judgment was entered in pursuance of the findings of fact and
law, from which an appeal was taken to the Supreme Court of
Pennsylvania, and the judgment was by that court
Page 158 U. S. 435
affirmed, and to that judgment a writ of error was used out from
the Supreme Court of the United States.
MR. JUSTICE SHIRAS, after stating the facts in the foregoing
language, delivered the opinion of the Court.
The Legislature of Pennsylvania, by a revenue statute approved
June 7, 1879, enacted that certain enumerated classes of companies,
including railroad companies, whether incorporated by or under any
law of the commonwealth or whether incorporated by any other state,
doing business in the commonwealth, and owning, operating, or
leasing to or from any other corporation any railroad, canal,
pipeline, slack-water navigation, or street-passenger railway, or
other device for the transportation of freight or passengers, shall
pay to the state treasurer, for the use of the commonwealth, a tax
of eight-tenths of one percentum upon the gross receipts of said
company for
tolls and transportation.
In the leading case of
Boyle v. Philadelphia & Reading
Railroad Co., 54 Penn.St. 341, the Supreme Court of
Pennsylvania, through Mr. Justice Strong, then a justice of that
court, thus defined the term "tolls," as used in the tax laws of
that state:
"Toll is a tribute or custom paid for passage, not for carriage;
always something taken for a liberty or privilege, not for a
service, and such is the common understanding of the word. Nobody
supposes that tolls taken by a turnpike or canal company include
charges for transportation, or that they are anything more than an
excise demanded and paid for the privilege of using the way."
This definition was subsequently approved in the case of
Pennsylvania Railroad v. Sly, 65 Penn.St. 205, and was
followed by the trial court and the Supreme Court of Pennsylvania
in the present case. A construction or meaning attributed to the
terms of a state statute by the courts of
Page 158 U. S. 436
such state will, of course, be adopted by this Court when called
upon to decide questions arising under such legislation, and we
shall accordingly assume in the present case that the moneys
received by the New York, Lake Erie and Western Railroad Company
from the Delaware and Hudson Canal Company and from the Rochester
and Pittsburgh Railroad Company for their use of the railroad of
the former company were
tolls within the meaning of the
statute of 1879.
It was found as a fact by the court below that the New York
company leased and operated as one of its branches a railroad lying
wholly within the State of Pennsylvania, and that under an
agreement between it and the Delaware and Hudson Canal Company, the
latter paid the former, for the use of its railroad during the six
months ending June 30, 1889, the sum of $69,462.11. This amount
became payable under the eighth section of said agreement, which
was in the following terms:
"The canal company shall pay to the railroad company trackage on
the Jefferson Branch of the New York, Lake Erie and Western
Railroad to the amount of one-fourth of one cent per ton per mile,
but the total amount in any one year shall not be less than
$120,000, and the same shall be payable monthly."
The canal company furnished its own cars and locomotives, and
the moneys paid to the New York company were tolls or rentals for
the use of its railroad. Of the amount paid as aforesaid, the sum
of $69,100 was in respect of coal and merchandise destined and
transported to points in other states, and $36,210 was paid in
respect of coal and merchandise taken up and put down within the
State of Pennsylvania.
The precise question, then, for our solution is whether the
State of Pennsylvania can validly impose taxes on tolls paid by one
company to another for the use of its railroad where the company
paying the tolls is engaged in the transportation of merchandise
from points within the state to points beyond.
It is of course obvious that what is objected to is not the
payment of the tolls, for they arise by virtue of the contract
between the companies, but the imposition of taxes thereon.
Page 158 U. S. 437
It is contended that such taxes tend to increase the rents or
tolls demanded and received by the company owning the road, and
thus constitute a burden upon transportation and commerce between
the states.
In support of this contention, numerous decisions of this Court
are cited in which it has been held that state statutes which levy
taxes upon gross receipts of railroads for the carriage of freights
and passengers into, out of, or through the state put a burden upon
commerce among the states, and are therefore void.
It is needless to review the cases cited, because we regard the
proposition they are quoted to sustain as thoroughly established;
but is the principle of those cases applicable to this?
Undoubtedly state taxation of interstate commerce, directly
placed upon the articles or subjects of such commerce or upon the
necessary means of their transportation, may be used to restrict or
regulate such commerce, and more than once this Court has been
obliged to pronounce invalid state legislation respecting such
matters. On the other hand, we have frequently had occasion to show
that the existence of federal supervision over interstate commerce,
and the consequent obligation upon the federal courts to protect
that right of control from encroachment on the part of the states,
are not inconsistent with the power of each state to control its
own internal commerce and to tax the franchises, property, or
business of its own corporations engaged in such commerce, nor with
its power to tax foreign corporations on account of their property
within the state.
Owing to the paramount necessity of maintaining untrammeled
freedom of commercial intercourse between the citizens of the
different states and to the fact that so frequently transportation
and telegraph companies transact both local and interstate
business, it has been found difficult to clearly define the line
where the state and the federal powers meet. That difficulty has
been chiefly felt by this Court in dealing with questions of
taxation, and is shown by the not infrequent dissents by members of
the Court when the effort has been
Page 158 U. S. 438
made to formulate a general statement of the law applicable to
such questions.
It is unnecessary at this time to again review the cases, or to
undertake to show that while the facts and circumstances that
distinguish one case from another may have led to some difference
in the mode of stating the law, there is yet a substantial
uniformity in the decisions. It is sufficient for our present
purposes to refer to the recent case of
Postal Telegraph
Company v. Adams, 155 U. S. 688,
where many of the cases were considered and where the general
results reached are thus stated:
"It is settled that where, by way of duties laid on the
transportation of the subjects of interstate commerce or on the
receipts derived therefrom or on the occupation or business of
carrying it on, a tax is levied by a state on interstate commerce,
such taxation amounts to a regulation of such commerce, and cannot
be sustained. But property in a state belonging to a corporation,
whether foreign or domestic, engaged in foreign or interstate
commerce, may be taxed, or a tax may be imposed on the corporation
on account of its property within a state, and may take the form of
a tax for the privilege of exercising its franchises within the
state if the ascertainment of the amount is made dependent in fact
on the value of its property situated within the state (the
exaction therefore not being susceptible of exceeding the sum which
might be leviable directly thereon) and if payment be not made a
condition precedent to the right to carry on the business, but its
enforcement left to the ordinary means devised for the collection
of taxes. The corporation is thus made to bear its proper
proportion of the burdens of the government under whose protection
it conducts its operations, while interstate commerce is not, in
itself, subjected to restraint or impediment."
Coming to apply these settled principles to the case in hand, we
find no difficulty.
The tax complained of is not laid on the transportation of the
subjects of interstate commerce, or on receipts derived therefrom,
or on the occupation or business of carrying it on.
Page 158 U. S. 439
It is a tax laid upon the corporation on account of its property
in a railroad, and which tax is measured by a reference to the
tolls received. The state has not sought to interfere with the
agreement between the contracting parties in the matter of
establishing the tolls. Their power to fix the terms upon which the
one company may grant to the other the right to use its road is not
denied or in any way controlled.
It is argued that the imposition of a tax on tolls might lead to
increasing them in an effort to throw their burden on the carrying
company. Such a result is merely conjectural, and at all events too
remote and indirect to be an interference with interstate commerce.
The interference with the commercial power must be direct, and not
the mere incidental effect of the requirement of the usual
proportional contribution to public maintenance.
One of the assignments of error is based on the finding that
"that portion of defendant's railroad known as the 'Buffalo,
Bradford and Pittsburgh Branch,' extending from Buttsville or
Gilesville, Pennsylvania, to a connection with defendant's main
line at Carrollton, in the State of New York, as shown in findings
of fact No. 6, is used by the Buffalo, Rochester and Pittsburgh
Rail way Company for purposes of interstate transportation
exclusively,"
and it is claimed that the court erred in apportioning the tax
according to the portions of the railroad within and without the
state.
We do not understand that any objection is made as to the
fairness of the apportionment, but the claim is that, as all the
business done over the road by the lessee party was interstate
commerce, it was not competent for the state to tax the tolls
received by the company which owned the road. Thus understood, the
legal question is the same with that which arose under the contract
between the defendant company and the Delaware and Hudson Canal
Company, and which is hereinbefore considered.
The fact that the same corporation which owns the track in
Pennsylvania owns likewise a track in New York does not deprive
such company of the right to receive tolls for the use of that part
of its road that lies in Pennsylvania, nor the state
Page 158 U. S. 440
of its right to tax such portion of the tolls, and this is what
the court below decided.
In
Maine v. Grand Trunk Railway, 142 U.
S. 217, it was held that a state statute which requires
every corporation, person, or association operating a railroad
within the state to pay an annual tax, to be determined by the
amount of its gross transportation receipts, and further provides
that, when applied to a railroad lying partly within and partly
without the state, or to one operated as a part of a line or system
extending beyond the state, the tax shall be equal to the
proportion of the gross receipts in the state, to be ascertained in
the manner provided by the statute, does not conflict with the
Constitution of the United States, and that the tax thereby imposed
upon a foreign corporation operating a line of railway, partly
within and partly without the state, is one within the power of the
state to levy.
So in the case of
Pittsburgh &c. Railway Co. v.
Backus, 154 U. S. 421, the
validity of a state tax law whereby a railroad which traversed
several states was valued for the purposes of taxation by taking
that part of the value of the entire road which was measured by the
proportion of the length of the particular part in that state to
that of the whole road was upheld.
Our conclusion is that the federal questions involved in the
case were properly decided by the court below, and its judgment is
accordingly
Affirmed.
MR. JUSTICE HARLAN dissents.
