The decision of the Supreme Court of Ohio entertaining
jurisdiction of this case, and delivering a considered opinion,
State v. Jones, 61 Ohio St.
Page 165 U. S. 195
492, adjudging the Nichols Law to be valid under the
constitution of that state, will not be reviewed by this Court.
Although the transportation of the subjects of interstate
commerce, or the receipts received therefrom, or the occupation or
business of carrying it on, cannot be directly subjected to state
taxation, yet property belonging to corporations or companies
engaged in such commerce may be, and whatever the particular form
of the exaction, if it is essentially only property taxation, it
will not be considered as falling within the inhibition of the
Constitution.
The property of corporations engaged in interstate commerce,
situated in the several states through which their lines or
business extends, may be valued as a unit for the purposes of
taxation, taking into considerate tion the uses to which it is put
and all the elements making up aggregate value, and a proportion of
the whole fairly and properly ascertained may be taxed by the
particular state without violating any federal restriction.
While there is an undoubted distinction between the property of
railroad and telegraph companies and that of express companies,
there is the same unity in the use of the entire property for the
specific purposes, and there are the same elements of value,
arising from such use.
The classification of express companies with railroad and
telegraph companies as subject to the unit rule does not deny the
equal protection of the laws; as that provision in the Fourteenth
Amendment was not intended to prevent a state from adjusting its
system of taxation in all proper and reasonable ways, and was not
intended to compel a state to adopt an iron rule of equal
taxation.
The statute of the State of Ohio of April 27, 1893, 90 Laws Ohio
330 (amended May 10, 1894, 91 Laws Ohio, 220) created a board of
appraisers and assessors, and required each telegraph, telephone
and express company doing business within the state to make returns
of the number of shares of its capital, the par value and market
value thereof, its entire real and personal property, and where
located and the value thereof as assessed for taxation, its gross
receipts for the year of business wherever done and of the business
done in the State of Ohio, giving the receipts of each office in
the state, and the whole length of the line of rail and water
routes over which it did business within and without the state. It
required the board of assessors to
Page 165 U. S. 196
"proceed to ascertain and assess the value of the property of
said express, telegraph, and telephone companies in Ohio, and in
determining the value of the property of said companies in this
state, to be taxed within the state and assessed as herein
provided, said board shall be guided by the value of said property
as determined by the value of the entire capital stock of said
companies, and such other evidence and rules as will enable said
board to arrive at the true value in money of the entire property
of said companies within the State of Ohio in the proportion which
the same bears to the entire property of said companies, as
determined by the value of the capital stock thereof, and the other
evidence and rules as aforesaid."
Held:
(1) That, assuming that the proportion of capital employed in
each of the several states through which such a company conducts
its operations has been fairly ascertained, while taxation thereon
or determined with reference thereto may be said in some sense to
fall on the business of the company, it does so only indirectly,
and that the taxation is essentially a property tax, and, as such,
not an interference with interstate commerce.
(2) That the property so taxed has its actual situs in the
state, and is therefore subject to its jurisdiction, and that the
distribution among the several counties is a matter of regulation
by the state legislature.
(3) That this was not taking of property without due process of
law, either by reason of its assessment as within the jurisdiction
of the taxing authorities or of its classification as subject to
the unit rule.
(4) That the valuation by the assessors cannot be overthrown
simply by showing that it was otherwise than as determined by
them.
These are cases involving the constitutionality of certain laws
of the state of Ohio providing for the taxation of telegraph,
telephone, and express companies, and the validity of assessments
of express companies thereunder.
The General Assembly of Ohio passed, April 27, 1893, an act to
amend and supplement §§ 2777, 2778, 2779, and 2780 of the Revised
Statutes of that state (commonly styled the "Nichols Law"), which
was amended May 10, 1894. The law created a State Board of
Appraisers and Assessors, consisting of the Auditor of state,
Treasurer of state, and Attorney General, which was charged with
the duty of assessing the property in Ohio of telegraph, telephone,
and express companies. By the act as amended, between the first and
thirty-first days of May annually, each telegraph, telephone, and
express company doing business in Ohio was
Page 165 U. S. 197
required to file a return with the Auditor of the state setting
forth, among other things, the number of shares of its capital
stock; the par value and market value (or, if there be no market
value, then the actual value) of its shares at the date of the
return; a statement in detail of the entire real and personal
property of said companies, and where located, and the value
thereof as assessed for taxation. Telegraph and telephone companies
were required to return also the whole length of their lines, and
the length of so much of their lines as is without and is within
the state of Ohio, including the lines controlled and used, under
lease or otherwise. Express companies were required to include in
the return a statement of their entire gross receipts, from
whatever source derived, for the year ending the first day of May,
of business wherever done, and of the business done in the State of
Ohio, giving the receipts of each office in the state; also, the
whole length of the lines of rail and water routes over which the
companies did business, within and without the state. Provision was
made in the law for the organization of the board, for the
appointing of one of its members as secretary, and the keeping of
full minutes of its proceedings. The board was required to meet in
the month of June, and assess the value of the property of these
companies in Ohio. The rule to be followed by the board in making
the assessment was that,
"in determining the value of the property of said companies in
this state to be taxed within the state and assessed as herein
provided, said board shall be guided by the value of said property
as determined by the value of the entire capital stock of said
companies, and such other evidence and rules as will enable said
board to arrive at the true value in money of the entire property
of said companies within the State of Ohio, in the proportion which
the same bears to the entire property of said companies, as
determined by the value of the capital stock thereof, and the other
evidence and rule as aforesaid."
As to telegraph and telephone companies, the board was required
to apportion the valuation among the several counties through which
the lines ran in the proportion that the length of the lines in the
respective counties bore to the
Page 165 U. S. 198
entire length in the state. In the case of express companies,
the apportionment was to be made among the several counties in
which they did business in the proportion that the gross receipts
in each county bore to the gross receipts in the state.
The amount thus apportioned was to be certified to the county
auditor, and placed by him on the duplicate, "to be assessed, and
the taxes thereon collected the same as taxes assessed and
collected on other personal property," the rate of taxation to be
the same as that on other property in the local taxing
district.
The valuation of all the real estate of the companies situated
in Ohio was required to be deducted from total valuation as fixed
by the board.
Provisions were made for hearings, and for the correction of
erroneous and excessive valuations, as follows:
"At any time after the meeting of the board on the first Monday
in June and before the assessment of the property of any company is
determined, any company or person interested shall have the right,
on written application, to appear before the board and be heard in
the matter of the valuation of the property of any company for
taxation. After the assessment of the property of any company for
taxation by the board, and before the certification by the auditor
of state of the apportioned valuation to the several counties, as
provided in section 2780, the board may, on the application of any
interested person or company or on its own motion, correct the
assessment or valuation of the property of any company in such
manner as will in its judgment make the valuation thereof just and
equal. The provisions of section 167 of the Revised Statutes shall
apply to the correction of any error or overvaluation in the
assessment of property for taxation by the state board of
appraisers and assessors, and to the remission of taxes and
penalties illegally assessed thereon."
Section 167 of the Revised Statutes, referred to, reads
thus:
"SECTION 167. He [the auditor of state] may remit such taxes and
penalties thereon as he ascertains to have been illegally assessed,
and such penalties as have accrued or may
Page 165 U. S. 199
accrue in consequence of the negligence or error of any officer
required to do any duty relating to the assessment of property for
taxation, or the levy or collection of taxes, and he may from time
to time correct any error in any assessment of property for
taxation or in the duplicate of taxes in any county, provided that
when the amount to be remitted in any one case shall exceed one
hundred dollars, he shall proceed to the office of the governor and
take to his assistance the governor and attorney general, and in
all such cases may remit no more than shall be agreed upon by a
majority of the officers named."
Instead of distributing the valuation as under the act of 1893,
the state board, by the act of 1894, was to certify it to the
auditor of state, whose duty it was made to apportion and certify
the valuation among the counties.
In No. 337, the taxes for 1893 were involved; and in Nos. 338,
339, and 340, the taxes for 1894. These are appeals from the
Circuit Court of Appeals for the Sixth circuit. In Nos. 398, 399,
and 400, the taxes for 1895 were involved. These are appeals from
decrees of the Circuit Court for the Southern District of Ohio.
The original suits were brought in the circuit court to enjoin
the certification of the apportioned valuations to the county
auditors, as to 1893, against the state board; as to 1894 and 1895,
against the auditor of state.
The circuit court (Taft, J.), on April 23, 1894, after a
preliminary opinion, filed opinions in the case of
Western
Union Telegraph Company against the State Board, 61 F. 449,
and in No. 337,
Adams Express Co. v. Poe, 61 F. 470,
holding the Nichols Law to be invalid under the Constitution of
Ohio. On the first of May following, the Supreme Court of Ohio
decided that the Nichols Law was constitutional and valid.
State v. Jones, 51 Ohio St. 492.
Thereupon the circuit court reversed its ruling and accepted the
decision of the supreme court of the state, and Judge Taft filed a
further opinion holding that the assessments were valid. 64 F.
9.
In all the cases, the final decrees of the circuit court
dissolved
Page 165 U. S. 200
the temporary injunctions which had been granted, sustained
demurrers, and dismissed the bills.
The circuit court of appeals affirmed the cases taken to it on
appeal. 69 F. 546; 69 F. 557.
The proceedings of the state board in making the assessments for
1895, and certain correspondence, are set forth in the records as
if exhibits to the bills. The action of the board, relative to
express companies, is thus given:
"The board having given each express company doing business in
Ohio, whose property in Ohio is hereinafter assessed, opportunity
to appear and be heard personally by the board, and having heard
all companies which desired to be heard through their officers,
agents, or counsel, and having carefully considered the facts set
out in the returns, schedules, and supplementary statements of such
companies, and all evidences of value and all matters bearing upon
the question of the value of the property of the companies, which,
in the judgment of the board, would assist it in arriving at the
true value, in money, of the entire property of each of said
companies within the State of Ohio, on motion, the state board of
appraisers and assessors unanimously fix and determine the values
of the property of express companies hereinafter named in Ohio, to
be taxed therein, at the amounts set out in the following
table:"
The Adams Express Company . . . . . . . . $533,095.80
The American Express Company. . . . . . . 499,373.60
The United States Express Company . . . . 488,264.70
This valuation was made July 24, 1895. On the second of August,
counsel for the companies wrote the auditor requesting to be
advised of the assessments when made, in order that they might
apply for a correction. On the seventh of August, the secretary of
the board informed counsel of the assessments. On August 10,
counsel wrote, asking
"upon what calculation, if any, the apparently precise amounts
of the assessments, especially in the case of the express
companies, are based, and how the figures are arrived at."
The auditor replied for the board that
"the method pursued
Page 165 U. S. 201
by the state board of appraisers and assessors this year in
assessing the property in Ohio of the Western Union Telegraph
Company and the express companies you represent is not different
from that followed in former years, has been sustained by the
courts, and is set forth in the records of the board."
Attention was called to certain data lacking in the companies'
returns, and counsel were informed that opportunity would be
afforded for a hearing on September 2, at 10 o'clock a.m., but the
three bills involving these assessments were filed August 14, 1895.
Subsequently returns were filed, as of May 1, 1895, showing:
As to the Adams Express Company: Number of shares, 120,000.
Market value, $140 to $150. Taxable value of real estate owned in
Ohio, $25,170. Value of personal property, including moneys and
credits, owned by company in Ohio, $42,065. Total value of real
estate owned outside of Ohio, $3,005,157.52. Total value of
personal property owned outside of Ohio, $1,117,426.05. Entire
gross receipts, from whatever source, received within the state for
the year, $282,181. Whole length of lines of rail and water routes
over which the company was doing business, 29,647 miles. Length
without the state, 27,518 miles; within the state, 2,129 miles.
As to the United States Express Company: Number of shares,
100,000. Par value, $100. Market value, $40. Taxable value of real
estate owned in Ohio, $22,190. Value of personal property,
including moneys and credits, owned in Ohio, $28,438. Entire gross
receipts, from whatever source, derived within the state, $358,519.
Length of lines within the state over which the company was doing
business, 3,011 miles.
As to the American Express Company: Number of interests,
180,000. Par value, $100. Market value, $112. Taxable value of real
estate in Ohio, $58,660. Value of personal property, including
moneys and credits, in Ohio, $23,430. Total value real estate
outside of Ohio, $4,891,259. Total value of personal property
outside of Ohio, $1,661,759. Gross receipts within the state,
$275,446. Whole length of lines, 35,295 miles; length within the
state, 1,731 miles.
Page 165 U. S. 202
The companies made no return of their entire gross receipts of
business, wherever done, nor of the terms of their contracts or
arrangements for transportation.
These returns stated, and the bills repeated, that, aside from
the real estate mentioned, the companies had no property in the
State of Ohio "except certain horses, wagons, harness, trucks,
safes, and office fixtures located at different points," and that
their actual value was given. That
"the business of the company in the state consists in carrying
packages on passenger and express trains, steamboats, and stages,
in the care and custody of its employees, who accompany the
packages. The express company has no ownership of nor interest in
these means of conveyance, and simply pays to the railroad
companies and the owners of the steamboats and stage coaches for
the passage of messengers and their accompanying packages. The
horses, wagons, and trucks are used by it in the collection and
delivery of these packages. There is no peculiarity about this
property. It is of an ordinary kind, whose true value in money must
be measured by the ordinary standards, and is easily ascertained
and determined."
Each of the bills in Nos. 398, 399, and 400 alleged that the
scheme of taxation contemplated by the act,
"while professing to provide for taxation of property in the
State of Ohio, does not in fact, do so, inasmuch as it directs the
state board of appraisers, in determining the value of the property
of express companies in said state for the purpose of taxation, to
be"
"guided by the value of said property as determined by the value
of the entire capital stock of said company . . . in the proportion
which the same [
viz., the property of the companies within
the state] bears to the entire property of said companies, as
determined by the value of the capital stock thereof;"
that
"the value of the capital stock or shares of said company, and
of express companies generally, is determined not so much by the
value of the property and appliances which they use in carrying on
their business as by the skill, diligence, fidelity, and success
with which they conduct their business. Said company employs many
thousands of men, who are constantly engaged in carrying express
packages,
Page 165 U. S. 203
many of them of great value, from one part of the country to
another, and its income and the value of its shares are largely the
result of their efforts, fidelity, and integrity, and of skillful
management and supervision of the business. Said company,
furthermore, owns real and personal property of great value, aside
from the appliances of its express business, which is not held or
taxable in the State of Ohio, and some of which is not taxable at
all, all of which, however, together with the business connections
of the company, and the reputation and goodwill which it has earned
in the course of more than fifty years of public service, enter
largely into the value of its capital shares;"
that the market price of the company's shares does not
"afford any fair, reasonable, or just method of estimating the
value of its property, or fixing the basis of value for the purpose
of taxation, because the market price is speculative and variable,
depending upon financial conditions not at all connected with this
company, its business, or its property; and your orator insists
that said scheme of taxation is unfair, illegal, unjust, and
unequal, and is a regulation of and a tax upon interstate commerce,
and a taking of its property without due process of law;"
that the act, and the assessments made thereunder, are in
contravention of the Constitution of the United States, because act
provides for the assessment of, and the assessments embrace,
property not situated within the jurisdiction of the State of Ohio,
and the property of the companies is therefore taken without due
process of law; and that the scheme, as a special one, imposes an
illegal burden on interstate commerce, and denies the equal
protection of the laws.
Page 165 U. S. 218
MR. CHIEF JUSTICE FULLER, after stating the facts in the
foregoing language, delivered the opinion of the Court.
Page 165 U. S. 219
No difference material to the determination of the controversy
exists between the cases, and, as matter of convenience, the
statement refers to the amended act and the records in Nos. 398,
399, and 400.
The contention that the act in question is invalid because
repugnant to the Constitution of the State of Ohio has been
disposed of by the decision of the highest tribunal of that state
sustaining its validity.
State v. Jones, 51 Ohio St. 492.
These cases fall within no recognized exception to the general rule
that the construction by the state courts of last resort of state
constitutions and statutes will ordinarily be accepted by this
Court as controlling.
It is suggested that the decision of the Supreme Court of Ohio
should not be followed because the case in which it was announced
did not involve a genuine controversy, but was prepared for the
purpose of obtaining an adjudication, and, under the circumstances,
ought not to have been considered by that court. But it was for
that tribunal to pass on this question, and, as it entertained
jurisdiction, and delivered a considered opinion, which appears in
the official reports of the court as its judgment of the validity
of the Nichols Law under the Constitution of the State of Ohio, it
is not within our province to review its determination in that
regard.
This brings us to the only inquiry which it concerns us to
examine.
The legislation in question is claimed to be repugnant to the
Constitution of the United States because in violation of the
commerce clause of that instrument and because operating to deprive
appellants of their property without due process of law and of the
equal protection of the laws.
We assume that the assessments complained of were made in
pursuance of the definite rule or principle of appraisement
recognized and established by the Nichols Law, as construed by the
Supreme Court of Ohio, and the question is whether the law
prescribing that rule is valid under the federal constitution.
The principal contention is that the rule contravenes the
commerce clause because the assessments, while purporting to
Page 165 U. S. 220
be on the property of complainants within the state, are in fact
levied on their business, which is largely interstate commerce.
Although the transportation of the subjects of interstate
commerce, or the receipts received therefrom, or the occupation or
business of carrying it on, cannot be directly subjected to state
taxation, yet property belonging to corporations or companies
engaged in such commerce may be; and, whatever the particular form
of the exaction, if it is essentially only property taxation, it
will not be considered as falling within the inhibition of the
constitution. Corporations and companies engaged in interstate
commerce should bear their proper proportion of the burdens of the
governments under whose protection they conduct their operations,
and taxation on property, collectible by the ordinary means, does
not affect interstate commerce otherwise than incidentally, as all
business is affected by the necessity of contributing to the
support of government.
Postal Telegraph Cable Co. v.
Adams, 155 U. S. 688.
As to railroad, telegraph, and sleeping car companies, engaged
in interstate commerce, it has often been held by this Court that
their property, in the several states through which their lines or
business extended, might be valued as a unit for the purposes of
taxation, taking into consideration the uses to which it was put,
and all the elements making up aggregate value, and that a
proportion of the whole, fairly and properly ascertained, might be
taxed by the particular state without violating any federal
restriction.
Western Union Telegraph Co. v. Massachusetts,
125 U. S. 530;
Massachusetts v. Western Union Telegraph Co., 141 U. S.
40;
Maine v. Grand Trunk Railway, 142 U.
S. 217;
Pittsburgh, Cincinnati &c. Railway v.
Backus, 154 U. S. 421;
Cleveland, Cincinnati &c. Railway v. Backus,
154 U. S. 439;
Western Union Telegraph Co. v. Taggart, 163 U. S.
1;
Pullman's Palace Car Co. v. Pennsylvania,
141 U. S. 18. The
valuation was thus not confined to the wires, poles, and
instruments of the telegraph company, or the roadbed, ties, rails,
and spikes of the railroad company, or the cars of the sleeping car
company, but
Page 165 U. S. 221
included the proportionate part of the value resulting from the
combination of the means by which the business was carried on -- a
value existing to an appreciable extent throughout the entire
domain of operation. And it has been decided that a proper mode of
ascertaining the assessable value of so much of the whole property
as is situated in a particular state is, in the case of railroads,
to take that part of the value of the entire road which is measured
by the proportion of its length therein to the length of the whole,
Pittsburgh &c. Railway v. Backus, 154
U. S. 429, or taking as the basis of assessment such
proportion of the capital stock of a sleeping car company as the
number of miles of railroad over which its cars are run in a
particular state bears to the whole number of miles traversed by
them in that and other states,
Pullman's Palace Car Co. v.
Pennsylvania, 141 U. S. 18, or
such a proportion of the whole value of the capital stock of a
telegraph company as the length of its lines within a state bears
to the length of all its lines everywhere, deducting a sum equal to
the value of its real estate and machinery subject to local
taxation within the state,
Western Un. Tel. Co. v.
Taggart, 163 U. S. 1.
Doubtless there is a distinction between the property of
railroad and telegraph companies and that of express companies. The
physical unity existing in the former is lacking in the latter; but
there is the same unity in the use of the entire property for the
specific purpose, and there are the same elements of value arising
from such use.
The cars of the Pullman Company did not constitute a physical
unity, and their value as separate cars did not bear a direct
relation to the valuation which was sustained in that case. The
cars were moved by railway carriers under contract, and the
taxation of the corporation in Pennsylvania was sustained on the
theory that the whole property of the company might be regarded as
a unit plant, with a unit value, a proportionate part of which
value might be reached by the state authorities on the basis
indicated.
No more reason is perceived for limiting the valuation of the
property of express companies to horses, wagons, and furniture than
that of railroad, telegraph, and sleeping car
Page 165 U. S. 222
companies, to roadbed, rails, and ties, poles and wires, or
cars. The unit is a unit of use and management, and the horses,
wagons, safes, pouches and furniture, the contracts for
transportation facilities, and the capital necessary to carry on
the business, whether represented in tangible or intangible
property, in Ohio, possessed a value in combination, and from use
in connection with the property and capital elsewhere, which could
as rightfully be recognized in the assessment for taxation in the
instance of these companies as the others.
We repeat that while the unity which exists may not be a
physical unity, it is something more than a mere unity of
ownership. It is a unity of use not simply for the convenience or
pecuniary profit of the owner, but existing in the very necessities
of the case -- resulting from the very nature of the business.
The same party may own a manufacturing establishment in one
state and a store in another, and may make profit by operating the
two, but the work of each is separate. The value of the factory, in
itself, is not conditioned on that of the store, or vice versa, nor
is the value of the goods manufactured and sold affected thereby.
The connection between the two is merely accidental, and growing
out of the unity of ownership. But the property of an express
company, distributed through different states, is an essential
condition of the business united in a single specific use. It
constitutes but a single plant, made so by the very character and
necessities of the business.
It is this which enabled the companies represented here to
charge and receive, within the State of Ohio, for the year ending
May 1, 1895, $282,181, $358,519, and $275,446, respectively, on the
basis, according to their respective returns, of $42,065, $28,438,
and $23,430, of personal property owned in that state -- returns
which confessedly do not, however, take into account contracts for
transportation and accompanying facilities.
Considered as distinct subjects of taxation, a horse is, indeed,
a horse; a wagon, a wagon; a safe, a safe; a pouch, a pouch. But
how is it that $23,430 worth of horses, wagons, safes,
Page 165 U. S. 223
and pouches produces $275,446 in a single year? Or $28,438
worth, $358,519? The answer is obvious.
Reliance seems to be placed by counsel on the observation of Mr.
Justice Lamar in
Pacific Express Co. v. Seibert,
142 U. S. 354,
that
"express companies, such as are defined by this act, have no
tangible property, of any consequence, subject to taxation under
the general laws. There is, therefore, no way by which they can be
taxed at all, unless by a tax upon their receipts for business
transacted."
But the reference was to the legislation of the state of
Missouri, and the scheme of taxation under consideration here was
not involved in any manner.
The method of assessment provided by the Nichols Law was as
follows:
"The said board shall proceed to ascertain and assess the value
of the property of said express, telegraph, and telephone companies
in Ohio, and in determining the value of the property of said
companies in this state, to be taxed within the state and assessed
as herein provided, said board shall be guided by the value of said
property as determined by the value of the entire capital stock of
said companies, and such other evidence and rules as will enable
said board to arrive at the value in money of the entire property
of said companies within the State of Ohio, in the proportion which
the same bears to the entire property of said companies, as
determined by the value of the capital stock thereof, and the other
evidence and rules as aforesaid."
And this provision was thus construed by the Supreme Court of
Ohio in
State v. Jones:
"The board, in determining the value of the company's property
in this state for taxation, is not required to fix the value of
such property upon the principle that the value of the entire
property of the company shall be deemed the same as the value of
its entire capital stock, thus making the respective values
equivalents of each other. But, taking the market value of the
entire capital stock as a datum, the board is to be only guided
thereby in ascertaining the true value in money of the company's
property in this state. The statute does not bind the board to find
the value
Page 165 U. S. 224
of the entire property of the company equal to that of the
entire capital stock."
The court further said:
"But the property of a corporation may be regarded, in the
aggregate, as a unit, an entirety, as a plant designed for a
specific object, and its value may be estimated not in parts, but
taken as a whole. If the market value -- perhaps the closest
approximation to the true value in money -- of the corporate
property as a whole were inquired into, the market value of the
capital stock would become a controlling factor in fixing the value
of the property. Should all the stockholders unite to sell the
corporate plant as an entirety, they would not be inclined to sell
it for less than the market value of the aggregate shares of the
capital stock. Besides, while the amount of the capital stock may
be limited by the charter and the laws governing it, the real and
personal property of the corporation may be constantly augmented,
and may keep pace with any increase in the value of the capital
stock. The market value of the capital stock, it is urged, has no
necessary relation to the value of the tangible property of the
corporation. But such is the well understood relation between the
two that not only is the value of the capital stock an essential
factor in fixing the market value of the corporate plant, but the
corporate capital or property has a reflex action on the value of
the capital stock. . . ."
"If by reason of the goodwill of the concern, or the skill,
experience, and energy with which its business is conducted, the
market value of the capital stock is largely increased, whereby the
value of the tangible property of the corporation, considered as an
entire plant, acquires a greater market value than it otherwise
would have had, it cannot properly be said not to be its true value
in money within the meaning of the constitution, because goodwill
and other elements indirectly entered into its value. The market
value of property is what it will bring when sold as such property
is ordinarily sold in the community where it is situated, and the
fact that it is its market value cannot be questioned because
attributed
Page 165 U. S. 225
somewhat to goodwill, franchise, skillful management of the
property, or any other legitimate agency."
"It will, we think, be conceded that the earning capacity of
real estate owned by individuals may be considered in fixing its
value for taxation. Take an office building on a prominent street
in one of our large cities. It will not be doubted that, by care in
the selection of tenants and in the preservation of the reputation
of the building, by superior elevator service, by vigilance in
guarding and protecting the property, by the exercise of skill and
knowledge in the general management of the premises, a goodwill of
the establishment will be promoted which will tend to an extra
increase in the earning capacity and value of the building. For the
purpose of taxation, it would be nonetheless the true value in
money of the building because contributed to by the operative
causes that gave rise to the goodwill. We discover no satisfactory
reason why the same rule should not apply to the valuation of
corporate property -- why the selling value of the capital stock,
as affected by the goodwill of the business, should be excluded
from the consideration of the board of appraisers and assessors,
under the Nichols Law charged with the valuation of corporate
property in this state, especially as the capital stock, when paid
up, practically represents at least an equal value of the corporate
property."
Similar views were expressed by the circuit court of appeals,
Sanford v. Poe, 69 F. 554, Judge Lurton, delivering the
opinion, saying:
"The tax imposed is not a license tax, nor a tax on the business
or occupation, nor on the transportation of property through the
state, nor from points within the state to points in other states,
nor from points in other states to points within the state. It
purports to provide for a tax upon property within the State of
Ohio. Though this property is employed very largely in the business
if interstate commerce, yet that does not exempt it from the same
liability to taxation as all other property within the jurisdiction
of Ohio. This proposition is too well settled to need argument. . .
."
"Neither does the fact that the property of the express
Page 165 U. S. 226
companies was valued as a unit profit-producing plant violate
any federal restriction upon the taxing power of a state within
which a part of that plant is found. The value of property depends
in a large degree upon the use to which it is put. If a railroad
may be valued as a unit, rather than as a given number of acres of
land plus so many tons of rails and so many thousand ties and a
certain number of depots, shops, etc., there is no sufficient
reason why the property of an express company should not be treated
as a unit plant. If the State of Ohio had a right to tax the
property within the state, and to assess it at its true cash value,
there is no federal restriction which will prevent such property
from being 'assessed at the value which it has, as used, and by
reason of its use. . . .'"
"That an express company owns no line of railway and operates no
railroad does not prevent the value of its property from being
affected by the relation of each part to every other part, and the
use to which a part is put as a factor in a unit business."
The line of reasoning thus pursued is in accordance with the
decisions of this Court already cited. Assuming the proportion of
capital employed in each of several states through which such a
company conducts its operations has been fairly ascertained, while
taxation thereon, or determined with reference thereto, may be said
in some sense to fall on the business of the company, it is only
indirectly. The taxation is essentially a property tax, and, as
such, not an interference with interstate commerce.
Nor, in this view, is the assessment on property not within the
jurisdiction of the taxing authorities of the state, and for that
reason amounting to a taking of property without due process of
law. The property taxed has its actual situs in the state, and is
therefore subject to the jurisdiction, and the distribution among
the several counties is a matter of regulation by the state
legislature.
Pullman's Palace Car Co. v. Pennsylvania,
141 U. S. 18,
141 U. S. 22;
State Railroad Tax Cases, 92 U. S.
575;
Delaware Railroad
Tax, 18 Wall. 206;
Erie
Railroad v. Pennsylvania, 21 Wall. 492;
Columbus Southern Railway v. Wright, 151 U.
S. 470.
Page 165 U. S. 227
In
Pullman's Palace Car Co. v. Pennsylvania, the rule
is considered that personal property may be separated from its
owner, and he may be taxed on its account, at the place where it
is, although not the place of his own domicile and even if he is
not a citizen or a resident of the state which imposes the tax; and
the distinction between ships and vessels and other personal
property is pointed out. The authorities are largely examined, and
need not be gone over again.
There is here no attempt to tax property having a situs outside
of the state, but only to place a just value on that within.
Presumptively all the property of the corporation or company is
held and used for the purposes of its business, and the value of
its capital stock and bonds is the value of only that property so
held and used.
Special circumstances might exist, as indicated in
Pittsburgh, Cincinnati &c. Railway v. Backus,
154 U. S. 421,
154 U. S. 443,
which would require the value of a portion of the property of an
express company to be deducted from the value of its plant, as
expressed by the sum total of its stock and bonds, before any
valuation by mileage could be properly arrived at, but the
difficulty in the cases at bar is that there is no showing of any
such separate and distinct property which should be deducted, and
its existence is not to be assumed. It is for the companies to
present any special circumstances which may exist, and, failing
their doing so, the presumption is that all their property is
directly devoted to their business, which being so, a fair
distribution of its aggregate value would be upon the mileage
basis.
The states through which the companies operate ought not to be
compelled to content themselves with a valuation of separate pieces
of property, disconnected from the plant as an entirety, to the
proportionate part of which they extend protection, and to the
dividends of whose owners their citizens contribute.
It is not contended that notice of the time and place of the
meetings of the board was not afforded, or that the companies were
denied the opportunity to appear and submit such proofs,
explanations, suggestions, and arguments with reference to the
assessment as they desired.
Page 165 U. S. 228
We are also unable to conclude that the classification of
express companies with railroad and telegraph companies as subject
to the unit rule denies the equal protection of the laws. That
provision in the Fourteenth Amendment "was not intended to prevent
a state from adjusting its system of taxation in all proper and
reasonable ways," nor was that amendment "intended to compel a
state to adopt an iron rule of equal taxation."
Bell's Gap R.
Co. v. Pennsylvania, 134 U. S. 232.
In
Pacific Express Co. v. Seibert, 142 U.
S. 339, in which a tax on gross receipts of express
companies in the state of Missouri was sustained, Mr. Justice
Lamar, speaking for the Court, well says:
"This Court has repeatedly laid down the doctrine that diversity
of taxation, both with respect to the amount imposed and the
various species of property selected either for bearing its burdens
or for being exempt from them, is not inconsistent with a perfect
uniformity and equality of taxation, in the proper sense of those
terms, and that a system which imposes the same tax upon every
species of property, irrespective of its nature or condition or
class, will be destructive of the principle of uniformity and
equality in taxation, and of a just adaptation of property to its
burdens."
And see Kentucky Railroad Tax Cases, 115 U.
S. 321;
Home Insurance Co. v. New York,
134 U. S. 594.
The policy pursued in Ohio is to classify property for taxation
when the nature of the property, or its use, or the nature of the
business engaged in requires classification in the judgment of the
legislature in order to secure equality of burden, and property of
different sorts is classified under various statutory provisions
for the purposes of assessment and taxation. The state constitution
requires all property to be taxed by a uniform rule and according
to its true value in money, and it was held by the Supreme Court of
Ohio in
State v. Jones that the Nichols Law did not
violate that requirement.
In
Wagoner v. Loomis, 37 Ohio St. 571, it was ruled
that:
"Statutory provisions whereby different classes of property are
listed and valued for taxation in and by different modes
Page 165 U. S. 229
and agencies are not necessarily in conflict with the provisions
of the constitution which require all property to be taxed by a
uniform rule and according to its true value in money."
And the court said:
"A faithful execution of the different provisions of the
statutes would place upon the duplicate for taxation all the
taxable property of the state, whether bank stocks or other
personal property or real estate, according to its true value in
money, and the equality required by the constitution has no other
test."
The constitutional test was held to be complied with, whatever
the mode, if the result of the assessment was that the property was
assessed at its true value in money.
Considering, as we do, that the unit rule may be applied to
express companies without disregarding any other federal
restriction, we think it necessarily follows that this law is not
open to the objection of denying the equal protection of the
laws.
We have said nothing in relation to the contention that these
valuations were excessive. The method of appraisement prescribed by
the law was pursued, and there were no specific charges of fraud.
The general rule is well settled that
"whenever a question of fact is thus submitted to the
determination of a special tribunal, its decision creates something
more than a mere presumption of fact, and if such determination
comes into inquiry before the courts, it cannot be overthrown by
evidence going only to show that the fact was otherwise than as so
found and determined."
Pittsburgh, Cincinnati &c. Railway v. Backus,
154 U. S. 434;
Western Union Telegraph Co. v. Taggart, 163 U. S.
1.
Decrees affirmed.
MR. JUSTICE WHITE, dissenting.
Not being able to concur in the opinion and judgment of the
Court in the foregoing cases, I am impelled by what I conceive to
be the serious nature or the questions involved to state the
reasons for my dissent.
Page 165 U. S. 230
It is elementary that the taxing power of one government cannot
be lawfully exerted over property not within its jurisdiction or
territory, and within the territory and jurisdiction of another.
The attempted exercise of such power would be a clear usurpation of
authority, and involve a denial of the most obvious conceptions of
government. This rule, common to all jurisdictions, is peculiarly
applicable to the several states of the Union, as they are by the
constitution confined within the orbit of their lawful authority,
which they cannot transcend without destroying the legitimate
powers of each other, and therefore without violating the
Constitution of the United States.
This limitation upon the taxing power was early declared by Mr.
Chief Justice Marshall in
McCulloch v. State of
Maryland, 4 Wheat. 316, where it was said (p.
17 U. S.
429):
"All subjects over which the sovereign power of a state extends
are objects of taxation, but those over which it does not extend
are, upon the soundest principles, exempt from taxation. This
proposition may almost be pronounced self-evident."
In
Hays v. Pacific Mail Steamship
Co., 17 How. 596, a tax imposed upon twelve
steamships belonging to the company, which, while engaged in lawful
trade and commerce between the port of San Francisco and ports and
territories without the state, were temporarily within the
jurisdiction of California, was held illegal. This Court, by Mr.
Justice Nelson, declared that the vessels were not properly abiding
within the limits of California so as to become incorporated with
the other personal property of that state; that their situs was at
the home port, where the vessels belonged and where the owners were
liable to be taxed for the capital invested and where the tax had
been paid.
In
St. Louis v. Ferry
Co., 11 Wall. 423, the validity of a tax assessed
by the City of St. Louis upon the boats of a ferry company, an
Illinois corporation, as property within the City of St. Louis, was
considered. This Court held that Illinois was the home port of the
boats, that they were beyond the jurisdiction of the authorities by
which the taxes were assessed,
Page 165 U. S. 231
and that the validity of the taxes could not be maintained. It
was observed (p.
78 U. S.
430):
"Where there is jurisdiction neither as to person nor property,
the imposition of a tax would be
ultra vires and void. If
the legislature of a state should enact that the citizens or
property of another state or country should be taxed in the same
manner as the persons and property within its own limits, and
subject to its authority, or in any manner whatsoever, such a law
would be as much a nullity as if in conflict with the most explicit
constitutional inhibition. Jurisdiction is as necessary to valid
legislative as to valid judicial action."
In
State Tax on Foreign-Held
Bonds, 15 Wall. 300, a tax laid by the State of
Pennsylvania on the interest paid by the railroad company on its
bonds was held to be a tax upon the bonds, the property not of the
debtor company, but of its creditors, and that so far as such bonds
were held by nonresidents of the state, they were property beyond
its jurisdiction. It was declared that no adjudication should be
necessary to establish so obvious a proposition as that property
lying beyond the jurisdiction of a state is not a subject upon
which the taxing power can be legitimately exercised, and that "the
power of taxation, however vast in its character and searching in
its extent, is necessarily limited to subjects within the
jurisdiction of the state." Of the act there under consideration,
the Court said (p.
82 U. S.
321):
"It is only one of many cases where, under the name of taxation,
an oppressive exaction is made without constitutional warrant,
amounting to little less than an arbitrary seizure of private
property. It is, in fact, a forced contribution levied upon
property held in other states, where it is subjected or may be
subjected to taxation upon an estimate of its full value."
In
Morgan v.
Parham, 16 Wall. 471, it was adjudged, upon the
authority of the
Hays case,
supra, that the State
of Alabama could not lawfully tax a vessel registered in New York,
but employed in commerce between Mobile, in that state, and New
Orleans, in Louisiana. The situs of the
Page 165 U. S. 232
vessel was held to be at the home port in New York, where its
owner was liable to be taxed for its value.
The circumstance that the steamer might not actually have been
taxed in New York during the years for which the taxes in
controversy were levied was held to be unimportant. The Court said
(p.
83 U. S.
478):
"Whether the steamer
Frances was actually taxed in New
York during the years 1866 and 1867 is not shown by the case. It is
not important. She was liable to taxation there. That state alone
had dominion over her for that purpose."
In
Delaware Railroad
Tax, 18 Wall. 206, this Court, in considering an
objection interposed to a taxing act, that it imposed taxes upon
property beyond the jurisdiction of the state, observed (p. 18
Wall. 229229): "If such be the fact, the tax to that extent is
invalid, for the power of taxation of every state is necessarily
confined to subjects within its jurisdiction."
In
Gloucester Ferry Co. v. Pennsylvania, 114 U.
S. 196, at pages
114 U. S.
206-209, MR. JUSTICE FIELD reviews the cases just cited.
The Gloucester Ferry Company was a New Jersey corporation, and
operated a ferry between Gloucester, New Jersey, and Philadelphia.
The State of Pennsylvania laid a tax on the appraised value of the
capital stock of the ferry company, which owned no property in
Pennsylvania except the lease of a slip or dock, where its
ferryboats put up in plying across the river between the two
states.
In this Court, it was sought in argument to support the tax in
question by advancing the theory of "a homogeneous unit." The
counsel said (p. 201 [argument omitted from electronic
version]):
"The tax is upon the capital stock of the corporation, 'not in
separate parcels, as representing distinct properties, but as a
homogeneous unit, partaking of the nature of personalty,' and
taxable where its corporate functions are exercised or its business
done. The franchise itself may constitute the material part of all
its property, since not only its wharves and slips, but also its
boats, might be leased, and in that case the tax would be measured
by the value of the franchise, represented by the extent of its
exercise within the state, and not by its tangible property
situated there. The extent of its property
Page 165 U. S. 233
subject to the taxing power is immaterial. Its franchise would
be worthless without the leasehold interest owned by it in the City
of Philadelphia. The value of its franchise depends upon the
leasehold, and it will therefore not do to say that it has no
property within the jurisdiction of the taxing power. It does not
seem necessary to inquire further as to an ownership of property
within the jurisdiction of Pennsylvania."
But this Court, speaking through MR. JUSTICE FIELD, completely
answered the argument, as follows (p.
114 U. S.
205):
"If by reason of landing or receiving passengers and freight at
wharves or other places in a state, they can be taxed by the state
on their capital stock on the ground that they are thereby doing
business within her limits, the taxes which may be imposed may
embarrass, impede, and even destroy such commerce with the citizens
of the state. If such a tax can be levied at all, its amount will
rest in the discretion of the state. It is idle to say that the
interests of the state would prevent oppressive taxation. Those
engaged in foreign and interstate commerce are not bound to trust
to its moderation in that respect. They require security."
Of the
Gloucester Ferry case, it was observed by this
Court in
Philadelphia Steamship Co. v. Pennsylvania,
122 U. S. 344,
that
"it is hardly necessary to add that the tax on the capital stock
of the New Jersey company in that case was decided to be
unconstitutional because, as the corporation was a foreign one, the
tax could only be construed as a tax for the privilege or franchise
of carrying on its business, and that business was interstate
commerce."
In
Erie Railroad v. Pennsylvania, 153
U. S. 646, this Court denied the power of the State of
Pennsylvania to require a foreign railroad company doing business
within its borders to deduct therefrom, when paying interest upon
its obligations in New York, the amount of a tax assessed by the
state upon the bonds and moneyed capital owned by the residents of
Pennsylvania. The money in the hands of the company in New York was
held to be property beyond the jurisdiction of Pennsylvania. The
Court said that
"No principle is better settled than that the power of a state,
even its power of
Page 165 U. S. 234
taxation, in respect to property is limited to such as is within
its jurisdiction."
This inherent want of power in every government to transcend its
jurisdiction is subject, as already stated, to an additional
limitation as to the several states of the Union, resulting from
those provisions of the Constitution of the United States which,
insofar as they restrict the power of the states, necessarily
create limitations to which they are all subject, and from which
they cannot depart without a violation of the constitution. It will
not be necessary to allude to every special restriction on the
power of the states resulting from the constitution, but it will
suffice for my present purpose to refer to one only, the necessary
existence of which has often been recognized to have been one of
the most cogent motives leading to the adoption of the
Constitution, and upon the enforcement of which it has often been
declared the perpetuity of our institutions depend, to-wit, the
inhibition resulting from the provision of the Constitution of the
United States conferring on Congress power to regulate interstate
commerce.
Under the interstate commerce clause of the Constitution, as
held by this Court, speaking through Mr. Justice Bradley in
Leloup v. Mobile, 127 U. S.
648,
"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,
and the reason is that such taxation is a burden on that commerce,
and amounts to a regulation of it, which belongs solely to
Congress."
The following cases were referred to as supporting the
proposition thus enunciated:
Case of State Freight
Tax, 15 Wall. 232;
Pensacola Telegraph Co. v.
Western Union Telegraph Co., 96 U. S. 1;
Mobile v. Kimball, 102 U. S. 691;
Western Union Telegraph Co. v. Texas, 105 U.
S. 460;
Moran v. New Orleans, 112 U. S.
69;
Gloucester Ferry Co. v. Pennsylvania,
114 U. S. 196;
Brown v. Houston, 114 U. S. 622;
Walling v. Michigan, 116 U. S. 446;
Pickard v. Pullman Southern Car Co., 117 U. S.
34;
Wabash &c. Railway Co. v.
Illinois,
Page 165 U. S. 235
118 U. S. 557;
Robbins v. Shelby County Taxing District, 120 U.
S. 489;
Philadelphia & Southern Steamship Co. v.
Pennsylvania, 122 U. S. 336;
Western Union Telegraph Co. v. Pendleton, 122 U.
S. 347;
Ratterman v. Western Union Telegraph
Co., 127 U. S. 411.
The following cases, since decided, enforce the same principle:
Asher v. Texas, 128 U. S. 129;
Stoutenburgh v. Hennick, 129 U. S. 141;
Lyng v. Michigan, 135 U. S. 161;
McCall v. California, 136 U. S. 104; and
Crutcher v. Kentucky, 141 U. S. 47.
These authorities were reviewed by this Court in
Brennan v.
Titusville, 153 U. S. 289,
where, speaking through MR. JUSTICE BREWER, it was held that a
municipal corporation could not lawfully tax a nonresident
manufacturer of goods for the privilege of endeavoring to sell his
goods by means of an agent sent into the state to solicit orders
therefor. This Court there said (p.
153 U. S.
303):
"This tax is a direct charge and burden upon the business, and
if a state may lawfully exact it, it may increase the amount of
this 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."
The question then arises, does the tax imposed by the State of
Ohio upon express companies violate either of the two elementary
propositions to which I have just referred?
Under the law of Ohio, express companies are taxed in three
forms: first, their real estate is assessed for state, county, and
municipal purposes, in the same manner as is real estate within the
state belonging to other companies and persons; second, such
companies are also taxed upon their gross receipts derived from
business done within the state, 91 Ohio Laws, 237; and, third, they
are additionally assessed by a state board, 90 Ohio Laws, 330, as
amended by 91 Ohio Laws, 220. It is the assessment resulting from
the last of these provisions which is involved in the cases now
under consideration.
Page 165 U. S. 236
In compliance with the law, the companies returned to the state
board a statement for the year 1893, showing first, the amount of
capital stock, and its par and market value; second, a detailed
account of the entire real and personal property of the companies,
and its assessed value; and, third, their entire gross receipts
during the taxing year for business done within the State of Ohio.
For the years 1894 and 1895, the statements, under the requirements
of the amendatory statute of May 10, 1894, 91 Ohio Laws, 220,
exhibited first, the number of shares of capital stock, and its par
and market value; second, a detailed statement of the real estate
owned in Ohio, and its assessed value; third, a full and correct
inventory of the personal property, including moneys and credits
owned in Ohio and the value thereof; fourth, the total value of the
real and personal property owned and situate outside of Ohio;
fifth, the entire gross receipts of the company, from whatever
source derived, of business wherever done for the taxing year; and
sixth, the gross receipts of each company in Ohio, from whatever
source derived.
It is proper here to notice that while the gross receipts in
Ohio of express companies was required to be stated, there was no
direction that mention should be made of the sum of the payments
properly chargeable against such gross receipts, to-wit,
disbursements to railroad companies or individuals for
transportation facilities, wages of its army of employees, care and
maintenance of its horses, and other operating expenses.
Although the assessment on the real estate and on the gross
receipts may be relevant to some aspects of the controversy now
examined, I eliminate them from consideration, as the direct issue
here presented concerns the taxation asserted to be only upon the
personal property.
The value of the personal property within the State of Ohio
returned by the express companies was averred in each bill, and was
conceded by the demurrer to have been correct. The valuation thus
returned, and the amount of the assessment levied on such personal
property by the state board, is shown in the following table:
Page 165 U. S. 237
Assessment for 1893
Value as Returned, and Value Assessed
as Alleged in the Bills by State Board
Adams Express Co. . . . . . $53,080 74 $460,033 08
American Express Co. . . . 27,300 00 400,576 45
United States Express Co. . 26,318 00 397,300 00
Assessment for 1894
Adams Express Co. . . . . . $41,102 60 $543,569 00
American Express Co. . . . 21,795 00 446,142 00
United States Express Co. . 26,333 00 481,348 00
Assessment for 1895
Adams Express Co. . . . . . $42,065 00 $533,095 80
American Express Co. . . . 23,430 00 499,373 60
United States Express Co. . 28,438 00 488,264 00
It thus appears that, for the year 1893, property possessing an
actual value of but $106,698.74 was assessed as being worth
$1,257,909.53; in 1894, property valued at $89,230.60 was assessed
at $1,471,059; and for 1895, property worth but $93,933 was
assessed at $1,520,734.10 -- a total valuation during three years
of property worth only $289,862.34 at $4,249,702.63.
In addition to this enormous taxation, the real estate and the
gross receipts of the companies have also been taxed for all state,
county, and municipal purposes. It cannot, I submit, be asserted
with reason that the nearly $4,000,000 of excess on the assessment
of the tangible property laid by the state board resulted from
assessing only the actual intrinsic value of such property, since
to so contend would be not only beyond all reason, but would also
be destructive of the admission by the demurrer that the companies
possessed no other personal property within the State of Ohio but
that returned by them, and that its actual and intrinsic value was
correctly set forth. The assessment therefore must necessarily have
taken into consideration some other property, or some element of
value other than the real intrinsic worth of the property
assessed.
Page 165 U. S. 238
The fact of the vast excess of the valuation over and above the
admitted value of the property is not, however, the only mode by
which it is conclusively demonstrated that the assessment resulted
from the consideration and estimate by the state board of sources
of value extrinsic to the property assessed. One of the assessments
in controversy was made under the Ohio law of April 27, 1893, and
the others under the law of May 10, 1894, and, although there is
some difference between the two statutes, they both, as I have
already said, substantially require express companies to make
return of their real and personal property within the state, the
value thereof, the number of shares of their capital stock, their
market value, and a statement of the gross receipts for business
done within the State of Ohio during the taxing year, from whatever
source derived. Considering the obligation thus imposed to report
the total value of the stock of the companies and all their gross
earnings, as also the total routes over which their agents
traveled, etc., and putting these things in connection with the
extraordinary amount by which the valuation exceeds the actual
value of the property assessed, it leaves no reasonable doubt that
the sources of reported value, which were entirely outside of the
territory and beyond the jurisdiction of the State of Ohio, were by
some process of calculation added to the intrinsic value of the
property within the state, thereby assessing not only the property
within the state, but a proportion also of all the property
situated without its territorial boundaries.
The fact that it was by this method that the sum of the personal
property liable for taxation was fixed by the board results clearly
and unmistakably from the opinion of the Supreme Court of the State
of Ohio in
State v. Jones, 51 Ohio St. 492, in which case
the court sustained the validity of the taxes here questioned. The
Supreme Court of Ohio therein declared that the state board, whose
duty it was to assess express companies, was
"not required
* to fix the value of such
property upon the principle that the value of the entire property
of the company shall be deemed the same as the value of
Page 165 U. S. 239
its entire capital stock, thus making the respective values
equivalents of each other. But, taking the market value of the
entire capital stock as a datum, the board is only to be guided
thereby in ascertaining the true value in money of the company's
property
in this state. The statute does not bind the
board to find the value of the entire property of the company equal
to that of the entire capital stock."
Although the requirement, in so many words, to assess property
outside the state is thus said not to be found in the statute, yet
that it in substance so provides is acknowledged, for, adds the
Ohio court,
"the property of a corporation may be regarded in the aggregate
as a unit, an entirety, as a plant designed for a specific
object, and its value may be estimated not in parts, but taken as a
whole. If the market value -- perhaps the closest
approximation to the true value in money -- of the corporate
property as a whole were inquired into, the market value of the
capital stock would become a controlling factor in fixing the value
of the property. . . . The market value of the capital stock, it is
urged, has no necessary relation to the value of the tangible
property of the corporation. But such is the well understood
relation between the two that not only is the value of the capital
stock an essential factor in fixing the market value of the
corporate plant, but the corporate capital or property has a reflex
action on the value of the capital stock. . . . If, by reason of
the goodwill of the concern, or the skill, experience, and energy
with which its business is conducted, the market value of the
capital stock is largely increased, whereby by the value of the
tangible property of the corporation,
considered as an entire
plant, acquires a greater market value than it otherwise would
have had,
it cannot properly be said not to be its true value
in money within the meaning of the Constitution, because
goodwill and other elements indirectly entered into its value. . .
. We discover no satisfactory reason why the same rule should not
apply to the valuation of corporate property -- why the selling
value of the capital stock, as affected by the goodwill of the
business, should be excluded from the consideration of the board of
appraisers and assessors under the Nichols Law,
Page 165 U. S. 240
charged with the valuation of corporate property in this state,
especially as the capital stock, when paid up, practically
represents at least an equal value of the corporate property."
Now this language is susceptible only of one meaning -- that is,
that in assessing the actual intrinsic value of tangible property
of express companies in the State of Ohio, it was the duty of the
assessing board to add to such value a proportionate estimate of
the capital stock, so as thereby to assess not only the tangible
property within the state, but also, along with such property, a
part of the entire capital stock of the corporation, without
reference to its domicile, and equally without reference to the
situation of the property and assets owned by the company from
which alone its capital stock derives value. In other words,
although actual property situated in states other than Ohio may not
be assessed in that state, yet that it may take all the value of
the property in other states, and add such portion thereof as it
sees fit to the assessment in Ohio, and that this process of
taxation of property in other states, in violation of the
Constitution, becomes legal, provided, only, it is called "taxation
of property within the state."
I submit that great principles of government rest upon solid
foundations of truth and justice, and are not to be set at naught
and evaded by the mere confusion of words. In considering a
question of taxation in
Postal Telegraph Cable Co. v.
Adams, 155 U. S. 688, to
which case I shall hereafter refer, this Court said (p.
155 U. S.
698): "The substance, and not the shadow, determines the
validity of the exercise of the power." It seems to me that, to
maintain the tax levied by the State of Ohio, this ruling must be
reversed, and the doctrine be announced that the shadow is of more
consequence than the substance. Such result would appear to
inevitably flow from the holding referred to, now affirmed by the
court. Nothing, I submit, can be plainer than the fact that the
value of the capital stock of a corporation represents all its
property, franchises, goodwill -- indeed, everything owned by it
wherever situated. I reiterate, therefore, that the rule which
recognizes that for the purpose of assessing tangible property in
one state, you may take its full worth, and then add to the
value
Page 165 U. S. 241
of such property a proportion of the total capital stock, is a
rule whereby it is announced that the sum of all the property, or
an arbitrary part thereof, situated in other states, may be joined
to the valuation of property in one state for the purpose of
increasing the taxation within that state. What difference can
there be between an actual assessment by Ohio of property situated
in New York, Pennsylvania, Massachusetts, or in any of the other
states of the Union, and the taking by Ohio of an aliquot part of
the value of all the property situated in such other states, and
adding it, for the purpose of assessment, to the value of property
in Ohio? The recognition of this method breaks down both of the
well settled and elementary rules to which I have in the outset
adverted.
First, the rule which forbids one state to extend its power
of taxation beyond its jurisdiction to property in another
state. If the express companies are domiciled in New York, and
having millions of property there situated and subject to taxation,
all of which gives value to their capital stock, and hence enters
into the sum of its worth, how can it be that to tax a proportion
of the value of all that property is not taxing the property
itself? This proportion of the capital stock, added to the inherent
value of the property in the State of Ohio, is therefore an actual
taxation by the State of Ohio of property situated in the State of
New York.
It seems to me that not only the illegality, but the injustice,
of this taxation by the State of Ohio on these express companies,
which is now upheld, is clear. Let me suppose that the bonds,
stocks, other investments, and elements, which represent the
capital of the companies, and therefore producing the resultant
value of such capital stock, are situated in the states of New
York, Pennsylvania, and Massachusetts. These items, thus making up
the value of the capital stock, being so situated in such states,
are, of course, entirely and wholly, at their full value,
assessable in those states. The attribution of an aliquot share of
the value of the capital stock to the State of Ohio, and the
consequent right of that state to tax such value, in no way
deprives the states of New York, Pennsylvania, and Massachusetts of
their right to assess
Page 165 U. S. 242
the property within their borders for its full value. But, as
attributing to the State of Ohio a proportion of such property
gives that state the right to tax the proportion allotted, it
follows, by an inevitable deduction, that the recognition of the
right here claimed practically subjects the property in the states
of New York, Pennsylvania, and Massachusetts to double taxation.
unless those states voluntarily forego the inherent power of
taxation vested in them to levy a tax upon all the property within
their respective jurisdictions. Certainly the states of New York,
Massachusetts, and Pennsylvania would if they were independent
sovereignties, removed from the jurisdiction of the Constitution of
the United States, be driven to protect, by retaliatory
legislation, their citizens, as was the case between the states
prior to the adoption of the Constitution. But, having entered into
the Union, these states are bereft of all such relief, and must
thus look for the protection of their citizens to the remedies
afforded by the Constitution itself. The rule now announced allows
Ohio to exercise an authority in violation of the Constitution, and
thereby strips not only the citizens of the other states, but those
states themselves, of all redress by depriving them of the
safeguards which it was the avowed purpose of the Constitution to
secure.
Second, as to the interstate commerce clause. It is
clear that the recognition of a right to take an aliquot proportion
of the value of property in one state and add it to the intrinsic
value of property in another state, and there assess it, is in
substance an absolute denial and overthrow of all the great
principles announced from the beginning, and enforced by the many
decisions of this Court on the subject of interstate commerce. This
results from the fact that the necessary consequence of the ruling
in this case is this: that a corporation -- and there is no
distinction, in principle, in the particular here considered,
between a corporation and an individual -- cannot go from one state
into another state of the Union for the purpose of there engaging
in interstate commerce business without subjecting itself to the
certainty of having a proportion of all its property situated in
the other states added to the sum of property,
Page 165 U. S. 243
however small, which it may carry into the state to which it
goes, for the purposes of taxation therein. Under this system, not
only is an appalling penalty imposed for going from one state into
another state, but the carrying on of interstate commerce itself
becomes hampered and loaded with a burden threatening its absolute
destruction.
The contradiction involved in the proposition is well
illustrated by the legislation and decisions of the State of Ohio.
Thus, as I have said, in addition to the tax imposed on express
companies which is here considered, the law of the State of Ohio,
besides assessing their real estate, also imposes a tax on the
gross receipts of such companies for business done within the
state. In order to save the tax here in question, the law by which
this last tax is imposed is careful to provide that nothing in the
imposition of the tax therein provided -- that is, the tax on gross
receipts -- shall be construed as impairing the right to the tax on
tangible property already provided for (the tax here in question).
Now in passing upon the validity of this tax on gross receipts, the
Supreme Court of Ohio treats it as not a double tax, because the
previous tax is considered as one on tangible property.
Adams
Exp. Co. v. State, 44 N.E. 506. We have therefore both the
legislature and the court of last resort of the State of Ohio
upholding the enormous valuation put upon the personal property for
the purposes of the tax now before us on the theory that such
valuation includes an aliquot part of the capital stock, and
necessarily therefore also an equal portion of all the property and
earnings of the company, both in and out of the state, and yet we
have the same legislature and the same tribunal upholding the tax
on gross receipts on the ground that the tax first provided is
purely a tax upon tangible property. Thus, the departure from the
pathway of principle is marked in this instance, as it is always
marked, by confusion and injustice.
The wound which the ruling announced, if I correctly apprehend
it, inflicts on the Constitution is equally as severe upon the
unquestioned rights of the states as it is upon the lawful
authority of the United States, because, while
Page 165 U. S. 244
submitting the states and their citizens to injustice and wrong
committed by another state, it at the same time greatly weakens or
destroys the efficacy of the interstate commerce clause of the
Constitution.
But the contention is that however sound, as an original
question, may be the reasoning upon which the tax is assailed, its
validity is not now open to question, because the theory by which
the State of Ohio added the value of property outside of the state
to the intrinsic amount of property actually within the state for
the purposes of taxation is asserted to be concluded by many
adjudications of this Court. The cases relied on to establish this
proposition are cited in the opinion of the Court. I submit that
the statement made by this Court in
Pacific Express Co. v.
Seibert, 142 U. S. 339, is
a sufficient answer to this contention, as regards all the cases
relied on decided prior to that case. The
Seibert case
involved the question of the validity of a law of the State of
Missouri imposing a tax upon the gross receipts of an express
company in addition to the ordinary tax upon its tangible property.
The Court, finding the tax to be only on the business of the
company within the state, held it not to be a tax on interstate
commerce, and therefore valid. The Court, through Mr. Justice
Lamar, in speaking of the right of a state to classify express
companies for the purpose of taxation, resulting from the fact that
such companies were normally only owners of a small amount of
tangible property in one state, said (p.
142 U. S.
354):
"On the other hand, express companies such as are defined by
this act have no tangible property of any consequence subject to
taxation under the general laws. There is therefore no way by which
they can be taxed at all unless upon a tax upon their receipts for
business transacted. This distinction clearly places express
companies defined by this act in a separate class from companies
owning their own means of transportation."
The argument here advanced in favor of the tax therefore simply
is that what this Court said could not be done in a decision
rendered in January, 1892, had theretofore been settled to the
contrary by a line of adjudications. But the answer to
Page 165 U. S. 245
the contention in favor of the tax does not rest alone upon this
view. All the cases relied upon and referred to in argument were
considered and interpreted in
Postal Telegraph Cable Co. v.
Adams, 155 U. S. 688. It
becomes unnecessary, therefore, to review the prior cases in detail
and analyze their reasoning, since this duty was effectually
performed by this Court in the opinion announced in the
Postal
Telegraph case. The significance of the ruling in that case,
and the controlling nature of the principles which the opinion
there rendered inculcated, can better be understood by considering
the controversy which that case determined and the aspect in which
it was necessarily presented to this Court for adjudication. The
case involved the validity of a tax imposed by the State of
Mississippi on a telegraph company. The tax, in the mere form of
its imposition, was undoubtedly on the occupation and business of
the company, and therefore was an unlawful burden on interstate
commerce, as the company was engaged in such commerce. The
controversy came to this Court on error from the Supreme Court of
the State of Mississippi. The attention of that court, in
determining the issue presented to it, was called to all the
previous decisions of this Court. Considering these previous
adjudications, the Mississippi court said that there was
undoubtedly language in opinions of this Court which seemed to
support the validity of the tax there questioned, and there was
also undoubtedly language in other lines of adjudication which
seemed clearly to render the tax void under the Constitution of the
United States. In view of the apparent conflict in the cases
decided by this Court, the Mississippi court in its opinion
marshaled the authorities upon both sides and expressed its
hesitancy and diffidence in reaching a conclusion. The
Postal
Telegraph case therefore pointedly called the attention of
this Court to all the previous cases, and accentuated the arguments
on both sides of the issue presented, and rendered it absolutely
necessary for this Court to construe and interpret all the previous
adjudications. In this condition of things, in deciding the case
and holding the tax valid, although in form a tax upon interstate
commerce, this Court said (p.
155 U. S.
695):
Page 165 U. S. 246
"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."
And again (p.
155 U. S.
696):
"Doubtless no state could add to the taxation of property,
according to the rule of ordinary property taxation, the burden of
a license or other tax on the privilege of using, constructing, or
operating an instrumentality of interstate or international
commerce, or for the carrying on of such commerce; but the value of
property results from the use to which it is put, and varies with
the profitableness of that use, and by whatever name the exaction
may be called, if it amounts to no more than the ordinary tax upon
property, or a just equivalent therefor, ascertained by reference
thereto, it is not open to attack as inconsistent with the
Constitution.
Cleveland, Cincinnati &c. Railway v.
Backus, 154 U. S. 439,
154 U. S.
445."
Referring to the opinion of the Supreme Court of Mississippi,
which directly involved all the issues presented by this case, the
Court said (p.
155 U. S.
697):
Page 165 U. S. 247
"And in the case at bar, the supreme court, in its examination
of the liability of plaintiff in error for the taxes in question,
said:"
"It will be thus seen at once that this is a tax imposed upon a
telegraph company, in lieu of all others, as a privilege tax, and
its amount is graduated according to the amount and value of the
property measured by miles. It is to be noticed that it is in lieu
of all other taxes, state, county, and municipal. The
reasonableness of the imposition appears in the record, as shown by
the second count of the declaration and its exhibits, whereby the
appellant seems to be burdened in this way with a tax much less
than that which would be produced if its property had been
subjected to a single
ad valorem tax."
"This exposition of the statute brings it within the rule where
ad valorem taxes are compounded or commuted for a just
equivalent, determined by reference to the amount and value of the
property. Being thus brought within the rule, the tax becomes
substantially a mere tax on property, and not one imposed on the
privilege of doing interstate business. The substance, and not the
shadow, determines the validity of the exercise of the power."
And, summing the whole up, the Court concluded (p.
155 U. S.
700):
"We are of opinion that it was within the power of the state to
levy a charge upon this company in the form of a franchise tax, but
arrived at with reference to the value of its property within the
state, and in lieu of all other taxes, and that the exercise of
that power by this statute, as expounded by the highest judicial
tribunal of the state in the language we have quoted, did not
amount to a regulation of interstate commerce or put an
unconstitutional restraint thereon."
This construction of the previous cases decided by this Court
elucidates and makes plain the fact that they proceeded upon and
were intended to enforce the rule that the validity of a state tax
would be determined by the substantial results of the burden
imposed, and not by the mere form which it assumed, and although
the form of the imposition might seem to bring the tax within the
reach of the inhibition against levying a charge upon property
beyond the jurisdiction of the state, or within the prohibitions of
the Constitution of the United States
Page 165 U. S. 248
forbidding the laying of burdens on interstate commerce, this
Court would not interfere therewith, provided the exaction, in
substance, amounted to no more than the sum of the taxation which
the state might lawfully impose upon the property actually within
its jurisdiction, and provided that, in reality, the burden laid by
the state was not an interference with interstate commerce. This
explanation and this rule was the answer given to the question
directly presented as to the significance and interpretation of the
previous decisions now cited as authority for the proposition that
it is within the power of a state not only to tax at will property
beyond its jurisdiction, but also to substantially destroy
interstate commerce by heaping direct and onerous burdens thereon.
Such explanation and ruling were also reiterated in the recent
decision in
Western Union Telegraph Co. v. Taggart,
163 U. S. 1, where,
at page
163 U. S. 18, it
is clearly intimated that a taxing law could not be upheld which,
in its necessary operation, was shown to be oppressive and
unconstitutional.
Testing the tax in controversy by the rule laid down in the
Postal Telegraph case, it becomes, in reason, impossible
to conclude otherwise than that it is, both in form and substance,
taxation by the State of Ohio of property beyond its jurisdiction,
and that it also is an imposition by that state of a burden on
interstate commerce. It cannot with fairness be argued that the
amount of the tax is only such sum as would have resulted from a
levy upon the property actually in the state when the record admits
that the aggregate value of such property for the taxing years of
1893, 1894, and 1895 amounted only to two hundred and odd thousand
dollars, while the assessment exceeds this amount by nearly four
millions of dollars. It cannot be said that this vast excess does
not embrace property situated outside of Ohio when both the text of
the statute of that state and such text as expounded by the supreme
court of the state clearly show that the sum of the excess is
arrived at by adding to the property in the state the value of
property situated outside thereof. Nor can it be contended that the
tax here involved is not a tax on interstate commerce in view of
the fact that, from the nature of the criteria of value
adopted,
Page 165 U. S. 249
an aliquot part of the avails and receipts of the company of
every kind is added to the taxing value in the State of Ohio,
although that state had also imposed a tax upon the gross receipts
from business of a purely state nature.
But, dismissing absolutely from consideration the authoritative
construction of all the prior decisions of this Court announced in
Postal Telegraph Cable Co. v. Adams, and conceding for the
sake of argument that the previous adjudications now relied on are
unexplained by that case, and that they substantially hold that
there is a so-called "unit rule" properly applicable to the
assessment for taxation of the continuous lines of telegraph and
railroad companies, such concession does not in reason admit the
validity of the method adopted by the State of Ohio for assessing
the tangible personal property of express companies. Before
proceeding to discuss this proposition, however, I call attention
to the fact that I intentionally refrain from placing a sleeping
car company in the same category with telegraph and railroad
companies, because the decision in the case of
Pullman's Car
Co. v. Pennsylvania, 141 U. S. 18, was
not founded upon the theory, nor did it purport to assert that the
property or plant of a sleeping car company was a unit, and that,
of necessity, a part of such property may be measured by a rule
applicable to continuous lines of road. In that decision, the Court
merely emphasized the holding that the tax was one laid upon one
hundred cars of the company, possessing an actual situs in
Pennsylvania. In the statement of the case (p.
141 U. S. 20)
the decision of the Supreme Court of Pennsylvania was quoted
verbatim, in which it was declared that the tax on the capital
stock of the Pullman Company was in reality but a tax on its
property, that the coaches of the company were such property, and
that the fact that the coaches might also be operated in other
states would simply reduce the value of the property in
Pennsylvania justly subject to taxation there. This Court
practically adopted the views so expressed by the state court.
When, however, it was said (p.
141 U. S. 26)
that the method of assessment, to-wit, taking a proportion of the
capital stock ascertained on the mileage basis, as the value of one
hundred sleeping cars
Page 165 U. S. 250
was a just and equitable method, such statement was made with
reference to the facts held to exist in the case before the court.
What were those facts? The taxes demanded covered a period of
eleven years, and, excluding interest from the time when payable
and the attorney general's commission for collecting, aggregated
but $16,321.89. 107 Penn.St. 158. Surely this Court might well say
that a rule of taxation which operated to assess on one hundred
sleeping cars a tax of less than $1,500 per annum was, in the
absence of any showing to the contrary, just and equitable to the
company. No such showing was made. The objection advanced by
counsel to the method of taxation was not that the results produced
were inequitable, but that (theoretically, not practically) the
method adopted was improper. Indeed, the facts of that case caused
the ruling there made to be but an example of the principle
subsequently explicitly announced in
Postal Telegraph Cable Co.
v. Adams, ubi supra.
It is, I submit, undeniable that if there be such a unit rule
applicable to the continuous lines of telegraph and railroad
companies, its existence pushes the power of state taxation, as to
these particular kinds of property, at least to the confines of the
Constitution, and therefore if, under the rule of
stare
decisis, the cases which announce it should be followed, they
should not be extended. The mere ownership, however, by an express
company of personal property within a state presents no case for
the application of a unit rule. What unity can there be between the
horses and wagons of an express company in Ohio with those
belonging to the same company situated in the State of New York?
The conception of the unity of railroad and telegraph lines is
necessarily predicated upon the physical connection of such
property. To apply a rule based upon this condition to the isolated
ownership by an express company of movable property in many states
in reality declares that a mere metaphysical or intellectual
relation between property situated in one state and property found
in another creates, as between such property, a close relation for
the purposes of taxation. But this theory, by an enormous stride,
at once advances the unit rule beyond every
Page 165 U. S. 251
constitutional barrier, and causes such rule or theory to
embrace property between which there is not, and cannot in the
nature of things be, any real union or relation whatever. If mere
intellectual union between property be thus adopted as a rule of
taxation, then all the restrictions upon the power of a state to
tax property arising from the fact that the situs of such property
is beyond its jurisdiction, as well as of the restraints arising
from the interstate commerce clause of the Constitution, are
destroyed. Certainly the mere fact that the same owner has movable
property in one state and movable property in another state does
not, from the fact of the one ownership, create a link of
continuity between the property for the purpose of taxation. The
fact that the movable property situated in one state earns profits,
and the movable property in the other likewise so earns, and that
these profits go to the common owner, does not create such unity
for the purpose of taxation so as to make the property assessable
in each state. This Court has effectually determined that where a
corporation is engaged in interstate business, no one of the states
has the power to tax the receipts of such company derived from
interstate commerce business, and that the power of the states as
to taxation on earnings is limited to those derived from the
business done within the state. This line of concluded authority is
illustrated and referred to in the recent opinion in
Osborne v.
Florida, 164 U. S. 650,
decided at this term. It is therefore manifest that where property
owned in common, belonging to the same person, and situated in
different states, contributes to earnings, and the proceeds of
these earnings go into the treasury of the owner, and lay side by
side therein, the fact that there is a common owner, that there is
a common business, and that all the results of the business are in
immediate contact in the common treasury, gives no power to the
state to tax the whole, but only to levy on that which comes from
the state business alone. How, I submit, can it now be announced
that there is an imaginary unity between personal property widely
separated, because that property has a common owner, without at the
same time reversing the settled
Page 165 U. S. 252
adjudications of this Court on the subject of the power of a
state to tax the earnings from interstate commerce?
But a few illustrations will serve at once to make clear what I
submit is the impossibility, in reason, of declaring that, as a
legal fact or fiction, property is unified when between such
property there is no unity or physical relation whatever.
Take, for example, the case of
Brennan v. City of
Titusville, supra. Of what value is the ruling in that case
that a manufacturer cannot be compelled to pay a license for the
doing, through his agent, of the business of interstate commerce by
selling his goods in a state into which such agent enters for that
purpose, if the mere fact that the agent takes into the state
$1,000 worth of goods creates a supposed intellectual union between
those goods and the vast stock and capital of the manufacturer
located in another state, so as to enable the attribution of an
aliquot part of the wealth of the manufacturer to the goods in the
custody of the agent for the purpose of taxation? Would it not be
as true in such case to say that the capital and wealth of the
manufacturer facilitates and increases the capacity of the agent to
transact business, and adds value to the property the agent has for
sale, as to say that the horses and wagons of an express company in
New York and its capital there facilitate and aid the agents of
such company, and add value to the tangible property employed by
such agents, in transacting business in Ohio? It certainly cannot,
I submit, with reason be said that there is not the same unity
between the operations of a manufacturer who makes his goods in one
state, and sells them in another, as there is between the
operations of an express company. The sale of the manufactured
goods is as essentially necessary to the profits of the
manufacturer as is the manufacture of the goods themselves. No
profit can result from the one without the other, and to attribute
a supposed unity to the business of an express company, and to deny
such unity to that of a manufacturer, is, as I understand it, to
declare that there is a difference when there is no possible
difference.
If the rule contended for by the State of Ohio be true, why
would it not apply to a corporation, partnership, or individual
Page 165 U. S. 253
engaged in the drygoods business, or any other business, having
branches in various states? Would it not be as proper to say of
such agencies, as it is of the agencies of express companies, that
there is an intellectual unity of earnings between the main
establishment and all such agencies, and therefore a right to
assess goods found in an agency with relation to the capital and
wealth of the original house and all the other branches situated in
other states? Take the case of a merchant carrying on a general
commercial business in one state and having connections of
confidence and credit with another merchant of great capital in
another state. If this rule be true, can it not also be said that
such merchant derives advantages in his business from the sum of
the capital in other states which may be availed of to extend his
credit and his capacity to do business, and that therefore his
tangible property must be valued accordingly? Suppose bankers in
Boston, Philadelphia, and New York, of great wealth, owning stocks
and bonds of various kinds, send representatives to New Orleans
with a limited sum of money, there to commence business. These
representatives rent offices and buy office furniture. Is it not
absolutely certain that the business of those individuals would be
largely out of proportion to the actual capital possessed by them,
because of the fact that, reflexly and indirectly, their business
and credit is supported by the home offices? In this situation, the
assessor comes for their tax return. He finds noted thereon only a
limited sum of money and the value of the office furniture. What is
to prevent that official, under the rule of supposed metaphysical
or intellectual unity between property, from saying:
"It is true you have but a small tangible capital, and your
office furniture is only worth $250, but the value of property is
in its use, and, as you have various elements of wealth situated in
the cities named, I will assess your property, because of its use,
at a million dollars?"
Such conduct would be exactly in accord with the power of
taxation which it is here claimed the State of Ohio possesses, and
which, as I understand it, the Court now upholds. To give the
illustrations, I submit, is to point to the confusion, injustice,
and impossibility of such a rule.
Page 165 U. S. 254
Nor, in conclusion, I submit, is there any force in the
argument, advanced at bar, that we have entered a new era,
requiring new and progressive adjudications, and that unless this
Court admits the power of the State of Ohio to tax to be as
claimed, it will enable aggregations of capital to escape just
taxation by the several states. This assertion, at best, but
suggests that unless constitutional safeguards be overthrown, harm
will come, and wrong will be done. In its last analysis, the claim
is but a protestation that our institutions are a failure, that
time has proven that the Constitution should not have been adopted,
and that this Court should now recognize that fact, and shape its
adjudications accordingly. The claim is as unsound as the
fictitious assertion of expediency by which it is sought to be
supported. If it be true that by the present enforcement of the
Constitution and laws property will escape taxation, the remedy
must come not from violating the Constitution, but from upholding
it.
Within the power lodged in Congress to regulate commerce between
the states, ample authority exists to enact the necessary
legislation to prevent the just relations between the states and
the regulation of such commerce from becoming the pretext for
avoiding the proper burdens of either state or national taxation.
As the necessity arises, such apt powers will doubtless be brought
into operation. The recognition of the right of taxation exerted by
the State of Ohio in these cases must, if followed in other states,
not only reproduce the illegality and injustice here shown, but
greatly increase it, as every new imposition will be a new levy on
property already taxed, and result in an additional burden on
interstate commerce. If the principles by which such results are
brought about be recognized as lawful under the Constitution, not
only will Congress be deprived of all power to protect the citizens
of the respective states, and the states themselves, from these
conditions, but it will also be rendered impotent to devise, under
the power to regulate commerce, any just and fair regulation to
prevent the interstate commerce clause from being made a shield for
avoiding taxation, and to cause property engaged in such commerce
to be subjected to just and
Page 165 U. S. 255
uniform taxation on the part of the several states. Thus, by
holding that the states possess the power claimed in this case to
exist, not only will a wrong be committed, but that wrong will be
permanently and without remedy ingrafted into our constitutional
system.
I am authorized to say that MR. JUSTICE FIELD, MR. JUSTICE
HARLAN, and MR. JUSTICE BROWN concur in this dissent.
* The italics here and elsewhere in this quotation are mine.