1. The mere formation of a contract between persons of different
States is not within the protection of the commerce clause, unless
the performance is within its protection, at least in the absence
of Congressional action. P.
303 U. S.
253.
2. Taxation of a local business or occupation which is separate
and distinct from the transportation and intercourse which are
interstate commerce is not forbidden merely because, in the
ordinary course, such transportation or intercourse is induced or
occasioned by the business. P.
303 U. S.
253.
3. A statute of New Mexico levied on all engaged within the
State in the business of publishing newspapers or magazines a
privilege tax of 2% on the gross receipts from the sale of
advertising. Appellants, whose only office and place of business
was within the State, prepared, edited, and published there a
journal the circulation of which was partly interstate. Part of
their receipts from advertising was derived from contracts with
advertisers out of the State. Such contracts involved interstate
transmission, from advertisers to appellants, of cuts, mats,
information, copy, etc.; also payment through interstate
facilities.
Held, the tax, as applied to appellants in
respect of the sums received under such advertising contracts, did
not infringe the commerce clause of the Federal Constitution. Pp.
303 U. S.
259-260.
So far as the advertising rates reflected a value attributable
to the maintenance of a circulation of the magazine interstate, the
burden on the interstate business was too remote and too attenuated
to call for a rigidly logical application of the doctrine that
gross receipts from interstate commerce may not be made the measure
of a tax.
4. The commerce clause does not relieve those engaged in
interstate commerce from their just share of the state tax burden,
even though the cost of doing the business be thereby increased. P.
303 U.S. 254.
5. The vice characteristic of such local taxes, measured by
gross receipts from interstate commerce, as have been held invalid
was that they placed on the commerce burdens of such a nature
as
Page 303 U. S. 251
were capable, in point of substance, of being imposed, or added
to, with equal right by every State which the commerce touched,
merely because interstate commerce was being done, so that, without
the protection of the commerce clause, it would bear cumulative
burdens not imposed on local commerce. The tax here involved is not
subject to that objection. P.
303 U. S.
255.
6. The business of preparing, printing and publishing magazine
advertising is peculiarly local, and distinct from its circulation,
whether or not that circulation be interstate commerce. P.
303 U. S.
258.
7. In reconciling opposing demands that interstate commerce bear
its share of local taxation, and, on the other hand, not be
subjected to multiple tax burdens merely because it is interstate
commerce, practical, rather than logical, distinctions must be
sought. P.
303 U. S.
259.
8.
Fisher's Blend Station v. State Tax Comm'n,
297 U. S. 650, and
Crew Levick Co. v. Pennsylvania, 245 U.
S. 292, distinguished. Pp.
303 U. S.
260-261.
41 N.M. 28, 67 P.2d 505, affirmed.
Appeal from a judgment affirming a judgment against the
appellants in a suit brought by them to recover taxes paid under
protest and alleged to have been unlawfully exacted.
MR. JUSTICE STONE delivered the opinion of the Court.
Section 201, chapter 7, of the New Mexico Special Session Laws
of 1934 levies a privilege tax upon the gross receipts of those
engaged in certain specified businesses. [
Footnote 1]
Page 303 U. S. 252
Subdivision I imposes a tax of 2 percent of amounts received
from the sale of advertising space by one engaged in the business
of publishing newspapers or magazines. The question for decision is
whether the tax laid under this statute on appellants, who sell
without the state, to advertisers there, space in a journal which
they publish in New Mexico and circulate to subscribers within and
without the state, imposes an unconstitutional burden on interstate
commerce.
Appellants brought the present suit in the state district court
to recover the tax, which they had paid under protest, as exacted
in violation of the commerce clause of the Federal Constitution.
Article 1, § 8, cl. 3. The trial court overruled a demurrer to the
complaint and gave judgment for appellants, which the Supreme Court
reversed. 41 N.M. 141, 65 P.2d 863. Appellants refusing to plead
further, the district court gave judgment for the appellees, which
the Supreme Court affirmed. 41 N.M. 288, 67 P.2d 505. The case
comes here on appeal from the second judgment under § 237 of the
Judicial Code, as amended.
Appellants publish a monthly livestock trade journal which they
wholly prepare, edit, and publish within the state of New Mexico,
where their only office and place of business is located. The
journal has a circulation in New Mexico and other states, being
distributed to paid subscribers through the mails or by other means
of transportation. It carries advertisements, some of which are
Page 303 U. S. 253
obtained from advertisers in other states through appellants'
solicitation there. Where such contracts are entered into, payment
is made by remittances to appellants sent interstate, and the
contracts contemplate and provide for the interstate shipment by
the advertisers to appellants of advertising cuts, mats,
information, and copy. Payment is due after the printing of such
advertisements in the journal and its ultimate circulation and
distribution, which is alleged to be in New Mexico and other
states.
Appellants insist here, as they did in the state courts, that
the sums earned under the advertising contracts are immune from the
tax because the contracts are entered into by transactions across
state lines, and result in the like transmission of advertising
materials by advertisers to appellants, and also because
performance involves the mailing or other distribution of
appellants' magazines to points without the state.
That the mere formation of a contract between persons in
different states is not within the protection of the commerce
clause, at least in the absence of Congressional action, unless the
performance is within its protection, is a proposition no longer
open to question.
Paul v.
Virginia, 8 Wall. 168;
Hooper v.
California, 155 U. S. 648;
New York Life Ins. Co. v. Deer Lodge County, 231 U.
S. 495.
Cf. Ware & Leland v. Mobile County,
209 U. S. 405;
Engel v. O'Malley, 219 U. S. 128.
Hence it is unnecessary to consider the impact of the tax upon the
advertising contracts except as it affects their performance,
presently to be discussed. Nor is taxation of a local business or
occupation which is separate and distinct from the transportation
and intercourse which is interstate commerce forbidden merely
because, in the ordinary course, such transportation or intercourse
is induced or occasioned by the business.
Williams v.
Fears, 179 U. S. 270;
Ware & Leland v. Mobile County, supra; 233 U.
S. Waycross,
Page 303 U. S. 254
233 U. S. 16;
General Railway Signal Co. v. Virginia, 246 U.
S. 500,
246 U. S. 510;
Utah Power & Light Co. v. Pfost, 286 U.
S. 165. Here, the tax which is laid on the compensation
received under the contract is not forbidden either because the
contract, apart from its performance, is within the protection of
the commerce clause or because, as an incident preliminary to
printing and publishing the advertisements, the advertisers send
cuts, copy, and the like to appellants.
We turn to the other and more vexed question whether the tax is
invalid because the performance of the contract for which the
compensation is paid involves to some extent the distribution,
interstate, of some copies of the magazine containing the
advertisements. We lay to one side the fact that appellants do not
allege specifically that the contract stipulates that the
advertisements shall be sent to subscribers out of the state, or is
so framed that the compensation would not be earned if subscribers
outside the state should cancel their subscriptions. We assume the
point in appellants' favor, and address ourselves to their argument
that the present tax infringes the commerce clause because it is
measured by gross receipts which are to some extent augmented by
appellants' maintenance of an interstate circulation of their
magazine.
It was not the purpose of the commerce clause to relieve those
engaged in interstate commerce from their just share of state tax
burden even though it increases the cost of doing the business.
"Even interstate business must pay its way,"
Postal
Telegraph-Cable Co. v. Richmond, 249 U.
S. 252,
249 U. S. 259;
Ficklen v. Shelby County Taxing District, 145 U. S.
1,
145 U. S. 24;
Postal Telegraph Cable Co. v. Adams, 155 U.
S. 688,
155 U. S. 696;
Galveston, H. & S.A. R. Co. v. Texas, 210 U.
S. 217,
210 U. S.
225-227, and the bare fact that one is carrying on
interstate commerce does not relieve him from many forms of state
taxation which add to the cost of his business. He is subject to a
property tax on
Page 303 U. S. 255
the instruments employed in the commerce,
Western Union
Telegraph Co. v. Massachusetts, 125 U.
S. 530;
Cleveland, C., C. & St.L. R. Co. v.
Backus, 154 U. S. 439;
Adams Express Co. v. Ohio State Auditor, 165 U.
S. 194;
Adams Express Co. v. Kentucky,
166 U. S. 171;
Western Union Tel. Co. v. Missouri ex rel. Gottlieb,
190 U. S. 412;
Old Dominion S.S. Co. v. Virginia, 198 U.
S. 299, and, if the property devoted to interstate
transportation is used both within and without the state, a tax
fairly apportioned to its use within the state will be sustained,
Pullman's Palace-Car Co. v. Pennsylvania, 141 U. S.
18;
Cudahy Packing Co. v. Minnesota,
246 U. S. 450. Net
earnings from interstate commerce are subject to income tax,
United States Glue Co. v. Oak Creek, 247 U.
S. 321, and, if the commerce is carried on by a
corporation, a franchise tax may be imposed measured by the net
income from business done within the state, including such portion
of the income derived from interstate commerce as may be justly
attributable to business done within the state by a fair method of
apportionment,
Underwood Typewriter Co. v. Chamberlain,
254 U. S. 113.
Cf. Bass, Ratcliff & Gretton, Ltd. v. State Tax
Commission, 266 U. S. 271.
All of these taxes in one way or another add to the expense of
carrying on interstate commerce, and in that sense burden it; but
they are not for that reason prohibited. On the other hand, local
taxes measured by gross receipts from interstate commerce have
often been pronounced unconstitutional. The vice characteristic of
those which have been held invalid is that they have placed on the
commerce burdens of such a nature as to be capable, in point of
substance, of being imposed (
Fargo v. Stevens, Michigan,
121 U. S. 230;
Philadelphia & Sou.S.S. Co. v. Pennsylvania,
122 U. S. 326;
Galveston, H. & S.A. R. Co. v. Texas, supra; Meyer v.
Wells, Fargo & Co., 223 U. S. 298) or
added to (
Crew Levick Co. v. Pennsylvania, 245 U.
S. 292;
Fisher's Blend Station, Inc.
v. State Tax
Page 303 U. S. 256
Commission, 297 U. S. 650),
with equal right by every state which the commerce touches, merely
because interstate commerce is being done, so that, without the
protection of the commerce clause, it would bear cumulative burdens
not imposed on local commerce.
See Philadelphia & Sou.S.S.
Co. v. Pennsylvania, supra, 122 U. S. 346;
State Freight
Tax, 15 Wall. 232,
82 U. S. 280;
Bradley, J., dissenting in
Maine v. Grand Trunk Ry. Co.,
142 U. S. 217,
142 U. S. 235.
Cf. Pullman's Palace-Car Co. v. Pennsylvania, supra,
141 U. S. 26.
The multiplication of state taxes measured by the gross receipts
from interstate transactions would spell the destruction of
interstate commerce and renew the barriers to interstate trade
which it was the object of the commerce clause to remove.
Baldwin v. G.A.F. Seelig, 294 U.
S. 511,
294 U. S.
523.
It is for these reasons that a state may not lay a tax measured
by the amount of merchandise carried in interstate commerce,
State Freight Tax, supra, or upon the freight earned by
its carriage,
Fargo v. Stevens, supra; Philadelphia &
Sou.S.S. Co. v. Pennsylvania, supra, restricting the effect of
State Tax on Railway Gross
Receipts, 15 Wall. 284,
with which compare
Miller, J., dissenting in that case at
82 U. S. 297.
Taxation measured by gross receipts from interstate commerce has
been sustained when fairly apportioned to the commerce carried on
within the taxing state,
Wisconsin & M. Ry. Co. v.
Powers, 191 U. S. 379;
Maine v. Grand Trunk Railway, supra; Cudahy Packing Co. v.
Minnesota, supra; United States Express Co. v. Minnesota,
223 U. S. 335, and
in other cases has been rejected only because the apportionment was
found to be inadequate or unfair,
Fargo v. Michigan, supra;
Galveston, H. & S.A. R. Co. v. Texas, supra; Meyer v. Wells,
Fargo & Co., supra, with which compare Wisconsin & M. R.
Co. v. Powers, supra. Whether the tax was sustained as a fair
means of measuring a local privilege or franchise, as in
Maine
v. Grand Trunk Railway, supra; Ficklen v. Shelby County
Taxing
Page 303 U. S. 257
District, supra; American Manufacturing Company v. St.
Louis, 250 U. S. 459, or
as a method of arriving at the fair measure of a tax substituted
for local property taxes,
Cudahy Packing Co. v. Minnesota,
supra; United States Express Company v. Minnesota, supra; cf.
Postal Telegraph Cable Co. v. Adams, supra; see McHenry v.
Alford, 168 U. S. 651,
168 U. S. 670,
671, it is a practical way of laying upon the commerce its share of
the local tax burden without subjecting it to multiple taxation not
borne by local commerce and to which it would be subject if gross
receipts, unapportioned, could be made the measure of a tax laid in
every state where the commerce is carried on. A tax on gross
receipts from tolls for the use by interstate trains of tracks
lying wholly within the taxing state is valid,
New York, L.E.
& W. R. Co. v. Pennsylvania, 158 U.
S. 431;
cf. Henderson Bridge Co. v. Kentucky,
166 U. S. 150,
although a like tax on gross receipts from the rental of railroad
cars used in interstate commerce both within and without the taxing
state is invalid.
Fargo v. Michigan, supra. In the one
case, the tax reaches only that part of the commerce carried on
within the taxing state; in the other, it extends to the commerce
carried on without the state boundaries, and, if valid, could be
similarly laid in every other state in which the business is
conducted.
In the present case, the tax is, in form and substance, an
excise conditioned on the carrying on of a local business, that of
providing and selling advertising space in a published journal,
which is sold to and paid for by subscribers, some of whom receive
it in interstate commerce. The price at which the advertising is
sold is made the measure of the tax. This Court has sustained a
similar tax said to be on the privilege of manufacturing, measured
by the total gross receipts from sales of the manufactured goods
both intrastate and interstate.
American Manufacturing Co. v.
St. Louis, supra, 250 U. S. 462.
The actual sales prices which
Page 303 U. S. 258
measured the tax were taken to be no more than the measure of
the value of the goods manufactured, and so an appropriate measure
of the value of the privilege, the taxation of which was deferred
until the goods were sold.
Ficklen v. Shelby County Taxing
District, supra, sustained a license tax measured by a
percentage of the gross annual commissions received by brokers
engaged in negotiating sales within for sellers without the
state.
Viewed only as authority,
American Manufacturing Co. v. St.
Louis, supra, would seem decisive of the present case. But we
think the tax assailed here finds support in reason, and in the
practical needs of a taxing system which, under constitutional
limitations, must accommodate itself to the double demand that
interstate business shall pay its way and that, at the same time,
it shall not be burdened with cumulative exactions which are not
similarly laid on local business.
As we have said, the carrying on of a local business may be made
the condition of state taxation if it is distinct from interstate
commerce and the business of preparing, printing and publishing
magazine advertising is peculiarly local and distinct from its
circulation, whether or not that circulation be interstate
commerce.
Cf. Puget Sound Stevedoring Co. v. Tax Comm'n,
302 U. S. 90. No
one would doubt that the tax on the privilege would be valid if it
were measured by the amount of advertising space sold.
Utah
Power & Light Co. v. Pfost, supra; Federal Compress & W.
Co. v. McLean, 291 U. S. 17, or by
its value.
Oliver Iron Mining Co. v. Lord, 262 U.
S. 172;
Hope Natural Gas Co. v. Hall,
274 U. S. 284.
Selling price, taken as a measure of value whose accuracy
appellants do not challenge, is, for all practical purposes, a
convenient means of arriving at an equitable measure of the burden
which may be imposed on an admittedly taxable subject matter.
Unlike the measure of the tax sustained in
American
Manufacturing Co. v. St. Louis, supra, it does not embrace
Page 303 U. S. 259
the purchase price (here, the magazine subscription price) of
the articles shipped in interstate commerce. So far as the
advertising rates reflect a value attributable to the maintenance
of a circulation of the magazine interstate, we think the burden on
the interstate business is too remote and too attenuated to call
for a rigidly logical application of the doctrine that gross
receipts from interstate commerce may not be made the measure of a
tax. Experience has taught that the opposing demands that the
commerce shall bear its share of local taxation, and that it shall
not, on the other hand, be subjected to multiple tax burdens merely
because it is interstate commerce, are not capable of
reconciliation by resort to the syllogism. Practical, rather than
logical, distinctions must be sought.
See Galveston, H. &
S.A. R. Co. v. Texas, supra, 210 U. S. 227.
Recognizing that not every local law that affects commerce is a
regulation of it in a constitutional sense, this Court has held
that local taxes may be laid on property used in the commerce; that
its value for taxation may include the augmentation attributable to
the commerce in which it is employed, and, finally, that the
equivalent of that value may be computed by a measure related to
gross receipts when a tax of the latter is substituted for a tax of
the former.
See Galveston, H. & S.A. R. Co. v. Texas,
supra, 210 U. S.
225.
Here it is perhaps enough that the privilege taxed is of a type
which has been regarded as so separate and distinct from interstate
transportation as to admit of different treatment for purposes of
taxation,
Utah Light & Power Co. v. Pfost, supra; Federal
Compress & Warehouse Co. v. McLean, supra; Chassaniol v.
Greenwood, 291 U. S. 584, and
that the value of the privilege is fairly measured by the receipts.
The tax is not invalid because the value is enhanced by appellants'
circulation of their journal interstate, any more than property
taxes on railroads are invalid because property value is increased
by the circumstance that the railroads do an interstate
business.
Page 303 U. S. 260
But there is an added reason why we think the tax is not subject
to the objection which has been leveled at taxes laid upon gross
receipts derived from interstate communication or transportation of
goods. So far as the value contributed to appellants' New Mexico
business by circulation of the magazine interstate is taxed, it
cannot again be taxed elsewhere any more than the value of railroad
property taxed locally. The tax is not one which, in form or
substance, can be repeated by other states in such manner as to lay
an added burden on the interstate distribution of the magazine. As
already noted, receipts from subscriptions are not included in the
measure of the tax. It is not measured by the extent of the
circulation of the magazine interstate. All the events upon which
the tax is conditioned -- the preparation, printing, and
publication of the advertising matter and the receipt of the sums
paid for it -- occur in New Mexico, and not elsewhere. All are
beyond any control and taxing power which, without the commerce
clause, those states could exert through its dominion over the
distribution of the magazine or its subscribers. The dangers which
may ensue from the imposition of a tax measured by gross receipts
derived directly from interstate commerce are absent.
In this and other ways, the case differs from
Fisher's Blend
Station, Inc. v. State Tax Comm'n, supra, on which appellants
rely. There, the exaction was a privilege tax laid upon the
occupation of broadcasting, which the Court held was itself
interstate communication, comparable to that carried on by the
telegraph and the telephone, and was measured by the gross receipts
derived from that commerce. If broadcasting could be taxed, so also
could reception.
Station WBT, Inc. v.
Poulnot, 46 F.2d
671. [
Footnote 2]
Page 303 U. S. 261
In that event, a cumulative tax burden would be imposed on
interstate communication such as might ensue if gross receipts from
interstate transportation could be taxed. This was the vice of the
tax of a percentage of the gross receipts from goods sold by a
wholesaler in interstate commerce, held invalid in
Crew Levick
Co. v. Pennsylvania, supra. In form and in substance, the tax
was thought not to be one for the privilege of doing a local
business separable from interstate commerce.
Cf. American
Manufacturing Co. v. St. Louis, supra. In none of these
respects is the present tax objectionable.
Affirmed.
MR. JUSTICE McREYNOLDS and MR. JUSTICE BUTLER are of opinion
that the judgment should be reversed.
MR. JUSTICE CARDOZO took no part in the consideration or
decision of this case.
[
Footnote 1]
"Sec. 201. There is hereby levied, and shall be collected by the
Tax Commission, privilege taxes, measured by the amount or volume
of business done, against the persons, on account of their business
activities, engaging, or continuing, within the New Mexico, in any
business as herein defined, and in the amounts determined by the
application of rates against gross receipts, as follows:"
"
* * * *"
"I -- At an amount equal to 2 percent of the gross receipts of
any person engaging or continuing in any of the following
businesses: . . . Publication of newspapers and magazines (but the
gross receipts of the business of publishing newspapers or
magazines shall include only the amounts received for the sale of
advertising space)."
[
Footnote 2]
Great Britain levies an annual license tax on radio receiving
apparatus.
See Wireless Telegraphy Act of 1904, c. 24, 4
Edw. 7, as explained by c. 67, 15 & 16 Geo. 5, and implemented
by regulation printed in Great Britain, Post Office Guide, July,
1936.