An Illinois corporation, not qualified to do local business in
California, solicited orders for its goods from California
purchasers through agents for whom it hired offices in that State
and who took the orders subject to the vendor's approval. Goods
sold were sent by the vendor from outside of California directly to
the purchasers or to the agents for distribution to them. Prices
were paid to the vendor directly, in Illinois.
Held: that California constitutionally may apply to
such nonresident corporation the provision of its Use Tax Act
requiring retailers maintaining a place of business in the State,
and making sales of tangible personal property for storage, use, or
other consumption therein, to collect from the purchasers the taxes
imposed. P.
306 U. S.
64.
The Act, so applied, is consistent with the commerce clause, and
with the due process clause of the Fourteenth Amendment.
23 F. Supp. 186 affirmed.
Page 306 U. S. 63
Appeal from a District Court of three judges dismissing a bill
to enjoin appellees from enforcing a tax act.
Page 306 U. S. 64
MR. JUSTICE McREYNOLDS delivered the opinion of the Court.
Appellant seeks an injunction prohibiting the state officers
from enforcing against it the California Use Tax Act of 1935.
(Cal.Stat. 1935, ch. 361, as amended by Cal.Stat. 1937, chs. 401,
671 and 683). Counsel do not question the right of the state to
collect this tax from the user, etc., but they say that, in the
circumstances here disclosed, the officers may not compel appellant
to serve as an agent for collecting the tax as they are threatening
to do.
The trial court, three judges, dismissed the bill upon
motion.
It appears --
Appellant, an Illinois corporation, is engaged in manufacturing
and selling comptometers in that state and delivering these to
purchasers in various parts of the Union. As stated by the court
below, its method of doing business with respect to California
purchasers is substantially as follows:
"Pursuant to a separate contract made with each, the exclusive
right to solicit orders in California is granted to two general
agents, each of whom is allotted a separate section of the State.
Under this contract, the only compensation paid to a general agent
consists of commissions on sales made. Each general agent may
employ sub-agents and also a demonstrator for the purpose of
demonstrating and instructing respecting the comptometers, provided
such employment is approved by plaintiff. Likewise, plaintiff
agrees by this contract to pay the rent of an office for each
general agent, provided the lease to the same has been approved by
it, such office
Page 306 U. S. 65
to be used exclusively in furthering its business; also agrees
to pay part of the traveling expenses incurred by each general
agent, his sub-agents and demonstrators while traveling on business
trips authorized by plaintiff, and also to reimburse each general
agent to the extent of part of the monies advanced to a subagent
and, in addition, in the amount of $40.00 per month toward the
salary of a demonstrator. Plaintiff assumes no other financial
obligation with respect to subagents and demonstrators. Under this
contract, the general agent must devote his entire time and
attention to soliciting orders for plaintiff. All orders taken must
be submitted to and approved by plaintiff, all sales and deliveries
must be made by, and all bills for such orders as are accepted must
be rendered by, the plaintiff. The general agent is prohibited from
making collections, and all payments must be made directly to
plaintiff. The contract further requires the general agent to
maintain certain records and make certain reports, and make a
specified minimum number of calls on prospective customers."
And further,
"That each of these two general agents maintains an office in
this State, the lease to such office designating the plaintiff as
lessee therein, the rent for the same being paid by plaintiff,
while all other expenses of maintaining such office are paid by the
general agent. As soon as an order is accepted, a particular
machine is appropriated for that purpose in plaintiff's shipping
department in Illinois. All machines sold for delivery in
California are shipped from one of plaintiff's distributing points
outside of the State. Sometimes machines are forwarded directly to
the purchasers, while, in other instances, in order to secure
reduced freight charges, large groups of machines are shipped to
the general agent, who makes delivery to the respective purchasers.
The only machines kept by plaintiff in California are those used
as
Page 306 U. S. 66
demonstrators. Plaintiff has never qualified to do intrastate
business in California."
The Use Tax Act (§ 6) directs retailers maintaining a place of
business in the state, and making sales of tangible personal
property for storage, use or other consumption therein, to collect
from the purchaser the tax imposed.
Appellant presents for our consideration two points: (1) The
statute, as construed and applied by the appellees to the
appellant, is repugnant to Art. 1, § 8, clause 3 of the Federal
Constitution. (2) The threatened enforcement of the statute would
deprive appellant of his property without Due Process of Law
contrary to the Fourteenth Amendment.
The argument is this:
The appellant, an Illinois corporation, carried on no intrastate
operations in California, and is not subject to its jurisdiction.
Such business as it transacts in California is interstate in
character. California therefore lacks the power to require it (1)
to act as the state's collecting agent with respect to use tax
which may become due from California storers, users, or consumers,
or (2) to insure payment of such tax if it fails to make
collections from the tax debtors, or (3) otherwise to act as a
"retailer" as defined by the Act and the appellees. The treatment
of the appellant as a retailer subject to the provisions of the
California Use Tax Act is a direct burden upon interstate commerce
prohibited by the Federal Constitution. Numerous provisions of the
statute, if applied, would deprive appellant of its property
without due process of law.
The trial court thought that both contentions were foreclosed by
what was said and ruled in
Bowman v. Continental Oil Co.,
256 U. S. 642,
256 U. S. 650,
Monamotor Oil Co. v. Johnson, 292 U. S.
86,
292 U. S. 93-95,
and
Henneford v. Silas Mason Co., 300 U.
S. 577,
300 U. S.
582-583. And we agree with that conclusion.
Page 306 U. S. 67
Henneford v. Silas Mason Co. upheld a Washington
statute similar to the one under consideration. The opinion
declared (pp.
300 U. S.
582-583):
"The tax is not upon the operations of interstate commerce, but
upon the privilege of use after commerce is at an end."
"Things acquired or transported in interstate commerce may be
subjected to a property tax, nondiscriminatory in its operation,
when they have become part of the common mass of property within
the state of destination. . . . This is so, indeed, though they are
still in the original packages. . . . For like reasons, they may be
subjected, when once they are at rest, to a nondiscriminatory tax
upon use or enjoyment. . . . A tax upon the privilege of use or
storage when the chattel used or stored has ceased to be in transit
is now an impost so common that its validity has been withdrawn
from the arena of debate."
Bowman v. Continental Oil Company recognized the right
of the state to require a distributor
"to render detailed statements of all gasoline received, sold,
or used by it, whether in interstate commerce or not, to the end
that the state may the more readily enforce said excise tax to the
extent that it has lawful power to enforce it as above stated."
Monamotor Oil Co. v. Johnson upheld an Iowa statute.
The complainant there sought an injunction prohibiting tax officers
from requiring the distributor of motor oil received from another
state to pay into the state treasury the tax levied upon the
consumer. This Court said (pp.
292 U. S.
93-95),
"There is no substance in the claim that the statutes impose a
burden upon interstate commerce. . . . The statute in terms imposes
the tax on motor vehicle fuel used or otherwise disposed of in the
state. Instead of collecting the tax from the user through its own
officers, the state makes the distributor its agent for that
Page 306 U. S. 68
purpose. This is a common and entirely lawful arrangement. . . .
The statute obviously was not intended to reach transactions in
interstate commerce, but to tax the use of motor fuel after it had
come to rest in Iowa, and the requirement that the appellant as the
shipper into Iowa shall, as agent of the state, report and pay the
tax on the gasoline thus coming into the state for use by others on
whom the tax falls imposes no unconstitutional burden either upon
interstate commerce or upon the appellant."
The challenged judgment must be
Affirmed.
MR. JUSTICE ROBERTS took no part in the consideration or
decision of this cause.