While a state cannot exclude from its limits a corporation
enraged in interstate or foreign commerce or a corporation in the
employment of the general government by the imposition of
unreasonable conditions, it may subject it to a property taxation
incidentally affecting its occupation in the same way that business
of individuals or other corporations is affected by common
governmental burdens.
The tax imposed by the laws of Mississippi (Code of 1880, c.10,
§ 585; Sess.Laws 1888, c. 3), when enforced against a
telegraph company organized under the laws of another state and
engaged in interstate commerce in Mississippi, being graduated
according to the amount and value of the company's property
measured by miles, and being in lieu of taxes directly levied on
the property, is a tax which it is within the power of the state to
impose, and the exercise of that power, as expounded by the highest
judicial tribunal of the state, does not amount to a regulation of
interstate commerce, or put an unconstitutional restraint
thereon.
Page 155 U. S. 689
By the revenue laws of Mississippi certain taxes were levied as
privilege taxes on various corporations, such as express companies,
telegraph companies, insurance companies, sleeping car companies,
banks of deposit or discount, gas companies, and the like, and on
taverns, hotels, restaurants, brokers, auctioneers, peddlers,
liquor sellers, dealers in malt liquors, and so on. Code Miss.
1880, c. 10, § 585; Sess.Laws Miss. 1888, c. 3. The tax
required to be paid by telegraph companies was $3,000 on each
telegraph company operating within the state one thousand miles or
more of wire, and on each telegraph company operating less than one
thousand miles of wire a tax of one dollar per mile, and the tax
thus levied was "in lieu of other state, county, and municipal
taxes." During the fiscal years 1890 and 1891, the Postal Telegraph
Cable Company, a corporation chartered under the laws of New York,
operated within the State of Mississippi three hundred ninety-one
and twenty-eight hundredths miles of wire. The telegraph lines,
equipment, and property appertaining thereto, owned and operated by
the company within the limits of nineteen counties of the state,
were during these years worth and valued at the sum of $41,967.54.
The tax levied on the company be the law of March 8, 1888, under
the name of privilege tax, amounted annually to $391.28, or an
aggregate for the two years of $782.56. Under the general revenue
laws of the state, the
ad valorem tax on the property of
the company for the two years would have been $1,188.56 for state
and county purposes only, not including what might have been
assessed and collected by municipalities in the way of
ad
valorem taxes for municipal purposes. For the years 1890 and
1891, the company failed to pay its taxes, and Adams, the state
revenue agent of the State of Mississippi, brought suit in the
Circuit Court of Hinds County, August 16, 1892, against the company
therefor. The first count of the declaration was for the privilege
taxes, and the second count for
ad valorem taxes in the
several counties, which it was alleged had been duly levied for
state and county purposes. The company demurred to the second count
and pleaded specially to the first count, in substance,
Page 155 U. S. 690
so far as essential here, that it was a telegraph company duly
incorporated and organized under the laws of the State of New York
and was on the 1st days of January, 1890, 1891, and 1892,
respectively, engaged in, and still continued to carry on, the
business of a telegraph company, having offices in various cities
and towns in the State of Mississippi for the purpose of receiving
and sending telegraphic messages and maintaining and operating
certain lines of telegraph on the various post roads, public roads,
and railroads extending over, across, leading into and from the
State of Mississippi to the State of Alabama, and other points in
other states of the United States and the dominion of Canada; that
it was also the lessee of the Atlantic Postal Telegraph Cable
Company, a corporation duly organized under the laws of the State
of New York, and by its charter authorized to construct and operate
lines of telegraph in and between the various states of the Union,
including the State of Mississippi; that as such lessee and owner
it was engaged in the general public telegraph business of
transmitting messages for commercial purposes by, along, and over
its lines within, from, through, and across the State of
Mississippi and many other states and territories of the Union, and
had offices for the receiving and sending of messages by telegraph
in each and every state and territory wherein the lines leased or
owned by it extended, including the State of Mississippi; that on
or about the 6th day of March, 1886, the company duly filed its
written acceptance with the Postmaster General of the United States
of the restrictions and obligations of the act of Congress
entitled, "An act to aid in the construction of telegraph lines and
to secure to the government the use of the same for postal,
military, and other purposes," approved July 24, 1866, now title 65
of the United States Revised Statutes, and that in pursuance
thereof it had been designated by the Postmaster General as one of
the telegraph companies that must transmit messages for the United
States at a price and rate to be fixed by the said Postmaster
General; that defendant was engaged as a governmental agent of the
United States at the times mentioned, in transmitting messages
for
Page 155 U. S. 691
the government of the United States between its various offices,
not only from points within the State of Mississippi to points
without the State of Mississippi, but also for such government
officers from points wholly within the State of Mississippi to
other points also wholly within the State of Mississippi, and that
all of the roads upon which the lines of said company were
constructed were post roads of the United States.
Plaintiff demurred to the special pleas. The case came on to be
heard upon these demurrers, and the circuit court sustained
defendant's demurrer to the second count, and plaintiff's demurrer
to defendant's pleas to the first count, with leave to defendant to
plead over. This defendant declined to do, and judgment was
thereupon entered against the company for the amount of the
so-called "privilege taxes" for the years 1890 and 1891, with
interest and costs. From this judgment an appeal was taken to the
Supreme Court of Mississippi, and the judgment affirmed. The
opinion of that court will be found reported in advance of the
official series in 14 S. 36. A writ of error was then allowed to
this Court.
Page 155 U. S. 695
MR. CHIEF JUSTICE FULLER, after stating the facts in the
foregoing language, delivered the opinion of the Court.
It is settled that where, by way of duties laid on the
transportation of the subjects of interstate commerce, or on
the
Page 155 U. S. 696
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.
As pointed out by MR. JUSTICE FIELD in
Horn Silver Mining
Company v. New York, 143 U. S. 305, the
right of a state to tax the franchise or privilege of being a
corporation as personal property his been repeatedly recognized by
this Court, and this whether the corporation be domestic or a
foreign corporation doing business by its permission within the
state. But a state cannot exclude from its limits a corporation
engaged in interstate or foreign commerce, or a corporation in the
employment of the general government, either directly in terms or
indirectly by the imposition of inadmissible conditions.
Nevertheless the state may subject it to such property taxation as
only incidentally affects its occupation, as all business, whether
of individuals or corporations, is affected by common governmental
burdens.
Ashley v. Ryan, 153 U. S. 436, and
cases cited.
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,
Page 155 U. S. 697
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.
The method of taxation by "a tax on privileges" has been
determined by the Supreme Court of Mississippi to be in harmony
with the Constitution of that state, and that
"where the particular arrangement of taxation provided by
legislative wisdom may be accounted for on the assumption of
compounding or commuting for a just equivalent, according to the
determination of the legislature, in the general scheme of
taxation, it will not be condemned by the courts as violative of
the [state] Constitution."
Vicksburg Bank v. Worrell, 67 Miss. 47. In that case,
privilege taxes imposed on banks of deposit or discount, which
varied with the amount of capital stock or assets and were declared
to the "in lieu of all other taxes, state, county, or municipal,
upon the shares and assets of said banks," came under review, and
it was decided that the privilege tax, to be effectual as a release
from liability for all other taxes, must be measured by the capital
stock and entire assets or wealth of the bank, and that real estate
bought with funds of the bank was exempt from the ordinary
ad
valorem taxes, but was part of the assets of the bank to be
considered in fixing the basis of its privilege tax.
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 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, municipal. The reasonableness of
the imposition appears in
Page 155 U. S. 698
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.
The act, in prescribing the ascertainment of the charge as to
telegraph companies operating less than one thousand miles of wire,
was directed to reach a reasonable commutation of the amount which
the company would be compelled to pay if the taxation were
ad
valorem. The taxation was neither arbitrary nor
discriminating, nor, so far as we are advised, was payment made a
condition precedent to doing business, but collection was
enforceable by suit, and the remedies pertaining thereto, and not
otherwise. Code Mississippi 1880, §§ 585, 587-589,
594.
We concur with the view of the act thus expressed by the supreme
court of the state, and, accepting it as correct, it is obvious
that the case does not fall within the line of decisions in which
state laws have been held inoperative because in conflict with, or
amounting to the exercise of, or the assertion of control over, a
power vested exclusively in the United States. In those decisions,
the interference with the commercial power was found to be direct,
and not the mere incidental effect of the requirement of the usual
proportional contribution to public maintenance.
They need not be reexamined here, as the taxation in question,
according to the proper interpretation of the statute, is in
principle such as was sustained in
Western Union Telegraph Co.
v. Massachusetts, 125 U. S. 530;
Ratterman v. West. Un. Telegraph Co., 127 U.
S. 411;
Pullman Palace Car Co. v. Pennsylvania,
141 U. S. 18;
Massachusetts v. West Un. Telegraph
Page 155 U. S. 699
Co., 141 U. S. 40;
Maine v. Grand Trunk Railway, 142 U.
S. 217.
In
Massachusetts v. Western Union Tel. Co., it was held
that the tax imposed by the statutes of Massachusetts requiring
every telegraph company owning a line of telegraph within the state
to pay to the state treasurer "a tax upon its corporate franchise
at a valuation thereof equal to the aggregate value of the shares
in its capital stock," deducting such portion of that valuation as
is proportional to the length of its lines without the state, and
deducting also an amount equal to the value of its real estate and
machinery, subject to local taxation within the state, was in
effect a tax upon the corporation on account of property used by it
within the state, and was constitutional and valid as applied to a
telegraph company incorporated by another state, and which had
accepted the rights conferred by Congress by section 5263 of the
Revised Statutes. In arriving at this conclusion,
Western Union
Tel. Co. v. Massachusetts, 125 U. S. 530, was
followed, and the following propositions affirmed in that case were
reiterated by MR. JUSTICE GRAY, delivering the opinion of the
Court:
"The franchise of the company to be a corporation, and to carry
on the business of telegraphing, was derived not from the act of
Congress, but from the laws of the State of New York, under which
it was organized, and it never could have been intended by the
Congress of the United States, in conferring upon a corporation of
one state the authority to enter the territory of any other state,
and to erect its poles and lines therein, to establish the
proposition that such a company owed no obedience to the laws of
the state into which it thus entered, and was under no obligation
to pay its fair proportion of the taxes necessary to the support of
the government of that state. 125 U.S.
125 U. S.
547-548. By whatever name the tax may be called, as
described in the laws of Massachusetts, it is essentially an excise
upon the capital of the corporation, and those laws attempt to
ascertain the just amount which any corporation engaged in business
within its limits shall pay as a contribution to the support of its
government upon the amount and value of the
Page 155 U. S. 700
capital so employed by it therein. 125 U.S.
125 U. S.
547. The tax, though nominally upon the shares of the
capital stock of the company, is in effect a tax upon that
organization on account of property owned and used by it in the
State of Massachusetts, and the proportion of the length of its
lines in that state to their entire length throughout the whole
country is made the basis for ascertaining the value of that
property. Such a tax is not forbidden by the acceptance on the part
of the telegraph company of the rights conferred by § 5263 of
the Revised Statutes, or by the commerce clause of the
Constitution. 125 U.S.
125 U. S. 552. The statute
of Massachusetts is intended to govern the taxation of all
corporations doing business within its territory, whether organized
under its own laws or under those of some other state, and the rule
adopted to ascertain the amount of the value of the capital engaged
in that business within its boundaries, on which the tax should be
assessed, is not an unfair or unjust one, and the details of the
method by which this was determined have not exceeded the fair
range of legislative discretion. 125 U.S.
125 U. S.
553."
In the case before us, the tax was graduated according to the
amount and value of the property measured by miles, and was in lieu
of taxes levied directly on the property. In marking the
distinction between the power over commerce and municipal power,
literal adherence to particular nomenclature should not be allowed
to control construction in arriving at the true intention and
effect of state legislation. 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.
Judgment affirmed.
