The New York, Lake Erie & Western Railroad Company, a corporation of the state of New York, doing business in the state of Pennsylvania, appealed from a settlement of account made by the auditor general of the latter state, assessing [158 U.S. 431, 432] certain taxes, to the court of common pleas of Dauphin county. Pa. The case was heard by agreement without a jury, the court finding both the law and the facts.
The following were the finding of fact:
Tax eight-tenths of 1 per cent. upon $71,402.11, paid by the Delaware and Hudson Canal Company $571 69 And upon $1,350 paid by the Buffalo, Rochester and Pittsburgh Railway Company 10 60 Interest 31 63 Attorney general's commission 29 11 ___ Total $643 03
-For which amount judgment is directed to be entered.'
Upon exception the court made an additional finding as follows:
Judgment was entered in pursuance of the findings of fact and law, from which an appeal was taken to the supreme court of Pennsylvania, and the judgment was by that court [158 U.S. 431, 435] affirmed (22 Atl. 212), and to that judgment a writ of error was used out from the supreme court of the United States.
Mr. Justice Harlan dissenting.
M. E. Olmsted, for plaintiff in error.
Henry C. McCormick, Atty. Gen. Pa., and Jas. A. Stranahan, for the Commonwealth.
Mr. Justice SHIRAS, after stating the facts in the foregoing language, delivered the opinion of the court.
The legislature of Pennsylvania, by a revenue statute approved June 7, 1879, enacted that certain enumerated classes of companies, including railroad companies, whether incorporated by or under any law of the commonwealth or whether incorporated by any other state, doing business in the commonwealth, and owning, operating, or leasing to or from any other corporation any railroad, canal, pipe line, slack-water navigation, or street-passenger railway, or other device for the transportation of freight or passengers, shall pay to the state treasurer, for the use of the commonwealth, a tax of eight-tenths of 1 per centum upon the gross receipts of said company for tolls and transportation.
In the leading case of Boyle v. Railroad Co., 54 Pa. St. 341, the supreme court of Pennsylvania, through Mr. Justice Strong, then a justice of that court, thus defined the term 'tolls,' as used in the tax laws of that state: 'Toll is a tribute or custom paid for passage, not for carriage; always something taken for a liberty or privilege, not for a service; and such is the common understanding of the word. Nobody supposes that tolls taken by a turnpike or canal company include charges for transportation, or that they are anyti ng more than an excise demanded and paid for the privilege of using the way.'
This definition was subsequently approved in the case of Railroad Co. v. Sly, 65 Pa. St. 205, and was followed by the trial court and the supreme court of Pennsylvania in the present case. A construction or meaning attributed to the terms of a state statute by the courts of [158 U.S. 431, 436] such state will, of course, be adopted by this court when called upon to decide questions arising under such legislation; and we shall accordingly assume in the present case that the moneys received by the New York, Lake Erie & Western Railroad Company from the Delaware & Hudson Canal Company and from the Rochester & Pittsburgh Railroad Company for their use of the railroad of the former company were tolls, within the meaning of the statute of 1879.
It was found as a fact by the court below that the New York company leased and operated as one of its branches a railroad lying wholly within the state of Pennsylvania, and that under an agreement between it and the Delaware & Hudson Canal Company the latter paid the former, for the use of its railroad during the six months ending June 30, 1889, the sum of $69, 462.11. This amount became payable under the eighth section of said agreement, which was in the following terms:
The canal company furnished its own cars and locomotives, and the moneys paid to the New York company were tolls or rentals for the use of its railroad. Of the amount paid as aforesaid the sum of $69,100 was in respect of coal and merchandise destined and transported to points in other states, and $36,210 was paid in respect of coal and merchandise taken up and put down within the state of Pennsylvania.
The precise question, then, for our solution is, whether the state of Pennsylvania can validly impose taxes on tolls paid by one company to another for the use of its railroad, where the company paying the tolls is engaged in the transportation of merchandise from points within the state to points beyond.
It is, of course, obvious that what is objected to is not the payment of the tolls, for they arise by virtue of the contract between the companies; but the imposition of taxes thereon. [158 U.S. 431, 437] It is contended that such taxes tend to increase the rents or tolls demanded and received by the company owning the road, and thus constitute a burden upon transportation and commerce between the states.
In support of this contention numerous decisions of this court are cited, in which it has been held that state statutes which levy taxes upon gross receipts of railroads for the carriage of freights and passengers into, out of, or through the state put a burden upon commerce among the states, and are therefore void.
It is needless to review the cases cited, because we regard the proposition they are quoted to sustain as thoroughly established; but is the principle of those cases applicable to this?
Undoubtedly, state taxation of interstate commerce, directly placed upon the articles or subjects of such commerce, or upon the necessary means of their transportation, may be used to restrict or regulate such commerce; and more than once this court has been obliged to pronounce invalid state legislation respecting such matters. On the other hand, we have frequently had occasion to show that the existence of federal supervision over interstate commerce, and the consequent obligation upon the federal courts to protect that right of control from encroachment on the part of the states, are not inconsistent with the power of each state to control its own internal commerce, and to tax the franchises, property, or business of its own corporations engaged in such commerce; nor with its power to tax foe ign corporations on account of their property within the state.
Owing to the paramount necessity of maintaining untrammeled freedom of commercial intercourse between the citizens of the different states, and to the fact that so frequently transportation and telegraph companies transact both local and interstate business, it has been found difficult to clearly define the line where the state and the federal powers meet. That difficulty has been chiefly felt by this court in dealing with questions of taxation, and is shown by the not infrequent dissents by members of the court when the effort has been [158 U.S. 431, 438] made to formulate a general statement of the law applicable to such questions.
It is unnecessary, at this time, to again review the cases, or to undertake to show that, while the facts and circumstances that distinguish one case from another may have led to some difference in the mode of stating the law, there is yet a substantial uniformity in the decisions. It is sufficient for our present purposes to refer to the recent case of Telegraph Co. v. Adams, 155 U.S. 688 , 15 Sup. Ct. 268, 360, where many of the cases were considered, and where the general results reached are thus stated:
Coming to apply these settled principles to the case in hand, we find no difficulty.
The tax complained of is not laid on the transportation of the subjects of interstate commerce, or on receipts derived therefrom, or on the occupation or business of carrying it on. [158 U.S. 431, 439] It is a tax laid upon the corporation on account of its property in a railroad, and which tax is measured by a reference to the tolls received. The state has not sought to interfere with the agreement between the contracting parties in the matter of establishing the tolls. Their power to fix the terms upon which the one company may grant to the other the right to use its road is not denied, or in any way controlled.
It is argued that the imposition of a tax on tolls might lead to increasing them in an effort to throw their burden on the carrying company. Such a result is merely conjectural, and, at all events, too remote and indirect to be an interference with interstate commerce. The interference with the commercial power must be direct, and not the mere incidental effect of the requirement of the usual proportional contribution to public maintenance.
One of the assignments of error is based on the finding that 'that portion of defendant's railroad known as the 'Buffalo, Bradford and Pittsburgh Branch,' extending from Buttsville or Gilesville, Pennsylvania, to a connection with defendant's main line at Carrollton, in the state of New York, as shown in findings of fact No. 6, is used by the Buffalo, Rochester and Pittsburgh Rail way Company for purposes of intes tate transportation exclusively,' and it is claimed that the court erred in apportioning the tax according to the portions of the railroad within and without the state.
We do not understand that any objection is made as to the fairness of the apportionment, but the claim is that, as all the business done over the road by the lessee party was interstate commerce, it was not competent for the state to tax the tolls received by the company which owned the road. Thus understood, the legal question is the same with that which arose under the contract between the defendant company and the Delaware & Hudson Canal Company, and which is hereinbefore considered.
The fact that the same corporation which owns the track in Pennsylvania owns likewise a track in New York, does not deprive such company of the right to receive tolls for the use of that part of its road that lies in Pennsylvania, nor the state [158 U.S. 431, 440] of its right to tax such portion of the tolls; and this is what the court below decided.
In Maine v. Grand Trunk Ry. Co., 142 U.S. 217 , 12 Sup. Ct. 121, 163, it was held that a state statute which requires every corporation, person, or association operating a railroad within the state to pay an annual tax, to be determined by the amount of its gross transportation receipts, and further provides that, when applied to a railroad lying partly within and partly without the state, or to one operated as a part of a line or system extending beyond the state, the tax shall be equal to the proportion of the gross receipts in the state, to be ascertained in the manner provided by the statute, does not conflict with the constitution of the United States, and that the tax thereby imposed upon a foreign corporation operating a line of railway, partly within and partly without the state, is one within the power of the state to levy.
So, in the case of Railway Co. v. Backus, 154 U.S. 421 , 14 Sup. Ct. 1114, the validity of a state tax law, whereby a railroad which traversed several states was valued for the purposes of taxation by taking that part of the value of the entire road which was measured by the proportion of the length of the particular part in that state to that of the whole road, was upheld.
Our conclusion is that the federal questions involved in the case were properly decided by the court below, and its judgment is accordingly affirmed.
Mr. Justice HARLAN dissents.