[226 U.S. 404, 405] Messrs. Rush Taggart, Willliam M. Williams, John F. Dillon, George H. Fearons, F. N. Whitney, and Ray Rushton for plaintiff in error
[226 U.S. 404, 409] Mr. J. K. Dixon for defendant in error.
Mr. Justice Day delivered the opinion of the court:
This is a writ of error to review the judgment of the supreme court of the state of Alabama, affirming the judgment of the city court of Talladega. 164 Ala. 633, 51 So. 330.
D. G. Williams, the plaintiff in error, was convicted of doing business in the city of Talladega, as agent of the Western Union Telegraph Company, from October 1, 1908, to December 31, 1908, without taking out and paying for a license, in violation of an ordinance of the city. The ordinance contained a schedule of licenses for divers businesses, vocations, occupations, and professions carried on in the city, among others, the following:
Section 2 of the ordinance declared that the license was exacted in the exercise of the police power of the city, as well as for the purpose of raising revenue for the city. The 4th section provided that any person, firm, or corporation who engaged in any trade, business, or profession for which a license was required, without first having obtained such license, should be guilty of an offense, and upon conviction should be fined not less than $1 and not more than $100, and that each day should constitute a separate offense.
The record discloses that the corporation was organized [226 U.S. 404, 412] under the laws of the state of New York, and had accepted the provisions of the act of Congress of July 24, 1866 [14 Stat. at L. 221, chap. 230] ( Rev. Stat. 5263-5268, U. S. Comp. Stat. 1901, pp. 3580, 3581), and for several years theretofore and during the years 1907 and 1908, had had an office in the city of Talladega, and was engaged in the business of transmitting messages between private parties and between the departments and agencies of the United States government from Talladega to other points in the state of Alabama, and also from other points in the state of Alabama to Talladega; that during the months of October, November, and December, 1908, Williams was employed by the Western Union Telegraph Company as manager of its office at Talladega; that a license fee of $25 was demanded of him for the quarter ending December 31, 1908, which was refused, and that he was fined $25 and costs, and in the event of his failure to pay the fine and costs he was sentenced to labor on the streets for fifty days. It also appears that the Western Union Telegraph Company pays taxes on its property in the state. In addition to the agreed facts, from which the above statement is taken, it is shown by the testimony of the defendant that the lines of the Western Union Telegraph Company enter and leave the city over the right of way of the Southern Railroad and the Louisville & Nashville Railroad, both of which are public railroads, and that within the city of Talladega the company has lines which leave the right of way of the railroad companies and proceed along public streets to the office of the company; and also that government messages were relayed daily at the Talladega office; that it received messages between the different departments of the government of the United States at this office from points within the state; and that government messages were given a preference and were sent at reduced rates. From the testimony, the supreme court of Alabama found that for the year 1908, not including the month of January, the [226 U.S. 404, 413] company did its intrastate business at a net loss of 86 cents.
This case differs from some cases which have been in this court, involving the right to tax the Western Union Telegraph Company, in that it places emphasis upon the alleged immunity from taxation of the class herein involved, because, it is contended, by the act of 1866, Congress, by virtue of the authority given it to establish post roads, conferred Federal franchises upon the company, and made the Western Union Telegraph Company an instrumentality of the Federal government, endowed with franchises to construct, maintain, and operate telegraph lines on the post roads of the United States, with the duty in the operation of those lines not only to serve the government of the United States, but also to serve the public which might wish to transact business over its lines. This being so, it is now insisted that the attempt to impose a license tax upon the company, either by the state of Alabama or any of its municipalities, is an attempt to impose a tax on the franchises so created by the Federal government.
The question made upon this point was considered in Postal Teleg. Cable Co. v. Charleston, 153 U.S. 692 , 38 L. ed. 871, 4 Inters. Com. Rep. 637, 14 Sup. Ct. Rep. 1094. In that case the Postal Telegraph Cable Company had accepted the provisions of the act of 1866, and the state statute imposed a license of $500 upon the telegraph company for business done exclusively within the city of Charleston, not including any business done to or from points without the state, and not including any business done by the officers of the United States. It was contended for the telegraph company that the license required by the ordinance was a tax upon it for the privilege of exercising its franchise within the city of Charleston; that the telegraph company having constructed its lines along post roads in the city of Charleston and elsewhere, no state or municipal authority could collect a license fee [226 U.S. 404, 414] from it for the privilege of conducting its business, 'thus restraining the powers possessed by it under its franchises and under the acts of Congress;' and furthermore, that the ordinance in question was in interference with interstate commerce and therefore void. It will thus be seen that in that case not only was the contention made as to the interstate commerce feature of the telegraph company's business, but it was specifically claimed that to exact such a license would restrain the powers possessed by it under the franchises created by the act of Congress. After reviewing a number of cases, Mr. Justice Shiras, who delivered the opinion of the court, said:
In Western U. Teleg. Co. v. Missouri, 190 U.S. 412 , 47 L. ed. 1116, 23 Sup. Ct. Rep. 730, this court, again considering the act of 1866, quoting from the opinion of Mr. Justice Miller in Western U. Teleg. Co. v. Atty. Gen. 125 U.S. 530 , 31 L. ed. 790, 8 Sup. Ct. Rep. 961, said, speaking by Mr. Justice McKenna:
In the latest utterance of this court upon the subject under consideration (Western U. Teleg. Co. v. Richmond, 224 U.S. 160 , 56 L. ed. 710, 32 Sup. Ct. Rep. 449), Mr. Justice Holmes, delivering the opinion of the court said:
The act of Congress of course conveyed no title, and did not attempt to found one by delegating the power to take by eminent domain. Western U. Teleg. Co. v. Pennsylvania R. Co. 195 U.S. 540, 574 , 49 S. L. ed. 312, 324, 25 Sup. Ct. Rep. 133, 1 Ann. Cas. 517. It made the erection of telegraph lines free to all submitting to its conditions, as against an attempt by a state to exclude them because they were foreign corporations, or because of its wish to erect a monopoly of its own. Pensacola Teleg. Co. v. Western U. Teleg. Co. 96 U.S. 1 , 24 L. ed. 708. It has been held to prevent a state from stopping the [226 U.S. 404, 416] operation of lines within the act by injunction for failure to pay taxes. Western U. Teleg. Co. v. Atty. Gen. 125 U.S. 530 , 31 L. ed. 790, 8 Sup. Ct. Rep. 961. But, except in this negative sense, the statute is only permissive, not a source of positive rights.'
These cases, taken together, establish the proposition that the privilege given under the terms of the act to use the military and post roads of the United States for the poles and wires of the company is to be regarded as permissive in character, and not as creating corporate rights and privileges to carry on the business of telegraphy, which were derived from the laws of the state incorporating the company, and that this permissive grant did not prevent the state from taxing the real or personal property belonging to the company within its borders, or from imposing a license tax upon the right to do a local business within the state. Nor is there anything running counter to the former cases in the case of Western U. Teleg. Co. v. Kansas, 216 U.S. 1 , 54 L. ed. 355, 30 Sup. Ct. Rep. 190, wherein it was held that the attempt to levy a graded charter fee upon the entire capital stock of the Western Union Telegraph Company, a corporation of another state, engaged in commerce among the states, as a condition to the right to do local business within the state of Kansas, was void as an attempt, when the substance of things was reached, to tax the right of the company to do interstate business within the state, and as a tax upon property beyond the limits and jurisdiction of the state.
It is further contended that the tax is unreasonable and unjust because of its effect upon interstate business. The reasonableness of the ordinance, unless some Federal right set up and claimed is violated, is a matter for the state to determine. It is contended that the result of the tax upon the intrastate business conducted at a loss is to impose a burden upon the other business of the company, and is therefore void. The supreme court of Alabama [226 U.S. 404, 417] however, reached the conclusion that the attempted test for eleven months, showing a loss of 86 cents, is not a sufficiently accurate representation of the business of the company conducted at Talladega to render the tax void. With this view we agree, and we are not satisfied that the tax is such as to impose a burden upon interstate commerce, and therefore make it subject to attack as a denial of Federal right.
It is further contended that this ordinance is void because it makes no exception as to the sending of government messages. In this respect it is suggested in the brief of the defendant in error that the ordinance may be construed as not to include business transacted by the company as an agency of the government, and as applying only to commercial business of a different character; but, in view of the construction which the supreme court of Alabama has placed upon it, we must consider the ordinance as construed by that court. Upon the authority of a previous case (Moore v. Eufaula, 97 Ala. 670, 11 So. 921), it held the ordinance valid, although it does not exclude messages sent for the government of the United States. In this connection it said:
We therefore have to consider whether a license tax by a state on the doing of business within the state, including the transmission of government messages, by a telegraph company which has accepted the terms in the act of 1866, can be lawfully imposed. By the act of 1866, government messages are given priority over all other business, and are transmitted at the rates annually fixed by the Postmaster General; and before the telegraph companies exercise any of the powers or privileges conferred by the law, they are required to file with the Post- [226 U.S. 404, 418] master General their written acceptance of the restrictions and obligations of the act (Rev. Stat. 5266 and 5268, U. S. Comp. Stat. 1901, pp. 3580, 3581).
This court has had occasion to consider the effect of this legislation and the acceptance of its terms by the telegraph company, so far as the transmission of government telegrams and the transaction of government business is concerned. In the case of Western U. Teleg. Co. v. Texas, 105 U.S. 460 , 26 L. ed. 1067, an ordinance was held void which required the company to pay a tax of 1 cent for all full rate messages sent, and 1/2 cent for every message less than full rate. This was in addition to taxes paid by the company on real and personal property in the state. The ordinance was held void as levying a tax upon interstate messages, and also void in so far as it undertook to tax the transaction of government business. After declaring that as to such business, companies which had accepted the terms of the act became government agencies, this court, speaking by Mr. Chief Justice Waite, said:
And, after dealing with the interstate commerce feature of the law said:
The ordinance sustained in Postal Teleg. Cable Co. v. Charleston, 153 U.S. 692 , 38 L. ed. 871, 4 Inters. Com. Rep. 637, 14 Sup. Ct. Rep. 1094, expressly excluded interstate and government messages.
Were it otherwise, an agency of the Federal government, in the execution of its sovereign power, would be at the mercy of the taxing power of the state. It is enough, in this connection, to refer to the cases of McCulloch v. Maryland, supra; Osborn v. Bank of United States, 9 Wheat. 738, 6 L. ed. 204; Union P. R. Co. v. Peniston, 18 Wall. 5, 21 L. ed. 787; California v. Central P. R. Co. 127 U.S. 1 , 32 L. ed. 150, 2 Inters. Com. Rep. 153, 8 Sup. Ct. Rep. 1073; Central P. R. Co. v. California, 162 U.S. 91 , 40 L. ed. 903, 16 Sup. Ct. Rep. 766.
We have, then, an ordinance which taxes, without exemption, the privilege of carrying on a business a part of which is that of a governmental agency constituted under a law of the United States and engaged in an essential part of the public business,-communication between the officers and departments of the Federal government. The ordinance, making no exception of this class of business, necessarily includes its transaction within the privilege tax levied. This part of the license exacted necessarily affects the whole, and makes the tax unconstitutional and void. In Leloup v. Mobile, 127 U.S. 640 , 32 L. ed. 311, 2 Inters. Com. Rep. 134, 8 Sup. Ct. Rep. 1380, Mr. Justice Bradley, speaking for the court, said:
For this reason we think the judgment of the Supreme Court of Alabama should be reversed, and the case remanded to that court for further proceedings not inconsistent with this opinion.