[231 U.S. 68, 69] Messrs. William P. Everts and Charles A. Snow for plaintiffs in error.
[231 U.S. 68, 73] Mr. James M. Swift, Attorney General of Massachusetts, and Mr. Andrew Marshall for the state of Massachusetts.
Mr. Justice Day delivered the opinion of the court:
These cases present the question of the constitutional validity of an act of the commonwealth of Massachusetts (Stat. 1909, chap. 490, pt. 3, 54 et seq.), undertaking to impose a tax on foreign corporations within the commonwealth. While the cases are not in all respects parallel, [231 U.S. 68, 79] they were argued together, and present the same questions, and we shall accordingly dispose of them as one.
The cases were heard upon agreed statements of fact, which show:
The Baltic Mining Company, a Michigan corporation, organized for the purpose of mining, producing, and selling copper, with a total authorized capital stock of $2,500,000, consisting of 100,000 shares of the par value of $25 each, all of which have been issued and are outstanding, $18 having been paid on each share, owns a copper mine with equipment in Michigan, and has its principal place of business in that state. It has an office in the city of Boston, for the use of its president and treasurer, residing in Boston, for the general financial management and direction of its affairs, and for the meetings of its board of directors and the transfer of its stock. The Copper Range Consolidated Company, a New Jersey corporation, owns and holds 99,659 shares of its stock, and also has an office and place of business in Boston. The Baltic Mining Company was admitted to do business in Massachusetts, and complied with the foreign corporation laws of that state. Its total property and assets amount to $ 10,776,000, but none of the property is in Massachusetts except current bank deposits and a certificate for $80,000 of stock in another Michigan corporation. It is engaged in the mining and refining of copper in Michigan, which is sold for delivery in the several states of the United States and in foreign countries. The United Metals Selling Company, a New Jersey corporation, with its principal office in New York city, and with no office in Massachusetts, has the exclusive agency for marketing the Baltic Mining Company's copper, it making no sales directly itself. Considerable quantities of the copper are sold for delivery in Massachusetts, as well as in other states, and transported from the Michigan smelter to the purchaser. In exceptional instances sales are made in Massachusetts [231 U.S. 68, 80] for delivery there, but this is out of the usual course of business, not more than 5 per cent of the total sales being made, the larger part being regularly consummated in New York city. The petition was brought to recover an excise tax of $500 imposed by the commonwealth, pursuant to 56 of the act, and paid by the company, and was dismissed by the supreme judicial court of Massachusetts. 207 Mass. 381, 93 N. E. 831.
The S. S. White Dental Manufacturing Company is a Pennsylvania corporation, engaged in manufacturing and buying and selling artificial teeth and dental supplies, with an authorized capital stock of $1,000,000, and with its principal office in Philadelphia. Its assets aggregate $5,711, 718.29. It has a usual place of business in Boston, consisting of large salesrooms, stockrooms, offices, and storerooms, occupied under lease, where it keeps a supply of goods displayed for sale and in stock. Books are kept here, a New England sales agent is in charge, and fifty-four persons are employed, twelve being salesmen who travel through the New England states, except Connecticut and the maritime provinces; but no manufacturing is done in Massachusetts. It sells goods over the counter from its Boston store and also for delivery in Massachusetts by messenger, mail, and express, 50 per cent of the sales made at that store being to persons residing in Massachusetts, and 50 per cent for delivery to persons residing outside of the state. Goods sold from the Boston stock for delivery other than over the counter or by mail or messenger are billed from the Boston salesrooms directly to the purchaser as consignee, from the company as consignor. Orders are also accepted at the Boston salesrooms for delivery from the New York and Pennsylvania factories, such orders being sent to the principal office in Pennsylvania, and filled either in New York or in Pennsylvania, and the goods being billed directly to the purchaser. Except in intrastate deliveries by messenger, [231 U.S. 68, 81] the company uses public carriers in the transportation of the goods, and a large percentage of the total sales require transportation from the New York or Pennsylvania factories into other states. The stock on hand in the Boston store, the Fixtures and the current bank deposits, represent the tangible property in Massachusetts, and amount to about $100,000. The company maintains fourteen places of business other than the ones in Pennsylvania and Massachusetts, located in New York and other states. Ten per cent of the sales are made in Massachusetts, of which approximately one half are for delivery in that state. The company complied with the requirement of the laws relating to foreign corporations for ten years, and seeks to recover an excise tax of $200, levied pursuant to the statute, and paid by it. The supreme judicial court of Massachusetts held that the act was valid, and dismissed the petition. 212 Mass. 35, 98 N. E. 1056, Ann. Cas. 1913 C, 805.
The act provides ( 54) for the filing of a certificate annually by foreign corporations, showing their authorized capital stock and assets and liabilities, and ( 55) that such certificate shall be accompanied by an auditor's sworn statement, and shall be submitted to the commissioner of corporations, who shall assess an excise tax upon the corporation, in accordance with the provisions of 56 of the act, and that the certificate shall not be filed until approved by him and the tax paid.
Section 56 reads:
The specific objections of the plaintiffs in error to the imposition of this tax under the facts shown in the records are threefold: First, the tax is a regulation of interstate commerce, in that it imposes a direct burden upon that portion of the business and capital of the plaintiffs in error which is devoted to interstate commerce; second, the tax is in violation of the due process of law clause, because it attempts to impose taxes upon property beyond the jurisdiction of the commonwealth of Massachusetts; and third, the tax denies to the plaintiffs in error the equal protection of the law.
It is well settled and requires no review of the decisions of this court to that effect that the power of Congress over interstate commerce is supreme under the Federal Constitution, and that the states may not burden such commerce, it being the purpose of the Constitution of the United States to bring commerce of this character under one supreme control, and to vest the exercise of authority over it in the general government. It is equally well settled that forms of regulation prohibited to the state by the Constitution may consist of efforts to tax the carrying on of such commerce, and of attempted levies of taxes upon the receipts of interstate commerce as such. Galveston, H. & S. A. R. Co. v. Texas, 210 U.S. 217 , 52 L. ed. 1031, 28 Sup. Ct. Rep. 638; Western U. Teleg. Co. v. Kansas, 216 U.S. 1 , 54 L. ed. 355, 30 Sup. Ct. Rep. 190; Pullman Co. v. Kansas, 216 U.S. 56 , 54 L. ed. 378, 30 Sup. Ct. Rep. 232; Minnesota Rate Cases (Simpson v. Shepard) 230 U.S. 352, 400 , 57 S. L. ed. 1151, 33 Sup. Ct. Rep. 729, and previous cases in this court therein cited.
While this is true, other equally well-established principles must be borne in mind in considering the validity of a state tax attacked upon grounds of unconstitutionality. The mere fact that a corporation is engaged in [231 U.S. 68, 83] interstate commerce does not exempt its property from state taxation. United States Exp. Co. v. Minnesota, 223 U.S. 335, 344 , 56 S. L. ed. 459, 464, 32 Sup. Ct. Rep. 211. It is the commerce itself which must not be burdened by state exactions which interfere with the exclusive Federal authority over it. A resort to the receipts of property or capital employed in part, at least, in interstate commerce, when such receipts or capital are not taxed as such, but are taken as a mere measure of a tax of lawful authority within the state, has been sustained. Maine v. Grand Trunk R. Co. 142 U.S. 217 , 35 L. ed. 994, 3 Inters. Com. Rep. 807, 12 Sup. Ct. Rep. 121, 163; Provident Inst. v. Massachusetts, 6 Wall. 611, 18 L. ed. 907; Hamilton Mfg. Co. v. Massachusetts, 6 Wall. 632, 18 L. ed. 904; Flint v. Stone Tracy Co. 220 U.S. 107 , 162-165, 55 L. ed. 389, 417-419, 31 Sup. Ct. Rep. 342, Ann. Cas. 1912 B, 1312; United States Exp. Co. v. Minnesota, supra.
The right of a state to exclude a foreign corporation from its borders, so long as no principle of the Federal Constitution is violated in such exclusion, has been repeatedly recognized in the decisions of this court, and the right to prescribe conditions upon which a corporation of that character may continue to do business in the state, unless some contract right in favor of the corporation prevents, or some constitutional right is denied in the exclusion of such corporation, is but the correlative of the power to exclude. Hammond Packing Co. v. Arkansas, 212 U.S. 322, 343 , 53 S. L. ed. 530, 541, 29 Sup. Ct. Rep. 370, 15 Ann. Cas. 645; Southern P. Co. v. Denton, 146 U.S. 202 , 36 L. ed. 942, 13 Sup. Ct. Rep. 44; Barron v. Burnside, 121 U.S. 186 , 30 L. ed. 915, 1 Inters. Com. Rep. 295, 7 Sup. Ct. Rep. 931; Home Ins. Co. v. Morse, 20 Wall. 445, 22 L. ed. 365; Herndon v. Chicago, R. I. & P. R. Co. 218 U.S. 135 , 54 L. ed. 970, 30 Sup. Ct. Rep. 633. For example, a state may not say to a foreign corporation, you may do business within our borders if you permit your property to be taken without due process of law; or you may transact business in interstate commerce subject to the regulatory power of the state. To allow a state to exercise such authority would permit it to deprive of fundamental rights those entitled to the protection of the Constitution in every part of the Union. Having these general prin- [231 U.S. 68, 84] ciples in mind, we will proceed to a consideration of the statute of Massachusetts directly involved in these cases.
The supreme judicial court of Massachusetts, in considering the character of the tax assessed under the statute of 1909, said (207 Mass. 388, 93 N. E. 831):
We have no fault to find with the conclusion that this is an excise tax. See also Provident Inst. v. Massachusetts, 6 Wall. 611, 18 L. ed. 907; Hamilton Mfg. Co. v. Massachusetts, 6 Wall. 632, 18 L. ed. 904, in which this court had occasion to consider the taxing system of Massachusetts. That the state may impose a tax upon a corporation, foreign or domestic, for the privilege of doing business within its borders, is undoubted; and such has long been the legislative policy of the commonwealth of Massachusetts, as appears from the history of legislation set forth in the opinions in the cases last cited. Construing the act in question, the supreme judicial court of Massachusetts has held that it does not apply to corporations engaged in railroad, telegraph, telephone, etc., business, which are taxed on another plan under the provisions of the statute. It is held not to apply to corporations whose business is interstate commerce, or who carry on interstate and intrastate business in such close connection that the intrastate business cannot be abandoned without serious impairment of the interstate business of the corporation. And the statute, it is held, does not apply to corporations which have places of business for the transaction solely of interstate commerce. Atty. Gen. ex rel. Commissioner of Corporations v. Electric Storage Battery Co. 188 Mass. 239, 74 N. E. 467, 3 Ann. Cas. 631. The tax is levied upon the privilege of carrying on business within [231 U.S. 68, 85] the state, and not upon property therein which is otherwise taxed.
It is said, notwithstanding, that this tax is a direct burden upon interstate commerce, and an attempt to tax property beyond the jurisdiction of the state, within the authority of the Kansas cases, Western U. Teleg. Co. v. Kansas, 216 U.S. 1 , 54 L. ed. 355, 30 Sup. Ct. Rep. 190; Pullman Co. v. Kansas, 216 U.S. 56 , 54 L. ed. 378, 30 Sup. Ct. Rep. 232. These cases have been followed by others similar in character. Ludwig v. Western U. Teleg. Co. 216 U.S. 146 , 54 L. ed. 423, 30 Sup. Ct. Rep. 280; Western U. Teleg. Co. v. Andrews, 216 U.S. 165 , 54 L. ed. 430, 30 Sup. Ct. Rep. 286; Atchison, T. & S. F. R. Co. v. O'Connor, 223 U.S. 280 , 56 L. ed. 436, 32 Sup. Ct. Rep. 216, Ann. Cas. 1913 C, 1050; Meyer v. Wells, F. & Co. 223 U.S. 298 , 56 L. ed. 445, 32 Sup. Ct. Rep. 218.
In Western U. Teleg. Co. v. Kansas, and Pullman Co. v. Kansas, the statute under which the state of Kansas undertook to levy a charter fee of 1/10 of 1 per cent of their authorized capital upon the first $100,000 of the capital stock of foreign corporations, and 1/20 of 1 per cent upon the next $400,000, and for each million or major part thereof, $200, making a tax of $20,100 against the Western Union Telegraph Company, and $14,800 against the Pullman Company, was declared to be unconstitutional, as having the effect not simply to exert the lawful power of taxing a foreign corporation for the privilege of doing local business, but to burden interstate commerce, and to reach property represented by the capital stock of the companies, which was duly paid in and invested in property in many states, and therefore beyond the taxing jurisdiction of Kansas. Every case involving the validity of a tax must be decided upon its own facts, and having no disposition to limit the authority of those cases, the facts upon which they were decided must not be lost sight of in deciding other and alleged similar cases. In the Kansas cases the business of both complaining companies was commerce, the same instrumentalities and the same agencies carrying on in the same places the business of the companies of state and inter- [231 U.S. 68, 86] state character. In the Western U. Teleg. Co. Case, the company had a large amount of property permanently located within the state, and between 800 and 900 offices constantly carrying on both state and interstate business. The Pullman Company had been running a large number of cars within the state, in state and interstate business, for many years. There was no attempt to separate the intrastate business from the interstate business by the limitations of state lines in its prosecution.
An examination of the previous decisions in this court shows that they have been decided upon the application to the facts of each case of the principles which we have undertaken to state, and a tax has only been invalidated where its necessary effect was to burden interstate commerce, or to tax property beyond the jurisdiction of the state. In the cases at bar the business for which the companies are chartered is not, of itself commerce. True it is that their products are sold and shipped in interstate commerce, and to that extent they are engaged in the business of carrying on interstate commerce, and are entitled to the protection of the Federal Constitution against laws burdening commerce of that character. Interstate commerce of all kinds is within the protection of the Constitution of the United States, and it is not within the authority of a state to tax it by burdensome laws. From the statement of facts it is apparent, however, that each of the corporations in question is carrying on a purely local and domestic business, quite separate from its interstate transactions. That local and domestic business, for the privilege of doing which the state has imposed a tax, is real and substantial, and not so connected with interstate commerce as to render a tax upon it a burden upon the interstate business of the companies involved. In these cases the ultimate contention is not that the receipts from interstate commerce are taxed as such, but that the property of the corporations, including [231 U.S. 68, 87] that used in such comperce, represented by the authorized capital of the corporations, is taxed, and therefore interstate commerce is unlawfully burdened by a state statute. While the tax is imposed by taking a percentage of the authorized capital, the agreed facts show that the authorized capital is only a part of the capital of the corporations, respectively. In the Baltic Mining Company Case, the authorized capital is $ 2,500,000, while the entire property and assets are $10,776,000; and in the White Dental Company Case the authorized capital is $1,000,000, while the assets aggregate $5,711,718.29. Further, the Massachusetts statute limits the tax to a maximum of $2,000. The conclusion, therefore, that the authorized capital is only used as the measure of tax, in itself lawful, without the necessary effect of burdening interstate commerce, brings the legislation within the authority of the state. So, if the tax is, as we hold it to be, levied upon a legitimate subject of such taxation, it is not void because imposed upon property beyond the state's jurisdiction, for the property itself is not taxed. In so far as it is represented in the authorized capital stock, it is used only as a measure of taxation, and, as we have seen, such measure may be found in property or in the receipts from property not in themselves taxable.
It is further contended that the imposition of the tax denies the equal protection of the laws, and this upon the authority of Southern R. Co. v. Greene, 216 U.S. 400 , 54 L. ed. 536, 30 Sup. Ct. Rep. 287, 17 Ann. Cas. 1247. In that case the railway company had gone into the state of Alabama, and, under authority of the state, acquired a large amount of railroad property upon which it paid taxes as well as a license tax imposed by the state. After the payment of all such taxes, and in this condition of affairs, the state undertook to levy upon the railroad company a privilege tax because it was a foreign corporation, not imposing the same tax upon domestic corporations doing precisely the same business. This court held that the railroad company was a person within the meaning [231 U.S. 68, 88] of the Constitution, and entitled to the equal protection of the laws, and that by the taxation of its railroad property under such circumstances it was denied the equal protection of the law, no like tax being levied upon domestic corporations. It was said in that case (p. 416):
The conditions existing in the Southern R. Co. v. Greene Case are not presented here. It is true that the plaintiffs in error paid taxes assessed against foreign corporations before the passage of the law of 1909, and that the White Dental Company had a leasehold for storerooms in the state; but we do not find in this situation an acquisition of permanent property, such as was shown in the Greene Case. And there is no question of the continued authority of the state to tax a foreign corporation for the privilege of doing business within its borders, which authority the state possesses so long as it does not violate rights secured by the Federal Constitution. Even if, as plaintiffs in error contend, under the statute, domestic corporations are favored, the statute is not invalid, for no limitation upon the power of a state to exclude foreign corporations requires identical taxes in all cases upon domestic and foreign corporations.
As this statute has been construed by the Supreme Judicial Court of Massachusetts, and applied in these cases, we are unable to find that the tax imposed violates the constitutional rights of the plaintiffs in error.
Dissenting: The CHIEF JUSTICE, Mr. Justice Van Devanter, and Mr. Justice Pitney.