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In March, 1896, the American Refrigerator Transit Company, a corporation organized under laws of the state of Illinois, filed in the district court of Arapahoe county, state of Colorado, against Frank Hall, treasurer of said county, a bill of complaint, seeking to restrain the defendant from enforcing payment by the said transit company of certain taxes assessed upon refrigerator cars owned by the company, and used for the transportation of perishable freight over various lines of railroad throughout the United States. The bill alleged that the business in which said cars were engaged was exclusively interstate commerce business; that the company has, and has had, no office of place of business within the state of Colorado, and that all the freight transported in plaintiff's cars was transported either from a point or points in a state outside of the state of Colorado to a point within that state, or from a point in the state of Colorado to a point without said state, or between points wholly outside of said state; that said cars had no taxable situs within said state; that said assessment of taxes upon said cars was without authority of [174 U.S. 70, 71] law and void; and that complainant had no plain or adequate remedy a law.
A demurrer to the complaint was overruled, and answer was filed denying some, and admitting other, allegations of the bill. At the trial the parties agreed to and filed the following stipulation:
The following constitutional and statutory provisions are referred to in the opinion:
The cause having come on to be heard, judgment was entered on behalf of the plaintiff, awarding a perpetual injunction as prayed for in the bill of complaint. Thereupon an appeal was taken to the supreme court of the state, from whose decision, reversing the judgment of the trial court ( 51 Pac. 421), and directing the dismissal of the bill, an appeal was taken to this court. Judson Harmon and Percy Werner, for plaintiff in error.
Alexander B. McKinley, for defendant in error.
Mr. Justice SHIRAS, after stating the facts in the foregoing language, delivered the opinion of the court.
In this record we again meet the problem, so often presented, how to reconcile the rightful power of a state to tax property within its borders with its duty to obey those provisions of the federal constitution which forbid the taking of property without due process of law, and the imposition of burdens upon interstate commerce.
The frequency with which the question has arisen is evidence both of its importance and of its difficulty. The vast increase of commerce throughout the country, and the consequent necessary increase of the means whereby such commerce is carried on, have been the occasion of many of the cases in which this court has been called upon to consider the [174 U.S. 70, 75] subject. The expense involved in the manufacture of some of the common articles in daily use, and in their transportation, is so great as to be beyond the means of individuals, and has rendered necessary the aggregation of capital in the form of corporations. Usually such corporations, though organized under the law of one state, make their profits by doing their business in several or all of the states, and, while so doing, receive the protection of their laws. When the taxpayers of one state perceive that they are subjected to competition by the importation of articles made in another, or that they are contributing continually to the prosperity of foreign corporations, what more natural than that they should demand that some share of the public burdens should be put upon such corporations? The difficult task of the lawmaker is to meet that natural and proper demand without infringing upon the freedom of interstate commerce, or depriving those engaged therein of the equal protection of the laws.
In the case before us, we do not need to go far in search of the principles which determine it. We think they may be found in the cases of W. U. Tel. Co. v. Massachusetts, 125 U.S. 530 , 8 Sup. Ct. 961; Pullman's PalaceCar Co. v. Pennsylvania, 141 U.S. 18 , 11 Sup. Ct. 876; and Adams Exp. Co. v. Ohio, 165 U.S. 194 , 17 Sup. Ct. 305.
I the first of those cases was involved the question of the validity of a law of Massachusetts which imposed on the Western Union Telegraph Company, a corporation of the state of New York, a tax on account of the property owned and used by it within the state of Massachusetts, the value of which was to be ascertained by comparing the length of its lines in that state with the length of its entire lines. This court held that such a tax is essentially an excise tax, and not forbidden by the commerce clause of the constitution.
In Pullman's Palace-Car Co. v. Pennsylvania, the nature of the case and the conclusion were thus stated by Mr. Justice Gray:
Adams Exp. Co. v. Ohio was a case wherein was drawn in question the validity of a law of the state of Ohio imposing an assessment upon an express company whose business was carried on through several states. The statute required a board of assessors 'to proceed to ascertain and assess the value [174 U.S. 70, 77] of the property of express, telegraph and telephone companies in Ohio, and in determining the value of the property of said companies in this state, to be taxed within the state and assessed as herein provided, said board shall be guided by the value of said property as determined by the value of the entire capital stock of said companies, and such other evidence and rules as will enable said board to arrive at the true value in money of the entire property of said companies within the state of Ohio, in the proportion which the same bears to the entire property of said companies, as determined by the value of the capital stock thereof, and the other evidence and rules as aforesaid.'
It was contended on behalf of the express company that the law in question was invalid because it sought to impose taxes on property beyond the territorial jurisdiction of Ohio, because the assessments therein pr vided for were an invasion of the constitutional guaranty of the equal protection of the laws, and because the assessments imposed a burden upon interstate commerce. But this court held otherwise. Portions of the opinion of Mr. Chief Justice Fuller may be appropriately quoted:
On a petition for a rehearing the questions were again fully argued, and the conclusions reached on the first hearing were reaffirmed. Adams Exp. Co. v. Ohio, 166 U.S. 186 , 17 Sup. Ct. 604. From the opinion denying the rehearing, delivered by Mr. Justice Brewer, a few extracts may be quoted as applicable to the case in hand:
The constitution of the state of Colorado provides that all corporations in the state, or doing business therein, shall be subject to taxation on the real and personal property owned or used by them within the territorial limits of the authority levying the tax; and its statutes provide for a board of equalization, whose duty it shall be to assess all the property in the state owned, used, or controlled by railway companies, telegraph, telephone, and sleeping or palace car companies, and that, whenever it shall be found that one corporation uses or controls any property belonging to or owned by another corporation, said board may assess such property either to the corporation using or controlling the same, or to the corporation to which it belongs.
The American Refrigerator Transit Company is a corporation of the state of Illinois, engaged in the business of furnishing refrigerator cars for the transportation of perishable products over the various lines of railroads in the United States, and receives as compensation for he use of its cars a [174 U.S. 70, 81] mileage of three-fourths of a cent per mile from each railroad company over whose lines said cars are run.
The receiver of the Union Pacific. Denver & Gulf Company reported to the board of equalization that he had on the line of the railroad which he was operating within the state of Colorado 42 refrigerator cars belonging to the American Refrigerator Transit Company on December 31, 1894. The board thereupon assessed to the transit company said 42 cars, at a valuation of $250 each, and distributed said assessment to the different counties through which the line of said railroad extended.
It was stipulated in the trial court 'that it is necessary for the railroad companies operating within the state of Colorado, and which are required to carry over their lines perishable freight, to have such character of cars wherein they can safely transport such freight, and that, owing to the varying and irregular demands for such cars, the various railroad companies within the state of Colorado have not deemed it profitable to build or own cars of such character, and therefore rely upon securing such cars when needed from the transit company, or corporations doing a like business.'
It was further stipulated 'that the average number of cars of the plaintiff used in the course of the business aforesaid within the state of Colorado during the year for which such assessment was made would equal forty, and that the cash value of plaintiff's cars exceeds the sum of two hundred and fifty dollars per car, and that, if such property of the plaintiff is assessable and taxable within such state, then the amount for which such cars, the property of the plaintiff, is assessed by said state board of equalization, is just and reasonable, and not in excess of the value placed upon other like property within said state for the purposes of taxation.'
Applying the reasoning and conclusions of the cases hereinbefore cited to those admitted facts, we have no difficulty in affirming the judgment of the supreme court of Colorado sustaining the validity of the taxation in question.
The state statutes impose no burdens on the business of the plaintiff in error, but contemplate only the assessment and [174 U.S. 70, 82] levy of taxes upon the property situated within the state; and the only question is whether it was competent to ascertain the number of the cars to be subjected to taxation by inquiring into the average number used within the state limits during the period for which the assessment was made.
It having been settled, as we have seen, that where a corporation of one state brings into another, to use and employ, a portion of its movable personal property, it is legitimate for the latter to impose upon such property thus used and employed its fair share of the burdens of taxation imposed upon similar property used in like way by its own citizens, we think that such a tax may be properly assessed and collected, in cases like the present, where the specific and individual items of property so used and employed were not continuously the same, but were constantly changing, according to the exigencies of the business, and that the tax may be fixed by an appraisement and valuation of the average amount of the property thus habitually used and employed. Nor would the fact that such cars were employed as vehicles of transportation in the interchange of interstate commerce render their taxation invalid. Marye v. Railroad Co., 127 U.S. 123 , 8 Sup. Ct. 1037; Pullman's Palace-Car Co. v. Pennsylvania, 141 U.S. 18 , 11 Sup. Ct. 876.
The judgment of the supreme court of the state of Colorado is accordingly affirmed.
Mr. Justice HARLAN and Mr. Justice WHITE dissented
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Citation: 174 U.S. 70
Docket No: No. 226
Decided: April 24, 1899
Court: United States Supreme Court
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