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Messrs. Robert E. Olds, Frank B. Kellogg, and C. A. Severance for plaintiff in error.
[223 U.S. 335, 338] Mr. Lyndon A. Smith, attorney General of Minnesota, Mr. William J. Stevenson, Assistant Attorney General, and Mr. George T. Simpson for defendant in error.
Mr. Justice Day delivered the opinion of the court:
This is a writ of error to the supreme court of the state of Minnesota, bringing in review a judgment of that court sustaining a tax assessed against the United States Express Company. 114 Minn. 346, -- L.R. A.(N.S.) --, 131 N. W. 489.
The express company is an unincorporated association, with its principal office in the state of New York, engaged in the express business in the United States. The business is carried on under contracts between the company and railroads for the transportation by the railroad companies of goods forwarded by the express company, upon the payment by the express company, as compensation for such service, of a certain percentage of the gross receipts of the express company, derived from the business carried over the lines of the railroads. Under such contracts the company is engaged in carrying on express business over many lines of railroads in the United States, amounting in the aggregate to some 30,000 miles of road. It carries on express business in this manner in the state of Minnesota upon the Chicago, Rock Island & Pacific Railway, Duluth & Iron Range Railroad, and, for a time, the Chicago, Milwaukee, & St. Paul Railway. The company has offices in many states, the District of Columbia and Canada, and in various European countries. It has about fifty offices in the state of Minnesota.
The law in question (Revised Laws of Minnesota 1905, chapter 11) provides for the taxation of express companies. Section 1013 of the act requires every express [223 U.S. 335, 339] company doing business in the state, between January 1 and February 1, to file with the state auditor, in such form as he may prescribe, a statement, duly verified, showing the entire receipts, including all sums earned or charged, whether received or not, for business done within the state, including its proportion of gross receipts for business done in the state by such company in connection with other companies. The statement must further show the amount actually paid by such express company to the railroads within the state for the transportation of its freight for the year, giving the amount paid to each railroad company; and also show the entire receipts of the company for business done within the state, including its proportion of gross receipts for business done within the state in connection with other companies, after deducting the amounts paid for transportation to railroads within the state. Section 1015 provides that the auditor shall annually, between March 1 and April 1, ascertain the gross receipts of such company by deducting the sums thus annually paid by it for the transportation of freight within the state from its entire receipts for business done in the state, including its proportion for business done within the state in connection with other companies.
Section 1019 provides that annually, on or before March 15, the auditor shall assess upon each company a tax of 6 per cent upon its gross receipts for business done in the state for the preceding calendar year, as determined by the auditor, which shall be in lieu of all taxes upon its property, and shall deliver to the state treasurer for collection a draft upon the company for such sum.
The action was brought by the state of Minnesota to recover certain items which it was claimed were omitted from the returns of the express company, and which were properly the subject of taxation under the statute. Under the stipulated facts these items, embraced in paragraph 3 of complaint, schedule No. 1, consist of: [223 U.S. 335, 340] 'Earnings of $54,209.19, constituting earnings on express business for the years 1899 to 1908, inclusive, which express business was made up entirely of shipments delivered by the shipper to an express company in the state of Minnesota, consigned to an ultimate consignee at a second point in the state of Minnesota, which shipments were forwarded by express between the point of origin and point of destination over lines of railroad, which lines were partly within and partly without the state of Minnesota. That is to say, all of these shipments necessarily passed out of the state of Minnesota in transit. Said amount, namely, $54,209.19, is based upon the total earnings on said shipments, and is not that part of said earnings apportionable to the transportation which was performed within the state of Minnesota. In arriving at said amount, the total earnings received by the express company upon said shipments have been taken, regardless of what proportion of the through carry was performed within the state of Minnesota. About 91 per cent of the mileage under this item is within Minnesota.'
Alleged omitted earnings on which back taxes were claimed under paragraph 3 of complaint, schedule No. 2, such omitted earnings amounting to $9,702.89, on which back taxes were claimed of $504.47, were made up as follows:
Taxes are not claimed or collected upon shipments of express matter in the classes named where the same express company performs the transportation service both within and without the state of Minnesota.
A question was also made as to the constitutional validity of the tax upon money orders issued by the express company, but that objection has not been pressed in argument here.
The plaintiff in error contends that the assessment of the tax upon its earnings from shipments by a consignor in the state of Minnesota to an ultimate consignee within the state, which shipments were forwarded by express between the points of origin and destination, over railroads partly within and partly without the state of Minnesota (paragraph 3, schedule No. 1), is an unconstitutional exaction, in that it is an attempt of the state to regulate interstate commerce, and is without due process of law.
[223 U.S. 335, 342]
As to such shipments, the supreme court held that 9 per cent of the taxes claimed on this class of earnings should be deducted from the amount of the recovery allowed in the court of original jurisdiction, since it was disclosed that only 91 per cent of the mileage was within the state. For this part of the decision the Minnesota court relied upon Lehigh Valley R. Co. v. Pennsylvania,
As to the transportation described in paragraph 3, schedule No. 2, from points within the state to points without the state, from points without the state to points within the state, and from points without the state to points without the state, passing through the state, the transportation outside of the state being performed by connecting companies, the supreme court of Minnesota held that it was the intention of the legislature, in the statute under consideration, to include the earnings from these classes within the state in the gross receipts upon which the tax is based. This construction of the statute is binding upon us.
The transportation was made upon a through rate and through bill of lading, and, it is stipulated, consisted of a single transportation transaction, commencing with the delivery by the shipper to the express company, and continuing until the delivery of the shipment to the consignee at the ultimate destination. This was clearly interstate commerce, and the Federal question made in this connection is: Is this tax a burden upon interstate commerce, and therefore an infraction of the exclusive power of Congress, under the Constitution, to regulate commerce among the states?
It is thoroughly well settled in this court that state laws may not burden interstate commerce. As one form of burden may exist in taxing the conduct of interstate terstate
[223 U.S. 335, 343]
commerce, such taxation has been uniformly condemned. Examples of cases of that character may be found in Fargo v. Michigan (Fargo v. Stevens)
While we have no disposition to detract from the authority of these decisions, this court has had also to consider and determine the effect of statutes which undertake to measure a tax within the legitimate power of the state by receipts which came in part from business of an interstate character. In that class of cases a distinction was drawn between laws burdening interstate commerce, and laws where the measure of a legitimate tax consists in part of the avails or income from the conduct of such commerce.
In Maine v. Grand Trunk R. Co.
In Wisconsin & M. R. Co. v. Powers,
A question in principle not unlike the one here presented, came before this court in Flint v. Stone Tracy Co.
The right of the state to tax property, although it is used in interstate commerce, is thoroughly well settled. Postal Teleg. Cable Co. v. Adams,
In that case the statute of Texas was condemned, because it appeared to the court to be an attempt to reach the receipts from interstate commerce by a tax of 1 per cent, or what was equal to the same thing, on gross receipts arising from such commerce, when it appeared from the judgment of the state court and the argument on behalf of the state that another tax on the property had already been levied, covering its full value as a going concern. The tax under consideration was held to be merely an effort to reach the gross receipts, not disguised by the name of an occupation tax, or in any way helped by the words 'equal to.'
Upon like reasoning the statute of Oklahoma was condemned
[223 U.S. 335, 346]
in the case of Meyer v. Wells, F. & Co. decided to-day. [
Appreciating the difficulty emphasized in the Galveston Case of drawing the line between taxes that burden interstate commerce and those whereby the legislature is simply undertaking to impose a property tax within its legitimate power, measured in part by the income from interstate commerce transactions, how does the present case stand? The supreme court of Minnesota construed the tax to be a property tax, measured by the gross earnings within the state, which, under their construction of the tax, included the earnings here in question. That court held that the statute was part of a system long in force in Minnesota, passed under the authority of the state Constitution, and was intended to afford a means of valuing the property of express companies within the state. While the determination that the tax is a property tax measured by gross receipts is not binding upon this court, we are not prepared to say that this conclusion is not well founded, in view of the provisions and purposes of the law.
The statute itself provides that the assessments under it 'shall be in lieu of all taxes upon its property.' In other words, this is the only mode prescribed in Minnesota for exercising the recognized authority of the state to tax the property of express companies as going concerns within its jurisdiction. If not taxed by this method, the property is not taxed at all. In this connection, the language of Mr. Justice Peckham in McHenry v. Alford,
The tax in the present case is not like those held invalid in the Galveston Case and the Oklahoma Case, being in addition to other state taxation reaching the property of all kinds of the express company. The tax to be collected in part from the earnings of interstate commerce was part of a scheme of taxation seeking to reach the value of the property of such companies in the state, measured by the receipts from business done within the state. The statute was not aimed exclusively at the avails of interstate commerce (Philadelphia & S. Mail S. S. Co. v. Pennsylvania, supra), but, as in the Maine Case, was an attempt to measure the amount of tax within the admitted power of the state by income derived, in part, from the conduct of interstate commerce. The property of express companies, being much of it of an intangible character, is difficult to reach and properly assess for taxation. This difficulty led this court in Adams Exp. Co. v. Ohio State Auditor,
As this court said in Postal Teleg. Cable Co. v. Adams,
We think the tax here in question comes within this principle. There is no suggestion in the present record, as was shown in Fargo v. Hart,
Upon the whole, we think the statute falls within that class where there has been an exercise in good faith of a legitimate taxing power, the measure of which taxation is in part the proceeds of interstate commerce, which could not, in itself, be taxed, and does not fall within that class of statutes uniformly condemned in this court, which show a manifest attempt to burden the conduct of interstate commerce, such power, of course, being beyond the authority of the state.
We find no error in the judgment of the Supreme Court of the State of Minnesota, and it is affirmed.
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Citation: 223 U.S. 335
No. 708
Decided: February 19, 1912
Court: United States Supreme Court
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