COMPAÑÍA GENERAL DE TABACOS DE FILIPINAS v. COLLECTOR OF INTERNAL REVENUE
No. 42
Supreme Court of the United States
Argued October 18, 19, 1927.—Decided November 21, 1927.
275 U.S. 87
“Similar laws have been enacted by Congress under its general power of legislation over the District of Columbia, Rev. Stat. D. C. §§ 281, 282, 283, 310, 319, as well as by the legislatures of many of the States, and have been generally, if not uniformly, sustained by the Courts,” citing many of the cases above named.
Most of the cases cited arose, it is true, over the establishment of separate schools as between white pupils and black pupils, but we can not think that the question is any different or that any different result can be reached, assuming the cases above cited to be rightly decided, where the issue is as between white pupils and the pupils of the yellow races. The decision is within the discretion of the state in regulating its public schools and does not conflict with the Fourteenth Amendment. The judgment of the Supreme Court of Mississippi is
Affirmed.
CERTIORARI TO THE SUPREME COURT OF THE PHILIPPINE ISLANDS.
1. A foreign corporation which has property and does business through agents in the Philippine Islands is subject to the taxing power of the Island government as a quasi sovereign, but the power is limited by the Organic Act. P. 92.
2. The liberty secured by the Organic Act embraces the right to make contracts and accumulate property and do business outside of the Philippine Islands and beyond its jurisdiction without prohibition, regulation, or governmental exaction. P. 92.
4. This is true whether the imposition be regarded as a penalty or as a tax, and regardless of its amount. The purpose in either case is to discourage insurance in outside companies by regulating the conduct of the insured not within the local jurisdiction. P. 95.
5. Where a foreign corporation doing business in the Philippine Islands insures goods in the Islands against fire, in a foreign insurance company which is licensed to do business there, the premiums paid are subject to taxation by the Philippine government, even though the policy was executed and the payments made in a foreign country where the assured had its headquarters. P. 98.
48 P. I. 35, reversed in part; affirmed in part.
CERTIORARI, 271 U. S. 655, to a judgment of the Supreme Court of the Philippine Islands which affirmed a judgment dismissing an action brought by the present petitioner to recover the money demanded of it by the respondent as taxes on insurance premiums, and which the petitioner paid under protest.
Messrs. W. F. Williamson, B. M. Aikins, and Barry Mohun for petitioner, submitted.
Mr. William Cattron Rigby, with whom Messrs. Delfin Jaranilla, Attorney General of the Philippine Islands, and A. R. Stallings were on the brief, for respondent.
MR. CHIEF JUSTICE TAFT delivered the opinion of the Court.
The Compañía General de Tabacos de Filipinas, hereafter to be called the Tobacco Company, brought this suit in the Court of First Instance in Manila to recover from the Philippine Collector of Internal Revenue certain sums paid under protest as internal revenue taxes on insurance
The taxes were collected under § 192 of Act No. 2427, as amended by Act No. 2430, of the Statutes of the Philippines. 9 Public Laws 292. That section provides that it shall be unlawful for any person or corporation in the Philippines to procure, receive or forward applications for insurance in, or to issue or to deliver or accept policies of, or for, any company or companies not having been legally authorized to transact business in the Philippine Islands, and that any person or company violating this section shall be guilty of a penal offense and upon conviction shall be punished by a fine of two hundred pesos, or imprisonment for two months, or both in the discretion of the court. The section contains a proviso that insurance may be placed by authority of a certificate of the insurance commissioner to any regularly authorized fire or marine insurance agent of the Islands, subject to revocation at any time, permitting the person named therein to procure policies of insurance on risks located in the Philippine Islands in companies not authorized to transact business in the Philippine Islands. Before the agent named in the certificate shall procure any insurance in such company, it must be shown by affidavit that the person desiring insurance after diligent effort has been unable to procure in any of the companies authorized to do business in the Philippine Islands the amount of insurance necessary.
The court of first instance sustained the validity of the tax as to each insurance company. The Supreme Court of the Philippines affirmed the judgment. Two judges of the latter court dissented on the ground that the tax violated the rule of uniformity, and was a denial of the equal protection of the law.
The Philippine Organic Act (
In Allgeyer v. Louisiana, 165 U. S. 578, a law of Louisiana provided that any person who should do any act in Louisiana to effect for himself or for another,
On the authority of the Allgeyer case, this Court decided St. Louis Cotton Compress Company v. State of Arkansas, 260 U. S. 346. That was a suit by the State of Arkansas against the Compress Company, a corporation of Missouri, authorized to do business in Arkansas. It was brought to recover 5 per cent. on the gross premiums paid by the Compress Company for insurance upon its property
“The short question is whether this so-called tax is saved because of the name given to it by statute when it has been decided in Allgeyer v. Louisiana, 165 U. S. 578, that the imposition of a round sum, called a fine, for doing the same thing, called an offense, is invalid under the
The authority of these cases is controlling in disposing of the one before us. The effect of them is that, as a state is forbidden to deprive a person of his liberty without due process of law, it may not compel any one within its juris-
But it is said that these two cases were really cases of penalties, although in the Compress Company case the law called the imposition an occupation tax. We are unable to see any sound distinction between the imposition of a so-called tax and the imposition of a fine in such a case. A so-called tax is just as much an interference with the liberty of contract as is a penalty by fine, where the subject matter giving rise to the imposition is beyond the jurisdiction of the state. Reference was made in the Compress case to the fact that that which was imposed was larger than would have been the tax in the state if all parties had been in the state and the contract had been made there, but the decision itself clearly does not depend for its basis upon discrimination as between a tax and a prohibition or the amount of it. This Court said, in comparing the Allgeyer case and the Compress case:
“In Louisiana the detriment was $1,000. Here it is five per cent. upon the premiums—which is three per cent. more than is charged for insuring in authorized companies. Each is a prohibition to the extent of the payment required. The Arkansas tax manifests no less plainly than the Louisiana fine a purpose to discourage insuring in companies that do not pay tribute to the State.”
And that is just what this tax is for. Even though it is only equal to the tax upon normal premiums paid in the Philippine Islands, it is imposed for the purpose of discouraging insurance in companies that do not pay tribute to the state because out of its taxing or penalizing jurisdiction. As the language above quoted from the opinion in the Compress case shows, the action of Arkansas was invalid, because of its attempt to regulate the conduct of the Compress Company in respect of a matter not
It is sought to take this case out of the Allgeyer and the Compress cases by reference to Equitable Life Assurance Society v. Pennsylvania, 238 U. S. 143. The Equitable Life Assurance Society of New York did business in Pennsylvania. The Legislature levied an annual tax of 2 per cent. upon the gross premiums of every character received from business done by it within the state during the preceding year. The company paid large taxes, but appealed to the state courts to relieve it from charges for such of the premiums for five years as had been paid outside the state by residents of Pennsylvania. It was contended by the company that such taxation was of property beyond the jurisdiction of the state, relying on the Allgeyer case. This Court held that the tax was a tax for the privilege of doing business in Pennsylvania, and that the fact that the state could not prevent the contracts did not interfere with its right to consider the benefit annually extended to the Assurance Society by Pennsylvania in measuring the value of the privileges so extended; that the tax was a tax upon a privilege actually used, and the only question concerned the mode of measuring the tax. This Court said as to that:
“A certain latitude must be allowed. It is obvious that many incidents of the contract are likely to be attended to in Pennsylvania, such as payment of dividends when received in cash, sending an adjuster into the State in case of dispute, or making proof of death. See Connecticut Mut. Life Ins. Co. v. Spratley, 172 U. S. 602, 611; Pennsylvania Lumbermen‘s Mut. Fire Ins. Co. v. Meyer, 179 U. S. 407, 415. It is not unnatural to take the policy holders residing in the State as a measure without going into nicer if not impracticable details. Taxation has to be determined by general principles, and it seems to us
The case is not in conflict either with the Allgeyer case or with the Compress case, decided as late as December, 1922. It turns entirely on the fact that the taxpayer had subjected itself to the jurisdiction of Pennsylvania in doing business there, and it was for the state to say what the condition of its doing that business in the matter of the payment of taxes should be. This Court said that the Equitable Society was doing business in Pennsylvania when it was annually paying dividends in Pennsylvania, or sending an adjuster into the state in case of dispute, or making proof of death, and therefore that it was not improper to measure the tax for doing business in the state by the number of individuals whose lives had been insured and with respect to whom, and the execution of whose contracts, the company was necessarily doing business in the state, even if the premiums paid by some of them had not been paid in the state.
It is true that, in considering the question of the measure of the tax, this Court referred to the argument of the Supreme Court of Pennsylvania that the tax might be properly measured by New York contracts because Pennsylvania protected the individuals insured therein during their lives in Pennsylvania. Our Court accepted this as one of several reasons for including such individuals in the measure of the tax, because of the incidental business done by the Insurance Company in Pennsylvania which the living of such individuals in that state, after the making of the contract, brought into its performance and consummation. But such reference can not be made a basis for an argument that such protection as the Government of the Philippine Islands gave to the merchandise while being shipped at Manila furnished any jurisdiction for a tax by that Government on the premiums paid in Barcelona upon the insurance contract.
Second. We come now to the question of the tax upon the premiums paid to the London Company, which was licensed and presumably was doing business in the Philippine Islands. Does the fact that, while the Tobacco Company and the London Company were within the jurisdiction of the Philippines, they made a contract outside of the Philippines for the insurance of merchandise in the Philippines, prevent the imposition upon the assured of a tax of one per cent. upon the money paid by it as a premium to the London Company? We may properly assume that this tax, placed upon the assured, must ultimately be paid by the insurer, and treating its real incidence as such, the question arises whether making and carrying out the policy does not involve an exercise or use of the right of the London Company to do business in the Philippine Islands under its license, because the policy covers fire risks on property within the Philippine Islands which may require adjustment, and the activities of agents in the Philippine Islands with respect to settlement of losses arising thereunder. This we think must be answered affirmatively under Equitable Life Society v. Pennsylvania, 238 U. S. 143. The case is a close one, but in deference to the conclusion we
The judgment of the Supreme Court of the Islands is reversed in part and affirmed in part.
MR. JUSTICE HOLMES, dissenting.
This is a suit to recover the amount of a tax alleged to have been illegally imposed. The plaintiff is a Spanish corporation licensed to do business in the Philippine Islands and having an office in Manila. In 1922 from time to time it bought goods and put them into its Philippine warehouses. It notified its head office in Barcelona, Spain, of the value of the goods and that office thereupon insured them under open policies issued by a company of London. From time to time also the Philippine branch shipped the goods abroad for sale and secured insurance upon the shipments in the same manner, the premiums being charged to it in both cases. By § 192 of the Philippine Insurance Act, No. 2427, as amended by Act No. 2430, where owners of property obtain insurance directly with foreign companies, the owners are required to report each case to the Collector of Internal Revenue and to “pay the tax of one per centum on premium paid, in the manner required by law of insurance companies.” The defendant Collector collected this tax on the above mentioned premiums from the plaintiff against its protest. The plaintiff bases its suit upon the contentions that the statute is contrary to the Act of Congress of August 29, 1916, c. 416, § 3, (the Jones Act);
Sometimes there may be a difficulty in deciding whether an imposition is a tax or a penalty, but generally the intent to prohibit when it exists is plainly expressed. Sometimes even when it is called a tax the requirement is shown to be a penalty by its excess in amount over the tax in similar cases, as in St. Louis Cotton Compress Co. v. Arkansas. But in the present instance there is no room for doubt. The charge not only is called a tax but is the same in amount as that imposed where the right to impose it is not denied.
The Government has the insured within its jurisdiction. I can see no ground for denying its right to use its power to tax unless it can be shown that it has conferred no benefit of a kind that would justify the tax, as is held with regard to property outside of a State belonging to one within it. Frick v. Pennsylvania, 268 U. S. 473, 489.
The result of upholding the Government‘s action is just. When it taxes domestic insurance it reasonably may endeavor not to let the foreign insurance escape. If it does not discriminate against the latter, it naturally does not want to discriminate against its own.
The suggestion that the rule of taxation is not uniform may be disposed of in a few words. The uniformity required is uniformity in substance, not in form. The insurance is taxed uniformly, and although in the case of domestic insurance the tax is laid upon the Company whereas here it is laid upon the insured, it must be presumed that in the former case the Company passes the tax on to the insured as an element in the premium charged.
For these reasons Mr. Justice BRANDEIS and I are of the opinion that the judgment of the Supreme Court of the Islands should be affirmed.