FREEMAN, TRUSTEE, v. HEWIT, DIRECTOR OF GROSS INCOME TAX DIVISION
No. 3
Supreme Court of the United States
Decided December 16, 1946
Argued November 8, 1944. Reargued October 14, 1946
329 U.S. 249
Harry T. Ice reargued the cause and filed a brief for appellant.
John J. McShane, Deputy Attorney General, reargued the cause for appellee. With him on the brief were James A. Emmert, Attorney General, John H. Fetterhoff and Fred C. McClurg, Deputy Attorneys General.
MR. JUSTICE FRANKFURTER delivered the opinion of the Court.
This case presents another phase of the Indiana Gross Income Tax Act of 1933, which has been before this Court in a series of cases beginning with Adams Mfg. Co. v. Storen, 304 U. S. 307. The Act imposes a tax upon “the receipt of the entire gross income” of residents and domiciliaries of Indiana but excepts from its scope “such gross income as is derived from business conducted in commerce between this state and other states of the United States . . . to the extent to which the State of Indiana is prohibited from taxing such gross income by the Constitution of the United States.” Indiana Laws 1933, pp. 388, 392, as amended, Laws 1937, pp. 611, 615,
Appellant‘s predecessor, domiciled in Indiana, was trustee of an estate created by the will of a decedent domiciled in Indiana at the time of his death. During 1940, the trustee instructed his Indiana broker to arrange for the sale at stated prices of securities forming part of the trust estate. Through the broker‘s New York correspondents the securities were offered for sale on the New York Stock Exchange. When a purchaser was found, the New York brokers
The power of the States to tax and the limitations upon that power imposed by the Commerce Clause have necessitated a long, continuous process of judicial adjustment. The need for such adjustment is inherent in a federal government like ours, where the same transaction has aspects that may concern the interests and involve the authority of both the central government and the constituent States.1
Our starting point is clear. In two recent cases we applied the principle that the Commerce Clause was not merely an authorization to Congress to enact laws for the protection and encouragement of commerce among the States, but by its own force created an area of trade free from interference by the States. In short, the Commerce Clause even without implementing legislation by Congress is a limitation upon the power of the States. Southern Pacific Co. v. Arizona, 325 U. S. 761; Morgan v. Virginia, 328 U. S. 373. In so deciding we reaffirmed, upon fullest consideration, the course of adjudication unbroken through the Nation‘s history. This limitation on State power, as the Morgan case so well illustrates, does not merely forbid a State to single out interstate commerce for hostile action. A State is also precluded from taking any action which may fairly be deemed to have the effect of impeding the free flow of trade between States. It is immaterial that local commerce is subjected to a similar encumbrance. It may commend itself to a State to encourage a pastoral instead of an industrial society. That is its concern and its privilege. But to compare a State‘s treatment of its local trade with the exertion of its authority against commerce in the national domain is to compare incomparables.
These principles of limitation on State power apply to all State policy no matter what State interest gives rise to its legislation. A burden on interstate commerce is none the lighter and no less objectionable because it
It has been suggested that such a tax is valid when a similar tax is placed on local trade, and a specious appearance of fairness is sought to be imparted by the argument that interstate commerce should not be favored at the expense of local trade. So to argue is to disregard the life of the Commerce Clause. Of course a State is not required to give active advantage to interstate trade. But it cannot aim to control that trade even though it desires to control its own. It cannot justify what amounts to a levy upon the very process of commerce across States lines by pointing to a similar hobble on its local trade. It is true that the existence of a tax on its local commerce detracts from the deterrent effect of a tax on interstate commerce to the extent that it removes the temptation to sell the goods locally. But the fact of such a tax, in any event, puts impediments upon the currents of commerce across the State line, while the aim of the Commerce Clause was precisely to prevent States from exacting toll from those engaged in national commerce. The Commerce Clause does not involve an exercise in the logic of empty categories. It operates within the framework of our federal scheme and with due regard to the national experience reflected by the decisions of this Court, even though the terms in which these decisions have been cast may have varied. Language alters, and there is a fashion in judicial writing as in other things.
These illustrative instances show that a seller State has various means of obtaining legitimate contribution to the costs of its government, without imposing a direct tax on interstate sales. While these permitted taxes may, in an ultimate sense, come out of interstate commerce, they are not, as would be a tax on gross receipts, a direct imposition on that very freedom of commercial flow which for more than a hundred and fifty years has been the ward of the Commerce Clause.
It is suggested, however, that the validity of a gross sales tax should depend on whether another State has also sought to impose its burden on the transactions. If another State has taxed the same interstate transaction, the burdensome consequences to interstate trade are undeniable. But that, for the time being, only one State has taxed is irrelevant to the kind of freedom of trade which the Commerce Clause generated. The immunities implicit in the Commerce Clause and the potential taxing power of a State can hardly be made to depend, in the world of practical affairs, on the shifting incidence of the varying tax laws of the various States at a particular moment. Courts are not possessed of instruments of determination so delicate as to enable them to weigh the various factors in a complicated economic setting which, as to an isolated application of a State tax, might mitigate the obvious burden generally created by a direct tax on commerce. Nor is there any warrant in the constitutional principles heretofore applied by this Court to support the notion that a State may be allowed one single-tax-worth of direct interference with the free flow of commerce. An exaction by a State from interstate commerce falls not because of a proven increase in the cost of the product. What makes the tax invalid is the
It has been urged that the force of the decision in the Adams case has been sapped by McGoldrick v. Berwind-White Co., 309 U. S. 33. The decision in McGoldrick v. Berwind-White was found not to impinge upon “the rationale of the Adams Manufacturing Co. case,” and the tax was sustained because it was “conditioned upon a local activity, delivery of goods within the state upon their purchase for consumption.” 309 U. S. at 58. Compare McLeod v. Dilworth Co., 322 U. S. 327. Taxes which have the same effect as consumption taxes are properly differentiated from a direct imposition on interstate commerce, such as was before the Court in the Adams case and is now before us. The tax on the sale itself cannot be differentiated from a direct unapportioned tax on gross receipts which has been definitely held beyond the State taxing power ever since Fargo v. Michigan, 121 U. S. 230, and Philadelphia Steamship Co. v. Pennsylvania, 122 U. S. 326. See also, e. g., Galveston, H. & S. A. R. Co. v. Texas, 210 U. S. 217; Kansas City, Ft. S. & M. R. Co. v. Kansas, 240 U. S. 227, 231; Puget Sound Co. v. Tax Commission, 302 U. S. 90, 94; and compare Wallace v. Hines, 253 U. S. 66. For not even an “internal regulation” by a
Nor is American Mfg. Co. v. St. Louis, 250 U. S. 459, or Harvester Co. v. Dept. of Treasury, 322 U. S. 340, any justification for the present tax. The American Mfg. Co. case involved an imposition by St. Louis of a license fee upon the conduct of manufacturing within that city. It has long been settled that a State can levy such an occupation tax graduated according to the volume of manufacture. In that case, to lighten the manufacturer‘s burden, the imposition of the occupation tax was made contingent upon the actual sale of the goods locally manufactured. Sales in St. Louis of goods made elsewhere were not taken into account in measuring the license fee. That tax, then, unlike this, was not in fact a tax on gross receipts. Cf. Cornell v. Coyne, 192 U. S. 418. And, if words are to correspond to things, the tax now here is not “a tax on the transfer of property” within the State, which was the basis for sustaining the tax in Harvester Co. v. Dept. of Treasury, supra, at 348.
There remains only the claim that an interstate sale of intangibles differs from an interstate sale of tangibles in respects material to the issue in this case. It was by this distinction that the Supreme Court of Indiana sought to escape the authority of Adams Mfg. Co. v. Storen, supra. Latin tags like mobilia sequuntur personam often do service for legal analysis, but they ought not to confound constitutional issues. What Mr. Justice Holmes said about that phrase is relevant here. “It is a fiction, the historical origin of which is familiar to scholars, and it is this fiction that gives whatever meaning it has to the saying mobilia sequuntur personam. But being a fiction it is not allowed to obscure the facts, when the facts become important.” Blackstone v. Miller, 188 U. S. 189, 204.
Reversed.
MR. JUSTICE BLACK dissents.
MR. JUSTICE RUTLEDGE, concurring.
This is a case in which the grounding of the decision is more important than the decision itself. Whether the Court now intends simply to qualify or to repudiate entirely, except in result, Adams Mfg. Co. v. Storen, 304 U. S. 307, I am unable to determine from its opinion. But that one or the other consequence is intended seems obvious from its refusal to rest the present decision squarely on that case, together with the wholly different foundation on which it now relies. In either event, the matter is important and calls for discussion.
I.
The Adams case held the Indiana tax now in issue to be invalid when applied, without apportionment, to gross receipts derived from interstate sales of goods made by Indiana manufacturers who sold and shipped them to purchasers in other states. “The vice of the statute” as thus applied, it was held, was “that the tax includes in its measure, without apportionment, receipts derived from activities in interstate commerce; and that the exaction is of such a character that if lawful it may in substance be laid to the fullest extent by States in which the goods are sold as well as those in which they are manufactured. Interstate commerce would thus be subjected to the risk of a double tax burden to which intrastate commerce is
Today‘s opinion refuses to rest squarely on the Adams case, although that case would be completely controlling if no change in the law were intended. No basis for distinguishing the cases on the facts or the ultimate questions is found or stated. The Court takes them as identical.2 Yet it places no emphasis upon apportionment, the absence of which the Adams opinion held crucial. The Court also puts to one side as irrelevant the factor there most stressed, namely, the danger of multiple taxation, that is, of similar taxation by other states, if the Indiana tax should be upheld in the attempted application.
Those matters were the very essence of the Adams decision. They were in its words “the vice” of the statute as applied. The Adams opinion gives no reason for believing that the application of the tax would not have been sustained if either of the two elements vitiating it had been absent. On the contrary, the fair, indeed the necessary, inference from the language and reasons given is that the tax would not have been voided if there had been no danger of multiple state taxation or if the tax had been apportioned so as to eliminate that risk. Moreover those
Yet now they are put to one side, either as irrelevant or as not controlling and therefore presumably as insufficient,4 in favor of another rationalization which ignores them completely. Shortly, this is, in reiterated forms, that the tax as applied is laid “directly on” interstate commerce, is a levy “on the very sale” or “the very process” of such commerce, is therefore and solely thereby a “burden” on it, and consequently is an exaction the commerce clause forbids. What outlaws it is neither comparative disadvantage with local trade nor any actual or probable clogging or impeding effect in fact.5 It is simply the “direct” bearing and “incidence” of the tax on interstate commerce and this alone. Stripped of any discriminatory element and of any actual or probable tendency to block or impede the commerce in fact, this “direct incidence” is itself enough without more to invalidate the tax, although it is one of general application singling out the commerce neither for separate nor for distinct or invidious treatment.
If this ever was the law, it has not been such for many years. In a sense it is a reversion to ideas once preva-
That consequence must follow if the presently asserted basis for decision is to be taken as a principle fit for general application and intended to be so used. We cannot assume that the Court intends it to be used otherwise, for that would be to make of it an arbitrary formula applied to dispose of the present case alone and having no validity for any other situation. But the ground relied upon is broad enough to include many other types of situation and of tax, and cannot be restricted logically or in reason to these narrow facts. If discrimination and real risk, in
It will be appropriate, before turning to further consideration of the more pertinent decisions, to note the only basis upon which the Court grounds its ruling that “direct” state taxes on “the very process” of interstate commerce are void. This is because, in the words of the opinion, the commerce clause “by its own force created an area of trade free from interference by the States.” Although this is stated as grounding for the long-established conclusion that even without implementing legislation by Congress the clause is a limitation upon state power, it also is quite obviously the foundation of the further conclusion that “direct” taxes laid by the states within that area are outlawed regardless of any other factor than their direct incidence upon it.
II.
I agree that the commerce clause “of its own force” places restrictions upon state power to tax, as well as to regulate, interstate commerce. This has been held through various lines of decision extending back to Gibbons v. Ogden, 9 Wheat. 1, some of them unbroken.9 I also agree that this construction is consonant with the great purpose of the commerce clause to maintain our dis-
The fact is that “direct incidence” of a state tax or regulation, apart from the presence of such a factor, has long
Again, an apportioned tax on interstate commerce is a “direct” tax bearing immediately upon it in incidence. But such a tax is not for that reason invalid. Decisions have sustained such taxes repeatedly, regardless of their direct bearing, provided the apportionment were fairly made and no other vitiating element were present, such as those above mentioned.15 It was this fact, without question, which the Court had in mind in the Adams case, when it carefully saved from its ban any question concerning such a tax as Indiana‘s if properly apportioned in a situation like the ones presented there and now.16
The language purporting to outlaw “direct” taxes because they are direct has appeared more frequently perhaps in relation to gross receipts taxes than any other, including both “direct” taxes, apportioned and unapportioned, and others considered “indirect” because purporting to be laid not “on the commerce itself” but upon some “local incident.” We have recently held that a tax having effects forbidden by the commerce clause will not be saved merely because it is cast in terms of bearing upon some “local incident.”17 As we then said, all interstate commerce takes place within the states and the consequences forbidden by the commerce clause cannot be achieved legally simply by the device of hooking the tax or other forbidden regulation to some selected “local incident.” That such a factor may be chosen for bearing the “direct”
The difficulty of any other rule or approach is disclosed most clearly perhaps by contrasting the decision in American Mfg. Co. v. St. Louis, 250 U. S. 459, with the Adams decision and this one, in both of which efforts are made, unsuccessfully in my opinion, to distinguish the American case. There the tax was laid upon the manufacture, locally done, of goods sold locally and out of state. But the tax was “measured by” the gross receipts from sales of the goods manufactured, including those sold interstate.18
Unless we are to return to the formalism of another day, neither the “directness” of the incidence of a tax “upon the commerce itself” nor the fact that its incidence is manipulated to rest upon some “local incident” of the interstate transaction can be used as a criterion or, many times, as a consideration of first importance in determining the validity of a state tax bearing upon or affecting interstate commerce. Not the words “direct” and “indirect” or “local incident” can fulfill the function of judgment in deciding
IV.
Judgments of this character and magnitude cannot be made by labels or formulae. They require much more than pointing to a word. It is for this reason that increasingly with the years emphasis has been placed upon practical consequences and effects, either actual or threatened, of questioned legislation to block or impede interstate commerce or place it at practical disadvantage with the local trade.23 Formulae and adjectives have been retained at times in intermixture with the effective practical considerations. But proportionately the stress upon them has been greatly reduced, until the present decision; and the trend of recent decisions to sustain state taxes formerly regarded as invalid has been due in large part to this fact.
The commerce clause was not designed or intended to outlaw all state taxes bearing “directly” on interstate commerce. Its design was only to exclude those having the effects to block or impede it which called it and the Constitution itself into being. Not all state taxes, nor indeed all direct state taxes, can be said to produce those effects. On the other hand, many “indirect” forms of state taxation, that is, “indirect” as related to “incidence,” do in fact produce such consequences and for that reason are invalid.
This case is not one of the former sort. The transactions were as closely connected in fact with Indiana as with any other state.27 But the case is one of the latter
V.
This Court in recent years has gone far in sustaining state taxes laid upon local incidents of interstate transactions by both the state of origin and the state of the mar-
Such taxes, whether in one state or the other, may in fact block or impede interstate commerce as much as, or more than, one placed directly upon the commerce itself. They have been sustained, nevertheless, not simply because of their bearing upon a local incident, but because in the circumstances of their application they were considered to have neither discriminatory effects upon interstate trade as compared with local commerce nor to impose upon it the blocking or impeding effects which the commerce clause was taken to forbid.31
Thus, it is highly doubtful that the levy in this case, or in the Adams case, actually had any impeding effect whatever upon the transactions or the free flow interstate of such commerce.34 But the Adams case found the impediment in the assumption that if one state could tax, so also could the other, and in that event, a double burden would result for interstate commerce not borne by local
The basic assumption was not true as a universally or even a generally resulting consequence, for two reasons. One is that it would not follow necessarily as a matter of fact that both states would tax or, if they did so, that the combined effects of the taxes would be either to clog or to impede the commerce.35 The other, it no more follows, as a matter of law, that because one state may tax the other may do likewise.
The Adams decision did not take account of any difference, as regards the risk of multiple state taxation, between situations where the multiple burden would actually or probably be incurred in fact and others in which no such risk would be involved. It rather disregarded such differences, so that “the risk of a double tax burden” on which the Court relied to invalidate the levy was not one actually, probably, or even doubtfully imposed in fact by another state.36 It rather was one which resulted only from an assumed, and an unexercised, power in that state to impose a similar tax.
The Court was not concerned with whether the forbidden consequences had been incurred in the particular situation or might not be incurred in others covered by its ruling. The motivating fear was more general. The
By thus relieving interstate commerce from liability to pay taxes in either state, without any showing that both had laid them, the effect was, not simply to relieve that commerce from multiple burden, but to give it exemption from taxes all other trade must bear.37 Local trade was thus placed at disadvantage with interstate trade, by the amount of the tax, and the commerce clause thereby became a refuge for tax exemption, not simply a means of protection against unequal or undue taxation. Certainly its object was not to create for interstate trade such a specially privileged position.
But the alternatives to such a ruling were not themselves free from difficulty. They may be stated shortly. But preliminarily I accept the view, frequently declared,38 that a state runs afoul the commerce clause when it singles out interstate commerce for special taxation not applied to other trade or otherwise discriminates against it or treats it invidiously. Moreover, all other things being equal,
This too I accept. For discrimination not only is ordinarily itself invidious treatment, but has an obvious tendency toward blocking or impeding the commerce, if not always the actual effect of doing so. Nor is the discriminatory tendency or effect lessened because it results from cumulation of tax burdens rather than from a single tax producing the same consequence. To allow both states to tax “to the fullest extent” would produce the invidious sort of barrier or impediment the commerce clause was designed to stop. But the bare unexercised power of another state to tax does not produce such results. It only opens the way for them to be produced. This danger is not fanciful but real, more especially in a time when new sources of revenue constantly are being sought. Accordingly, I agree that this door should not be opened.
But it is not necessary to go as far as the Adams case went, or as the decision now rendered goes, in order to prevent the anticipated deluge. There is no need to give interstate commerce a haven of refuge from taxation, albeit of gross receipts or from “direct” incidence, in order
The alternative methods available for avoiding the multiple state tax burden may now be stated. They are: (1) To apply the Adams ruling, stopping such taxes at the source, unless the tax is apportioned, thus eliminating the cumulative burdens;40 (2) To rule that either the state of origin or the state of market, but not both, can levy the exaction; (3) To determine factually in each case whether application of the tax can be made by one state without incurring actual danger of its being made in another or the risk of real uncertainty whether in fact it will be so made.
The Adams solution is not unobjectionable, for reasons already set forth. To deprive either state, whether of origin or of market, of the power to lay the tax, permitting the other to do so, has the vice of allowing one state to tax but denying this power to the other when neither may be as much affected by the deprivation as would be the one allowed to tax and, in any event, both may have equal or substantial due process connections with the transaction. The solution by factual determination in particular cases of the actual or probable incidence of both taxes is open to two objections. One is that to some extent it would make the taxing power of one or both states depend upon whether the other had exercised, or probably would
VI.
The problem of multiple state taxation, absent other factors making for prohibition, is therefore one of choosing among evils. There is no ideal solution. To leave the matter to Congress, allowing both states to tax “to the fullest extent” until it intervenes, would run counter not only to the long-established rules requiring apportionment where incidence of multiple taxes would be likely, but also in substance and effect to those forbidding discrimination, without the consent of Congress, cf. Prudential Ins. Co. v. Benjamin, 328 U. S. 408, as well as the long-settled rule that the clause is “of its own force” a prohibition upon the states. To require factual determination of forbidden effects in each case would be to invite costly litigation, make decision turn in some cases, perhaps many, on doubtful facts or conclusions, and encourage the enactment of legislation involving those consequences. The Adams ruling, as I have said, creates for many situations a tax refuge for interstate commerce and does this in both states.
As among the various possibilities, I think the solution most nearly in accord with the commerce clause, at once most consistent with its purpose and least objectionable for producing either evils it had no design to bring or practical difficulties in administration, would be to vest the power to tax in the state of the market, subject to power in the forwarding state also to tax by allowing credit to the full amount of any tax paid or due at the destination. This too is more nearly consonant with what the more recent decisions have allowed, if full account is taken of their effects.
It is true this view logically would deny the state of origin power to tax, notwithstanding its adequate due process connections, except by giving credit for taxes due at the destination.42 But the forwarding state has no greater power under the Adams ruling and none at all under the present one if it is to be applied consistently and, as I think, this can be taken to outlaw both unapportioned and apportioned taxes.
I have no doubt that under the law prevailing until now this tax would have been sustained, if apportioned, under the Adams decision and others.43 Nor have I any question that such a tax laid by New York would be upheld under
It is true the Berwind-White case purported to distinguish the Adams case. But it did so by pointing out that the New York tax was “conditioned upon a local activity, delivery of goods within the state upon their purchase for consumption” and that “the effect of the tax, even though measured by the sales price, as has been shown, neither discriminates against nor obstructs interstate commerce more than numerous other state taxes which have repeatedly been sustained as involving no prohibited regulation of interstate commerce.” 309 U. S. 33, 58.
This comes down to sustaining the tax, as was done in American Mfg. Co. v. St. Louis, supra, relied upon to distinguish the Adams case, simply because the tax was pegged upon the “local incident” of delivery. Apart from the reasons I have set forth above for regarding this as not being controlling, that basis was flatly repudiated in Nippert v. Richmond, 327 U. S. 416, as adequate for sustaining a tax having otherwise the forbidden effects and features. So here, in my opinion, it is hardly adequate to distinguish the Adams case, leaving it unimpaired, or to differentiate consistently the broader ruling made in this case.
I therefore agree with the appellee that the effect of the Berwind-White ruling was in substance, though not in words, to qualify the Adams decision, and that the combined effect of the two cases, taken together, was to permit the state of the market to tax the interstate transaction,
Whether or not acknowledgment of this effect of the Berwind-White decision would require reconsideration of the validity of apportioned taxes otherwise than by full credit, laid by the forwarding state,45 neither that fact nor the effect of Berwind-White in qualifying the Adams ruling justifies the broader ruling now made to reach the same result as the Adams case reached. The trend of recent decisions has been toward sustaining state taxes formerly regarded as outlawed by the commerce clause. The present decision, by its reversion to the formal and discarded grounding in the “direct incidence” of the tax, is a reversal of that trend. It is one, moreover, unnecessary for sustaining the result the Court has reached. Its consequence, if followed in logical application to apportioned taxes, will be to outlaw them, for they bear as “directly” on “the commerce itself” as does the tax now stricken down in its
I think the result now reached is justified, as necessary to prevent the cumulative and therefore discriminatory tax burden which would rest on or seriously threaten interstate commerce if more than one state is allowed to impose the tax, as does Indiana, upon the gross receipts from the sale without apportionment or credit for taxes validly imposed elsewhere. This result would follow in view of the Berwind-White decision and others like it,46 if not only the state of the market but also the forwarding state could tax the sale “to the fullest extent” upon the gross receipts. For this reason I concur in the result.
But in doing so I dissent from grounding the decision upon a foundation which not only will outlaw properly apportioned taxes, thus going beyond the Adams decision, unless the Court is merely to reiterate the rule forbidding “direct” taxation of interstate sales only to recall it when a case involving a properly apportioned tax shall arise; but also will require outlawing many other types of tax heretofore sustained, unless a similar retreat is made.
MR. JUSTICE DOUGLAS, with whom MR. JUSTICE MURPHY concurs, dissenting.
I think the Court confuses a gross receipts tax on the Indiana broker with a gross receipts tax on his Indiana customer. Gwin, White & Prince, Inc. v. Henneford, 305 U. S. 434, would hold invalid a gross receipts tax, unappor-
Under that view a tax on the commissions of the Indiana broker would be invalid. But I see no more reason for giving the customer immunity than I would for giving immunity to the fruit growers who sold their fruit through the broker in Gwin, White & Prince, Inc. v. Henneford, supra.
Concededly almost any local activity could, if integrated with earlier or subsequent transactions, be treated as parts of an interstate whole. In that view American Mfg. Co. v. St. Louis, 250 U. S. 459, would find survival difficult. For in that case a state tax on a manufacturer was upheld though the tax was measured by the value of the goods
I think the least that can be said is that the local transactions or activities of this taxpayer can be as easily untangled from the interstate activities of his broker.
Any receipt of income in Indiana from out-of-state sources involves, of course, the use of interstate agencies of communication. That alone, however, is no barrier to its taxation by Indiana. Western Live Stock v. Bureau of Revenue, supra. Cf. New York ex rel. Cohn v. Graves, 300 U. S. 308. The receipt of income in Indiana, like the delivery of property there, International Harvester Co. v. Dept. of Treasury, 322 U. S. 340, is a local transaction which constitutionally can be made a taxable event. For a local activity which is separate and distinct from interstate commerce may be taxed though interstate activity is induced or occasioned by it. Western Live Stock v. Bureau of Revenue, supra, p. 253. The management of an investment portfolio with income from out-of-state sources is as much a local activity as the manufacture of goods destined for interstate commerce, American Mfg. Co. v. St. Louis, supra, the publication of a trade journal with interstate revenues, Western Live Stock v. Bureau of Revenue, supra, or the growing of fruit for interstate markets, Gwin, White & Prince, Inc. v. Henneford, supra. All such taxes affect in some measure interstate commerce or increase the cost of doing it. But, as we pointed out in McGoldrick v. Berwind-White Coal Mining Co., 309 U. S. 33, 48, that is no
Adams Mfg. Co. v. Storen, 304 U. S. 307, is different. In that case the taxpayer had its factory and place of business in Indiana and sold its products in other States on orders taken subject to approval at the home office. The Court thought the risk of multiple taxation was real, because of the interstate reach of the taxpayer‘s business activities. The fact is that the incidence of that tax was comparable to the incidence of an unapportioned tax on interstate freight revenues.
The present tax is not aimed at interstate commerce and does not discriminate against it. It is not imposed as a levy for the privilege of doing it. It is not a tax on interstate transportation or communication. It is not an exaction on property in its interstate journey. It is not a tax on interstate selling. The tax is on the proceeds of the sales less the brokerage commissions and therefore does not reach the revenues from the only interstate activities involved in these transactions. It is therefore essentially no different, so far as the Commerce Clause is concerned, from a tax by Indiana on the proceeds of the sale of a farm or other property in New York where the mails are used to authorize it, to transmit the deed, and to receive the proceeds.
I would adhere to the philosophy of our recent cases1 and affirm the judgment below.
Notes
Gross receipts taxes which have not been sustained fall into the following groups: (a) Those which were not fairly apportioned. See, e. g., Oklahoma v. Wells Fargo Co., 223 U. S. 298. (b) Those which were not apportioned and subjected interstate commerce to the risk of multiple taxation. Philadelphia & So. S. S. Co. v. Pennsylvania, 122 U. S. 326; Ratterman v. Western Union Telegraph Co., 127 U. S. 411; Western Union Telegraph Co. v. Alabama, 132 U. S. 472; Adams Mfg. Co. v. Storen, 304 U. S. 307; Gwin, White & Prince v. Henneford, 305 U. S. 434, 439. Cf. Fargo v. Michigan, 121 U. S. 230, as explained in Western Live Stock v. Bureau of Revenue, 303 U. S. 250, 256. (c) Those in which there was a discriminatory element in that they were directed exclusively “at transportation and communication,” Lockhart, Gross Receipts Taxes on Transportation (1943) 57 Harv. L. Rev. 40, 65-66. Galveston, H. & S. A. Ry. v. Texas, 210 U. S. 217, and cf. New Jersey Tel. Co. v. Tax Board, 280 U. S. 338. But see Nashville, C. & St. L. Ry. v. Browning, 310 U. S. 362. In both the Galveston and New Jersey Telephone Company cases, although the taxable events all occurred within the taxing state, the possibility of multiple taxation was nevertheless present. (d) Those in which there
The Adams decision purported to distinguish American Mfg. Co. v. St. Louis simply on the ground that the tax was not one laid on the taxpayer‘s sales or the income derived from them, but was a license fee for engaging in the manufacture which could be measured “by the sales price of the goods produced rather than by their value at the date of manufacture.”