283 N.Y. 439 | NY | 1940
Lead Opinion
Appellants challenge the constitutionality of a tax statute. They have affixed the tax stamps as required and bring this action pursuant to section
The facts are as follows: Appellants are partners in an investment and securities business, with offices in New York city. As a result of negotiations conducted by telephone, telegraph and mail, appellants entered into contracts to sell securities to Kennedy Co., and to Butcher and Sherred, both of Philadelphia, Pennsylvania, and to Babbage Co. of Washington, D.C. The purchasers mailed confirmations to appellants, who mailed confirmations of the sales to the purchasers. These memoranda are indispensable incidents of such transactions. Appellants mailed to banks in Philadelphia and in Washington, D.C., sight drafts for collection with the securities attached, and the banks remitted the proceeds by mailing checks to appellants in New York city. Title to the stock involved did not pass until payment was received by appellants. *443
In regard to the sale to Babbage Co., there is a finding that the shares in question were delivered to MacKubin, Logg Company of New York on behalf of the purchaser. Thus, in regard to this transaction, the record contains two inconsistent findings, to wit, that appellants delivered the shares to the purchaser via the collection bank, and that the appellants delivered the shares to an agent of the purchaser in New York.
Throughout all the transactions, the several memoranda exchanged between sellers and buyers stated that each party acted as a principal in the transaction. The agreements to sell were made in New York city, and the shares of stock which were the subject of the agreements were located in New York city both prior to and after the making of such agreement, and up to the time they were shipped in interstate commerce.
Section
Section 270-a imposes an additional emergency tax at the same rate, so that the total tax is now three cents per share sold for less than twenty dollars, and four cents per share sold for more than twenty dollars. *444
The statute as applied to the transactions in the case at bar is said to offend the Constitution of the United States, particularly the due process clause (Fourteenth Amendment), the import-export clause (Art. I, § 10, cl. 2), and the commerce clause (Art. I, § 8, cl. 3).
Due process. Appellants suggest objection to the statute on this score, but they submit no supporting argument. Indeed, the question has been previously considered and answered contrary to the contention of appellants. (New York ex rel. Hatch v.Reardon,
Import-export duties. It is now well settled that the constitutional proscription that no State shall lay "any imposts or duties on imports or exports" applies only to foreign commerce and not to interstate commerce. (Woodruff v. Parham, 8 Wall. [U.S.] 123, 130; Coe v. Errol,
Interstate commerce. Appellants contend that the grant to Congress of power to regulate interstate commerce operates even in the absence of action by Congress to forbid the imposition of a non-discriminatory State tax, upon an agreement made within the State with respect to goods which are within the State and prior to their shipment in interstate commerce. "The question, it should be observed, is not with respect to the extent of the power of Congress to regulate interstate commerce, but whether a particular exercise of State power in view of its nature and operation must be deemed to be in conflict with this paramount authority." (Bacon v. Illinois,
Cases concerned with the effect of the commerce clause upon State action are truly legion, and only a few in number will be adverted to here. One fundamental principle which is not now questioned is that State action is not necessarily unconstitutional merely because it has some effect on interstate commerce (Baldwin v. Seelig, Inc.,
The validity of State regulation under the commerce clause is to be determined by the balancing of two considerations: that State government shall be able to derive revenue for its support, and that commerce among the States shall be unfettered by provincial impediments. Stated conversely, interstate commerce must bear its share of the tax burden along with intrastate commerce, but the States may not exact of interstate commerce a toll heavier than that which intrastate commerce is liable to pay. The *446 consequences of these principles have been variously stated. The States may not impose a "direct" tax or a tax on interstate commerce "as such;" interstate commerce may not be subjected to multiple burdens to which intrastate commerce is not exposed. But however expressed, the guiding principle which limits the power of the States to tax is that the several States of the Union may not discriminate against interstate commerce in favor of intrastate commerce.
It is a matter of historical record that the Founding Fathers were concerned lest State rivalries should lead to the stifling of trade carried on beyond the confines of any single State. But it was not thereby intended that commerce among the several States, when once protected from the dangers of local prejudice, should altogether escape its proportionate share of the cost of government. (McGoldrick v. Berwind-White Coal Mining Co.,
Appellants then argue that the decision in the Berwind-White
case would permit the State of destination, to wit, Pennsylvania, likewise to impose a sales tax, and that cumulative burdens would thus be borne by interstate commerce. It should be noted that the plaint is not of a present condition, for the record is barren of any suggestion that such a tax has been imposed on the transactions in the case at bar. But assuming that theBerwind-White decision is authority for the proposition that the State of the buyer may impose a sales tax on the buyer,
that does not render interstate commerce liable to greater taxation than that which may be levied upon intrastate commerce. In cases such as Gwin, White Prince, Inc., v. Henneford
(
Appellants argue that the rulings of the Stock Transfer Bureau seek to enforce the tax upon transactions converse to those in the case at bar, so that the statute has the effect of applying, both to sales made within the State to extra-State buyers, and to sales by extra-State sellers to local buyers. The question of the application of the statute to such situations is not now before this court. The narrow question for decision in the case at bar is whether the commerce clause forbids the application of the statute in question to the facts presented by the record in the case at bar. The constitutionality of the statute, as applied to those in a class other than that in which appellants find themselves, does not aggrieve appellants, who may complain, when a statute is similar to that in the case at bar, only of such matters as concern them. This court may declare statutes unconstitutional only in so far as it is essential to do so in order properly to determine the relative rights of the litigants. (Marbury v. Madison, 1 Cranch [U.S.], 137; New York ex rel.Hatch v. Reardon, supra.)
The judgment should be affirmed, with costs.
Dissenting Opinion
The statute provides for a tax upon sales and transfers of shares of stock. The claimants are engaged in an investment and securities business in the city of New York. In the course of their business, they agreed to sell shares of stock to two firms, one engaged in business in Philadelphia and the other in Washington, and, thereafter, mailed the securities to banks in Philadelphia and Washington, D.C., for delivery upon payment of sight drafts which were attached. The plaintiffs challenged the validity of the Tax Law of the State of New York (Cons. Laws, ch. 60) in so far as it purports to impose a tax upon the sale or transfer of the stock which the plaintiffs have sold and delivered to persons outside of the State of New York, on the ground that such a tax constitutes an unlawful burden on interstate commerce.
The sellers reside in New York and, unquestionably, the State would have power to tax their personal property here, including property which the plaintiffs intend to use *450 in interstate commerce, until the moment when such property becomes part of a movement in interstate commerce. The purchasers live in other jurisdictions and, unquestionably, such jurisdictions would have power to tax their property immediately after it was delivered in the course of interstate commerce to the purchasers. The Tax Law of New York State, which is challenged, does not, however, attempt to tax the property of the plaintiffs or any exercise of power over such property by them, except in connection with a sale in interstate commerce.
Every transaction in interstate commerce requires the performance of acts in two or more States. Here the contract was made by telephone, telegraph and mail, with the messages originating in one State and received in another State, and the contract of sale became effective only upon exchange of confirmation by the buyer outside of the State and the seller here. The shares of stock were mailed here, passed through other States to the cities where the purchasers did business. Payment was made there and transmitted to the sellers here. Authority of the State, if any, to tax the sale or transfer of the stock must rest upon the fact that the sellers lived here and the State had jurisdiction of the property before it entered into the stream of interstate commerce, or upon the fact that part of the transaction in interstate commerce occurred here.
If the State of New York had power to tax the sale or transfer of this property on such grounds, then it would seem clear that Pennsylvania and the District of Columbia would each have the right to tax the sale or transfer of such securities because the purchaser resides and the transfer is made there. But in such case "interstate commerce would thus be subjected to the risk of a double tax burden to which intrastate commerce is not exposed and which the commerce clause forbids." (Adams ManufacturingCo. v. Storen,
The State, however, relies for authority to a great extent upon the later case of McGoldrick v. Berwind-White Coal Mining Co.
(
After analyzing the tax there challenged, Mr. Justice STONE pointed out: "The ultimate burden of the tax, both in form and in substance, is thus laid upon the buyer, for consumption, oftangible personal property, and measured by the sales price. Only in event that the seller fails to pay over to the city the tax collected or to charge and collect it as the statute requires, is the burden cast on him. It is conditioned upon events occurring within the state, either transfer of title or possession of the purchased property, *452 or an agreement within the state, `consummated' there * * *" (p. 43).
Then he points out that
"Certain types of tax may, if permitted at all, so readily be made the instrument of impeding or destroying interstate commerce as plainly to call for their condemnation as forbidden regulations. Such are the taxes already noted which are aimed at or discriminate against the commerce or impose a levy for the privilege of doing it, or tax interstate transportation or communication or their gross earnings, or levy an exaction on merchandise in the course of its interstate journey. Each imposes a burden which intrastate commerce does not bear, and merely because interstate commerce is being done places it at a disadvantage in comparison with intrastate business or property in circumstances such that if the asserted power to tax were sustained, the states would be left free to exert it to the detriment of the national commerce.
"The present tax as applied to respondent is without the possibility of such consequences. Equality is its theme. Cf.Henneford v. Silas Mason Co.,
Here the tax is imposed upon the seller and not the buyer and it has no possible analogy to a "use" tax or a property tax on goods at their destination. If this tax is sustained, then similar sales in interstate commerce may be subjected to the risk of a burden of multiple taxation which might impede or destroy such commerce, and similar taxes have been declared a violation of the Constitution whenever challenged. It is said that the State of New York would have power to require both buyer and seller to pay a tax upon a sale made in intrastate commerce and that sales in interstate commerce may properly be made subject to the same risk that where buyer and seller live in different States, each may be required to pay a tax upon the sale. Perhaps some inscrutable reason might induce a State to require both buyer and seller to pay a sales tax on intrastate commerce and only one to pay a sales tax on interstate commerce. We do not now pass upon the validity of such a tax. Here the State has attempted to subject a sale in interstate commerce to the same single tax which must be paid on other sales and other States would have power, at least as good, to impose a similar sales tax upon the same sale.
The judgment should be reversed, with costs in all courts, and judgment directed for the claimants for the taxes they have paid, with interest.
RIPPEY, SEARS and LEWIS, JJ., concur with FINCH, J.; LEHMAN, Ch. J., dissents in opinion, in which LOUGHRAN and CONWAY, JJ., concur.
Judgment affirmed. *454