138 N.Y. 1 | NY | 1893
This is an appeal by the comptroller of the state of New York from an order of the General Term of the third department, reversing the determination of the comptroller assessing a tax on the relator for the sum of $40,886.89, under the alleged authority of chapter 542 of the Laws of 1880, and the acts supplementary thereto and amendatory thereof. The relator is a Pennsylvania corporation, operating a line of railroad for the transportation of freight and passengers, extending through the state of New Jersey into other states of the Union. No part of its road is within the state of New York. But it operates in connection *5 with its road a ferry from the New Jersey shore across the Hudson river to the city of New York, where it has terminal facilities consisting of wharves, piers and docks, and buildings connected therewith, used in the transaction of the business of delivering freight and passengers carried over its line, to that city, and of receiving freight and passengers, to be carried from the city into New Jersey and other states reached by its system of roads.
The only transportation over New York territory carried on by the relator is over that part of the Hudson river within the territorial boundaries of the state, by means of its ferry boats. It collects in the city of New York money due for transportation to that point and for transportation from that city, and there makes contracts for transportation of freight and passengers over its lines and issues and sells passenger tickets. It employes in the city of New York a large number of agents, clerks and laborers in the prosecution of its business. It is engaged in no business in that city, except such as relates to the transportation of freight and passengers over its lines.
The question of the validity of the tax in question, irrespective of alleged errors in the computation, depends upon the point whether the scheme of taxation enacted by chapter 542 of the Laws of 1880, entitled "An act to provide for raising taxes for the use of the state, upon certain corporations, joint-stock companies and associations," and its amendments, can be enforced against the relator. It is claimed in behalf of the relator that, as applied to it, the tax is a tax upon interstate commerce, and that the act under which it is imposed is, as to the relator, an attempted regulation by the state of interstate commerce, which appertains exclusively to Congress under art. 1, sec. 8, clause 3 of the Federal Constitution. That a tax imposed by a state may constitute a regulation of commerce was decided in the case of Brown v. Maryland (12 Wheat. 419), and has been frequently decided in subsequent cases. There has been much difficulty in the Federal courts in determining what constitutes interstate commerce, *6
and what acts of the state are to be deemed regulations thereof. But there is no question, at least at this time, that the business of the relator comes within the description of "commerce among the states" in the commerce clause of the Federal Constitution. (MILLER, J., Fargo v. Michigan,
We do not understand it to be contended by the learned counsel for the state that if the act of 1880, as applied to the relator, is a regulation of commerce, the tax in question can be sustained.
In determining the question now presented, two propositions must be deemed established. One is that the business in which the relator was engaged in this state was exclusively that of interstate commerce. Whatever it did here was incident to and in aid of the business of interstate transportation. Interstate transportation was not a part of its business only, in this state. It performed the work of an interior carrier in New Jersey and other states, but in this state its business was that of interstate commerce exclusively. There may, therefore, be eliminated from the discussion the question which would arise in the case of a foreign corporation conducting within this state both the business of strictly interior transportation and that of interstate carrier to points within and points without the state. We do not intend to be understood as determining that, in that case, the state might not, under the act of 1880, lawfully impose upon such a corporation, in common with all other corporations, domestic and foreign, doing business here, a business tax based upon its capital employed in the state, which, under the amendment of 1885, is now the basis of taxation of corporations, liable to taxation under the act of 1880. (Chap. 501, Laws of 1885.)
There would seem to be no question that domestic corporations, engaged in both state and interstate commerce, may lawfully be subjected by the state to a franchise tax, measured by its whole capital or business, or in any other way in the discretion *7
of the legislature, without taking notice of the part of its business arising from interstate commerce, provided no hostile discrimination is made against such part. Nor would there seem to be any valid reason why a foreign corporation, engaged both in the business of state and interstate transportation in this state, should not be subject to taxation in common with domestic corporations. (See People ex rel. v. Wemple,
The second point which must be deemed to be established is that the tax imposed upon corporations under the act of 1880, as amended by chapter 361 of the Laws of 1881, is a tax upon the "corporate franchise or business," and is not a tax upon property. It is made a tax upon the corporate franchise or business by the express language of the enactment, and it was upon the ground that it was a tax on corporate franchises or business, and not upon property, that this court, in the case ofPeople v. Home Ins. Co. (
We come, therefore, to the crucial question in the case — can the state of New York tax the relator, a foreign corporation, upon its business carried on in this state, which is exclusively the business of interstate commerce. The question stated in another form is, may a state tax a foreign corporation whose business in such state is exclusively that of interstate commerce, for the privilege of transacting that business here, because as we have held, this is the essential nature of the tax under the act of 1880. (People ex rel., etc., v. Wemple,
The state power of taxation extends in general to all property, real or personal, having an actual situs within the state, irrespective of the residence of the owner. The state may not only tax property within its limits, but the business and occupation of its citizens, and the franchises of domestic corporations; and when it permits foreign corporations to carry on business in the state, it may ordinarily subject the privilege to such taxation as it may deem expedient. In short, the power of state taxation is coextensive with the subjects of taxation, and the state may define the subjects, provided only that the property, privilege, or right upon which the tax is imposed is within the jurisdiction. The existence of this power is essential to the existence of the state governments. But, under our system, certain powers have been delegated by the whole people to the general government, some exclusive, and some concurrent with the power of the states, and in some instances, affirmative restrictions upon the power of the states have been imposed by the Federal Constitution, and others are implied from affirmative powers vested in the government of the Union. Among these restrictions, express or implied, are restrictions on the taxing power of the states. The states cannot tax the property of the Federal government within the jurisdiction, nor the public securities of the United States, nor the instrumentalities through which it exercises its delegated powers. It can levy no tax upon exports or imports, and goods imported from foreign countries and brought within a state cannot be reached by its taxing power while in the hands of the importer in the condition in which they were when imported, unless they have been mingled with the general mass of property therein. These are familiar illustrations of an acknowledged principle. *10
But conflicts have arisen in respect to the power of state taxation which do not admit of so easy a solution. Indeed in many cases it has been found difficult to draw the line and to determine where state taxation is excluded under the provisions of the Federal Constitution. The difficulty of the subject has been acknowledged by the courts and by no court more frequently than by the Supreme Court of the United States. It is delicate ground, and as was said by Chief Justice CHASE in Osborne v.Mobile (16 Wall. 479), "It is as important to leave the rightful powers of the state in respect to taxation unimpaired, as to maintain the powers of the Federal government in their integrity." No more fruitful subject of controversy has been presented than the proper construction of the commerce clause in the Federal Constitution, as connected with the right of the states to impose taxation upon interstate commerce, or rather on the question, when a tax is to be regarded a tax on such commerce, because the bald proposition that a state may tax interstate commerce has never probably been asserted by any of the courts of the states. The tax has usually been laid on the business, or franchises, or on the occupation of those engaged in interstate commerce, or on the property employed therein, or on freights, the tonnage of vessels, or in some form in which it could be plausibly argued that the tax was not a direct tax on the commerce itself.
In deciding the question before us we are bound to follow the adjudications of the Supreme Court of the United States, so far as they have determined any constitutional principle bearing upon the point in controversy. It has been held in a series of decisions in that court, that while a state tax, which in substance and effect is a direct tax on interstate commerce, constitutes a state regulation of commerce and is the usurpation of a power exclusively vested in Congress and, therefore, void, yet that the commerce provision of the Federal Constitution does not deprive the states of the power to levy a property tax upon property employed in interstate commerce, having a situs within the jurisdiction, provided no adverse discrimination *11
is made in the imposition of the tax between such property and other property of a similar character. The state may subject to a property tax in common with other property, every description of property, real and personal, having its situs there, although used or employed exclusively in the business of foreign or interstate commerce. Ships or vessels engaged in foreign or coastwise commerce may be taxed at their home port, and the products of one state carried into another and there held for sale by the original producer, may be taxed, even before sale in the state to which they have been taken. The courts have given the broadest construction to the power of a state to lay a property tax on property employed in interstate commerce, provided, as before stated, it is subjected to no unjust discrimination. (Transportation Co. v. Wheeling,
If the tax imposed on corporations by the act of 1880, and the subsequent statutes amending the same, had been a property tax instead of a tax on franchises or business, it would not, as we interpret the decisions of the United States Supreme Court, have been subject to the objection now made in behalf of the relator, nor could the relator have lawfully resisted its payment. The tax would then have been a tax imposed on the property of the relator actually within this state, and that it was employed in conducting the operations of interstate commerce would have furnished no claim on constitutional grounds for exemption. But we understand that it is the established doctrine of the Federal courts that no state can impose a tax on the business of interstate commerce, whatever may be the guise under which the tax is laid, and that a tax which operates directly as a tax on such business is void as a state regulation of commerce. The general power of a state to tax business pursuits and callings carried on within the *12
state, does not, as is held, extend to the taxation of such pursuits where the business is that of interstate commerce. This question has frequently arisen under state laws imposing a license tax upon agents of firms or corporations of other states, as a condition of being permitted to prosecute within the state exacting the license, the business of selling or taking orders for the sale of goods or products to be sent there from the state where the principal resides. In some cases the statute under consideration discriminated between the agents of foreign principals and the agents of domestic principals, and in others no such discrimination was made. While some of the earlier decisions may seem to conflict with the later ones, the rule of the Federal courts, established by the recent decisions, is "that a state law is unconstitutional and void which requires a party to take out a license for carrying on interstate commerce, no matter how specious the pretext may be for imposing it," and that it is immaterial whether the person from whom the license is exacted is an individual or a foreign corporation. (Robbins v.Shelby Taxing District,
The principle upon which the license cases proceed is that a license tax is a tax on the business of interstate commerce, and being such it is a regulation of commerce, a subject exclusively within the regulating power of Congress. There seems to be no proposition more firmly established by the decisions of the United States Supreme Court than that a tax imposed by a state upon the business of interstate commerce, is a tax on such commerce and is, therefore, void. The difficulty arises in determining whether the tax in a given case is in substance a tax on commerce, or a tax affecting commerce indirectly and incidentally only, in which latter case it is not obnoxious to constitutional objection. Taxation of property employed in interstate commerce affects commerce, because it increases the expense of carrying it on, and the burden ultimately falls on the subjects of commerce, but this as we have said does not remove such property from the taxing power of the state. So the taxation of the franchises of domestic corporations, *13
part of whose business may be interstate commerce, falls in part upon such commerce, but we do not understand that this in any respect qualifies the power of the state. Many cases of this kind arise under the law now under consideration, in the taxation of railroads organized under our laws. It must be assumed that the grant by a state of corporate powers carries with it special and peculiar advantages to the corporation to whom the grant is made, and it is this that justifies the taxation of corporate franchises by the state. But it has been held that the state may not tax the gross receipts of a steamship company incorporated under its laws, engaged in foreign and interstate transportation. (Phila. Southern S.S. Co. v. Pennsylvania,
The tax against the Pennsylvania Railroad Company, involved in this case, was distinctly a tax on its business, and that business in this state, as we have said, was exclusively interstate commerce. It has been suggested that the tax is upon the privilege it enjoys as a foreign corporation, of coming into this state and here exercising corporate functions. We are not called upon to determine in this case whether the state, under the general rule that it may exclude foreign corporations from coming here, and that it is by comity alone that such corporations are permitted to exercise corporate franchises *14
outside of the jurisdiction of origin, could lawfully exclude a foreign corporation engaged in interstate commerce from landing its freight or passengers on our shores, or at the wharves in the city of New York, or from there receiving freight or passengers. (See Pensacola v. West. Union Tel. Co.,
The learned counsel for the state, who presented with much ability at our bar the argument in support of the tax now in question, places much stress on the recent cases of WesternUnion Tel. Co. v. Massachusetts (
The order of the General Term is therefore, affirmed.
All concur, except MAYNARD, J., not sitting.
Order affirmed. *16