Petition for Writ of Certiorari — Nebraska v. Wyoming
Supreme Court brief1935
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TABLE OF CONTENTS.
Page
ee ae ee Or Gc ne cedcccnnoanedadoeseneseceeudeddes 1
1. Summary statement of matter Involved................... 1
Pe MD. De cesecctdeccnceudesdecsuecedeneodeddesedoocees 3
III. Reasons relied on for the allowance of the writ............ 3
A. Importance of the question involved.............. ; 3
ahi B. Conflict of decisions. ae. pecbeceaseedeecoesoaes 4
Brief in support of petition for writ of certiorari.................. 7
. ey Ge GP GUS Bi occcccccedscscmmessecessee 7
is SEED eunnedusededocuddudseesdecedoocéoeescuedaces 8
OO a Seer 7)
Des GD Gr GU ceaevdscuscdcassecetsceshoosscouss 11
Vo SRS Sse ccccesboosecccecesoseseéecoouceceses< eeeeees 12
Point A. (Assignments of error 1 and 2): ‘
The tax is a general ad valorem tax on property that
- is within the jurisdiction of Virginia......../.... wee
Point B. (Assignments of error 1, 2, and,3):; .
Even though the respondent was engaged solely in in-
terstate commerce and owned no real estate and no
tangible property in Virginia, the tax was valid,
since the burden is so indirect as not to amount to:
ai regulation of interstate commerce..............- 13
Point C, (Assignment sof error 1, 2, and 4):
‘ The rule laid down in he cases involving privilege
taxes on those engaged in interstate commerce is
inapplicable to the case at bar, which involves a
SSS GE GES Gilc acccecaccesuscsuwadenscéus 22
RUE ocaccenscecsucssebnudecenesetedendsswedsebmeddnnbanne 25
TABLE OF CASES.
Adams Express Co. v. Ohio State Auditor, 166 U. 8S. 185, 218........ 16
Alpha Portland Cement Co. v. Massachusetts, 268 U. S. 203.... ; 5
Baldwin v. Missouri, 281 U. S. 586, SO1.............. Sane 13
Bees & Gee, Bae o Oe Succccdccucnosedsinceensetqosss 8
Commonwealth of Virginia v. Castner, Curran & Bullitt, Inc., 138
We, Goccccvcdesccococvesdecceccecoueooesocceseessdeseeoeesees 5
Eastern Air Transport, Inc., v. South Carolina Tax Commission, 285
ey Eb Ble Menccdeccoesceenscorueosseeeceseeennsoesbedstsouss< 5, 15
Express Company Cases, 165 U. S. 1904, 220... ......4. cc ceecceccces 16
Galyeston, Harrisburg, etc.. Ry. Co. v. Texas, 210 U. S. 217, 225..... 22
Gloucester Ferry Co. v. Commonwealth of Pennsylvania, 114 U. 8.
Hees Ges Gee Gooccccdccncccoocarcooococeseceoeoouss: seccces 17
Lawrence v. State Tax Commission of Mississippi, 286 U. 8S. 276.... 13
—4756-C
8 | INDEX
Page
McCulloch v. Maryland, 4 Wheat. 429........560cccceecccereeenees 17
Minor v. Philadelphia, etc., R. Co., 18 Wall. 206.........0eecceeeeee 23
New Jersey Telephone Co. v. Tax Board, 286 U. 8. 338, 246,..... ore 15
Ozark Pipe Line Corp. v. Monier, 266 U. S. 555......... poneeeooees m
People v. Commlasioners, 106 U. ©. 0G... ccccccccccccccsecreccscees 19
Philadelphia, etc., v. Pennsylvania, 122 U. 8. 326, 344, 345.......... 23
Postal Tel., etc., v. Adams, 155 U. 8. 688, 697...... eesadseavessnes 22,
St. Louis & 8. W. Ry. Co. v. Nattin, 277 Sg)? UD .ccccccccece 7s 6,15
State of Minnesota v. Blasius, — U. 8. — (decided ' November 6,
1933), No. 4, October Term, 1933. pedeedededeneereeerrveeooercceee 9
TEXTBOOKS.
Commerce Clause of the Federal Constitution (FE. P. Prentice and
J. C. Egan), Page 229....ceccccccceccccccecccecccscsccteceesess 19
Interstate Commerce (Judson, 2d Edn.), page 35.........+-06ee00- 22
Srarures.
Constitution of the United States:
Article 1, Section 8, Subsection 3............ceeee00. fooeeeese 4, 20
Article 1, Section 10, Subsection 2..........+++sseeeees- meses 20
Acts of Congress:
Judicial Code, Section 237 (b), as amended by Act of pebruary
13, 1925 (28 U. 8S. C. A., Section 344 (b) ) of... cece csecete Ss
Virginia Statutes:
Acts of Assembly, 1928, pp. 35, 63, 69, 738, 739 (quoted in Ap-
A EP Perr rer rer ryt Tr rT errr rr Terrrerr rrr ere 25
The Tax Code of Virginia (Same as Acts, supra):
Section 6B.....6.66-. Iicusesdceuuatavadesseceeeeeus gueveooeres 2,12
CEE Te vcdscccevaceseseccsesvvcesedteentedvessasaserastaeae 2, 25
SD Ucn davedosdorrndbscntecdedsons tasneatddeous Ria deh eae 13, 27
SUPREME COURT OF THE UNITED STATES
OCTOBER TERM, 1933.
No. 924
COMMONWEALTH OF VIRGINIA, *
° Petitioner,
vs,
IMPERIAL COAL SALES COMPANY, INCOR-
PORATED.
_ PETITION FOR A WRIT OF CERTIORARI
May IT PLEASE THE OOURT:
The petition of the Commonwealth of Virginia respect-
fully shows to this Honorable Court:
I.
Summary Statement of the Matter Involved.
. Your petitioner, the Commonwealth of Virginia, respect-
fully states that she is aggrieved by the final judgment of
the Supreme Court of Appeals of Virginia, rendered on
the 11th day of January, 1934, in a suit wherein the re-
spondent was exonerated from the payment of certain
taxes, aggregating $1,579.69, on intangible property of the
respondent. The intangible property was the excess of
bills and accounts receivable over bills and accounts pay-
able, and money, belonging to respondent (R. 43-44), which
items constituted taxable ‘‘capital’’ as defined by the Vir-
la
2
. ginta statute (Appendix hereto, p. 25, Section 68 of the
Tax Code of Virginia, Acts of Assembly 1928, pp. 35, 63,
and Section 73, Idem., as amended, Acts of Assembly 1928,
pp. 738, 739). The respondent is a.corporation created
‘under the laws of the State of Virginia, with its princi-
pal office in Lynchburg, Virginia (R. 10, 16), where all
of ifs records are kept (R. 33); it is engage@.only in the |
business of selling coal.for others on commission by means
of written orders and contracts (R: 16, 17); none of the
coal‘is in Virginia at the time of sale and only a negligible
amount is sold to purchasers located in Virginia (R. 17-
18); a large part of the coal, possibly as much as 90%
thereof, is sold by contracts that become effective upon
being appPoved (R. bot. page 29, top p. 80) and which are
approved in Lynchburg, Virginia (R. 33-34). The respond-
ent was actively engaged in — in the conduct of an
interstate business.
, it ’was stipulated by anni for the parties in the court
of original jurisdiction that ‘‘the property constituting the
basis of the assessment on capital were (sic) on the dates
in-question the property of the Imperial Coal Sales Com-
_ pany, Inc., and that the income constituting the basis of
the income assessment was income earned by the Imperial .
Coal Sales Company, Incorporated, and that the assess-
ments as made are correct if the Imperial Coal Sales Com-
pany, Inc., is subject to any capital or income tax what-
ever- during the years in question by the State of Vir-
ginia.”’ (R; 15-16.)
The trial court sustained the contention of the respond-
ent (petitioner there) that the tax on the capital was in-
valid for the ‘reason that it was a burden upon interstate
“commerce in violation of the Commerce Clause of the
United States Constitution (R. 45) and this view was sus-
tained by ‘the Supreme Court of Appeals of Virginia by
37
“its opinion rendered at the first hearing (R. 46), Epes, J.,
dissenfing (R, 60), and a rehearing was. granted in, the
Supreme Court of Appeals of Virginia ‘and the-frst opinion
was adhered to (R. 61), Epes and Hudgins, JJ., dissent-
ing, and final judgment entered on the 11th day of Jan-.
uary, 1934 (R. 61). eh
It is to he noted that a net income tax as well as an ad °
valorem tax on capital was invol¥ed.and while the court
“discussed the non-fedexal question of interpretation of the
State law as to both the income and property tax and held
the income tax void on a non-federal ground, it neverthe-»
less said as to the capital tax (R. 52): ‘“We prefer to rest
the decision of the validity of the capital tax here con-
sidered upon the broad proposition that it is invalid be-
‘cause-it is a burden upon interstate commerce forbidden
by the Constitution of the United States. os
a 5
- The Issue.
_ The issue thué presented by this petitionsis*whether the °
State of Virginia has the power to tax the intangible assets
of a Virgiaia corporation activelf engaged in Virginia in
the conduct of an interstate business.
ILL.
Reasons Relied on for the Allowance of the Writ
A. vals
Importance of the Question Involved.
The question of taxation of intangible property is one of
great importance not only to the State of Virginia, but to
the other States in the United ‘States, for in_all of them
there are, no doubt, persons, firms and corporations én-
".
4
gaged solely in interstate commerce. Although in the case
at*bar there is involved only $1,579.69 of State taxes on in-
tangibles, which is small in comparison with the total reve-
nue of the State of Virginia, it is a tax that would be levied
annually and would increase annually with the growth of
the business of the respondent and others that are engaged
now and that would, no doubt, be attracted bythe benefits
of the decision to engage in similar businesses. Virginia
would become an attractive State in yhich to locate sell-.
ing agencies for the vast businesses “of the country and the
items of excess of receivables over payables and money on
- deposit—the chief items of taxable ‘‘capital’’ as defined By
Virginia statute—would escape all taxes thereon to Vir-
ginia, because the owners would be engaged in interstate
commerce.
Similar a would soon exist, if they are not al
ready existing, in all of the other States, as well as in Vir-
ginia, if the decision is allowed to stand.
The present holding removes from the tax field all in-
tangible property belonging to those engaged solely in in-
- terstate commerce, unless they also own real estate or
tangible property within, the taxing jurisdiction. “The ex-
emption very materially limits the States’ taxable subjects.
It is, therefore, highly —— that the quien be
finally determined by this Court. .
B.
Conflict of Decisions.
The Supreme Court of Appeals of Virginia is the high-
est court of the State of Virginia in which a decision ‘could
be had and its decision in the case at bar, in holding that the .
capital tax is ‘‘invalid because it contravenes Article I,
Section 8, Subsection 3, of the Constitution of the United
‘States’ (R. 50) is contrary to and in-conflict with the de-
--.
|
\ |
— | 5
cisions of this Court in St. Lowis & §. W. Ry. Co. v. Nattin,
277 U. S. 157, 159, and Eastern Air Transport, Inc. v. South
Carolina Tax Commission, 285 U. S. 147, 152, and other
applicable decisions of this Court.
The three cases relied upon by the Supreme Court of Ap-
peals of Virginia, Ozark Pipe Line Corp. v. Monier, 266
U. S. 555 (RB. 54-55), Alpha Portland Cement Co. v. Mass.,
268 U.S. 203 (R. 57), Commonwealth of Virginia v. Castner,
Curran & Bullitt, Inc., 138 Va. 81 (R. 58), can be readily
distinguished in that each of them involved a privilege tax,
while the tax in the case at bar is a general ad valorem
property tax. In the Ozark case this Court said (266 U. S.
562): ‘‘The tax-is one upon the privilege or right to do ©
business’’, and the statute provided that a failure to make
the report for the purpose of a proper assessment caused
—the foreign corporation ‘‘to forfeit its right to engage in
business’’ in the taxing State; in the Alpha Portland
Cement case, the tax waa in terms and in effect an exvise tax
and the statute carried the statutory right of restraint by
* injunction if the tax be not paid; and in-the Castner case,
the Virginia Court said (138 Va. 97): ‘‘The tax sought to
be imposed in the instant case’is not an income tax, but a
license tax for the privilege of doing Dusiness in this
State * * *’’, and the Virginia law provided that it was
a misdemeanor to conduct a business without taking out
the license. (Sec. 136, The Tax Code of Virginia, Acts of
Assembly 1928, p. 35, 98.) On the other hand, the tax in
the case at bar is a pure property tax, in name and effect,
and its enforcement is left to the ordinary means devised
for the collection of taxes. '
Wausnsyous your petitioner reopectfally 1 prays that a
‘Writ of Certiorari be issued out of and under the seal of
this Honorable Court directed to the Supreme’ Court of
Appeals of the State of Virginia, commanding that court
6
to certify and to send to this Court for its review and
determination, on a day certain to be therein named, a full
and complete transcript of the record and all proceedings
in the case numbered and entitled on its docket No. 1234,
Commonwealth of Virginia, Petitioner, vs. Imperial Coal
Sales Co., Inc., Respondent, and that the judgment of the
Supreme Court of Appeals of Virginia may be reversed by
this Honorable Court, and that your petitioner may have
such other and further relief in the premises as to this Hon-
orable Court may seem meet and just, and your petitioner
will ever pray.
CoMMONWEALTH OF VIRGINIA.
W. W. Martin,
Henry R. Muyer, Jr.,
Counsel for the State Tax Commissioner,
State Office Building, Richmond, Virginia,
Attorneys for Petitioner.
March 17th, 1934.
SUPREME COURT OF THE UNITED STATES
No. 924
—_
COMMONWEALTH OF VIRGINIA,
Petitioner,
vs.
IMPERIAL COAL SALES COMPANY, INC.
BRIEF IN SUPPORT OF PETITION FOR WRIT OF
CERTIORARI.
I,
The Opinions of the Court Below. :
The majority opinion of the Supreme Court of Appeals
of Virginia and the dissenting opinion of Justice Epes
upon the original hearing therein will probably appear in
161 Va. and are already printed in 167 S. E. 271. Both
opinions are set forth verbatim in the record beginning on
page 46. ; :
The opinion of the majority of the same court upon the
rehearing, from which opinion Justices Epes and Hudgins
‘dissented without writing dissenting opinions, has not yet
been printed but will no doubt also appear in 161 Va.
2a
8
II.
J urisdiction.
1. The-appellate and supervisory jurisdiction of the Su-
preme Court of the United States is invoked under Section
237(b), Judicial Code of the United States, as amended’
by the Act of Feb. 13, 1925 (28 U. 8..C. A. Sec. 344(b) ), to
correct error of the Supreme Court of Appeals of Virginia
in the case just referred to under I.
2. Final judgment. of the Supreme Court of Appeals of
Virginia—which is the highest court of the State of Vir-
ginia in which a decision could be kad—was entered on the
‘11th day of January, 1934 (R. 61).
3.-The case at bar comes within the appellate jurisdic-
tion of this Court under Section 237(b) of the Judicial
Code by reason of the respondent’s claim that it was en-
gaged exclusively .in’ interstate commerce (R. 14) and
that its property was therefore exempt from State taxa-
tion, thus setting up and claiming on hehalf of the re-
spondent a right, privilege and immunity under the Con-
stitution of the United States. .
The trial court held that, inasmuch as the respondent did
exclusively an interstate business, the taxes imposed were
a burden upon interstate commerce and, therefore, invalid
(R. 48-49), and this view was sustained by the Supreme,
Court of Appeals of Virginia on the first hearing, Epes, J.,
dissenting, and again on the rehearing, Epes and Hudgins,
JJ., dissenting (R. 61).
The language of the section of the Judicial Code seems
to clearly support the right of this court to review the de-
cision and the jurisdiction is supported also by decisions
of this Court, namely:
Blodgett v. Silberman, 277 U.S. 1 (Case No. 190, Octo-
ber Term, 1927). [The companion case, No. 191, in-
volved a writ of error.]
—,
9
State of Minmesota v. Blasius (decided November 6,
1933), — U. S. —, 54 Sup. Ct. Rep. 34 (No. 7, Oct.
Term, 1933). , |
4
Adopting the forceful language and reasoning contained __.
~ in the brief of the distinguished counsel for the petitioner
for the writ of certiorari in the Blodgett case, supra, it is
submitted that there can be no limit’ upon the power of the
Commonwealth of Virginia to impose a tax upon the in-
tangibles belonging to a Virginia corporation, with its
principal place of businss in Virginia, and actively engaged
in Virginia in the conduet of an interstate business, unless
that limitation is imposed by the Constitution of the United
States, and there is but one final judge of the meaning of
that Constitution. We, therefore, respectfully submit that
the Commonwealth of Virginia is entitled to have the limits —
of her power adjudicated by, the only court competent
finally to determine the issue.
—
Statement of Case.
This case arises upon a petition of the respondent here
(petitioner in trial, court) to be exonerated from the pay-
ment of certain State taxes on intangible property belong-
ing to it. The property was the ‘‘capital’’, as defined by
Virginia law, that belonged to the respondent on January 1,
1928, 1929 and 1930, and consisted of its money and the
excess of its bills and accounts receivable over its bills and
accounts payable (R. 43, 44). ; .
The respondent is a. corporation created under the laws
of the State of Virginia, with its principal office in Lynch-
burg, Virginia (R. 10, 16), where all of its records ‘are
kept (R. 33); it is engaged only in the business of selling
coal for others on commission by means of written orders
10
and contracts (R. 16, 17); none of the coal is in Virginia
at the time of sale and only a negligible amount is sold to
purchasers located in Virginia (R. 17-18); a large part of
the coal, possibly as much as 90% thereof, is sold by con-
tracts that become effective upon being approved (R. bot.
29, top 30) and which are approved in Lynchburg, Virginia
(R. 33-34). The respondent was actively engaged in
Virginia in the conduct of an interstate business.
It was stipulated by counsel for the parties in the court
of original jurisdiction that ‘‘the property constituting the
basis of the assessment on capital were (sic) on the dates
in question the property of the Imperial Coal Sales Com-
pany, Inc., and that the income constituting the basis of the
income assessment was income earned by the Imperial Coal
Sales Company, Inc., and that the assessments as made are
correct if the Imperial Coal Sales Company, Inc., is subject
to any capital or income tax whatever during the years in
question by the Staté of Virginia.’ (R. 15-16.)
The.trial court sustained the contention of the respond-
ent (petitioner there), that the tax on the capital was in-
valid for the reason that it was a burden upon interstate
commerce in violation of the Commerce Clause of the
United States Constitution (R. 45), and this view was sus-
tained by the Supreme Court of Appeals of Virginia ‘by
its opinion rendered at the first hearing (R. 46), Epes, J.,
dissenting (R. 60), and a rehearing was granted in the Su-
preme Court of Appeals of Virginia and the first opinion
was adhered to (R. 61), Epes and Hudgins, JJ., dissenting,
and final judgment entered on the 11th day of January,
1934 (R. 61).
It is to be noted that a net income tax as well as an ad
valorem tax on capital was involved, and while the court
discussed the non-Federal question of interpretation of the
State law as to both the income and property tax and held
the income tax void on a non-Federal ground, it neverthe-
11
less said as to the capital tax (R..52): ‘‘We prefer to rest
the decision of the validity of the capital tax here consid-
ered upon the broad proposition that it is invalid because
it is a burden upon interstate commerce forbidden by the
Constitution of the United States.’’ |
One of the grounds of defense filed in the court of orig- .
inal jurisdiction (R. 15) is as follows:
** All of the assets used in making up the capital as-
sessed against petitionér were the gross proceeds of
interstate commerce and as such not taxable by the
State of Virgirtia.’’
_ This was absolutely unsupported by the evidence and a
reading of the statute (Appendix A) shows clearly that the
law does not impose any such tax. The-tax was upon money
and the excess of receivables over payables, which is en-
tirely different from a tax on gross proceeds.. The distinc-
tion is mentioned here simply to avoid the appearance of
the unchallenged defense. The ~— was made but >
a, abandoned.
IV.
Specifications of Error.
1. The Supreme Court of Appeals of Virginia erred in
holding that the assessment of the State tax upon ‘‘capital’’
was invalid.
2. The Supreme Court of Appeals of Virginia erred in
exonerating the respondent from the payment of the tax in
question.
3. The Supreme Court of Appeals of Virginia erred in
holding that, because the respondent was engaged solely in
interstate commerce and had no real estate in’ Virginia and
no tangible property in Virginia, the respondent’s intan-
gible property was exempt from all State taxation.
12
4. The Supreme Court of Appeals of Virginia erred in
applying the rule laid down in the cases involving State
taxes upon the privilege of engaging in interstate com-
merce to the case at bar, which involves an ordinary ad
valorem property tax.
V.
- ARGUMENT.
Your petitioner contends that the tax involved in the case
at bar was valid, and that the final judgment of the Supreme
Court of Appeals of Virginia, sustaining respondent’s
claim of immunity and exemption, is erroneous for the fol-
’ lowing reasons:
A. The'tax is a general ad valorem tax imposed’ upon
property that is within the jurisdiction of VirfBinia.
B. Even though the respondent was engaged solely in
interstate commerce and owned no real estate and no tan-
gible property in Virginia, the tax was valid, since the
burden is so indirect as not to amount to a regulation of
interstate commerce,
C. The rule laid down in the cases involving privilege
taxes on those engaged in interstate commerce is inap-
plicable to the case at bar, which involves a@ general ad
valorem tax. ;
Point A.
(Assignments of Error, 1 and 2.)
The tax is a general ad valorem tax on property that is
within the jurisdiction of Virginia.
Section 68 of the Tax Code of Virginia (Appendix A,
post) imposes an annual State tax of 75¢ per $100 of actual
value of ‘‘capital’’ as defined therein, including such -capi-
tal as belongs to corporations chartered under the laws of
13
Virginia (Section 81 of the Tax Code of Virginia, Appendix
A, post).
The respondent stipulated that it was the owner of the
property constituting the basis of the assessment and that
if any tax was assessable against it, the tax that was as-
sessed was correct (R. 15-16).
The respondent is a corporation organized under the
laws of Virginia, with its principal office in Lynchburg, Vir-
ginia (R. 10,16). The bank account and books and records
of the corporation are kept in Lynchburg, Virginia, and in-
voices are paid and payable there and checks are drawn in
that office (R. 33).
The legal title of the canted, its business situs, actual
situs and beneficial ownership are all within the jurisdic-
tion of Virginia and there is not the slightest’ basis for a
‘jurisdictional claim by any other State. Money and
credits, such as constitute the basis of the capital tax
herein, are taxable at the domicil of the owner and nowhere
else,
- Baldwin v. Missouri, 281 U, s. 586, 591.
See also:
Lawrence v. State Tag Commission of Mississippi,
- 286 U. S. 276.
Point B.
(Assignments of Error, 1, 2, and 3.)
Even though the respondent was engaged solely in in-
terstate commerce and owned no real estate and no tangible
property in Virginia, the tax was valid, since the burden
is so indirect as not to amount to a on of inter-
state commerce. o,
The issue under this _ is clearly defined by a con-
sideration of the argument of opposing counsel in the
lower court and the lower court’s opinion.
14
From page 7 of the original brief of counsel for the re-
spondent in the lower court, we quote as follows:
“It has not. been contended and will not be con-
tended that the State has nof a right to assess its or-
- dinary taxes on all tangible property in the State.
a . . . 7 . " *@
) -
‘*It is universally held that such taxes are proper and
. that the effect on interstate commerce is only indi-
rect.’”’
Then counsel for respondent argued that taxes upon in-
tangible assets have a direct effect upon interstate com-
merce and the lower court concurred in this argument as
appears from the opinion (R. 59) where the eourt said:
‘*From the principles gathered from the cases it
seems clear that a corperation engaged in interstate
commerce may be taxed by a state on (1) its real es-
tate and tangible personal property situated in the
taxing state, and (2) upon its intangible personal
property, if in the taxing state it does intrastate busi-
ess or has any appreciable real or tangible property.
But if it has no real or tangible property and does no
intrastate business in the taxing state, it cannot be
taxed by that state.’’ .
‘The ownership and taxation of Virginia realty and tan-
gible property would, according to the holding and express
opinion of the lower court, lift from the interstate com-
merce of the respondent the burden otherwise resting
thereon by reason of Virginia’s tax upon’ the intangibles.
If there is piled upon the respondent’s interstate com-
merce the additional burden of real estate and tangible
property taxes, the burden upon interstate commerce is
lightened—by increasing the tax burden, the commerce
burden is decreased, holds the lower court. It is ré t-
15
fully submitted that this is unsound and in direct conflict
with the decisions of this Court.
See St. Louis € 8. W. Ry. Co. v. Nattin, 277 U. 8. 157,
in which case the railway company owned a line of railroad
in Bossier parish, Louisiana, and the tax assessing au-
thorities of phat parish un lertook to lay an ad valorem tax
upon all property within the parish, including the railroad.
The railway corapany sought an injunction against the —
enforcement of the tax upon several grounds, one being
that it was engaged in interstate commerce and that, there-
fore, the tax was invalid. ‘See report of case below (27
F. (2d) 766}, where the court4aid that dne of the grounds
for injunction against’ theG/collection of the tax -was
that the portion of thé tagypayer’s line within the par-
ish of Bossier forms a parfyof an interstate railroad, and
said assessment levies ff sai burden upon interstate
commerce in violation of’Section 8, Article 1 of the’United
‘States Constitution. The lower court dismissed the bill
and this Court affirmed that decision, saying through Mr.
Justice McReynolds: ;
‘Without doubt a local legislative body, when °
properly authorized, may lay general ad valorem taxes.
upon all property within its jurisdiction, including that
of common carriers engaged in interstate commerce,
without violating the Federal Constitution. That such
taxation does not amount to regulation of interstate
commerce is settled doctrine.’’
No authority was cited for that view as ‘‘without doubt’’
it was ‘‘settled doctrine.’’
See also the most recent statement on the subject, East-
ern Air Transport, Inc., v. South Carolina Tax Commis-
sion, 285 U. 8S. 147, where Chief Justice Hughes said at
page 152:
«Tt is elementary’, said the court in New Jersey
Telephone Co. v. Taw Board, 280 U. S, 338, 346, 50
¢
o
16
S»Ct. 111, 113, ‘that a State may tax property used to ~
carry on interstate commerce. done
The decisions make no distinction between tangible and
intangible property. .The only limitations are those which
relate to the effect of the tax, rather than the nature of the
property.
The limits of the rights of Virginia in imposing such a .
tax are prescribed in the Express Company Cases, 165
U. S. 194, 220, where this Court said:
@ ‘‘Although the transportation of the subjects of in-
- terstate commerce, or the receipts received therefrom,
or the occupation or business df carrying. it on, cannot
be directly subjected to state taxation, yet property
belonging to corporations or companies engaged in
such commerce may be; and whatever the particular
form of the exaction, if it is essentially only property
taxation, it will not be considered as falling within the
inhibition of the Constitution. Corporations-and com-
panies engaged in interstate commerce should bear
their proper proportion of the burdens of the govern-
ments under whose protection they conduct their
operations, and taxation on property, collectible by the
ordinary means, does not affect interstate commerce
otherwise than incidentally as all business is affected
by the necessity of contributing to the support of gov-
* ernment. Postal Teleg. Cable Co. v. Adams, 155 U. S.
688. 99
The same Court upon a sthtenten said, through Mr. Jus-
tice Brewer (Adams Express Co. v. Ohio State Auditor,
166 U. S. 185, 218) :
** Again and again has this court affirmed the propo-
sition that no state can ‘interfere with interstate com-
merce through the imposition of a tax, by whatever
name called, which is in effect a tax for the privilege
of transacting such commerce. And it has as often
affirmed that such restriction upon the power of a State
17
to interfere with interstate commerce does not in the
least degree abridge the right of a state to tax at their
full value all the instrumentalities used for such
commerce.’’ ‘
In Gloucester Ferry Co. v. Commonwealth of Pennsyl-
vania, 114 U. S. 196, the facts are stated by the Court and
may be summarized as follows: The Gloucester Ferry
Company, a New Jersey corporation, operated a ferry
from Gloucester, in the State of New J ersey, to Philadel-
phia, in the State of Pennsylvania. It owned or leased
ferry boats which it operated, and leased the slip in Phila-
delphia and owned the one in Gloucester. It was engaged
solely in interstate commerce, its entire business consisting
of ferrying passengers and freight across the Delaware |
River. The only property it owned in Pennsylvania was
the lease upon the Philadelphia slip or wharf. Its boats
were registered in New J erséy. Pennsylvania assessed a
tax on its capital stock.
In holding the tax invalid, the Court said this (114 U. 8.
206) :
“‘It is true that the property of corporations en-'
gaged in foreign or interstate commerce, as well as the
property of corporations engaged in other business, -
is subject to state taxation, provided always it be
within the jurisdiction of the State. As said by Chief
Justice Marshall in McCulloch v. Maryland, 4 Wheat.
429, ‘All subjects over which the sovereign power of a
State extends are objects of taxation; but those over
which it does not extend are, upon the soundest prin-
ciples, exempt from taxation. This proposition may
also be pronounced self-evident.’ ”’
In the Ferry case the tax was based upon the appraised
value of the entire capital stock of the corporation, while’
only a negligible portion of the capital stock was repre-
sented by property subject to Pennsylvania’s jurisdiction.
18
The court then holding that there was no property, tangible
or intangible, of appreciable value within Pennsylvania,
, the tax must necessarily have been upon the business of
interstate commerce and was on that account void.
However, this Court recognized the validity of an ad
valorem property tax upon intangibles, as is seen from the
following quotations from the same opinion (114 U. S.
210): -
*‘Under this decision there is no property held by
the Gloucester Ferry Company which can be the sub-
ject of taxation in Pennsylvania except the lease of
the wharf in that State. Whether that wharf is taxed to
the owner or to the lessee it matters not, for no ques-
tion here is involved in such taxation. It is admitted
that it could be taxed by the State according to’ its
appraised value.’’ (Italics supplied.)
And again, in 114 U. S. 217:
‘‘That freedom [the freedom of transportation be-
tween the States secured under the commercial power
of Congress] implies exemption from charges other
than such as are imposed by way of compensation for
the use of the property employed, or for facilities
afforded for its use, or as ordinary taxes upon the
value of the property.’’ (Italics supplied.)
It is respectfully asserted that this Court has in the
above case indicated its approval of a State ad valorem
tax upon intangible property (the lease of the wharf) be-
longing to a foreign corporation, engaged solely in inter-
state commerce and doing no intrastate business and hav-
ing no real estate or tangible personal property within the
taxing jurisdiction. This being permitted with respect to
a foreign corporation, a fortiori it should be permitted
with respect to a domestic corporation and the capital tax
on the Sales Company should on this account be upheld.
19
‘‘A State may tax capital used in the business of
selling imported goods where it does not appear to be -
invested in original packages; and capital which was
in money on the date to which the assessment related,
though on the date it was actually made the capital .
was invested in goods which were in interstate or for-
eign transit; * * *°.’? Commerce Clause of the Fed-
eral Constitution, by E. P. Prentice and J. C. Egan,
, page 229.
One of the cases cited as authority for a portion of the
above is People v. Commissioners, 104 U. S. 466. In this
case, Hanemann, a resident of New York City, ‘‘was as-
sessed for taxation as of January 1, 1876, upon his per-
sonal: estate, exclusive of bank stock, to the amount of
- $60,000.00.’"" He applied for relief on these grounds:
‘That the value and amount of all his personal estate, on
the first day of January, 1876, and during the period
covered by the assessment, did not exceed $125,000, of
which $4,500 was invested in railroad bonds,. and $1,000
in household furniture; that the remainder was ‘continu-
ously employed in the business of exporting cotton from
the United States of America to foreign countries, through _
the Customs Department of the United States aforesaid,
and that said employment consists in purchasing and pay-
ing for the cotton in different States of the United States,
and actually exported by deponent in said business, and
for the payment of all the expenses of shipping the same
.as such exports,’ and that the only portion of his estate
upon which he is liable to be assessed and taxed is the
sum of $5,500. In his examination before the tax commis-
sioners, upon the occasion of his application for reduc-
tion or remission, he further stated that ‘his said capital
is invested uniformly and contimtously in cotton, the prod-
uct of, and having a situs in, various Statés outside of ©
New York, and in transit to the port of New York, and
20
other Atlantic ports, for the sole purpose of exportation,
and no portion of such cotton is intended to be, or is, sold
in New York, or any other United States market; that de-
ponent purchases cotton largely upon credit, and that of
his capital as much as $115,000 is continuously invested
in cotton of the growth of the United States, which has
been cleared at a custom-house, and is on shipboard in
x, 99
' course of exportation to some foreign State or country’.
The reduction and remission were both denied. The rest
of the opinion is short and important, as follows: ‘The as-
sessment in excess of $5,500, it is claimed by plaintiff ‘in er-
“ror, was in violation as well of Art. 1, Sect. 10, and clause 2,
as of Art. 1, Sect. 8, clause 3, of the National Constitution.
The main propositions advanced by his counsel are that
products of the United States which have passed the Cus-
toms Department, and are on shipboard in the course of
exportation to a foreign market, have become exports, and
are no longer within the taxing power of the State; that to
tax money invested in such products is, in effect, laying an
impost or duty on exports; that a tax on capital invested in
the products of the United States, in transit from one State
to another fer purposes of exportation, or on money used
' and employed in exporting such products, is an unauthor-
ized interference by the State with the regulation of
commerce. ;
‘¢ Although these propositions are deemed by counsel to .
be very easy of solution, we do not feel obliged to determine
them in this case. The plaintiff in error was assessed, upon
his personal property, as of January 1, 1876. If the capital,
which he claims was uniformly and continuously employed
in the business of purchasing cdtton for exportation from
the United States to foreign countries, through the Customs
Department, was, in fact, in money on the first day of
January, 1876 he could not escape a subsequent assess-
21
ment of that money upon the ground that, at the timé the
assessment was made, it was invested in cotton for exporta-
tion to foreign countries. Neither in his affidavit nor in his
examination before the tax commissioners does he distinctly ,
claim (and, perhaps, could not) that the capital which he
thus employed in the business of purchasing cotton for
exportation was, in fact, so invested on the first day of
January, 1876. His capital may have been, in a business or
mercantile sense, continuously so employed, and yet it may
not have been, in fact, so invested at the date to which the
assessment, whenever made, relates. We have no occasion,
therefore, in the present case, to consider or determine the
questions of constitutional law discussed by counsel. It will
be time enough to consider them when they come before us
in such form as to require their determination.’’
This Honorable Court affirmed. the tax, basing its hold-
ing upon the fact that, at the date of incidence of the tax,
the taxable subject was money—intangible property—not
goods in transit to or from a foreign country. Being a tax
on intangibles, the Court considered that there was no con-
stitutional question presented, although it was positively
shown that the money was used, ‘‘in a business of mercan-
tile sense,’’ in foreign commerce, The tax was in name and
effect a tax on the intangible property of one engaged in
interstate or foreign commerce. This is thé exact situation
here and it is, therefore, respectfully but urgently sub-
mitted that the above case is in support of the tax in the
case at bar.
22
Point C.
(Assignments of Error, 1, 2 and 4.)
The rule laid down in the cases involving privilege taxes
on those engaged in interstate commerce is inapplicable to
the case at bar, which involves a general ad valorem tax.
There is a recognized distinction between a privilege tax
and a property tax, with regard to their effect upon inter-
state commerce. See Galveston v. Harrisburg, &c., Ry. Co.,
Texas, 210 U.S. 217, where it is said at page 225:
‘‘It being once admitted, as of course it must be, that
not every law that affects commerce among the States
is a regulation of it in a constitutional sense, nice dis-
tinctions are to be expected.”’
In the same case, at page 227, the Court quoted from
Postal Tel. etc. v. Adams, 155 U. S. 688, 697, as follows:
‘*By whatever name the exaction may be called, if it
amounts to no more than the ordinary tax upon prop-
erty or a just equivalent therefor, ascertained by refer-
ence thereto, it is not-open to attack as‘ inconsistent
with the Constitution.’’
See also Judson, on Interstate Commerce (2nd Ed.), p
35, where it is said:
‘*While a state cannot tax interstate commerce, that
* is, the privilege of carrying on such commerce, it tan
tax the property in its Jurisdiction employed in carry-
mg on such commerce.’
In Philadelphia, etc. V. . Pennsylvania, 122 2 U. 8. 306, 344,
the Court said: |
“The decision in this case and the reasoning on
which it is founded so far as they relate to the taxation
of interstate commerce carried on by corporations ‘ap-
ply equally to domestic and foreign corporations. No °
doubt the capital stock of the former, regarded as in-
habitants of the State, or their property, may be taxed
as other corporations and inhabitants are, provided no ©
discrimination be made against them as corporations
carrying on foreign and interstate commerce, so as to
make the tax, in effect, a tax on such commerce.’’
A taxation that affects interstate commerce only by mak-
ing it more expensive, is not an unlawful regulation df it.
Minor v. Philadelphia, etc., R. Co., 18 Wall. 206.
There is no discrimination against the respondent here
by reason of its interstate commerce. This appears from a
reading of the statute and the fact that if the: respondent
had: withdrawn from interstate commerce and had during
the years in question engaged solely’ in intrastate com-
merce, the tax would have been, nevertheless, the same.
In Philadelphia, etc. v. Pénnsylvania, supra, the Court
also said (122 U. S. 345):
‘*The corporate franchises, the property, the busi-
ness, the income of corporations created by a State
may undoubtedly be taxed by the State; * * °%.”
A comparison of the facts and statutes in the cases relied
upon by the lower court (Ozark Pipe Line and Alpha Port-
." land Cement, and Castner, Curran ¢ Bullitt cases, supra)
with the facts and statutes in the instant case shows that
. each of the former éases involves a privilege tax while the
instant case involves a pure property tax in both name and
effect. (See Petition for Writ of Certiorari, page 5.)
The lower court, however, said in its opinion (R. 59) : .
‘*While we are aware of the material difference be-
tween a privilege tax and a capital and income tax, yet,
we will apply the reasoning and principles there dis-
cussed to the case at bar becatise we think the business
done by the Sales Company is not subject to State
taxation.’’
ra
While the lower court recognized and discussed the well
established doctrines of this Honorable Court to the con-
trary, it nevertheless illogically held that the tax was
invalid ‘‘because’’ it thought that ‘‘the business is not sub-
ject to State taxation.’’ —
Conclusion.
It is, therefore, respectfully submitted that the case at -
bar is one calling for the exercise, by this Court, of its super-
visory powers to correct error of the Supreme Court of Ap-
peals of Virginia in deciding a Federal question of sub-
stance in a way not in accord with applicable decisions of ,
this Court. To such end it is respectfully submitted that a
Writ of Certiorari should be granted and this Court should
review the decision of the Supreme Court of Appeals of
the State of Virginia and reverse it.
Respectfully submitted,
W. W. Martin,
Henry R. Mitxer, Jr.,
Counsel for the State Tax
Commissioner, State Office Building,
Richmond, Virginia,
Attorneys for Petitioner.
25
APPENDIX A.
Acts of Assembly ‘of Virginia, 1928, Pages 35, 63.
(The Tax Code of Virginia.)
Sec. 68. Intangible personal property segregated for
State taxation only.—Intangible* personal property having
been segregated for State taxation only, the subjects of
taxation classified by this chapter are hereby’ defined as
intangible personal property, and shall be taxed as herein-
after provided, that is to say: ,
Section 69. [Classifying taxable bonds, notes, etc.]
Section 70. [Classifying taxable money on deposit, ex-
pressly excepting ‘‘money which is otherwise taxed,’” such
as money included in ‘‘capital.’’]
‘ Section 71. [Classifying taxable shares of stock.]
Section 72. [Classifying taxable municipal and State
bonds. ]
Section 73. [As amended by Acts ‘of Assembly of Vir-
ginia, 1928, pages 738, 739.]
Capital of any trade or business of any person, firm, or
corporation, except the capital of any trade or business
which capital is otherwise specifically taxed or specifically
exempt from taxation.—All capital’ of any trade or business
of any person, firm or corporation, except the capital of
any trade or business which is otherwise specifically taxed
or specifically exempt from taxation. me
_ Capital as used herein is defined as follows:
First. The inventory of stock on hand, which shall in.
clude all materials for use.in the business, whether at the
place of business, in storage or elsewhere in the State.
Second. The excess of all bills and accounts receivable
over bills and accounts payable.
Third. All money on hand and on deposit.
Fourth. All other taxable personal property of any kind
whatever, including all choses in action, equities, demands
_-—
and claims, Bat excluding the property hereinafter specifi-
cally mentioned i in this ion.
Real estate shall not be Reld to be capital under this sec-
tion, but shall be listed an xed as other real estate.
_ Magzhinery and tools used ina manufacturing or mining
. business taxable on capital under this section shall not be
‘held to be capital under this sectien, nor shall such ma-
chinery and tools be ‘hereafter assesssed as real estate.
All such machinery and tools used in a manufacturing or
mining business taxable on capital uader this section shall
be listed for local taxation exclusively, and each city, town
‘ and county is hereby authorized to make 4 separate classi-
fication for all such machinery. and tools and to fix the rate
of levy thereon, but such rate shall not be higher than the
rate imposed upon tangible personal property in such city,
town, county or district.
The shares of stock mentioned in section seventy-one of ©
the Tax Code of Virginia, as amended, and bonds of the
political sub-divisions of this State mentioned in section
seventy-two of the Tax Code of Yirginia, as amended,
_ shall not be held to be capital under this section.
Personal property, tangible in fact, used or empioyed in
the trades and businesses hereinafter specifically men-
tioned in this section shall not be held to be capital under
this section, but shail be listed for local taxation exclu-
sively and taxed as tangible personal property, that is to
say:
Amusement business, including theatres of every kind
and class; auctioneers ;*barbers, including beauty shops;
bowling; billiard and pool rooms; collection agencies ; con-
tractors, plumbers and steamfitters; educational institu-
tions whose property is taxable under the Constitution and
laws of this State; garage business; hospitals; hotels;
laundries, including cleaning, pressing and dyeing estab-
lishments; lodging and boarding houses; motor vehicle
carriers; photographers; restaurants, including. eating
houses and cafeterias; shoeshining business ; taxi-cab busi-
ness, including the business of motor vehicle hiring; trans-
fer business; and undertakers and funeral directors.
27
This section shall not be construed to apply to any pro-
fession which the State regulates by law, nor shall it be
construed to include the business of farming. Property
used or employed in such professions, and in the business -
. of farming, shall be taxable in the actual form in which ‘it
may be, and not as capital.
On all capital defined by this section there is hereby an-
nually levied a tax of seventy-five cents on every one hun-
dred dollars of the actual value thereof.
This section, as hereby amended, shall be in force on
and after the first day of January, nineteen hundred-and
twenty-nine.
Note: The amendment effective as to the 1929 capital
tax in the case at bar, is the one referred to on pages 19
and 20 of the Record herein, but in view of the stipulation
(R. 15) the difference between the old and new-law is not
material to the issues now presented.
Acts of Assembly, 1928, pp. 35, 69.
(The Tax Code of Virginia.) _,
Section 81. Who must file returns of intangible per-
sonal property, and where.—Every owner of any taxable -
intangible personal property and every fiduciary shall an-
nually file under oath a return of intangible personal prop-
erty on such form or forms as may be prescribed by the
‘ department of taxation. : Such-form-or_forms may or may
not be combined or connected with the forni or forms for
reporting incomes, as the department of taxation may or-
der from time to time; but if they be so combined o?.con-
nected all such returns shall be kept under lock and key at
all times when they are not in the personal possession of
the commissioner of the revenue, department of taxation,
or some other person authorized to inspect the same.
> > .
Every corporation charteref under the laws of Virginia
* and owning any taxable intangible personal property, shall
file a return thereof with the commissioner of the revenue
28
for the county or city in which the principal office of the
corporation is-locatead by the terms of its certificate of
incorporation.
Every corporation chartered under the laws of a State
or county other than Virginia, and owning any intangible
personal property, taxable in this State, shall file a return
thereof with the commissioner of the revenue for the’
county or city in which is located the place designated by
the corporation as the office in Virginia at which all claims
against the corporation may be audited, settled and paid.
(4756-C)
This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.