[Chap. XXIX. holder's person; but that does not exclude the idea that the property as to which the right relates, and which is, in effect, a distinct interest in the corporate property, is not within the jurisdiction of the state for the purpose of assessment upon its transfer through the operation of any law, or of the act of its owner." But a better ground on which to support such a tax is that expressed by Baldwin, J., in the Supreme Court of Connecticut: 35 "There is nothing in the objection urged in the demurrer to the complaint that the law in question 'attempts to impose a tax upon personal property outside the jurisdiction and beyond the territory of the state.' Each non-resident shareholder participates in the enjoyment of a franchise granted by this state, and has an equitable interest in property which is protected by this state, and whose legal owner (the defendant) is one of its own citizens. The sovereign power which gave his shares a being could also give them a situs within its territory for purposes of taxation.36 To do this it is not necessary to declare in terms that they shall be deemed to be situated where the corporation belongs. It is enough to lay a tax upon them there, and impose a lien upon them there." 37 It would seem that this last ground is the only one upon which this tax can properly be based. The stockholder is taxable, not because he has property within the jurisdiction, but because he obtains from the State of charter the privilege of becoming a stockholder, and may be taxed upon that privilege. Therefore no foreign State, though the corporation does business there, can tax a foreign stockholder.38 And a tax upon property situated within the State, like the New York transfer 35 State v. Travellers' Ins. Co., 70 Conn. 590, 40 Atl. 465. 36 Citing Tappan v. Bank, 19 Wall. 490, 22 L. ed. 189; Lockwood v. Town of Weston, 61 Conn. 211, 218, 23 Atl. 9. 37 And see St. Albans v. Car Co., 57 Vt. 68; American Coal Co. v. Comrs., 59 Md. 185; Spiller v. Turner, [1897] 1 Ch. 911. 38 Spiller v. Turner, [1897] 1 Ch. 911. tax, should not be imposed upon a foreign stockholder in a domestic corporation. § 737. Transfer of stock to avoid taxation. Several States have provided penalties for fraudulently transferring stock to avoid taxation.39 § 738. Transfer or inheritance tax or probate duty. A transfer tax or probate duty is imposed upon the privilege of passing title to the thing. Such a tax may therefore be imposed, in the case of a share of stock, by any country the law of which is invoked to pass the title. Provisions bearing on this kind of taxation are found in several States. "If a foreign executor, administrator or trustee shall assign or transfer any stock or obligations in this state standing in the name of a decedent, or in trust for a decedent, liable to any such tax, the tax shall be paid to the treasurer of the proper county or the state comptroller on the transfer thereof. No safe deposit company, bank or other institution, person or persons holding securities or assets of a decedent, shall deliver or transfer the same to the executors, administrators or legal representatives of said decedent, or upon their order or request, unless notice of the time and place of such intended transfer be served upon the state comptroller at least ten days prior to the said transfer; nor shall any such safe deposit company, bank or other institution, person or persons deliver or transfer any securities or assets of the estate of a non-resident decedent without retaining a sufficient portion or amount thereof to pay any tax which may thereafter be assessed on account of the transfer of such securities or assets under the provisions of this article, unless the state comptroller consents thereto in writing. And it shall be lawful for the said county treasurer or state comptroller, personally, or by representative, to examine said securities or assets at the time of such delivery or transfer. Failure 39 See, for instance, Conn. Stat. § 3839; Fla. Rev. Stat. § 2135; Mich. Stat. § 4882. to serve such notice or to allow such examination, or to retain a sufficient portion or amount to pay such tax as herein provided, shall render said safe deposit company, trust company, bank or other institution, person or persons liable to the payment of the tax due upon said securities or assets in pursuance of the provisions of this article." 40 41 It would seem that the law of the State of charter must be invoked to alter the right of the former shareholder, and therefore that the State of charter may rightfully tax the transfer. And this is the view usually held, though this is sometimes put on the untenable ground that it is a tax on property situated within the jurisdiction.42 The country in which the certificate of stock is situated at the time of the transfer may tax the transfer as that of property within the jurisdiction.43 But a foreign State in which the shares are not physically situated cannot tax the transfer merely because the corporation is registered to do business there.44 40 N. Y. 1901, ch. 173, § 228. To the same effect, Mo. Rev. Stat. of 1899, § 311; Wis. 1903, ch. 44, § 11; Wyo. 1903, ch. 80, § 9. 41 Attorney General v. New York Breweries Co., [1898] 1 Q. B. 205; Matter of Bronson, 150 N. Y. 1, 55 A. S. R. 632, 34 L. R. A. 238, 44 N. E. 707; In re Cushing's Estate, 40 N. Y. Misc. 505, 82 N. Y. S. 795. But see contra, Citizens' Nat. Bank v. Sharp, 53 Md. 521. 42 Matter of Bronson, 150 N. Y. 1, 6, 44 N. E. 707, 55 A. S. R. 632, 34 L. R. A. 238. 43 Stern v. Queen, [1896] 1 Q. B. 211. So of a bond; In re Morgan, 150 N. Y. 35, 44 N. E. 1126. 44 Treasurer General v. 255 (Orange Free State). 505, 82 N. Y. S. 795. New Jagersfontein M. & E. Co., 10 Cape L. J. CHAPTER XXX. TAXATION AND INTERSTATE COMMERCE. 741. Regulation of interstate com- [§ 752. License fee solely for intra merce by taxation uncon- 742. Tangible property. 743. Property in transit or lately 744. Distinction between regula- 748. Vehicles of interstate com- 749. Proportionate tax on vehicles as property. 750. Tax on the business of interstate commerce. 751. License fee for interstate business. state business. 753. Amount of such fee unim portant. 754. Exception in case of publicservice companies. 755. Taxation of franchise as 756. Taxation of franchise of do- 758. Whether valid as franchise 759. Proportionate tax on entire property of corporation. 760. Taxation of proportion of intangible property. 761. Tax on special franchise granted by State. 762. Tax as return for special police supervision. 763. General conclusion. § 741. Regulation of interstate commerce by taxation unconstitutional. The power to regulate interstate commerce being lodged in Congress, a State legislature can lay no tax on a foreign corporation engaged in interstate commerce if the tax amounts to a regulation of such commerce. It is necessary therefore to re-examine the questions already considered with a view to the constitutional limitations. It is clear that any tax levied upon a foreign corporation. engaged in interstate commerce impedes its efficiency, and to [Chap. XXX. that extent interferes with commerce. This may of course render the tax unconstitutional, but it does not necessarily In the words of Field, J., in The Delaware Railroad do so. Tax: "The tax imposed by the act in question affects commerce among the states and impedes the transit of persons and property from one state to another just in the same way and in no other that taxation of any kind necessarily increases the expenses attendant upon the use or possession of the thing taxed. That taxation produces this result of itself constitutes no objection to its constitutionality." 8742. Tangible property. The land and chattels of a corporation engaged in interstate commerce may always be taxed without infringing the constitutional provision. And this is true even if the property is used to facilitate interstate commerce, like the rolling stock of a railroad, or cabs maintained by the railroad for the use of interstate passengers.3 On this principle a State tax on the stock employed within the State of a foreign corporation whose business consists partly of domestic commerce and partly of foreign commerce is not a regulation of commerce.4 § 743. Property in transit or lately brought in. It has been seen that property in actual transit through a State cannot be taxed; but where the property is used for in 1 Morgan v. Parham, 16 Wall. 471, 21 L. ed. 303; Transp. Co. v. Wheeling, 99 U. S. 273, 25 L. ed. 412; Ferry Co. v. East St. Louis, 107 U. S. 365, 27 L. ed. 419; Atlantic & P. Tel. Co. v. Philadelphia, 190 U. S. 160, 47 L. ed. 995, and cases cited. 2 Marye v. B. & O. Ry., 127 U. S. 117, 32 L. ed. 94; A. & P. Ry. v. Lesueur, 2 Ari. 428, 19 Pac. Rep. 157; Carlisle v. P. P. C. Co., 8 Col. 320. 3 People v. Knight, 171 N. Y. 354, 64 N. E. 152. 4 New York v. Roberts, 171 U. S. 658, 43 L. ed. 323; People v. Roberts, 158 N. Y. 168, 52 N. E. 1104; People v. Roberts, 36 App. Div. 597, 55 N. Y. Supp. 950. |