been held that a tax assessed on a telephone company doing business within the State of seventy-five cents on every instrument in use, was, if the company was doing some intrastate business, valid as to the instruments used in such business.37 It must be clear, however, that the corporation would be allowed to carry on its interstate business without obtaining a license; for if it were coerced into obtaining a license for doing business within the State by a refusal otherwise to permit the interstate business there would certainly be an interference with interstate commerce.38

39

The distinction is brought out by two decisions of the Supreme Court of the United States. In Crutcher v. Kentucky the act in question prohibited the agent of a foreign express company from carrying on business at all in that State without first obtaining a license from the State. The company was thus prevented from doing any business, even of an interstate character, without obtaining the license in question. The act was held to be a regulation of interstate commerce in its application to corporations or associations engaged in that business, and that subject was held to belong exclusively to national, and not State, legislation. Mr. Justice Bradley said. that "taxes or license fees, in good faith imposed exclusively on express business carried on wholly within the State, would be open to no such objection," viz.: an objection that the tax or license was a regulation of, or that it improperly affected, interstate commerce. In the later case of Osborne v. Florida,40 the State statute required all express companies doing business in the State to pay a certain arbitrarily fixed sum as a license tax for doing its business. As construed by the Supreme Court of the State, this tax was held payable only by an express company which did a local business within the State, though a company doing such business must pay the

37 State v. Rocky Mt. Bell Tel. Co., 27 Mont. 394, 71 Pac. 311. 38 Allen v. Pullman's Palace Car Co., 191 U. S. 171.

39 141 U. S. 47, 35 L. ed. 649.

40 164 U. S. 650, 41 L. ed. 586.

tax even if it also carried on an interstate business. The tax was held constitutional.

Mr. Justice Peckham said: "The statute herein differs from the cases where statutes upon this subject have been held void, because in those cases the statutes prohibited the doing of any business in the State whatever, unless upon the payment of the fee or tax. It was said, as to those cases, that as the law made the payment of the fee, or the obtaining of the license, a condition to the right to do any business whatever, whether interstate or purely local, it was on that account a regulation of interstate commerce, and therefore void. Here, however, under the construction as given by the State court, the company suffers no harm from the provisions of the statute. It can conduct its interstate business without paying the slightest heed to the act, because it does not apply to, or in any degree affect, the company in regard to that portion of its business which it has the right to conduct without regulation from the State.

"The company in this case need take out no license, and pay no tax, for doing interstate business, and the statute is therefore valid."

That extremely nice distinctions may arise in this class of cases is illustrated by two other decisions of the same court. In Ficklen v. Shelby County 41 the courts held that interstate commerce was not restricted to an unconstitutional extent by a statute taxing commission merchants upon their gross annual commissions, although in the case at bar all the commissions for the year had been earned upon consignments from other States. But in Stockard v. Morgan, 42 where a tax was laid on the agent of a foreign merchant, the tax was held unconstitutional.43 The merchants in the former case asked and received permission to carry on a general business; and

41 145 U. S. 1, 36 L. ed. 601.

42 185 U. S. 27, 46 L. ed. 785.

43 See to the same effect, Caldwell v. North Carolina, 187 U. S. 622, 47 L. ed. 336; Norfolk & W. Ry. v. Sims, 191 U. S. 441.

they were thereby authorized to do any kind of commission business, local as well as interstate. That they happened to do no local business was an accidental circumstance; they had obtained permission to do it. In the latter case the agent intended to do and by the license was empowered to do only an interstate business, the business in which his principal was engaged; and the tax was therefore one on interstate com

merce.

8753. Amount of such fee unimportant.

In a later case it was claimed that the privilege tax, though. nominally levied upon the interstate business, was only colorably so; and it was shown that the amount of the tax was greater than the entire receipts of the intrastate business. But the court held that so long as it was within the power of the corporation to cease to do an intrastate business while still carrying on the interstate business, the tax was constitutional. 44 Mr. Justice Holmes said: "If the Pullman Company . . . had the right to choose between what points it would carry, and, therefore, to give up the carriage of passengers from one point to another in the State, the case is governed by Osborne v. Florida. The company cannot complain of being taxed for the privilege of doing a local business which it is free to renounce." The decision has been followed.45

8754. Exception in case of public service companies.

There is probably a difference in this respect between an ordinary commercial business and the business of a public service company which is directly engaged in interstate commerce. The ordinary commercial corporation may be taxed. for the privilege of doing business even though part of its business consists of the sale of goods brought from another State, provided part of its business is or may be the sale of

44 Pullman's Palace Car Co. v. Adams, 189 U. S. 420, 47 L. ed. 877. 45 Allen v. Pullman's Palace Car Co., 191 U. S. 171.

[Chap. XXX. domestic goods. But it seems that where an express company or a railroad is engaged in interstate commerce, it is difficult if not impossible to impose conditions on its business within the State which will not affect its interstate business.46 The Supreme Court of the United States has pointed out "the distinction between corporations organized to carry on interstate commerce, and having a quasi-public character, and corporations organized to conduct strictly private business; " 47 and this distinction has been emphasized in other cases."

§ 755. Taxation of franchise as property.

48

But while permission to do the business of interstate commerce may not be taxed, the franchise of the corporation, regarded as property, may be taxed so far as it can be said to enter into the value of the property within the State, even if the corporation is engaged in interstate commerce, provided only it is not a franchise conferred by the United States.49 The distinction between a tax upon the franchise and a license fee to do business is certainly a shadowy one; 50 but once the principle already considered 51 is established, that a foreign corporation may be taxed in a State, as upon its property actually there, upon its business capital, including franchise and good will, it follows that such a tax assessed upon the franchise of a foreign corporation engaged in interstate commerce is valid as a mere tax on property within the jurisdiction.

46 See Louisville & N. R. R. v. Eubank, 184 U. S. 27, 46 L. ed. 416. 47 Shiras, J., in New York v. Roberts, 171 U. S. 658, 665, 43 L. ed. 323. 48 People v. Roberts, 36 App. Div. 597, 55 N. Y. S. 950.

49 Postal Tel. Cable Co. v. Adams, 155 U. S. 688, 39 L. ed. 311; Adams Exp. Co. v. Ohio State Auditor, 165 U. S. 194, 41 L. ed. 683; Atlantic & Pac. Tel. Co. v. Philadelphia, 190 U. S. 160, 47 L. ed. 995, and cases cited; Oakland Sugar Mill Co. v. Fred W. Wolf Co., 118 Fed. 239; A. & P. Ry. v. Lesueur, 2 Ariz. 428, 19 Pac. 157; State v. W. U. Tel. Co., 165 Mo. 502, 65 S. W. 775; People v. Roberts, 158 N. Y. 168, 52 N. E. 1104.

50 Bradley, J., in Leloup v. Mobile, 127 U. S. 640, 32 L. ed. 311; Lamar, J., in Railroad Co. v. Pennsylvania, 136 U. S. 114, 34 L. ed. 394.

§ 756. Taxation of franchise of domestic corporations.

How far may the State of charter impose any tax it pleases as a franchise tax upon a corporation engaged in interstate commerce? This question cannot be answered in an altogether satisfactory manner. It seems clear that a tax which is in reality a fair compensation for the franchise may be imposed; and it is almost equally clear that a franchise tax upon an ordinary commercial corporation, though it is engaged in interstate commerce, might be set by the State of charter at any amount.52 But where the corporation is organized expressly to conduct interstate commerce as a public service company the matter is not so clear. In Fargo v. Michigan 53 Mr. Justice Miller said:

"The proposition that the States can, by way of a tax upon business transacted within their limits, or upon franchises of corporations which they have created, regulate such business, and the affairs of such corporations, has often been set up as a defense to the allegation that the taxation was such an interference with commerce as violated the constitutional provision; but where the business so taxed is commerce itself, and is commerce among the States or with foreign nations, the constitutional provision cannot thereby be denied, nor can the States, by granting franchises to corporations engaged in the business of transportation, which is in itself interstate commerce, acquire the right to regulate that commerce, either by taxation or any other way."

And in Philadelphia & Southern Mail Steamship Company v. Pennsylvania 54 Mr. Justice Bradley said to the same effect: "The corporate franchises, the property, the business, the income of corporations created by a State may undoubtedly be taxed by the State; but in imposing such taxes care should be taken not to hamper, directly or by indirection, interstate or foreign commerce, or any other matter exclusively within the

52 Honduras Commercial Co. v. Assessors, 54 N. J. Law, 278, 23 Atl. 668. 53 121 U. S. 230, 30 L. ed. 888.

54 122 U. S. 326, 30 L. ed. 1200.