145 U.S. 1
12 S.Ct. 810
36 L.Ed. 601
FICKLEN et al.
TAXING DISTRICT OF SHELBY COUNTY.
April 11, 1892.
[Syllabus from pages 1-2 intentionally omitted]
STATEMENT BY MR. CHIEF JUSTICE FULLER.
Bill by Charles L. Ficklen and Charles Cooper and Edward M. Cooper, partners under the style of Cooper & Co., against the taxing district of Shelby county, Tenn., and Andrew J. Harris, as trustee thereof, to enjoin the collection of taxes. Decree for complainants, which was reversed in the state supreme court. Defendants bring error. Affirmed.
This was a bill filed in the chancery brokers, to the trustee $50.25 each, as Ficklen and Cooper & Co. against the taxing district of Shelby county and Andrew J. Harris, county trustee.
The bill alleged that complainants were 'commercial agents or merchandise brokers, located within the taxing district of Shelby county, where their respective firms rent a room for the purpose of keeping, and, at times, exhibiting their samples, and carrying on their correspondence with their respective principals. That they use no capital in their business. That they handle or deal in no merchandise, and are neither buyers nor sellers; they only engage in negotiating sales for their respective principals. They do precisely the same business that commercial drummers do; the only difference being that they are stationary, while the commercial drummers are transitory, and go from place to place, and secure a temporary room at each town or city in which to exhibit their samples. That each solicits orders for the sales of the merchandise of their respective principals, and forwards the same to them, when such orders are filled by shipping the goods direct to the purchasers thereof in the county of Shelby.'
It was then averred that all of the sales negotiated by complainant Ficklen were exclusively for nonresident firms, who resided and carried on business in other states than Tennessee, and all the merchandise so sold was in other states than Tennessee, where the sales were made, and was shipped into Tennessee, when the orders were forwarded and filled.
That at least nine tenths of the sales negotiated and effected by complainants Cooper & Co., and at least nine tenths of their gross commissions, were derived from merchandise of nonresident firms or persons, and which merchandise was shipped into Tennessee from other states after the sales were effected.
That section 9, c. 96, of the Act of 1881, of Tennessee, (made subsection 17 of section 22 of the Taxing District Acts, Taxing District Digest 50,) provides:
'Every person or firm dealing in cotton, or any other article whatever, whether as factor, broker, buyer, or seller on commission or otherwise, ($50) fifty dollars per annum, and, in addition, every such person or firm shall be taxed ad valorem (10 cts.) ten cents on every one hundred dollars of amount of capital invested or used in such business: provided, however, that, if such person or firm carry on the cotton or other business in connection with the grocery or any other business, the capital invested in both shall only be taxed once; but such person or firm must pay the privilege tax for both occupations: and provided, further, that if the persons taxed in this subsection have no capital invested, they shall pay 2 1/2 per cent. on their gross yearly commissions, charges, or compensations for said business, and at the time of taking out their said license they shall give bond to return said gross commissions, charges, or compensation to the trustee at the end of the year, and at the end of the year they shall make return to said trustee accordingly, and pay to him the said 2 1/2 per cent.'
Complainants charged that, as they were neither dealers, buyers, nor sellers, but only engaged in negotiating sales for buyers, they were not embraced within the meaning of said section, and further stated that they had each heretofore paid the privilege tax and the income tax, except for the year 1887, and had tendered the privilege tax of $50 and costs of issuing license for the year 1888, to the trustee, who refused to accept the same unless complainants would also pay the income tax for the year 1887.
From the bill and exhibits attached it appeared that complainants, in January, 1887, each paid the sum of $50 for the use of the taxing district, and executed bonds agreeably to the requirements of the law in that behalf, and received licenses as merchandise brokers within the limits of the district for the year 1887, and that in January, 1888, they tendered, as commercial brokers, to the trustee $50.25 each, as their privilege tax and charges for the year 1888, which he refused to accept because they refused to pay for the year 1887 2 1/2 per cent. upon their gross commissions derived from their business for the year 1887, although they executed bonds in January, 1887, to report said gross commissions.
Complainants charged that the law in question was in violation of the commerce clause of the constitution of the United States, and also of the constitution of Tennessee, and prayed as follows:
'That an injunction issue to restrain the defendants, or either of them, from instituting any suit or proceeding against them, or either of them, for the collection of said 2 1/2 per cent tax upon their respective gross commissions from their said business, or from issuing any warrant for their arrest for their failure to pay the same for the year 1887, and that defendants be also restrained from in any way interfering with them in the carrying on their said business for the year 1888; and upon final hearing they (the defendants) be restrained perpetually from collecting from them, or either of them, said 2 1/2 per cent. tax upon their said gross commissions from their said business, and from collecting said privilege tax of $50, and they pray for general relief, and will ever pray,' etc.
To this bill the defendants filed a demurrer, which was overruled by the chancellor, and, the defendants electing to stand by it, a final decree was entered, making the injunction perpetual in behalf of Ficklen as to the entire tax, including the $50; and, as to Cooper & Co., adjudging that they were legally bound to pay the sum of $50 and the tax of 2 and 1/2 per cent on their commissions, to the extent that those commissions were upon sales of property owned by residents of Tennessee, and perpetuating the injunction in all other respects.
From this decree the defendants prayed an appeal to the supreme court of the state, and that court decided that the act of the legislature in question was not in violation of the state constitution, and, further, that, 'inasmuch as it appears from the bill that the complainants at the beginning of the year 1887 applied for and received, respectively, license to carry on the business of commission brokers without qualification, and that they, the complainants, held said license throughout the year 1887, complainants were chargeable with the privilege tax, as fixed by the act aforesaid, without regard to the amount or character of the business carried on under said licenses or the places of residence of their principals, and that complainants must have reported and paid 2 1/2 per cent. on the gross commissions received by them during the year 1887 before they could have become entitled to licenses for the year 1888. * * * That when, at the beginning of the year 1888, the complainants applied for license as merchandise brokers, they were rightfully required (1) to report and pay 2 1/2 per cent. on their commissions received during 1887, and (2) to pay the fixed charge of $50, and give bond to report their gross commissions at the end of the year 1888. * * * That the said act is not, as to these complainants, violative of article 1, § 8, of the constitution of the United States, by which the power to regulate commerce between the states is conferred upon the congress of the United States; and * * * that complainants, having applied for, accepted, and held for and during the year 1887 unqualified license as commission brokers, and having applied for the same unqualified license for the year 1888, cannot question the validity of the said act as being in conflict with said provisions of the constitution of the United States, for that the said complainants were not entitled to the said license upon the facts stated in the bill, whether the business actually done and theretofore conducted by them was or was not exonerated from said privilege tax under the said provision of the federal constitution.'
The decree of the chancellor was accordingly reversed, and the demurrer sustained, and the bill dismissed, whereupon a writ of error was taken out from this court.
[Argument of Counsel from pages 7-14 intentionally omitted]
Henry Craft and W. Hallett Phillips, for plaintiff in error.
S. P. Walker, for defendants in error.
[Argument of Counsel from Pages 14-19 intentionally omitted]
Mr. Chief Justice FULLER, after stating the facts in the foregoing language, delivered the opinion of the court.
In Robbins v. Taxing Dist., 120 U. S. 489, 7 Sup. Ct. Rep. 592, it was held that section 16 of chapter 96 of the laws of Tennessee of 1881, enacting that 'all drummers and all persons not having a regular licensed house of business in the taxing district of 'Shelby county,' offering for sale or selling goods, wares, or merchandise therein by sample, shall be required to pay to the county trustee the sum of $10 per week, or $25 per monty, for such privilege,' so far as it applied to persons soliciting the sale of goods on behalf of individuals or firms doing business in another state, was a regulation of commerce among the states, and violated the provision of the constitution of the United States which grants to congress the power to make such regulations. The question involved was stated by Mr. Justice BRADLEY, who delivered the opinion of the court, to be 'whether it is competent for a state to levy a tax or impose any other restriction upon the citizens or inhabitants of other states for selling or seeking to sell their goods in said state before they are introduced therein;' and it was decided that it was not. At the same time it was conceded that commerce among the states might be legitimately incidentally affected by state laws, when they, among other things, provided for 'the imposition of taxes upon persons residing within the state, or belonging to its population, and upon avocations and employments pursued therein, not directly connected with foreign or interstate commerce, or with some other employment or business exercised under authority of the constitution and laws of the United States.' And it was further stated: 'To say that the tax, if invalid as against drummers from other states, operates as a discrimination against the drummers of Tennessee, against whom it is conceded to be valid, is no argument, because the state is not bound to tax its own drummers; and if it does so whilst having no power to tax those of other states, it acts of its own free will, and is itself the author of such discrimination. As before said, the state may tax its own internal commerce; but that does not give it any right to tax interstate commerce.'
In the case at bar the complainants were established and did business in the taxing district as general merchandise brokers, and were taxed as such under section 9 of chapter 96 of the Tennessee Laws of 1881, which embraced a different subject-matter from section 16 of that chapter. For the year 1887 they paid the $50 tax charged, gave bond to report their gross commissions at the end of the year, and thereupon received, and throughout the entire year held, a general unrestricted license to do business as such brokers. They were thereby authorized to do any and all kinds of commission business, and bucame liable to pay the privilege tax in question, which was fixed in part and in part graduated according to the amount of capital invested in the business, or, if no capital were invested, by the amount of commissions received. Although their principals happened during 1887, as to the one party, to be wholly nonresident, and as to the other, largely such, this fact might have been otherwise then and afterwards, as their business was not confined to transactions for nonresidents.
In the Case of Robbins the tax was held, in effect, not to be a tax on Robbins, but on his principals, while here the tax was clearly levied upon complainants in respect of the general commission business they conducted, and their property engaged therein, or their profits realized therefrom.
No doubt can be entertained of the right of a state legislature to tax trades, professions, and occupations, in the absence of inhibition in the state constitution in that regard, and where a resident citizen engages in general business subject to a particular tax the fact that the business done chances to consist, for the time being, wholly or partially in negotiating sales between resident and nonresident merchants of goods situated in another state does not necessarily involve the taxation of interstate commerce, forbidden by the constitution.
The language of the court in Lyng v. State of Michigan, 135 U. S. 161, 166, 10 Sup. Ct. Rep. 725, was: 'We have repeatedly held that no state has the right to lay a tax on interstate commerce in any form, whether by way of duties laid on the transportation of the subjects of that commerce, or on the receipts derived from that transportation, or on the occupation or business of carrying it on, for the reason that such taxation is a burden on that commerce, and amounts to a regulation of it, which belongs solely to congress.' But here the tax was not laid on the occupation or business of carryig on interstate commerce, or exacted as a condition of doing any particular commission business, and complainants voluntarily subjected themselves thereto in order to do a general business.
In McCall v. California, 136 U. S. 104, 10 Sup. Ct. Rep. 881, it was held that 'an agency of a line of railroad between Chicago and New York, established in San Francisco for the purpose of inducing passengers going from San Francisco to New York to take that line at Chicago, but not engaged in selling tickets for the route, or receiving or paying out money on account of it, is an agency engaged in interstate commerce; and a license tax imposed upon the agent for the privilege of doing business in San Francisco is a tax upon interstate commerce, and is unconstitutional.' This was because the business of the agency was carried on with the purpose to assist in increasing the amount of passenger traffic over the road, and was therefore a part of the commerce of the road, and hence of interstate commerce.
In Philadelphia & Southern S. S. Co. v. Pennsylvania, 122 U. S. 326, 345, 7 Sup. Ct. Rep. 1118, 1124, Mr. Justice BRADLEY, speaking for the court, said: '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 interfere with or hamper, directly or by indirection, interstate or foreign commerce, or any other matter exclusively within the jurisdiction of the federal government.' And this, of course, in equally true of the property, the business, and the income of individual citizens of a state. It is well settled that a state has power to tax all property having a situs within its limits, whether employed in interstate commerce or not. It is not taxed because it is so employed, but because it is within the territory and jurisdiction of the state. Pullman's Palace Car Co. v. Pennsylvania, 141 U. S. 18, 11 Sup. Ct. Rep. 876; Gloucester Ferry Co. v. Pennsylvania, 114 U. S. 196, 5 Sup. Ct. Rep. 826.
And it has been often laid down that the property of corporations holding their franchises from the government of the United States is not exempt from taxation by the states of its situs. Railroad Co. v. Peniston, 18 Wall. 5; Thomson v. Railroad, 9 Wall. 579; Telegraph Co. v. Attorney General, 125 U. S. 530, 8 Sup. Ct. Rep. 961.
So in Wiggins Ferry Co. v. City of East St. Louis, 107 U. S. 365, 374, 2 Sup. Ct. Rep. 257, where an annual license fee was imposed on the ferry company by the city of East St. Louis, the company having been chartered by the state of Illinois, and being domiciled in East St. Louis, its boats plying between that place and St. Louis, Mo., the court said: 'The exaction of a license fee is an ordinary exercise of the police power by municipal corporations. When, therefore, a state expressly grants to an incorporated city, as in this case, the power 'to license, tax, and regulate ferries,' the latter may impose a license tax on the keepers of ferries, although their boats ply between landings lying in two different states, and the act by which this exaction is authorized will not be held to be a regulation of commerce.'
Again, in Maine v. Railway Co., 142 U. S. 217, 12 Sup. Ct. Rep. 121, 163, we decided that a state statute which required every corporation, person, or association operating a railroad within the state to pay an annual tax for the privilege of exercising its franchise therein, to be determined by the amount of its gross transportation receipts, and further provided that, when applied to a railroad lying partly within and partly without a state, or to one operated as a part of a line or system extending beyond the state, the tax should be equal to the proportion of the gross receipts in the state, to be ascertained in the manner provided by the statute, did not conflict with the constitution of the United States. It was held that the reference by the statute to the transportation receipts, and to a certain percentage of the same, in determining the amount of the excise tax, was simply to ascertain the value of the business done by the corporation, and thus obtain a guide to a reasonable conclusion as to the amount of the excise tax which should be levied. In this respect the tax was unlike that levied in Philadelphia & Southern S. S. Co. v. Rennsylvania, supra, where the specific gross receipts for transportation were taxed as such,—taxed 'not only because they are money, or its value, but because they were received for transportation.' Since a railroad company engaged in interstate commerce is liable to pay an excise tax according to the value of the business done in the state, ascertained as above stated, it is defficult to see why a citizen doing a general business at the place of his domicile should escape payment of his share of the burdens of municipal government because the amount of his tax is arrived at by reference to his profits. This tax is not on the goods, nor on the proceeds of the goods, nor is it a tax on nonresident merchants; and, if it can be said to affect interstate commerce in any way, it is incidentally, and so remotely as not to amount to a regulation of such commerce.
We presume it would not be doubted that if the complainants had been taxed on capital invested in the business, such taxation would not have been obnoxious to constitutional objection, but because they had no capital invested the tax was ascertained by reference to the amount of their commissions, which, when received, were no less their property than their capital would have been. We agree with the supreme court of the state that the complainants, having taken out licenses under the law in question to do a general commission business, and having given bond to report their commissions during the year, and to pay the required percentage thereon, could not, when they applied for similar licenses for the ensuing year, resort to the courts because the municipal authorities refused to issue such licenses without the payment of the stipulated tax. What position they would have occupied if they had not undertaken to do a general commission business, and had taken out no licenses therefor, but had simply transacted business for nonresident principals, is an entirely different question, which does not arise upon this record.
The judgment of the supreme court is affirmed.
Mr. Justice HARLAN, dissenting.
It seems to me that the opinion and judgment in this case are not in harmony with numerous decisions of this court. I do not assume that the court intends to modify or overrule any of those cases, because no such purpose is expressed; and yet I feel sure that the present decision will be cited as having that effect.
In Robbins v. Taxing Dist., 120 U. S. 489, 496, 497, 7 Sup. Ct. Rep. 592, it was held that Tennessee could not require, even from its own people, a drummer's license for soliciting the sale of goods there on behalf of individuals or firms doing business in another state. This rule, the court said, 'will only prevent the levy of a tax, or the requirement of a license for making negotiations for the conduct of interstate commerce, and it may well be asked where the state gets authority for imposing burdens on that branch of business any more than for imposing a tax on the business of importing from foreign countries, or even on that of postmaster or United States marshal. The mere calling the business of a drummer a privilege cannot make it so. Can the state legislatute make it a Tennessee privilege to carry on the business of importing goods from foreign countries? If not, has it any better right to make it a state privilege to carry on interstate commerce? It seems to be forgotten, in argument, that the people of this country are citizens of the United States, as well as of the individual states, and that they have some rights under the constitution and laws of the former independent of the latter, and free from any interference or restraint from them.' Again: 'It is strongly urged, as if it were a material point in the case, that no discrimination is made between domestic and foreign drummers, those of Tennessee and those of other states; that all are taxed alike. But that does not meet the difficulty. Interstate commerce cannot be taxed at all, even though the same amount of tax should be laid on domestic sommerce, or that which is carried on solely within the state. This was decided in the Case of State Freight Tax, 15 Wall. 232. The negotiation of sales of goods which are in another state for the purpose of introducing them into the state in which the negotiation is made is interstate commerce. A New Orleans merchant cannot be taxed there for ordering goods from London or New York, because in the one case it is an act of foreign, and in the other of interstate, commerce, both of which are subject to regulation by congress alone.' In Philadelphia & Southern S. S. Co. v. Pennsylvania, 122 U. S. 326, 7 Sup. Ct. Rep. 1118, a tax imposed in Pennsylvania upon the gross receipts of a steamship company incorporated under the laws of that state, such gross receipts being derived from the transportation of persons and property by sea, between different states, and to and from foreign countries, was held to be a regulation of interstate and foreign commerce, and therefore unconstitutional.
In Leloup v. Port of Mobile, 127 U. S. 640, 648, 8 Sup. Ct. Rep. 1380, an ordinance of that port requiring a license tax from telegraph companies was held to be invalid in its application to a company, having a place of business in Mobile, and being engaged there in the occupation of transmitting messages from and to points in Alabama to and from points in other states. This court, overruling Osborne v. Mobile, 16 Wall. 479, said that 'no state has the right to lay a tax on interstate commerce in any form, whether by way of duties laid on the transportation of the subjects of that commerce, or on the receipts derived from that transportation, or on the occupation or business of carrying it on; and the reason is that such taxation is a burden on that commerce, and amounts to a regulation of it, which belongs solely to congress.'
In Asher v. Texas, 128 U. S. 129, 9 Sup. Ct. Rep. 1, a state law exacting a license tax to enable a person within the state to solicit orders and make sales there for a person residing in another state, was held to be repugnant to the commerce clause of the constitution.
In Stoutenburgh v. Hennick, 129 U. S. 141, 147, 9 Sup. Ct. Rep. 256, the question was whether an act passed in 1871 by the legislative assembly of the District of Columbia, requiring commercial agents, engaged in offering merchandise by sample, to take out and pay for a license, was invalid when applied to persons soliciting in the District the sale of goods on behalf of individuals or firms doing business outside of the District. Referring to the particular clause of the act upon which it was attempted to sustain the case, this court said: 'This provision was manifestly regarded as a regulation of a purely municipal character, as is perfectly obvious, upon the principle of noscitur a sociis, if the clause be taken as it should be, in connection with the other clauses and parts of that act. But it is indistinguishable from that held void in Robbins v. Taxing Dist. and Asher v. Texas, 128 U. S. 129, 9 Sup. Ct. Rep. 1, as being a regulation of interstate commerce, so far as applicable to persons soliciting, as Hennick was, the sale of goods on behalf of individuals or firms doing business outside of the District.'
In McCall v. Caiifornia, 136 U. S. 104, 10 Sup. Ct. Rep. 881, it was held that a license tax, imposed by an ordinance enacted by the board of supervisors of the city and county of San Francisco, upon an agent engaged at that city, in the business of soliciting travel for a line of railroad between Chicago and New York, was invalid under the commerce clause of the constitution.
In Norfolk & W. R. Co. v. Pennsylvania, 136 U. S. 114, 10 sup. Ct. Rep. 958, a tax imposed by Pennsylvania upon a railroad company incorporated in another state, and whose line extended from Philadelphia into other states, for the privilege of keeping an office in Pennsylvania, to be used by its officers, stockholders, agents, and employes, was a tax upon commerce among the states, and therefore void.
In Crutcher v. Kentucky, 141 U. S. 47, 11 Sup. Ct. Rep. 851, the court adjudged to be void an act of the legislature of Kentucky, so far as it forbade foreign express companies from carrying on business between points in that state and points in other states, without first obtaining a license from the state.
The principles announced in these cases if fairly applied to the present case, ought, in my judgment, to have led to a conclusion different from that reached by the court. Ficklen took out a license as merchandise broker, and gave bond to make a return of the gross commissions earned by him. His commissions in 1887 were wholly derived from interstate business; that is, from mere orders taken in tennessee for goods in other states, to be shipped into that state, when the orders were forwarded and filled. He was denied a license for 1888 unless he first paid 2 1/2 per cent. on his gross commissions. And the court holds that it was consistent with the constitution of the United States for the local authorities of the taxing district of Shelby county to make it a condition precedent of Ficklen's right to a license for 1888 that he should pay the required per cent. of the gross commissions earned by him in 1887 in interstate business. This is a very clever device to enable the taxing district of Shelby county to sustain its government by taxation upon interstate commerce. If the ordinance in question had, in express terms, made the granting of a license as merchandise broker depend upon the payment by the applicant of a given per cent. upon his earnings in the previous year in interstate business, the court, I apprehend, would not have hesitated to pronounce it unconstitutional. But it seems that if the local authorities are discreet enough not to indicate in the ordinances under which they act their purpose to tax interstate business, they may successfully evade a constitutional provision designed to relieve commerce among the states from direct local burdens. The bond which Ficklen gave should not, in my opinion, be construed as embracing his commissions earned in business upon which no tax can be constitutionally imposed by a state.
The result of the present decision is that while, under Robbins v. Taxing Dist., a license tax may not be imposed in Tennessee upon drummers for soliciting there the sale of goods to be brought from other states; while, under Leloup v. Port of Mobile, a local license tax cannot be imposed in respect to telegrams between points in different states; and while, under Stoutenburgh v. Hennick, commercial agents cannot be taxed in the District of Columbia for soliciting there the sale of goods to be brought into the District from one of the states,—the taxing district of Shelby County may require, as a condition of granting a license as merchandise broker, that the applicant shall pay a license fee, and, in addition, 2 1/2 per cent. upon the gross commissions received, not only in the business transacted by him that is wholly domestic, but in that which is wholly interstate.
For these reasons I am constrained to dissent from the opinion and judgment of the court in this case.