State ex rel. Wabash Ry. Co. v. Williams

• Decision Date: 12 July 1920
• Citation: 224 S.W. 822,284 Mo. 456
• Parties: THE STATE ex rel. WABASH RAILWAY COMPANY, Appellant, v. R. D. WILLIAMS et al., as Members of STATE TAX COMMISSION
• Court: Missouri Supreme Court

224 S.W. 822

284 Mo. 456

THE STATE ex rel. WABASH RAILWAY COMPANY, Appellant, v. R. D. WILLIAMS et al., as Members of STATE TAX COMMISSION

Supreme Court of Missouri

July 12, 1920

Appeal from Cole Circuit Court. -- Hon. J. G. Slate, Judge.

Affirmed.

N. S Brown and L. H. Strasser for appellant.

(1) The franchise of a foreign corporation to carry on its interstate business in this State cannot be taxed by the State, either directly or indirectly. Western Union Co. v. Kansas, 216 U.S. 1; Galveston Railroad v. Texas, 210 U.S 217. (2) It is conceded that as to a foreign corporation doing business in this State, the State has the right to levy a franchise tax upon that proportion of its capital stock which is used in conducting its intrastate business in the State. St. Louis Railroad v. Arkansas, 235 U.S. 350; Kansas City Railroad v. Botkins, 240 U.S. 227. But the act of the State Tax Commission in determining that the amount of appellant's taxes should be computed upon that proportion of appellant's outstanding capital stock which the value of all its property in this State bears to the value of all its property wherever located, is erroneous and void, because is is admitted that all of appellant's property in this State is used by it in carring on both interstate and intrastate commerce. Western Union Co. v Kansas, supra; Lusk v. Kansas, 240 U.S. 236.

Frank W. McAllister, Attorney-General, and John T. Gose, Assistant Attorney-General, for respondent.

(1) It is now firmly settled, upon principle and authority, that the State, in its imposition of a tax upon property within its jurisdiction, is entitled to tax such property at its value as part of a going concern, and no deducted from such value is required because such property is also used in interstate commerce. St. Louis v. Arkansas, 235 U.S. 350, 367; Adams Express Co. v. Ohio, 165 U.S. 194; Adams Express Co. v. Kentucky, 166 U.S. 171; Fargo v. Hart, 193 U.S. 490, 499; Wisconsin v. Powers, 191 U.S. 379; Pullman Palace Car Co. v. Pennsylvania, 141 U.S. 18; Galveston v. Texas, 210 U.S. 225, 227. (2) By so much the more, then, is the State at liberty to select as a measure of a franchise tax for the privilege of doing intrastate business, the property within its jurisdiction, even though such property be used in part in interstate commerce. St. Louis v. Arkansas, 235 U.S. 364, 367; Atlantic v. Philadelphia, 190 U.S. 160; Maine v. Grand Trunk, 142 U.S. 217; Baltic v. Massachusetts, 231 U.S. 68, 83; Provident Inst. v. Massachusetts, 6 Wall. 611; Flint v. Stone Tracy Co., 220 U.S. 162, 165; Western Union v. Attorney-General, 125 U.S. 530, 141 U.S. 40; State ex inf. v. Merchants Exchange, 269 Mo. 365; Postal Tel. Co. v. Adams, 165 U.S. 688; Home Ins. Co. v. New-York, 134 U.S. 594.

WILLIAMS, J. Walker, C. J., Blair, Graves, Goode and Williamson, JJ., concur; Woodson, J., absent.

OPINION

In Banc

WILLIAMS J. --

This is a mandamus proceeding instituted in the Circuit Court of Cole County, whereby relator seeks to compel the members of the State Tax Commission to assess relator's franchise tax in accordance with the principles of a certain formula herein-after more fully explained. The trial court sustained a demurrer to the petition and, relator refusing to plead further, the court entered judgment in favor of respondents. Thereupon relator duly appealed to this court. The Franchise Tax Act of 1917 (Laws 1917, p. 237) provides in part as follows:

"Every corporation, not organized under the laws of this State, and engaged in business in this State, shall pay an annual franchise tax to the State of Missouri equal to three-fortieths of one per cent of the par value of its capital stock and surplus employed in business in this State, and for the purposes of this act such corporation shall be deemed to have employed in this State that portion of its entire capital stock and surplus that its property and assets in this State bears to all its property and assets whereever located."

The petition is quite lengthy. We do not deem that it is necessary to copy the same in full here.

The following quoted portions of the petition, together with comments on certain portions not quoted, will, we think, disclose the pleadings sufficiently for an understanding of the case.

It is alleged: "That relator owns and operates within this State more than six hundred miles of railroad, consisting of mainline tracks, sidings, turnouts, depots, station grounds, terminals and terminal facilities; that said properties of relator are assessed for taxation under the general laws of this State. That upon said line of railroad relator conducts its business as a common carrier by railroad in the transportation of property and passengers in both interstate and intrastate commerce; that all of said properties in this State are used in intrastate commerce, and also used in interstate commerce, and no part thereof is exclusively used in either intrastate or interstate commerce."

The petition alleges that relator duly made its report to the respondents showing that the market value of all its property and assets in this State was $ 14,039,641; that the market value of its property and assets without the State was $ 81,186,709; that the par value of its total paid up capital stock was $ 139,492,536.97; that of its entire business transacted in the State of Missouri for the year ending December 31, 1917, 73.34 per cent was interstate business and 26.66 per cent was intrastate business.

The petition further alleges:

"That in determining the amount of the franchise tax required to be paid by relator under the said Franchise Tax Act, it was the duty of said Tax Commission to determine and take into account, in the manner provided by said act, only that proportion of the clear market value of all its property and assets in this State which was used in the conduct of the intrastate business of relator in this State during the calendar year ending December 31, 1917.

"That the amount of the franchise tax required to be paid by relator when measured by the provisions of said act as applied to that proportion of the clear market value of all the property and assets of relator in this State which was used in the conduct of its intrastate business in this State during the calendar year ending December 31, 1917, was and is $ 4,082.07, which said sum is found by apportioning the clear market value of all the property and assets of relator in this State on the percentage relation which its intrastate business in this State bears to all of its business herein. . . .

"And relator avers, on information and belief, that the said predecessors of respondents in determining the amount of tax which relator is required to pay under the provisions of said act, took the clear market value of all the property and assets of relator within this State to be the sum of $ 14,039,641, and the clear market value of the property and assets of relator without this State to be $ 81,186,709, and ascertained that the clear market value of all the property and assets of relator within this State was 14.743 per cent. of the clear market value of all the property and assets of relator without the State, and applied this percentage to the par value of the outstanding capital stock of relator, $ 138,492,536.97, thereby ascertaining that the proportion of the entire capital stock and surplus employed by relator in the conduct of all its business in this State was $ 20,417,954.72, to which last-named sum was applied the rate of taxation, to-wit, three-fortieths of one per cent, which gives the sum of $ 15,313.50, or the amount which the said predecessors of respondents wrongfully reported to the State Auditor as the amount of the tax that relator is liable to pay under the provisions of said Franchise Tax Act. . . .

"That the construction so given to the provisions of said Franchise Tax Act by the said predecessors of respondents as applied to the facts in relation to the business and the value of the property and assets of relator in this State, renders the provisions of said act unconstitutional and void, because

"(a) It attempts thereby to assess a tax upon the franchise of relator to do an interstate business in this State in violation of the provisions of Section 8 of Article I of the Constitution of the United States.

"(b) It thereby deprives relator of its property without due process of law, and denies the relator the equal protection of the laws, in violation of Article XIV of he Amendmens to the Constitution of the United States."

The petition alleges that relator is without other adequate remedy and prays that respondents be directed "to correctly determine the proportion of the capital stock and surplus of relator employed in the business in this State, by ascertaining (1) the value of the property and assets of relator devoted to its intrastate business in this State, and (2) that...