252 U.S. 60 (1920), 548, Travis v. Yale & Towne Manufacturing Company

Docket Nº:No. 548
Citation:252 U.S. 60, 40 S.Ct. 228, 64 L.Ed. 460
Party Name:Travis v. Yale & Towne Manufacturing Company
Case Date:March 01, 1920
Court:United States Supreme Court

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252 U.S. 60 (1920)

40 S.Ct. 228, 64 L.Ed. 460



Yale & Towne Manufacturing Company

No. 548

United States Supreme Court

March 1, 1920

        Argued December 15, 16, 1919




        Shaffer v. Carter, ante 37, followed, to the effect that a state may tax incomes of nonresidents arising within her borders, and that there is no unconstitutional discrimination against nonresidents in confining the deductions allowed them for expenses, losses, etc., to such as are connected with income so arising while allowing residents, taxed on their income generally, to make such deductions without regard to locality. P. 75.

        Such a tax may be enforced as to nonresidents working within the state by requiring their employers to withhold and pay it from their salaries or wages, and no unconstitutional discrimination against such nonresidents results from omitting such a requirement in the case of residents. P. 76.

        A regulation requiring that the tax be thus withheld is not unreasonable as applied to a sister-state corporation carrying on local business without any contract limiting the regulatory power of the taxing state; nor is the power to impose such a regulation affected by the fact that the corporation may find it more convenient to pay its employees and keep its accounts in the its origin and principal place of business. Id.

        The terms "resident" and "citizen" are not synonymous, but a general taxing scheme of a state which discriminates against all nonresidents necessarily includes in the discrimination those who are citizens of other states. P. 78.

        A general tax laid by a state on the incomes of residents and nonresidents, which allows exemptions to the residents, with increases for married persons and for dependents, but allows no equivalent exemptions to nonresidents, operates to abridge the privileges and immunities of citizens of other states in violation of § 2 of Art. IV of the Constitution. P. 79.

        Held that such a discrimination in the income tax law of New York is

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not overcome by a provision excluding from the taxable income of nonresident annuities, interest, and dividends not part of income from a local business, or occupation, etc., subject to the tax. P. 81.

        An abridgment by one the privilege and immunities of the citizens of other states cannot be condoned by those states or cured by retaliation. P. 82.

        262 F. 576 affirmed.

        The case is stated in the opinion.

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        PITNEY, J., lead opinion

        MR. JUSTICE PITNEY delivered the opinion of the Court.

        This was a suit in equity, brought in the district court by appellee against appellant as Comptroller of the State of New York to obtain an injunction restraining the enforcement of the Income Tax Law of that state (c. 627, Laws 1919) as against complainant upon the ground of its repugnance to the Constitution of the United States because violating the interstate commerce clause, impairing the obligation of contracts, depriving citizens of the States of Connecticut and New Jersey employed by complainant of the privileges and immunities enjoyed by citizens of the State of New York, depriving complainant and its nonresident employees of their

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property without due process of law, and denying to such employees the equal protection of the laws. A motion to dismiss the bill -- equivalent to a demurrer -- was denied upon the ground that the act violated § 2 of Art. IV of the Constitution by discriminating against nonresidents in the exemptions allowed from taxable income; an answer was filed, raising no question of fact; in due course, there was a final decree in favor of complainant, and defendant took an appeal to this Court under § 238, Judicial Code.

        The act (§ 351) imposes an annual tax upon every resident of the state with respect to his net income as defined in the act at specified rates, and provides also:

A like tax is hereby imposed and shall be levied, collected, and paid annually at the rates specified in this section upon and with respect to the entire net income as herein defined, except as hereinafter provided, from all property owned and from every business, trade, profession, or occupation carried on in this state by natural persons not residents of the state.

        Section 359 defines gross income, and contains this paragraph:

3. In the case of taxpayers other than residents, gross income includes only the gross income from sources within the state, but shall not include annuities, interest on bank deposits, interest on bonds, notes, or other interest-bearing obligations or dividends from corporations except to the extent to which the same shall be a part of income from any business, trade, profession, or occupation carried on in this state subject to taxation under this article.

       In § 360, provision is made for deducting in the computation of net income [40 S.Ct. 230] expenses, taxes, losses, depreciation charges, etc., but, by paragraph 11 of the same section:

In the case of a taxpayer other than a resident of the state, the deductions allowed in this section shall be allowed only if, and to the extent that, they are connected with income arising from sources within the state. . . .


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section 362, certain exemptions are allowed to any resident individual taxpayer, viz., in the case of a single person, a personal exemption of $1,000, in the case of the head of a family or a married person living with husband or wife, $2,000, and $200 additional for each dependent person under 18 years of age or mentally or physically defective. The next section reads as...

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