Quaker City Cab Co v. Commonwealth of Pennsylvania, 139

• Decision Date: 28 May 1928
• Docket Number: No. 139,139
• Citation: 48 S.Ct. 553,277 U.S. 389,72 L.Ed. 927
• Parties: QUAKER CITY CAB CO. v. COMMONWEALTH OF PENNSYLVANIA
• Court: U.S. Supreme Court

277 U.S. 389

48 S.Ct. 553

72 L.Ed. 927

QUAKER CITY CAB CO.

v COMMONWEALTH OF PENNSYLVANIA.

No. 139.

Argued April 20, 1927.

Decided May 28, 1928.

As Amended June 9, 1928.

Messrs. Owen J. Roberts, of Philadelphia, Pa., and Douglas D. Story, of Jersey City, N. J., for plaintiff in error.

[Argument of Counsel from pages 390-393 intentionally omitted] Messrs. John Robert Jones and George W. Woodruff, both of Philadelphia, Pa., for defendant in error.

[Argument of Counsel from pages 394-398 intentionally omitted] Mr. Justice BUTLER delivered the opinion of the Court.

Judgment was entered in the court of common pleas of Dauphin county, Pa., in favor of the commonwealth for 'gross receipts taxes for the six months ending the 31st day of December, 1923,' amounting, with interest and commission, to $6,049.94. The tax is claimed under section 23 of an Act of June 1, 1889, P. L. 420, 431. The provisions here material are printed in the margin.¹ The gross receipts taxed were derived by plaintiff in error from the use of its motor vehicles for the transportation within Pennsylvania of persons and their luggage. Plaintiff in error contended that, if applied to such receipts, the section violates the equal protection clause of the Fourteenth Amendment. The highest court of the state upheld the act, and affirmed the judgment. 287 Pa. 161, 134 A. 404.

Plaintiff in error is a New Jersey corporation authorizedto do business in Pennsylvania as a foreign corporation; and, since June 1, 1917, it has carried on a general taxicab business in Philadelphia. The Supreme Court held that the section taxes gross receipts from the operation of taxicabs. It provides that every transportation company, whether incorporated in Pennsylvania or elsewhere, owning or operating any device for the transportation of passengers, 'shall pay to the state treasurer a tax of eight mills upon the dollar upon the tross receipts of said corporation * * * received from passengers * * * transported wholly within this state. * * *'

Plaintiff in error was subject to competition in its business by individuals and partnerships operating taxicabs. The act does not apply to them, and no tax is imposed on their receipts. Corporations operating taxicabs are not exempted from any of the taxes imposed on natural persons carrying on that business. And every such corporation, whether domestic or foreign, pays a capital stock tax of 5 mills on the actual value of its capital stock and a bonus of one-third of 1 per cent. on the par value of all stock issued if it be a domestic corporation, and a like rate on its capital employed in Pennsylvania if it be a foreign corporation. Act of July 22, 1913, P. L. 903 (Pa. St. 1920, §§ 20366-20368); section 1, Act of May 3, 1899, P. L. 189 (Pa. St. 1920, § 5686); section 1, Act of May 8, 1901, P. L. 150 (Pa. St. 1920, § 5691). The Supreme Court said that it is immaterial whether individuals engaged in a like taxicab business are subject to the tax here involved, and that corporations may be placed in a class separate from individuals and so taxed.

The equal protection clause extends to foreign corporations within the jurisdiction of the state, and safeguards to them protection of laws applied equally to all in the same situation. Plaintiff in error is entitled in Pennsylvania to the same protection of equal laws that natural persons within its jurisdiction have a right to demand under like circumstances. Kentucky v. Paramount Exch., 262 U. S. 544, 550, 43 S. Ct. 636, 67 L. Ed. 1112. The equal protection clause does not detract from the right of the state justly to exert its taxing power or prevent it from adjusting its legislation to differences in situation or forbid classification in that connection, 'but it does require that the classification be not arbitrary, but based on a real and substantial difference having a reasonable relation to the subject of the particular legislation.' Power Co. v. Saunders, 274 U. S. 490, 493, 47 S. Ct. 678, 679 (71 L. Ed. 1165). It is established that a corporation, by seeking and obtaining permission to do business in a state, does not thereby become bound to comply with, or estopped from objecting to, the enforcement of its enactments that conflict with the Constitution of the United States. The right to withhold from a foreign corporation permission to do local business therein does not enable the state to require such a corporation to surrender the protection of the federal Constitution. Power Co. v. Saunders, supra, 497 (47 S. Ct. 680); Hanover Insurance Co. v. Harding, 272 U. S. 494, 507, 47 S. Ct. 179, 71 L. Ed. 372, 49 A. L. R. 713; Frost v. Railroad Commission, 271 U. S. 583, 593 et seq., 46 S. Ct. 605, 70 L. Ed. 1101, 47 A. L. R. 457; Fidelity & Deposit Co. v. Tafoya, 270 U. S. 426, 434, 46 S. Ct. 331, 70 L. Ed. 664; Western Union Tel. Co. v. Foster, 247 U. S. 105, 114, 38 S. Ct. 438, 62 L. Ed. 1006, 1 A. L. R. 1278; Looney v. Crane Co., 245 U. S. 178, 188, 38 S. Ct. 85, 62 L. Ed. 230; Sioux Remedy Co. v. Cope, 235 U. S. 197, 203, 35 S. Ct. 57, 59 L. Ed. 193.

The section declares the imposition to be a tax 'upon gross receipts.' And the Supreme Court said (287 Pa. 167, 134 A. 406):

'The real subject of the tax is the gross receipts of a company engaged in the transportation of freight of passengers. * * *'

That statement is not affected by a later expression referring to the tax as a 'state tax on business or income' in contrast with a 'local tax on property,' such as hacks, cabs, and other vehicles. The variation of language used by the court evidently is intended to be, and is, without significance. The words of the section are too plain to require explanation. They could not reasonably be given any other meaning. But, in any event, a characterization of the tax by the state court is not binding here. Louisville Gas & Electric Co. v. Coleman, 277 U. S. 32, 48 S. Ct. 423, 72 L. Ed. 770; St. Louis Compress Co. v. Arkansas, 260 U. S. 346, 348, 43 S. Ct. 125, 67 L. Ed. 297. There is no controversy as to the application of the tax. Plaintiff in error assumes that the section covers its gross receipts, as held by the state court, but insists that the section is invalid because it does not extend to like receipts of natural persons and partnerships. No doubt there are situations in which, as appears in Cudahy Packing Co. v. Minnesota, 246 U. S. 450, 38 S. Ct. 373, 62 L. Ed. 827, and other cases, a percentage of gross earnings may be taken as a tax on property used in the business and properly may be deemed not to be a tax or burden on such earnings. But the practical operation of the section is to be regarded, and it is to be dealt with according to its effect. Frick v. Pennsylvania, 268 U. S. 473, 45 S. Ct. 603, 69 L. Ed. 1058, 42 A. L. R. 316; Panhandle Oil Co. v. Mississippi, 277 U. S 218, 48 S. Ct. 451, 72 L. Ed. 857. Here the tax is one that can be laid upon receipts belonging to a natural person quite as conveniently as upon those of a corporation. It is not peculiarly applicable to corporations, as are taxes on their capital stock or franchises. It is not taken in lieu of any other Pa. 83, 22 A. 240; Commonwealth v. National Oil fall elsewhere. It is laid upon and is to be considered and tested as a tax on gross receipts; it is specifically that and nothing else.

In effect section 23 divides those operating taxicabs into two classes. The gross receipts of incorporated operators are taxed, while those of natural persons and partnerships carrying on the same business are not. The character of the owner is the sole fact on which the distinction and discrimination are made to depend. The tax is imposed merely because the owner is a corporation. The discrimination is not justified by any difference in the source of the receipts or in the situation or character of the property employed. It follows that the section fails to meet the requirement that a classification, to be consistent with the equal protection clause, must be based on a real and substantial difference having reasonable relation to the subject of the legislation. Power Co. v. Saunders, supra. No decision of this court gives support to such a classification. And the Supreme Court of Pennsylvania has condemned such a classification. Schoyer v. Comet Oil & Refining Co., 284 Pa. 189, 196, 197, 130 A. 413. In no view can it be held to have more than an arbitrary basis As construed and applied by the state court in this case, the section violates the equal protection clause of the Fourteenth Amendment. See The Railroad Tax Cases (C. C.) 13 F. 722; County of Santa Clara v. Southern Pacific R. R. Co. (C. C.) 18 F. 385; Northern Pacific R. Co. v. Walker (C. C.) 47 F. 681. The tax cannot be sustained.

Judgment reversed.

Mr. Justice HOLMES.

I think that the judgment should be affirmed. The principle that I think should govern is the same that I stated in Louisville Gas & Electric Co. v. Coleman, April 30, 1928, 277 U. S. 32, 48 S. Ct. 423, 72 L. Ed. 770. Although this principle was not applied in that case I do not suppose it to have been denied that taking acts like other rules of law may be determined by differences of degree, and that to some extent States may have a domestic policy that they constitutionally may enforce. Quong Wing v. Kirkendall, 223 U. S. 59, 32 S. Ct. 192, 56 L. Ed. 350. If usually there is an important difference of degree between the business done by corporations and that done by individuals, I see no reason why the larger businesses may not be taxed and the small ones disregarded, and I think it would be immaterial if here and there exceptions were found to the general rule. Flint v. Stone Tracy Co., 220 U. S. 107, 158, et seq., 31 S. Ct. 342, 55 L. Ed. 389, Ann. Cas. 1912B, 1312; Citizens' Telephone Co. v. Fuller, 229 U. S. 322, 33 S. Ct. 833, 57 L. Ed. 1206; Amoskeag Savings Bank v. Purdy, 231 U. S. 373, 393, 34 S. Ct. 114, 58 L. Ed. 274; Miller v. Wilson, 236 U. S. 373, 384, 35 S. Ct. 342, ...