Nitrate Sales Corporation v. State of Alabama

• Decision Date: 06 February 1933
• Docket Number: ANGLO-CHILEAN,No. 377,377
• Citation: 288 U.S. 218,53 S.Ct. 373,77 L.Ed. 710
• Parties: NITRATE SALES CORPORATION v. STATE OF ALABAMA
• Court: U.S. Supreme Court

288 U.S. 218

53 S.Ct. 373

77 L.Ed. 710

ANGLO-CHILEAN NITRATE SALES CORPORATION

v STATE OF ALABAMA.

No. 377.

Argued Jan. 19, 1933.

Decided Feb. 6, 1933.

Appeal from the Supreme Court of the State of Alabama.

Messrs. R. Worth Vaughan and Elihu Root, Jr., both of New York City, for appellant.

Messrs. Thomas E. Knight, Jr., and Frontis H. Moore, both of Montgomery, Ala., for the State of Alabama.

[Argument of Counsel from page 219 intentionally omitted] Mr. Justice BUTLER delivered the opinion of the Court.

Appellant is a New York corporation having its principal office in that state. October 10, 1927, it qualified to do business in Alabama, and March 14, 1930, made and sent to the state tax commission a return showing that its only property in Alabama on December 31, 1929, the date as of which the statute required the statement to be made, was 33,455,763 pounds of nitrate of soda which had been imported by it from Chile into Alabama and stored in the original packages, the book value of which was $712,846.72. March 31, 1930, the commission under section 54 of No. 163, General Acts 1927,¹ assessed against appellant for that year a franchise tax of $1,425.69, being at the rate of $2 on each $1,000 of the value so reported.

Conformably to state practice appellant appealed to the circuit court of Montgomery county. The case was submitted on an agreed statement of facts the abridged substance of which follows.

From the date of its qualification in Alabama to the time of the assessment, appellant was engaged in the business of importing nitrate through the port of Mobile and other ports. The nitrate, in bags containing about 100 pounds each, was brought into Mobile and there stored by appellant in a public warehouse and kept in the original packages until sold and delivered to the ultimate consumers. All was sold upon orders through a salesman who, paying his own expenses, was compensated by commissions on his sales. The orders were taken subject to approval and were not effective until approved by appellant in its New York office. When so accepted, directions were given that the nitrate be forwarded to the customers. These directions were given to and carried out by the Walsh Stevedoring Company at Mobile, an independent contractor, having an arrangement with appellant to handle its importations of nitrate, store it in a public warehouse and forward it as directed.

All transactions were for cash. The customers received the nitrate only upon payment of the purchase price when they took up the shipping documents through a bank of collection by paying the drafts attached. Such payments were sent to the Merchants' National Bank at Mobile and by it immediately transferred to appellant in New York. Appellant had no bank account in Alabama and paid all expenses there by remittances from New York. On the date as of which appellant's return was made it had no accounts or bills receivable in Alabama and had no money there at any time except during the brief intervals that the funds were being so transmitted. It did not have or employ any capital in that State unless the importation through the port of Mobile, the storage and sale of nitrate in the manner above described constitutes capital and its employment there.

Section 54, under which the assessment was made, declares that every corporation organized under the laws of any other state and doing business in Alabama shall pay to the state an annual franchise tax of $2 on each $1,000 of the actual amount of capital employed therein. Appellant maintained below and here insists that the section, construed to impose the tax in question is repugnant to the declarations of the federal Constitution: 'No state shall, without the consent of the congress, lay any imposts or duties on imports or exports, except what may be absolutely necessary for executing its inspection laws,' article 1, § 10, cl. 2, and, 'The congress shall have power * * * to regulate commerce with foreign nations, and among the several states * * *' article 1, § 8.

The Alabama statute in question was enacted in pursuance of section 232 of the state Constitution which declares: No foreign corporation shall do any business in the state without having a place of business and an authorized agent therein and without filing with the secretary of state a certified copy of its articles of incorporation. 'The legislature shall, by general law, provide for the payment to the State of Alabama of a franchise tax by such corporation, but such franchise tax shall be based on the actual amount of capital employed in this state.' As to the meaning and purpose of the statute, we are governed by the construction put upon it by the state supreme court.

Its decisions clearly show that the exaction is laid, not upon the authorization, right, or privilege to do business in Alabama, but upon the actual doing of business. While the case at bar was pending on appeal there, the state supreme court in State v. National Cash Credit Ass'n, 224 Ala. 629, 632, 141 So. 541, 544, held that the mere investment in or ownership of property in the state by a foreign corporation does not subject it to the franchise tax. Adverting to the language of the statute, it declared that the 'property must be employed in a corporate business done in this state.' On rehearing, May 19, 1932, and after its decision in the case before us, that court said: 'We merely hold a franchise tax to be what it purports to be, a tax upon the exercise or use of its franchise in Alabama for the purposes of such franchise; and that if no corporate activity is conducted in Alabama during the period covered by the tax, the corporation does not owe a franchise tax.'

And in the case at bar the court said: 'The defendant duly qualified as a foreign corporation to do business in this state, appointed a resident agent, and that it actually engaged in business in Alabama by selling its nitrate through a selesman both within and without the state appears as an uncontroverted fact. It seeks to be relieved from this franchise tax solely upon the theory the imported nitrate, the sale of which constituted its business, was immune from state taxation. * * * The statute here under review has no reference to imports, but is merely of a general character relating to the fixation of the amount of a franchise tax upon foreign corporations doing business in this state.' 142 So. 87, 89. And, aftet referring to the manner of appellant's acceptance of orders and the collections and remittances, the court said: 'These details go to show the corporation was actually engaged in business in this state. * * *' 142 So. 87, 91. As appellant did no local business in the state, that decision plainly rests upon the assumption that Alabama had power to tax appellant's sales in original packages of the nitrate it imported into that state only for sale and that such sales constituted a business that is taxable under section 54. The Alabama statute is unlike that of Michigan examined here in Detroit International Bridge Co. v. Corporation Tax Appeal Board of Michigan, 287 U.S. 295, 53 S.Ct. 137, 77 L.Ed. 314, and Michigan v. Michigan Trust Co., 286 U.S. 334, 342, 52 S.Ct. 512, 76 L.Ed. 1136. There the tax upon a domestic corporation was imposed for the mere right to transact business.

The fact that appellant qualified to do business in Alabama was not, and rightly cannot be, held to sustain the tax. In Ozark Pipe Line v. Monier, 266 U.S. 555, 45 S.Ct. 184, 69 L.Ed. 439, we condemned as repugnant to the commerce clause a Missouri statute that required every foreign corporation engaged in business in that state to pay an annual franchise tax upon the privilege or right to do business. The company's business there consisted in the operation of a pipe line for interstate transportation of oil and in the ownership of property, the keeping of its principal office, purchase of supplies, employment of labor, maintenance and operation of telephone and telegraph lines all in furtherance of such interstate commerce and constituting the means and instruments by which it was conducted. We held that the tax could not be constitutionally exacted, and that the facts that the foreign corporation was organized for local business and had applied for and received a local license conferring the power of eminent domain did not enable the state to tax its right to carry on interstate commerce. We said (page 567 of 266 U.S., 45 S.Ct. 184, 187): 'The state has no such power even in the case of domestic corporations. See Phila. Steamship Co. v. Pennsylvania, 122 U.S. 326, 342, 7 S.Ct. 1118, 30 L.Ed. 1200.'

The question whether, consistently with the imports and commerce clauses, the Alabama statute may be construed to require appellant to pay the specified franchise tax is dual in form but single in substance for, upon the facts of this case, it is clear that if the exaction is a tax on imports it necessarily burdens foreign commerce. Crew Levick Co. v. Pennsylvania, 245 U.S. 292, 295, 38 S.Ct. 126, 62 L.Ed. 295.

The stipulation of the parties shows that the only transactions in Alabama in which appellant is concerned are the landing, storage, and sale of the nitrate in the form and packages in which it was put up abroad and transported into the United States. The bags were kept intact, no nitrate was removed therefrom, and, prior to the delivery of the same to those who bought from appellant, it was not in any manner commingled with, and did not become a part of, the general mass of property within the state. The right to import the nitrate included the right to sell it in the original bags while it remained the property of appellant and before it lost its distinctive character as an import. State prohibition of such sales would take from appellant the very rights in respect of importation that are conferred by the Constitution and laws of the United States. Alabama was powerless, without the consent of Congress, to...