Western Live Stock v. Bureau of Revenue

• Decision Date: 28 February 1938
• Docket Number: No. 322,322
• Citation: 82 L.Ed. 823,303 U.S. 250,115 A.L.R. 944,58 S.Ct. 546
• Parties: WESTERN LIVE STOCK v. BUREAU OF REVENUE et al
• Court: U.S. Supreme Court

303 U.S. 250

58 S.Ct. 546

82 L.Ed. 823

WESTERN LIVE STOCK

v BUREAU OF REVENUE et al.

No. 322.

Argued Jan. 31, 1938.

Decided Feb. 28, 1938.

Messrs. D. A. Macpherson, Jr., and J. R. Modrall, both of Albuquerque, N.M., for appellant.

Mr. Frank H. Patton, of Santa Fe , N.M., for appellees.

Mr. Justice STONE delivered the opinion of the Court.

Section 201, chapter 7, of the New Mexico Special Session Laws of 1934, levies a privilege tax upon the gross receipts of those engaged in certain specified businesses.¹ Subdivision I imposes a tax of 2 per cent. of amounts received from the sale of advertising space by one engaged in the business of publishing newspapers or magazines. The question for decision is whether the tax laid under this statute on appellants, who sell without the state, to advertisers there, space in a journal which they publish in New Mexico and circulate to subscribers within and without the state, imposes an unconstitutional burden on interstate commerce.

Appellants brought the present suit in the state district court to recover the tax, which they had paid under protest, as exacted in violation of the commerce clause of the Federal Constitution. Article 1, § 8, cl. 3. The trial court overruled a demurrer to the complaint and gave judgment for appellants, which the Supreme Court reversed. 41 N.M. 141, 65 P.2d 863. Appellants refusing to plead further, the district court gave judgment for the appellees, which the Supreme Court affirmed. 41 N.M. 288, 67 P.2d 505. The case comes here on appeal from the second judgment under section 237 of the Judicial Code, as amended, 28 U.S.C.A. § 344.

Appellants publish a monthly livestock trade journal which they wholly prepare, edit, and publish within the state of New Mexico, where their only office and place of business is located. The journal has a circulation in New Mexico and other states, being distributed to paid subscribers through the mails or by other means of transportation. It carries advertisements, some of which are obtained from advertisers in other states through appellants' solicitation there. Where such contracts are entered into, payment is made by remittances to appellants sent interstate; and the contracts contemplate and provide for the interstate shipment by the advertisers to appellants of advertising cuts, mats, information, and copy. Payment is due after the printing of such advertisements in the journal and its ultimate circulation and distribution, which is alleged to be in New Mexico and other states.

Appellants insist here, as they did in the state courts, that the sums earned under the advertising contracts are immune from the tax because the contracts are entered into by transactions across state lines and result in the like transmission of advertising materials by advertisers to appellants, and also because performance involves the mailing or other distribution of appellants' magazines to points without the state.

That the mere formation of a contract between persons in different states is not within the protection of the commerce clause, at least in the absence of Congressional action, unless the performance is within its protection, is a proposition no longer open to question. Paul v. Virginia, 8 Wall. 168, 19 L.Ed. 357; Hooper v. California, 155 U.S. 648, 15 S.Ct. 207, 39 L.Ed. 297; New York Life Ins. Co. v. Deer Lodge County, 231 U.S. 495, 34 S.Ct. 167, 58 L.Ed. 332. Cf. Ware & Leland v. Mobile County, 209 U.S. 405, 28 S.Ct. 526, 52 L.Ed. 855, 14 Ann.Cas. 1031; Engel v. O'Malley, 219 U.S. 128, 31 S.Ct. 190, 55 L.Ed. 128. Hence it is unnecessary to consider the impact of the tax upon the advertising contracts except as it affects their performance, presently to be discussed. Nor is taxation of a local business or occupation which is separate and distinct from the transportation and intercourse which is interstate commerce forbidden merely because in the ordinary course such transportation or intercourse is induced or occasioned by the business. Williams v. Fears, 179 U.S. 270, 21 S.Ct. 128, 45 L.Ed. 186; Ware & Leland v. Mobile County, supra; Browning v. Waycross 233 U.S. 16, 34 S.Ct. 578, 58 L.Ed. 828; General Railway Signal Co. v. Virginia, 246 U.S. 500, 510, 38 S.Ct. 360, 62 L.Ed. 854; Utah Power & Light Co. v. Pfost, 286 U.S. 165, 52 S.Ct. 548, 76 L.Ed. 1038. Here the tax which is laid on the compensation received under the contract is not forbidden either because the contract, apart from its performance, is within the protection of the commerce clause, or because as an incident preliminary to printing and publishing the advertisements the advertisers send cuts, copy and the like to appellants.

We turn to the other and more vexed question, whether the tax is invalid because the performance of the contract, for which the compensation is paid, involves to some extent the distribution, interstate, of some copies of the magazine containing the advertisements. We lay to one side the fact that appellants do not allege specifically that the contract stipulates that the advertisements shall be sent to subscribers out of the state, or is so framed that the compensation would not be earned if subscribers outside the state should cancel their subscriptions. We assume the point in appellants' favor and address ourselves to their argument that the present tax infringes the commerce clause because it is measured by gross receipts which are to some extent augmented by appellants' maintenance of an interstate circulation of their magazine.

It was not the purpose of the commerce clause to relieve those engaged in interstate commerce from their just share of state tax burden even though it increases the cost of doing the business. 'Even interstate business must pay its way,' Postal Telegraph-Cable Co. v. Richmond, 249 U.S. 252, 259, 39 S.Ct. 265, 266, 63 L.Ed. 590; Ficklen v. Shelby County Taxing District, 145 U.S. 1, 24, 12 S.Ct. 810, 36 L.Ed. 601; Postal Telegraph Cable Co. v. Adams, 155 U.S. 688, 696, 15 S.Ct. 268, 360, 39 L.Ed. 311; Galveston, H. & S.A.R. Co. v. Texas, 210 U.S. 217, 225, 227, 28 S.Ct. 638, 52 L.Ed. 1031, and the bare fact that one is carrying on interstate commerce does not relieve him from many forms of state taxation which add to the cost of his business. He is subject to a property tax on the instruments employed in the commerce, Western Union Telegraph Co. v. Massachusetts, 125 U.S. 530, 8 S.Ct. 961, 31 L.Ed. 790; Cleveland, C., C. & St. L.R. Co. v. Backus, 154 U.S. 439, 14 S.Ct. 1122, 38 L.Ed. 1041; Adams Express Co. v. Ohio State Auditor, 165 U.S. 194, 17 S.Ct. 305, 41 L.Ed. 683; Adams Express Co. v. Kentucky, 166 U.S. 171, 17 S.Ct. 527, 41 L.Ed. 960; Western Union Tel. Co. v. Missouri ex rel. Gottlieb, 190 U.S. 412, 23 S.Ct. 730, 47 L.Ed. 1116; Old Dominion S.S. Co. v. Virginia, 198 U.S. 299, 25 S.Ct. 686, 49 L.Ed. 1059, and if the property devoted to interstate transportation is used both within and without the state, a tax fairly apportioned to its use within the state will be sustained, Pullman's Palace-Car Co. v. Pennsylvania, 141 U.S. 18, 11 S.Ct. 876, 35 L.Ed. 613; Cudahy Packing Co. v. Minnesota, 246 U.S. 450, 38 S.Ct. 373, 62 L.Ed. 827. Net earnings from interstate commerce are subject to income tax, United States Glue Co. v. Oak Creek, 247 U.S. 321, 38 S.Ct. 499, 62 L.Ed. 1135, Ann.Cas.1918E, 748, and, if the commerce is carried on by a corporation, a franchise tax may be imposed, measured by the net income from business done within the state, including such portion of the income derived from interstate commerce as may be justly attributable to business done within the state by a fair method of apportionment, Underwood Typewriter Co. v. Chamberlain, 254 U.S. 113, 41 S.Ct. 45, 65 L.Ed. 165. Cf. Bass, Ratcliff & Gretton, Ltd. v. State Tax Commission, 266 U.S. 271, 45 S.Ct. 82, 69 L.Ed. 282.

All of these taxes in one way or another add to the expense of carrying on interstate commerce, and in that sense burden it; but they are not for that reason prohibited. On the other hand, local taxes, measured by gross receipts from interstate commerce, have often been pronounced unconstitutional. The vice characteristic of those which have been held invalid is that they have placed on the commerce burdens of such a nature as to be capable in point of substance, of being imposed, Fargo v. Stevens, Michigan, 121 U.S. 230, 7 S.Ct. 857, 30 L.Ed. 888; Philadelphia & S.M.S.S. Co. v. Pennsylvania, 122 U.S. 326, 7 S.Ct. 1118, 30 L.Ed. 1200; Galveston, H. & S.A.R. Co. v. Texas, supra; Meyer v. Wells, Fargo & Co., 223 U.S. 298, 32 S.Ct. 218, 56 L.Ed. 445, or added to, Crew Levick Co. v. Pennsylvania, 245 U.S. 292, 38 S.Ct. 126, 62 L.Ed. 295; Fisher's Blend Station, Inc. v. State Tax Commission, 297 U.S. 650, 56 S.Ct. 608, 80 L.Ed. 956, with equal right by every state which the commerce touches, merely because interstate commerce is being done, so that without the protection of the commerce clause it would bear cumulative burdens not imposed on local commerce. See Philadelphia & S.M.S.S. Co. v. Pennsylvania, supra, 122 U.S. 326, 346, 7 S.Ct. 1118, 30 L.Ed. 1200; State Freight Tax, 15 Wall. 232, 280, 21 L.Ed. 146; Bradley, J., dissenting in Maine v. Grand Trunk Railway Co., 142 U.S. 217, 235, 12 S.Ct. 121, 163, 35 L.Ed. 994. Cf. Pullman's Palace-Car Co. v. Pennsylvania, supra, 141 U.S. 18, 26, 11 S.Ct. 876, 35 L.Ed. 613. The multiplication of state taxes measured by the gross receipts from interstate transactions would spell the destruction of interstate commerce and renew the barriers to interstate trade which it was the object of the commerce clause to remove. Baldwin v. G.A.F. Seelig, 294 U.S. 511, 523, 55 S.Ct. 497, 500, 79 L.Ed. 1032, 101 A.L.R. 55.

It is for these reasons that a state may not lay a tax measured by the amount of merchandise carried in interstate commerce, State Freight Tax, supra, or upon the freight earned by its carriage, Fargo v. Stevens, supra; Philadelphia & S.M.S.S. Co. v....