337 U.S. 562 (1949), 447, Wheeling Steel Corp. v. Glander

Docket Nº:No. 447
Citation:337 U.S. 562, 69 S.Ct. 1291, 93 L.Ed. 1544
Party Name:Wheeling Steel Corp. v. Glander
Case Date:June 20, 1949
Court:United States Supreme Court

Page 562

337 U.S. 562 (1949)

69 S.Ct. 1291, 93 L.Ed. 1544

Wheeling Steel Corp.



No. 447

United States Supreme Court

June 20, 1949

Argued March 29, 1949



Certain foreign corporations which had been authorized to do business in Ohio and which operated manufacturing plants there had their principal places of business in other states, where all orders were accepted, credits extended, books kept, and where all accounts receivable were payable. The corporations had paid all franchise taxes and all taxes on real and personal property located within Ohio. In addition, the State levied an ad valorem tax on their accounts receivable derived from sales of goods manufactured within the State. The accounts receivable were not used in the conduct of the business of the corporations in Ohio, but in their general business. Accounts receivable of identical nature which were owned by residents and domestic corporations were exempt from the tax.


1. The tax denied the foreign corporations the equal protection of the laws, in violation of the Fourteenth Amendment of the Federal Constitution. Pp. 563-574.

(a) After a state has chosen to admit foreign corporations to do business within it, they are entitled to equal protection with domestic corporations at least to the extent that their property is entitled to an equally favorable ad valorem tax basis. Pp. 571-572.

(b) The inequality to which the foreign corporations are subjected is not based on Ohio's relation to the decisive transaction, but solely on difference in residence of the owner of the accounts receivable. P. 572.

2. The tax was not saved from constitutional invalidity by the "reciprocity" provisions of the statute imposing it, since the plan of reciprocity is not one which, by credits or otherwise, protects the nonresident or foreign corporation against the discriminations apparent in the Ohio statute. Pp. 572-574.

150 Ohio St. 229, 80 N.E.2d 863, reversed.

Page 563

An Ohio ad valorem tax on foreign corporations, challenged as violating the Federal Constitution, was sustained by the State Supreme Court. 150 Ohio St. 229, 80 N.E.2d 863. On appeals to this Court, reversed, p. 574.

JACKSON, J., lead opinion

[69 S.Ct. 1293] MR. JUSTICE JACKSON delivered the opinion of the Court.

The Ohio has laid an ad valorem tax against certain intangible property, consisting of notes, accounts receivable, and prepaid insurance, owned by foreign corporations. As applied to appellants in these two cases, the tax is challenged as violating the Federal Constitution on several grounds which may conveniently be considered in a single opinion. Facts are not in dispute.

Appellant Wheeling Steel Corporation is organized under the laws of Delaware, where it maintains a statutory office. Ohio has authorized it to do business in that State, and four of its eight manufacturing plants are located there. General offices, from which its entire business is controlled and conducted, are in Wheeling, West Virginia. Its officers there have custody of its money, notes, and books of account. In twelve other states, including Ohio, it maintains sales offices which solicit and receive orders for its products subject to acceptance or rejection at the Wheeling office, to which all are forwarded.

Page 564

From this office only may credit be extended to purchasers. Accounts are billed and collected from the Wheeling office, and the sales offices have no powers or duties with respect to collection. All accounts or notes receivable are payable at Wheeling, where the written evidences thereof are kept. Proceeds from receivables are taken into appellant's treasury at Wheeling and there applied to general purposes of the business.

Appellant National Distillers Products Corporation is organized under the laws of Virginia, where it has a statutory office and holds annual stockholders meetings. It is admitted to do business in Ohio, where it maintains a distillery, or rectifying plant, and warehouse, as it does also in six other states. Payroll checks for plant employees are drawn on funds deposited in banks in the locality of the plant. Appellant also is licensed to do business in New York, where it maintains its principal business office and conducts its fiscal affairs and from which all business activities are directed and controlled. The Corporation maintains regional sales offices in various of those states which permit private distribution of liquor. In such states, customers are solicited and orders taken, subject to acceptance or rejection at New York. It maintains no sales office in Ohio, where dispensing liquor is a state monopoly. Orders from Ohio state authorities are forwarded directly to the offices in New York, and are subject to acceptance or rejection there. When the New York office accepts an order from any source, it sends shipping orders to various plants, none of which makes any shipments except upon such orders. Only in New York can any credits be approved, and all books, records, and evidences of accounts receivable are kept there. Collections are managed from New York, which is the place of payment of all receivables. During the tax year in question, the Corporation solicited and took orders through agents in states other than Ohio

Page 565

for a large quantity of liquor shipped from its plants and warehouses in Ohio to customers elsewhere.

It is stipulated that appellants each paid all franchise or other taxes required by Ohio for admission to do business in the State, and paid all taxes assessed upon real and personal property located in said State.

The Wheeling Company also paid to the West Virginia, for the year in question, ad valorem taxes on all of its receivables, including those sought to be taxed by Ohio, pursuant to this Court's decision in Wheeling Steel Corp. v. Fox, 298 U.S. 193. Neither Virginia nor New York has sought to tax the accounts receivable of National Distillers involved herein.

The Ohio Tax Commissioner, applying §§ 5328-1 and 5328-2 of the General Code of Ohio,1 assessed for taxation

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in Ohio a [69 S.Ct. 1294] large amount of notes and accounts receivable which each appellant derived from shipments originating at Ohio manufacturing plants. The specific ground stated for assessment was that such receivables "result from the sale of property from a stock of goods maintained within this State."

The Board of Tax Appeals affirmed both assessments, and, in the Distiller's case, set forth the above mentioned statutes and pointed out wherein its own views and practices as to their application to accounts receivable had been modified by decisions of the Ohio Supreme Court, whose interpretations, for our purposes, become a part of the statutes. The Board said:

Page 567

. . . On a consideration of the statutory provisions above noted, the Board of Tax Appeals was of the view that, before a business situs of accounts receivable and other intangible property, for purposes of taxation, could be given to a state other than the state of the domicile of the taxpayer, it must appear that such receivables or other intangible property not only arose in the conduct of the business of the taxpayer in such other state, but were therein so used as to become an integral part of the business carried on in such other state, and that it was not sufficient that such accounts receivable and other intangible property be used in business generally by the taxpayer. And, on this view, the Board held that the accounts receivable there in question, although they arose in the conduct of taxpayer's business in the States of Indiana and Michigan, did not have a business situs in such states, and that such accounts receivable were taxable in Ohio.

On the appeal of the decision of the Board of Tax Appeals in the Ransom & Randolph Co. case to the Supreme Court of Ohio, that Court reversed the decision [69 S.Ct. 1295] of the Board of Tax Appeals upon the point above indicated. 142 Ohio St. 398, 404, 52 N.E.2d 738. That Court, upon consideration of the applicable provisions of section 5328-2 and related sections of the General Code above noted, held that the accounts receivable of a taxpayer which arose in the conduct of its business in a state or states other than the state in which it had its domicile or place of residence, had a business situs in such other state or states if such accounts receivable or the avails thereof are being applied or are intended to be applied in the conduct of the taxpayer's business, whether, in this State or elsewhere. This view of the Supreme

Page 568

Court as to the construction to be placed upon the statutory provisions here in question was later followed by that Court in its decisions in the cases of the Haverfield Company v. Evatt, Tax Comm'n, 143 Ohio St. 58, 54 N.E.2d 149, and National Cash Register Company v. Evatt, Tax Comm'n, 145 Ohio St. 597, 62 N.E.2d 327.

. . . In this situation, and applying the statutory provisions here in question as the same have been construed by the Supreme Court of this State, it follows that, since the accounts receivable of the appellant corporation involved in this case arose -- as this Board hereby find -- in the conduct of its business in the Ohio by the sale of its products from a stock of goods located in this State, and since, further, such accounts receivable or the avails thereof were used or were intended to be used by the appellant in its business, whether in this State or elsewhere, such accounts receivable have a business and taxable situs in the Ohio, as found and determined by the tax commissioner.

With respect to a question such as that here presented, to-wit, that as to the taxation of the accounts receivable of a foreign corporation arising in the conduct of its business in this State, the application of the above noted provisions of sections 5328-1, 5328-2 and other...

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