Canton Co v. Rogan

• Citation: 340 U.S. 511,71 S.Ct. 447,95 L.Ed. 488,20 A.L.R.2d 145
• Decision Date: 26 February 1951
• Docket Number: No. 96,96
• Parties: CANTON R. CO. v. ROGAN et al
• Court: United States Supreme Court

340 U.S. 511

71 S.Ct. 447

95 L.Ed. 488

CANTON R. CO.

v ROGAN et al.

No. 96.

Argued Nov. 28, 29, 1950.

Decided Feb. 26, 1951.

Mr. J. Henry Lewin, Baltimore, Md., for Canton R. Co.

Messrs. Hall Hammond and Harrison L. Winter, Baltimore, Md., for appellees.

Mr. Justice DOUGLAS delivered the opinion of the Court.

The State of Maryland imposes on steam railroad companies a franchise tax, measured by gross receipts, apportioned to the length of their lines within the State.¹ Appellant Canton Railroad Company, a Maryland corporation, challenges the validity of the tax under the Import-Export Clause of the Constitution, Art. I, § 10, cl. 2, insofar as the gross income by which the taxes measured includes revenues derived from the handling of goods moving inforeign trade.

Canton is a common carrier of freight operating entirely within the City of Baltimore, Maryland. It maintains a marine terminal in the port of Baltimore and railroad lines connecting this terminal with the lines of major trunk-line railroads. Its operating revenues are derived from services which fall into the following classifications:

Switching freight cars from the piers to the lines of connecting railroads.

Storage pending forwarding, for which a charge is made for each day beyond a free period.

Wharfage, or the privilege of using Canton's piers for the transfer of cargo to lighters or to trucks.

Weighing of loaded freight cars.

Furnishing a crane for use in unloading vessels. This crane is operated by a stevedoring company, which pays Canton a set charge per ton for the 'crane privilege.'

A substantial proportion of the freight moved to and from the port consists of exports from and imports into the United States. In its report to the State Tax Commission for 1946, Canton showed gross receipts from its railroad business in Maryland of $1,588,744.48, of which it claimed $705,957.21 to be exempt from taxation because derived from operations in foreign commerce. After a hearing, the Commission rejected Canton's contention that a part of its gross receipts was constitutionally exempt from the tax, assessed its gross receipts at the higher figure, and imposed a tax of.$39,092.34. TheCommission's order was affirmed both by the Baltimore Circuit Court and by the Court of Appeals of Maryland, two judges dissenting. Western Maryland Ry. Co. v. State Tax Commission, Md., 73 A.2d 12.

The case is here on appeal.

The Constitution commands in Art. I, § 10, cl. 2 that '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 * * *.' The Maryland court held that the tax does not violate this provision of the Constitution; and we agree.

If this were a tax on the articles of import and export, we would have the kind of problem presented in Spalding & Bros. v. Edwards, 262 U.S. 66, 43 S.Ct. 485, 67 L.Ed. 865; Richfield Oil Corp. v. State Board, 329 U.S. 69, 67 S.Ct. 156, 91 L.Ed. 80; Hooven & Allison Co. v. Evatt, 324 U.S. 652, 65 S.Ct. 870, 89 L.Ed. 1252; and Joy Oil Co. v. State Tax Comm., 337 U.S. 286, 69 S.Ct. 1075, 93 L.Ed. 1366. But the present tax is not on the articles of import and export; nor is it the equivalent of a direct tax on the articles, as was held to be true of stamp taxes on foreign bills of lading, Fairbank v. United States 181 U.S. 283, 21 S.Ct. 648, 45 L.Ed. 862, stamp taxes on charter parties in foreign commerce, United States v. Hvoslef, 237 U.S. 1, 35 S.Ct. 459, 59 L.Ed. 813; and stamp taxes on policies insuring exports against maritime risks. Thames & Mersey Marine Ins. Co. v. United States, 237 U.S. 19, 35 S.Ct. 496, 59 L.Ed. 821. It is true that the latter cases indicate that the prohibition of the Import-Export Clause against taxes on imports and exports involves more than an exemption from taxes laid upon the goods themselves. Moreover, Crew Levick Co. v. Com. of Pennsylvania, 245 U.S. 292, 38 S.Ct. 126, 62 L.Ed. 295, following the reasoning of Brown v. Maryland, 12 Wheat. 419, 444—445, 6 L.Ed. 678, gave like immunity to the business of selling goods in foreign commerce when gross receipts were taxes. Cf. Anglo-Chilean Nitrate Sales Corp. v. Alabama, 288 U.S. 218, 53 S.Ct. 373, 77 L.Ed. 710. Though appellant is not engaged in the import-export business, it claims that its handling of goods, which are destined for export or which arrive as imports, is part of the process of exportation and importation. In support of the argument it refers to language in Spalding & Bros. v. Edwards, supra, and Richfield Oil Corp. v. State Board, supra, relative to when the export process starts; and it argues that, if the baseballs and the baseball bats in Spalding² and the oil in Richfield were immune from the sales taxes because those commodities had been committed to exportation, the same immunity should be allowd here since the goods handled by appellant were similarly committed The difference is that in the present case the tax is not on the goods, but on the handling of them at the port. An article may be an export and immune from a tax long before or long after it reaches the port. But when the tax is on activities connected with the export or import the range of immunity cannot be so wide.

To export means to carry or send abroad; to import means to bring into the country. Those acts begin and end at water's edge. The broader definition which appellant tenders distorts the ordinary meaning of the terms. It would lead back to every forest, mine, and factory in the land and create a zone of tax immunity never before imagined. For if the handling of the goods at the port were part of the export process, so would hauling them to or from distant points or perhaps mining them or manufacturing them. The phase of the process would make no difference so long as the goods were in fact committed to export or had arrived as imports.

Appellant claims that loading and unloading are a part of its activities. But close examination of the record indicates that it merely rents a crane for loading and unloading and does not itself do the stevedoring work. Hence we need not decide whether loading for export and unloading for import are immune from tax by reason of the Import-Export Clause. Cf. Joseph v. Carter & Weekes Stevedoring Co., 330 U.S. 422, 67 S.Ct. 815, 91 L.Ed. 993.

We do conclude, however, that any activity more remote than that does not commence the movement of the commodities abroad nor end their arrival and therefore is not a part of the export or import process.

The objection to Maryland's tax on the ground that interstate commerce is involved is not well taken. It is settled that a nondiscriminatory gross receipts tax on an interstate enterprise may be sustained if fairly apportioned to the business done within the taxing state, see Western Live Stock v. Bureau of Revenue, 303 U.S. 250, 255, 58 S.Ct. 546, 548, 82 L.Ed. 823, and not reaching any activities carried on beyond the borders of the state. Where transportation is con- cerned, an apportionment according to the mileage within the state³ is an approved method. Central Greyhound Lines of New York v. Mealey, 334 U.S. 653, 663, 68 S.Ct. 1260, 1266, 92 L.Ed. 1633.

Affirmed.

The CHIEF JUSTICE took no part in the consideration or decision of this case.

For opinion of Mr. Justice Jackson see 340 U.S. 511, 71 S.Ct. 451.

By Mr. Justice JACKSON, reserving judgment.

In this case, I reserve judgment in the belief that today's decision of the Court may be found, upon consideration of matters not briefed or argued, to be untenable.

One of the fundamental federal policies, established by the Constitution itself, is that 'No Preference shall be given by any Regulation of Commerce or Revenue to the Ports of one State over those of another * * *.' Art. I, § 9, cl. 6. This policy is further implemented by a requirement that federal duties, imposts and excises, be uniform, Art. I, § 8, cl. 1, and by a prohibition of any federal tax or duty on articles exported from a state, Art. I, § 9, cl. 5. But this policy of equality of access to the high seas can also be upset by the states. Hence the Constitution forbids any state, without the consent of Congress, to lay any imposts or duties on imports or exports, except to pay the cost of inspection laws. Art. I, § 10, cl. 2.

This detailed constitutional concern about exports and imports is a manifestation of a realistic recognition that a state or city with a safe harbor sits at a gateway with not only an inevitable natural advantage, but also a strategic one which may be exploited if not restrained. Political influence of wealthy and populous port areas was feared in the making of federal law, hence the restrictions on Congress. The disposition of cities and states to exploit their location astride the Nation's portals also was feared, hence the restriction on the states.

If the roads to the ports may be obstructed with local regulation and taxes, inland producers...