Commonwealth v. Standard Oil Co.
| Decision Date | 22 January 1883 |
| Citation | 101 Pa. 119 |
| Parties | Commonwealth <I>versus</I> Standard Oil Company. Standard Oil Company <I>versus</I> Commonwealth. |
| Court | Pennsylvania Supreme Court |
Before SHARSWOOD, C. J., MERCUR, GORDON, PAXSON, TRUNKEY, STERRETT and GREEN, JJ.
ERROR to the Court of Common Pleas of Dauphin county: Of May Term 1882, Nos. 73 and 77.
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Lyman D. Gilbert and Robert Snodgrass, deputy attorney-general, and Henry W. Palmer, attorney-general, for the Commonwealth. —The intent is to tax all the capital stock. The acts, in plain words, tax every corporation upon its capital stock; not a part thereof; it is not permitted to interpret what needs no interpretation: Potter's Dwarris on Stat. 143; Daggett v. Everett, 19 Me. 373; U. S. v. Fisher, 2 Cranch 358, 399. But even if we go out of the act for the intention, it is clear. The Act of 1868 was passed to remedy the discrimination against domestic corporations caused by the omission of foreign corporations from the tax Act of April 12th 1859, and to put both classes on the same plane; the acts subsequent to 1868 continue its policy; therefore, as since the Act of 1859 to the present time domestic corporations have paid tax on all their capital stock irrespective of the situs of their property, so it is intended that foreign corporations shall. The cases cited by the court below on this point only decide the state can pro rate the tax according to the situs of the property if she chooses; with one exception they were cases of railroads, and the policy has been to consider them substantially a separate corporation in each state through which they run, and to pro rate the tax according to the mileage in each state; in none of these cases was the right, under the acts, to tax all the capital stock raised or decided; the one exception is the Trenton Bridge Company's Case (C. P.), 9 Am. L. R. (O. S.) 298; and there the tax was arbitrarily imposed on half the stock, irrespective of the value of the property in Pennsylvania. The state cannot be estopped by her officers' action: Del. Div. Canal Co. v. Com., 14 Wr. 399.
The tax is on the corporation for the privilege of doing business in Pennsylvania. The tax on capital stock is distinct from a tax on property in which such stock is invested: 1 Redfield on Railways 117; Pierce on Railways 474; Burroughs on Taxation, § 83, pp. 164, 166; Gordon v. App. Tax Court, 3 How. 143, &c. People v. Commissioners, 4 Wall. 244; Cooley on Taxation 273, 393. This tax is a franchise tax, as defined by the court below; for when certain dividends are declared (as was the case here), it is measured by those dividends irrespective of the value of the capital stock or of the property. But the case of Delaware Railroad Tax, 18 Wall. 206, is conclusive; the words were, "Shall pay one-fourth of one per cent. upon the actual cash value of every share of its capital stock" (which is equivalent to its capital stock); that tax was held to be on the corporation, and not on its property. The line of cases relied on in the court below, from School Directors v. Bank, 8 Watts 289, down to Gas Co. v. Chester Co., 1 Out. 476, are ruled on the principle that "the public works of a corporation, used as such, with their necessary appurtenances, are exempt from taxation as real estate." There may be dicta in these and other cases, but that this is a property tax has never been heretofore the point in issue or decided.
The power to impose this tax rests upon Pennsylvania's power to prescribe the conditions of this corporation's entry into Pennsylvania; this power is undoubted: Bank of Augusta v. Earle, 13 Peters 519; Paul v. Virginia, 8 Wallace 168; Ducat v. Chicago, 10 Id. 410; Doyle v. Ins. Co., 4 Otto 535; Cooley on Taxation 44; and upon the proposition that a foreign corporation entering the state brings all its capital stock with it. The place where the capital stock is to exist is a matter for the sovereign's decision: Field on Corporations § 516; Tappan v. Bank, 19 Wallace 499, 502; Cooley on Taxation 44; this corporation is here by permission implied in these taxing statutes, and they impliedly require all the capital stock to be here for taxation: Pierce on Railroads 22; Railroad Co. v. Whitton, 13 Wallace 284. As to Pennsylvania, this corporation is both foreign and domestic: McGregor v. Erie Railway Co., 35 N. J. L. 115; Green's Brice's Ultra Vires 641, n; it came here as an entity; jurisdiction of it is jurisdiction of its stock; it cannot change its chartered amount of stock at the state line.
The Supreme Court of the United States recognized a state's right to impose a tax upon a corporation within its jurisdiction greater than if measured by the corporate property within its limits; Minot v. Railroad, 18 Wallace 229, 231; Erie Railway Co. v. Pennsylvania, 21 Wall. 492; Kirtland v. Hotchkiss, 10 Otto 491. So has the Supreme Court of Pennsylvania: Commonwealth v. Gloucester Ferry Co., 10 W. N. C. 509, and see Ins. Co. of N. A. v. Com., 6 Norris 173.
Purchasing oil is doing business in this Commonwealth within the meaning of these tax acts. The court below denied this corporation's tax liability by reason of its purchases of oil, or upon its capital so employed. This corporation is created "to manufacture petroleum, and deal in petroleum and its products;" it was domiciled here, and doing business here, and is in a different category from a foreigner who merely buys supplies here; in purchasing oil it was exercising its powers for the purposes of its creation, and was therefore and thereby "lawfully doing business in this Commonwealth;" that an individual can buy oil without a franchise does not defeat the right to tax the exercise of such a grant by a corporation: Kittanning Coal Co. v. Commonwealth, 29 P. F. S. 100.
This tax is not an interference with inter-state commerce. That it may affect the price of articles of commerce is nothing: Nathan v. Louisiana, 8 How. 73. We can tax inter-state railroads: State Tax on Gross Receipts, 15 Wall. 284; Erie Railway Co. v. Pennsylvania, 21 Id. 492; Delaware Railroad Tax, 18 Id. 206; Railroad v. Commonwealth, 16 P. F. S. 73; the tax upon gross receipts was held to be "a tax upon the railroad company measured in amount by the extent of its business or the degree to which its franchise is exercised:" State Tax on Gross Receipts, supra. This is not an effort to tax purchases of oil, but the capital stock of companies lawfully doing business in this Commonwealth.
Ownership of shares in Pennsylvania limited partnerships and corporations subject this corporation to this tax. There is no difference between owning shares of a limited and of an ordinary partnership which are confessedly taxable. As to shares in corporations; supposing they are taxable at the domicile this corporation has acquired a business and taxation domicile here: Commonwealth v. Gloucester Ferry Co., 10 Weekly Notes 509. The principle approved in that case will cure all the errors assigned by us.
As to the method followed in pro-rating by the court below. If this tax is to be pro-rated, it should, in conformity with the decisions cited, be pro-rated according to the proportion that the capital invested in the state bears to its nominal capital, not its entire assets and property.
As to penalties for failure to report, and the interest charged. The penalty of ten per cent. for failure to report was imposed by each of the Acts of 1868, 1874, 1877, and 1879, and interest at 12 per cent. for taxes due is authorized by the same acts irrespective of any notice to the company of the amount due; the proviso to § 13, Act June 7th 1879, P. L. 119, of notice by the auditor-general to the company of the amount due only prevents the running of interest upon the settlement made, which otherwise bore interest from 60 days thereafter.
M. E. Olmsted, D. T. Watson, S. C. T. Dodd, Lewis C. Casidy, John J. Pearson and Rufus P. Ranney, for the Standard Oil Company.—We deny the intent as well as the power to tax our entire stock. We deny that the tax is imposed as a condition of our doing business in Pennsylvania. We deny that we brought all our capital stock into Pennsylvania.
The tax is not imposed as a condition upon which our right to do business depends. With certain limitations, we admit the right to impose such conditions, but deny the intent. If interstate comity is to be infringed, it must be by positive and express words: Cowell v. Springs Co., 10 Otto 55; Christian Union v. Yount, 11 Otto 352; Ins. Co. v. Morse, 20 Wall. 445; Story on Conflict of Laws, § 38; Merrick v. Van Santvoord, 34 N. Y. 208; Erie Railroad Co. v. State, 31 N. J. L. 543. A tax imposed as a condition of doing business is a license or franchise tax (this species of franchise tax differs from a tax on the franchise as property; the latter sort of tax is included in a tax upon capital stock at its true value: State Railroad Tax Cases, 2 Otto 603); the distinction between a tax as a condition and as a consequence of doing business is apparent; to be a license tax, it must confer a privilege to do what would otherwise be illegal: Cooley on Taxation 407; Burroughs on Taxation, § 48; Attorney-General v. Bay State Mining Co., 99 Mass. 152; Mayor v. Charlton, 36 Ga. 462; Home Ins. Co. v. Augusta, 50 Ga. 537; Chilvers v. The People, 11 Mich. 49; Erie Railroad Co. v. The State, 31 N. J. L. 543; but we can do business in Pennsylvania by comity; the acts do not tax us until we are "lawfully doing business in this Commonwealth." As a consequence of our by comity...
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