Felt Tarrant Mfg Co v. Gallagher

• Citation: 306 U.S. 62,59 S.Ct. 376,83 L.Ed. 488
• Decision Date: 30 January 1939
• Docket Number: No. 302,302
• Parties: FELT & TARRANT MFG. CO. v. GALLAGHER et al
• Court: United States Supreme Court

306 U.S. 62

59 S.Ct. 376

83 L.Ed. 488

FELT & TARRANT MFG. CO.

v GALLAGHER et al.

No. 302.

Argued Dec. 13, 1938.

Decided Jan. 30, 1939.

Appeal from the District Court of the United States for the Southern District of California.

Messrs. A. Calder MacKay and Thomas R. Dempsey, both of Los Angeles, Cal., for appellant.

Mr. James J. Arditto, of San Francisco, Cal., for appellees.

[Argument of Counsel from page 63 intentionally omitted] Mr. Justice McREYNOLDS delivered the opinion of the Court.

Appellant seeks an injunction prohibiting the state officers from enforcing against it the California Use Tax Act of 1935. Cal.Stat.1935, Ch. 361, p. 1297, as amended by Cal.Stat.1937, Chs. 401, 671 and 683, pp. 1327, 1874, 1936. Counsel do not question the right of the state to collect this tax from the user, etc., but they say that, in the circumstances here disclosed, the officers may not compel appellant to serve as an agent for collecting the tax as they are threatening to do.

The trial court, three judges, dismissed the bill upon motion.

It appears—

Appellant, an Illinois corporation, is engaged in manufacturing and selling comptometers in that state and delivering these to purchasers in various parts of the Union. As stated by the court below its method of doing business with respect to California purchasers is substantially as follows:

'Pursuant to a separate contract made with each, the exclusive right to solicit orders in California is granted to two general agents, each of whom is allotted a separate section of the State. Under this contract the only compensation paid to a general agent consists of commissions on sales made. Each general agent may employ sub-agents and also a demonstrator for the purpose of demonstrating and instructing respecting the comptometers, provided such employment is approved by plaintiff. Likewise, plaintiff agrees by this contract to pay the rent of an office for each general agent, provided the lease to the same has been approved by it, such of- fice to be used exclusively in furthering its business; also agrees to pay part of the traveling expenses incurred by each general agent, his sub-agents and demonstrators while traveling on business trips authorized by plaintiff, and also to reimburse each general agent to the extent of part of the monies advanced to a subagent and, in addition, in the amount of $40.00 per month toward the salary of a demonstrator. Plaintiff assumes no other financial obligation with respect to subagents and demonstrators. Under this contract the general agent must devote his entire time and attention to soliciting orders for plaintiff. All orders taken must be submitted to and approved by plaintiff, all sales and deliveries must be made by, and all bills for such orders as are accepted must be rendered by, the plaintiff. The general agent is prohibited from making collections and all payments must be made directly to plaintiff. The contract further requires the general agent to maintain certain records, and make certain reports and make a specified minimum number of calls on prospective customers.'

And further 'That each of these two general agents maintains an office in this State, the lease to such office designating the plaintiff as lessee therein, the rent for the same being paid by plaintiff, while all other expenses of maintaining such office are paid by the general agent. As soon as an order is accepted a particular machine is appropriated for that purpose in plaintiff's shipping department in Illinois. All machines sold for delivery in California are shipped from one of plaintiff's distributing points outside of the State. Sometimes machines are forwarded directly to the purchasers, while in other instances, in order to secure reduced freight charges, large groups of machines are shipped to the general agent who makes delivery to the respective purchasers. The only machines kept by plaintiff in California are those used as demonstrators. Plaintiff has never qualified to do intrastate business in California.'

The Use Tax Act (sec. 6, St.Cal.1937, p. 1938) directs retailers maintaining a place of business in the state, and making sales of tangible personal property for storage, use or other consumption therein, to collect from the purchaser the tax imposed.

Appellant presents for our consideration two points: (1) The statute as construed and applied by the appellees to the appellant is...