Galveston, Harrisburg San Antonio Railway Company v. State of Texas

• Decision Date: 18 May 1908
• Docket Number: No. 207,207
• Citation: 52 L.Ed. 1031,28 S.Ct. 638,210 U.S. 217
• Parties: GALVESTON, HARRISBURG, & SAN ANTONIO RAILWAY COMPANY et al., Plffs. in Err., v. STATE OF TEXAS
• Court: U.S. Supreme Court

210 U.S. 217

28 S.Ct. 638

52 L.Ed. 1031

GALVESTON, HARRISBURG, & SAN ANTONIO RAILWAY COMPANY et al., Plffs. in Err.,

v STATE OF TEXAS.

No. 207.

Argued April 21, 22, 1908.

Decided May 18, 1908.

Messrs. Hiram M. Garwood, Maxwell Evarts, Robert S. Lovett, and Messrs. Baker, Botts, Parker, & Garwood for plaintiffs in error.

[Argument of Counsel from Pages 218-220 intentionally omitted] Messrs. William Edward Hawkins and Robert Vance Davidson for defendant in error.

[Argument of Counsel from pages 220-223 intentionally omitted] Mr. Justice Holmes delivered the opinion of the court:

This is an action against certain railroads to recover taxes and penalties. The supreme court of the state held the penal- ties to be void under the state Constitution, but upheld the tax. 97 S. W. 71. The railroads bring the case here mainly on the ground that the law upon which the action is based is an attempt to regulate commerce among the states.

The act in question is entitled, 'An Act Imposing a Tax upon Railroad Corporations . . . and Other Persons . . . Owning . . . or Controlling Any Line of Railroad in This State . . . Equal to 1 Per Cent of Their Gross Receipts, . . . and Repealing the Existing Tax on the Gross Passenger Earnings of Railroads.' It proceeds in § 1 to impose upon such railroads 'an annual tax for the year 1905, and for each calendar year thereafter, equal to 1 per centum of its gross receipts, if such line of railroad lies wholly within the state.' In § 2 a report, under oath, of 'the gross receipts of such line of railroad, from every source whatever, for the year ending on the 30th day of June last preceding,' and immediate payment of the tax, 'calculated on the gross receipts so reported,' are required. The comptroller is given power to call for other reports, and is to 'estimate such tax on the true gross receipts thereby disclosed,' etc. The lines of the railroads concerned are wholly within the state, but they connect with other lines, and a part, in some instances much the larger part, of their gross receipts is derived from the carriage of passengers and freight coming from, or destined to, points without the state. In view of this portion of their business, the railroads contend that the case is governed by Philadelphia & S. Mail S. S. Co. v. Pennsylvania, 122 U. S. 326, 30 L. ed. 1200, 1 Inters. Com. Rep. 308, 7 Sup. Ct. Rep. 1118. The counsel for the state rely upon Maine v. Grand Trunk R. Co. 142 U. S. 217, 35 L. ed. 994, 3 Inters. Com. Rep. 807, 12 Sup. Ct. Rep. 121, 163, and maintain, if necessary, that the later overrules the earlier case.

In Philadelphia & S. Mail S. S. Co. v. Pennsylvania, supra, it was decided that a tax upon the gross receipts of a steamship corporation of the state, when such receipts were derived from commerce between the states and with foreign countries, was unconstitutional. We regard this decision as unshaken and as stating established law. It cites the earlier cases to the same effect. Later ones are Ratterman v. Western U. Teleg. Co. 127 U. S. 411, 32 L. ed. 229, 2 Inters. Com. Rep. 59, 8 Sup. Ct. Rep. 1127; Western U. Teleg. Co. v. Pennsylvania, 128 U. S. 39, 32 L. ed. 345, 2 Inters. Com. Rep. 241, 9 Sup. Ct. Rep. 6; Western U. Teleg. Co. v. Alabama Bd. of Assessment (Western U. Teleg. Co. v. Seay), 132 U. S. 472, 33 L. ed. 409, 2 Inters. Com. Rep. 726, 10 Sup. Ct. Rep. 161. See also Pullman's Palace Car Co. v. Pennsylvania, 141 U. S. 18, 25, 35 L. ed. 613, 617, 3 Inters. Com. Rep. 595, 11 Sup. Ct. Rep. 876; Ficklen v. Taxing District, 145 U. S. 1, 22, 36 L. ed. 601, 606, 4 Inters. Com. Rep. 79, 12 Sup. Ct. Rep. 810; New York, L. E. & W. R. Co. v. Pennsylvania, 158 U. S. 431, 438, 39 L. ed. 1043, 1045, 15 Sup. Ct. Rep. 896; McHenry v. Alford, 168 U. S. 651, 670, 671, 42 L. ed. 614, 621, 18 Sup. Ct. Rep. 242; Atlantic & P. Teleg. Co. v. Philadelphia, 190 U. S. 160, 162, 47 L. ed. 995, 999, 23 Sup. Ct. Rep. 817. In Maine v. Grand Trunk R. Co. supra, the authority of the Philadelphia Steamship Company Case was accepted without question, and the decision was justified by the majority as not in any way qualifying or impairing it. The validity of the distinction was what divided the court.

It being once admitted, as of course it must be, that not every law that affects commerce among the states is a regulation of it in a constitutional sense, nice distinctions are to be expected. Regulation and commerce among the states both are practical rather than technical conceptions, and, naturally, their limits must be fixed by practical lines. As the property of companies engaged in such commerce may be taxed (Pullman's Palace Car Co. v. Pennsylvania, 141 U. S. 18, 35 L. ed. 613, 3 Inters. Com. Rep. 595, 11 Sup. Ct. Rep. 876), and may be taxed at its value as it is, in its organic relations, and not merely as a congeries of unrelated items, taxes on such property have been sustained that took account of the augmentation of value from the commerce in which it was engaged. Adams Exp. Co. v. Ohio State Auditor, 165 U. S. 194, 41 L. ed. 683, 17 Sup. Ct. Rep. 305; Adams Exp. Co. v. Kentucky, 166 U. S. 171, 41 L. ed. 960, 17 Sup. Ct. Rep. 527; Fargo v. Hart, 193 U. S. 490, 499, 48 L. ed. 761, 765, 24 Sup. Ct. Rep. 498. So it has been held that a tax on the property and business of a railroad operated within the state might be estimated prima facie by gross income, computed by adding to the income derived from business within the state the proportion of interstate business equal to the proportion between the road over which the business was carried within the state to the total length of the road over which it was carried. Wisconsin & M. R. Co. v. Powers, 191 U. S. 379, 48 L. ed. 229, 24 Sup. Ct. Rep. 107.

Since the commercial value of property consists in the expectation of income from it, and since taxes ultimately, at least, in the long run, come out of imcome, obviously taxes called taxes on property, and those called taxes on income or receipts, tend to run into each other somewhat as fair value and anticipated profits run into each other in the law of damages. The difficulty of distinguishing them became greater when it was decided, not without much debate and difference of opinion, that interstate carriers' property might be taxed as a going concern. In Wisconsin & M. R. Co. v. Powers, supra, the measure of property by income purported only to be prima facie valid. But the extreme case came earlier. In Maine v. Grand Trunk R. Co. supra, 'an annual excise tax for the privilege of exercising its franchise' was levied upon everyone operating a railroad in the state, fixed by percentages, varying up to a certain limit, upon the average gross receipts per mile multiplied by the number of miles within the state, when the road extended outside. This seems at first sight like a reaction from the Philadelphia & Southern Mail Steamship Company Case. But it may not have been. The estimated gross receipts per mile may be said to have been made a measure of the value of the property per mile. That the effort of the state was to reach that value, and not to fasten on the receipts from transportation as such, was shown by the fact that the scheme of the statute was to establish a system. The buildings of the railroad and its lands and fixtures outside of its right of way were to be taxed locally, as other property was taxed, and this excise with the local tax were to be in lieu of all taxes. The language shows that the local tax was not expected to include the additional value gained by the property being part of a going concern. That idea came in later. The excise was an attempt to reach that additional value. The two taxes together fairly may be called a commutation tax. See Ficklen v. Taxing District, 145 U. S. 1, 23, 36 L. ed. 601, 607, 4 Inters. Com. Rep. 79, 12 Sup. Ct. Rep. 810; Postal Teleg. Cable Co. v. Adams, 155 U. S. 688, 697, 39 L. ed. 311, 316, 5 Inters. Com. Rep. 1, 15 Sup. Ct. Rep. 268, 360; McHenry v. Alford, 168 U. S. 651, 670, 671, 42 L. ed. 614, 621, 18 Sup. Ct. Rep. 242.

'By whatever name the exaction may be called, if it amounts to no more than the ordinary tax upon property or a just equivalent therefor, ascertained by reference thereto, it is not open to attack as inconsistent with the Constitution.' Postal Teleg. Cable Co. v. Adams, supra. See New York, L. E. & W. R. Co. v. Pennsylvania, 158 U. S. 431, 438, 439, 39 L. ed. 1043, 1045, 1046, 15 Sup. Ct. Rep. 896. The question is whether this is such a tax. It appears sufficiently, perhaps from what...