Northern Pac. Ry. Co. v. Gifford

Decision Date22 November 1913
PartiesNORTHERN PACIFIC RAILWAY CO., Respondent, v. WILFRED L. GIFFORD, Secretary of State, Appellant
CourtIdaho Supreme Court

INTERSTATE COMMERCE-DOING BUSINESS IN THIS STATE-EXCISE OR LICENSE TAX-CONSTITUTIONALITY OF EXCISE TAX.

1. Under the constitution of this state, sec. 2, art. 7, the legislature is authorized to impose a license tax both upon natural persons and corporations, other than municipal "doing business in this state."

2. The words "doing business in this state" employed in the constitution do not apply to a foreign corporation doing only an interstate business, but only apply to local and intrastate business as the same may be distinguished from interstate business.

3. Where a statute would be unconstitutional as applied to a certain class of business and cases arising thereunder and is constitutional as applied to another class, and it is reasonably probable that the legislature had in mind applying it to the latter class, it should be held to have been intended by the legislature to apply only to the class to which it could constitutionally apply.

4. Under the provisions of sec. 2, art. 7, of the state constitution, authorizing the legislature to provide for such revenue as may be needful by levying a tax by valuation so that every person or corporation shall pay a tax in proportion to the value of his, her or its property, held that sec. 3, chap. 6, of the Session Laws of the extraordinary session of the legislature of 1912, laying a license tax upon domestic and foreign corporations doing business in this state, is an excise tax within the purview and meaning of the state constitution and was so intended by the state legislature, and that it is not a property tax which is laid or intended to be laid upon corporations engaged exclusively in interstate commerce and cannot apply thereto, but that it does apply to the local and intrastate business in which a corporation may be engaged, whether it is also engaged in interstate commerce or not so engaged.

5. Under the act of the legislature, the authorized capital stock of a corporation is only used as a basis of measuring the license or excise tax which is imposed upon the corporation and is not used for the purpose of a basis for taxing the property of the corporation, the purpose being to graduate the license tax proportionately to the size magnitude and probable activities of the corporation seeking to engage in domestic business.

6. A license or corporation tax imposed on a foreign corporation engaged in both interstate and intrastate business must be so imposed upon the domestic or intrastate business and have such direct reference to that as not to impose burdens upon or impair the right of the corporation to continue to carry on its interstate business and do all things necessary to be done in conducting such business.

APPEAL from the District Court of the Second Judicial District for Nez Perce County. Hon. E. C. Steele, Judge.

Action by plaintiff to recover from Wilfred L. Gifford, Secretary of State, a license tax paid under protest. Judgment for plaintiff. Defendant appealed. Reversed.

Reversed and remanded with direction. Costs in favor of appellant.

J. H. Peterson, Attorney General, J. J. Guheen, T. C. Coffin, Assistants, and Miles S. Johnson, County Attorney, for Appellant.

The state may impose such conditions as it deems proper upon permitting a foreign corporation to do business within its borders. (Horn Silver Min. Co. v. New York, 143 U.S. 305, 12 S.Ct. 403, 36 L.Ed. 164.)

It is not every burden affecting interstate commerce which is unconstitutional. (Galveston, H. & S. A. Ry. Co. v. Texas, 210 U.S. 217, 28 S.Ct. 638, 52 L.Ed. 1031.)

The controlling question in determining the validity of state statutes imposing taxes upon foreign corporations doing business within the state is whether the exactions are an excise or a property tax. (Society for Savings v. Coite, 73 U.S. (6 Wall.) 594, 18 L.Ed. 897; Hamilton Mfg. Co. v. Massachusetts, 73 U.S. (6 Wall.) 632, 18 L.Ed. 904; Provident Institute for Savings v. Massachusetts, 73 U.S. (6 Wall.) 611, 18 L.Ed. 907; Home Ins. Co. v. New York, 134 U.S. 594, 10 S.Ct. 593, 33 L.Ed. 1025; Maine v. Grand Trunk Ry., 142 U.S. 217, 12 S.Ct. 121, 35 L.Ed. 994; White Dental Mfg. Co. v. Commonwealth, 212 Mass. 35, Ann. Cas. 1913C, 805, 98 N.E. 1056.)

"Franchise" as used in the term "franchise tax" has a different meaning and refers to a different element than when used to describe property under the revenue ad valorem laws. (Louisville etc. Tel. Co. v. Hopkins, 121 Ky. 850, 90 S.W. 594; Home Ins. Co. v. New York, supra; Paul v. Virginia, 75 U.S. (8 Wall.) 168, 19 L.Ed. 357.)

The legislature has authority to impose license taxes. (Const., sec. 2, art. 7; State v. Doherty, 3 Idaho 384, 29 P. 855; State v. Union Central Life Ins. Co., 8 Idaho 240, 67 P. 647; In re Gale, 14 Idaho 761, 95 P. 679.)

It is essential to a decision in this case that the principles of the following two cases be reconciled: Maine v. Grand Trunk Ry., 142 U.S. 217, 12 S.Ct. 121, 35 L.Ed. 994; Western Union Tel. Co. v. Kansas, 216 U.S. 1, 30 S.Ct. 190, 54 L.Ed. 355.

As to foreign corporations seeking to do business within the state, the state is the master and may prohibit or tax such business at will. (Bank of Augusta v. Earle, 13 Pet. 539, 10 L.Ed. 284; Security Mutual Life Ins. Co. v. Prewitt, 202 U.S. 246, 26 S.Ct. 619, 50 L.Ed. 1013, 6 Ann. Cas. 317.)

A property tax must be proportional and reasonable. An excise tax need not be proportional but must be reasonable. (White Dental Co. v. Commonwealth, supra; Western Union Tel. Co. v. Kansas, 216 U.S. 1, 30 S.Ct. 190, 54 L.Ed. 355; Pullman Co. v. Kansas, 216 U.S. 56, 30 S.Ct. 232, 54 L.Ed. 378.)

J. E. Babb, for Respondent.

Respondent relies for affirmance upon the following authorities: Western Union Tel. Co. v. Kansas, 216 U.S. 1, 30 S.Ct. 190, 54 L.Ed. 355; Pullman Co. v. Kansas, 216 U.S. 56, 30 S.Ct. 232, 54 L.Ed. 378; Ludwig v. Western Union Tel. Co., 216 U.S. 146, 30 S.Ct. 280, 54 L.Ed. 423; Atchison, Topeka & Santa Fe R. Co. v. O'Conner, 223 U.S. 280, Ann. Cas. 1913C, 1050, 32 S.Ct. 216, 56 L.Ed. 436; H. K. Mulford Co. v. Curry, 163 Cal. 236, 125 P. 236; Chicago M. & S. P. Ry. Co. v. Swindlehurst (Mont.), 130 P. 966; Hirschfeld v. McCullagh, 64 Ore. 502, 127 P. 541, 130 P. 1131; White Dental Mfg. Co. v. Commonwealth, 212 Mass. 35, Ann. Cas. 1913C, 805, 98 N.E. 1056; King County v. Northern P. Ry. Co., 196 F. 323, 116 C. C. A. 143.

Where a foreign corporation is engaged in transacting both interstate and domestic commerce, an excise tax measured by its gross receipts is clearly unconstitutional unless a bona fide attempt is made either to apportion the tax between the domestic and interstate receipts or to confine the tax to local property and the receipts therefrom. (Ratterman v. Western Union Tel. Co., 127 U.S. 411, 8 S.Ct. 1127, 32 L.Ed. 229; Leloup v. Port of Mobile, 127 U.S. 640, 647, 8 S.Ct. 1380, 32 L.Ed. 311; Crutcher v. Kentucky, 141 U.S. 47, 11 S.Ct. 851, 35 L.Ed. 649; Gloucester Ferry Co. v. Pennsylvania, 114 U.S. 196, 5 S.Ct. 826, 29 L.Ed. 158; Galveston etc. Ry. Co. v. Texas, 210 U.S. 217, 28 S.Ct. 638, 52 L.Ed. 1031; Fargo v. Hart, 193 U.S. 490, 24 S.Ct. 498, 48 L.Ed. 761; Meyer v. Wells, Fargo & Co., 223 U.S. 298, 32 S.Ct. 218, 56 L.Ed. 445.)

The Kansas and Pullman cases very clearly held that the tax of the corporation on its corporate stock was a tax upon its property and all of it wheresoever situate, and its business and all of it, whether local or interstate. Mr. Justice Holmes, though dissenting in the first case, has clearly announced the same doctrine in subsequent cases where he has written the opinion of the court recognizing that there is no longer any controversy about this. The tax in question, therefore, being upon property in other states, violates the due process clause, and being upon interstate commerce, violates the interstate commerce clause of the constitution.

AILSHIE, C. J. Sullivan and Stewart, JJ., concur.

OPINION

AILSHIE, C. J.

This action was instituted by the Northern Pacific Railway Co. to recover from Wilfred L. Gifford a license fee paid by it for the year 1912 to Wilfred L. Gifford as Secretary of State.

The Clearwater Short Line Ry. Co. and the Northern Express Co. each paid a license fee for the year 1912 under the same circumstances as that paid by the respondent corporation, and their claims have been assigned to the respondent. The Northern Pacific Ry. Co. commenced its action, setting up the three causes of action for the recovery of these license fees which had been paid under protest. These fees were demanded under the provisions of sec. 3, chap. 6, of the Session Laws of the extraordinary session of the legislature of 1912 (Extraordinary Session 1912, p. 13). The statute reads as follows:

"It shall be the duty of every corporation incorporated under the laws of this state, and of every foreign corporation now doing business, or which shall hereafter engage in business in this state, except such as are exempt by the provisions of section 2 of this act to procure annually from the Secretary of State a license authorizing the transaction of such business in this state, and shall pay therefor a license tax as follows:

"When the authorized capital stock does not exceed $ 5,000.00, an annual license fee of $ 10.00; when the authorized capital stock exceeds $ 5,000.00 and does not exceed $ 10,000.00, $ 12.50; when the authorized capital stock exceeds $ 10,000.00 and does not exceed $ 25,000.00, $ 15.00; when the authorized capital stock exceeds $ 25,000.00 and does not exceed $ 50,000.00, $ 22.50; when the authorized capital stock exceeds $ 50,000.00, and...

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