Northwest Airlines v. State of Minnesota

• Decision Date: 15 May 1944
• Docket Number: No. 33,33
• Citation: 64 S.Ct. 950,88 L.Ed. 1283,322 U.S. 292,153 A.L.R. 245
• Parties: NORTHWEST AIRLINES, Inc., v. STATE OF MINNESOTA
• Court: U.S. Supreme Court

322 U.S. 292

64 S.Ct. 950

88 L.Ed. 1283

NORTHWEST AIRLINES, Inc.,

v STATE OF MINNESOTA.

No. 33.

Argued Oct. 19, 20, 1943.

Decided May 15, 1944.

Rehearing Denied Oct. 9, 1944.

See 65 S.Ct. 26.

Mr. Michael J. Doherty, of St. Paul, Minn., for petitioner.

Messrs. Andrew R. Bratter and George B. Sjoselius, both of St. Paul, Minn., for respondent.

Mr. Justice FRANKFURTER announced the conclusion and judgment of the Court.

The question before us is whether the Commerce Clause or the Due Process Clause of the Fourteenth Amendment bars the State of Minnesota from enforcing the personal property tax it has laid on the entire fleet of airplanes owned by the petitioner and operated by it in interstate transportation. The answer involves the application of settled legal principles to the precise circumstances of this case. To these, about which there is no dispute, we turn.

Northwest Airlines is a Minnesota corporation and its principal place of business is St. Paul. It is a commercial airline carrying persons, property and mail on regular fixed routes, with due allowance for weather, predominantly within the territory comprising Illinois, Minnesota, North Dakota, Montana, Oregon, Wisconsin and Washington. For all the planes St. Paul is the home port registered with the Civil Aeronautics Authority, under whose certificate of convenience and necessity Northwest operates. At six of its scheduled cities, Northwest operates maintenance bases, but the work of rebuilding and overhauling the planes is done in St. Paul. Details as to stopovers, other runs, the location of flying crew bases and of the usual facilities for aircraft, have no bearing on our problem.

The tax in controversy is for the year 1939. All of Northwest's planes were in Minnesota from time to time during that year. All were, however, continuously engaged in flying from State to State, except when laid up for repairs and overhauling for unidentified periods. On May 1, 1939, the time fixed by Minnesota for assessing personal property subject to its tax (Minn.Stat.1941, § 273.01), Northwest's scheduled route mileage in Minnesota was 14% of its total scheduled route mileage, and the scheduled plane mileage was 16% of that scheduled. It based its personal property tax return for 1939 on the number of planes in Minnesota on May 1, 1939. Thereupon the appropriate taxing authority of Minnesota assessed a tax against Northwest on the basis of the entire fleet coming into Minnesota. For that additional assessment this suit was brought. The Supreme Court of Minnesota, with three judges dissenting, affirmed the judgment of a lower court in favor of the State. 213 Minn 395, 7 N.W.2d 691. A new phase of an old problem led us to bring the case here. 319 U.S. 734, 63 S.Ct. 1157, 87 L.Ed. 1695.

The tax here assessed by Minnesota is a tax assessed upon 'all personal property of persons residing therein, including the property of corporations * * *.' Minn.Stat.1941, § 272.01. It is not a charge laid for engaging in interstate commerce or upon airlines specifically; it is not aimed by indirection against interstate commerce or measured by such commerce. Nor is the tax assessed against planes which were 'continuously without the state during the whole tax year,' New York Central & H.R.R. Co. v. Miller, 202 U.S. 584, 594, 26 S.Ct. 714, 716, 50 L.Ed. 1155, and had thereby acquired 'a permanent location elsewhere,' Southern Pacific Co. v. Kentucky, 222 U.S. 63, 68, 32 S.Ct. 13, 15, 56 L.Ed. 96; and see Cream of Wheat Co. v. Grand Forks County, 253 U.S. 325, 328—330, 40 S.Ct. 558, 559, 560, 64 L.Ed. 931.

Minnesota is here taxing a corporation for all its property within the State during the tax year no part of which receives permanent protection from any other State. The benefits given to Northwest by Minnesota and for which Minnesota taxes—its corporate facilities and the governmental resources which Northwest enjoys in the conduct of its business in Minnesota—are concretely symbolized by the fact that Northwest's principal place of business is in St. Paul and that St. Paul is the 'home port' of all its planes. The relation between Northwest and Minnesota—a relation existing between no other State and Northwest—and the benefits which this relation affords are the constitutional foundation for the taxing power which Minnesota has asserted. See State Tax Com. v. Aldrich, 316 U.S. 174, 180, 62 S.Ct. 1008, 1011, 86 L.Ed. 1358, 139 A.L.R. 1436. No other State can claim to tax as the State of the legal domicile as well as the home State of the fleet, as a business fact. No other State is the State which gave Northwest the power to be as well as the power to function as Northwest functions in Minnesota; no other State could impose a tax that derives from the significant legal relation of creator and creature and the practical consequences of that relation in this case. On the basis of rights which Minnesota alone originated and Minnesota continues to safeguard, she alone can tax the personalty which is permanently attributable to Minnesota and to no other State. It is too late to suggest that this taxing power of a State is less because the tax may be reflected in the cost of transportation. See In re Delaware Railroad Tax, 18 Wall. 206, 232, 21 L.Ed. 888.

Such being the case, it is clearly ruled by New York Central & H.R.R. Co. v. Miller, supra. Here, as in that case, a corporation is taxed for all its property within the State during the tax year none of which was 'continuously without the state during the whole tax year.' Therefore the doctrine of Union Refrigerator Transit Co. v. Kentucky, 199 U.S. 194, 26 S.Ct. 36, 50 L.Ed. 150, 4 Ann.Cas. 493, does not come into play. The fact that Northwest paid personal property taxes for the year 1939 upon 'some proportion of its full value' of its airplane fleet in some other States does not abridge the power of taxation of Minnesota as the home State of the fleet in the circumstances of the present case. The taxability of any part of this fleet by any other State than Minnesota, in view of the taxability of the entire fleet by that State, is not now before us. It was not shown in the Miller case and it is not shown here that a defined part of the domiciliary corpus has acquired a permanent location, i.e., a taxing situs, elsewhere.¹ That was the decisive feature of the Miller case, and it was deemed decisive as late as 1933 in Johnson Refining Oil Co. v. Oklahoma, 290 U.S. 158, 54 S.Ct. 152, 78 L.Ed. 238, which was strongly pressed upon us by Northwest. In that case it was not the home State, Illinois, but a foreign State, Oklahoma, which was seeking to tax a whole fleet of tank cars used by the oil company. That case fell outside of the decision of the Miller case and ours falls precisely within it. 'Appellant had its domicile in Illinois,' as Mr. Chief Justice Hughes pointed out, 'and that state had jurisdiction to tax appellant's personal property which had not acquired an actual situs elsewhere.' 290 U.S. at page 161, 54 S.Ct. at page 153, 78 L.Ed. 238.² This constitutional basis for what Minnesota did, reflects practicalities in the relations between the States and air transportation. 'It has been customary to tax operating airplanes at their overhaul base.' Thompson, State and Local Taxation Affecting Air Transportation (1933) 4 J.Air L. 479, 483.

The doctrine of tax apportionment for instrumentalities engaged in interstate commerce introduced by Pullman's Palace-Car Co. v. Pennsylvania, 141 U.S. 18, 11 S.Ct. 876, 35 L.Ed. 613, is here inapplicable. The principle of that case is that a nondomiciliary State may tax an interstate carrier 'engaged in running railroad cars into, through, and out of the state, and having at all times a large number of cars within the state * * * by taking as the basis of assessment such proportion of its capital stock as the number of miles of railroad over which its cars are run within the state bears to the whole number of miles in all the states over which its cars are run.' Union Refrigerator Transit Co. v. Kentucky, supra, 199 U.S. at page 206, 26 S.Ct. at page 38, 50 L.Ed. 150, 4 Ann.Cas. 493. This principle was successively extended to the old means of transportation and communication, such as express companies and telegraph systems. But the doctrine of apportionment has neither in theory nor in practice been applied to tax units of interstate commerce visiting for fractional periods of the taxing year. (Thus, for instance, 'The coaches of the company * * * are daily passing from one end of the state to the other', in Pullman's Palace-Car Co. v. Pennsylvania, supra, 141 U.S. at page 20, 11 S.Ct. at page 877, 35 L.Ed. 613, citing the opinion of the court below in 107 Pa. 156, 160.) The continuous protection by a State other than the domiciliary State—that is, protection throughout the tax year—has furnished the constitutional basis for tax apportionment in these interstate commerce situations, and it is on that basis that the tax laws have been framed and administered.

The taxing power of the domiciliary State has a very different basis. It has power to tax because it is the State of domicile and no other State is. For reasons within its own sphere of choice Congress at one time chartered interstate carriers and at other times has left the chartering and all that goes with it to the States. That is a practical fact of legislative choice and a practical fact from which legal significance has always followed. That far-reaching fact was recognized, as a matter of course, by Mr. Justice Bradley in his dissent in the Pullman's Palace-Car Co. case, supra, 141 U.S. at page 32, 11 S.Ct. at page 881, 35 L.Ed. 613. Congress of course could exert its controlling authority over commerce by appropriate regulation and exclude a domiciliary State from authority which it otherwise would have because it is the domiciliary State. But no judicial restriction has been applied against the domiciliary State...