Roy Stone Transfer Corp. v. Messner

• Decision Date: 24 March 1954
• Citation: 377 Pa. 234,103 A.2d 700
• Parties: ROY STONE TRANSFER CORP. v. MESSNER et al.
• Court: Pennsylvania Supreme Court

103 A.2d 700

377 Pa. 234

ROY STONE TRANSFER CORP. v. MESSNER et al.

Supreme Court of Pennsylvania.

March 24, 1954

Action by non-resident corporation engaged in transportation of property as common carrier exclusively in interstate commerce, against fiscal officers of Commonwealth, to restrain defendants from enforcing the Corporation Income Tax Law of 1951, a catch-all act which sought to impose a property tax upon income of all corporations derived from ownership of property located in commonwealth or from performance of activities carried on within commonwealth regardless of whether carried on in interstate or intrastate commerce. The Court of Common Pleas, Dauphin County, at No 2020 Equity Docket, Commonwealth Docket No. 64, 1952, William H. Neely, J., sustained demurrer and dismissed plaintiff's bill, and plaintiff appealed. The Supreme Court, Bell, J., held that the tax in question was invalid as violative of interstate commerce clause of Federal Constitution.

Decree reversed with a procedendo.

Frank A. Sinon, Rhoads, Sinon & Reader, Harrisburg for appellant.

Edward Friedman, Deputy Atty. Gen., Frank F. Truscott, Atty. Gen., for appellees.

J. Harry LaBrum, James M. Marsh, Philadelphia, Conlen, LaBrum & Beechwood, Philadelphia, of counsel, for Spector Motor Service, Inc.

H. Ober Hess, Robert R. Batt, William R. Spofford, Philadelphia, Ballard, Spahr, Andrews & Ingersoll, Philadelphia, of counsel, amici curiae.

Before STERN, C. J., and STEARNE, JONES, BELL, CHIDSEY, MUSMANNO and ARNOLD, JJ.

BELL Justice.

The plaintiff,^[1] a Virginia corporation, with its principal office located at Martinsville, Virginia, is engaged in the business of transporting property as a common carrier exclusively in interstate commerce. The defendants are the fiscal officers of the Commonwealth. Plaintiff engages in interstate transportation over irregular routes, pursuant to a certificate of public convenience issued by the Interstate Commerce Commission; and carries on no activities in this Commonwealth other than interstate commerce.

Plaintiff makes deliveries by truck of interstate shipments to points within Pennsylvania, and at times picks up property here for delivery outside of the Commonwealth. Plaintiff has no tangible or intangible property in Pennsylvania; no office or terminal is maintained in the Commonwealth; it pays no wages and has no payroll in Pennsylvania; and there are no employees of the plaintiff doing any kind of work in this State except those engaged in operating plaintiff's trucks. No contracts, orders or solicitations for the transportation of property of any kind are made or accepted within the Commonwealth and no payments for transportation or services rendered are received by the plaintiff in Pennsylvania.

Plaintiff filed a bill in equity to restrain the officers of the Commonwealth from enforcing the Corporation Income Tax Law of August 24, 1951, as reenacted and amended by the Act of December 27, 1951,^[2] because it violated several provisions of the Constitution of the United States and of the Constitution of Pennsylvania. Defendants filed an answer in the nature of a demurrer, admitting all the facts but denying that the Act was unconstitutional. The lower Court sustained the demurrer and dismissed plaintiff's bill.

The first and most important contention is that the Act violates the Interstate Commerce Clause, Article I, § 8, of the Constitution of the United States.

The Corporation Income Tax Law of 1951 is a ‘ catch-all’ Act and seeks to impose (what it calls) a property tax upon the income of all corporations derived from the ownership of property, tangible or intangible, located or having a situs in this Commonwealth, or the performance of activities carried on within the Commonwealth regardless of whether carried on in intrastate or interstate commerce. Section 3 of said Act, 72 P.S. § 3420n-3, provides: ‘ Every corporation carrying on activities in this Commonwealth ^[3] or owning property in this Commonwealth by or in the name of itself or any person, partnership, joint-stock association or corporation shall be subject to and shall pay a State property tax on net income derived from sources within this Commonwealth at the rate of five per centum per annum upon each dollar of such net income received by and accruing to such corporation * * *. Provided, however, That such net income shall not include income for any period for which the corporation is subject to taxation under the Corporate Net Income Tax Act, approved the sixteenth day of May, one thousand nine hundred thirty-five (Pamphlet Laws, two hundred eight), as reenacted and amended, according to or measured by net income.

‘ Except as otherwise provided in this section, the tax hereby imposed shall be in addition at all taxes now imposed on any corporation under the provisions of existing laws.’

Section 2 of the Act defines ‘ Sources within this Commonwealth’ as follows: " Sources within this Commonwealth' includes tangible or intangible property located or having a situs in this commonwealth, and any activities carried on in this Commonwealth, regardless of whether carried on in intrastate, interstate, or foreign commerce .'

Section 3 of the Corporate Net Income Tax Act of May 16, 1935, P.L. 208, as reenacted and amended, provides ‘ Every corporation shall be subject to, and shall pay for the privilege of doing business in this Commonwealth, or having capital or property employed or used in this Commonwealth, * * * a State excise tax at the rate of 6% per annum upon each dollar of net income of such corporation.’ 72 P.S. § 3420c.

The Corporate Net Income Tax Act of 1935 imposing a tax on the net income of a corporation based upon its tangible property in Pennsylvania and the wages paid to its employees in Pennsylvania, and that part of its gross receipts attributable to business carried on within Pennsylvania, was declared to be a property tax in spite of the declaration in the Act that it was an excise tax; and as such, its Constitutionality was sustained. Blauner's Inc. v. City of Philadelphia, 330 Pa. 342, 345, 198 A. 889; National Biscuit Co. v. City of Philadelphia, 374 Pa. 604, 612, 98 A.2d 182; Murray v. City of Philadelphia, 364 Pa. 157, 169, 71 A.2d 280; Philadelphia v. Samuels, 338 Pa. 321, 326, 12 A.2d 79; see also to the same effect, Kelley v. Kalodner, 320 Pa. 180, 181 A. 598.

While the label in each Act if different, the language of each Act and the formula in each is almost identical. However, there is this important difference: While each formula has the same three factors-tangible property in Pennsylvania, wages paid, and gross receipts-under the 1935 Act the wages paid are applicable to persons employed in Pennsylvania and the gross receipts are likewise restricted to receipts from business conducted in Pennsylvania; whereas the 1951 Act applies to and includes wages payable to employees employed outside of Pennsylvania which may be attributable to the work they perform in Pennsylvania, and the gross receipts to business attributable to Pennsylvania, but negotiated or performed by persons employed outside of Pennsylvania.

The general principle is long and well established that a State cannot tax Interstate Commerce as such or the receipts derived therefrom, nor can it tax a person or corporation for the privilege of engaging in interstate commerce. ‘ It long has been settled that a state cannot lay a tax on interstate commerce in any form, whether on the transportation of subjects of commerce, the receipts derived therefrom, or the occupation or business of carrying it on. Leloup v. Port of Mobile, 127 U.S. 640, 648, 8 S.Ct. 1380, 32 L.Ed. 311; Kansas City, [Ft. S. & M.] Ry. Co. v. Botkin, 240 U.S. 227, 231, 36 S.Ct. 261, 60 L.Ed. 617, and cases cited.’ Ozark Pipe Line Corp. v. Monier, 266 U.S. 555, 562, 45 S.Ct. 184, 185, 69 L.Ed. 439.This principle has been reiterated in Alpha Portland Cement Co. v. Commonwealth of Massachusetts, 268 U.S. 203, 217, 45 S.Ct. 477, 69 L.Ed. 916; Freeman v. Hewit, 329 U.S. 249, 67 S.Ct. 274, 91 L.Ed. 265; Joseph v. Carter & Weekes Stevedoring Co., 330 U.S. 422, 67 S.Ct. 815, 91 L.Ed. 993; Keystone Metal Co. v. City of Pittsburgh, 374 Pa. 323, 97 A.2d 797; Dixie Ohio Express Co. v. State Revenue Commission, 306 U.S. 72, 59 S.Ct. 435, 83 L.Ed. 495; Sprout v. City of South Bend, 277 U.S. 163, 48 S.Ct. 502,72 L.Ed. 83; Interstate Transit Inc. v. Lindsey, 283 U.S. 183, 51 S.Ct. 380, 75 L.Ed. 953; Gwin, White & Prince v. Henneford, 305 U.S. 434, 59 S.Ct. 325, 83 L.Ed. 272; Norfolk & Western Railroad Co. v. Commonwealth of Pennsylvania, 136 U.S. 114, 10 S.Ct. 958, 34 L.Ed. 394; General Trading Co. v. State Tax Commission, 322 U.S. 335, 64 S.Ct. 1028, 88 L.Ed. 1309; and as recently as 1951 in Spector Motor Service Inc. v. O'Connor, 340 U.S. 602, 71 S.Ct. 508, 95 L.Ed. 573.

In Dixie Ohio Express Co. v. State Revenue Commission, 306 U.S. at page 76, 59 S.Ct. at page 437, 83 L.Ed. 495 supra, the Court said: ‘ It is elementary that a State may not impose a tax on the privilege of engaging in interstate commerce . Sprout v. [City of] South Bend, 277 U.S. 163, 171, 48 S.Ct. 502, 504, 72 L.Ed. 833; Interstate Transit, Inc. v. Lindsey, 283 U.S. 183, 185, 51 S.Ct. 380, 75 L.Ed. 953; Gwin, White & Prince, Inc. v. Henneford, 305 U.S. 434, 59 S.Ct. 325, 83 L.Ed. 272, * * *.’

In Spector Motor Service, Inc. v. O'Connor, 340 U.S. at page 609, 71 S.Ct. at page, 512, 95 L.Ed. 573 supra, the Court said: ‘ This Court heretofore has struck down, under the Commerce Clause, state taxes upon the privilege of carrying on a business that was exclusively interstate in character. The constitutional infirmity of such a tax persists no matter how fairly it is apportioned to business done...