State of Indiana ex rel. Wolf, Auditor v. Pullman Palace-Car Co.

• Decision Date: 08 March 1883
• Citation: 16 F. 193
• Parties: STATE OF INDIANA ex rel. WOLF, Auditor, etc., v. PULLMAN PALACE CAR CO. [1]
• Court: United States Circuit Court, District of Indiana

16 F. 193

STATE OF INDIANA ex rel. WOLF, Auditor, etc., v. PULLMAN PALACE CAR CO. ^[1]

United States Circuit Court, D. Indiana.

March 8, 1883

1. Under the allegations of the complaint the defendant is a foreign corporation engaged in the business of carrying passengers, and as to corporations of this character the state has no more power of control than it has over a natural person engaged in the same business. Paul v. Virginia, 8 Wall. 168; Pensacola Telegraph Co. v. Western Union Tel. Co. 96 U.S. 1; Liverpool Ins. Co. v. Mass. 10 Wall 566-573; Ducat v. Chicago, Id. 410; Rorer Interstate Law, 288.

2. This being a suit for a penalty founded on a statute, the statute must be strictly construed, and if the section in question requires anything to be done by the defendant that is beyond the power of Indiana to command, and if the failure to do the thing which the state had no power to command is an ingredient in the offense for which the penalty sued for is imposed, then the entire section must fall. In other words where the legislature attempts to require two things, one of which is within and the other beyond its constitutional power, and a joint or entire penalty is provided for the failure to perform both requirements, the penalty can not be collected, because the offense does not consist in the non-performance only of the thing which the legislature had the right to require, but is coupled with the non-performance of an act over which the legislature had no control. U.S. v. Reese, 92 U.S. 214; State v. Amer. Exp. Co. 7 Biss. 227.

3. Passenger transportation falls within the range of the commercial power of the United States. Passenger Cases, 7 How. 283, 401; Crandall v. Nevada, 6 Wall. 35; Case of the State Freight Tax, 15 Wall. 232, 280, 281; Railroad Co. v. Maryland, 21 Wall. 456-472; Erie Ry. Co. v. New Jersey, 31 N.J.Law, 531; Henderson v. Mayor of New York, 92 U.S. 259.

4. Where the subjects of the commercial power of the United States government are national in their character or admit of a uniform system or regulation, there the commercial clause of the constitution is self-executing, and no legislation by congress is necessary to prevent interference by state legislation. Cooley v. Board of Wardens, 12 How. 299; Gilman v. Philadelphia, 3 Wall. 713; Baltimore, etc., R. Co. v. Maryland, 21 Wall. 456; Welton v. Missouri, 91 U.S. 275; Henderson v. Mayor of New York, 92 U.S. 259, 272; Hall v. De Cuir, 95 U.S. 485; Railroad Co. v. Husen, 95 U.S. 465; County of Mobile v. Kemball, 102 U.S. 691; Webber v. Virginia, 103 U.S. 344-351; Western Union Telegraph Co. v. State of Texas, 105 U.S. 460; State v. American Express Co. 7 Biss. 227; Erie Ry. Co. v. State, 31 N.J.Law, 531; Carton v. Illinois Cent. R. Co. 14 Reporter, 518.

5. The section of the statute is null and void, because it is an attempt to give the section an extraterritorial operation, by requiring sleeping-car companies incorporated in other states than Indiana to report to the auditor of the state of Indiana their receipts received in such other states for business done in such other states, although such receipts were never within the territorial limits of the state of Indiana. Rorer, Interstate Law, 10, and cases cited in note 5 on same page; Story, Confl. Laws, Sec. 20.

It is not competent for a state to require a foreign corporation to report for taxation or to tax gross receipts not received within such state, and it is a rudimentary principle that state laws can have no extraterritorial force. Railroad Co. V. Pennsylvania, 15 Wall. 300; Railroad Co. v. Jackson, 7 Wall. 262; St. Louis v. The Ferry Co. 11 Wall. 423; Delaware Tax Case, 18 Wall. 229; State v. Amer. Exp. Co. 7 Biss. 230; Foresman v. Byrns, 68 Ind. 247; Herron v. Keeran, 59 Ind. 472; City of Evansville v. Hall, 14 Ind. 27; People v. Eastman, 25 Cal. 603; Davenport v. Miss. & M.R. Co. 12 Iowa, 539; Oliver v. Washington Mills, 11 Allen, 268; Rorer, Interstate Law, 275.

The case of State Tax on Gross Receipts, 15 Wall. 284, presented the question as to the validity of a Pennsylvania statute in its operation upon a Pennsylvania and not a foreign corporation, and was sustained upon two grounds: (1) The tax was upon the fruits of commerce after those fruits had been garnered into the treasury of the railway company, and not a tax upon the commerce which produced those fruits; (2) that the tax was upon the franchise of the corporation. The 'fruits' in this case are in the treasury of the defendant in another state, and are, therefore, not within the reach of the taxing power of Indiana, and the corporation was created by another state, so that the state of Indiana is not in a position to tax its franchises.

6. It should be stated, by way of application of the foregoing principles, that the section attempting to impose the penalty sued for requires the defendant, an Illinois corporation, to report to the auditor of state of the state of Indiana, as a basis of taxation, all its gross receipts received in other states in all cases where any part of such receipts includes pay for sleeping-car accommodations in passing through Indiana, or any part thereof. This is manifest from the declaration contained in the section that, 'in computing such gross receipts, the same shall be in the proportion that the distance traversed in this state bears to the whole distance paid for.'

Suppose a sleeping-car ticket is purchased and paid for at the city of New York, by way of Indianapolis, to the city of San Francisco. In such case the section contemplates that the company shall apportion the entire price of the ticket in the proportion that the number of miles traveled by the passenger in Indiana bears to the whole number of miles from New York to San Francisco. In the case supposed, and, indeed, in all other cases, there can be no taxation without such a report, for the taxation is based on the report, and can, under the section, have no other basis. It follows that if Indiana cannot require such a report to be made to its auditor of state, it cannot impose the tax, and of course cannot recover a penalty for not making the report or for not paying the tax, or for refusing to do both. The penalty provided for is for not making the report and for not paying the tax. As, in the case supposed, the money paid for the ticket was paid in New York, the business of selling the ticket and receiving the money was not, of course, transacted in Indiana, and therefore, being business done in New York, Indiana could not require such business to be reported to her auditor, and could not tax such business or the proceeds thereof. Indiana could not tax the business or require a report thereof, because it was not transacted in Indiana but in New York. Indiana could not tax the money arising from the business, because it was received in New York and was never in Indiana. From this it appears that sleeping-car companies are required to report to Indiana, as a basis of taxation, their receipts for tickets sold without the state, simply because the coach in which the holder of the ticket is to be carried must, in passing from New York to San Francisco, run through Indiana; and the tax is levied upon a part of the receipts thus reported in the proportion designated by the section. What is this if it be not a tax on the passenger for the privilege of being carried through Indiana? or a tax on the company for the privilege of allowing the passenger to be carried through Indiana in its coach?

If the statute in question only required a report of money received in Indiana for tickets sold therein, a different question would be presented. But here the provision is for reporting all the gross receipts of the company, no matter where received, provided the journey for which they are received lies through Indiana. There is no provision for separating and separately reporting the receipts in Indiana from those received elsewhere, but the requirement is to report all the gross receipts, wherever received, and to pay taxes thereon in the proportion named in the section, in all cases, where such receipts are for a ticket involving a journey through Indiana. The penalty sought to be recovered is for not reporting and not paying taxes on gross receipts received without the state as well as within the state; and, being an entire and indivisible penalty for not doing things which the state had no right to require, the legislation must fall; although it may include the doing of things which the state might have required if they had been unblended with requirements beyond its power.

Again, if Indiana may require such a report and impose such a tax, and exact penalties for failing to make the one and pay the other, every other state may do the like, and thereby interstate commerce, so far as passengers in sleeping cars are concerned, be destroyed.

D. P. Baldwin, Atty. Gen., and Ralph Hill, for the State.

O. A. Lochrane and Baker, Hord & Hendricks, for defendant.

GRESHAM J.

The legislature of Indiana, oh the twenty-ninth day of March, 1881, passed an act entitled 'An act concerning taxation,' the eighty-seventh section of which reads as follows:

'Every joint-stock association, company, or corporation, incorporated under the laws of any other state, and conveying to, from and through this state, or any part thereof, passengers and travelers in palace cars, drawing-room cars, sleeping cars, or chair cars, on contract with any railroad company, or the managers, lessee, agent, or receiver thereof, shall be held and deemed to be a sleeping-car company; and every such sleeping-car company doing business in this state shall annually, between the first day of April and the first day of June, report to the auditor of state, under the oath

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