State v. Pacific States Telephone & Telegraph Co.

• Decision Date: 02 February 1909
• Parties: STATE v. PACIFIC STATES TELEPHONE & TELEGRAPH CO.
• Court: Oregon Supreme Court

99 P. 427

53 Or. 162

STATE v. PACIFIC STATES TELEPHONE & TELEGRAPH CO.

Supreme Court of Oregon

February 2, 1909

Appeal from Circuit Court, Multnomah County; John B. Cleland, Judge.

Action by the State against the Pacific States Telephone & Telegraph Company to recover a 2 per cent. tax on the gross receipts of the defendant. From a judgment for plaintiff after sustaining a demurrer to the answer, defendant appeals. Affirmed.

This is an action by the state against the Pacific States Telephone &amp Telegraph Company to recover 2 per cent. of the gross receipts of such company for the year 1906. The case is as follows: In 1903 the Legislature passed an act requiring all corporations, domestic and foreign, doing business in the state, to pay an annual license fee of from $10 to $200 according to their capital stock. Laws 1903, p. 39. In 1906 there was proposed by an initiative petition, and adopted by the people in June of that year, pursuant to the provisions of the initiative and referendum amendment to the Constitution, and without reference to the Legislature, an act requiring telephone and telegraph companies to pay a license of 2 per cent. per annum on the gross receipts of the company, and requiring such corporations to make annual statements to the state treasurer of the amount of such receipts as a basis for such tax. The defendant corporation is an Oregon concern and made the returns, required by the act, for the year 1906, but refused to pay the tax thereon and hence this suit. It answered the complaint, denying liability on the grounds: (1) That the initiative act requiring it to pay such license or tax was never approved by the Governor, nor submitted to him for his approval; (2) that the defendant has paid the annual license fee required by the act of 1903, and also all state, county, and school taxes levied upon all of its property, "including its franchise to do business," and therefore the act of 1906 is unconstitutional and void because violative of section 32 art. 1, of the state Constitution, requiring that "all taxation shall be equal and uniform"; (3) that the initiative and referendum amendment to the Constitution, under which the act of 1906 was proposed and adopted, is unconstitutional and void, because repugnant to sections 2, 3, 4, and 8 of article 1, section 1 of article 2, sections 3 and 4 of article 4, article 5, article 6, and section 1 of the fourteenth amendment to the Constitution of the United States; and also to Act Cong. Feb. 14, 1859, c. 33, 11 Stat. 383, admitting Oregon to the Union, and the act approved June 1, 1789 (chapter 1, § 3, 1 Stat. 23, Rev.St.U.S. § 1836 [U.S.Comp.St. 1901, p. 1256]). Other grounds of objection are set forth in paragraphs 24, 25, 26, and 27 of the answer, but were stricken out on application of the defendant. The plaintiff demurred to the new matter pleaded in the answer, on the ground that it did not constitute a defense to the cause of action stated in the complaint. The demurrer was sustained, judgment rendered in favor of plaintiff, and defendant appeals.

Chas. H. Carey, for appellant.

A.M. Crawford, Atty. Gen., and A.S. Bennett, for the State.

BEAN J. (after stating the facts as above).

The question whether an initiative measure is subject to the veto power of the Governor was decided in State v. Kline, 50 Or. 426, 93 P. 237, and that case is conclusive here. What is said on the subject in Kadderly v. Portland, 44 Or. 118, 146, 74 P. 710, 75 P. 222, was in answer to the point that the initiative and referendum amendment deprived the Governor of a veto power over acts of the Legislature and had no reference to measures proposed by the initiative. The annual license fee required by the act of 1903 to be paid by corporations is a business or excise tax on the right to be or exercise the powers of a corporation, and is in no sense a tax on property; nor is it a tax on the business or franchise which the corporation, when organized, may exercise. Am. S. & R. Co. v. People, 34 Colo. 240, 82 P. 531; Delaware R.R. Tax, 18 Wall. 206, 21 L.Ed. 888; Home Ins. v. New York, 134 U.S. 594, 10 Sup.Ct. 593, 33 L.Ed. 1025.

The right to be a corporation, or do business as such, rests entirely within the discretion of the state, and it may therefore require it to pay a specified sum each year, or at stated intervals, for the privilege. The payment of such fee or tax, however, does not exempt the corporation from...