Union Refrigerator Transit Company v. Commonwealth of Kentucky

Citation26 S.Ct. 36,4 Ann.Cas. 943,50 L.Ed. 150,199 U.S. 194
Decision Date13 November 1905
Docket NumberNo. 84,84
CourtUnited States Supreme Court

This proceeding was begun by a statement filed by the revenue agent of the commonwealth in the Jefferson county court, praying that certain personal property belonging to the plaintiff in error be assessed for taxation for state, county, and municipal taxes, and be also adjudged to pay a penalty of 20 per cent on the aggregate amount of the tax.

To this statement the transit company filed certain demurrers and answers, upon which, and upon the deposition of the comptroller of the company in St. Louis, Missouri, the case went to a hearing, and resulted in a finding of facts that the transit company was the owner of 2,000 cars in September, 1897, 1898, 1899, and 1900, to which years the recovery was limited, of the value of $200 each; that its cars were employed by the company by renting them to shippers, who took possession of them from time to time at Milwaukee, Wisconsin, and used them for the carriage of freight in the United States, Canada, and Mexico, the company being paid by the railroads in proportion to the mileage made over their lines; that the correct method of ascertaining the number of cars which should be assessed for taxation was to ascertain and list such a proportion of its cars as, under a system of averages upon their gross earnings, were shown to be used in the state of Kentucky during the fiscal year, the court finding by this method that there were subject to assessment in Kentucky 28 cars for the year 1897, 29 for the year 1898, 40 for the year 1899, and 67 for 1900.

The court also found that the cars other than those mentioned were not liable to assessment.

The order of the county court was affirmed by the circuit court, and an appeal taken to the court of appeals of Kentucky, which reversed the judgment of the court below, and found that the company was liable to taxation upon its entire number of 2,000 cars, and directed the court below to enter judgment against it for the taxes appropriate to this number. 26 Ky. L. Rep. 23, 80 S. W. 490.

To review this judgment this writ of error was sued out.

Messrs. William H. Field and Alexander Pope Humphrey for plaintiff in error.

[Argument of Counsel from pages 196-199 intentionally omitted] Messrs. Henry L. Stone, Samuel B. Kirby, and Robert W. Bingham for defendant in error.

Statement by Mr. Justice Brown:

[Argument of Counsel from pages 199-201 intentionally omitted] Mr. Justice Brown delivered the opinion of the court:

In this case the question is directly presented whether a corporation organized under the laws of Kentucky is subject to taxation upon its tangible personal property permanently located in other states, and employed there in the prosecution of its business. Such taxation is charged to be a violation of the due process of law clause of the 14th Amendment.

Section 4020 of the Kentucky statutes, under which this assessment was made, provides that 'all real and personal estate within this state, and all personal estate of persons residing in this state, and of all corporations organized under the laws of this state, whether the property be in or out of this state, . . . shall be subject to taxation, unless the same be exempt from taxation by the Constitution, and shall be assessed at its fair cash value, estimated at the price it would bring at a fair voluntary sale.'

That the property taxed is within this description is beyond controversy. The constitutionality of the section was attacked not only upon the ground that it denied to the transit company due process of law, but also the equal protection of the laws, in the fact that railroad companies were only taxed upon the value of their rolling stock used within the state, which was determined by the proportion which the number of miles of the railroad in the state bears to the whole number of miles operated by the company.

The power of taxation, indispensable to the existence of every civilized government, is exercised upon the assumption of an equivalent rendered to the taxpayer in the protection of his person and property, in adding to the value of such property, or in the creation and maintenance of public conveniences in which he shares,—such, for instance, as roads, bridges, sidewalks, pavements, and schools for the education of his children. If the taxing power be in no position to render these services, or otherwise to benefit the person or property taxed, and such property be wholly within the taxing power of another state, to which it may be said to owe an allegiance, and to which it looks for protection, the taxation of such property within the domicil of the owner partakes rather of the nature of an extortion than a tax, and has been repeatedly held by this court to be beyond the power of the legislature, and a taking of property without due process of law. Northern C. R. Co. v. Jackson, 7 Wall. 262, 19 L. ed. 88; StateTax on Foreign-held Bonds, 15 Wall. 300, 21 L. ed. 179; Tappan v. Merchants' Nat. Bank, 19 Wall. 490-499, 22 L. ed. 189-193; Delaware, L. & W. R. Co. v. Pennsylvania, 198 U. S. 341, 358, 49 L. ed. 1077, 1083, 25 Sup.Ct.Rep. 669. In Chicago, B. & Q. R. Co. v. Chicago, 166 U. S. 226, 41 L. ed. 979, 17 Sup.Ct.Rep. 581, it was held, after full consideration, that the taking of private property without compensation was a denial of due process within the 14th Amendment. See also Davidson v. New Orleans, 96 U. S. 97, 102, 24 L. ed. 616, 618; Missouri P. R. Co. v. Nebraska, 164 U. S. 403, 417, 41 L. ed. 489, 495, 17 Sup.Ct.Rep. 130; Mt. Hope Cemetery v. Boston, 158 Mass. 509, 519, 35 Am. St. Rep. 515, 33 N. E. 695.

Most modern legislation upon this subject has been directed (1) to the requirement that every citizen shall disclose the amount of his property subject to taxation, and shall contribute in proportion to such amount; and (2) to the avoidance of double taxation. As said by Adam Smith in his Wealth of Nations, Book V. chap. 2, pt. 2, p. 371: 'The subjects of every state ought to contribute towards the support of the government as nearly as possible in proportion to their respective abilities; that is, in proportion to the revenue which they respectively enjoy under the protection of the state. The expense of government to the individuals of a great nation is like the expense of management to the joint tenants of a great estate, who are all obliged to contribute in proportion to their respective interests in the estate. In the observation or neglect of this maxim consists what is called the equality or inequality of taxation.'

But notwithstanding the rule of uniformity lying at the basis of every just system of taxation, there are doubtless many individual cases where the weight of a tax falls unequally upon the owners of the property taxed. This is almost unavoidable under every system of direct taxation. But the tax is not rendered illegal by such discrimination. Thus, every citizen is bound to pay his proportion of a school tax, though he have no children; of a police tax, though he have no buildings or personal property to be guarded; or of a road tax, though he never use the road. In other words, a general tax cannot be dissected to show that, as to certain constituent parts, the taxpayer receives no benefit. Even in case of special assessments imposed for the improvement of property within certain limits, the fact that it is extremely doubtful whether a particular lot can receive any benefit from the improvement does not invalidate the tax with respect to such lot. Kelly v. Pittsburgh 104 U. S. 78, 26 L. ed. 658; Amesbury Nail Factory Co. v. Weed, 17 Mass. 53; Thomas v. Gay, 169 U. S. 264, 42 L. ed. 740, 18 Sup. Ct. Rep. 340; Louisville & N. R. Co. v. Barber Asphalt Paving Co. 197 U. S. 430, 49 L. ed. 819, 25 Sup. Ct. Rep. 466. Subject to these individual exceptions, the rule is that in classifying property for taxation, some benefit to the property taxed is a controlling consideration, and a plain abuse of this power will sometimes justify a judicial interference. Norwood v. Baker, 172 U. S. 269, 43 L. ed. 443, 19 Sup. Ct. Rep. 187. It is often said protection and payment of taxes are correlative obligations.

It is also essential to the validity of a tax that the property shall be within the territorial jurisdiction of the taxing power. Not only is the operation of state laws limited to persons and property within the boundaries of the state, but property which is wholly and exclusively within the jurisdiction of another state receives none of the protection for which the tax is supposed to be the compensation. This rule receives its most familiar illustration in the cases of land, which, to be taxable, must be within the limits of the state. Indeed, we know of no case where a legislature has assumed to impose a tax upon land within the jurisdiction of another state; much less where such action has been defended by any court. It is said by this court in the State Tax on Foreign-held Bonds Case, 15 Wall. 300-319, 21 L. ed. 179-187, that no adjudication should be necessary to establish so obvious a proposition as that property lying beyond the jurisdiction of a state is not a subject upon which her taxing power can be legitimately exercised.

The argument against the taxability of land within the jurisdiction of another state applies with equal cogency to tangible personal property beyond the jurisdiction. It is not only beyond the sovereignty of the taxing state, but does not and cannot receive protection under its laws. True, a resident owner may receive an income from such property, but the same may be said of real estate within a foreign jurisdiction. Whatever be the rights of the state with respect to the taxation of such income, it is clearly beyond its power to tax the land from which the income is derved. As we said in Louisville & J....

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