Wheeling Steel Corporation v. Glander National Distillers Products Corporation v. Glander

• Decision Date: 20 June 1949
• Docket Number: Nos. 447 and 448,s. 447 and 448
• Citation: 93 L.Ed. 1544,69 S.Ct. 1291,337 U.S. 562
• Parties: WHEELING STEEL CORPORATION v. GLANDER, Tax Commissioner of Ohio. NATIONAL DISTILLERS PRODUCTS CORPORATION, N.Y., v. GLANDER, Tax Commissioner of Ohio
• Court: U.S. Supreme Court

337 U.S. 562

69 S.Ct. 1291

93 L.Ed. 1544

WHEELING STEEL CORPORATION

v GLANDER, Tax Commissioner of Ohio.

NATIONAL DISTILLERS PRODUCTS CORPORATION, N.Y.,

v. GLANDER, Tax Commissioner of Ohio.

Nos. 447 and 448.

Argued March 29, 30, 1949.

Decided June 20, 1949.

Appeals from the Supreme Court of the State of Ohio.

Mr. John M. Caren, Columbus, Ohio, for appellant Wheeling Steel corporation.

Mr. Charles H. Tuttle, New York City, for appellant National Distillers Products Corporation.

Mr. W. H. Annat, Wooster, Ohio, for appellees.

Mr. Justice JACKSON delivered the opinion of the Court.

The State of Ohio has laid an ad valorem tax against certain intangible property, consisting of notes, accounts receivable and prepaid insurance, owned by foreign corporations. As applied to appellants in these two cases, the tax is challenged as violating the Federal Constitution on serveral grounds which may conveniently be considered in a single opinion. Facts are not in dispute.

Appellant Wheeling Steel Corporation is organized under the laws of Delaware, where it maintains a statutory office. Ohio has authorized it to do business in that State and four of its eight manufacturing plants are located there. General offices, from which its entire business is controlled and conducted, are in Wheeling, West Virginia. Its officers there have custody of its money, notes and books of account. In twelve other states, including Ohio, it maintains sales offices which solicit and receive orders for its products subject to acceptance or rejection at the Wheeling office, to which all are for- warded. From this office only may credit be extended to purchasers. Accounts are billed and collected from the Wheeling office and the sales offices have no powers or duties with respect to collection. All accounts or notes receivable are payable at Wheeling, where the written evidences thereof are kept. Proceeds from receivables are taken into appellant's treasury at Wheeling and there applied to general purposes of the business.

Appellant National Distillers Products Corporation is organized under the laws of Virginia, where it has a statutory office and holds annual stockholders meetings. It is admitted to do business in Ohio, where it maintains a distillery, or rectifying plant, and warehouse, as it does also in six other states. Pay roll checks for plant employees are drawn on funds deposited in banks in the locality of the plant. Appellant also is licensed to do business in New York, where it maintains its principal business office and conducts its fiscal affairs and from which all business activities are directed and controlled. The Corporation maintains regional sales offices in various of those states which permit private distribution of liquor. In such states customers are solicited and orders taken, subject to acceptance or rejection at New York. It maintains no sales office in Ohio, where dispensing liquor is a state monopoly. Orders from Ohio state authorities are forwarded directly to the offices in New York and are subject to acceptance or rejection there. When the New York office accepts an order from any source, it sends shipping orders to various plants, none of which makes any shipments except upon such orders. Only in New York can any credits be approved and all books, records and evidences of accounts receivable are kept there. Collections are managed from New York, which is the place of payment of all receivables. During the tax year in question, the Corporation solicited and took orders through agents in states other than Ohio for a large quantity of liquor shipped from its plants and warehouses in Ohio to customers elsewhere.

It is stipulated that appellants each paid all franchise or other taxes required by Ohio for admission to do business in the State and paid all taxes assessed upon real and personal property located in said State.

The Wheeling Company also paid to the State of West Virginia, for the year in question, ad valorem taxes on all of its receivables, including those sought to be taxed by Ohio, pursuant to this Court's decision in Wheeling Steel Corp. v. Fox, 298 U.S. 193, 56 S.Ct. 773, 80 L.Ed. 1143. Neither Virginia nor New York has sought to tax the accounts receivable of National Distillers involved herein.

The Ohio Tax Commissioner, applying §§ 5328—1 and 5328—2 of the General Code of Ohio,¹ assessed for taxa- tion in Ohio a large amount of notes and accounts receivable which each appellant derived from shipments originating at Ohio manufacturing plants. The specific ground stated for assessment was that such receivables 'result from the sale of property from a stock of goods maintained within this State.'

The Board of Tax Appeals affirmed both assessments and in the Distiller's case set forth the above mentioned statutes and pointed out wherein its own views and practices as to their application to accounts receivable had been modified by decisions of the Ohio Supreme Court, whose interpretations, for our purposes, become a part of the statutes. The Board said:

'* * * On a consideration of the statutory provisions above noted, the Board of Tax Appeals was of the view that before a business situs of accounts receivable and other intangible property, for purposes of taxation, could be given to a state other than the state of the domicile of the taxpayer, it must appear that such receivables or other intangible property not only arose in the conduct of the business of the taxpayer in such other state, but were therein so used as to become an integral part of the business carried on in such other state; and that it was not sufficient that such accounts receivable and other intangible property be used in business generally by the taxpayer. And on this view the Board held that the accounts receivable there in question, although they arose in the conduct of taxpayer's business in the States of Indiana and Michigan, did not have a business situs in such states, and that such accounts receivable were taxable in Ohio.

'On the appeal of the decision of the Board of Tax Appeals in The Ransom & Randolph Co. case to the Supreme Court of Ohio, that Court reversed the decision of the Board of Tax Appeals upon the point above indicated. 142 Ohio St. 398, 404, 52 N.E.2d 738. That Court, upon consideration of the applicable provisions of section 5328-2 and related sections of the General Code above noted, held that the accounts receivable of a taxpayer which arose in the conduct of its business in a state or states other than the state in which it had its domicile or place of residence, had a business situs in such other state or states if such accounts receivable or the avails thereof are being applied or are intended to be applied in the conduct of the taxpayer's business, whether in this State or elsewhere. This view of the Supreme Court as to the construction to be placed upon the statutory provisions here in question was later followed by that Court in its decisions in the cases of The Haverfield Company v. Evatt, Tax Comm., 143 Ohio St. 58, 54 N.E.2d 149, and National Cash Register Company v. Evatt, Tax Comm., 145 Ohio St. 597, 62 N.E.2d 327.

'* * * In this situation, and applying the statutory provisions here in question as the same have been construed by the Supreme Court of this State, it follows that since the accounts receivable of the appellant corporation involved in this case arose—as this Board hereby find—, in the conduct of its business in the State of Ohio by the sale of its products from a stock of goods located in this State, and since, further, such accounts receivable or the avails thereof were used or were intended to be used by the appellant in its business, whether in this State or elsewhere, such accounts receivable have a business and taxable situs in the State of Ohio, as found and determined by the tax commissioner.

'With respect to a question such as that here presented, to wit, that as to the taxation of the accounts receivable of a foreign corporation arising in the conduct of its business in this State, the application of the above noted provisions of sections 5328-1, 5328-2 and other related sections of the General Code, as the same have been construed by the Supreme Court, presents, to our mind, a serious question as to the constitutionality of said statutory provisions as so construed under the Due Process of Law clause of the Federal Constitution. * * *'

The Ohio Supreme Court affirmed in both cases,² which were brought here by appeals.³ Appellants urge that the question which the Board of Tax Appeals regarded as serious should be resolved against the State on the ground that these intangibles had no situs in Ohio to sustain its power under the Due Process Clause so to tax them and also that to do so imposes an undue burden on interstate commerce in violation of the Commerce Clause. They point out that the credits sought to be taxed here were not created in Ohio, not payable there, and neither the payor nor payee, debtor nor creditor, was resident there. Moreover, the receivables arose from a contract for sale of goods, but the contracts were not made in Ohio nor performed in Ohio, and neither buyer nor seller resided there. On the assumption that Ohio could not follow tangible goods into a foreign state and tax them, either in the hands of the vendor before delivery or in the hands of a vendee after delivery, it is argued that she has no greater power to tax intangibles substituted in a foreign state for them and has no right to tax intangible proceeds of the sale of tangible goods that had passed beyond her taxing power.

In their original application of the statutory scheme the taxing authorities sought to overcome this hurdle by requiring an additional and more substantial connection between the taxed intangibles and the state taxing power. For purpose of an Ohio tax the Board of Tax Appeals held intangibles to have a situs in that State only when and to the extent ...