court intimate that the decision in Maine v. Grand Trunk R. R. Co. can be sustained only as viewing the tax in that case as in reality not a franchise tax but as a property tax on the additional value given to the tangible property of the company by being part of a going concern. The court observe that the line between a tax on receipts, and a tax on property, but measured by receipts, is often difficult to draw, but can be drawn, by taking into account the whole state scheme of taxation.25

From the foregoing it would appear that the law with reference to the state taxation of the gross receipts of companies doing an interstate commerce business is not in as definite a shape as might be desired. One general principle may, however, be deduced from

25 The court say: "It appears sufficiently, perhaps from what has been said, that we are to look for a practical rather than a logical or philosophical distinction. The State must be allowed to tax the property, and to tax it at its actual value as a going concern. On the other hand, the State cannot tax the interstate business. The two necessities hardly admit of an absolute logical reconciliation. Yet the distinction is not without sense. When a legislature is trying simply to value property, it is less likely to attempt or to effect injurious regulation than when it is aiming directly at the receipts from interstate commerce. A practical line can be drawn by taking the whole scheme of taxation into account. That must be done by this court as best it can. Neither the state courts nor the legislatures, by giving the tax a particular name or by the use of some form of words, can take away our duty to consider its nature and effect. If it bears upon commerce among the States so directly as to amount to a regulation in a relatively immediate way, it will not be saved by name or form."

As regards the tax in question, the court say: "We are of opinion that the statute levying this tax does amount to an attempt to regulate commerce among the States. The distinction between a tax 'equal to' 1 per cent. of gross receipts, and a tax of 1 per cent. of the same, seems to us nothing, except where the former phrase is the index of an actual attempt to reach the property and to let the interstate traffic and the receipts from it alone. We find no such attempt or anything to qualify the plain inference from the statute, taken by itself. On the contrary, we rather infer from the judgment of the state court and from the argument on behalf of the State that another tax on the property of the railroad is upon a valuation of that property, taken as a going concern. This is merely an effort to reach the gross receipts, not even disguised by the name of an occupation tax, and in no way helped by the words 'equal to.' Of course, it does not matter that the plaintiffs in error are domestic corporations, or that the tax embraces indiscriminately gross receipts from commerce within as well as outside of the State."

all the cases. This is, that a state tax is invalid, whatever its form, if in effect it lays a direct burden upon interstate commerce; and that, conversely, a state tax is valid, however measured, or (if we follow the doctrine of Maine v. Grand Trunk Ry.) whatever its form, which may be fairly held to be a tax on the property of the company, whether tangible or intangible. The tax being thus valid, if valid at all, only as a property tax, it may never amount to more than an ordinary property tax, and its non-payment may never involve a forfeiture of the right of the company to do an interstate commerce business. The doctrine of Maine v. Grand Trunk Ry. that a tax measured by the gross receipts may be sustained as a franchise or excise tax upon the right of the company to do business in the State is certainly unsound, and is, it would appear, as above indicated, so recognized by the court in Galveston H. & S. A. R. R. Co. v. Texas.

Perhaps the general doctrine which we have been considering is best stated and illustrated in Postal Telegraph Cable Co. v. Adams,28 in which it was held that a State has the power to levy on a foreign telegraph company doing both a domestic and an interstate business a franchise tax, the amount thereof being graduated according to the value of the property within the State, such tax being in lieu of all other taxes. Though in terms a franchise tax, the tax was held valid as, in fact, taking the place of a property tax which, of course, the State might constitutionally levy. The court say: "A tax [may be] imposed on the corporation on account of its property within the State and may take the form of a tax on the privilege of exercising its franchises within the State, and if the ascertainment of the amount is made dependent in fact on the value of its property situated within the State (the exaction, therefore, not being susceptible of exceeding the sum which might be levied directly thereon), and if payment be not made a condition precedent to the right to carry on the business, but its enforcement left to the ordinary means devised for the collection of taxes."

26 155 U. S. 688; 15 Sup. Ct. Rep. 268; 39 L. ed. 311.

§ 339. Taxation of Net Receipts.

It would appear that the same rules apply to the state taxation of net receipts of companies doing an interstate commerce business as govern in the case of the taxation of gross receipts. It may, however, be observed, that should the court seek to justify the taxation of receipts' by an assumption that they have, when taxed, become a part of the property of the companies receiving them, as was, for example, asserted in State Tax on Railway Gross Receipts,27 the argument is especially strong as to net receipts. It is believed, however, that the courts will not in the future place any reliance upon this argument which is, at its best, an exceedingly weak one.28

§ 340. Charter Provisions.

The State which grants a charter to a railway corporation may, as a condition precedent to the grant, stipulate that the company shall pay into the State's treasury a certain percentage of its receipts, or be liable to a certain tax on the amount of its capital stock, or to a special property tax, and the fact that these receipts are derived from its interstate commerce business, or that its property is so employed does not render the stipulation void. The sums so paid are not paid because of the interstate commerce done, but as a payment to the State for the charter which it has obtained, and which the State could grant or withhold as it might see fit.29

But a State may not in a charter which it grants reserve to itself a right to regulate the interstate commerce business of a corporation, for it does not lie within the power of a State thus by its own act to obtain an authority over matters vested exclusively in the Federal Government.30

27 15 Wall. 284; 21 L. ed. 164.

28 See the dissenting opinion of Justice Miller in State Tax on Railway Gross Receipts.

29 Railroad v. Maryland, 21 Wall. 456; 22 L. ed. 678. Cf. Prentice and Egan, Commerce Clause, p. 299, and authorities there cited.

30 Louisville R. R. Co. v. Railroad Com. of Tenn., 19 Fed. Rep. 679.

§ 341. Taxation of Capital Stock of Interstate Commerce Companies.

Because of the control which a State has over corporations of its own creation, it is held that it may tax the entire capital stock of domestic corporations, even though some of the property of those corporations is situated outside of the taxing State. For such a tax is held to be not upon the property which in large measure gives the value to the capital stock, but upon the corporation as an entity, over which entity the State has full personal jurisdiction. The same rule is applied to foreign corporations which have been permitted to consolidate with and thus become constituent elements of domestic corporations.31

As to foreign corporations doing an interstate commerce business, it is held that their capital stock may be taxed only to the extent that such corporations have property within the taxing States.32 This doctrine has not been questioned since the decision of Gloucester Ferry Co. v. Pennsylvania.33

35

In Western Union Telegraph Co. v. New Hope4 and Atlantic & Pacific Tel. Co. v. Philadelphia the court has laid down the doctrine that where, from the nature of the case, a certain amount of police supervision of an interstate carrier on the part of the State or of one of its political subdivisions is needed, a charge, in the form of a tax, sufficient to meet approximately the expenses of such supervision may be imposed by the State or its political subdivisions. The fact that, in result, a revenue somewhat greater than the actual cost of supervision is derived does not render the

31 Ashley v. Ryan, 153 U. S. 436; 14 Sup. Ct. Rep. 865; 38 L. ed. 773; The Delaware Railroad Tax, 18 Wall. 206; 21 L. ed. 888; State Railroad Tax Cases, 92 U. S. 575; 23 L. ed. 663.

32 As to whether when such corporations seek to do other than an interstate commerce business in States other than those of their origin, conditions may be attached to the permission so to do, and whether these conditions may take the form of a tax on capital stock, or any other form of tax, see W. U. Tel. Co. v. Kansas, 216 U. S. 1; 30 Sup. Ct. Rep. 190; and Pullman Co. v. Kansas, 216 U. S. 54; 30 Sup. Ct. Rep. 232.

33 114 U. S. 196; 5 Sup. Ct. Rep. 826; 29 L. ed. 158. 34 187 U. S. 419; 23 Sup. Ct. Rep. 204; 47 L. ed. 240.

35 190 U. S. 160; 23 Sup. Ct. Rep. 817; 47 L. ed. 995.

tax void, but such excess cannot be sufficient to make the tax essentially a revenue measure.

"Whether or not the fee is so obviously excessive as to lead irresistibly to the conclusion that it is exacted as a return for the use of the streets, or is imposed for revenue purposes, is a question for the courts, and is to be determined upon a view of the facts and not upon evidence consisting of the opinions of witnesses as to the proper supervision that the municipal authorities might properly exercise and expense of the same." 56 In Atlantic & Pacific Tel. Co. v. Philadelphia, however, the court point out that the function of the court, as to the reasonableness of the regulation, is to pass upon the character of the regulations prescribed, and whether a charge upon the supervised company is proper; and that it is the function of the jury to pass upon the question as to the reasonableness of the amount of the charge in the particular case at issue. "What is reasonable in one municipality may be oppressive and unreasonable in another."

§ 342. State Regulation of Carriers.

In the absence of congressional regulation the common law of the States controls with reference to the so-called common-law rights, duties, and responsibilities of interstate carriers. These rights and duties which relate to reasonableness of service, impartiality of treatment of shippers, liabilities either contractual or in tort for injuries to passengers or freights, etc., have, in many instances, it is apparent, more than a local significance and effect, and it is, therefore, somewhat difficult to justify, upon principle, the constitutional authority of the States in these respects. Practical necessity and convenience seem, however, to have de manded that this validity should be ascribed to the common law of the States, for otherwise, in the absence of congressional regulation, there would be no law whatever for the courts to apply.3

37

36 Quoted with approval in Western Union Tel. Co. v. New Hope, from opinion of the court in Philadelphia v. W. U. Tel. Co., 32 C. C. A. 246.

37 That there is no federal common law which, in absence of congressional statute, can be made use of is fairly certain. Cf. United States v. Worrall, 2 Dall. 384; 1 L. ed. 426; Wheaton v. Peters, 8 Pet. 591; 8 L. ed. 1055. But see Western Union Tel. Co. v. Call Pub. Co., 181 U. S. 92; 21 Sup. Ct. Rep. 561; 45 L. ed. 765.