Ohio Tax Cases

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These suits were brought in the United States district court for the southern district of Ohio (eastern division) by appellants, which are Ohio railroad corporations, to enjoin the certification and collection by appellees of a tax which the state was seeking to enforce upon the privilege of carrying on business in that state. This tax appellants claimed to be in violation of the due process and equal protection clauses of the 14th Amendment, and of the commerce clause of the Federal Constitution, and also of the preamble and Article 1, §§ 2 and 19 of the Ohio Constitution.

A restraining order was allowed by the district court, and afterwards appellants' motions for temporary injunctions came on for hearing before three judges, of whom one was a circuit judge, pursuant to § 266 of the Judicial Code (36 Stat. at L. 1162, chap. 231, U.S.C.omp. Stat. Supp. 1911, p. 236), which went into effect shortly after the bills were filed. The two cases were argued and considered together, upon the facts averred in the bills, which were, for the purposes of the motions, conceded to be true by appellees, and, after consideration, the temporary injunctions were refused. 203 Fed. 537.

Appellants come direct to this court, under the same section of the Code.

The tax law in question, the validity of which is attacked generally, and also specially in its application to appellants, was enacted in its present form May 31, 1911. 102 Ohio Laws, 224.

It created a tax commission, with defined powers, and prescribed various taxes, some upon property and others upon franchises and privileges, with sundry provisions, penal and otherwise, for the collection thereof. Some of these taxes were new in Ohio law, others were carried over from previously existing statutes.

The tax here in question is limited in its operation to certain lines of quasi public business, specifically named in the act and therein referred to as 'public utilities,' including railroads.

As applied to railroads, the act requires the filing with the tax commission, by each railroad doing business in the state, of a statement, on or before September 1, setting forth, among other things, its 'entire gross earnings, including all sums earned or charged, whether actually received or not, for the year ending on the 30th day of June next preceding, from whatever source derived, for business done within this state, excluding therefrom all earnings derived wholly from interstate business or business done for the Federal government. Such statement shall also contain the total gross earnings of such company for such period in this state from business done within this state.' Sections 81 and 83 of act; §§ 5470 and 5472, General Code of Ohio.

It is further provided that on the first Monday of October the commission 'shall ascertain and determine the gross earnings as herein provided, of each railroad company whose line is wholly or partially within this state, for the year ending on the 30th day of June next preceding, excluding therefrom all earnings derived wholly from interstate business or business done for the Federal government. The amount so ascertained by the commission shall be the gross earnings of such railroad company for such year.' Section 88 of act; § 5477, Gen. Code.

The act further provides that on the first Monday of November the commission shall certify to the auditor of state the amount of the 'gross earnings so determined' (§ 93 of act; § 5482, Gen. Code), and that-'in the month of November, the auditor of state shall charge for collection, from each railroad company, a sum in the nature of an excise tax, for the privilege of carrying on its intrastate business, to be computed on the amount so fixed and reported to him by the commission, as the gross earnings of such company on its intrastate business for the year. . . by taking 4 per cent of all such gross earnings.' Section 97 of act; § 5486, Gen. Code. The tax is imposed equally and alike on corporations, partnerships, and individuals. Section 39 of act; § 5415, Gen. Code.

Messrs. Robert J. King and F. A. Durban for appellants.

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Messrs. Frank Davis, Jr., Clarence D. Laylin, and Mr. Timothy S. Hogan, Attorney General of Ohio, for appellees.

Statement by Mr. Justice Pitney:

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Mr. Justice Pitney, after making the foregoing statement, delivered the opinion of the court: