People ex rel. Parke, Davis, & Company v. Roberts/Opinion of the Court

The construction put upon the statute of the state of New York by its courts is, of course, binding upon this court; and that portion of the contention which questioned the action of the comptroller on the ground of a misinterpretation of the law is thus disposed of.

It must be regarded as finally settled by frequent decisions of this court that, subject to certain limitations as respects interstate and foreign commerce, a state may impose such conditions upon permitting a foreign corporation to do business within its limits as it may judge expedient, and that it may make the grant or privilege dependent upon the payment of a specific license tax, or a sum proportioned to the amount of its capital used within the state. Paul v. Virginia, 8 Wall. 168; Horn Silver-Min. Co. v. New York, 143 U.S. 305, 12 Sup. Ct. 403.

Accordingly, the counsel for the plaintiff in error disavows in his brief any wish to bring those decisions into further review, but his contention is that this Michigan corporation, having come within the jurisdiction of New York by compliance with all the provisions of law imposing conditions for transacting business within the state, is denied the equal protection of the law when subjected to a tax from which are exempted other corporations, foreign and domestic, which wholly manufacture the same class of goods within the state; that such a tax is an unjust discrimination against this corporation, whose place of manufacture is in the state of Michigan. By this contention it is not meant, of course, that this particular corporation is, in terms, discriminated against in the New York statute, but that all corporations which manufacture their goods wholly in other states, and send them for sale in New York, are discriminated against in favor of such corporations, whether foreign or domestic, as manufacture their goods within the state of New York.

To sustain this contention, the well-known line of cases is cited wherein this court has had to deal with state legislation imposing discriminating taxes against the products of other states. Walling v. Michigan, 116 U.S. 446, 6 Sup. Ct. 454; Robbins v. Taxing Dist., 120 U.S. 489, 7 Sup. Ct. 592; Minnesota v. Barber, 136 U.S. 313, 10 Sup. Ct. 862.

If the object of the law in question was to impose a tax upon products of other states, while exempting similar domestic goods from taxation, there might be room to contend that such a distinction was constitutionally objectionable, as tending to affect or regulate commerce between the states. But we think that, obviously, such is not the purpose of this legislation. 'Every corporation, joint-stock company, or association whatever, now or hereafter incorporated, organized or formed under, by, or pursuant to law in this state or in any other state or country, and doing business in this state, * *  * shall be liable to and shall pay a tax as a tax upon its franchise or business into the state treasury annually, to be computed as follows.'

It will be perceived that the tax is prescribed as well for New York corporations as for those of other states. It is true that manufacturing or mining corporations wholly engaged in carrying on manufacture or mining ores within the state of New York are exempted from this tax; but such exemption is not restricted to New York corporations, but includes corporations of other states as well, when wholly engaged in manufacturing within the state.

In construing this statute, it was held, in the case of People v. roberts, 4 App. Div. 388, 38 N. Y. Supp. 872, that a New York corporation which carried on a manufacturing business in another state was liable to this tax; and this decision was affirmed by the New York court of appeals. 151 N. Y. 652, 46 N. E. 1150.

The tax is graded according to annual dividends, and originally was assessed upon the entire capital of a corporation; but the statute was amended in 1885 so as to read: 'The amount of capital stock which shall be the basis for tax under the provisions of section three in the case of every corporation, joint stock company and association liable to taxation thereunder, shall be the amount of capital stock employed within this state.'

So that it is apparent that there is no purpose disclosed in the statute either to distinguish between New York corporations and those of other states to the detriment of the latter, or to subject property out of the state to taxation.

In the present case, indeed, complaint is made of the action of the comptroller in determining the 'amount of the capital stock employed within the state,'-that the amount fixed by him was too large. The action of the comptroller was subject to revision, and the corporation's complaints in respect thereto were heard and passed upon by the supreme court of New York. The estimate of the comptroller, in determining the amount of capital employed in the state, would not be judicially interfered with unless it was clearly shown that the same was erroneous; and even then such errors would not present a federal question for our consideration

Nor can we consider the further contention that portions of the business which were made the basis of the assessment were improperly treated as business of the corporation, whereas they should have been regarded as pertaining to the personal transactions of Mr. Clay, the company's agent. The true relation of Mr. Clay to the corporation's business was one of fact, in respect to which a hearing was afforded to the corporation, and this court is in no position to enter into such an inquiry.

Again, it is said that, even assuming that the importation of crude drugs and their sale in the original packages constituted a portion of the corporate business, no tax could be imposed by the state, under the doctrine of Brown v. Maryland, 12 Wheat. 419.

But that case is inapplicable. Here no tax is sought to be imposed directly on imported articles or on their sale. This is a tax imposed on the business of a corporation, consisting in the storage and distribution of various kinds of goods, some products of their own manufacture and some imported articles. From the very nature of the tax, being laid as a tax upon the franchise of doing business as a corporation, it cannot be affected in any way by the character of the property in which its capital stock is invested. Society v. Coite, 6 Wall. 594; Provident Inst. v. Massachusetts, 6 Wall. 611; Pembina Consol. Silver Mining & Milling Co. v. Pennsylvania, 125 U.S. 181, 8 Sup. Ct. 737; Home Insurance Co. v. New York, 134 U.S. 594, 10 Sup. Ct. 593.

When a corporation of one state, whose business, is that of a common carrier, transacts part of that business in other states, difficult questions have arisen, and this court has been called upon to decide whether certain taxing laws of the respective states infringe upon the freedom of interstate commerce. It has been found difficult to prescribe a satisfactory rule whereby the public burdens of taxation can be justly apportioned between the business and agencies of such a corporation in different states, and the subject has been much discussed in several recent cases. W. U. Tel. Co. v. Massachusetts, 125 U.S. 530, 8 Sup. Ct. 961; Railroad Co. v. Backus, 154 U.S. 421, 14 Sup. Ct. 1114; Pullman's Palace-Car Co. v. Pennsylvania, 141 U.S. 18, 11 Sup. Ct. 876; Adams Exp. Co. v. Ohio, 165 U.S. 194, 17 Sup. Ct. 305. It is not necessary in this case to enter into a subject so difficult, but the cases are referred to as showing the distinction between corporations organized to carry on interstate commerce, and having a quasi public character, and corporations organized to conduct strictly private business.

The corporation concerned in the present litigation is of the latter character, and the case comes within the doctrine of Paul v. Virginia, 8 Wall. 168, and of subsequent cases affirming that one. Horn Silver-Min. Co. v. New York, 143 U.S. 305, 12 Sup. Ct. 403, may be specially mentioned, as it involved a similar question and the same statute which are before us in the present case. The Horn Silver-Mining Company was a corporation of the territory of Utah, where it carried on a mining and manufacturing business. it also carried on business in the state of New York, and was there subjected to an annual tax upon its corporate franchise or business, as prescribed in the statute of the state of New York. The company refusing to pay the tax, proceedings to enforce its payment were resorted to, which resulted in the case being brought to this court, where some of the questions raised in the present case were considered and determined. The conclusions reached were that the law in question did not tax property not within the state, nor regulate interstate commerce, nor deny to the corporation the equal protection of the laws, nor impose a tax beyond the constitutional power of the state.

It is said that the operation of that portion of this taxing law which exempts from a business tax, corporations which are wholly engaged in manufacturing within the state of New York is to encourage manufacturing corporations which seek to do business in that state to bring their plants into New York. Such may be the tendency of the legislation, but, so long as the privilege is not restricted to New York corporations, it is not perceived that thereby any ground is afforded to justify the intervention of the federal courts.

The judgment of the supreme court of the state of New York is accordingly affirmed.