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Keywords

statutecorporationregulation

plaintiff

Related Cases

In re State Tax on Railway Gross Receipts, 82 U.S. 284, 1872 WL 15378, 21 L.Ed. 164, 15 Wall. 284

Facts

The Pennsylvania legislature enacted a tax on the gross receipts of certain transportation companies, including the Reading Railroad Company, which was incorporated in Pennsylvania. The company transported coal from the coal regions to Philadelphia and other states. The company reported its gross receipts but protested the tax on receipts derived from interstate transportation, claiming it was unconstitutional under the Commerce Clause of the U.S. Constitution.

The company, in refusing to pay, alleged that the act of February 23d, 1866-so far as it taxed that portion of the gross receipts which were derived from transportation from the State to another State, or into the State from another,-was unconstitutional and void.

Issue

Is the Pennsylvania statute imposing a tax on the gross receipts of the Reading Railroad Company unconstitutional as it relates to interstate commerce?

The question is whether the act of the legislature of Pennsylvania passed February 23d, 1866, under which a tax was levied upon the Philadelphia and Reading Railroad Company of three-quarters of one per cent. upon the gross receipts of the company, during the six months ending December 31st, 1867, is in conflict with the third clause of the eighth section, article first, of the Constitution of the United States.

Rule

A state tax on gross receipts of a transportation company does not constitute a regulation of interstate commerce and is permissible under the Constitution, provided it does not discriminate against non-residents.

A tax upon the gross receipts of a transportation company is necessarily a tax upon transportation.

Analysis

The court analyzed whether the tax on gross receipts was effectively a tax on interstate commerce. It concluded that while the tax might indirectly affect transportation costs, it was not a direct tax on the transportation of goods across state lines. The tax was seen as a legitimate exercise of state power to tax the franchises of corporations operating within its borders.

The tax is laid upon the gross receipts of the company; laid upon a fund which has become the property of the company, mingled with its other property, and possibly expended in improvements or put out at interest.

Conclusion

The U.S. Supreme Court affirmed the decision of the Pennsylvania Supreme Court, ruling that the tax on gross receipts was constitutional and did not violate the Commerce Clause.

Influenced by these considerations, we hold that the act of the legislature of the State imposing a tax upon the plaintiffs in error equal to three-quarters of one per cent. of their gross receipts is not invalid because in conflict with the power of Congress to regulate commerce among the States.

Who won?

The Commonwealth of Pennsylvania prevailed in the case, as the court upheld the constitutionality of the tax on gross receipts, determining it did not infringe upon federal powers regarding interstate commerce.

The Supreme Court of Pennsylvania adjudged that the act was not in conflict with either of the clauses of the Constitution relied on.

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