330 Argument for Plaintiffs in Error. on such property, valued as part of a going concern, nor relatively higher than taxes on other classes of property, does not discriminate against interstate commerce. P. 339. 3. A state statutory provision that a foreign corporation failing to pay a tax shall be excluded from doing business in the State would be void as applied to interstate commerce. P. 339. 4. The tax here involved, based on the California Constitution (Art. XIII, § 14, as amended, 1910) and on subsequent statutes, was not intended to reach income from property situated or business done outside of the State. P. 340. 185 Cal. 484, affirmed. ERROR to judgments of the Supreme Court of California affirming judgments for the defendant in actions brought against the State Treasurer to recover money paid, under protest, as taxes. In the first six cases, the taxes were paid and the actions brought by the Pullman Company. In the last of the cases, the taxes were paid while the business of the Company was under federal control, and the action brought by the Company and the Director General of Railroads. Mr. Cordenio A. Severance, with whom Mr. Gustavus A. Fernald and Mr. Burke Corbet were on the brief, for plaintiffs in error. There is no doubt that a State is entitled to tax instrumentalities of interstate commerce within the State and that, in so doing, it may take into account "intangible values" accruing from their use as part of a unit system of transportation. The so-called unit system of taxation approved in Adams Express Co. v. Ohio, 165 U. S. 227, and other cases, need only be referred to. It is but one method of ascertaining a fair valuation of the property taxed. Gross-receipts or gross-earnings systems of taxation may be used as a method of arriving at the same result; but the State may not tax interstate commerce itself, or the earnings therefrom, or property situated without the State; and if, under the circumstances, the tax may be said to be so directly aimed at interstate Argument for Plaintiffs in Error. 261 U.S. earnings as to evidence an intention to levy upon them, as such, the tax will be declared void as an unlawful burden upon interstate commerce. In determining this question, the controlling matter is not the expressed intention of the legislature, nor the manner in which the law is administered, but the effect of the act. The difficulty has been in applying the foregoing principles to the particular case. However, the expressed intention of the legislature, as well as the manner in which the law is administered, may be, and should be, considered to such extent as it is or may be an indication that the gross receipts are aimed at and the purpose of such aim, in a particular case. [The following cases were reviewed: State Tax on Railway Gross Receipts, 15 Wall. 284; State Freight Tax, 15 Wall. 232; Fargo v. Michigan, 121 U. S. 230; Philadelphia & Southern S. S. Co. v. Pennsylvania, 122 U. S. 326; Gloucester Ferry Co. v. Pennsylvania, 114 U. S. 196; Ratterman v. Western Union Tel. Co., 127 U. S. 411; Western Union Tel. Co. v. Pennsylvania, 128 U. S. 39; Leloup v. Mobile, 127 U. S. 640; Western Union Tel. Co. v. Alabama, 132 U. S. 472; Lyng v. Michigan, 135 U. S. 161; Crutcher v. Kentucky, 141 U. S. 47; Pacific Express Co. v. Seibert, 142 U. S. 339; Maine v. Grand Trunk Ry. Co., 142 U. S. 217; Postal Telegraph Cable Co. v. Adams, 155 U. S. 688; Wisconsin & Michigan Ry. Co. v. Powers, 191 U. S. 379; Fargo v. Hart, 193 U. S. 490; Galveston, etc., Ry. Co. v. Texas, 210 U. S. 217; Western Union Tel. Co. v. Kansas, 216 U. S. 1; Pullman Co. v. Kansas, 216 U. S. 56; Ludwig v. Western Union Tel. Co., 216 U. S. 146; Meyer v. Wells Fargo & Co., 223 U. S. 298; United States Express Co. v. Minnesota, 223 U. S. 335; Lehigh Valley R. R. Co. v. Pennsylvania, 145 U. S. 192; Ewing v. Leavenworth, 226 U. S. 464; Maine v. Grand Trunk Ry. Co., 142 U. S. 217; St. Louis Southwestern Ry. Co. v. Arkansas, 235 U. S. 350; Baltic Mining Co. v. Massachusetts, 231 U. S. 68; Ohio Tax Cases, 232 U. S. 576; Kansas City, etc., Ry. 330 Opinion of the Court. Co. v. Kansas, 240 U. S. 227; Kansas City, etc., R. R. Co. v. Stiles, 242 U. S. 111; Cudahy Packing Co. v. Minnesota, 246 U. S. 450; Union Tank Line Co. v. Wright, 249 U. S. 275; Wallace v. Hines, 253 U. S. 66.] This tax is aimed so directly at gross receipts as to constitute an unlawful burden on interstate commerce and a tax upon the income of property and business without the State. No reference was made to the value of the property in ascertaining the tax. The theoretical method alleged to have been adopted by the Tax Commission for determining whether the gross receipts tax is equivalent to an ad valorem tax is fallacious and misleading. The situation is exactly like that in Fargo v. Michigan, 121 U. S. 230, and similar to that in other kindred cases. The burden of sustaining the tax rests with the State. Bank of California v. Roberts, 173 Cal. 402; Galveston, etc., Ry. Co. v. Texas, 210 U. S. 217; Foote v. Maryland, 232 U. S. 494. The forfeiture clause of the tax law renders it invalid. Atchison, Topeka & Santa Fe Ry. Co. v. O'Connor, 223 U. S. 280; Pickard v. Pullman Southern Car Co., 117 U. S. 34; Western Union Tel. Co. v. Massachusetts, 125 U. S. 530; Leloup v. Mobile, 127 U. S. 640; Allen v. Pullman's Palace Car Co., 191 U. S. 171; Western Union Tel. Co. v. Kansas, 216 U. S. 1; St. Louis Southwestern Ry. Co. v. Arkansas, 235 U. S. 350; Postal Telegraph Cable Co. v. Adams, 155 U. S. 688. Mr. U. S. Webb, Attorney General of the State of California, and Mr. Raymond Benjamin, for defendant in error, submitted. MR. JUSTICE VAN DEVANTER delivered the opinion of the Court. These were actions by the Pullman Company against the Treasurer of California to recover moneys paid under Opinion of the Court. 261 U.S. protest as state taxes. Each action related to a designated part of the tax for a distinct year and was brought on the theory that the part designated was invalid because imposed under constitutional and statutory provisions repugnant to the Constitution of the United States. The Treasurer prevailed in the court of first instance and in the Supreme Court of the State. 185 Cal. 484. The Pullman Company then brought the cases here on writs of error. In 1910 California adopted an amendment to her constitution, § 14 of Article XIII, one purpose of which was to effect a separation of state from local taxation by subjecting public service corporations to a designated tax for state purposes and relieving them from taxation for county and municipal purposes. Referring to this feature of the amendment, the Supreme Court of the State said in San Francisco v. Pacific Telephone & Telegraph Co., 166 Cal. 244, 248: "Under the old system, the property and franchises of the corporations above referred to were taxed for both state and local purposes. The amendment creates a new mode of taxing such property and franchises, and appropriates the revenue so raised to state purposes solely. The new method, by which taxes are collected exclusively for the state, is substituted for the former system, under which the same subjects were taxed for both state and local purposes." The pertinent parts of the amendment are as follows (Laws 1910-11, p. xliv): "Sec. 14 (a). . all sleeping car, dining car, drawing-room car, and palace car companies, operating upon the railroads in this State; shall annually pay to the State a tax upon their franchises, and other property, or rolling stock, any part thereof used exclusively in the operation of their business in this State, computed as follows: Said tax shall be equal to the percentages hereinafter fixed upon 330 Opinion of the Court. the gross receipts from operation of such companies and each thereof within this State. When such companies are operating partly within and partly without this State, the gross receipts within this State shall be deemed to be all receipts on business beginning and ending within this State, and a proportion, based upon the proportion of the mileage within this State to the entire mileage over which such business is done, of receipts on all business passing through, into, or out of this State. "The percentages above mentioned shall be as follows: on all sleeping car, dining car, drawing-room car, three per cent; palace car companies, Such taxes shall be in lieu of all other taxes and licenses, State, county and municipal, upon the property above enumerated of such companies except as otherwise in this section provided; "(e). In the event that the above named revenues are at any time deemed insufficient to meet the annual expenditures of the State, including the above named expenditures for educational purposes, there may be levied, in the manner to be provided by law, a tax, for State purposes, on all the property in the State, including the classes of property enumerated in this section, sufficient to meet the deficiency. "(f) All the provisions of this section shall be selfexecuting, and the Legislature shall pass all laws necessary to carry this section into effect, and shall provide for a valuation and assessment of the property enumerated in this section, The rates of taxation fixed in this section shall remain in force until changed by the Legislature, two thirds of all the members elected to each of the two houses voting in favor thereof." Several acts to carry the amendment into effect were adopted from time to time, but it suffices here to say of them, first, that the computing percentage applicable to sleeping car, dining car, drawing-room car, and palace car |