US SUPREME COURT DECISIONS

Neither the right of a state to attach conditions when licensing a sister state corporation to do local business nor its power to tax the corporation in respect of such business, when licensed, can sustain impositions which, in the guise of permit charges or franchise or excise taxes, result in direct burdens on interstate commerce or in the chanrobles.com-red

Page 245 U. S. 179

taxation of property beyond the confines and jurisdiction of the state.

These principles, repeatedly affirmed by the Court, are in nowise qualified by Baltic Mining Co. v. Massachusetts, 231 U. S. 68, and other recent cases involving particular state statutes which were not inherently repugnant to the commerce clause or the due process clause of the Fourteenth Amendment and which, because of their own restrictive provisions, avoided such repugnancy in their necessary operation and effect. Those cases lend no sanction to the proposition that the duty of enforcing the Constitution may depend upon the degree of violation or of resulting wrong.

In 1889, Texas exacted of foreign corporations a charge, graduated upon capital stock, but limited to $200, for a permit to do business for 10 years. In 1893, a so-called franchise tax of $10 per annum was exacted of domestic and licensed foreign corporations alike, which was increased in 1897 to a maximum of $50 for domestic corporations, while for foreign corporations the minimum was raised to $25, and the tax was otherwise calculated by fixed percentages upon capital stock without maximum limit. After some intervening modification, it was enacted in 1907, as to both classes of corporations, that, in case the capital stock, issued and outstanding, plus surplus and undivided profits, should exceed the capital stock authorized, the franchise tax should be calculated upon the aggregate of such amounts. In the same year, the permit provisions were altered by abolishing the maximum limit ($200) and increasing the percentages on authorized capital stock. An Illinois manufacturing and trading corporation engaged largely in interstate commerce obtained a 10-year permit under the Act of 1889, purchased real estate, erected warehouses, and engaged in business in Texas; paid its taxes on its local property, and also those laid under the franchise laws, until its permit (obtained in 1905) was about to expire, when it brought suit against the Secretary of State and the Attorney General to enjoin the enforcement by them of the permit and franchise laws of 1907. Its authorized capital stock was $17,000,000, issued and paid up, and its surplus and undivided profits over $8,000,000. The total assessed value of its property in Texas was about $300,000. Its gross receipts and gross sales in all its business in 1913 were $39,831,000, of which only $1,019,750 had any relation to Texas, and of this nearly one-half had resulted from sales and shipments in interstate commerce. Its franchise tax had increased from $480 in 1904 to $1,948 in 1914, under the franchise Act of 1907. Its permit fee under the permit Act of 1907 would have been $17,040. chanrobles.com-red

Page 245 U. S. 180

Held that the franchise and permit taxes both violated the due process clause of the Fourteenth Amendment and directly burdened interstate commerce.

A suit to enjoin state officials from enforcing an unconstitutional tax is not a suit against the state.

218 F.2d 0 affirmed.

The case is stated in the opinion. chanrobles.com-red

Page 245 U. S. 183