Shirks Motor Express Corp. v. Messner

Opinion by

Mr. Justice Chidsey,

The appellants, Shirks Motor Express Corporation and Interstate Motor Freight System, Inc., filed separate bills in equity against tbe Secretary of Revenue and the Auditor General of the Commonwealth of Pennsylvania to enjoin them from enforcing the Act of June 22, 1931, P. L. 694, as amended by the Act of December 27, 1951, P. L. 1761, 72 PS §2185 et seq., which imposes an excise tax on the gross receipts of common carriers by motor vehicle, on the ground that the Act, as amended, violates the Commerce Clause, the Equal Protection Clause and the Due Process Clause of the United States Constitution, and also violates certain provisions of the Pennsylvania Constitution. The defendants filed preliminary objections in the nature of a demurrer, which in each case were sustained, and the respective complaints dismissed.

Shirks Motor Express Corporation is a Delaware corporation registered to do business in Pennsylvania. It is engaged in the business of transporting property by motor vehicle as a common carrier. It is engaged in interstate transportation, pursuant to certificates issued by the Interstate Commerce Commission, over various routes and between various points in seven States, including Pennsylvania. It is also engaged to a limited extent in intrastate transportation, pursuant to a certificate issued by the Pennsylvania Public Utility Commission, over certain routes within Pennsylvania.

Interstate Motor Freight System, Inc. is a Michigan corporation. It is a common carrier engaged solely in interstate transportation of property by motor vehicles, pursuant to certificates issued to it by the Interstate Commerce Commission. It operates over various routes and between various points in fifteen States, including Pennsylvania. This plaintiff’s bill in equity substantially duplicates the bill of Shirks Motor Express Corporation, but also alleges that the tax is unconstitutional because it is levied upon transportation over the Pennsylvania Turnpike, a State instrumentality, for which tolls are charged.

Both appellants pay to the Commonwealth taxes for liquid fuels and registration fees on their vehicles.

Appellants attack the constitutionality of the statute involved on many fronts. Their contentions may be roughly subdivided into two groups: (1) those aimed solely at the amendatory Act of 1951, and (2) those aimed at those portions of the original Act of 1931 which were not affected by the 1951 amendment.

In its original form the Act of 1931 imposed a tax of 8 mills on each dollar of the gross receipts of motor carriers as an excise for the use of the public highways. Intrastate carriers were required to pay eight mills of the gross receipts from all operations and interstate carriers were required to pay “. . . eight (8) mills upon the dollar upon such portion of the gross receipts of such company as is represented by the ratio that the number of miles of routes operated in this Commonwealth by such company, during the period for which the report is filed, bears to the total number of miles of all routes operated by such company during said period.”. The original Act also provided for credits against the amount of the tax for any tax paid to a city for the use of its highways and for registration fees paid to the Commonwealth. The Act of 1931 further provided that the tax receipts collected from interstate carriers should be paid into the Motor License Fund, while tax receipts collected from intrastate carriers should be paid into the General Fund of the Commonwealth. The Act of 1951 made two changes, (1) it eliminated the credit for payment of local taxes and registration fees, and (2) it provided that all tax receipts be paid into the General Fund.1

Appellants’ first contention is that the Act of 1931, as amended, violates the Commerce Clause (Article I, Section 8) of the United States Constitution. Appellants’ contention is based in part upon their construction of the above quoted portion of the statute to mean that the trucking companies are taxed upon the basis of physical location and extent of routes rather than miles operated. Such a construction is unwarranted. The title of the Act provides: “Imposing a tax on gross receipts as an excise on the use of the public highways by certain owners or operators of motor vehicles transporting passengers and property for hire.” (Emphasis supplied). Use of the highways can be ascertained only from the number of miles operated, not from the physical layout of the routes. We adopt as correct the construction given to the statute by the Department of Revenue in administering the tax, that is, that the tax is based upon the number of miles operated, not the physical location and the extent of the routes. Cf. Commonwealth, v. Brink’s, Incorporated, 346 Pa. 296, 30 A. 2d 128.

It is well settled that a State does not have the power to tax interstate commerce as such: Alpha Portland Cement Company v. Commonwealth of Massachusetts, 268 U. S. 203; Spector Motor Service, Inc. v. O’Connor, Tax Commissioner, 340 U. S. 602. It is equally well settled that a State may, consistently with the Commerce Clause, impose upon vehicles engaged in interstate commerce a reasonable, nondiscriminatory excise tax as compensation for the use of its highways: Dixie Ohio Express Co. v. State Revenue Commission et al., 306 U. S. 72; Hendrick v. State of Maryland, 235 U. S. 610; Capitol Greyhound Lines et al. v. Brice, Commissioner of Motor Vehicles, 339 U. S. 542. Both appellants and appellees concede these fundamental propositions, but disagree as to their application to the statute here involved.

Where an excise tax of snch nature is imposed by a State upon carriers engaged in interstate commerce it must affirmatively appear that it is levied only as compensation for the use of its highways. This limitation upon the taxing power of a State has not been violated where the taxing statute discloses that the incidence of the tax is apportioned to the use of the State’s highways or where the proceeds of the tax are apportioned directly or indirectly to highway purposes: Clark et al. v. Poor et al., 274 U. S. 554; Interstate Transit, Incorporated v. Lindsey, County Court Clerk, 283 U. S. 183; Morf v. Bingaman, Commissioner of Revenue for New Mexico, 298 U. S. 407; Aero Mayflower Transit Co. v. Board of Railroad Commissioners of Montana et al., 332 U. S. 495 (1947), and cases cited therein. This is merely another way of stating the rule previously referred to, that is, that the tax must be for the purpose of compensating the State for the use of its highways. Where the proceeds of the tax are allocated directly or indirectly for highway uses, there can be no doubt that the purpose of the tax is compensation for the use of the highways. Where the amount of the tax is reasonable and nondiscriminatory, and apportioned so as to reflect the use of a State’s highways, a State does not abdicate its right to exact compensatory taxes from vehicles engaged in interstate commerce because the proceeds of the tax are placed in a general fund, as was done in the instant case, rather than in a highway fund. If appellants’ argument were adopted, vehicles engaged in interstate commerce, which contribute largely to the depreciation of the highways, would pay only the motor fuel tax and registration fees, while similar carriers engaged in intrastate commerce, would, in addition, be subject to this excise tax. An interstate carrier may not base a constitutional objection solely upon the use made of the proceeds of the tax. This is a matter for the exclusive determination of the Legislature. If the tax is otherwise constitutional, the use to which the proceeds of the tax are allocated will not render it unconstitutional: Morf v. Bingaman, supra, at p. 412; Aero Mayflower Transit Co. v. Commissioner, supra; Clark v. Poor, supra; Dixie Ohio Co. v. State Revenue Commissioner, supra.2 None of the cases cited by the appellants holds otherwise.

Under the principles above set forth it is necessary to determine whether the formula set forth in the Act of 1931, as amended by the Act of 1951, is reasonably calculated to impose the tax only on that portion of the operation of interstate carriers which is effected by the use of highways within the Commonwealth of Pennsylvania,, and whether 'the tax is nondiscriminatory and reasonable in amount. The numerator of the tax formula is the number of miles operated in Pennsylvania. The denominator is the total number of miles operated. The multiple is the gross receipts of the carrier from all of its operations. The tax of eight mills is imposed upon the result of this calculation. The statute under consideration provides a reasonably accurate and nondiscriminatory formula to reflect the use of highways within this Commonwealth. In all of the cases cited by the appellants, either there was no formula whatever or the formula did not reflect use of the highways.

The only other question to be answered with reference to appellants’ contention that the Act of 1931 as amended violates the Commerce Clause, is whether the amount of the tax is reasonable. The burden of proving that the tax is unreasonable is on the carrier: Capitol Greyhound Lines v. Brice, supra; Clark, Director of Department of Motor Vehicles et al. v. Paul Gray, Inc. et al., 306 U. S. 583, and appellants have failed to carry that burden. It is true that the effect of that portion of the 1951 amendment which eliminated the credit for payment of local taxes and registration fees was the same as an increase in the amount of the tax which theretofore, because of those credits, was something less than eight mills. We do not regard a tax of eight mills on gross receipts apportioned to activities of interstate carriers within Pennsylvania as unreasonable, particularly since it has been held that an interstate carrier may be required to contribute toward the cost of construction of highways as well as their upkeep: Clark v. Poor, supra. The fact that one of the appellants or other marginal truck carriers will operate at a loss if the tax is applied, if true for that reason, does not establish that the tax is unreasonable.

None of the arguments advanced by the appellants is sufficient to show that the Act of 1931 as amended by the Act of 1951 is violative of the Commerce Clause of the United States Constitution.

Appellants also contend that the portion of the 1951 amendment which requires that the proceeds of the tax in question be placed in the General Fund violates Article IX, Section 18 of the Constitution of Pennsylvania. Article IX, Section 18, which was adopted in 1945, provides: “All proceeds from gasoline and other motor fuel excise taxes, motor vehicle registration fees and license taxes, operators’ license fees and other excise taxes imposed on products used in motor transportation after providing therefrom for (a) cost of administration and collection, (b) payment of obligations incurred in the construction and reconstruction of public highways and bridges shall be appropriated . . . and used solely for . . . public highways and bridges and air navigation facilities and costs and expenses incident thereto . . . and shall not be diverted by transfer or otherwise to any other purpose, . . .”. The amendment clearly and specifically enumerates the taxes intended to be covered by it and appellants recognize that a strict construction of this constitutional provision excludes a gross receipts tax on motor vehicle carriers for hire, and argue that the amendment must be construed in the light of common understanding and the form of the question which appeared on the ballot when the proposed amendment was approved by the voters. The question on the ballot was: “Shall the State Constitution be amended by adding Section eighteen to Article nine, requiring the revenues from taxes and license fees on gasoline, motor fuels, motor vehicles and operators and other products used in motor transportation, shall be used solely for highways, safety thereon, air navigation facilities, costs and expenses incident thereto; and permitting loans from such revenues to the Commonwealth only if repaid in the next fiscal year?”. Appellants stress the words “. . . revenue from taxes . . . on . . . motor vehicles and operators . . .”, and argue that the Act of 1931 imposed a gross receipts tax on operators of motor vehicles. But this argument proves too much and is self-defeating since the distinction between an owner’s license and an operator’s license is well known by almost all voters in Pennsylvania, and it can not be said that by approving the amendment as the question appeared on the ballot the voters intended by the word “operators” to include owners of motor vehicles for hire. The tax in question is clearly not a tax on motor vehicles as such, nor is it a tax on “operators” as that word is commonly understood.

Appellants further contend that the tax in question violates the Equal Protection Clause of the United States Constitution, and the Uniformity Clause of the Pennsylvania Constitution. This contention is based in part upon appellants’ erroneous construction of the statute which has been previously referred to and which requires no additional comment, and also upon the fact that the tax is applied to gross receipts arising from use of the Pennsylvania Turnpike for which a compensatory toll is also charged. Appellants argue that a carrier who uses the Turnpike for a given number of miles of its operation must pay a toll in addition to the tax, whereas another carrier who operates for an equal number of miles but does not use the Turnpike pays only the tax, and therefore there is lack of uniformity in the operation of the tax. The Turnpike Commission holds the legal title to the Turnpike, but only in its capacity as an instrumentality of the Commonwealth: Act of May 21, 1937, P. L. 774, Section 4, 36 PS §652d. The Turnpike is one of the public highways which cross the State of Pennsylvania in the same general locality. Two others are the William Penn Highway and the Lincoln Highway. No motor carrier is restricted to the use of the Turnpike to the exclusion of either of such other two routes. If a motor carrier voluntarily chooses to use the Turnpike because of more economic and efficient operation, such voluntary choice can not provide the foundation for a constitutional argument. The choice is obviously made because the amount of the toll is less than savings in operations resulting from a shorter route, few and very slight grades which make it possible to carry loads up to the legal limit, absence of intersections and savings in fuel and time. Appellant Interstate has not shown that the tax plus the toll exceeds fair compensation for its use of the Turnpike. A taxpayer can not voluntarily assume a burden and then be heard to say that it is unconstitutional. There is no merit in this contention.

Appellants’ last contention is that the 1951 amendment violates the Fourteenth Amendment, or Due Process Clause of the United States Constitution, and Article I, Sections 1 and 9 of the Constitution of Pennsylvania, which together appellants construe to be the Pennsylvania due process requirement. This contention is based upon the retroactive effect of that portion of the 1951 amendment which had the effect of increasing the amount of the tax by eliminating the credits formerly allowed for registration fees and local use taxes. The amendment was approved on December 27, 1951, but the Act- provides that it shall be applied to gross receipts for the calendar year 1951. The taxing power of the Legislature is very broad and includes power to enact taxes which are retroactive in effect as well as the power to retroactively increase taxes. Many Pennsylvania cases have sustained the exercise of this power and the United States Supreme Court has approved retroactive taxes since Stockdale v. The Insurance Companies, 20 Wall. 323 (1874). In Welch v. Henry et al., 305 U. S. 134, Justice Stone said at p. 148: “. . . For more than seventy-five years it has been the familiar legislative practice of Congress in the enactment of revenue laws to tax retroactively income or profits received during the year of the session in which the taxing statute is enacted, and in some instances during the year of the preceding session. See Untermyer v. Anderson, supra, footnote 1. [276 U. S. 440, 72 L. Ed. 645, 48 S. Ct. 353]. These statutes not only increased the tax burden by laying new taxes and increasing the rates of old ones or both, but they redistributed retroactively the tax burdens imposed by preexisting laws. This was notably the ease with the ‘Revenue Act of 1918/ enacted February 24, 1919, 40 Stat. 1057, and made applicable to the calendar year 1918, . . .”.

Even though the nature and amount of the increase in the tax could not have been anticipated, the retroactive effect of the 1951 amendment does not constitute a denial of due process under either the United States or the Pennsylvania Constitution.

We have considered all of the contentions made and authorities cited by appellants, but deem further discussion unnecessary.

The decrees of the court below which dismissed the complaint in each of these two cases are affirmed at the cost of the respective appellants.

1 Thus tax receipts from intrastate carriers continued to be paid into the General Fund.

2 In Morf v. Bingaman, 298 U. S. 407, Mr. Justice Stone said at p. 412: “. . . The use for highway maintenance of a fee collected from automobile owners may be of significance, when the point is otherwise in doubt, to show that the fee is in fact laid for that purpose and is thus a charge for the privilege of using the highways. Interstate Transit, Inc. v. Lindsey, supra. But where the manner of the levy, like that prescribed by the present statute, definitely identifies it as a fee charged for the grant of the privilege, it is immaterial whether the state places the fees collected in the pocket out of which it pays highway maintenance charges or in some other.”.

In the Aero Mayflower Transit Co. ease, 332 ü. S. 495, Mr. Justice Rutledge said at p. 504: “. . . Both before and after the Interstate Transit decision this Court has sustained state taxes expressly laid on the privilege of using the highways, as applied to interstate motor carriers, declaring in each instance that it is immaterial whether the proceeds are allocated to highway uses or others.”.

In Clark v. Poor, 274 U. S. 554, Mr. Justice Brandéis said at p. 557: “. . . It is said that all of the tax is not used for maintenance and repair of the highways; that some of it is used for defraying the expenses of the Commission in the administration or enforcement of the Act; and some for other purposes. This, if true, is immaterial. Since the tax is assessed for a proper purpose and is not objectionable in amount, the use to which the proceeds are put is not a matter which concerns the plaintiffs.”.

And in the Dixie Ohio Co. ease, 306 U. S. 72, Mr. Justice Butler said at p. 77: “. . . The exaction is not to be deemed offensive to the commerce clause merely because the State, in the conduct of its fiscal affairs, chooses to use part or all of the proceeds for purposes other than the construction, improvement, or maintenance of its highways . . . .”.