Anglo-Chilean Nitrate Sales Corp. v. Alabama

*220Mr. Justice Butler

delivered the opinion of the Court.

Appellant is a New York corporation having its principal office in that State. October 10, 1927,. it qualified to do business in Alabama, and March 14, 1930, made and sent to the state tax commission a return showing that its *221only property in Alabama on December 31, 1929, the date as of which the statute required the statement to be made, was 33,455,-763 pounds of nitrate of soda which had been imported by it from C^ile into Alabama and stored in the original packages, the book value of which was $712,846.72. March 31, 1930, the commission under § 54 of No. 163, General Acts, 1927,1 assessed against appellant for that year a franchise tax of $1,425.69, being at the rate of two dollars on each One thousand dollars of the value so reported.

Conformably to state practice appellant appealed to the circuit court of Montgomery county. The case’ was submitted on an agreed statement of facts the abridged substance of which follows:

From the- date of its qualification in Alabama to the time of the assessment, appellant was engaged in the business of importing nitrate through the port of Mobile and other ports. The nitrate, in bags containing about 100 pounds each, was brought into Mobile and there stored *222by appellant in a public warehouse and kept in the original packages until sold and delivered to the ultimate consumers. All was sold upon orders through a salesman who, paying his own expenses, was compensated by commissions on his sales. , The orders were taken subject to approval and were not effective until approved by appellant in its New York office. When so accepted, directions were given that the nitrate be forwarded to the customers. These directions were given to and carried out by the Walsh Stevedoring Company at Mobile, an-independent contractor, having an arrangement with appellant to handle its importations of nitrate, store it in a public warehouse and forward it as directed.

- All transactions were for cash. The customers received the nitrate only upon payment of the purchase price when they took up the shipping documents through a bank of collection by paying the drafts attached. Such payments were sent to the Merchants National Bank at Mobile and by it immediately transferred to appellant in New York. Appellant had no bank account in Alabama and paid all expenses there by remittances from New York. On the date as of-which appellant’s return was made it had no accounts or bills receivable in Alabama and had no money there at any time except during the brief intervals that the funds were being so transmitted. It did not have or em- • ploy any capital in that State unless the importation through the port of Mobile, the storage and sale, of nitrate in the manner above described, constitutes capital and its employment there.

Section 54, under which the assessment was made, declares that every corporation organized under the laws of any other State and doing business in Alabama shall pay to the State an annual franchise tax of two dollars on each thousand dollars of the actual amount of capital employed therein. Appellant maintained below and here insists that the section, construed to impose the tax .in question, *223is repugnant to the declarations of the federal Constitu-' tion: “No State shall, without the Consent of the Congress, lay any Imposts or Duties on Imports or Exports, except what may be absolutely necessary for executing it’s inspection Laws,” Art. I, § 10, cl. 2, and.“ The Congress shall have Power ... To regulate Commerce with foreign Nations, and among the several States ...” Art. I, §8. '

The Alabama statute in question was enacted in pursuance of § 232 of the state constitution which declares: No foreign corporation shall do any business in the State without having a place of business and an. authorized agent therein- and without filing ydth the' secretary of state a certified copy of its articles of incorporation. “ The legislature shall, by general law, provide for the payment to the State of Alabama of a franchise tax by such corporation, but such franchise tax shall be based on the actual amount of capital employed in this State.” As to the meaning and purpose of the statute, we are governed by the construction put upon it by the state supreme court.

Its decisions clearly show that the exaction is laid, not upon the authorization, right or privilege to do business in Alabama, but upon the actual doing of business. While the case at bar was pending on appeal there, the state supreme court in State v. National Cash Credit Assn., 224 Ala. 629, 632; 141 So. 541, held that the mere investment in or ownership of property in the State by a foreign corporation does not subject it- to the franchise tax. Adverting to the language of the statute, it declared that the “ property must be employed in a corporate "business done in-this state.” -On rehearing; May 19, 1932, and after its decision .in the case before us, that court said: “We merely hold a franchise tax to be what-it purports to be, a tax upon the exercise or use of its franchise in Alabama for the purposés of such franchise; and that, *224if no corporate activity is conducted in Alabama during the period covered by the tax, the corporation does not owe a franchise tax.”

And in the case at bar the court said: “The defendant duly qualified as a foreign corporation to do business in this state, appointed a resident agent, and that it actually engaged in business in Alabama by selling its nitrate through a salesman both within and without the state appears as an uncontroverted fact. It seeks to be relieved from this franchise tax solely upon the theory the imported nitrate, the sale of which constituted its business, was immune from state taxation. . . . The statute here under review has no reference to imports, but is merely of a general character relating to the fixation of the amount of a franchise tax upon foreign corporations doing business in this state.” And, after referring to the manner of appellant’s acceptance of orders and the collections and remittances, the court said: “ These details go to show the corporation was actually engaged in business in this state ...” As appellant did no local business in the State, that decision plainly rests upon the assumption that Alabama had power to tax appellant’s sales in original packages of the nitrate it imported into that State only for sale and that such sales constituted a business that is taxable under § 54. The Alabama statute is unlike that of Michigan examined here in Detroit International Bridge Co. v. Michigan, 287 U. S. 295, and Michigan v. Michigan Trust Co., 286 U. S. 334, 342. There the tax upon a domestic corporation was imposed for the mere right to transact business.

The fact that appellant qualified to do business in Alabama was not, and- rightly cannot be, held to sustain the tax. In Ozark Pipe Line Corp. v. Monier, 266 U. S. 555, we condemned as repugnant to the commerce clause a Missouri statute that required every foreign corporation engaged in business in that State to pay an annual franchise tax upon the privilege or right to do business. *225The company-ebusiness there consisted in the operation of a pipe line- for interstate transportation of oil and in the ownership of property, the keeping of its principal office, purchase of supplies, employment of labor, maintenance and operation of telephone and telegraph lines ail in furtherance of such interstate commerce and constituting the means and instruments by which it was conducted. We held that the tax could not be constitutionally exacted, and that -the facts that the foreign corporation was organized for local business and had applied for and received a local license conferring the power of eminent domain.did not enable the State to tax its right to carry on interstate commerce. We said (p. 567): “ The state has no such power even in the case of domestic corporations. See Philadelphia S. S. Co. v. Pennsylvania, 122 U. S. 326, 342.”

The question whether, consistently with the imports and commerce clauses, the Alabama statute may be construed to require appellant to pay the specified franchise tax is dual in form but single in substance, for, upon the facts of this case, it is clear that if the exaction is a tax on imports it necessarily burdens foreign commerce. Crew Levick Co. v. Pennsylvania, 245 U. S. 292, 295.

The stipulation of the parties shows that the only transactions in Alabama in which appellant is concerned are the landing, storage and sale of the nitrate in the form and packages in which it was put up abroad and .'transported into the United States. The bags were kept intact, no nitrate was removed therefrom and, prior to the delivery of the same to those who bought from appellant, it was not in any manner commingled with, and did not become a part of, the general mass of property within the State. The right -to import the nitrate included the right to sell it in the original bags while it remained the' property of appellant and before it lost-its distinctive character as an import. State prohibition of such, sales' *226would take from appellant the very rights in respect of importation that are conferred by the Constitution and laws of the United States. Alabama was powerless, without the consent of Congress, to tax the nitrate before such sales or to require appellant by the payment of occupation or franchise tax or otherwise to purchase from it the. privilege of selling goods so imported and handled. Brown v. Maryland, 12 Wheat. 419, 436, 442-444. In that case a state license fee imposed on an importer selling imported goods in the original bales or packages was condemned as repugnant to the imports and commerce clauses. Chief Justice Marshall said (p. 444): “All must perceive, that a tax on the sale of an article, imported only for sale, is a tax on the article itself. ... A tax on the occupation of an importer is ... a tax on importation. It must add to the price of the article, and be paid by the consumer, or by the importer himself, in like manner as a direct duty on the article itself would be made. This the State has not a right to do; because it is prohibited by the constitution.”

In Cook v. Pennsylvania, 97 U. S. 566, the court held offensive to the same provisions a tax on the amount of the sales of imported goods in the original packages made by ail auctioneer for the importer. In May v. New Orleans, 178 U. S. 496, the court (p. 507) formally reaffirmed and succinctly stated the propositions established in Brown v. Maryland, but held that the city tax there involved did not violate the imports or commerce clause, because the imported goods were not sold in the. original package.2 And recently in Willcuts v. Bunn, 282 U. S. 216, we. said (p. 228): “ When the. Constitution prohibits States from laying duties on imports, the prohibition not *227only extends to a tax upon the act of importing, but also to one upon the occupation of the importer or upon the articles ilnported. A tax on the sale of ah article, imported only for sale, is a tax on the article itself. Brown v. Maryland, 12 Wheat. 419, 444.” And see Almy v. California, 24 How. 169. Fairbank v. United States, 181 U. S. 283. Selliger v. Kentucky, 213 U. S. 200. United States v. Hvoslef, 237 U. S. 1. Thames & Mersey Ins. Co. v. United States, 237 U. S. 19. Crew Levick Co. v. Pennsylvania, supra. Sonneborn Bros. v. Cureton, 262 U. S. 506, 509. The constitutional protection extends to corporations as well as to individuals. Crutcher v. Kentucky, 141 U. S. 47, 57. International Textbook Co. v. Pigg, 217 U. S. 91, 108.

In support of its conclusion the state court cited and appellee relies upon New York v. Roberts, 171 U. S. 658. The question for decision in the case now before us was not involved, presented or decided there. The statute of New York considered there imposed a tax on the business or franchise of domestic and foreign corporations except, among others, those wholly engaged in carrying on manufacture in the State. . The taxpayer, Parke, Davis & Company, was. a Michigan corporation. It had its factory in Detroit and a warehouse .and depot in New York. It had a manager and over 50 employees there. It did local business and also sold in original packages goods received from its factory and goods imported for it from foreign countries. The tax rate was graded by the statute according to dividends (presumably paid out of net earnings). Cf. U. S. Glue Co. v. Oak Creek, 247 U. S. 321. The tax base was the amount of capital employed within the State and the comptroller fixed that amount at $90,-000. The corporation, seeking to have the assessment set aside, took the case to the'state supreme court. It sustained the assessment against the contention that the statute as construed by the comptroller was repugnant to *228the privileges and immunities clause, Art. IV, § 2, and .held that the business was “not interstate commerce, which will prevent the corporation carrying it on from being taxed, . . . 91 Hun 158, 162; 36 N. Y. S. 368. No other federal question .was considered. The court of appeals affirmed without opinion. In this court the corporation’s principal insistence was that the statute was repugnant to the equal protection clause of the Fourteenth Amendment, in that it exempted domestic corporations manufacturing and selling in New York while imposing upon the Michigan corporation a discriminatory tax for selling in New York in original packages products manu- . faetured in its Detroit factory. The court overruled that contention. The opinion shows that as to the amount of its capital employed in New York no federal question was presented. And, as admittedly the corporation did a local business in that State, i. e., business not included in interstate or foreign commerce (171 U. S. 659; 91 Hun 160; 36 N. Y. S. 368), that case is essentially different from this one.

The decisions here since New York v. Roberts, supra, definitely show that the power of the State to withhold from a foreign corporation permission to exercise its fran'chise to do business therein does not enable it, when granting the' privilege, to burden by taxation interstate commerce carried on by such corporation within the State. And quite recently in Fidelity & Deposit Co. v. Tafoya, 270 U. S. 426, we said (p. 434): “ Thus the right to ex- ■ elude a foreign corporation cannot be used to prevent it from resorting to a federal court, Terral v. Burke Construction Co., 257 U. S. 529; or to tax it upon property that by established principles the State has no power to tax, Western Union Telegraph Co. v. Kansas, 216 U. S. 1, and other cases in the same volume and later that have followed it; or to interfere with interstate commerce Sioux Remedy Co. v. Cope, 235 U. S. 197, 203; Looney *229v. Crane Co., 245 U. S. 178, 188. Western Union Telegraph Co. v. Foster, 247 U. S. 105, 114.” See Ozark Pipe Line v. Monier, supra, Alpha Cement Co. v. Massachusetts, 268 U. S. 203. Frost Trucking Co. v. Railroad Comm’n, 271 U. S. 583, 593, et seq. Sprout v. South Bend, 277 U. S. 163, 170-171. New Jersey Tel. Co. v. Tax Board, 280 U. S. 338, 346. East Ohio Gas Co. v. Tax Comm’n, 283 U. S. 465, 470.

It follows that the Alabama statute, construed to impose a tax upon appellant for selling in that State in the original packages the nitrate imported by it from Chile, is repugnant to the imports and commerce clauses above quoted. And, as it did no other business in that State, it is not liable for any part of the tax that the state commission assessed against it.

Judgment reversed.

Section 54 of Act No. 163, Alabama General Acts, 1927, p. 176, provides:

“That every corporation organized under the laws of any other state, nation, or territory, and doing business in this State, except strictly benevolent, educational or religious corporations, shall pay annually to the State an annual franchise tax of Two Dollars ($2.00) on each One Thousand Dollars' of the actual amoimt of capital employed in this State. In, ascertaining the annual franchise tax which shall be paid by any foreign corporation doing business in this State under’this section, there shall be deducted from the amount of the capital employed by such corporation in this State the aggregate amount of loans of money made by such corporation in this State, and which shall be secured by existing mortgage or mortgages to it on real estate in’ this State, and upon which mortgages there shall have been paid the recording privilege tax provided by law.”

For the derivation of this section see: § 16 of Act No. 464, Generai Acts, 1915, p.'397. § 16 of Act No. 328, General Acts, 1919, p. 291. § 11 of Act No. 172, General Acts, 1923, p. 164, as amended by Act No. 263, General Acts, 1923, p. 267.

Cf. Austin v. Tennessee, 179 U. S. 343, 359. Cook Marshall County, 196 U. S. 261, 270. Kirmeyer v. Kansas, 236 U. S. 568, 573. Price v. Illinois, 238 U. S. 446, 454. Hebe Co. v. Shaw, 248 U. S. 297, 304.