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    AMERICAN STEEL & WIRE CO. v. SPEED, 192 U.S. 500 (1904)

    U.S. Supreme Court

    AMERICAN STEEL & WIRE CO. v. SPEED, 192 U.S. 500 (1904)

    192 U.S. 500

    R. A. SPEED, Clerk of the County Court of Shelby County, Deft. in Err.
    No. 356.

    Submitted January 11, 1904.
    Decided February 23, 1904.

    [192 U.S. 500, 501]   Mr. Josiah Patterson and Messrs. Paterson, Neely, & Henderson, and Pam, Calhoun, & Glennon for plaintiff in error.

    [192 U.S. 500, 505]   Messrs. Charles T. Cates, Jr., W. H. Carroll, and James M. Greer for defendant in error.

    [192 U.S. 500, 508]  

    Mr. Justice White delivered the opinion of the court:

    Whether the plaintiff in error is entitled to recover the sum of certain taxes which were paid under protest, on the ground that the taxes were repugnant to the Constitution of the United States, is the question for decision on this record.

    Section 28, article 2, of the Constitution of the state of Tennessee, so far as pertinent to the issue to be decided, is as follows:

    Section 30, article 2, of the same Constitution, provides:

    The assessing and taxing laws of the state of Tennessee in force at the time the taxes in controversy were levied provided, first, for a general ad valorem tax upon all property; second, for [192 U.S. 500, 509]   a merchants' tax separate from the general ad valorem levy, this latter tax being of two classes: A tax upon the average capital invested in business, and a privilege tax, which was at a different rate, and in other respects distinct from the merchants' tax just referred to. Moreover, at the time the tax assessments in question were made the statutes of the state of Tennessee concerning the merchants' tax contained the following:

    Moreover, the assessment laws, whilst providing that all 'persons, copartners, and joint stock companies engaged in the manufacture of any goods, wares, merchandise, or other articles of value shall pay an ad valorem tax upon the actual cash value of their property, real, personal, or mixed, . . .' made the following exception: 'Provided, the value of articles manufactured from the produce of the state in the hands of the manufacturer shall be deducted in assessing the property.' And a like exception qualified a provision imposing an ad valorem tax upon the capital and franchises of manufacturing corporations. Besides, the assessing statutes contained a general provision exempting 'all growing crops of whatever nature or kind-the direct product of the soil of this state-in the hands of the producer or his immediate vendee, and manufactured articles from the produce of this state in the hands of the manufacturer.'

    Whilst these laws were in force the officer whose duty it was to list the merchant tax assessed against the American Steel & Wire Company, which we shall hereafter call the steel company, both the general merchants' tax and a merchants' privilege tax. The company resisted the assessment, and, [192 U.S. 500, 510]   after unsuccessfully pressing, through the administrative channels provided by the law of Tennessee, its objections, paid the tax under protest, and thereupon, as authorized by the law of Tennessee, commenced this suit to recover the amount paid.

    Without going into detail, it suffices to say that the bill filed in the action to recover substantially alleged as follows: That the company was a New Jersey corporation, having a place of business in the city of Chicago, and owning and operating the various plants for the manufacture of wire, nails, etc., in states other than the state of Tennessee. And, for the purpose of facilitating the sale and delivery of the goods by it manufactured, it had selected Memphis, Tennessee, as a distributing point, and had made an arrangement in that city with the Patterson Transfer Company, a corporation engaged at Memphis in the transfer of merchandise. By this arrangement the Patterson Transfer Company was to take charge of the products when shipped to Memphis, consigned to the steel company, store them in a warehouse there, assort them and make delivery to the persons to whom the goods were sold by the steel company. It was averred that the Patterson Transfer Company, in fulfilling its obligations under the contract, was in no sense a merchant, but only a carrier, and that the steel company, in storing and delivering its goods at Memphis, was not a merchant in Memphis, but was simply a manufacturer, delivering in the original packages goods made in other states to the persons who had bought them. In substance, besides, it was alleged that the goods in the warehouse in Memphis were merely in transit from the point of manufacture outside of the state of Tennessee to the persons to whom they had been previously sold. The levy of the tax was charged to be repugnant to the commerce clause of the Constitution of the United States: First, because the goods in the warehouse in Memphis were in the original packages as shipped from other states and had not been sold in Tennessee, and hence had not been commingled with the property of that state, and because, in any event, they had acquired no situs in Tennessee, as they [192 U.S. 500, 511]   were moving in the channels of interstate commerce from the place where the goods were manufactured, for delivery to the persons to whom in effect they had been sold. Second. Because, as the state of Tennessee exempted from taxation articles manufactured from the produce of that state, no tax could be imposed by Tennessee upon articles manufactured from the produce of other states, without operating a discrimination against articles manufactured from the produce of other states. Issue was joined on the complaint. The trial court, deducing from the proof conclusions of ultimate fact in favor of the complainant, entered a decree in favor of the steel company. The case was taken to the supreme court of the state. In that court the validity of the tax was upheld and the judgment below was reversed. The questions raised concerning the repugnancy of the tax to the Constitution of the United States were expressly considered and decided adversely to the steel company. This writ of error was thereupon prosecuted.

    The supreme court of Tennessee stated the facts as follows:

    With these facts in hand we are of opinion that the court [192 U.S. 500, 519]   below was right in deciding that the goods were not in transit, but, on the contrary, had reached their destination at Memphis, and were there held in store at the risk of the steel company, to be sold and delivered as contracts for that purpose were completely consummated. All question, therefore, as to the power of the state to levy the merchants' tax based on the contrary contention, being without merit, may be put out of view. The other propositions pressed upon our attention require consideration. They relate to two subjects: First, the asserted want of power of the state of Tennessee to tax because the goods were imported from another state, and were yet, it is contended, in the original packages; and, second, because of the alleged discrimination asserted to result from the provision of the state Constitution exempting goods manufactured from the produce of the state.

    1. Since Brown v. Maryland, 12 Wheat. 436, 6 L. ed. 684, it has not been open to question that taxation imposed by the states upon imported goods, whether levied directly on the goods imported or indirectly by burdening the right to dispose of them, is repugnant to that provision of the Constitution providing that 'No state shall, without the consent of the Congress, lay any imposts or duties on imports or exports.' (Article 1 , 10, paragraph 3.) And Brown v. Maryland also settled that where goods were imported they preserved their character, as imports, and were therefore not subject to either direct or indirect state taxation as long as they were unsold in the original packages in which they were imported. A recent case referring to the authorities and restating this elementary doctrine is May v. New Orleans, 178 U.S. 496 , 44 L. ed. 1165, 20 Sup. Ct. Rep. 976. Assuming that the goods concerning which the state taxes in this case were levied were in the original packages and had not been sold, if the bringing of the goods into Tennessee from another state constituted an importation, in the constitutional signification of that word, it is clear they could not be directly or indirectly taxed. But the goods not having been brought from abroad, they were not imported in the legal sense, and [192 U.S. 500, 520]   were subject to state taxation after they had reached their destination and whilst held in the state for sale. This is as conclusively foreclosed by the decisions of this court as is the doctrine resting upon the decision in Brown v. Maryland. Woodruff v. Parham, 8 Wall. 123, 19 L. ed. 382; Brown v. Houston, 114 U.S. 622 , 29 L. ed. 257, 5 Sup. Ct. Rep. 1091. The doctrine upon which the cases rest was this,-that imports, in the constitutional sense, embrace only goods brought from a foreign country, and consequently do not include merchandise shipped from one state to another. The several states, therefore, not being controlled as to such merchandise by the prohibition against the taxation of imports, it was held that the states had the power, after the goods had reached their destination and were held for sale, to tax them, without discrimination, like other property situated within the state.

    Those two cases decided, the one more than thirty-five and the other more than eighteen years ago, are decisive of every contention urged on this record depending on the import and the commerce clause of the Constitution of the United States. The doctrine which the two cases announced has never since been questioned. It has become the basis of taxing power exerted for years, by all the states of the Union. The cases themselves have been approvingly referred to in decisions in this court too numerous to be cited, and we therefore content ourselves by mentioning two of the cases where the doctrine was restated. Emert v. Missouri, 156 U.S. 296 , 39 L. ed. 430, 5 Inters. Com. Rep. 68, 15 Sup. Ct. Rep. 367; Kelley v. Rhoads, 188 U.S. 1 , 47 L. ed. 359, 23 Sup. Ct. Rep. 259. But it is strenuously insisted that the principle of the cases referred to, reiterated again and again and uniformly followed for so long a period of time, has been, by inevitable implication, overruled by the cases of Leisy v. Hardin, 135 U.S. 100 , 34 L. ed. 128, 3 Inters. Com. Rep. 36, 10 Sup. Ct. Rep. 681; Lying v. Michigan, 135 U.S. 161 , 34 L. ed. 150, 3 Inters. Com. Rep. 143, 10 Sup. Ct. Rep. 725, and other cases resting on the rule expounded in those cases.

    We might well leave the unsoundness of the proposition to be demonstrated by what we have previously said, and also by the fact that, in Leisy v. Hardin and Lyng v. Michigan, and most of the similar cases relied on, the decisions in Woodruff [192 U.S. 500, 521]   v. Parham and Brown v. Houston were referred to without even an intimation that those cases were deemed to be overruled or even qualified. The earnestness with which the contention is pressed induces us, however, brieftached. to point out the misconception upon which it rests. It results from assuming that the rule which governs in a case where there is an absolute prohibition is applicable where no such prohibition obtains. Brown v. Maryland illustrates the first of these cases, while Woodruff v. Parham, Brown v. Houston, Leisy v. Hardin, Lyng v. Michigan are examples of the other. Thus, in Brown v. Maryland there was an absolute want of power to tax imports, and it was held that a state enactment which operated to tax imports, whether directly or indirectly, was within the positive prohibition. In other words, that imports could not be taxed at all until they had completely lost their character as such. Woodruff v. Parham and Brown v. Houston, on the other hand, so far as interstate commerce was concerned, dealt with no positive and absolute inhibition against the exercise of the taxing power, but determined whether a particular exertion of that power by a state so operated upon interstate commerce as to amount to a regulation thereof, in conflict with the paramount authority conferred upon Congress. In order to fix the period when interstate commerce terminated, the criterion announced in Brown v. Maryland-that is, sale in the original packages at the point of destination-was applied. The court, therefore, conceded that the goods which were taxed had not completely lost their character as interstate commerce, since they had not been sold in the original packages. As, however, they had arrived at their destination, were at rest in the state, were enjoying the protection which the laws of the state afforded, and were taxed without discrimination, like all other property, it was held that the tax did not amount to a regulation in the sense of the Constitution, although its levy might remotely and indirectly affect interstate commerce. In Leisy v. Hardin and Lyng v. Michigan the same question in a different aspect was presented. The goods had reached their [192 U.S. 500, 522]   destination and the question was not the power of the state to tax them, but its authority to treat the goods as not the subjects of interstate commerce, and to prohibit their introduction or sale. This was held to be a regulation within the constitutional sense, and therefore void. The cases, therefore, did not decide that interstate commerce was to be considered as having completely terminated at one time for the purposes of import taxation, and at a different period for the purposes of interstate commerce. But both cases, whilst conceding that interstate commerce was completely terminated only after the sale at the point of destination in the original packages, were rested upon the nature and operation of the particular exertion of state authority considered in the respective cases.

    2. The discrimination is asserted to have arisen from the provision of the state Constitution, saying that 'no article manufactured of the produce of this state shall be taxed otherwise than to pay inspection fees.' But in Kurth v. State (1887) 86 Tenn. 134, 5 S. W. 593, it was decided that this provision of the Constitution referred only to a direct levy of taxation on articles manufactured of the produce of the state, and did not apply to taxes levied by virtue of the grant conferred by the Constitution to tax 'merchants, peddlers, and privileges, in such manner as they (the legislature) may from time to time direct.' The two provisions, it was held, should be construed together, so that the one would not limit the other. We have been referred to no case decided by the supreme court of Tennessee modifying this interpretation of the state Constitution, and its correctness is in effect directly affirmed by the ruling made by the court in this case. Now the tax complained of on this record is not the general ad valorem tax levied on property as such, but is a merchants' tax, and is therefore not within the purview of the exemption clause from which it is asserted the discrimination arises. Construing the taxing statutes of the state, the court below decided in this case that they equally apply to all merchants, and hence did not discriminate as against any member of the merchants' class. The argument [192 U.S. 500, 523]   is made that under the facts found by the court below it was erroneously held that the steel company, because of the business which it carried on in the state of Tennessee, was a merchant within the statutes, and the power to review this question, it is insisted, should be exerted because the question is Federal in its nature. The contention is without merit. As the levy of the merchants' tax violated no Federal right, the mere determination of who were merchants within the state law involved no Federal question. The construction of the state law being conclusive and embracing all persons doing a like business with the steel company, it follows that there was no discrimination. Conceding it to be true, as argued, that in the past there would seem to have been conflict of opinion in the court of Tennessee in interpreting various statutes concerning the merchants' tax, this contrariety does not concern the meaning of the statute construed in this case. As that statute has been construed by the state court as applying to all merchants and as embracing alike all persons engaged in the character of business which the steel company was carrying on, it follows that there is no ground upon which to predicate the complaint of undue discrimination. Nor do we think that the opinion of the supreme court of Tennessee in Benedict v. Davidson County (not yet efficially reported), 67 S. W. 806, conflicts with the views just expressed. That case involved, not a merchants' tax, but the validity of a general ad valorem levy on property as such, and, therefore, affords no ground for the contention that manufacturers in Tennessee who shipped the goods by them made from the products of the state to a depot for sale, and there sold them under conditions and circumstances identical with those presented here, could not be taxed as merchants under the law of Tennessee.


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