Indiana Department of State Revenue v. Nebeker

233 Ind. 58

• Court: Indiana Supreme Court
• Decided: December 15, 1953
• Docket: No. 29,004
• Status: Published

Opinions

FLANAGAN, J.

In the case of Freeman v. Hewit (1947), 329 U. S. 249, 67 S. Ct. 274, 91 L. Ed. 265, the Supreme Court of the United States decided that an Indiana citizen who bought stock on the New York Stock Exchange was engaged in interstate commerce, and therefore was not subject to tax on those transactions under the Gross Income Tax Law of the State of Indiana. In that case the Indiana citizen actually bought and paid for the stock.

The question here presented is whether that decision governs buying on margin.

The factual difference, as we understand it, is that when stock is bought on margin the broker advances a percentage of the purchase price, holds a lien on the stock for his advancement, and does not permit the stock certificate to be put in the name of the customer unless the customer pays in full, which rarely happens.

This factual difference merely relates to the method of financing.

However, the State of Indiana contends that transactions of this kind are only matters of bookkeeping; that, since the stock certificates themselves do not cross state lines, no question of interstate commerce is involved.

We cannot agree. Importance cannot attach to whether a piece of paper goes over state boundaries. Importance must attach to whether the transaction itself was a part of interstate commerce.

As the Supreme Court of the United States pointed out in the case of Freeman v. Hewit, supra, the vital question in each case is whether the sale itself was in the field of interstate commerce. The evidence of the transaction may float around the world or stay safely buried in a gilded vault on Wall Street. It seems to us to make no decisive difference.

The trial court held that the facts in this case bring it within the rule laid down in the Freeman Case. We think the trial court was correct.

Judgment affirmed.