Joseph v. Carter & Weekes Stevedoring Co.

330 U.S. 422, 91 L. Ed. 993, 67 S. Ct. 815, 1947 U.S. LEXIS 2872

• Court: Supreme Court of the United States
• Decided: March 10, 1947
• Status: Published

Opinions

Mr. Justice Reed

delivered the opinion of the Court.

These two writs of certiorari bring before this Court contentions in regard to the application to the respective respondents, Carter & Weekes Stevedoring Company and John T. Clark & Son, of New York City, of the general business tax laws covering, when both cases are considered, the years 1937 to 1941, inclusive.¹ The character of the taxes in issue will appear from a section, set out below, of a local law imposing the tax for 1939 and 1940.² The respective taxpayers are liable also for the general income and ad valorem taxes of the State and City of New York. Both respondents are corporations engaged in the business of general stevedoring. For these cases, the business of respondents may be considered as consisting only of taking freight from a convenient place on the pier or lighter wholly within the territorial limits of New York City and storing it properly for safety and for handling in or on the outgoing vessel alongside, or of similarly unloading a vessel on its arrival. The vessels moved in interstate or foreign commerce, without a call at any other port of New York. We do not find it necessary to consider separately interstate and foreign commerce. The Commerce Clause covers both.

Through statutory proceedings unnecessary to particularize, the Comptroller of the City of New York determined that the respondents were liable for percentage taxes upon the entire gross receipts from the above activities for the years in question under the provisions of the respective local laws to which reference has been made. Review of these determinations was had by respondents in the Supreme Court of New York, Appellate Division. The determinations of the Comptroller were annulled on the authority of Puget Sound Stevedoring Co. v. Tax Commission, 302 U. S. 90. 269 App. Div. 685, 54 N. Y. S. 2d 380, 383. These orders were affirmed by the Court of Appeals, 294 N. Y. 906, 908, 63 N. E. 2d 112, and remittiturs issued stating that the Court of Appeals affirmed on the ground that the local laws as applied in these cases were in violation of Article I, § 8, Clause 3, of the Constitution of the United States.³ Writs of certiorari to this Court were sought and granted on the issue of whether or not this tax on these respondents constituted an unconstitutional burden on commerce.

Petitioners recognize the force of the Puget Sound case as a precedent. Their argument is that subsequent holdings of this Court have indicated that the reasons which underlay the decision are no longer controlling in judicial examination of the constitutionality of state taxation of the gross proceeds derived from commerce, subject to federal regulation. They cite, among others, these later decisions: Western Live Stock v. Bureau of Revenue, 303 U. S. 250; Southern Pacific Co. v. Gallagher, 306 U. S. 167; McGoldrick v. Berwind-White Co., 309 U. S. 33; Department of Treasury v. Wood Preserving Corp., 313 U. S. 62.

In the Puget Sound case a state tax on gross receipts, indistinguishable from that laid by New York City in this case, was held invalid as applied to stevedoring activities exactly like those with which we are here concerned. The Puget Sound opinion pointed out, p. 92 et seq., that transportation by water is impossible without loading and unloading. Those incidents to transportation occupy the same relation to that commerce whether performed by the crew or by stevedore, contracting independently to handle the cargo. The movement of cargo off and on the ship is substantially a continuation of the transportation. Cf. Baltimore & O. S. W. R. Co. v. Burtch, 263 U. S. 540.

It is trite to repeat that the want of power in the confederation to regulate commerce was a principal reason for the adoption of the Constitution. The Commerce Clause bears no limitation of power upon its face and, when the Congress acts under it, interpretation has suggested none, except such as may be prescribed by the Constitution. Gibbons v. Ogden, 9 Wheat. 1, 196; United States v. Carolene Products Co., 304 U. S. 144, 147; North American Co. v. S. E. C., 327 U. S. 686, 704. On the other hand, the Constitution, by words, places no limitation upon a state’s power to tax the things or activities or persons within its boundaries. What limitations there are spring from applications to state tax situations of general clauses of the Constitution. E. g., Art. I, § 10, Cl. 2 and 3; New York Indians, 5 Wall. 761; Board of County Commissioners v. United States, 308 U. S. 343; Bell’s Gap R. Co. v. Pennsylvania, 134 U. S. 232, 237; Lawrence v. State Tax Commission, 286 U. S. 276, 284; Henderson Bridge Co. v. Henderson City, 173 U. S. 592, 614-15; New York Rapid Transit Corp. v. City of New York, 303 U. S. 573, 581-82. From, the Commerce Clause itself, there comes, also, an abridgment of the state’s power to tax within its territorial limits. This has arisen from long-continued judicial interpretation that, without congressional action, the words themselves of the Commerce Clause forbid undue interferences by the states with interstate commerce⁴ and that this rule applies in full force to an unapportioned⁵ tax on the gross proceeds from interstate business,⁶ where the taxes were not in lieu of ad valorem taxes on property.⁷

We do not think that a tax on gross income from stevedoring, obviously a “continuation of the transportation,” is a tax apportioned to income derived from activities within the taxing state. The transportation in commerce, at the least, begins with loading and ends with unloading. Loading and unloading has effect on transportation outside the taxing state because those activities are not only preliminary to but are an essential part of the safety and convenience of the transportation itself.

When we come to weigh the burden or interference of this tax on the gross receipts from interstate commerce, the purposes of that portion of the Commerce Clause— the freeing of business from unneighborly regulations that inhibit the intercourse which supplies reciprocal wants by commerce⁸—is a significant factor for consideration. An interpretation of the text to leave the states free to tax commerce until Congress intervened would have permitted intolerable discriminations. Nippert v. City of Richmond, 327 U. S. 416, and cases collected in notes 13, 14, 15 and 16. Nevertheless, a proper regard for the authority of the states and their right to require interstate commerce to contribute by taxes to the support of the state governments which make their interstate commerce possible, has led Congress, over a long period, to leave intact the judicial rulings, referred to above, that apportioned, non-discriminatory gross receipt taxes or those fairly levied in lieu of property taxes conformed to the requirements of the Commerce Clause. As the power lies in Congress under the Clause to make any desired adjustment in the taxation area, its acquiescence in our former rulings on state taxation indicates its agreement with the adjustments of the competing interests of commerce and necessary state revenues.⁹ There is another reason that may be the basis for the acceptance, almost complete, by Congress of the judicial interpretations in this field. This is that a wide latitude exists for permissible state taxation. This term, in an effort to show that the reach of the Commerce Clause did not destroy the state’s power to make commerce pay its way, we elaborated the fact that taxes on the commerce itself was not the sole source of state revenue from that commerce. Freeman v. Hewit, supra, p. 254; see also Adams Mfg. Co. v. Storen, supra, 310.

A power in a state to tax interstate commerce or its gross proceeds, unhampered by the Commerce Clause, would permit a multiple burden upon that commerce. This has been noted as ground for their invalidation. Western Live Stock v. Bureau, 303 U. S. 250, 255. The selection of an intrastate incident as the taxable event actually carries a similar threat to the commerce but, where the taxable event is considered sufficiently disjoined from the commerce, it is thought to be a permissible state levy.¹⁰ This result generally is reached because the local incident selected is one that is essentially local and is not repeated in each taxing unit. In the present case, the threat of a multiple burden, except in the few instances in the record of interstate, in distinction to foreign, commerce, is absent. The multiple burden on interstate transportation from taxation of the gross receipts from stevedoring arises from the possibility of a similar tax for unloading. The actual effect on the cost of carrying on the commerce does not differ from that imposed by any other tax exaction—ad valorem, net income or excise. Cf. Western Live Stock v. Bureau, supra, 254. We need consider only whether or not the loading and unloading is distinct enough from the commerce to permit the tax on the gross.

On precedent, the Puget Sound case is controlling. It was promptly and recently cited with approval.¹¹ It appears in Adams Mfg. Co. v. Storen¹² in support of the possible double tax argument against levies on interstate commerce. In Western Live Stock v. Bureau, supra, 258, it was adverted to as a case for comparison with a ruling that “preparing, printing and publishing magazine advertising is peculiarly local and distinct from its circulation whether or not that circulation be interstate commerce.” The case was not included in the Court’s opinion in Gwin, White & Prince, Inc. v. Henneford,¹³ where a state gross receipts tax on income from marketing fruit interstate was invalidated under the Commerce Clause, or in McGoldrick v. Berwind-White Co.,¹⁴ though relied upon in the concurring opinion in the first at p. 442 and the dissent in the second at p. 62. Upon examination this history gives an impression that there has been a doubt as to the continued vitality of Puget Sound. We come now face to face with the problem of overruling or approving the case.

Since Puget Sound there has been full consideration of how far a state may go in taxing intrastate incidents closely related in time and movement to the interstate commerce. The cases that lend strongest support to petitioners’ argument for overruling the Puget Sound decision have been referred to above. We comment further upon them. The 2% excise tax levied by New Mexico on the gross receipts of publishers from advertising, upheld in Western Live Stock, was found to be an exaction for carrying on a local business.¹⁵ The Gallagher case turns expressly on our conclusion that a use tax is validly levied on an intrastate event, “separate and apart from interstate commerce,” p. 176, and the Wood Preserving case¹⁶ reached a similar result by reason of the fact that the taxpayer sold and delivered its ties intrastate before transportation began, 313 U. S. at 67. This is likewise true of American Mfg. Co. v. St. Louis, 250 U. S. 459, as explained in the Storen case.¹⁷ When we examine the

Berwind-White tax on the purchasers of tangible personal property for consumption, there is the same reliance upon the local character of the sale, pp. 43, 47, 49, 58.¹⁸ We there said, p. 48:

“Certain types of tax may, if permitted at all, so readily be made the instrument of impeding or destroying interstate commerce as plainly to call for their condemnation as forbidden regulations. Such are the taxes already noted which are aimed at or discriminate against the commerce or impose a levy for the privilege of doing it, or tax interstate transportation or communication or their gross earnings, or levy an exaction on merchandise in the course of its interstate journey.”

Though all of these cases were closely related to transportation in commerce both in time and movement, it will be noted that in each there can be distinguished a definite separation between the taxable event and the commerce itself. We have no reason to doubt the soundness of their conclusions.

Stevedoring is more a part of the commerce than any of the instances to which reference has just been made. Although state laws do not discriminate against interstate commerce or in actuality or by possibility subject it to the cumulative burden of multiple levies, those laws may be unconstitutional because they burden or interfere with commerce. See Southern Pacific Co. v. Arizona, 325 U. S. 761, 767. Stevedoring, we conclude, is essentially a part of the commerce itself and therefore a tax upon its gross receipts or upon the privilege of conducting the business of stevedoring for interstate and foreign commerce, measured by those gross receipts, is invalid. We reaffirm the rule of Puget Sound Stevedoring Company. “What makes the tax invalid is the fact that there is interference by a State with the freedom of interstate commerce.” Freeman v. Hewit, supra, p. 256. Such a rule may in practice prohibit a tax that adds no more to the cost of commerce than a permissible use or sales tax. What lifts the rule from formalism is that it is a recognition of the effects of state legislation and its actual or probable consequences. Not only does it follow a line of precedents outlawing taxes on the commerce itself but it has reason to support it in the likelihood that such legislation will flourish more luxuriantly where the most revenue will come from foreign or interstate commerce. Thus in port cities and transportation or handling centers, without discrimination against out-of-state as compared with local business, larger proportions of necessary revenue could be obtained from the flow of commerce. The avoidance of such a local toll on the passage of commerce through a locality was one of the reasons for the adoption of the Commerce Clause.

Affirmed.

Me. Justice Black dissents.

1 The taxes in question were levied by the City of New York by a series of local laws, No. 22 of 1937, No. 20 of 1938, No. 103 of 1939, No. 78 of 1940, No. 47 of 1941. The local laws were passed pursuant to authorization by the State of New York. See Laws of New York 1940, Ch. 245. There is no dispute as to the general validity of the local laws. See McGoldrick v. Berwind-White Coal Mining Co., 309 U. S. 33, and New York Rapid Transit Corp. v. City of New York, 303 U. S. 573. These cases involved other phases of these local laws.

Certiorari granted, 326 U. S. 713; argued March 1, 1946; restored to the docket for reargument April 22, 1946.

2 Local Laws of the City of New York (1940), No. 78:

“§ R41-2.0. Imposition of tax. a. For the privilege of carrying on or exercising for gain or profit within the city any trade, business, profession, vocation or commercial activity other than a financial business, or of making sales to persons within such city, for each of the periods of one year, or any part thereof, beginning on July first of the years nineteen hundred thirty-nine and nineteen hundred forty, every person shall pay an excise tax which shall be equal to one-tenth of one percentum upon all receipts received in and/or allocable to the city from such profession, vocation, trade, business or commercial activity exercised or carried on by him during the calendar year in which such period shall commence, . . . .”

No problem of allocation or apportionment is involved. See § b. No question is raised by petitioner that any part of the tax is allocable to receipts properly attributable to doing business in New York City, if all of the receipts are not subject to the local act. § R41-3.0.

3 “The Congress shall have Power ... To regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes; . . . .”

4 Southern Pacific Co. v. Arizona, 325 U. S. 761, 767-69, and cases cited; Morgan v. Virginia, 328 U. S. 373, 379, and cases cited, n. 17; Freeman v. Hewit, 329 U. S. 249; Richfield Oil Corp. v. State Board of Equalization, 329 U. S. 69, 75.

5 Compare Maine v. Grand Trunk R. Co., 142 U. S. 217; Oklahoma v. Wells, Fargo & Co., 223 U. S. 298, 301; Underwood Typewriter Co. v. Chamberlain, 254 U. S. 113; Hans Rees’ Sons v. North Carolina, 283 U. S. 123; Illinois Central R. Co. v. Minnesota, 309 U. S. 157.

6 Fargo v. Michigan, 121 U. S. 230; Ratterman v. Western Union Telegraph Co., 127 U. S. 411, 428; Leloup v. Port of Mobile, 127 U. S. 640; Western Union Telegraph Co. v. Alabama, 132 U. S. 472; Galveston, Harrisburg & San Antonio R. Co. v. Texas, 210 U. S. 217; Oklahoma v. Wells, Fargo & Co., 223 U. S. 298, 300; Minnesota Rate Cases, 230 U. S. 352, 400; Crew Levick Co. v. Pennsylvania, 245 U. S. 292, 295; Fisher’s Blend Station v. Tax Comm’n, 297 U. S. 650, 655; Adams Mfg. Co. v. Storen, 304 U. S. 307, 312; Freeman v. Hewit, supra.

7 Postal Telegraph Cable Co. v. Adams, 155 U. S. 688, 698; United States Express Co. v. Minnesota, 223 U. S. 335, 346-48.

8 Federalist 7, 22, 42; Baldwin v. O. A. F. Seelig, Inc., 294 U. S. 511, 523.

9 See Clark Distilling Co. v. Western Maryland R. Co., 242 U. S. 311, 326; United States v. Hill, 248 U. S. 420; Whitfield v. Ohio, 297 U. S. 431; Kentucky Whip & Collar Co. v. Illinois Central R. Co., 299 U. S. 334; Prudential Ins. Co. v. Benjamin, 328 U. S. 408, 430; Southern Pacific Co. v. Arizona, 325 U. S. 761, 769; Freeman v. Hewit, 329 U. S. 249, 253.

10 Western Live Stock v. Bureau, supra, 258-260; Southern Pacific Co. v. Gallagher, 306 U. S. 167, 176; McGoldrick v. Berwind-White Co., 309 U. S. 33, 48; Dept. of Treasury v. Wood Corp., 313 U. S. 62.

11 Coverdale v. Pipe Line Co., 303 U. S. 604, 609; Southern Pacific Co. v. Gallagher, 306 U. S. 167, 178; Freeman v. Hewit, supra, p. 257.

12 304 U. S. 307, 312.

13 305 U. S. 434.

14 309 U. S. 33.

15 303 U. S. at 257.

“All the events upon which the tax is conditioned—the preparation, printing and publication of the advertising matter, and the receipt of the sums paid for it—occur in New Mexico and not elsewhere.” P. 260. “So far as the advertising rates reflect a value attributable to the maintenance of a circulation of the magazine interstate, we think the burden on the interstate business is too remote and too attenuated to call for a rigidly logical application of the doctrine that gross receipts from interstate commerce may not be made the measure of a tax. . . . Practical rather than logical distinctions must be sought.” P. 259.

The alternate ground, p. 260, that such a local tax cannot be levied elsewhere is inapposite in such a foreign commerce situation as this.

16 See Harvester Co. v. Dept. of Treasury, 322 U. S. 340, 348.

17 304 U. S. at 312-13:

“The state court and the appellees rely strongly upon American Mfg. Co. v. St. Louis, 250 U. S. 459, as supporting the tax on appellant’s total gross receipts derived from commerce with citizens of the State and those of other States or foreign countries. But that case dealt with a municipal license fee for pursuing the occupation of a manufacturer in St. Louis. The exaction was not an excise laid upon the taxpayer’s sales or upon the income derived from sales. The tax on the privilege for the ensuing year was measured by a percentage of the past year’s sales. The taxpayer had during the preceding year removed some of the goods manufactured to a warehouse in another State and, upon sale, delivered them from the warehouse. It contended that the city was without power to include these sales in the measure of the tax for the coming year. The court held, however, that the tax was upon the privilege of manufacturing within the State and it was permissible to measure the tax by the sales price of the goods produced rather than by their value at the date of manufacture. If the tax there under consideration had been a sales tax the city could not have measured it by sales consummated in another State.”

Cf. Freeman v. Hewit, 329 U. S. 249, 252.

18 309 U. S. at 49: “Its only relation to the commerce arises from the fact that immediately preceding transfer of possession to the purchaser within the state, which is the taxable event regardless of the time and place of passing title, the merchandise has been transported in interstate commerce and brought to its journey’s end. Such a tax has no different effect upon interstate commerce than a tax on the ‘use’ of property which has just been moved in interstate commerce, sustained in Monamotor Oil Co. v. Johnson, 292 U. S. 86; Henneford v. Silas Mason Co., supra; Felt & Tarrant Mfg. Co. v. Gallagher, 306 U. S. 62; Southern Pacific Co. v. Gallagher, 306 U. S. 167, or the tax on storage or withdrawal for use by the consignee of gasoline, similarly sustained in Gregg Dyeing Co. v. Query, 286 U. S. 472; Nashville, C. & St. L. Ry. Co. v. Wallace, 288 U. S. 249; Edelman v. Boeing Air Transport, 289 U. S. 249, or the familiar property tax on goods by the state of destination at the conclusion of their interstate journey. Brown v. Houston, supra; American Steel & Wire Co. v. Speed, 192 U. S. 500.”