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decided: April 15, 1918.



Author: Van Devanter

[ 246 U.S. Page 451]

 MR. JUSTICE VAN DEVANTER delivered the opinion of the court.

A tax, for each of the years 1907 to 1912, inclusive, imposed under a law of Minnesota (Acts 1907, c. 250; 1909, c. 473; 1911, c. 377) against the Cudahy Packing Company as a freight line company, and sustained by the Supreme Court of the State (129 Minnesota, 30), is here in question. Whether the tax constitutes an unconstitutional restraint or burden on interstate commerce is the matter for decision.

The company is an Illinois corporation and operates plants in Iowa, Missouri and Nebraska for slaughtering live stock and converting the same into fresh meats and other articles of commerce. It sells the products throughout the United States, maintains branch houses in several States, including three in Minnesota, and owns a line of refrigerator cars wherein the products are shipped to the branch houses and places of consumption. Under a contractual arrangement it supplies these cars to the railroads for use in such transportation and receives therefor a fixed compensation per mile of trave. In the territory embracing Minnesota this compensation or rental is one cent per mile whether the cars be loaded or empty. Usually the cars are moved to particular destinations with loads of the company's products and are returned empty to be loaded again, but where it is practicable to do so the railroads are free to carry other freight in them on the

[ 246 U.S. Page 452]

     return trip. The company pays the usual tariff rates for the transportation of its products, just as though the railroads owned the cars, and also bears the expense of all repairs save such as become necessary through negligent handling by the railroads. The use made of the cars in Minnesota consists in transporting the company's products (a) across the State from points without on one side to points without on another, (b) from points without to points within the State and the reverse, and (c) between points within the State. Of their total mileage in the State 90 per cent. is in interstate and 10 per cent. in intrastate transportation. The average number of cars in the State per day ranges from 10 to 12.

The cash value of each car, as a separate article of tangible property, is from $700 to $900, and the intangible property incident to their combined use under the contractual arrangement with the railroads is also, as the record shows, of substantial value. The tax in question is all that is assessed against the company in respect of the cars or the intangible property. It has other tangible property in the State, not part of its car line, whereon it pays the usual local taxes.

The receipts of the railroads from shipments carried in these cars in Minnesota, less the compensation or rental paid to the company, are added to the other gross earnings of the railroads from business in the State and the total is taken as the value for purposes of taxation of the property which the railroads own or operate in the State for railway purposes.

As construed and applied by the state court, the Minnesota law requires a freight line company, meaning a company furnishing or leasing cars to railroads for freight transportation, to report annually its gross earnings from the operation of its car line within the State and to pay, in lieu of other taxes on the property so employed, a tax fixed at a stated per cent. of such earnings. That court

[ 246 U.S. Page 453]

     holds that this law is an exertion of the power of the State to tax the property within its limits from which the earnings are derived and is intended to embody a practical method of reaching and valuing that property, tangible, and intangible, for taxing purposes.

In so far as the property constituting this car line is regularly or habitually used or employed in Minnesota it is within the taxing power of the State, although chiefly devoted or applied to interstate transportation. Pullman's Car Co. v. Pennsylvania, 141 U.S. 18; Adams Express Co. v. Ohio, 165 U.S. 194; s.c., 166 U.S. 185; American Refrigerator Co. v. Hall, 174 U.S. 70; Union Refrigerator Co. v. Lynch, 177 U.S. 149. This is not questioned; but it is insisted that the tax imposed is not a property tax but one laid directly on the gross earnings. Of course, if it is laid on the earnings as such, they being derived largely from interstate commerce, it is an unconstitutional restraint or burden on such commerce and void. Fargo v. Michigan, 121 U.S. 230; Philadelphia & Southern Steamship Co. v. Pennsylvania, 122 U.S. 326; Galveston, Harrisburg & San Antonio Ry. Co. v. Texas, 210 U.S. 217. On the other hand, if what is done is to reach the property and not to tax the gross earnings, the latter being taken merely as an index or measure of the value of the former, it well may be that the objection urged against the tax is untenable; for, as this court has said, "by whatever name the tax or taxes may be called that are fixed by reference to the value of the property, if they are not imposed because of its use in interstate or foreign commerce, and if they amount to no ...

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