of the other complainant had been interstate. Both sought a license for the ensuing year without fulfilling the obligation assumed in the bond given the preceding year. The court found that the subject taxed was the privilege of doing a general brokerage business, including intra-state as well as interstate, and that it was therefore taxable. It recognized that a different question would have arisen if the complainants "had not undertaken to do a general commission business, and had taken out no licenses therefore, but had simply transacted business for non-resident principals.'

"25

Here obviously is the simple case of a tax on local business, measured by gross receipts from all business, with the only additional element that this measure of receipts was to be used only in case the business was done without capital. Had the complainants seen fit to employ $100 of capital, they would have paid ten cents each instead of a percentage of their receipts. This element in the case was accorded weight, for Chief Justice Fuller remarked:

"We presume it would not be doubted that, if the complainants had been taxed on capital invested in the business, such taxation would not have been obnoxious to constitutional objection; but because they had no capital invested, the tax was ascertained by reference to the amount of their commissions, which when received were no less their property than their capital would have been." 26

It is to be noted, however, that this observation appears in the final paragraph of the opinion, and that the preceding discussion conveys no hint that the tax on the gross receipts would not have been quite as proper if it had not been the alternative of a tax on capital. After quoting from Mr. Justice Bradley's opinion in Philadelphia & Southern M. S. S. Co. v. Pennsylvania 27 that "the corporate franchises, the property, the business, the income of corporations created by a State may undoubtedly be taxed by the State," 28 Chief Justice Fuller adds that "this of course is equally true of the property, the business, and the income of individual citizens of a State." 29 And later, after discussing Maine v. Grand Trunk Railway Co., 30 he declares:

28

27 Note 19, supra.

122 U. S. 326, 345, 7 Sup. Ct. Rep. 1118 (1887), quoted in 145 U. S. 1, 22, 12 Sup.

Ct. Rep. 810 (1892).

29 Ibid.

30 Note 20, supra.

"Since a railroad company engaged in interstate commerce is liable to pay an excise tax according to the value of the business done in the State, ascertained as above stated, it is difficult to see why a citizen doing a general business at the place of his domicil should escape payment of his share of the burdens of municipal government because the amount of his tax is arrived at by reference to his profits.""

The Chief Justice insists that "this tax is not on the goods or on the proceeds of the goods, nor is it a tax on nonresident merchants," 32 and then invokes the familiar and convenient slogan that "if it can be said to affect interstate commerce in any way it is incidentally, and so remotely as not to amount to a regulation of such commerce.'

11 33

By this decision Shelby County appears to have achieved indirectly what it would be forbidden to attain directly. It used receipts on which it could not impose a tax as the measure of a tax on something else. It was on the nature of that something else that the court fixed its attention. Had the county declared that no business at all might be done without a license, a broker would then come within the fangs of the law by doing interstate commerce alone, and the tax would have been held to be one on a subject that is interstate commerce itself.34 But here it was the broker, and not county, that wrapped interstate and local commerce in the same package. The Chief Justice admonishes Mr. Ficklen that he has only himself to blame for his predicament, since he asked for a license to do a "general" business, and did not restrict his professions to interstate business.

"The tax was not laid on the occupation or business of carrying on interstate commerce, or exacted as a condition of doing any particular commission business; and complainants voluntarily subjected themselves thereto in order to do a general business." 35

31 145 U. S. 1, 24, 12 Sup. Ct. Rep. 810 (1892).

32 Ibid., 24.

33 Ibid., 24.

34 Robbins v. Shelby County Taxing District, 120 U. S. 489, 7 Sup. Ct. Rep. 592 (1887); Leloup v. Port of Mobile, 127 U. S. 640, 8 Sup. Ct. Rep. 1380 (1888); Crutcher v. Kentucky, 141 U. S. 47, 11 Sup. Ct. Rep. 851 (1891); Williams v. Talladega, 226 U. S. 404, 33 Sup. Ct. Rep. 116 (1912); Barrett v. New York, 232 U. S. 14, 34 Sup. Ct. Rep. 203 (1914). In all but the first of these the complainant was engaged in local as well as interstate commerce, and was therefore taxable under a statute or ordinance properly drawn.

35 145 U. S. 1, 22, 12 Sup. Ct. Rep. 810 (1892).

Thus the court preserved the fiction that interstate commerce cannot be taxed, and contented itself with finding that the "subject on which the burden was imposed was not interstate commerce and in holding that therefore a tax on that subject is not a tax on interstate commerce.

The next gross-receipts taxes to come before the court were ones imposed by North Dakota on the Northern Pacific Railroad. A statute of 1883 provided that "all railroad companies, except railroads operated by horse power, owned and operated within the territory, should pay two per centum on the gross earnings of their railroads for a period of five years, and thereafter three per centum on the gross earnings, in lieu of all other taxes upon said railroads and the capital stock thereof." 36 The law was changed in 1889 so as to give the road the option of paying the gross-earnings tax or of having its property subjected to ad valorem assessments like those on other property in the state. The Northern Pacific accepted the Act of 1889, but did not pay in full the gross-earnings tax due in that year. Some of its lands were assessed for local taxation, and the company brought a bill to enjoin their sale for nonpayment of the tax. Relief was denied in Northern Pacific R. R. Co. v. Clark 37 on the ground that the company had no standing in equity until it had paid what was due under one or the other of the two modes of assessment. The road had contended that it was liable under neither. It argued that by accepting the Act of 1889 it gained exemption from ordinary taxation on its lands, and that it was excused from paying the gross-receipts tax by reason of the subsequent repeal of the statute under which it was imposed. The court held, however, that the Act of 1889 contemplated no exemption of any property, but merely offered two optional modes of assessment of that property. Though the case passed on no constitutional question, it figures in the family tree of the distinction subsequently drawn between taxes on gross receipts in addition to other demands and the same taxes as a substitute for other impositions.

Other lands of the railroad had been sold for nonpayment of local taxes assessed prior to 1889. These were lands not adjacent

36 Stated by Mr. Justice Jackson in Northern Pacific R. R. Co. v. Clark, 153 U. S. 252, 264, 14 Sup. Ct. Rep. 809 (1894).

37 153 U. S. 252, 14 Sup. Ct. Rep. 809 (1894).

to the right of way, which had been taxed locally on the assumption that the compulsory gross-earnings tax imposed by the law of 1883 was in lieu only of taxation on lands which actually contributed to the earnings through their use in the business. In McHenry v. Alford 38 the receivers of the road brought a bill to have the tax deeds declared invalid, since the gross-receipts tax had been fully paid. The purchasers defended on the grounds that the gross-receipts tax had no bearing on the local taxation of lands not adjacent to the right of way and, further, that it was not a valid tax and so could not operate to exempt the lands from other demands. Neither position was accepted by the court, although only the first was formally passed upon. As to this it was declared that, since the lands not adjacent to the right of way had been pledged for the payment of bonds issued to build and equip the road, and thus helped to make the earnings possible, their relation to the road and its operation was such that it was a proper classification to include them in all the property of the company which was relieved from local assessments and subjected to the gross-earnings tax, and that this was what the statute intended.39

The court was relieved from the necessity of passing explicitly on the question whether the gross-earnings tax was unconstitutional as a regulation of interstate commerce, because it found that the Act of 1889 was in the nature of a compromise which, when accepted by the company and complied with to the extent of paying all arrearages due under the Act of 1883, operated as an implied release from any other taxes assessed for any period which the gross-earnings tax covered. Nevertheless Mr. Justice Peckham

38 168 U. S. 651, 18 Sup. Ct. Rep. 242 (1898).

39 Mr. Justice Peckham said that the language of the Act of 1883 "gives great reason to doubt the correctness of the construction which would levy the tax upon the earnings derived from interstate commerce" (168 U. S. 651, 670). The doubt did not have to be resolved, since the company had paid all that had been assessed against it, and could not be in a worse position in recovering its lands because of the chance that it might have paid more than the legislature had intended to exact. The construction of Mr. Justice Peckham is strained and is inconsistent with the declaration in the Act of 1889 which reads: "Any company which has not complied with the provisions of chapter 99 of the Session Laws of 1883 by paying all taxes claimed on gross earnings, both territorial and interstate, or by filing an account of gross earnings, both territorial and interstate, shall prepare and file such account in the manner therein provided. . . and pay one half of the entire amount due. . . ." 168 U. S. 651, 656, 18 Sup. Ct. Rep. 242 (1898).

intimated rather strongly that the court thought the tax constitutional. This he did by way of distinguishing it from those declared invalid in Fargo v. Michigan 40 and Philadelphia & Southern Mail S. S. Co. v. Pennsylvania. His comment is as follows:

"In those cases there was a distinct tax upon the gross earnings without reference to any other tax, and not in substitution or in lieu of another tax, while in this case the act plainly substitutes a different method of taxation upon the property of the railroad company. It is a tax upon the lands and all the other property of the company, but instead of placing a valuation upon the lands and other property, and apportioning a certain amount upon such valuation directly, as was the old method, a new one is established of taking a percentage upon the gross earnings as a fair substitute for the former taxes upon all the lands and property of the company, and when it is said, as it is in this act, that the tax collected by this method shall be in lieu of all other taxes whatever, it would seem that it might be claimed with great plausibility that a tax levied under such circumstances and by such methods was not in reality a tax upon the gross earnings, but was a tax upon the lands and other property of the company, and that the method adopted of arriving at the sum which the company should pay as taxes upon its property was by taking a percentage of its gross earnings." 42

A gross-earnings tax, then, is a property tax, if it is imposed in lieu of a property tax. This sounds somewhat like saying that what is exempted is taxed, and what is taxed is not taxed. By a little logodædaly, things are not what they seem to be. Since taxes on property measured by receipts are valid, and taxes on receipts are not valid, taxes on receipts in lieu of taxes on property must be called taxes on property in order to sustain them. North Dakota had given to the pertinent section of the law of 1883 the heading: "Percentages of gross earnings to be paid in lieu of other taxes." 43 The Act of 1889, in referring to taxes "due under the assessments under said law of 1883," had called them "taxes on both territorial and interstate earnings." But the Supreme Court did not see its way clear to accept the designation and to declare that taxes on receipts from interstate commerce are not regulations of that com

40 Note 19, supra.

41 Note 19, supra.

42 168 U. S. 651, 671, 18 Sup. Ct. Rep. 242 (1898).

43 Ibid., 654.

44 Note 39, supra.