Vol. III.] WESTERN UNION TELEGRAPH Co. v. CITY OF RICHMOND. [No. 4. required to pay a mere toll-gatherer. And inasmuch as the transportation of freight for the purpose of exchange or sale is a constituent of commerce, a tax upon freight is necessarily a regulation of commerce. In the case of State Tax on Railway Gross Receipts, reported also in 15 Wall. 284, the supreme court sustains a Pennsylvania statute imposing a tax upon the gross receipts of railroad companies, although these receipts are made up in part of freights received for transportation of merchandise to and from the state into other states. This case is plainly distinguishable from the one last cited. In the first, as has been seen, the tax was upon transportation, and the railroad company a mere agency for its collection. In the second, the tax was upon the company, measured in amount by the extent of its business, or the degree to which its franchise was exercised. It was conceded that the ultimate effect of the tax would be to increase the cost of transportation, and therefore to affect commerce itself. Nevertheless, it was not a tax upon commerce any more than a tax upon a railroad or stage-coach is a tax upon transportation, or a tax upon attorneys constitutes a tax upon clients. The court further say, in effect, it is not everything that affects commerce that amounts to a regulation of it within the meaning of the Constitution. The states have authority to tax the estate, real and personal, of all their corporations, including carrying companies, precisely as they may tax similar property when belonging to natural persons. Such taxation may be laid on valuation or may be an excise; it may be a graduated contribution, proportioned to the value of the privileges granted, or to the extent of their exercise, or to the results of such exercise. Such a power is essential to the healthy exercise of the state governments; and the federal Constitution ought not to be so construed as to impair, much less to destroy, anything that is necessary to their efficient exercise. These cases show the great difficulty encountered by the supreme court of the United States in dealing with this perplexing subject. They further show, I think, the anxiety of that court to preserve unimpaired the taxing powers of the states, so far as it can be done consistently with the paramount obligations of the federal Constitution. And although these decisions cannot perhaps be always harmonized, and the learned judges have been unanimous in but few of them, yet they certainly affirm the proposition that it is competent for a state to impose a tax upon individuals or corporations within its territory; and such tax, if it does not discriminate against non-residents or the products of other states, may be upon the property, or the franchises, or the business, of the individual or corporation; and its validity is not at all affected by the consideration that the party is engaged in foreign as well as domestic trade and traffic. Society for Savings v. Coile, 6 Wall. 594; Woodruff v. Parham, 8 Ib. 123; Hinson v. Lott, Ib. 148. In Hinson v. Lott, 8 Wall. 148, the supreme court sustained a law of Alabama requiring every dealer in spirituous liquors introducing liquor into the state for sale to pay a tax per gallon before offering the same for sale within the limits of the state. Mr. Justice Miller, in delivering the opinion of the court, said: "If this was the only tax it would constitute an unjust discrimination against the products of other states in favor of those of Alabama, and might be so laid as to amount to an absolute pro VOL. III. 11 Vol. III.] WESTERN UNION TELEGRAPH Co. v. CITY OF RICHMOND. [No. 4. hibition; but it appeared there was another tax of like amount upon all spirits manufactured in the state. Inasmuch, therefore, as the law merely subjected foreign articles to the same rate of taxation as applied to domestic, it was not an attempt to regulate commerce, but an appropriate and legitimate exercise of the taxing power of the states." These decisions of the supreme court have a direct application to the case under consideration. In the first place, it will be observed that the ordinance of the city of Richmond makes no discrimination in favor of or against any express company. The tax is alike upon all, graduated by the extent of the business. In the next place, the tax is not upon the telegraph message or communication, but upon the company, measured by the business in the corporate limits. The effect of the tax may be to increase to some extent the expense of telegraph communication. It is very probable that the rates of telegraphing are established by general arrangement among all the companies, whether incorporated here or abroad, and it may be that these rates are fixed with reference to state and municipal taxation as to other necessary expenses. But the same thing is true as respects railroad companies engaged in the transportation of passengers and freight and domestic goods. A tax upon them is indirectly a tax upon such transportation. But no one ever questioned the constitutional power of a state to lay a tax upon its railroad companies. The same principle applies to express companies incorporated under the laws of one state, establishing its offices in other states, and engaged in the transmission of matter internal and external. In Osborne v. Mobile, 16 Wall. 479, the supreme court say, although the ultimate effect of the tax may be to increase the cost of transportation, it is within the general authority of the state to tax persons, property, business, or occupations within the state. course The mistake made in all this class of cases is in failing to distinguish between commerce itself and what may be termed a mere instrument of commerce. Telegraphic communication is not commerce: "it is not a subject of trade and barter offered in market as something having an existence and value independent of the parties to them." It is not an interthough it may be, and doubtless is, an important and valuable instrument or agency by which intercourse is carried on between the different parts of the country. It cannot be said, however, that this intercourse is purely of a national character, affecting the commercial interests of all the states, and therefore requiring exclusive legislation by Congress. Conceding that Congress may regulate the telegraphic business of ths country, it has not done so; and in the absence of any such legislation. on the subject, there is no valid objection to a system of state taxation upon these companies in return for the protection they receive. They are incorporated under state laws, controlled by state regulations, and protected by state authority. It is true they are engaged in transmitting government messages at rates fixed by the postmaster general; but the railroads perform duties of a similar character in carrying the mail; so also the stage-coaches. They are all subjects of state regulation, and are therefore necessarily liable to state taxation. The contract with the government for the transmission of its messages is in no just sense a regulation of commerce. These terms, "to regulate commerce," are well Vol. III.] WESTERN UNION TELEGRAPH Co. v. CITY OF RICHMOND. [No. 4. understood to mean the power to prescribe the rules by which commerce is to be governed. Hay on Com. § 1061. The very fact that Congress has undertaken neither to exclude state taxation, nor to prescribe any regulations for the various telegraph companies, indicates very clearly that the whole subject was intended to be left to the states under whose laws they are incorporated. Another ground taken by the plaintiff is, that the company is an important agency of the federal government in the management of public affairs, and as such no state or municipal corporation is authorized to impose a license tax upon its business, whereby the operations of the government may be impaired or obstructed. This view is based mainly upon the provisions of the Act of Congress of the 24th July, 1866. This act authorizes any telegraph company, organized under the laws of any state, to construct lines of telegraph over any portion of the public domain, along any of the military or post roads, and across any of the navigable waters of the United States. Authority is also given them to take from the public lands any material needful in the construction and operation of their lines of telegraph, and also to appropriate any portion of the public lands for their stations, not exceeding forty acres for each station. The act further provides, that communications of the government, its officers and agents, shall have priority over all others in their transmission over the lines, at rates fixed by the postmaster general. The provisions of this act were accepted by the plaintiffs, and the terms of government communication fixed accordingly by the postmaster general, and agreed to by the company. It is argued, that if the state or any of its municipalities may impose a tax upon, or require a license of this company, they may impose it to any extent, and the effect may be to deprive the company altogether of the power to serve the government, or, at any rate, to impair its efficiency. It is very clear that the states are prohibited from taxing either the property of the federal government or the instrumentalities by which its powers are carried into execution. This doctrine is well settled, and no one doubts its application to public corporations or other agencies created by the federal government for carrying into execution national objects and purposes. But none of the cases have gone so far as to affirm, that because the federal government enters into a contract with a corporation or a natural person to perform certain services this operates as an exemption from all state taxation. Can it be that a railroad company, by entering into an arrangement with the postmaster general to carry the mails, can escape the payment of its just public dues upon the pretext that its capacity to serve the federal government may be thereby impaired ? Chief Justice Marshall, in Osborne v. United States Bank, 9 Wheat. 738-860, has given a complete answer to that question. In that case it was argued that the tax imposed upon the Bank of the United States by the legislature was constitutional, because the bank was established for private benefit, and was founded upon contract between individuals having private trade and private interest for its great and principal object. The chief justice said if these premises were true, the conclusion would then be inevitable. A private corporation engaged in its own business with its own views would certainly be subject to the taxing power of the Vol. III.] WESTERN UNION TELEGRAPH Co. v. CITY OF RICHMOND. [No. 4. state, as any individual would be, and the casual circumstance of its being employed by the government in the transaction of its fiscal affairs would no more exempt its private business from the operation of that power than it would exempt the private business of any individual employed in the same manner. But the premises are not true. The bank is a public corporation, created for public and national purposes. It is not an instrument which the government found ready made, and has supposed to be adapted to its purposes, but one which was created in the form in which it now appears, for national purposes only. The very reverse of all this is the status of this company. It was not created by the federal government. It was not organized under any act of Congress, but under the laws of the State of New York. It is a private corporation, created for individual benefit and for the benefit of the private stockholders, carrying on business here under the authority of Virginia statutes, and protected in its franchises and the enjoyment of its property by state laws and the police power of the city government. The federal government has granted it certain privileges in consideration of the performance of certain services at certain specified rates of compensation. But the government has no interest in it and no concern with it, any further than the performance of these services. So long as these are not interfered with by the regulations of the states, it is no concern of the federal government whether a tax is imposed at all, or whether it is upon the property, or the franchise, or the business of the company. It is not pretended, there is not even a suggestion that the tax prevents the transmission of the government messages, or that it impairs in the slightest degree, the capacity of the company for the fulfilment of its obligations. Exemption from all state or municipal taxation might with the same propriety be claimed by all railroad companies, express companies, and others engaged in the transportation of mail matter, upon the ground that such taxation may tend to prevent the performance of the contract, or at least to impair the efficiency of those agencies in the discharge of their duties. The decisions of the supreme court of the United States do not give the least countenance to any such pretension. They establish the contrary doctrine. One of these, the case of National Bank v. Commonwealth, 9 Wall. 353, will show the manifest disinclination of the court to extend this doctrine of exemption from state taxation. In that case it was conceded that the Legislature of Kentucky might tax the stockholders upon the shares held by them in the national banks; but it was insisted that so much of the act as required the banks to pay such tax was invalid, because the banks, being instrumentalities of the federal government, are beyond the reach of state legislation. This view, however, did not prevail. The supreme court declared that the doctrine of exemption of federal agencies from state taxation had its just limitation, a limitation growing out of the necessity in which it is founded. This limitation is, that these agencies are only exempted from state legislation, so far as that legislation may interfere with or impair their efficiency in performing the functions by which they are designed to serve the federal government. Any other rule would convert a principle founded alone in the necessity of securing to the government the means of Vol. III.] WESTERN UNION TELEgraph Co. v. CITY OF RICHMOND. [No. 4. exercising its legitimate powers into an unauthorized and unjustifiable invasion of the rights of the states. The banks are subject to the laws of the states, and are governed in their daily course of business far more by the laws of the state than of the nation. Their contracts are governed and construed by state laws. Their acquisition and transfer of property, their right to collect their debts, and their liability to be sued for debts, are all based on state laws. It is only when the state law incapacitates the banks from discharging their duties to the government that it becomes unconstitutional. We do not perceive the remotest probability of this in their being required to pay the tax which their stockholders owe to the state for the shares of the capital stock, when the laws of the federal government authorize the same. In Thomson v. Pacific Railroad, 9 Wall. 579, the same doctrines are still more strongly stated. In that case the question was as to the validity of a tax imposed by the Legislature of Kansas upon the railroad and telegraph property of the Union Pacific Railway Company. Exemption from this taxation was claimed upon the ground, that, although the company was incorporated under the laws of Kansas, Congress had granted it lands and subsidies to a large amount, in consideration of which the company had executed a mortgage upon its property for the payment of five per cent. of its net gains, and had agreed to render services also in the transmission of messages, in the transportation of mails, troops, munitions, and other property at reasonable rates of compensation and it was insisted that the effect of the tax would be to impede and embarrass the company in the performance of these services as an agency of the government. Chief Justice Chase, in delivering the opinion of the court, dwelt at some length upon the distinction between a corporation created by the federal government for national purposes, and corporations deriving their existence and exercising their franchises under authority of state laws, but employed by the national government for certain duties and services. As to the latter, while Congress may exempt them from any state taxation, which will really prevent or impede such services, yet in the absence of legislation by Congress to indicate that exemption is deemed essential to the performance of the governmental services, it cannot be claimed upon the mere ground that the corporation is employed as an agency of the government. It is true that the tax in this case was upon the property of the railroad company; and the learned counsel seems to suppose there is a material distinction between such a tax and a tax upon the business of a corporation. But the reasoning of the court does not justify any such distinction. It applies equally to both forms of taxation. Indeed, Chief Justice Chase expressly says: "No one questions that the power to tax all property, business, and persons within their respective limits is original in the states, and has never been surrendered. It cannot be so used as to defeat or hinder the operations of the national government; but it will be safe to conclude in general, in reference to persons and state corporations employed in government service, that where Congress has not interfered to protect their property from state taxation, such taxation is not obnoxious to the objection suggested." These observations apply as strongly to a tax upon business as a tax |