122 U.S.

326
7 S.Ct. 1118
30 L.Ed. 1200

PHILADELPHIA & SOUTHERN MAIL S. S. CO.

v.
COMMONWEALTH OF PENNSYLVANIA.
May 27, 1887.

The question in this case is whether a state can constitutionally impose

upon a steam-ship company, incorporated under its laws, a tax upon the
gross receipts of such company derived from the transportation of persons
and property by sea, between different states, and to and from foreign
countries.
By an act of the legislature of Pennsylvania passed March 20, 1877, it
was, among other things, enacted as follows, to-wit: 'That every railroad
company, canal company, steam-boat company, slack-water navigation
company, transportation company, street-passenger railway company, and
every other company now or hereafter incorporated by or under and law
of this commonwealth, or now or hereafter incorporated by any other
state, and doing business in this commonwealth, and owning, operating, or
leasing to or from another corporation or company any railroad, canal,
slack-water navigation, or street-passenger railway, or other device for the
transportation of freight or passengers, or in any way engaged in the
business of transporting freight or passengers, and every telegraph
company incorporated under the laws of this or any other state, and doing
business in this commonwealth, and every express company, and any
palace-car and sleeping-car company, incorporated or unincorporated,
doing business in this commonwealth, shall pay to the state treasurer, for
the use of the commonwealth, a tax of eight-tenths of one per centum
upon the gross receipts of said company for tolls and transportation,
telegraph business, or express business.' A similar act was passed by the
same legislature on the seventh of June, 1879.
By the terms of these acts, returns of the gross receipts are required to be
made every six months to the auditor general, upon which the tax is
assessed by him, and charged against the company.

Under and by virtue of these acts, the auditor general of the state, in
October, 1882, charged the appellant, the Philadelphia & Southern Mail
Steam-Ship Company, taxes upon its gross receipts for the years 1877,
1878, 1879, 1880, and 1881, all ofw hich receipts were derived from
freight and passage money between the ports of Philadelphia and
Savannah, and in foreign trade from New Orleans, and a small amount for
charter-parties in the like trade. The tax thus charged against the company
for the five years in question amounted to about $6,500, and, with
accumulated interest and penalties, to over $9,000. After serving the
account upon the company, an action was brought for its recovery in the
common pleas of Dauphin county, at Harrisburg. The defendant pleaded
that it was a steam-ship company 'operating sea-going steam-ships
engaged in the business of ocean transportation between different states of
the United States, and between the United States and foreign countries,
and that all the said steam-ships of the said defendant were duly enrolled
or registered, under the laws of the United States, for the coasting or
foreign trade of the United States, and that the gross receipts so returned
to the auditor general, upon which a tax has been levied by the
commonwealth of Pennsylvania, were received by defendants for freight
and passengers carried in the said steam-ships on the ocean, and on the
navigable waters of the United States, between the state of Pennsylvania
and other states of the United States, and between the states of the United
States and foreign countries, and for the charter and hire of the said steamships to other parties in such trade and business; and that no part of the
said gross receipts was received for the transportation of freight and
passengers between places within the state of Pennsylvania, or for the hire
and use of the said steam-ships within the state of Pennsylvania.'
On the trial of the cause, the parties entered into an agreement as to the
facts, showing the gross receipts for each year, in each branch of the
company's trade, which facts supported the allegations of the plea. A trial
by jury was dispensed with, and the court gave judgment for the
commonwealth for the principal of the tax, and interest from the time of
commencing suit. Exceptions were taken on the ground that the judgment
was in conflict with the clause of the constitution of the United States
giving to congress the power to regulate commerce with foreign nations
and among the several states. The judgment, being removed by writ of
error to the supreme court of Pennsylvania, was affirmed by that court;
and its judgment is now before us for review.
Morton P. Henry, for plaintiff in error.
W. S. Kirkpatrick, Atty. Gen., and John F. Sanderson, for defendant in

error.
[Argument of Counsel from pages 328-335 intentionally omitted]
BRADLEY, J.

The question which underlies the immediate question in the case is whether the
imposition of the tax upon the steam-ship company's receipts amounted to a
regulation of, or an interference with, interstate and foreign commerce, and was
thus in conflict with the power granted by the constitution to congress. The tax
was levied directly upon the receipts derived by the company from its fares and
freights for the transportation of persons and goods between different states,
and between the states and foreign countries, and from the charter of its vessels,
which was for the same purpose. This transportation was an act of interstate
and foreign commerce. It was the carrying on of such commerce. It was that,
and nothing else. In view of the decisions of this court, it cannot be pretended
that the state could constitutionally regulate or interfere with that commerce
itself. But taxing is one of the forms of regulation. It is one of the principal
forms. Taxing the transportation, either by its tonnage or its distance, or by the
number of trips performed, or in any other way, would certainly be a regulation
of the commerce, a restriction upon it, a burden upon it. Clearly, this could not
be done by the state without interfering with the power of congress. Foreign
commerce has been fully regulated by congress, and any regulations imposed
by the states upon that branch of commerce would be a palpable interference. If
congress has not made any express regulations with regard to interstate
commerce, its inaction as we have often held, is equia lent to a declaration that
it shall be free in all cases where its power is exclusive; and its power is
necessarily exclusive whenever the subject-matter is national in its character,
and properly admits of only one uniform system. See the cases collected in
Robbins v. Shelby Taxing-Dist., 120 U. S. 489, 492, 493, ante, 592. Interstate
commerce carried on by ships on the sea is surely of this character.

If, then, the commerce carried on by the plaintiff in error in this case could not
be constitutionally taxed by the state, could the fares and freights received for
transportation in carrying on that commerce be constitutionally taxed? If the
state cannot tax the transportation, may it, nevertheless, tax the fares and
freights received therefor? Where is the difference? Looking at the substance of
things, and not at mere forms, it is very difficult to see any difference. The one
thing seems to be tantamount to the other. It would seem to be rather
metaphysics than plain logic for the state officials to say to the company: 'We
will not tax you for the transportation you perform, but we will tax you for

what you get for performing it.' Such a position can hardly be said to be based
on a sound method of reasoning.
3

This court did not so reason in the case of Brown v. Maryland, 12 Wheat. 419.
The state of Maryland required all importers of foreign goods and other persons
selling the same by wholesale, bale, or package, to take out a license and pay
$50 therefor, subject to a penalty and forfeiture for selling without such license.
It was contended on the part of the state that this was a mere tax on the
occupation of selling foreign goods, affecting only the person, and not the
importation of the goods themselves, or the occupation of importing them.
Chief Justice MARSHALL met this objection by showing that the attempt to
regulate the sale of imported goods was as much in conflict with the power of
congress to regulate commerce as a regulation of their importation itself would
be. 'If this power,' said he, (referring to the power of congress,) 'reaches the
interior of a state, and may be there exercised, it must be capable of authorizing
the sale of those articles which it introduces. Commerce is intercourse. One of
its most ordinary ingredients is traffic. It is inconceivable that the power to
authorize this traffic, where given in the most comprehensive terms, with the
intent that its efficacy should be complete, should cease at the point when its
continuance is indispensable to its value. To what purpose should the power to
allow importation be given, unaccompanied with the power to authorize a sale
of the thing imported? Sale is the object of importation, and is an essential
ingredient of that intercourse, of which importation constitutes a part. It is as
essential an ingredient, as indispensable to the existence of the entire thing,
then, as importation itself. It must be considered as a component part of the
power to regulate commerce. Congress has a right, not only to authorize
importation, but to authorize the importer to sell. * * * Any penalty inflicted on
the importer for selling the article in his character of importer must be in
opposition to the act of congress which authorizes importation. * * * The
distinction between a tax on the thing imported, and on the person of the
importer, can have no influence on this part of the subject. It is too obvious for
controversy that they interfere equally with the power to regulate commerce.'
Pages 446-448.

The application of this reasoning to the case in hand is obvious. Of what use
would it be to the ship-owner, in carrying on interstate and foreign commerce,
to have the right of transporting persons and goods free from state interference
if he had not the equal right to charge for such transportation without such
interference? The very object of his engaging in transportation is to receive pay
for it. The regulation of the transportation belongs to the power of congress to
regulate commerce, the regulation of fares and freights receivable for such
transportation must equally belong to that power; and any burdens imposed by

the state on such receipts must be in conflict with it. To apply the language of
Chief Justice MARSHALL, fares and freights for transportation in carrying on
interstate or foreign commerce are as much essential ingredients of that
commerce as transportation itself.
5

It is necessary, however, that we should examine what bearing the Cases of

State Freight Tax and Railway Gross Receipts, reported in 15 Wall., have upon
the question in hand. These cases were much quoted in argument, and the latter
was confidently relied on by the counsel of the commonwealth. They both
arose under certain tax laws of Pennsylvania. The first, which is reported under
the title of Case of State Freight Tax, 15 Wall. 232, was that of the Reading
Railroad Company, any arose under an act passed in 1864, which imposed upon
every railroad, steam-boat, canal, and slack-water navigation company a tax of
a certain rate per ton on every ton of freight carried by or upon the works of
said company, with a proviso directing, in substance, that every company,
foreign or domestic, whose line extended party in Pennsylvania, and party in
another state, should pay for the freight carried over that portion of its line in
Pennsylvania the same as if its whole line were in that state. Under this law, the
Reading Railroad Company was charged a tax of $38,000 for freight
transported to points within Pennsylvania, and of $46,000 for that exported to
points without the state. The latter sum the company refused to pay; and the
question in this court was whether that portion of the tax was constitutional,
and we held that it was not. Mr. Justice STRONG delivered the opinion of the
court. It was held that this was not a tax upon the franchises of the companies,
or upon their property, or upon their business, measured by the number of tons
of freight carried, but was a tax upon the freight carried, and because of its
carriage; that transportation is a constituent of commerce; that the tax was
therefore a regulation of commerce, and a regulation of commerce among the
state; that the transportation of passengers or merchandise from one state to
another is, in its nature, a matter of national importance, admitting of a uniform
system or plan of regulation, and therefore, under the rule established by
Cooley v. Port-Wardens, 12 How. 299, exclusively subject to the legislation of
congress. The inevitable conclusion was that the tax then in question was in
conflict with the exclusive power of congress to regulate commerce among the
states, and was therefore unconstitutional. Referring to the decision in Crandall
v. Nevada, 6 Wall. 35, in which this court had decided that a state cannot tax
persons for passing through or out of it, Justice STRONG said: 'If state taxation
of persons passing from one state to another, or a state tax upon interstate
transportation of passengers, is unconstitutional, a fortiori, if possible, is a state
tax upon the carriage of merchandise from state to state in conflict with the
federal constitution. Merchandise is the subject of commerce. Transportation is
essential to commerce; and every burden laid upon it is pro tanto a restriction.

Whatever, therefore, may be the true doctrine respecting the exclusiveness of

the power vested in congress to regulate commerce among the states, we regard
it as established that no state can impose a tax upon freight transported from
state to state, or upon the transporter because of such transportation.' The court
in its opinion took notice of the fact that the law was general in its terms,
making no distinction between freight transported wholly within the state and
that which was destined to or came from another state. But it was held that this
made no difference. The law might be valid as to one class, and
unconstitutional as to the other. On this subject, Justice STRONG said: 'h e
state may tax its internal commerce; but, if an act to tax interstate or foreign
commerce is unconstitutional, it is not cured by including in its provisions
subjects within the jurisdiction of the state. Nor is a rule prescribed for carriage
of goods through, out of, or into a state, any the less a regulation of
transportation because the same rule may be applied to carriage which is
wholly internal.' This last observation meets the argument that might be made
in the present case; namely, that the law is general in its terms, and taxes
receipts for all transportation alike, making no discrimination against receipts
for interstate or foreign transportation, and hence cannot be regarded as a
special tax on the latter. The decision in the case cited shows that this does not
relieve the tax from its objectionable character.
6

If this case stood alone, we should have no hesitation in saying that if would
entirely govern the one before us; for, as before said, a tax upon fares and
freights received for transportation is virtually a tax upon the transportation
itself. But at the same time that the Case of State Freight Tax was decided, the
other case referred to, namely, that of State Tax on Railway Gross Receipts,
was also decided, and the opinion was delivered by the same member of the
court. 15 Wall. 284. This was also a case of a tax imposed upon the Reading
Railroad Company. It arose under another act of assembly of Pennsylvania
sylvania passed in February, 1866, by which it was enacted that, 'in addition to
the taxes now provided by law, every railroad, canal, and transportation
company incorporated under the laws of this common wealth, and not liable to
the tax upon income under existing laws, shall pay to the commonwealth a tax
of three-fourths of one per centum upon the gross receipts of said company.
The said tax shall be paid semi-annually.' Under this statute the accounting
officers of Pennsylvania stated an account against the Reading Railroad
Company for tax on gross receipts of the company for the half year ending
December 31, 1867. These receipts were derived partly from the freight of
goods transported wholly within the state and partly from the freight of goods
exported to points without the state, which latter were discriminated from the
former in the reports made by the company. It was the tax on the latter receipts
which formed the subject of controversy. The same line of argument was taken

at the bar as in the other case. This court, however, held the tax to be
constitutional. The grounds on which the opinion was based, in order to
distinguish this case from the preceding one, were two:
7

First, that the tax, being collectible only once in six months, was laid upon a
fund which had become the property of the company, mingled with its other
property, and incorporated into the general mass of its property, possibly
expended in improvements or otherwise invested. The case is likened, in the
opinion, to that of taxing goods which have been imported after their original
packages have been broken, and after they have been mixed with the mass of
property in the country, which, it was said, are conceded in Brown v. Maryland
to be taxable. This reasoning seems to have much force. But is the analogy to
the case of imported goods as perfect as is suggested? When the latter become
mingled with the general mass of property in the state, they are not followed
and singled out for taxation as imported goods, and by reason of their being
imported. If they were, the tax would be as unconstitutional as if imposed upon
them while in the original packages. When mingled with the general mass of
property in the state, they are taxed in the same manner as other property
possessed by its citizens, without discrimination or partiality. We held in
Welton v. Missouri, 91 U. S. 275, that goods brought into a state for sale,
though they thereby become a part of the mass of its property, cannot be taxed
by reason of their being introduced into the state, o because they are the
products of another state. To tax them as such was expressly held to be
unconstitutional. The tax in the present case is laid upon the gross receipts for
transportation as such. Those receipts are followed, and caused to be accounted
for by the company dollar for dollar. It is those specific receipts, or the amount
thereof, (which is the same thing,) for which the company is called upon to pay
the tax. They are taxed, not only because they are money or its value, but
because they were received for transportation. No doubt a ship-owner, like any
other citizen, may be personally taxed for the amount of his property or estate,
without regard to the source from which it was derived, whether from
commerce or banking or any other employment. But that is an entirely different
thing from laying a special tax upon his receipts in a particular employment. If
such a tax is laid, and the receipts taxed are those derived from transporting
goods and passengers in the way of interstate or foreign commerce, no matter
when the tax is exacted, whether at the time of realizing the receipts, or at the
end of every six months or a year, it is an exaction aimed at the commerce
itself, and is a burden upon it, and seriously affects it. A review of the question
convinces us that the first ground on which the decision in State Tax on
Railway Gross Receipts was placed is not tenable; that it is not supported by
anything decided in Brown v. Maryland; but, on the contrary, that the reasoning
in that case is decidedly against it.

The second ground on which the decision referred to was based was that the tax
was upon the franchise of the corporation granted to it by the state. We do not
think that this can be affirmed in the present case. It certainly could not have
been intended as a tax on the corporate franchise, because, by the terms of the
act, it was laid equally on the corporations of other states doing business in
Pennsylvania. If intended as a tax on the franchise of doing business,which in
this case is the business of transportation in carrying on interstate and foreign
commerce,it would clearly be unconstitutional.

It was held by this court in the case of Gloucester Ferry Co. v. Pennsylvania,
114 U. S. 196, 5 Sup. Ct. Rep. 826, that interstate commerce carried on by
corporations is entitled to the same protection against state exactions which is
given to such commerce when carried on by individuals. In that case the tax
was laid upon the capital stock of a ferry company incorporated by New Jersey,
and engaged in the business of transporting passengers and freight between
Camden, in New Jersey, and the city of Philadelphia. The law under which the
tax was imposed was passed by the legislature of Pennsylvania on the seventh
of June, 1879, and declared 'that every company or association whatever, now
or hereafter incorporated by or under any law of this common wealth, or now or
hereafter incorporated by any other state or territory of the United States or
foreign government, and doing business in this commonwealth, * * * [with
certain exceptions named,] shall be subject to and pay into the treasury of the
common wealth annually a tax, to be computed as follows, namely.' The
amount of tax is then rated by the dividends declared, and imposed upon the
capital stock of the company at the rate of so many mills, or fractions of a mill,
for every dollar of such capital stock. It was contended that the ferry company
could not hold property in Philadelphia for the purpose of carrying on its
ferrying business, and could not carry on its said business there without a
franchise, express or implied from the state of Pennsylvania. But this court held
in its opinion, delivered by Mr. Justice FIELD, that the business of landing and
receiving passengers and freight at the wharf in Philadelphia was a necessary
incident to and a part of their transportation across the Delaware river from
New Jersey; that without it that transportation woud be impossible; that a tax
upon such receiving and landing of passengers and freight is a tax upon their
transportation,that is, upon the commerce between the two states involved in
such transportation; and that congress alone can deal with such transportation,
its non-action being equivalent to a declaration that it shall remain free from
burdens imposed by state legislation. The opinion proceeds as follows: 'Nor
does it make any difference whether such commerce is carried on by
individuals or corporations. Welton v. Missouri, 91 U. S. 275; Mobile v.
Kimball, 102 U. S. 691. AS WAS SAID IN PAul V. virginia, 8 wall. 168, at
the time of the forming of the constitution a large part of the commerce of the

world was carried on by corporations; and the East India Company, the Hudson
Bay Company, the Hamburgh Company, the Levant Company, and the Virginia
Company were mentioned as among the corporations which, from the extent of
their operations, had become celebrated throughout the commercial world. The
grant of power [to congress] is general in its terms, making no reference to the
agencies by which commerce may be carried on. It includes commerce by
whomsoever conducted, whether by individuals or corporations.' 114 U. S. 204,
5 Sup. Ct. Rep. 828. Again: 'While it is conceded that the property in a state
belonging to a foreign corporation engaged in foreign or interstate commerce
may be taxed equally with like property of a domestic corporation engaged in
that business, we are clear that a tax or other burden imposed upon the property
of either corporation because it is used to carry on that commerce, or upon the
transportation of persons or property, or for the navigation of the public waters
over which the transportation is made, is invalid and void as an interference
with and obstruction of the power of congress in the regulation of such
commerce.' 114 U. S. 211, 5 Sup. Ct. Rep. 832. It is hardly necessary to add
that the tax on the capital stock of the New Jersey Company, in that case, was
decided to be unconstitutional, because, as the corporation was a foreign one,
the tax could only be construed as a tax for the privilege or franchise of
carrying on its business, and that business was interstate commerce.
10

The decision in this case, and the reasoning on which it is founded, so far as
they relate to the taxation of interstate commerce carried on by corporations,
apply equally to domestic and foreign corporations. No doubt, the capital stock
of the former, regarded as inhabitants of the state, or their property, may be
taxed as other corporations and inhabitants are, provided no discrimination be
made against them as corporations carrying on foreign or interstate commerce,
so as to make the tax, in effect, a tax on such commerce. But their business as
carriers in foreign or interstate commerce cannot be taxed by the state under the
plea that they are exercising a franchise.

11

There is another point, however, which may properly deserve some attention.
Can the tax in this case be regarded as an income tax? And, if it can, does that
make any difference as to its constitutionality? We do not think that it can
properly be regarded as an income tax. It is not a general tax on the incomes of
all the inhabitants of the state, but a special tax on transportation companies.
Conceding, however, that an income tax may be imposed on certain classes of
the community, distinguished by the character of their occupations, this is not
an income tax on the class to which it refers, but a tax on their receipts for
transportation only. Many of the companies included in it may and undoubtedly
do have incomes from other sources, such as rents of houses, wharves, stores,
and water-power, and interest on moneyed investments. As a tax on

transportation, we have already seen from the quotations from the State Freight
Tax Case that it cannot be supported where that transportation is an ingredient
of interstate or foreign commerce, even though the a w imposing the tax be
expressed in such general terms as to include receipts from transportation which
are properly taxable. It is unnecessary, therefore, to discuss the question which
would arise if the tax were properly a tax on income. It is clearly not such, but a
tax on transportation only.
12

The corporate franchises, the property, the business, the income of corporations
created by a state may undoubtedly be taxed by the state; but, in imposing such
taxes, care should be taken not to interfere with or hamper, directly or by
indirection, interstate or foreign commerce, or any other matter exclusively
within the jusisdiction of the federal government. This is a principle so often
announced by the courts, and especially by this court, that it may be received as
an axiom of our constitutional jurisprudence. It is unnecessary, therefore, to
review the long list of cases in which the subject is discussed. Those referred to
are abundantly sufficient for our purpose. We may add, however, that, since the
decision of the Railway Tax Cases now reviewed, a series of cases has received
the consideration of this court, the decisions in which are in general harmony
with the views here expressed, and show the extent and limitations of the rule
that a state cannot regulate or tax the operations or objects of interstate or
foreign commerce. We may refer to the following: Railroad Co. v. Husen, 95
U. S. 465; Cook v. Pennsylvania, 97 U. S. 566; Guy v. Baltimore, 100 U. S.
434; Webber v. Virginia, 103 U. S. 344; Moran v. New Orleans, 112 U. S. 69,
5 Sup. Ct. Rep. 38; Walling v. michigan, 116 U. S. 446, 6 Sup. Ct. Rep. 454;
Pickard v. Pullman Co., 117 U. S. 34, 6 Sup. Ct. Rep. 635; Wabash R. Co. v.
Illinois, 118 U. S. 557, ante, 4; Robbins v. Taxing-Dist. Shelby Co., 120 U. S.
489, ante, 592; Fargo v. Michigan, 121 U. S. 230, ante, 857. The cases of
Moran v. New Orleans and Fargo v. Michigan are especially apposite to the
case now under consideration. As showing the power of the states over local
matters incidentally affecting commerce, see Munn v. Illinois, 94 U. S. 123, and
other cases in the same volume, pages 161, 176, 180, as explained by Wabash
Co. v. Illinois; The Wharfage Cases, viz., Packet Co. v. Keokuk, 95 U. S. 80;
Same v. St. Louis, 100 U. S. 428; Same v. Catlettsburg, 105 U. S. 563;
Transportation Co. v. Parkersburg, 107 U. S. 698, 2 Sup. Ct. Rep. 732; 121 U.
S. ; Mobile v. Kimball, 102 U. S. 691; Brown v. Houston, 114 U. S. 622,
630, 5 Sup. Ct. Rep. 1091; Railroad Commission Cases, 116 U. S. 307, 6 Sup.
Ct. Rep. 334, 348, 349, 388, 391, 1191; Coe v. Errol, 116 U. S. 517, 6 Sup. Ct.
Rep. 475.

13

It is hardly within the scope of the present discussion to refer to the disastrous
effects to which the power to tax interstate or foreign commerce may lead. If

the power exists in the state at all, it has no limit but the discretion of the state,
and might be exercised in such a manner as to drive away that commerce, or to
load it with an intolerable burden, seriously affecting the business and
prosperity of other states interested in it; and if those states, by way of
retaliation, or otherwise, should impose like restrictions, the utmost confusion
would prevail in our commercial affairs. In view of such a state of things which
actually existed under the confederation, Chief Justice MARSHALL, in the
case before referred to, said: 'Those who felt the injury arising from this state of
things, and those who are capable of estimating the influence of commerce of
the prosperity of nations, perceived the necessity of giving the control over this
important subject to a single government. It may be doubted whether any of the
evils proceeding from the feebleness of the federal government contributed
more to that great revolution which introduced the present system than the deep
andg eneral conviction that commerce ought to be regulated by congress. It is
not, therefore, matter of surprise that the grant should be as extensive as the
mischief, and should comprehend all foreign commerce, and all commerce
among the states. To construe the power so as to impair its efficacy would tend
to defeat an object, in the attainment of which the American public took, and
justly took, that strong interest which arose from a full conviction of its
necessity.' 12 Wheat. 446. Nothing can be added to the force of these words.
14

Our conclusion is that the imposition of the tax in question in this cause was a
regulation of interstate and foreign commerce, in conflict with the exclusive
powers of congress under the constitution. The judgment of the supreme court
of Pennsylvania is therefore reversed, and the case is remanded to be disposed
of according to law, in conformity with this opinion.