on the basis of the mileage within the State to the total mileage, has been distinctly reaffirmed.1 Thus the court in Erie R. R. Co. v. Pennsylvania reaffirmed the case of Maine v. Grand Trunk Railway and sustained a tax of Pennsylvania which it was claimed was improperly levied upon tolls received by a New York railroad company from other railroad companies for the use by them of so much of its railroad tracks as lay in the State of Pennsylvania. It said, at page 438: "The tax complained of is not laid on the transportation of the subjects of interstate commerce, or on receipts derived therefrom, or on the occupation or business of carrying it on. It is a tax laid upon the corporation on account of its property in a railroad, and which tax is measured by a reference to the tolls received. The State has not sought to interfere with the agreement between the contracting parties in the matter of establishing the tolls. Their power to fix the terms upon which the one company may grant to the other the right to use its road is not denied or in anyway controlled. "It is argued that the imposition of a tax on tolls might lead to increasing them in an effort to throw their burden on the carrying company. Such a result is merely conjectural, and, at all events, too remote and indirect to be an interference with interstate commerce. The interference with the commercial power must be direct, and not the mere incidental effect of the requirement of the usual proportional contribution to public maintenance." " 1 New York, Lake Erie and Western R. R. Co. v. Pennsylvania, 158 U. S. 431; Lehigh Valley R. Co. v. Pennsylvania, 145 U. S. 192. In the latter case the tax was upon the gross receipts, but it was held that the railroad running between two points in Pennsylvania and traversing only a short distance in New Jersey was not engaged in interstate commerce, because the incidental passage through another State in a continuous carriage from one point in a State to another point in the same State is not interstate commerce. 2 See Cumberland & Penn. R. R. Co. v. Maryland, 92 Md. 668, and 52 L. R. A. 764, following Maine v. Grand Trunk R. R. Co., and carefully reviewing the decisions of the Supreme Court. § 234. Immaterial whether corporation is domestic or foreign. In the case of Maine v. Grand Trunk Railway Company, the defendant was a foreign corporation organized under the laws of Canada, but its railroad in Maine had been constructed by another corporation under a Maine charter, and was operated by defendant under lease. The decision of the court however was not based upon any distinction between the status of a domestic and that of a foreign corporation. It said that the granting of the privilege to operate in the State as a corporation, whether the corporation be of domestic or foreign origin, rests entirely within the discretion of the State. Obviously this expression was used in the sense, not that the State can prohibit the corporation engaged in interstate commerce from operating in the State, but that, whether the corporation be domestic or foreign, the State has the right to tax the corporate franchise upon the basis of an apportionment to the receipts of the business. The rule as laid down therefore in Maine v. Grand Trunk Railroad Company, supra, § 231, would seem to be equally applicable to foreign and domestic corporations. The difference between foreign and domestic corporations was discussed in Fargo v. Michigan, supra, § 229, as constituting the distinction between that case, which involved a foreign corporation, and the case of the State Tax on Gross Receipts, in which the corporation was domestic.1 § 235. Tax not upon receipts as such, but excise tax apportioned to receipts. The decisions, supra, § 229, holding that a tax cannot be levied upon gross receipts as such have not been over 1 In Tide Water Pipe Co. v. Assessors, 57 N. J. L. 516, the rule was applied in sustaining a tax upon part of the gross receipts of a foreign pipe line company proportioned to the mileage in the State, the tax being levied as a franchise tax for the privilege of doing business in the State. ruled in terms and it would seem that, though the distinction seems one more in name than in substance, the tax must be levied as an excise tax apportioned to receipts and not directly upon receipts. The question does not seem to have been raised or considered, in relation to a tax upon earnings, whether the railroad company would be allowed to show in any particular case that the operation of the mileage rule of apportionment would work injustice by enabling the State to tax an undue proportion of earnings. Such a case might well occur where the portion of a company's line in one State traversing a very populous district would be far more productive of earnings than the same mileage in another State. As will be seen hereafter, this consideration has been recognized by the courts with reference to the mileage rule of apportionment in property valuation. § 236. State tax on net receipts. The same considerations that are applicable to a tax upon gross receipts apply to one levied upon net receipts. The latter, being the proceeds from the treasury of the corporation after paying all expenses of management and operation, are clearly distinguishable from transportation receipts, even if gross receipts are not, and this seems to have been conceded in the cases wherein that distinction was discussed.1 Either gross receipts or net receipts may therefore in the discretion of the State be taken as the basis for calculating the value of the privilege granted the corporation under its statutes, when the State seeks to determine the amount of an excise tax to be paid therefor by the corporation, whether domestic or foreign. This privilege, it should be remembered, is not that of transacting interstate commerce as 1 See opinion in State Tax on Railway Gross Receipts, supra, § 226; also Delaware Railroad Tax, supra, § 227. such, but that of operating as a corporation under the laws of the State. § 237. Valuation of property by capitalization of receipts. The right to tax receipts, whether gross or net, must be distinguished from using the receipts or income of the corporation by capitalizing the same as a means of determining the valuation of the property tax. It is the same distinction that there is between levying a tax upon the rental and upon the value of the property from which the rental is paid, determining the valuation of the property by capitalizing the rental.1 1 See infra, § 473. CHAPTER VIII. VALUATION OF INTERSTATE PROPERTIES FOR TAXATION. § 238. Right of property taxation conceded. 239. Unit rule. 240. Illinois railroad cases. 241. Supreme Court on situs of railroad property. 242. Supreme Court on apportionment. 243. Application of unit rule to interstate railroads. 244. Supreme Court on mileage apportionment in interstate railroads. 245. Exceptional circumstances may make mileage rule inapplicable. 246. Rulings on testimony not reviewed in Supreme Court unless bearing on Federal question. 247. Entire property may be considered in valuation of portion within State. 248. Value of property in use may be considered in valuation. 249. Unit and mileage rule as applied to taxation of telegraph com panies. 250. Value of property outside State to be considered in valuation under mileage apportionment. 251. Unit rule applied to express companies. 252. Ohio express company cases. 253. Special circumstances requiring deduction must be shown. 254. Rehearing of express company cases denied. 255. Intangible property of corporation properly considered in valuation. 256. Distinction between construction of statute and taxing power of State. 257. Property must be shown to be exempt by company. 258. Situs of intangible property of interstate company. 259. Kentucky express company case. 260. Power of State in valuing interstate properties as defined by Supreme Court. 261. Evidence of inapplicability of mileage rule admissible. 262. Stock market quotations as evidence of value. 263. Presumption that all evidence submitted was considered in valuation. |