A state tax directly upon and measured by the amount of freight carried is, as to interstate freight, a tax on interstate commerce and as such void.18

In State Tax on Railway Gross Receipts,19 however, the court upheld a tax on the gross receipts of the railways, including receipts from interstate commerce, the amount of such receipts being assessed in proportion to the mileage in the State; the ground being taken that the tax was upon a fund which had become the property of the company and mingled with its other property. The court say: "The tax is not levied, and indeed such a tax cannot be, until the expiration of each half year, and until the money received for freights, and from other sources of income, has actually come into the company's hand. Then it has lost its distinctive character as freight earned, by having become incorporated into the general mass of the company's property."

In American Refrigerator Transit Co. v. Hall (174 U. S. 70; 19 Sup. Ct. Rep. 599; 43 L. ed. 899) the foregoing language is quoted and approved, it being held in that case that a State may constitutionally tax refrigerator cars used on railroads of the State and required in their business, though owned by a corporation of another State, and being paid for by the railroad company on a mileage basis, though such cars are used within one State wholly for interstate commerce; and that a tax might be fixed upon the value of the average number of cars employed in the State.

17 In Fargo v. Hart (193 U. S. 490; 24 Sup. Ct. Rep. 498; 48 L. ed. 761) the court held that personal property owned by a non-resident express company and situated outside of the State, could not be taken into account in fixing the value, for taxation, of its property within the State, on the theory that the possession of such property by the company gave to it a better credit and thus a better opportunity to obtain business.

18State Freight Tax Cases. 15 Wall. 232; 21 L. ed. 146.

19 15 Wall. 284; 21 L. ed. 164.

Though followed in a number of subsequent cases, in Philadelphia SS. Co. v. Pennsylvania20 the reasoning of the court in State on Gross Receipts was declared unsound and its doctrine abandoned, the court saying: "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."

The prohibition thus laid upon the States was, however, again substantially done away with in Maine v. Grand Trunk R. R. Co.21 in which it was held that a State might levy a tax on the right of an interstate railway to exercise its franchises, whether domestic or foreign, within its borders and determine the value of this right, and, therefore, the amount of the tax, by the gross earnings of the company within the State as determined by it3 mileage therein.

The position of the court in this case has met with much criticism and it would seem impossible to harmonize it with earlier cases.22

Though later affirmed,23 a recent case indicates that the doctrine of Maine v. Grand Trunk R. Co. is to be strictly construed and that the principle declared in Philadelphia SS. Co. v. Pennsylvania is still unshaken. In the case of Galveston II. & S. A. R. R. Co. v. Texas24 was held invalid a state law which levied a tax upon railway companies, whose lines lay wholly within the State, "equal to one per centum of their gross receipts," it appearing that a part, and in some cases a considerable part of these receipts, were derived from the carriage of persons or freight coming from or destined to points without the State. After declaring the case of Philadelphia SS. Co. v. Pennsylvania to be unshaken, the court intimate that the decision in Maine v. Grand Trunk R. R. Co. can be sustained only as viewing the tax in that case as in reality not a franchise tax but as a property tax on the additional value given to the tangible property of the company by being part of a going concern. The court observe that the line between a tax on receipts, and a tax on property, but measured by receipts, is often difficult to draw, but can be drawn, by taking into account the whole state scheme of taxation.25

20 122 U. S. 326; 7 Sup. Ct. Rep. 1118; 30 L. ed. 1200. 21 142 U. S. 217; 12 Sup. Ct. Rep. 121; 35 L. ed. 994. 22 See the dissenting opinion of Justice Bradley.

23 N. Y., etc., R. R. Co. v. Pennsylvania, 158 U. S. 440; 15 Sup. Ct. Rep. 900; 39 L. ed. 1046.

24 210 U. S. 217; 28 Sup. Ct. Rep. 638; 52 L. ed. 1031.

From the foregoing it would appear that the law with reference to the state taxation of the gross receipts of companies doing an interstate commerce business is not in as definite a shape as might be desired. One general principle may, however, be deduced from all the cases. This is, that a state tax is invalid, whatever its form, if in effect it lays a direct burden upon interstate commerce; and that, conversely, a state tax is valid, however measured, or (if we follow the doctrine of Maine v. Grand Trunk Ry.) whatever its form, which may be fairly held to be a tax on the property of the company, whether tangible or intangible. The tax being thus valid, if valid at all, only as a property tax, it may never amount to more than an ordinary property tax, valid its non-payment may never involve a forfeiture of the right of the company to do an interstate commerce business. The doctrine of Maine v. Grand Trunk Ry. that a tax measured by the gross receipts may be sustained as a franchise or excise tax upon the right of the company to do business in the State is certainly unsound, and is, it would appear, as above indicated, so recognized by the court in Galveston H. & S. A. R. R. Co. v. Texas.

25 The court say: "It appears sufficiently, perhaps from what has been said, that we are to look for a practical rather than a logical or philosophical distinction. The State must be allowed to tax the property, and to tax it at its actual value as a going concern. On the other hand, the State cannot tax the interstate business. The two necessities hardly admit of an absolute logical reconciliation. Yet the distinction is not without sense. When a legislature is trying simply to value property, it is less likely to attempt or to effect injurious regulation than when it is aiming directly at the receipts from interstate commerce. A practical line can be drawn by taking the whole scheme of taxation into account. That must be done by this court as best it can. Neither the state courts nor the legislatures, by giving the tax a particular name or by the use of some form of words, can take away our duty to consider its nature and effect. If it bears upon commerce among the States so directly as to amount to a regulation in a relatively immediate way, it will not' be saved by name or form."

As regards the tax in question, the court say: "We are of opinion that the statute levying this tax does amount to an attempt to regulate commerce among the States. The distinction between a tax 'equal to' 1 per cent, of gross receipts, and a tax of 1 per cent, of the same, seems to us nothing, except where the former phrase is the index of an actual attempt to reach the property and to let the interstate traffic and the receipts from it alone. We find no such attempt or anything to qualify the plain inference from the statute, taken by itself. On the contrary, we rather infer from the judgment of the state court and from the argument on behalf of the State that another tax on the property of the railroad is upon a valuation of that property, taken as a going concern. This is merely an effort to reach the gross receipts, not even disguised by the name of an occupation tax, and in no way helped by the words 'equal to.' Of course, it does not matter that the plaintiffs in error are domestic corporations, or that the tax embraces indiscriminately gross receipts from commerce within as well as outside of the State."

Perhaps the general doctrine which we have been considering is best stated and illustrated in Postal Telegraph Cable Co. v. Adams,26 in which it was held that a State has the power to levy on a foreign telegraph company doing both a domestic and an interstate business a franchise tax, the amount thereof being graduated according to the value of the property within the State, such tax being in" lieu of all other taxes. Though in terms a franchise tax, the tax was held valid as, in fact, taking the place of a property tax which, of course, the State might constitutionally levy. The court say: "A tax [may be] imposed on the corporation on account of its property within the State and may take the form of a tax on the privilege of exercising its franchises within the State, and if the ascertainment of the amount is made dependent in fact on the value of its property situated within the State (the exaction, therefore, not being susceptible of exceeding the sum which might be levied directly thereon), and if payment be not made a condition precedent to the right to carry on the business, but its enforcement left to the ordinary means devised for the collection of taxes."

26 155 U. S. 688; 15 Sup. Ct. Rep. 268; 39 L. ed. 311.