In the seventh place, it must be remembered that the contract clause of the constitution does not prohibit a state from impairing the obligation of contracts but merely from passing any law impairing the obligation of contracts; and unless the alleged exemption is adversely affected by subsequent legislation as distinguished from judicial decision, the contract clause cannot be invoked.18

17. Discrimination Against Citizens of Other States

The constitution of the United States provides in Article 4 Section 2 that the citizens of each state shall be entitled to all the privileges and immunities of citizens in the several states. This provision makes it impossible for a state to tax residents of other states who own property or carry on business within its limits at a higher rate than its own citizens are taxed under like circumstances. The prohibition of this provision is not limited to discriminatory laws, and if it appears that there is an habitual practice, based upon a settled purpose, on the part of local assessors to discriminate against non-residents in the valuation of property, the proceedings are void.2

Exact identity in the taxation of residents and non-residents is not however required, if substantial equality is preserved, and differences in administrative procedure required to meet practical distinctions in the taxation of residents and non-resi

sanction of the legislature, Trask v. Maguire, 18 Wall. 391 (1878); Keokuk etc. R. R. Co. v. Missouri, 152 U. S. 301 (1893); Gulf etc. R. R. Co. v. Hewes, 183 U. S. 66 (1991); or the revival of an exemption which has lapsed, Chicago etc. R. R. Co. v. Minnesota, 216 U. S. 234 (1910); or the extension of an exemption granted originally for a limited term, Memphis etc. R. R Co. v. Gaines, 97 U. S. 697 (1878); or a radical change in the purposes for which an exempted corporation was chartered, Memphis City Bank v. Tennessee, 161 U. S. 186 (1896). 18 St. Paul etc. R. R. Co. v. Todd County, 142 U. S. 282 (1892).

1 Thus a state statute prohibiting non-residents of the state from selling goods within the state except upon payment of a license fee higher than that imposed upon resident merchants is in violation of this provision, Ward v. Maryland, 12 Wall. 424 (1870).

An excise on dividends paid to non-resident shareholders in domestic corporations is unconstitutional, Oliver v. Washington Mills, 11 Allen 281 (1865). A state statute taxing the business of hiring persons to labor outside the state does not violate this provision of the constitution, as there is no discrimination against citizens of other states, Williams v. Fears, 179 U. S. 274 (1900).

2 Beeson v. Johns, 124 U. S. 56 (1888).

dents are unobjectionable, even if as a result the non-resident is dealt with more severely.3

A corporation is not a citizen of any state within the meaning' of the clause of the constitution now under discussion, and consequently a corporation has no constitutional right as such to transact business in any state other than that from which it received its charter. A state can accordingly impose whatever tax it sees fit upon a foreign corporation seeking to do a purely local business within its limits provided that it does not require the corporation to surrender any of its rights under the constitution of the United States, and if the corporation wishes to avail itself of the privilege it must take it subject to the accompanying burden, even if the tax is much more onerous than is imposed upon domestic corporations under like conditions."

18. Obligation to Give Full Faith and Credit to Acts
of Every Other State

The constitution of the United States provides that full faith and credit shall be given in each state to the acts of every other state. This provision has little if any effect upon the taxing powers of the states, because no state can, by its public acts, detract from the taxing power of another state over property within its jurisdiction. Thus one state, by declaring bonds issued by its own municipalities to be exempt from taxation, cannot prevent such bonds from being taxed by another state when owned by inhabitants of such other state;1 and similarly a state by declaring the taxing situs of stock in corporations established under its laws to be in the state of their origin cannot prevent the taxation of such stock when held by inhabitants of other states.2

No state is bound by interstate comity to enforce the revenue

3 Thus a provision by which the non-resident pays his tax to the state and the resident to the municipality in which he lives is unobjectionable, although in a given year there may be some slight inequality in the actual result, Travellers' Insurance Co. v. Connecticut, 185 U. S. 371 (1902). A statute allowing constructive notice by publication of the sale of land for non-payment of taxes in the case of non-residents, but requiring personal service of notice upon resident owners is unobjectionable since personal service upon non-residents is not ordinarily practicable, Ballard v. Hunter, 204 U. S. 241 (1907). 4 Paul v. Virginia, 8 Wall. 181 (1868).

5 Infra, § 23.

1 Bonaparte v. Tax Court, 104 U. S. 592 (1881).

2 Bellows Falls Power Co. v. Commonwealth, 222 Mass. 51 (1915); affirmed, 245 U. S. 630 (1917).

laws of other states; and consequently an action cannot be maintained in one state against persons or property within its jurisdiction to recover a tax levied by authority of another state.3

19. Limitations of the Taxing Powers of the State by

Treaties

The power which a state would otherwise have of discriminating against aliens in its tax laws may be limited by treaties made by the United States with foreign governments, since it is provided by Article VI of the constitution of the United States that treaties made under the authority of the United States shall be the supreme law of the land. Thus in the absence. of a treaty to the contrary a state may deny to aliens the right to inherit property within its jurisdiction, and consequently may impose a tax upon inheritance by aliens at a higher rate than is imposed upon citizens of the United States.1 Such a discrimination may be prohibited by treaty, although a treaty would not affect a tax upon the estate of a decedent who had died before the treaty took effect. A treaty providing that no higher taxes shall be laid upon the property of citizens of one of the contracting parties than upon a citizen of the nation imposing the tax does not apply to a discriminatory inheritance tax, since such a tax is not a tax on property; and a treaty providing that citizens of either of the contracting parties may freely dispose of their goods by will does not prohibit a state inheritance tax law from discriminating against alien beneficiaries; or against beneficiaries who are not residents of the United States," because such a treaty grants a right to dispose of and not to receive property by will.

3 Wisconsin v. Pelican Insurance Co., 127 U. S. 265, 290 (1888).

1 Mager v. Grima, 8 How. 490 (1849). In the absence of a treaty the capacity of an alien to inherit depends upon the laws of the state. Sullivan v. Kidd, 254 U. S. 533 (1921).

2 Prevost v. Greeneaux, 19 How. 1 (1856).

3 Peterson v. Iowa, 245 U. S. 170 (1917).

4 Duus v. Brown, 245 U. S. 176 (1917).

5 Frederickson v. Louisiana, 23 How. 445 (1859).

INTERSTATE COMMERCE

20. The Taxation of Interstate Commerce, and of
Property Engaged Therein

The constitution of the United States contains in Article 1, Section 8 the following provision:

The Congress shall have power . . to regulate commerce with foreign nations, and among the several States, and with the Indian tribes.

It is to be noted that this provision of the constitution does not in terms prohibit the states from regulating interstate commerce and it has not been interpreted as in itself excluding them from all control over such commerce. It is only with regard to matters upon which Congress has acted or which in their nature require uniform treatment that the states are precluded from acting. Applied to the state power of taxation the interstate commerce clause does not prohibit a state from taxing property engaged in interstate commerce, or even from imposing the ordinary property tax upon the franchise of a corporation engaged in interstate commerce. It does however prohibit a state from taxing in any manner the privilege of engaging in interstate commerce within its limits, or from imposing a tax upon property engaged in interstate commerce at a higher rate than is imposed upon other property. The application of these principles is set forth in detail in the following sections.

Not all dealings which affect persons or property outside the state in which the dealings originate constitute interstate commerce; and a state may tax interstate transactions which do not constitute commerce without violating the clause of the constitution now under consideration.' So also not all pecuniary im

1 A license may be required of insurance agents acting for foreign corporations, Nutting v. Massachusetts, 183 U. S. 553 (1902), or of emigration agents seeking to employ persons in labor outside the state. Williams v. Fears, 179 U. S. 276 (1900). A tax on money and exchange brokers is valid though applied to one whose sole business is in foreign bills of exchange. Nathan v. Louisiana, 8 How. 80 (1850). A tax on the transfer within a state of shares in corporations may be applied to shares in foreign corporations owned by non-residents, Hatch v. Reardon, 204 U. S. 152 (1907), and a tax may be imposed on a local cab service connected with an interstate railway. New York v. Knight, 192 U. S. 21 (1904). A license tax on the occupation of a railroad

3

6

positions upon the act of engaging in interstate commerce are taxes, and a reasonable fee for the use of public property or for the services of public officers may be collected from persons or corporations engaged in interstate commerce as well as from other parties. For this reason wharfage fees, canal tolls, or charges for the use of log booms may be imposed without any exemption in favor of the persons engaged in interstate commerce; and for the same reason a license fee may be charged by a state for the use of its roads by motor vehicles even while engaged in interstate commerce.' Similarly a municipal corporation may be authorized to impose a charge upon an interstate telegraph company for the right to maintain poles in the public streets, since such a charge is more a rental than a tax, and fees covering the cost of an inspection required to protect the public health, morals or safety are equally unobjectionable though applied to persons engaged in interstate commerce.o But even charges and fees which are not taxes cannot be imposed in such a manner as to discriminate against interstate commerce, and an imposition which is really a tax cannot be sustained by calling it a toll or a charge.11

8

10

agent, or on the maintenance of a railroad office cannot however be applied to an interstate railway. McCall v. California, 136 U. S. 109 (1890); Norfolk R. R. Co. v. Pennsylvania, 136 U. S. 118 (1890).

2 Supra § § 4, 5, 6.

3 Northwestern Union Packet Co. v. St. Louis, 100 U. S. 423 (1879); Cincinnati etc. Packet Co. v. Catlettsburg, 105 U. S. 559 (1881); Onachita Packet Co. v. Aiken, 121 U. S. 444 (1887); Postal Tel. Cable Co. v. Baltimore, 156 U. S. 210 (1895); Richmond v. Southern etc. Tel. Co., 174 U. S. 761 (1899). See also the cases cited in notes 4 to 9 inc.

4 Parkersburg etc. Transportation Co. v. Parkersburg, 107 U. S. 691 (1882). 5 Huse v. Glover, 119 U. S. 543 (1886).

6 Lindsay etc. Co. v. Mullen, 176 U. S. 126 (1900).

Hendrick v. Maryland, 235 U. S. 610 (1915); Kane v. New Jersey, 242 U. S. 160 (1916).

8 St. Louis v. Western Union Tel. Co., 148 U. S. 92 (1893), 149 U. S. 465 (1893); Atlantic etc. Tel. Co. v. Philadelphia, 190 U. S. 160 (1903).

9 Thus a license fee may be imposed to cover the cost of the inspection of interstate telegraph poles, Western Union Tel. Co. v. New Hope, 187 U: S. 419 (1903); Atlantic etc. Tel. Co. v. Philadelphia, 190 U. S. 160 (1903); Postal Tel. Cable Co. v. Taylor, 192 U. S. 64 (1904); Mackay Tel. etc. Co. v. Little Rock, 250 U. S. 94 (1919). See also Postal Tel. Cable Co. v. Chicopee, 207 Mass. 341 (1911), holding that a telegraph company may be required to carry municipal lighting wires on its poles without compensation, as a set-off to the cost of inspection which its poles necessitate.

10 Guy v. Baltimore, 100 U. S. 434 (1879); Brimmer v. Rebman, 138 U. S. 78 (1891).

11 State Freight Tax Case, 15 Wall. 232 (1872).