ERROR TO THE SUPERIOR COURT OF THE STATE OF CONNECTICUT
White, McKenna, Holmes, Day, Van Devanter, Pitney, McReynolds, Brandeis, Clarke
MR. JUSTICE BRANDEIS delivered the opinion of the court.
This action was brought by the Underwood Typewriter Company, a Delaware corporation, in the Superior Court for the County of Hartford, Connecticut, to recover the amount of a tax assessed upon it by the latter State and paid under protest. The company contended that as applied to it the taxing act violated rights guaranteed by the Federal Constitution. The constitutional questions involved were reserved by that court for consideration and advice by the Supreme Court of Errors. The answers to these questions being favorable to the State, 94 Connecticut, 47, judgment was entered by the Superior Court confirming the validity of the tax. The case comes here on writ of error to that court.
Connecticut established in 1915 a comprehensive system of taxation applicable alike to all foreign and domestic corporations carrying on business within the State. This system prescribes practically the only method by which such corporations are taxed, other than the general property tax to which all property located within the State, whether the owner be a resident or a nonresident, an individual or corporation, is subject. The act divides business corporations into four classes and the several classes are taxed by somewhat different methods. The fourth class, "Miscellaneous Corporations," includes, among others, manufacturing and trading companies, and with these alone are we concerned here. Upon their net income earned during the preceding year from business carried on within the State a tax of two per cent. is imposed annually. The amount of the net income is ascertained by reference to the income upon which the corporation
is required to pay a tax to the United States. If the company carries on business also outside the State of Connecticut, the proportion of its net income earned from business carried on within the State is ascertained by apportionment in the following manner: The corporation is required to state in its annual return to the tax commissioner from what general source its profits are principally derived. If the company's net profits are derived principally from ownership, sale or rental of real property, or from the sale or use of tangible personal property, the tax is imposed on such proportion of the whole net income, as the fair cash value of the real and the tangible personal property within the State bears to the fair cash value of all the real and tangible personal property of the company. If the net profits of the company are derived principally from intangible property the tax is imposed upon such proportion of the whole net income as the gross receipts within the State bear to the total gross receipts of the company. A corporation aggrieved because of a tax assessed upon it may after paying the tax apply for relief to the Superior Court for the County of Hartford. There it may show cause why it is not subject to the tax or why the tax should have been less. If the whole tax assessed is found by the court to be proper, it enters judgment confirming the same. If the tax is found to be for any reason unauthorized in whole or in part, the court enters judgment for the company in the amount with interest which it is entitled to recover; and the state treasurer is directed to pay the same. The decision of the superior court is subject to review by the Supreme Court of Errors as in other cases. Laws of 1915, c. 292, part IV, §§ 19-29; Underwood Typewriter Co. v. Chamberlain, 92 Connecticut, 199.
The Underwood Typewriter Company is engaged in the business of manufacturing typewriters and kindred articles; in selling its product and also certain accessories and supplies which it purchases; and in repairing and
renting such machines. Its main office is in New York City. All its manufacturing is done in Connecticut. It has branch offices in other States for the sale, lease and repair of machines and the sale of supplies; and it has one such branch office in Connecticut. All articles made by it -- and some which it purchases -- are stored in Connecticut until shipped direct to the branch offices, purchasers or lessees. In its return to the tax commissioner of Connecticut, made in 1916 under the above law, the company declared that its net profits during the preceding year had been derived principally from tangible personal property; that these profits amounted to $1,336,586.13; that the fair cash value of the real estate and tangible personal property in Connecticut was $2,977,827.67, and the fair cash value of the real estate and tangible personal property outside that State was $3,343,155.11. The proportion of the real estate and tangible personal property within the State was thus 47 per cent. The tax commissioner apportioned that percentage of the net profits, namely $629,668.50, as having been earned from the business done within the State, and assessed thereon a tax of $12,593.37, being at the rate of two per cent. The company having paid the tax under protest, brought this action in the Superior Court for the County of Hartford to recover the whole amount.
First. It is contended that the tax burdens interstate commerce and hence is void under § 8 of Article I of the Federal Constitution. Payment of the tax is not made a condition precedent to the right of the corporation to carry on business, including interstate business. Its enforcement is left to the ordinary means of collecting taxes. St. Louis Southwestern Ry. Co. v. Arkansas, 235 U.S. 350, 364; Atlantic & Pacific Telegraph Co. v. Philadelphia, 190 U.S. 160, 163. The statute is, therefore, not open to the objection that it compels the company to pay for the privilege of engaging in interstate commerce. A
tax is not obnoxious to the commerce clause merely because imposed upon property used in interstate commerce, even if it takes the form of a tax for the privilege of exercising its franchise within the State. Postal Telegraph Cable Co. v. Adams, 155 U.S. 688, 695. This tax is based upon the net profits earned within the State. That a tax measured by net profits is valid, although these profits may have been derived in part, or indeed mainly, from interstate commerce is settled. U.S. Glue Co. v. Oak Creek, 247 U.S. 321; Shaffer v. Carter, 252 U.S. 37, ...