DOCTRINE OF WESTERN UNION TELEGRAPH _v._ KANSAS EX REL. COLEMAN
One of the most striking concessions ever made by the Court to the interstate commercial interest at the expense of the State's taxing power was that which appeared originally in 1910, in Western Union Telegraph. Co. _v._ Kansas ex rel. Coleman,[639] which involved a percentage tax upon the total capitalization of all foreign corporations doing or seeking to do a local business in the State. The Court pronounced the tax, as to the Western Union, a burden upon the company's interstate business and upon its property located and used outside the State, and hence void under both the commerce clause and the due process of law clause of the Fourteenth Amendment. The decision was substantially aided by the fact that the company had been doing a general telegraphic business within the State for more than fifty years without having been subjected to such an exaction.[640]
The doctrine of the case, however, soon cast off these initial limitations. In Looney _v._ Crane Company[641] a similar tax by the State of Texas was disallowed as to an Illinois corporation, engaged in its home State in the manufacture of hardware, but maintaining in Texas depots and warehouses from which orders were filled and sales made, likewise, in International Paper Company _v._ Massachusetts,[642] it was clearly stated that "the immunity of interstate commerce from State taxation" is not confined to what is done by carriers in such commerce, but "is universal and covers every class of ... [interstate] commerce, including that conducted by merchants and trading companies." On the same occasion the general proposition was laid down that "the power of a State to regulate the transaction of a local business within its borders by a foreign corporation, ... is not unrestricted or absolute, but must be exerted in subordination to the limitations which the Constitution places on State action."[643]
The precise standing of this doctrine is, nevertheless, seriously clouded by certain more recent holdings. In Sprout _v._ South Bend,[644] decided in 1928, the doctrine was still applied, to disallow a license tax on concerns operating a bus interstate. Pointing to the fact that the ordinance made no distinction between busses engaged exclusively interstate and those engaged intrastate or both interstate and intrastate, the Court said: "In order that the fee or tax shall be valid, it must appear that it is imposed solely on account of the intrastate business; that the amount exacted is not increased because of the interstate business done; that one engaged exclusively in interstate commerce would not be subject to the imposition; and that the person taxed could discontinue the intrastate business without withdrawing also from the interstate business."[645] Likewise, in Cooney _v._ Mountain States Telephone and Telegraph Co., the Court asserted that to sustain a State occupation tax on one whose business is both interstate and intrastate, "it must appear * * *, and that the one [who is] taxed could discontinue the intrastate business without [also] withdrawing from the interstate business."[646] A year later, nevertheless, Justice Brandeis, speaking for the Court in Pacific Telephone and Telegraph Co. _v._ Tax Commission,[647] asserted flatly: "No decision of this Court lends support to the proposition that an occupation tax upon local business, otherwise valid, must be held void merely because the local and interstate branches are for some reason inseparable."[648] An occupation tax, like other taxes and expenses, lessens the benefit derived by interstate commerce from the joint operation with it of the intrastate business of the carrier; but it is not an undue burden on interstate commerce where, as in this case, the advantage to the carrier, and to the interstate commerce, of continuing the intrastate business is greatly in excess of the tax. And subsequent holdings in cases involving foreign corporations doing a mixed business, comprising both interstate and intrastate elements, have tended on the whole to restore the rule stated in Paul _v._ Virginia[649] shortly after the Civil War, that the Constitution does not confer upon a foreign corporation the right to engage in local business in a State without its assent, which it may give on such terms as it chooses.[650]