The State Tax Commission of Iowa brought this suit under the authority of the Iowa Use Tax Law which was recently here in Nelson v. Sears, Roebuck & Co., 312 U.S. 359, 61 S.Ct. 586, 85 L.Ed. 888, 132 A.L.R. 475, and Nelson v. Montgomery Ward, 312 U.S. 373, 61 S.Ct. 593, 85 L.Ed. 897. The question now presented is, in short, whether Iowa may collect, in the circumstances of this case, such a use tax from General Trading Company, a Minnesota corporation, on the basis of property bought from Trading Company and sent by it from Minnesota to purchasers in Iowa for use and enjoyment there.
By the Iowa Use Tax Law a tax is 'imposed on the use in this state of tangible personal property purchased * * * for use in this state, at the rate of two percent of the purchase price of such property. Said tax is * * * imposed upon every person using such property within this state until such tax has been paid directly to the county treasurer, to a retailer, or to the commission * * *.' § 6943.103, Code of Iowa 1939. The use of property the sale of which is subject to Iowa's sales tax is exempted from the use tax (§ 6943.104(1), but the sales tax can be laid only on sales at retail within the State. § 6943.075. The use tax constitutes a debt owed by the retailer to the State. § 6943.112. But 'Every retailer maintaining a place of business' in Iowa must collect this tax from the purchaser (§ 6943.109), and may not advertise that he will himself absorb the tax. § 6943.111. Finally an offsetting credit (see Henneford v. Silas Mason Co., 300 U.S. 577, 584, 586, 587, 57 S.Ct. 524, 527, 528, 529, 81 L.Ed. 814) if another use or sales tax has been paid for the same thing elsewhere is allowed, and if the tax 'imposed in such other state is two percent or more, then no tax shall be due on such articles.' § 6943.125.
A judgment in favor of the Tax Commission by one of the lower courts was affirmed by the Supreme Court of Iowa, — Iowa --, 10 N.W.2d 659. The application by that Court of its local laws and the facts on which it founded its judgment are of course controlling here. From these it appears that General Trading Company had never qualified to do business as a foreign corporation in Iowa nor does it maintain there any office, branch or warehouse. The property on which the use tax was laid was sent to Iowa as a result of orders solicited by traveling salesmen sent into Iowa from their Minnesota headquarters. The orders were always subject to acceptance in Minnesota whence the goods were shipped into Iowa by common carriers or the post. Upon these facts and its holding that Trading Company was a 'retailer maintaining a place of business in this state' within the meaning of the Iowa Statute, the Iowa Supreme Court held that Iowa had not exceeded its powers in the imposition of this use tax on Iowa purchasers, and that collection could validly be made through the Trading Company.