Owen J. Roberts

“ If such power of apportionment or allocation exists at all, it must be true that the only repository of a power touching complex and national aspects of interstate commerce is not Indiana, not the Judiciary-but the National Congress.
Interstate commerce constitutes a large part of the business of the nation. Until Congress, in the exercise of its plenary power over interstate commerce, fixes a different policy, it would appear desirable that the States should remain free to adopt tax systems imposing uniform and nondiscriminatory taxes upon interstate and intrastate business alike. ”

“ Throughout the decisions upon the question has run recognition of the supreme power of Congress to regulate interstate commerce, and the courts have stricken down state taxes when found to raise barriers impeding the free flow of commerce between the States, but not obstructing commerce between citizens within a single State. ”

“ The Supreme Court of Indiana has consistently held that exemptions from taxation are not favored but are to be strictly construed. [18]
In the light of the foregoing facts we are of opinion that the case is controlled by Hale v. Iowa State Board, 302 U.S. 95, 58 S.Ct. 102, 82 L.Ed. 72. We are unable, therefore, to hold that the decision of the Supreme Court is plainly wrong, even upon the assumption that in adopting the statutory exemption the legislature intended to, and in fact did, contract with purchasers of municipal bonds. ”

“ The receipt of income is a taxable event and need not necessarily enjoy the immunity of the income's source. [39] Appellant's receipt of gross income could be taxed in one State only, because appellant received income only in Indiana. A sales tax might possibly be imposed upon independent distributors of appellant's products who do business in other States. Such tax would be constitutional only if it did not discriminate against appellant's products. [40] Distributors in States other than Indiana do business under the protection of their respective States. ”

“ A court may act to protect a litigant from unfair and unjust burdens upon the litigant's interstate business. Yet, it would seem that only Congress has the power to formulate rules, regulations and laws to protect interstate commerce from merely possible future unfair burdens. Here the record does not indicate any charge or proof of an existing extraordinary, unfair or multiple tax burden on appellant. The tax burden from which appellant is here exempted is one which the local taxpayers of Indiana must bear. ”

“ If the state discerns in business operations uniformities and averages that seem to point the way to a system easier to administer than one based upon a report of profits, and yet likely in the long run to work out approximate equality, it ought not to be denied the power to frame its laws accordingly.' Stewart Dry Goods Co. ”

“ Enjoyment of the privileges of residence in the state and the attendant right to invoke the protection of its laws are inseparable from responsibility for sharing the costs of government. 'Taxes are what we pay for civilized society.' * * * Neither the privilege nor the burden is affected by the character of the source from which the income is derived. For that reason income is not necessarily clothed with the tax immunity enjoyed by its source. * * * It may tax net income from operations in interstate commerce, although a tax on the commerce is forbidden, United States Glue Co. ”

“ Appellant is an Indiana corporation engaged in the business of manufacturing and selling road machinery. All of the machinery is manufactured in Indiana. Its office, only plant and all its properties are located in Indiana. Its products are sold to ultimate purchasers in Indiana and other States by independent distributors or through sales agents of appellant. All sales must be approved by, and all payments made to appellant's office in Indiana. While appellant is thus engaged in interstate commerce, obviously, a major portion of its activities takes place in Indiana. ”

“ Therefore, the total amount exacted from interstate commerce under a gross receipts tax can fluctuate just as the total paid under a property tax. Since property and corporate franchises used in interstate commerce can be constitutionally taxed by States, whether profitable or unprofitable, it seems difficult to justify a constitutional test for state income taxes based upon existence or absence of profit. ”

“ Section 6 exempts 'So much of such gross income as is derived from business conducted in commerce between this state and other states of the United States, or between this state and foreign countries, to the extent to which the State of Indiana is prohibited from taxing under the Constitution of the United States of America.'
The appellant, an Indiana corporation, manufactures road machinery and equipment and maintains its home office, principal place of business, and factory in the State. It sells 80 per cent. ”

“ Justice Cardozo: 'But profits themselves are not susceptible of ascertainment with certainty and precision except as the result of inquiries too minute to be practicable. The returns of the taxpayer call for an exercise of judgment as well as for a transcript of the figures on his books. They are subject to possible inaccuracies, almost without number. Salaries of superintendence, figuring as expenses, may have been swollen inordinately; appraisals of plant, of merchandise, of patents, of what not, may be erroneous or even fraudulent. ”

“ Shipments are made from the factory and payments are remitted to the home office. Pursuant to a practice of investing surplus funds not immediately required in its business, the appellant owns and receives interest upon bonds and notes of Indiana municipal corporations which, at the time they were issued, were declared by statute to be exempt from taxation. ”

“ It is those specific receipts, or the amount thereof, (which is the same thing,) for which the company is called upon to pay the tax. They are taxed, not only because they are money or its value, but because they were received for transportation. ”

“ Serious financial difficulties of the States stimulated efforts to find new sources of taxation, andthe widespread belief that property was bearing an unfair burden of taxes also substantially contributed to the levying of these new taxes. ”

“ The application of such a constitutional test will-as a practical matter-inevitably result in exempting all enterprises engaged in interstate commerce from all state gross income taxes on interstate commerce receipts, whether profitable or not. ”