TAXATION - STATE OCCUPATION TAX ON INTRASTATE BUSINESS OF CORPORATIONS DOING BOTH INTRASTATE AND INTERSTATE BUSINESS - BURDEN ON INTERSTATE COMMERCE

Authors

Abstract

The state of Washington imposed an occupation tax on practically all businesses within the state based on gross income from intrastate business. The Pacific Telephone and Telegraph Company sought to enjoin, and the state sued the Great Northern and the Northern Pacific Railway Companies for, the collection of this tax. Both the telephone company and the railways relied on the alleged rule of law that an occupation tax laid upon the local business of a foreign corporation engaged in both intrastate and interstate business is necessarily void unless the corporation is free in law and in fact to withdraw from the local business without discontinuing its interstate business. The Washington court assumed that practical considerations and governing law would not permit withdrawal from local business without withdrawal from interstate business as well, but denied the existence of the alleged rule of law and upheld the tax. The Supreme Court held that the tax was constitutional and that an occupation tax contributing to the operating deficit in the local business of a concern engaged in both intrastate and interstate business was not necessarily invalid, particularly if there was no desire on the part of the taxpayer to withdraw from such local business, for to hold the tax invalid the taxpayer must definitely demonstrate that the practical consequence of the tax is to impose an undue burden on interstate commerce. Pacific Telephone & Telegraph Co. v. Tax Commission, (U. S. 1936) 56 S. Ct. 522.

Recommended Citation

TAXATION - STATE OCCUPATION TAX ON INTRASTATE BUSINESS OF CORPORATIONS DOING BOTH INTRASTATE AND INTERSTATE BUSINESS - BURDEN ON INTERSTATE COMMERCE, 34 Mich. L. Rev. 1263 (1936).
Available at: https://repository.law.umich.edu/mlr/vol34/iss8/32