TAXATION - PRIVILEGE TAX ON FOREIGN CORPORATIONS - DUE PROCESS AND COMMERCE CLAUSES - VALIDITY OF FORMULA

Authors

James W. Deer, University of Michigan Law SchoolFollow

Abstract

The state of Texas levied an annual franchise tax on all corporations, both foreign and domestic, authorized to do business within the state. The tax was assessed on the basis of the amount of the total capital stock which was allocable to Texas, the allocation being based on the proportion that Texas gross receipts bore to total gross receipts. This formula, as applied to the Ford Motor Company, gave the statutory base of $23,000,000 on which Ford paid the tax under protest. The evidence showed that the Ford Motor Company had only an assembly plant in Texas worth $3,000,000, that auto parts were shipped in, assembled, and sold in intrastate commerce. The circuit court of appeals affirmed the district court's judgment upholding the tax against the claim that it burdened interstate commerce and taxed property outside the state. On certiorari to the Supreme Court of the United States, held, the formula was constitutional because it fairly measured the value added to the privilege of doing intrastate business by use of property outside the state. Judgment affirmed. Justices Black and Douglas concurred in the result. Justice McReynolds dissented. Ford Motor Co. v. Beauchamp, 308 U.S. 331, 60 S. Ct. 273 (1939).

Recommended Citation

James W. Deer, TAXATION - PRIVILEGE TAX ON FOREIGN CORPORATIONS - DUE PROCESS AND COMMERCE CLAUSES - VALIDITY OF FORMULA, 38 Mich. L. Rev. 1111 (1940).
Available at: https://repository.law.umich.edu/mlr/vol38/iss7/21