Thus emerged the concept of an "apportioned" tax, or as it is called when applied to the problem of property valuation, the "unit rule," which till 1938 afforded the Court its chief reliance in the field of Constitutional Law now under review. The theory underlying the concept appears to be that it is always possible for a State to devise a formula whereby it may assign to the property employed in interstate commerce within its limits, or to the proceeds from such commerce, a value which it may tax or by which it may "measure" a tax, without unconstitutionally burdening or interfering with interstate commerce, while at the same time exacting from it a fair return for the protection which the State gives it. The question in each case is, of course, whether the State has guessed right.
In reliance on the apportionment concept the Court has at various times sustained, in the case of a sleeping car company, as we have seen, a valuation based on the ratio of the miles of track over which the company runs within the State to the whole track mileage over which it runs;[664] in the case of a railroad company, a valuation based on the ratio of its mileage within the State to its total mileage;[665] in the case of a telegraph company, a valuation based upon the ratio of its length of line within the State to its total length;[666] in the case of an express company, as we have just seen, a valuation based upon the ratio of miles covered by it in the State to the mileage covered by it in all States.[667] Also, a tax has been upheld as to a railroad line whose principal business was hauling ore from mines in the taxing State to terminal docks outside the State, where the line and the docks were treated by the railway as a unit, the charge for the dock service being absorbed in the charge per ton transported; and where the evidence did not show that the mileage value of the part of the line outside of the taxing State, with the docks included, was greater than the mileage value of part within it.[668] Nor does the commerce clause preclude the assessment of an interstate railway within a State by taking such part of the value of the railroad's entire system, less the value of its localized property, such as terminal buildings, shops and nonoperating real estate, as is represented by the ratio which the railroad's mileage within the State bears to its total mileage.[669] To the objection that the mileage formula was inapplicable in this instance because of the disparity of the revenue-producing capacity between the lines in and out of the State, the Court answered that mathematical exactitude in making an apportionment had never been a constitutional requirement. "Wherever," it explained, "the State's taxing authorities have been held to have intruded upon the protected domain of interstate commerce in their use of a mileage formula, the special circumstances of the particular situation, in the view which this Court took of them, precluded a defensible utilization of the mileage basis."[670] The principle of apportionment is, moreover, applicable to the intangible property of a company engaged in both interstate and local commerce, as well as to its tangible property.[671]
APPORTIONED GROSS RECEIPTS TAXES
The first State to attempt to employ the apportionment device in order to tax the gross receipts of companies engaged in interstate commerce was Maine, in connection with a so-called "franchise tax," which was levied on such proportion of the revenues of railroads operating in the State as their mileage there bore to their total mileage. In Maine v. Grand Trunk Railway Company,[672] a sharply divided Court upheld the tax on the basis of its designation, giving scant attention to its apportionment feature. Said Justice Field for the majority: "The privilege of exercising the franchises of a corporation within a State is generally one of value, and often of great value, and the subject of earnest contention. It is natural, therefore, that the corporation should be made to bear some proportion of the burdens of government. As the granting of the privilege rests entirely in the discretion of the State, whether the corporation be of domestic or foreign origin, it may be conferred upon such conditions, pecuniary or otherwise, as the State in its judgment may deem most conducive to its interests or policy."[673] Four Justices, speaking by Justice Bradley, protested forcefully that the decision directly contradicted a whole series of decisions holding that the States are without power to tax interstate commerce;[674] and seventeen years later another sharply divided Court endorsed this contention when it overturned a Texas gross receipts tax drawn on the lines of the earlier Maine statute.[675] The Maine tax, however, the later Court suggested, had been in the nature of a commutation tax in lieu of all taxes, which the Texas tax was not.[676]
FRANCHISE TAXES
Today the term, franchise tax, possesses no specific saving quality of its own. If the tax is merely a "just equivalent" of other taxes it is valid however calculated.[677] Conversely, when such taxes are in addition to other taxes then their fate will be determined by the same rules as would apply had the label been omitted.[678] More precisely, the rule governing this species of tax is ordinarily the apportionment concept, and if the basis of apportionment adopted by the taxing State is deemed by the Court to be a fair and reasonable one, the tax will be sustained; otherwise, not.
Thus a franchise tax may be measured by such proportion of the company's net income as its capital invested in the taxing State and its business carried on there bear to its total capital and business;[679] also by the net income justly attributable to business done within the State although a part of this was derived from foreign or interstate commerce;[680] also by such proportion of the company's outstanding capital stock, surplus and undivided profits, plus its long-term obligations, as the gross receipts of its local business bear to its total gross receipts from its entire business;[681] also by such proportion of the company's total capital stock as the value of its property in the taxing State and of the business done there bears to the total value of its property and of its business.[682] On the other hand, a "franchise" tax on the unapportioned gross receipts of railroad companies engaged in interstate commerce, was, as we saw above, held void;[683] as was also one which was measured by assigning to the company's property in the State the same proportion of the total value of its stocks and bonds as its mileage in the State bore to its total mileage, no account being taken of the greater cost of construction of the company's lines in other States or of its valuable terminals elsewhere.[684] Other examples were given earlier.[685]
GROSS RECEIPTS TAXES, CLASSES OF
The late Justice Rutledge classified gross receipts taxes which have been sustained by the Court as follows: (a) those which were judged to be fairly apportioned;[686] (b) those which were justified on a "local incidence" theory, or the burden of which on interstate commerce was held to be "remote";[687] (c) those which were justified as not inviting the danger of multiple taxation of interstate commerce.[688] Gross receipts taxes which, on the other hand, have been invalidated under the commerce clause he placed in the following groups: (a) those which were held not to be fairly apportioned;[689] (b) those which were not apportioned at all and were bound to subject interstate commerce to the risk of multiple taxation;[690] (c) those in which a discriminatory element was detected in that they were directed exclusively at transportation or communication;[691] (d) those in which there was no discrimination but a possible multiple burden;[692] and, of course, any tax which it disallows the Court is always free to stigmatize as an unconstitutional attempt to tax or license the interstate commerce privilege.[693]