Central Greyhound Lines Inc of New York v. Mealey/Dissent Murphy
Mr. Justice MURPHY, with whom Mr. Justice BLACK and Mr. Justice DOUGLAS concur, dissenting.

A precise delineation of the controlling facts is essential to a determination of the constitutional issue involved in this appeal. That issue concerns an alleged conflict between the commerce clause of the Constitution of the United States and a New York statute taxing the gross income of utilities doing business within that state. Specifically, the problem relates to an application of the tax to the gross receipts from bus transportation originating and terminating in New York but passing through parts of New Jersey and Pennsylvania.

Section 186-a of the New York Tax Law is entitled 'Emergency tax on the furnishing of utility services.' It imposes a tax 'equal to two percentum of its gross income * * * upon every utility doing business in this state * * * in addition to any and all other taxes and fees imposed by any other provision of law for the same period.'  The word 'utility' is defined to include every person 'subject to the supervision of either division of the state department of public service'  and the words 'gross income' are defined to include 'receipts received in or by reason of any sale * * * made or service rendered for ultimate consumption or use by the purchaser in this state * * *.' 

Appellant is a New York corporation engaged in business as a common carrier by omnibus. It operates its buses both within and without New York and is subject to the supervision of the New York Public Service Commission. Hence it is a utility within the meaning of § 186-a.

Appellant operates buses over numerous routes from New York City to Buffalo and other cities in upstate New York, routes which cut across sections of New Jersey and Pennsylvania and which are the most direct ones possible. The controversy is concerned only with the taxation under § 186-a of that part of appellant's receipts derived from continuous transportation of passengers between New York points over such routes. Application of the tax to the receipts from transportation moving solely within New York is not contested; and receipts from transportation between New York points and out-of-state points have not been taxed.

At the hearing before the State Tax Commission relative to the contested tax, the parties agreed that the evidence would be limited to the operations over these routes during July, 1937, and that the conclusions to be drawn from such evidence would be applicable to all months subsequent thereto. The evidence which was introduced revealed that 57.47% of the total mileage of the journeys over the routes in question was traversed within New York, while 42.53% thereof was traversed within New Jersey and Pennsylvania. Although some transfers and stopovers in New Jersey and Pennsylvania were indicated, there was no showing that they were of a substantial number or that they were of such a nature as to break the transportation between New York points into two unrelated trips. The legal issues in the case have been predicated at all times upon the evidence that there was continuous transportation of passengers between New York points on single tickets and upon the evidence as to the percentage of the mileage traversed within and without New York.

The State Tax Commission construed § 186-a as applicable to appellant's total receipts from the transportation in issue, proration of the receipts in accordance with the mileage traversed in New York being considered unnecessary. So construed, § 186-a was held not to conflict with the commerce clause of the Federal Constitution. This ruling was sustained by the New York courts.

The crucial fact, from the constitutional standpoint, is the dual and unique character of transportation between termini in the same state where the territory of another state is traversed en route. Such transportation has both interstate and intrastate features. From the standpoint of physical movement, there is a crossing of state lines and a journey over territory belonging to more states than one-a movement that is undeniably interstate. At the same time, however, the business of transporting passengers or freight between points in the same state is essentially local in character despite the interstate movement. All of the essential elements of the commercial intercourse represented by the continuous transportation are resident in that one state. The parties to the transportation contract, the making of the contract and the service which is the subject of the contract are identified preeminently with that state. The whole purpose of the transaction is to transport the passengers or freight to a point within the same state as the point of origin. Passage through another state is a mere geographic incident in the consummation of this local transaction. While that passage may have interstate significance for other purposes, it cannot operate by itself to make interstate the commercial relationship underlying the continuous transportation.

And so within the narrow compass of this particular type of transportation it is something more than a fiction to say that both interstate and intrastate features are present. Cf. Bob-Lo Excursion Co. v. Michigan, 333 U.S. 28, 68 S.Ct. 358. It is a e cognition of the hard realities of the situation. It is a realization that transporting persons between points in the same state is a business local in all its commercial connotations, even though there is a physical movement of an interstate character. Due respect for Mr. Justice Holmes' admonition that commerce among the states is a practical rather than a technical legal conception, Swift & Co. v. United States, 196 U.S. 375, 398, 25 S.Ct. 276, 280, 49 L.Ed. 518, forbids an indiscriminate application of the interstate label simply because state lines are crossed in the course of a particular business. Where local elements remain intact despite the interstate movement it is of the essence of practicality to give recognition to that fact. Such is the situation in this case.

This Court has long recognized that this type of transportation, unlike other types, is physically interstate and commercially local. And it has given life to that distinction so that the federal power over interstate commerce might remain effective without detracting unnecessarily from the scope of state power over those engaged in this narrow transportation sphere. Where the proposed state action is such as to create an actual or potential conflict with the federal authority arising out of the physical movement across state lines, the Court has emphasized the interstate aspect of the transportation in making the federal power supreme. Thus in Hanley v. Kansas City Southern R. Co., 187 U.S. 617, 23 S.Ct. 214, 47 L.Ed. 333, Congress was found to have the sole power to fix the rates for transportation of freight by rail between two points in Arkansas over a route passing through a part of the Indian Territory; Arkansas was accordingly precluded from the exercise of its ratemaking authority in this instance. Such transportation was said to be interstate, stress being laid upon the physical movement of the freight across and beyond the Arkansas border. See also Missouri Pacific R. Co. v. Stroud, 267 U.S. 404, 45 S.Ct. 243, 69 L.Ed. 683; Western Union Tel. Co. v. Speight, 254 U.S. 17, 41 S.Ct. 11, 65 L.Ed. 104; compare Wilmington Transportation Co. v. Railroad Commission, 236 U.S. 151, 35 S.Ct. 276, 59 L.Ed. 508.

But where the impact of state action is such as not to endanger or embarrass federal control over interstate movements, the Court has relied upon the local elements of the transportation in sanctioning the imposition of state authority. This has occurred in the setting of state gross receipts taxes and city license taxes levied on those engaged in the type of transportation here involved. Lehigh Valley R. Co. v. Pennsylvania, 145 U.S. 192, 12 S.Ct. 806, 36 L.Ed. 672; United States Express Co. v. Minnesota, 223 U.S. 335, 32 S.Ct. 211, 56 L.Ed. 459; Ewing v. Leavenworth, 226 U.S. 464, 33 S.Ct. 157, 57 L.Ed. 303; Cornell Steamboat Co. v. Sohmer, 235 U.S. 549, 35 S.Ct. 162, 59 L.Ed. 355. In those cases the taxes were non-discriminatory in nature and interfered in no way with any regulations Congress might wish to impose by reason of the movements across state lines. The thrust of the taxes affected only the business of transporting articles between two points in the same state and the receipts derived therefrom. That business was considered to be of a local variety and a clear rejection was made of the contention that 'the mere passage over the soil of another state renders that business foreign which is domestic.' Lehigh Valley R. Co. v. Pennsylvania, supra, 145 U.S. at page 202, 12 S.Ct. at page 808, 36 L.Ed. 672. As stated in Cornell Steamboat Co. v. Sohmer, supra, 235 U.S. at page 560, 35 S.Ct. at page 164, 59 L.Ed. 355, 'But transportation between the ports of the state is not interstate commerce, excluded from the taxing power of the state, because as to a part of the journey the course is over the territory of another state.'

Room has thus been made in our federal system for a reasonable accommodation of the federal and state interests in regulating and taxing those engaged in this unq ue transportation. See Cornell Steamboat Co. v. United States, 321 U.S. 634, 639, note 4, 64 S.Ct. 768, 771, 88 L.Ed. 978. It is an accommodation designed to protect the national interest in uniform regulation of interstate movements as well as to safeguard the states' legitimate interest in placing a fair share of the local burdens on those doing local business. 

The proper answer to the issue in this case is dictated in large part by the Lehigh Valley line of decisions. Those prior cases are not to be dismissed as dialectical exercises in the law of interstate commerce. They represent a realistic appreciation of the fact that the business from which the gross receipts in issue were derived is local in nature. And § 186-a of the New York Tax Law, in taxing those gross receipts, is consistent with the commerce clause of the Federal Constitution. This tax is grounded on a base different from that which justifies the exercise of federal power, making a conflict between federal and state authority impossible. In effect, § 186-a levies a non-discriminatory tax on all companies furnishing continuous transportation service between cities in that state. The tax is in terms of a percentage of the gross receipts from that service. Engaging in such transportation service is a local business, even though some of the routes cross parts of other states. And taxing the gross receipts from this service is well within the constitutional power of New York so far as the commerce clause is concerned. 

In light of the past decisions of this Court, the only novel question here presented is whether New York must limit its tax to that proportion of the receipts which corresponds to the proportion of the mileage traversed within that state on the trips in issue, i.e. 57.47%. Lehigh Valley R. Co. v. Pennsylvania, supra, and United States Express Co. v. Minnesota, supra, did not involve this question since the gross receipts taxes had there been prorated by the respective states before reaching this Court, and Ewing v. Leavenworth, worth, supra, was concerned only with a flat license tax. While Cornell Steamboat Co. v. Sohmer, supra, did involve an unapportioned gross receipts tax, the facts were such as to make it impossible to determine what proportion of the journeys took place outside New York; the precise issue was thus unresolved.

The rule requiring apportionment of gross receipts taxes to the activities carried on within a state is one that is necessarily predicated upon the existence of some interstate activities which the commerce clause places beyond the taxing power of the state. See Ratterman v. Western Union Tel. Co., 127 U.S. 411, 8 S.t . 1127, 32 L.Ed. 229; Wisconsin & M.R. Co. v. Powers, 191 U.S. 379, 24 S.Ct. 107, 48 L.Ed. 229. It is designed to prevent the levying of such taxes as will discriminate against or prohibit the interstate activities or will place the interstate commerce at a disadvantage relative to local commerce. But this rule obviously is inapplicable where the tax is not levied on what is appropriately labelled interstate commerce. And as we have seen, New York here has levied a tax solely upon the local business of transporting passengers between points in that state, which constitutes the furnishing of utilities within the meaning of the New York Tax Law. The fact that 42.53% of the transportation occurs outside New York does not make that business any less local. From the commercial standpoint, the out-of-state segment of the journey retains its position as an integral part of the continuous local transaction. The proportion of the transportation actually taking place within or without New York thus has no commerce clause significance under these circumstances. Inasmuch as the restrictive force of the commerce clause is non-effective, New York is entitled to tax the total gross receipts from this local commerce.

This result does not permit other states, within the framework of the commerce clause, to tax the local business of transporting passengers between New York points. What is local business as to New York is not local business as to New Jersey or Pennsylvania. The elements which justify New York's unapportioned tax exists only in that state. If New Jersey or Pennsylvania were to tax a portion of appellant's gross receipts from the transportation in issue, such tax would involve quite different constitutional considerations than those which sustain the New York tax. Since New Jersey and Pennsylvania would have an interest in the situation because of the physical movements occurring within their borders, concentration would have to be placed upon the interstate aspect of the transportation. The problem would then be whether these states could constitutionally tax the portion of the gross receipts derived from the mileage traversed therein. If such taxes were sustained, the resulting multiple burden on the gross receipts would simply be a natural consequence of conducting a local business in such a manner as to use the facilities of more states than one. But that type of multiple burden is not outlawed by the commerce clause. Nor does the possibility of such a burden make the business of transporting persons between points in New York any less local in nature.

I would therefore affirm the judgment below. 

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