Quaker City Cab Co. v. Commonwealth of Pennsylvania
Docket: 139
Court: Supreme Court of the United States; May 28, 1928; Federal Supreme Court; Federal Appellate Court
Mr. Justice Butler delivered the Court's opinion affirming a judgment from the Court of Common Pleas of Dauphin County, Pennsylvania, in favor of the Commonwealth for gross receipts taxes totaling $6,049.94, based on the Act of June 1, 1889. The tax applies to gross receipts from the transportation of persons and their luggage within Pennsylvania, specifically targeting operations of taxicab companies, including the plaintiff, a New Jersey corporation authorized to operate in Pennsylvania. The plaintiff argued that the tax violated the equal protection clause of the Fourteenth Amendment since it did not apply to individual and partnership taxicab operators, which created an unfair competitive disadvantage.
The Supreme Court upheld the tax, reasoning that corporations can be classified separately from individuals for tax purposes, and that the equal protection clause does not prevent the state from exercising its taxing authority or from making reasonable classifications based on substantial differences. The Court emphasized that foreign corporations operating within the state are entitled to the same legal protections as natural persons and that seeking permission to do business in a state does not waive a corporation's rights under the U.S. Constitution. The ruling clarified that while the state can impose taxes, it must do so in a manner that is not arbitrary and is related to the nature of the business being taxed.
The section establishes a tax on gross receipts specifically for companies engaged in transportation, clearly defined by the Supreme Court as focusing on those receipts rather than being a general business or income tax. The language variations in the court's references to the tax are deemed inconsequential, and the straightforward wording of the section precludes alternative interpretations. There is agreement on the tax's applicability to the plaintiff's gross receipts. However, the plaintiff argues the section is invalid since it exempts natural persons and partnerships from the same tax burden imposed on corporations.
The court acknowledges that, in some cases, taxes on a percentage of gross earnings may be viewed as property taxes rather than on the earnings themselves. Nonetheless, the section is effectively a tax on gross receipts, applicable to both individuals and corporations without unique characteristics justifying the distinction. The classification discriminates solely based on ownership type—corporate versus individual or partnership—without valid justification related to the receipts' source or the operational context.
This classification does not satisfy the equal protection clause of the Fourteenth Amendment, as established in prior rulings, rendering the tax arbitrary. The court concludes that the tax cannot be upheld and reverses the judgment. The tax imposed is specifically eight mills on the dollar of gross receipts from transportation activities within the state, applicable to all incorporated entities operating in Pennsylvania.
