Wisconsin v. J. C. Penney Co., 311 U.S. 435 (1940)

Wisconsin v. J. C. Penney Co.

No. 46

Argued November 20, 1940
Decided December 16, 1940
311 U.S. 435

CERTIORARI TO THE SUPREME COURT OF WISCONSIN

Syllabus

1. With respect to domestic and foreign corporations, Wisconsin imposes a tax "for the privilege of declaring and receiving dividends" out of income derived from property located and business transacted in the State, equal to a specified percentage of such dividends, the payor corporation being required to deduct the tax from the dividends payable to residents or nonresidents and to report and pay it over to the State.

Held:

(1) That the practical operation is to impose a tax on corporate earnings within Wisconsin, in addition to the general tax on corporate income, but to postpone liability for the tax until such earnings are paid out in dividends. P. 441.

(2) The tax is constitutional -- consistent with the due process clause of the Fourteenth Amendment -- as applied to a Delaware corporation having its principal offices in New York, holding its meetings and voting its dividends in New York, and drawing its dividend checks on New York bank accounts. P. 442.

2. The constitutionality of a state tax depends upon its operating incidence, and not upon the name or description assigned to it by the state Supreme Court. P. 443.

3. The privilege granted by a State to a foreign corporation of carrying on local business supports a tax by that State on the income derived from that business. P. 444.

4. The fact that such a tax is, by the state law imposing it, made contingent upon the happening of events outside of the taxing State -- as, in this case, upon the declaration and payment of dividends from the local earnings -- does not destroy the nexus between the tax and the local transactions for which it is an exaction. P. 445.

5. Connecticut General Co. v. Johnson, 303 U.S. 77, distinguished. P. 445.

233 Wis. 286, 289 N.W. 677, reversed.

CERTIORARI, 310 U.S. 618, to review the reversal of a judgment which confirmed all order of the Wisconsin Tax Commission assessing a tax.