Railway Express Agency, Inc. v. Virginia, 358 U.S. 434 (1959)

Railway Express Agency, Inc. v. Virginia

No. 38

Argued October 15, 1958
Decided February 24, 1959
358 U.S. 434

APPEAL FROM THE SUPREME COURT OF APPEALS OF VIRGINIA

Syllabus

1. A Virginia statute provides a separate system of taxation for express companies. In lieu of all taxes on their other intangible property and rolling stock, it levies on express companies a "franchise tax" measured by gross receipts from their operations within Virginia, including receipts derived from transportation within the State of express transported through, into or out of the State.

Held: as applied to appellant, a foreign corporation doing an exclusively interstate business in Virginia and owning property there, this tax does not violate the Commerce Clause of the Federal Constitution. Pp. 435-443.

(a) Railway Express Agency v. Virginia, 347 U.S. 359, distinguished. Pp. 438-439.

(b) The descriptive words used by a state legislature in labeling a tax statute have no magic effect upon its validity or invalidity, but, where the plain language of the statute shows that the legislature intended to levy the tax upon intangible property and "going concern" value, and that interpretation is buttressed by a unanimity of opinion of all state agencies, including the State’s highest court, great weight must be given to the descriptive words so used in determining the natural and reasonable effect of the statute. Pp. 440-441.

(c) When measuring "going concern" value, the State has the right to use any fair formula which would give effect to the intangible factors which influence real values, and that is exactly what the State has done here. Pp. 441-442.

(d) The exclusive express privileges enjoyed by appellant on the railroads, admittedly valuable contract rights, cannot be said to have no value because all of appellant’s net income is paid over to the railroads for the specific purpose of precluding it from having any net taxable income, thus frustrating the collection of an otherwise fair tax. P. 442.

(e) The fact that Virginia could not prevent appellant from engaging in its exclusively interstate business does not prevent Virginia from taxing the "goodwill" or "going concern" value built up by such interstate business. Pp. 442-443.

2. In its tax return, appellant failed to furnish information showing its gross receipts allocated to Virginia, which was called for under the statute and requested by the tax authorities. This prevented the tax authorities from obtaining the correct amount except by some method of approximation, and they used a formula which, in effect, ascribed to Virginia such proportion of appellant’s gross receipts as the mileage of carriers within Virginia bore to the total national mileage of the same carriers.

Held: in these circumstances, this method of calculating the tax was not so palpably unreasonable as to deprive appellant of its property without due process of law in violation of the Fourteenth Amendment. Pp. 443-445.

199 Va. 589, 100 S.E. 785, affirmed.