Beidler v. South Carolina Tax Commission, 282 U.S. 1 (1930)

Beidler v. South Carolina Tax Commission

No. 2

Argued October 22, 1928
Reargued October 23, 24, 1930
Decided November 24, 1930
282 U.S. 1

ERROR TO THE SUPREME COURT OF SOUTH CAROLINA

Syllabus

1. A resident of Illinois died in that state owning a majority of the shares of a South Carolina corporation and also debts owed him by the corporation on unsecured open account partly for advances made by him to the corporation and partly for dividends previously declared on his shares. South Carolina, besides taxing the transfer of the shares, undertook to tax the transfer of the indebtedness, claiming this jurisdiction because of the local domicile of the debtor corporation and upon the ground that the indebtedness had acquired a "business situs" in South Carolina. Held that the South Carolina tax on the transfer of the indebtedness was void under the due process clause of the Fourteenth Amendment. Pp. 7 et seq.

2. It is now established that the mere fact that the debtor is domiciled within the state gives it no jurisdiction to impose an inheritance or succession tax upon the transfer of the debt from a decedent who is domiciled in another state. P. 7.

3. Open accounts fall within this principle. P. 8.

4. A conclusion that debts have acquired a situs for taxation other than at the domicile of their owner must have evidence to support it, and it is the province of the Court to inquire whether there is such evidence when the inquiry is essential to the enforcement of a right suitably asserted under the federal Constitution. P. 8.

5. The evidence in this case afford no adequate basis for a finding that the indebtedness had a business situs in South Carolina. It proves the existence of the debts and the facts that the decedent creditor was largely interested in the affairs of the corporation, but it shows nothing which derogates from the existence of the corporation as such, transacting its business a such, with corresponding rights and liabilities. P. 9.

6. The interests of a corporation in its property and of a shareholder of the corporation in his share are distinct property interests. Id.

Reversed.

Error to a judgment of the Supreme Court of South Carolina which sustained on appeal a transfer tax levied by the South Carolina Tax Commission on the transfer of credits belonging to a decedent’s estate. The plaintiffs in error were the executors of the will.