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February 28, 1921



White, McKenna, Holmes, Day, Van Devanter, Pitney, McReynolds, Brandeis, Clarke

Author: Mckenna

[ 255 U.S. Page 124]

 MR. JUSTICE McKENNA delivered the opinion of the court.

The City of Fremont is a city of Nebraska of the first class, having more than 5,000 and less than 25,000 inhabitants. By an ordinance duly enacted in 1903 and reenacted in 1907, there was levied a license tax upon businesses and occupations within the city including telegraph offices. Upon these offices it levied a tax of $60.00 per year on the business and occupation of sending

[ 255 U.S. Page 125]

     messages from the city to any place in the State, and receiving messages transmitted from any place in the State to the city, except messages received from or transmitted to any department, agency or agent of the United States, and except messages which were interstate commerce.

Plaintiff in error, herein called the Postal Company, is a corporation engaged in such business within the city, it having been in December, 1881, permitted by the constituted authorities of the city, in the manner provided by its ordinance, to occupy and use the streets of the city for that purpose, the ordinance providing that it was "subject to such regulations as have been or may be provided by ordinance," and that nothing in the article granting such consent to the use and occupation of the streets should "be construed to prevent said city from further regulating, licensing or taxing any person, company or corporation owning, using or operating any telephone or telegraph lines within the corporate limits of said city." The Postal Company in accordance with the ordinance paid a license tax of $60.00 a year for the years 1903 to 1914, each inclusive, but did not pay for the years 1915 and 1916, and this action was brought for the recovery of the same with interest at 7%.

The defenses of the Postal Company set up in its answer are that it is compelled by the charter of its organization to do intrastate as well as interstate telegraphing, that it paid the license tax for the years alleged inadvertently and without recognition of its legality; that it has accepted the terms of the Post Road Act of July 24, 1866, and is entitled to its benefits; that the tax is confiscatory and prohibitive and deprives the company of its property without due process of law in violation of the Fourteenth Amendment of the Constitution of the United States. In specification of this defense it is alleged that the receipts of the company for 1914 on its

[ 255 U.S. Page 126]

     intrastate business were only $108.28, and for the year 1915, $83.96, and that the expenses properly chargeable against these years respectively, exclusive of the tax, were $185.56 and $154.26, and that its loss on intrastate business would have to be made up from interstate business; that the city is under no expense by reason of the poles and wires of the company being in the city, and that $60.00 a year is in excess of a rental charge upon them and that the streets are post roads within the meaning of the Post Road Act of 1866. In further defense the answer alleges that the tax is one on interstate commerce; that it deprives the company of the equal protection of the laws and impairs the obligation of a contract, both in violation of the Constitution of the United States.

The case was tried to a jury, which, after evidence taken, was instructed by the court to return a verdict for the city in the sum of $135.00.

A motion for new trial was denied and judgment was rendered upon the verdict. It was affirmed by the Supreme Court of the State, the Supreme Court deciding: (1) the tax was "not a mere license or regulation measure, but one designed for revenue purposes," and that its extent was "a matter for the judgment and discretion of the municipal government, subject only to the restriction that it must not be prohibitory." Citing 2 Cooley on Taxation, 3rd ed., 1139, 1440. (2) The tax was not prohibitive; that proof of loss for two years without showing what volume of business was available in the municipality, or what portion was done by the company or what its facilities were for handling the business, was not sufficient to show that a tax of $60.00 imposed for revenue purposes on the privilege of doing an intrastate business in a city of ...

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