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ton but for the distinction between the national banks as, in themselves, governmental instrumentalities of the United States, and the railroads which are primarily private enterprises, but performing inter alia federal services. In Davis v. Bank the court had said: "National Banks are instrumentalities of the Federal Government, created for a public purpose, and as such necessarily subject to the permanent authority of the United States. It follows that an attempt by a State to define their duties, or control the conduct of their affairs is absolutely void, whenever such attempted exercise of authority expressly conflicts with the laws of the United States, and either frustrates the purpose of the national legislation or impairs the efficiency of these agencies of the Federal Government to discharge the duties for the performance of which they were created." "It follows, then, necessarily from these conclusions," the court say in the Owensboro case, "that the respective States would be wholly without power to levy any tax, either direct or indirect, upon the national banks, their property, assets or franchises, were it not for the permissive legislation of Congress."

In National Bank v. Commonwealth 8 the Supreme Court again resisted a claim attempted to be made under the authority of the doctrine of McCulloch v. Maryland, that the banks as governmental agencies are wholly exempt from the control of state law even with reference to matters unconnected with the services performed by them as federal agencies. The court declared: "It certainly cannot be maintained that banks or other corporations or instrumentalities of the government are to be wholly withdrawn from the operation of state legislation. The most important agents of the Federal Government are its officers, but no one will contend that when a man becomes an officer of the government he ceases to be subject to the laws of the State. The principle we are discussing has its limitation, a limitation growing out of the necessity on which the principle itself is founded. The limitation is, that the agencies of the Fed

7161 U. S. 275; 16 Sup. Ct. Rep. 502; 40 L. ed. 700. 89 Wall. 353; 19 L. ed. 701.

eral Government are only exempted from state legislation, so far
as the legislation may interfere with or impair their efficiency in
performing the functions by which they are designed to serve that
government. Any other rule would controvert a principle founded
alone in the necessity of securing to the government of the United
States the means of exercising its legitimate powers, into an un-
authorized and unjustifiable invasion of the rights of the States.
The salary of a federal officer may not be taxed; he may be ex-
empted from any personal services which will interfere with the
discharge of his official duties, because those exemptions are
essential to enable him to perform those duties. But he is subject
to all the laws of the State which affect his family, or social rela-
tions, or his property, and he is liable to punishment for crime,
though that punishment be imprisonment or death. So of the
[federal] banks. They are subject to the laws of the State, and
are governed in their daily course of business far more by the
laws of the State than of the Nation. All their contracts are
Their acquisition and

governed and construed by state laws.
transfer of property, their right to collect their debts, and their
liability to be sued for debts, are all based on state law. It is only
when the State incapacitates the bank from discharging their
duties to the government that it becomes unconstitutional."

§ 47. State Taxation of Federal Franchises.

A franchise to be or to act as a corporation granted by a State, may be taxed by a State as a piece of intangible property. But franchises or other rights derived from the Federal Government may not be taxed by the States nor any hindrances placed by th States upon their exercise. In California v. Central Pacific R. Co." one of a series of cases dealing with the Pacific Railroads, the court say: "These franchises were granted to the company for national purposes and to subserve national ends. It seems very clear that the State of California can neither take them away, nor destroy, nor abridge them, nor cripple them by onerous burdens.

Can it tax them? It may undoubtedly tax outside visible

9 127 U. S. 1; 8 Sup. Ct. Rep. 1073; 32 L. ed. 150.

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property of the company situated within the State. That is a different thing. But may it tax franchises which are the grant of the United States? In our judgment, it cannot."

§ 48. State Taxation of Patent Rights.

In conformity with the foregoing doctrine it has been held that while the States may tax the capital employed in the manufacture of copyrighted or patented articles, as well as the tangible property embodied in these articles, they may not exact a fee as a condition precedent to the exercise of these federally granted rights, nor can they tax the intangible rights themselves as property.10

In Patterson v. Kentucky the court held that a state statute regulating the inspection and gauging of oils was a mere police regulation and did not violate a patent right under which a certain oil was manufactured. A similar conclusion was reached in Webber v. Virginia.12 In Allen v. Riley13 was held valid a state law which required one selling a patent right in any county in the State, to file with the clerk of such county an authenticated copy of the letters patent, together with an affidavit of the genuineness of the letters patent, and that any written obligation given for the purchase price of a patent right should contain the words “given for a patent right." These, it was held, were proper police requirements. The court say: "We think the State has the power (certainly until Congress legislates upon the subject) with regard to the provision which shall accompany the sale or assignment of rights arising under a patent, to make reasonable regulations concerning the subject, calculated to protect its citizens from fraud.

10 Crown Cork and Seal Co. v. Maryland (87 Md. 687); People v. Assessors (156 N. Y. 417); People v. Roberts (159 N. Y. 70). In these cases it is held that if the tax is upon the corporate property, or even upon the shares of stock evidencing that property, the value of the patent rights must be deducted. If, however, the tax be upon the shares of stock to the holders, or is upon the franchise of the corporation, the fact that patent rights are included within the assets of the company is not material. Cf. Judson, Taxation, § 33. 11 97 U. S. 501; 24 L. ed. 1115.

12 103 U. S. 334; 26 L. ed. 565.

13 203 U. S. 347; 27 Sup. Ct. Rep. 95; 51 L. ed. 216.

The act must be a reasonable and fair exercise of the power of the State for the purpose of checking a well-known evil, and to prevent, so far as possible, fraud and imposition in regard to the sales of rights under patents. Possibly Congress might enact a statute which would take away from the States any power to legislate upon the subject, but it has not as yet done so.'

99 14

Of course no State may, in the exercise of its police or other powers, in any way discriminate against patented articles.15

§ 49. State Taxation of Federally Licensed Occupations.

16

Where, by federal license, an occupation has been authorized by the United States, enjoyment and employment of the license may not be restrained by a State. Thus in Moran v. New Orleans" was held void an ordinance of the city of New Orleans imposing a license tax on certain vessels engaged in foreign commerce and duly enrolled and licensed under act of Congress. The court say: "The sole occupation sought to be subjected to the tax is that of using and enjoying the license of the United States to employ these particular vessels in the coasting trade; and the State thus seeks to burden with an exaction, fixed at its own pleasure, the very right to which the plaintiff in error is entitled under and which he derives from the constitution and laws of the United States. The Louisiana statute declares expressly that if he refuses or neglects to pay the license tax imposed upon him, for using his boat in this way, he shall not be permitted to act under and avail himself of the license granted by the United States, but may be enjoined from so doing by judicial process. The conflict between the two authorities is direct and express. In such an opposition, the only question is which is the superior authority; and reduced to that it furnishes its own answer."

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In Harman v. Chicago1 this doctrine is approved and again applied.

14 Justices White and Day dissented.

15 Ozan Lumber Co. v. Union Co. Nat. Bank (145 Fed. 344).

16 112 U. S. 69; 5 Sup. Ct. Rep. 38; 28 L. ed. 653.

17 147 U. S. 396; 13 Sup. Ct. Rep. 306; 37 L. ed. 216.

§ 50. State Taxation of Federal Salaries.

That the salary or other emoluments of office of federal officials may not be taxed by the States has not been questioned since the doctrine was first declared in Dobbins v. Commissioners.18 "The powers of the National Government," the court say, "can only be executed by officers whose services must be compensated by Congress. The allowance is in its discretion. The presumption is that the compensation given by law is no more than the services are worth, and only such in amount as will secure from the officer the diligent performance of his duties. The compensation of an officer of the United States is fixed by a law made by Congress. It is in its exclusive discretion to determine what shall be given. Does not a tax, then, by a State upon the office, diminishing the recompense, conflict with the law of the United States, which secures it to the officer in its entireness? It certainly has such an effect." 19

§ 51. State Taxation of Federal Property.

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The principle that property belonging to the United States is not taxable by the States in which it is situated did not receive final judicial affirmation until 1885 in Van Brocklin v. Tennessee.20 Prior to this decision it had quite generally been taken for granted that federal property was thus exempt from state taxation, but in a number of cases Congress would seem to have implied that it was not confident upon this point since it incorporated into enabling acts for the admission of territories into the Union as States, the requirement that after admission the property of the United

18 16 Pet. 435; 10 L. ed. 1022.

19 It is probable that an act of Congress imposing a tax upon salaries of the president and federal judges would be held void as in violation of the constitutional provision that the compensation of these officials shall not be diminished during the period for which they are elected or appointed. See Sen. Mis. Doc., No. 214, 53rd Cong., 2nd Sess.

In W. U. Telegraph Co. v. Texas (105 U. S. 460; 26 L. ed. 1067) the court held that a state tax upon telegraph messages could not be collected upon messages sent by officers of the United States on public business.

20 117 U. S. 151; 6 Sup. Ct. Rep. 670; 29 L. ed. 845.

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