558 



HOHT 1 CV LTU 11 E 



Ai.rll LM, 1915 



Taxing Salesmen, Agents, Canvassers or Corporations Who Go 



Into a State From Outside 



Two clagspti of readers will be In- 

 lerostod in this article— ( 1 ) the Job- 

 ber or the manufacturer who sends 

 salosnipn or aRonts Into other States, 

 or uniploys salesmen or asents residing 

 In those Slates: and (2) Die local nier- 

 rliant who nuisl often compete with 

 (hose af;ent8. There Is a constant 

 warfare golni; on among these ele- 

 ments. The local towns and boroughs, 

 urged on by the local merchants, is 

 always attempting to tax the salesman 

 or agent who comes in from outside, 

 and if the concern employing the sales- 

 men or agents is a corporation, the 

 State itself will endeavor to tax it, on 

 the ground that while it is a foreign 

 corporation, it is doing business with- 

 in a State other than its own, and Is 

 therefore subject to the tax. 



Two well-established legal principles 

 govern all these cases; 1. if the sales- 

 man or agent which the local borough 

 is trying to license or tax is doing busi- 

 ness which can be called interstate 

 commerce, then he cannot be taxed by 

 the local borough, because neither local 

 borough nor towns nor cities can in- 

 terfere with or tax interstate com- 

 merce. 



The second legal principle is that if 

 the foreign corporation, too, is doing 

 an interstate business and not a resi- 

 dent business, it cannot be taxed by 

 the State. 



Hundreds of cases are daily being 

 decided under either one or the other 

 of these principles, and nearly all of 

 them are interesting far beyond the 

 ordinary law suit. Take the Jewel 

 Tea Co. case, a Missouri case. This 

 would represent the law all over the 

 United States because it was brought 

 in a United States court. The Jewel 

 Tea Co. is an Illinois concern and em- 

 ploys agents and canvassers who build 

 up trade or routes among consumers 

 in other States One of these agents 

 was canvassing in Lee's Summit, Mo., 

 and his methods were as follows: The 

 agent canvassed from house to house 

 in Lee's Summit for orders for future 

 delivery of teas and coffees. The or- 

 ders taken were mostly for half-pound 

 and pound lots. He forwarded the or- 

 ders lo the company at Chicago giving 

 the quantities only, not the names of 

 the purchasers. At Chicago the com- 

 pany put up the goods in small pack- 

 ages according to the quantities or- 

 dered, so as to permit of exact delivery 

 to each purchaser without breaking. 

 On each package was marked its 

 price, but not the name of the purchas- 

 er. The packages were then put into 

 a large box or other receptacle ana 

 shipped by freight to Lee's Summit; 

 the company being both consignor and 

 consignee. When the shipment arrived 

 at Lee's Summit the agent received it. 



opened the box or container, hud it 

 hauled around on a dray, delivered the 

 packages unopened to those who had 

 given the orders, and collected pay- 

 ment for them on delivery. At the 

 same lime he solicited further orders. 

 He made the rounds about twice each 

 month, and by other canvassing en- 

 . deavored lo increase tlie trade. Tlie 

 agent remitted the moneys collected to 

 the company at Chicago. He had no 

 financial interest In the business save 

 his salary, which was paid from that 

 city. Occasionally a purchaser would 

 refuse to accept and pay. In such case 

 the package intended for him was 

 sent to a branch house of the company 

 at Kansas City, Mo., but all the goods 

 delivered in Lee's Summit were 

 shipped directly there from Chicago 

 in the way described. 



The local merchants of Lee's Sum- 

 mit, seeing this man's trade increas- 

 ing — for all the trade he got he took 

 from them — put it up to the city of 

 Lee's Summit to tax him and the city 

 attempted to do it. He resisted and 

 the case got into the United States 

 Court. The court decided that the 

 agent could not be taxed by Lee's Sum- 

 mit, because the business he was doing 

 was interstate commerce — the orders, 

 while gotten in Lee's Summit, were 

 forwarded to Chicago, filled there and 

 shipped from there to the purchaser. 

 No stock was kept in Missouri 



So the agent can go on exasperating 

 the local dealers of Lee's Summit or 

 any other community where the l)usi- 

 ness is done in the same way. The 

 case books are full of cases where a 

 local community, for the protection of 

 its own merchants, has tried to impose 

 a tax on some outsider who came in 

 and took away the trade, but the tax 

 has always been held unconstitutional, 

 if the business done by the outsider 

 was shrewdly handled so that it be- 

 came interstate business. Some ol 

 these cases have gotten up to the 

 United States Supreme Court, but the 

 decision has always been the same. 



Salesmen traveling in Pennsylvania, 

 let us say, for a New York house, merely 

 obtaining orders which they forwarded 

 to the headquarters of their house, 

 to be filled and shipped from there, are 

 never subjeit to local taxation. Nor is 

 the house which employs them liable 

 to tax by the State into whicli they 

 go. That is not doing l)usiness within 

 the State, in a lepal sense. 



Not long ago a corporation whose 

 headquarters were. I think, in New 

 York, sold some goods to the whole 

 sale dealers of Massachusetts and then 

 sent out salesmen among the cus- 

 tomers of those wholesalers to get or- 

 ders and move the goods. It was the 

 old plan of getting orders from retail- 

 ers and turning them in to some job- 

 ber. A town in wliich one* of these 

 salesmen worked imposed a license tax 

 upon him and his house refused to 

 pay it and took it to court The de- 

 fense was that the business for which 

 the salesman was working was inter- 

 state business, but the court thougiu 

 differently. "The business," said the 



court, "is the bUHlness of providing 

 business for wholesalers, unci partakes 

 in no respect of Intersluto commerce. 

 The fact that a natural result may be 

 to Increase the sales of the manufac- 

 turing corporation is an immaterial 

 circumstance. It Is too remote from 

 the actual business of Its salesmen to 

 constitute interstate conimerce." 



So the manufacturing corporation 

 was compelled to pay a license tax for 

 all of its men who solicited orders 

 from retailers to be turned through 

 Jobbers. 



Brief reference to a third case may 

 be interesting. A concern incorpor- 

 ated outside of New York consigned 

 its goods to merchants within that 

 State. Contracts were made with the 

 merchants to that effect and these were 

 sent on to the company's headquarters 

 lo be approved. The New York mer- 

 chants sold the goods on installments, 

 took their own installment contracts 

 and turned them over to the corpora- 

 tion outside. The latter holds title to 

 the goods until the full price is paid. 

 An effort was made to tax the company 

 on the ground that it was doing busi- 

 ness in New York State, but the court 

 decided it was interstate commerce. 

 (Copyright. April. 1915, by 

 Elton J. Biickley.) 



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