American Steel & Wire Co. v. Speed

Background

A New Jersey manufacturer used Memphis as a distribution point and hired a local transfer company to receive, store, assort, and deliver its wire, nails, and staples. The manufacturer’s goods arrived in original packages and were kept in warehouses in Memphis until customers’ orders specified which packages to send. Tennessee assessed a merchants’ tax and a merchants’ privilege tax against the company; the company paid under protest and sued, arguing the tax violated the Constitution because the goods were still in interstate commerce or because Tennessee discriminated against out-of-state products.

Reasoning

The Court addressed whether the goods remained exempt from state taxation as imports or while moving in interstate commerce, and whether the state tax improperly discriminated. Relying on prior decisions, the Court found the goods had reached their destination in Memphis, were at the company’s risk, and were held there for sale, so they were subject to state taxation like other property. The Court also explained that the merchants’ tax was not the kind of direct tax exempted by the state constitution’s inspection-fee clause and that the Tennessee statutes applied equally to all merchants. Accordingly, the tax did not violate the Constitution.

Real world impact

The ruling affirms that a State may tax goods brought into the State and stored there for sale when those goods are at rest and treated like other property. Businesses using local warehouses for distribution cannot avoid state merchants’ taxes merely because goods arrived in original packages or were made elsewhere. The decision was final here: the Supreme Court affirmed the state court’s judgment in favor of the tax collector.