Pullman Co. v. Kansas Ex Rel. Coleman
Headline: Ruling blocks Kansas from forcing Pullman to pay a statewide percentage-of-capital charter fee as a condition for local business and reverses the state court order that would have ousted the company, protecting interstate service.
Holding: The Court held that Kansas could not require Pullman to pay a fee based on all its authorized capital as a condition for doing local business inside the State, and it reversed the order ousting the company.
- Stops states from imposing capital-based fees that tax interstate business and out-of-state property.
- Reinstates Pullman’s ability to run interstate sleeping and dining car services in Kansas.
- Requires states to use lawful, non-discriminatory rules for local business fees.
Summary
Background
The dispute began when Kansas challenged a nationwide rail sleeping-car company that charges for reserved seats, berths, and meals. Kansas required foreign companies seeking to do local business to apply for permission and pay charter fees based on their entire authorized capital; the State’s charter board demanded $14,800 from the company. The company refused, saying the fee effectively taxed its interstate business and property outside Kansas.
Reasoning
The Court examined whether Kansas could make payment of a single fee based on all of the company’s capital a condition of doing local business. Relying on the reasoning in a related case, the Court held that the company need not obtain permission to carry out interstate operations and that the capital-based fee was, in effect, a tax on interstate commerce and on property outside the State. Because the fee forced the company to waive constitutional protections in order to do local business, the Court found the condition unconstitutional and unsuitable as the basis for ousting the company.
Real world impact
The Court reversed the Kansas decree that would have ousted the company and sent the case back for further proceedings consistent with this opinion. The decision protects companies that operate across state lines from being blocked or taxed by a State through a single capital-based fee tied to their overall business. It leaves room, however, for reasonable local regulations that do not substantially burden interstate operations.
Dissents or concurrances
One Justice concurred with the judgment but emphasized different reasoning about when company cars have a tax situs in a State. Two Justices dissented, arguing the fee was a lawful state tax on local business.
Opinions in this case:
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