Pullman Co. v. Knott

Background

A company that ran sleeping and parlor railroad cars sued Florida to stop collection of taxes on its gross receipts. The company said the state’s 1907 and later statutes imposed both a property (ad valorem) tax and a gross‑receipts license tax, and argued the combination made the gross‑receipts tax invalid. A three‑judge court denied a preliminary injunction, the company paid the disputed sum into court under a stay, and then appealed to the Supreme Court, claiming the tax violated the U.S. Constitution.

Reasoning

The Court first addressed two federal complaints. One was that the tax unfairly targeted only sleeping and parlor car companies and not railroads that operate their own cars; the Court refused to overturn the tax on hypothetical cases and noted the state said no such railroad existed. The other was that companies lack a hearing; the statute requires companies to report receipts and sets the rate ($1.50 per $100), and only if they fail to report may the Comptroller estimate receipts and add a 10% penalty. The Court held that following the statutory reporting procedure leaves nothing for a separate hearing and found no federal constitutional defect. The Court declined to decide the closely related state‑law questions itself and relied on state court rulings that similar gross‑earnings levies are license taxes.

Real world impact

The decision lets Florida continue collecting the assessed taxes. Companies doing business with points inside Florida must file the required returns, pay the set percentage, and face a 10% penalty if they fail to report. The Court left final resolution of state constitutional issues to Florida courts, so some state‑law questions could still change later.