Lusk v. Botkin
Headline: Kansas tax on out-of-state railroads upheld, allowing the State to collect graduated annual fees on the portion of capital used in Kansas from foreign corporations.
Holding: The Court affirmed the judgment and rejected the receivers’ challenge, holding that Kansas may impose the graduated annual fee on out-of-state railroads for the portion of capital used in Kansas, because the plaintiffs’ primary objection failed.
- Allows Kansas to collect annual fees from out-of-state railroads for capital used in Kansas.
- Limits the tax to the portion of a company’s capital devoted to purely local Kansas business.
- Leaves interstate-only carriers exempt from these local fees.
Summary
Background
The people bringing this case were the receivers of a Missouri railroad who paid $2,500 under protest to the Kansas Secretary of State under a 1913 Kansas law. The railroad sued to recover the money after a general demurrer to its complaint was sustained and judgment entered for the State, a decision the Kansas Supreme Court later affirmed. The Kansas law requires out-of-state (foreign) corporations doing business in Kansas to file a report and pay an annual fee based on the portion of their issued capital stock used in Kansas, with fees graduated from $10 up to $2,500.
Reasoning
The main question was whether Kansas could impose that graduated fee on an out-of-state railroad without unlawfully burdening interstate business or taxing property outside the State. The railroad’s challenge relied chiefly on the claim that the same tax was invalid as applied to in-state (domestic) railroads and on a contract-like promise from an earlier Kansas statute. The Court explained that the Kansas Supreme Court had already rejected the attack on the tax as applied to domestic companies in a companion case decided the same day. Because the plaintiffs’ principal objection depended on that rejected theory, their challenge to the tax on the Missouri railroad failed and the judgment was affirmed.
Real world impact
The ruling lets Kansas keep collecting the annual, graduated fee from out-of-state railroad companies for the share of capital used in purely local Kansas business. Corporations engaged only in interstate commerce remain exempt from the statute’s local-charge provisions. The decision resolves this dispute in favor of the State, relying on the companion ruling about the tax on in-state companies.
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