Hump Hairpin Manufacturing Co. v. Emmerson
The Court upheld Illinois's privilege tax on an out-of-state manufacturing company, ruling that using some interstate sales figures as one factor in calculating the tax did not turn the tax into an unconstitutional burden on interstate commerce.
The decision confirms that a state may fold interstate business figures into a tax formula so long as the tax is not a disguised attempt to directly tax or restrain interstate commerce itself, and the effect on such commerce is only incidental.
“No formula has yet been devised by which it can be determined in all cases whether or not such a tax is valid”
The Court explains that whether a state tax unlawfully burdens interstate commerce depends on the specific facts of each case.
How it got here: The company sued the Illinois Secretary of State to recover the tax; the Illinois Supreme Court upheld the assessment, and the company brought the case to the U.S. Supreme Court.
The Case in Depth
What happened
A manufacturing corporation chartered in West Virginia, with all its property and its only business office located in Chicago, sold goods across many states, though its contracts had to be approved at its Illinois office. Illinois's Secretary of State assessed a $6,045 privilege tax on the company for 1918 using a formula based on its property and business in the state. The company paid under protest and sued to get the money back.
The question before the Court
Could Illinois charge a manufacturing company chartered in West Virginia a privilege tax based on its entire authorized capital stock, even though some of its sales were made to customers outside Illinois?
Why it matters
Companies doing business across state lines can still be taxed by a state for the privilege of operating there, even when some of their sales cross state borders, as long as the tax mainly measures in-state property and activity. This gives states continued room to tax out-of-state corporations without triggering automatic constitutional challenges every time interstate sales factor into the math.
What changes now
This is a final decision on the merits. The Illinois Supreme Court's judgment upholding the tax assessment stands, and the company must bear the tax as computed. The ruling leaves in place the settled principle that states may include interstate business data as one factor in tax formulas without automatically triggering a commerce-clause violation, though a state's miscalculation of what counts as interstate versus intrastate business could still be challenged as an error in a proper case.
What this does not decide
The Court did not decide that states may directly tax interstate commerce or its proceeds; it left open that a mistaken classification of interstate business as intrastate business could justify correcting the tax computation in an appropriate case, even though it would not make the statute itself unconstitutional.
Concurrences and dissents
How the Justices voted
Majority (1). Justice Clarke (author).
Separate writings (1). Justice McReynolds (author of a concurrence).
Dissent (1). Justice Van Devanter (author).
Dissent — Justice Van Devanter
Justice Van Devanter dissented from the Court's decision to uphold the tax, but the opinion does not include any explanation of his reasoning.
Concurrence — Justice McReynolds
Justice McReynolds agreed with the result affirming the tax but did not join the majority's opinion or reasoning; no further explanation of his views is given in the text. Read the full concurrence →
How the Court got there
The legal reasoning, step by step
- The Court distinguished between two kinds of state taxes touching interstate commerce: those that directly regulate or burden it, which the Constitution forbids, and those that only incidentally or remotely affect it while measuring something else, which are generally allowed.
- It noted a recognized exception allowing states to use interstate business figures as one ingredient in calculating a tax on a fund not entirely made up of interstate proceeds, so long as the tax is not a disguised attempt to reach interstate commerce itself.
- Applying this practical, fact-specific inquiry, the Court found that the Illinois statute was designed to separate in-state from interstate business and tax only the former, showing no hidden purpose to burden interstate commerce.
- The Court observed that the disputed interstate sales figure was only one of three factors in the formula, alongside the value of in-state property and in-state sales, and that the tax amount closely tracked the value of the company's Illinois property rather than its interstate sales.
- Because the tax's effect on interstate commerce was only incidental, remote, and unimportant rather than a direct restraint, the Court concluded the tax did not violate the Commerce Clause.
Doctrinal impact
Cases affected by this decision
Reaffirms Maine v. Grand Trunk Ry. Co. (142 U.S. 217)
Relied on as settled authority that using interstate business figures as one factor in a tax formula can be valid.
Reaffirms United States Glue Co. v. Oak Creek (247 U.S. 321)
Cited as support that a state income tax touching interstate profits is not automatically invalid.