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U.S. Supreme Court

International Harvester Co. v. Evatt, 329 U.S. 416 (1947)

International Harvester Co. v. Evatt

No. 75

Argued December 12, 1946

Decided January 6, 1947

329 U.S. 416


Under § 5495, Ohio Gen.Code, Ohio levied a franchise tax on appellant for the "privilege of doing business" in the State. Appellant owns and operates several factories, sales agencies, warehouses, and retail stores in Ohio and numerous factories, sales agencies, and retail stores in other States. Goods manufactured in Ohio are sold partly in Ohio and partly in other States. Some goods manufactured in other States are sold by appellant's sales agencies in Ohio to customers in Ohio. Under § 5498, Ohio Gen.Code, the tax base is computed as follows: the total value of the taxpayer's issued capital stock is divided in half. One half is multiplied by a fraction whose numerator is the value of all the taxpayer's property in Ohio and whose denominator is the total value of all its property, wherever located. The other half is multiplied by a fraction whose numerator is the total value of "business done" in Ohio and whose denominator is the total value of business done everywhere. The sum of these two products is the tax base.


Page 329 U. S. 417

1. This does not constitute a tax on sales made outside Ohio in violation of the Due Process Clause of the Fourteenth Amendment, since it is a franchise tax for the privilege of doing business in the State. Pp. 329 U. S. 419-421.

(a) The fact that the State chose to measure the tax on the business of manufacturing done in the State by the value of the products (including those sold out of the State) does not transform the tax on that business to a tax on sales out of the State. P. 329 U. S. 420.

(b) Treatment of sales within Ohio of products manufactured elsewhere as "business done" in Ohio did not result in taxing out-of-state or interstate transactions or sales in violation of the Due Process Clause, since the business of Ohio sales agencies and their sales to Ohio customers were intrastate activities. Pp. 329 U. S. 420-421.

2. The tax does not violate the Commerce Clause, since the purpose of the formula was to arrive at a fair conclusion as to what was the value of the intrastate business, and it has not been demonstrated that it achieves an unfair result. Pp. 329 U. S. 421-423.

(a) A State's tax law is not to be nullified merely because the result is achieved through a formula which includes consideration of interstate and out-of-state transactions in their relation to the intrastate privilege. P. 329 U. S. 423.

(b) No multiplication of this tax through its imposition by other States is involved, since the tax is levied only against the privilege of doing local business of manufacturing and selling in Ohio, and no other State can tax that privilege. P. 329 U. S. 423.

146 Ohio St. 58, 64 N.E.2d 53, affirmed.

The Supreme Court of Ohio affirmed a decision of Ohio's Board of Tax Appeals fixing the amount owed by appellant for its state corporation franchise tax assessed pursuant to §§ 5495-5499, Ohio Gen.Code. 146 Ohio St. 58, 64 N.E.2d 53. Affirmed, p. 329 U. S. 423.

Page 329 U. S. 418

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