rates have been held in Wabash, etc. R. Co. v. Illinois not to be applicable to the transportation of goods or passengers so far as such transportation is a part of interstate or foreign commerce. The state may, however, make regulations affecting railroads engaged in interstate or foreign commerce, if such regulations do not amount to an unreasonable restriction on such commerce. Thus statutes requiring that signals be given at highway crossings, or that rates of freight and fare be posted for information of the public, have been upheld. (See Railroad Co. v. Fuller.)

91. Sale of Goods brought into the State.

It is evident that commerce would not be substantially free from state interference if the state could impose a license tax on the privilege of selling such goods after they had been brought in, for such a tax imposed specifically with reference. to goods which are the subject of foreign or interstate commerce would be in effect a restriction upon such commerce. Accordingly it was held in an early case in the Supreme Court of the United States (Brown v. Maryland), that a license tax on the privilege of selling goods which had been imported, and on which duties had been paid in accordance with the provisions of the federal law as to importation, was invalid, and it was suggested that the privilege of importing secured under the law of the United States involved more than merely the right to bring into the state for use, and included also the right to sell without interference of state law so long as the goods had not become mingled with the general property within the jurisdiction of the state. More specifically it was suggested that the importer had the right to sell imported goods in the original packages in which they had been brought into the state, but that this immunity from the application of the state law did not extend to sales other than in the original packages or to sales by persons who had procured the goods in the state from the importer.

Subsequently in Leisy v. Hardin the same general rule was applied to goods such as intoxicating liquors brought into

Goods brought into State.

159 the state from another state, although there was no particular congressional regulation as to such matter and no duties had been paid to the United States for the privilege of bringing the goods into the state from another state; for, of course, Congress cannot impose duties on goods taken from one state into another. The so-called "Original Package" rule, therefore, means simply that in the absence of any regulation by Congress the state cannot tax or prohibit sales in the original package by the person who has brought the goods into the state from another state or from a foreign country, and that so long as such person continues to hold such goods for sale in the original package, the state cannot impose restrictions or burdens upon such sale.

This rule was the subject of particular discussion in connection with its application to the transportation and sale of intoxicating liquors in states where prohibitory liquor laws had been adopted; and the conclusion reached that state liquor laws did not apply to intoxicating liquors sold in the original packages by the person bringing them into the state was regarded by many as peculiarly unfortunate, because it opened the way for the constant violation of the policy of the state laws relating to the regulation of the liquor traffic. This objection has been obviated, so far as intoxicating liquors are concerned, by an act of Congress, known as the "Wilson Act," passed in 1890, providing that after intoxicating liquors are brought into any state they shall be subject to the regulations of the state law as to their sale; and since the passage of that act, sales in original packages are subject to the same restrictions as other sales of intoxicating liquors, for in the exercise of its power to regulate interstate and foreign commerce Congress may undoubtedly subject such commerce to state regulation so far as it may see fit (In re Rahrer). But the Wilson Act does not subject to state control the transportation of intoxicating liquors into a state; it relates only to their sale after they have reached their destination in the state (Rhodes v. Iowa). The "Original Package" rule still applies to sales of cigarettes, oleomargarine,

and other articles which are subjects of general commerce, but which come within the scope of the police regulations in the various states; it does not apply, however, to articles such as unwholesome food, infected clothing, devices for counterfeiting, and like articles which have no legitimate lawful use and are not properly subjects of commerce. As to such articles, the power of the state to prohibit transportation and sale may be fully exercised (Kimmish v. Ball).

92. State Taxation of Commerce.

The general power of the state to tax all property within its jurisdiction extends to property which, although it has been brought into the state as a subject of foreign or interstate commerce, is owned in the state or is otherwise subject to its jurisdiction for taxation purposes; but the state cannot levy taxes on property, which is a subject of interstate or foreign commerce, that is, while it is actually being transported through the state or from a point in the state to some point in another state or a foreign country. The exemption of such property from taxation commences when the transportation commences and continues so long as the transportation continues. The mere fact, however, that goods are manufactured or otherwise prepared to be sold outside of the state does not exempt them from state taxation or from state regulations until they have actually become subjects of commerce by the commencement of transportation to another state or country. (See Kidd v. Pearson.) On similar reasoning it has been held that the anti-trust and combination statutes passed by Congress in the exercise of its power to regulate interstate and foreign commerce (Act of 1890, known as the Sherman Act) have no application to trusts and combinations affecting the manufacture of goods in a state, for the reason that such trusts and combinations are subject only to state regulation (United States v. E. C. Knight Company).

But the state taxing power cannot be so exercised as to impose specific burdens upon persons or corporations engaged

§ 93]

State Taxation.

161

Thus it has been held

in interstate or foreign commerce. (Philadelphia, etc. Steamship Co. v. Pennsylvania) that a state tax on the gross receipts of a railway company or a steamship line is unconstitutional if a substantial part of such receipts are from interstate or foreign commerce. Likewise a specific tax on a telegraph company based upon its gross receipts for the transmission and delivery of telegrams is unconstitutional if the company is engaged in transmitting messages to or from other states and countries. (See Telegraph Co. v. Texas.) It is entirely proper, however, to require corporations engaged in interstate commerce to pay taxes in the state based on the value of their business within its limits, and it may properly be required that a corporation transacting such business in the state shall pay state taxes in accordance with the entire amount or profits of its business in all the states in which it operates, proportioned to the share of that business which is done in the state which levies the tax. (See Adams Express Company v. Ohio State Auditor.)

93. Federal Regulations of Commerce.

In the exercise of its power to regulate interstate and foreign commerce, Congress has enacted statutes which need not be here discussed in detail. It has in a variety of ways regulated the commerce on navigable rivers and lakes. It has regulated railroad transportation for the purpose of preventing unjust discrimination in rates as between persons and localities, and has provided (1887) for an interstate commerce commission, having specific duties to perform with reference to the enforcement of these laws. It has passed statutes as to immigration and in a variety of ways regulated and exercised supervision over commerce on the high seas either with foreign countries or between ports of the different states.

In the further exercise of its powers as to interstate and foreign commerce, Congress has by the so-called Sherman Act of 1890 prohibited the making of contracts and the formation of trusts and combinations and every other attempt to monopolize such commerce, and by a statute of 1898 made provision

for settlement of controversies between carriers engaged in such commerce and their employés. As to the Sherman Act it has been decided that while the manufacture of goods to be shipped into another state or abroad is not within the control of Congress (United States v. E. C. Knight Co.) the consolidation of competing railroad lines by means of the organization of a corporation to hold and control the stock of the railroad companies forming such lines so as to completely pool their interests and take away all inducement for competition is an arrangement in restraint of trade and an attempt to form a monopoly, and is invalid (Northern Securities Co. v. United States). Several other important decisions have been rendered as to the validity and effect of that statute, but they are all referred to and commented on in the case last above cited.

The power of Congress to regulate commerce has been held to extend to the preservation of the navigability of rivers and lakes within state limits, and in the exercise of this power Congress may prohibit the construction of dams or the diversion of water, even at points above the head of navigation of a navigable stream, so as to preserve the flow of water in that portion of the stream which is capable of use for the purpose of navigation (United States v. Rio Grande Dam and Irrigation Co.).

In the exercise of its power to regulate commerce with the Indian tribes Congress has prohibited sales of intoxicating liquors to the members of such tribes, and in other ways sought to protect them from impositions or injury at the hands of white persons seeking to take advantage of their helpless condition. And it has been held (United States v. Holliday) that such statutes may be made applicable to commercial transactions between the members of Indian tribes and white persons, whether such transactions take place on Indian reservations or elsewhere.

But the control which the federal government may exercise over such commerce as is placed under the regulation of Congress is not limited to the enactment of statutes. The federal executive may act, even to the extent of employing the military