e first State to attempt to employ the apportionment device in order
to tax the gross receipts of companies engaged in interstate commerce
was Maine, in connection with a so-called "franchise tax," which was
levied on such proportion of the revenues of railroads operating in the
State as their mileage there bore to their total mileage. In Maine _v._
Grand Trunk Railway Company,[672] a sharply divided Court upheld the tax
on the basis of its designation, giving scant attention to its
apportionment feature. Said Justice Field for the majority: "The
privilege of exercising the franchises of a corporation within a State
is generally one of value, and often of great value, and the subject of
earnest contention. It is natural, therefore, that the corporation
should be made to bear some proportion of the burdens of government. As
the granting of the privilege rests entirely in the discretion of the
State, whether the corporation be of domestic or foreign origin, it may
be conferred upon such conditions, pecuniary or otherwise, as the State
in its judgment may deem most conducive to its interests or
policy."[673] Four Justices, speaking by Justice Bradley, protested
forcefully that the decision directly contradicted a whole series of
decisions holding that the States are without power to tax interstate
commerce;[674] and seventeen years later another sharply divided Court
endorsed this contention when it overturned a Texas gross receipts tax
drawn on the lines of the earlier Maine statute.[675] The Maine tax,
however, the later Court suggested, had been in the nature of a
commutation tax in lieu of all taxes, which the Texas tax was not.[676]

FRANCHISE TAXES

Today the term, franchise tax, possesses no specific saving quality of
its own. If the tax is merely a "just equivalent" of other taxes it is
valid however calculated.[677] Conversely, when such taxes are in
addition to other taxes then their fate will be determined by the same
rules as would apply had the label been omitted.[678] More precisely,
the rule governing this species of tax is ordinarily the apportionment
concept, and if the basis of apportionment adopted by the taxing State
is deemed by the Court to be a fair and reasonable one, the tax will be
sustained; otherwise, not.

Thus a franchise tax may be measured by such proportion of the company's
net income as its capital invested in the taxing State and its business
carried on there bear to its total capital