The development of special taxes applying to corporations or to businesses conducted customarily under the corporate form is the most striking feature in the history of taxation in the state since 1880. In 1880 the only taxes of this character were on life, fire, and marine insurance companies; express companies; palace, sleeping and dining car companies; railroad companies; gas companies; and the steamboat and stage coach business. Receipts from all these amounted in 1881 to only $30,542, which was 1.2 per cent of the total tax receipts. At the present time every important commercial business, except chiefly the mercantile and general manufacturing, is subject to special occupation taxes which in 1910 brought in $770,698 or 9.8 per cent of the total tax receipts and in 1915 $1,071,473 which was 8 per cent of total tax receipts. The businesses selected for this special taxation are mainly those engaged with transportation, transmission, and insurance. The development is best shown by taking up the principal businesses in order.

A. Railroads

The 1 per cent tax on the gross receipts from passenger travel within the state which was first levied in 1879 was reduced to one-half of 1 per cent in 1882. There was agitation within the legislature in 1888 to increase the tax to 1 per cent on passenger and freight receipts, but the only result was to restore in 1889 the tax on passenger receipts of 1 per cent.1 The tax of 1 per cent on passenger earnings only was retained until 1905.2 The act of 1905 imposed a tax of 1 per cent upon the gross receipts from the passenger, freight, and baggage business of railroads.3 In the case of an interstate road the tax to be paid was to be "equal to such proportion of the said one per centum of its gross receipts as the length of the portion of such line within the state bears to whole length of such line," though it was permitted to the comptroller to substitute for this mileage rule any other rule which would be more fairly representative of the state's share of the total gross receipts. It was also provided that any road which paid the tax on intangible assets should be exempt from the payment of the gross receipts tax. The employment of this tax was denied to counties, towns, cities, and other local taxing units. Though levied exclusively as a state tax it was in addition to the state tax on the real and personal property of a railroad.

1 Galveston News, April 19, 1888.

2 In 1895 a strong effort was made to increase the rate to two per cent, but it failed; Houston Post, March 6 and 7, 1895. 3Laws of 1905, p. 336.

The test suit which determined the fate of the gross receipts tax was filed by the attorney general of Texas against the Galveston, Harrisburg and San Antonio Railway Company et al., in 1905, and resulted in a judgment in the district court in favor of the state, except as to penalties and forfeitures. The companies appealed and on March 21, 1906, a court of civil appeals held the statute unconstitutional.1 Upon being carried to the supreme court of the state, that court held the act to be constitutional, except as to penalties and forfeitures, which were declared to be excessive.2 The case was removed to the Supreme Court of the United States in December, 1906, and on May 18, 1908, that court reversed the decision of the supreme court of Texas and held the act to be unconstitutional as an attempt to regulate interstate commerce.3

1 Galveston, H. and S. A. Ry. Co. v. Davidson, 93 S. W. Rep., 436 (1906).

2100 Tex., 153 (1906).

3210 U. S., 217 (1908). The statute provided that railroads should pay an annual tax "equal to one per centum" of their gross receipts, and the interpretation of the state supreme court that this was an occupation tax whose operation in interstate commerce was incidental, not direct, was accepted by Chief Justice Fuller and Justices Harlan, White and McKenna of the U. S. Supreme Court who dissented from the majority decision. The distinction between the Texas tax and the Maine tax, which was sustained in 142 U. S., 217, seems to be that the Maine tax was in the nature of a "commutation" tax in lieu of all other taxes upon the roadbed of the railroad, while the Texas tax was in addition to all other taxes; State and Local Taxation, 1911, pp. 188-192.

Railroads are taxed at present only by the property tax on their real and personal property, including intangible. They are exempt from payment of the franchise tax.1