The Saint Paul globe. (St. Paul, Minn.) 1896-1905, 1901-07-01
OBJECT TO TAX STAMPS
SOUTH CAROLINA HAS BEGUN SUIT
TO RECOVER SPECIAL LIQUOR
REVENUES
UP TO REVENUE COMMISSIONER
IN VIEW OF DIsPENSARY SYSTEM
STATE QUESTIONS RIGHT OF
GOVERNMENT TO LEVY TAX
NOT A NEEDFUL STATE AGENCY

WASHINGTON, June 30.-The state OF
South Carolina acting through the gov
, ernOr ana attorney general has Instituted
proceedings before the commissioner of
internal revenue to test the qu stlon
whether the state can be legally re-
quired to take out special tax stamps
as wholesale and retail liquor dealers
under their state dispensaIy laws anl
has made a demand upon the commits
sloner for a refund of all such taxes
hitherto paid, amounting to S4,9l6. While
this sum is not large, it is realized that
Ohe principle at issue is great and far
reaching in Importance
The one question involved IS whether
the internal revenue laws Of the United
States apply to the disEensary system Of
Souuh Carolina so as to entitle the coll
.lector to demand the payment Of these
taxes. The entire dispensary system of
South Carolina is managed by a board
OF commissioners, consisting Of three
persons selected by the state legislature,
with Columbia as its headqua! ters. This
state dispensary distributes the supplies
TO the county dispensares and tn Sc in
Aurn are managed by county dispen-
earles or agents, all being under the
BOARD Of state commissioners. Under
the law, no liquor can be sold at night
nor drunk on the premises Of the dis
pensary. The liquors are sold as the
property of the state ana the profits nc
crue to the state. The salar. es Of all
the officials of the dispensari=s are fixed
by law and do not depend upon the
amount of their sales. In the brief filed
with the commissioner of internal rev.
enue on behalf of the state 1t is con-
tended that there is nothing In the laws
of the United States authorizing the I'm
position Of a tax against a state OF
Its lnstrumentaiitiss of government and
that such an act containing any pro-
vision taxing the tnstrumentalities Of
the state government would be to that
extent unconstitutional 1t is contend
ed further, that the property of state
ana the means and instrumentalities
employed by it to carry its laws into
operation, cannot be taxed by the fed
eral government and an opinion Of the
late Judge Cooley on this question is
quoted.
If the internal revenue laws of the
United States require the agents Of the
state and county dispensarIes of South
Carolina to put tax into the United
States before being permitted to exercise
the duties Of their office, It IS contended
that the law Is unconstitutional and void
in this particular because the tax which
II imposes is purely and simply a tax
upon the instrum ntalities by which the
state, through its laws, seeks to mini
.mize the evils of the liquor traffic with.
in Its borders The federal government,
II IS held, cannot cOnstitutiOnally inter-
fere with the administration Of these
laws by requiring a special tax stamp
to be paid by its officials as a condition
precedent to the exercise of their du-
ties.
Commissioner Yerlles has the claim
FOR refund Of taxes by the state of South
Carolina under consideration, but has
rendered no opinion yet. While 1t Is
true that this dispensaTy system may be
designated state agency, and It's
~ fra afFaHaFa l.y.n1
under the police power resident In all
soVeTeignties, yet the commissioner is
inclined to the opinion that it Is not
such necessary state agency, or such
needful function of the state govern
ment as will exempt 1t from taxation.
There are certain agencies absolutely es-
sentlal to the life of state such as
tie maintenance Of courts, ex cutive Of
fcials, collection Of taxes for the pay
ment of necessary state expenses and
1t may be admitted that the government
~ can at no time and in no way, directly
or indirectly, levy a tax upon these
necessary state agencies; otherwise the
national government must tax them out
Of existence. The government contenEs
when the state performs a work a~d
assumes direction Of an agency which
has been and can be performed by its
citizens in their Individual capacity
new aspect arises If It is unconsti-
NtLIOHdl 10 require the local agents en-
plOyed under the dispenSary system Of
South Carolina to pay to the government
the sums required for retail and whole
sale liquor dealers stamps, then this
same state and all other states, the
commissioner points out, could take
control not only OF the sale, but of the
manufacture of whisky, beer and to-
bacco, and if so, then the question would
arise could the government levy any tax
upon the products of plants under and
operated by the state and used for these
purposes? If so, while the states must
thereby be able to pay all Of their gov
ernmental expenses, the general govern
ment, it is said, would lose an internal
revenue income of some $20O, 900, 900 per
year. 1t is understood that If the COM
mlssioner's decision is against the
state, as seems probable, the case
eventually will go to the supreme court
OF the United States.