Evening star. [volume] (Washington, D.C.) 1854-1972, 1902-11-24
D|SPENSARY SYSTEM
South Carolina Wants Refund
of Taxes.
GROUNDS OF ITS CLAIM
CONTENDS THAT THE BUSINESS
Is A POLICE REGULATION.
The Government Holds That It is
Commercial Enterprise and That
Big Profit is Made.
GROUNDS OF IT'S CLAIM


state of South Carolina Is exempt from the
payment of the statutory license for whole
sale and retail whisky dealers will be
argued before the Court of Claims within
few days, the state having filed claim
before the court for the return Of more
than $4,000 of money paid by it to the in-
ternal revenue department of the United
States government as licenses to run it's
dispensary system. The dispensary law
has been in operation in South Carolina
for eight years, and, as known, no iEdi-
vidual or firm can legally traffic in spirit
uous and malt liquors in the state. There
is a big central dispensary which supplies
all kinds of liquid beverages of the hard
type to 112 county dispensaries located In
the various counties of the state. Under
the statutes of the United States the state
is requored to pay 500 year for a whole
sale license and $25 each year for the
county dispensaries. In the last eight years
the total amount paid to the government oy
the state has been over S20,00o. rms mas
been paid each year under protest, so as TO
afford opportunity for contest The stale
liquor commissioner has been in Washing
ton during the past few days assisting IN
the taking of testimony before commits.
sioner, and all the testimony is to be laid
before the court. Commissioner Yerkes OF
the internal revenue bureau heard the case
about year ago and decided against the
state. although admitting that the claims
of the commonwealth were strong
The States Contention.
The most serious part of the case is that
If the decision should be in favor Of the
state the rights of the government to col
lect taxes in a state might be threatened.
Franklin H. Mackey Of this city, who is
pressing the claim, will argue that the pro-
visions Of the internal revenue act as to
whisky licenses do not apply and were
never intended by Congress to apply to
state Of the federal Union that might con-
clude to regulate the whisky business in
Its own way. The argument is that the
| provisions of sections 1882 and 3244 of the
Revised Statutes apply only to persons"
! who are In the whisky business for profit
and not to a state of the Union or its in
| strumentalities of government Mr.. Mackey
| contends that the word person Is clearly
| used in the statutes and that Congress in
| tended 1t to be specific to individuals or
| firms of individuals.
The next important contention is that
| the dispensary system, being a legitimate
exercise by the state of its police power,
| and Its agents being the instrumentalities
| Of the state to enforce its provisions, is
| exempted under the federal Constitution
| from taxation. even had Congress intended
| the internal revenue laws to extend to
states Mr.. Mackey declares that the Con-
| stitution of the United States contains no
grant Of power to Congress, either express
l
| ercise Of a power not granted by the Con-
| stitution Is expressly forbidden.
Purely Police Regulation.
| In his arguments Mr.. Mackey declares
that upon the establishment of the dis
pensary system 1t was attacked by strong
enemies as unconstitutional. Churchmen,
he says, Joined with the saloon element to
| defeat the law, but the courts have held
| that 1t Is constitutional. Mr.. Mackey con-
| Guides with the assertion that the dispen-
| sary system Is not a commercial enterprise,
! as is charged, and says that the state Is
| not in the business for profit. The terms
| of the law, he holds, show it to be purely
| and simply police regulation, intended to
| secure the purity of WHISTLES by chemical
| analysis, a limit to the hours of sale, the
| quantity sold each person and limit to
! the class OF people who may purchase. He
| asserts that the law intends to minimize
| the sale and consumption Of liquors and its
| concomitant evils.
Profit in the Business.
| George H. German, the special attorney
| of the Department Of Justice in charge OF
the government side of the case, opposes
| all the contentious of the state. He shows
| that the total business transacted by the
dispensa-ies in 1891 amounted to 81 1926, 6S1.
and that the net profit of the business was
| $545.4S He, therefore, holds that the
| state Is IN the liquor business Tor pront.
| Should South Carolina win this case"
said Mr.. German, there will be no need
| for tariff law, and 1t would save the
tariff revisionists lot OF trouble. Any
| state could go into any kind of business
| and would be exempt from customs taxes
| WHISTLES could be imported from France
| or any country for state consumption and
would be exempt from tariff duties. A
precedent would be set that would be dam
| gerous in the extreme" Mr.. German thinks
| that South Carolina could go into the to-
| bacco business and be exempt. 1t could
| purchase goods from abroad for It's peo-
| pie and sell them without having to pay
| penny Of customs taxation. Clothing,
machinery, everything, would be free. and
the decision might be so far-reaching as
to revolutionize the right Of the govern
ment to collect taxes on goods imported
| for a citizen of state.
The Department Of Justice contends that
| state has a perfect right to prohibit the
sale of intoxicating liquors within its boun-
| daries, but the minute 1t sells whisky 1t
comes within the provisions Of the internal
| revenue laws.
The case viii probably not be decided
| hy