The news & observer. [volume] (Raleigh, N.C.) 1894-current, 1904-03-02
NOT A DIRECT TAX
Court of Claims Decides
South Carolina Whis-
key Tax Case.
(By the Associated Press

Washington, March 1.-The opinion of
livered by Chief Justice Mott dismissing
the suit brought by the State of South
Carolina against the United States to re-
cover money paid by the State as special
taxes for the sale of liquors at dispen-
saries was made public today. This, the
opinion says, is believed to be the first
case brought before a court in which a
State has united in one undertaking an
exercise of the police power with com
mercial business. The court decides that
the excise tax is not an interference with
the States police power, as to the con-
tention that the Federal government can
not tax the States of their instrumental
ties Of government as upheld in the in
come tax cases the opinion says that be-
tween the principle involved in them and
the principle involved in this case there
seem to the court to be three broad and
lain distinctions. The first distinction is
fundamental. The money eXacted here
is not direct tax but an excise. The
theory upon which the constitutional pro-
vision rests is that an excise upon articles
is paid by the purchaser.
"The State of South Carolina here
stands on precisely the same footing which
every other dealer stands upon All that
it has to do is to add the internal feve-
nue. excise to the price of the liquor which
it sells and, let the purchaser pay it.
The second distinction is that in the in
ocme tax cases. A tax had been extended
to "a function strictly belonging to a
State, Gin its ordinary governmental ca
pacity" In this connection the decision
says:
I'm this case now before us the money
exacted by the United States was not
paid by the tax payers of South Caro-
lima, but by the purchasers at its dispen-
saries; and it was not expended for ordi-
nary governmental urposes, but as incl
dent to carrying on its commercial busi-
ness. The court does not question the
over ofthe State to carry on this busi-
ness, and does not doubt that the pro-
ceeds of the business lessen the take of
the tax payers All that it decides is that
the business of the dispensaries was, in
trlnslcally, business and not government;
and being business was subject to the
same national tax which is borne by all
other persons engaged in the same busi-
ness
The third distinction, the opinion says,
is that in the income tax cases the money
being raised for governmental purposes
and expended upon governmental pur-
poses the purposes, though no defined,
were in their nature limited In this case
there seems no such limitation. The opin-
icn further says:
"Thc more this subject is studied the
more celarly it appears to the court that
the State has right to the exercise of
its police power, and a right to the use
of all proer instrumentalitiss of govern
ment, and a right to enter into this com
mercial business of buying and selling for
profit; but that none of these rights can
be exercised as an evasion of the national
governments rights to impose an excise
tax and to subject all parties, whether
States or private corporations, or indi-
vddual dealers to the same law"