Source: https://supreme.justia.com/cases/federal/us/283/570/
Timestamp: 2019-04-24 12:33:50+00:00

Document:
1. A certificate from the Court of Claims presenting a question of law, suitably distinct and definite, may be entertained although it be apparent that, with the facts as settled by an agreed statement accepted below, a decision of the question, either way, will be decisive of the case. P. 573.
2. The tax laid by § 600 of the Revenue Act of 1924 upon certain specified articles, including motorcycles, "sold . . . by the manufacturer . . . " equivalent to 5% of the price for which they are so sold, the statute requiring the manufacturers to make return of their sales and to pay the tax, is an excise on the sale, and not on the manufacturer or on the manufacture and sale. P. 283 U. S. 573.
3. The principle that the instrumentalities, means and operations whereby the states exert their governmental powers are exempt from taxation by the United States is not affected by the amount of the particular tax or the extent of the resulting interference, but is absolute. P. 283 U. S. 575.
5. In Metcalf & Eddy v. Mitchell, 269 U. S. 514, 269 U. S. 526; Wheeler Lumber Bridge & Supply Co. v. United States, 281 U. S. 572, 281 U. S. 579, and Willcuts v. Bunn, 282 U. S. 216, 282 U. S. 225, the taxes in question were not laid on transactions involving an exercise of governmental functions, and their bearing on governmental operations was so indirect or remote as to place them outside the principle which is applicable here. P. 283 U. S. 579.
Response to a question certified by the Court of Claims in a suit to recover money collected as a sales tax.
This is a certificate from the Court of Claims. At a prior term, the certificate was dismissed as not in accord with applicable rules, and then reinstated, as in Wheeler Lumber Bridge & Supply Co. v. United States, 281 U. S. 572. It since has been amended, and further argument has been heard.
corporation of a state for use by such corporation in its police service, can the transaction be taxed under § 600 of the Revenue Act of 1924 consistently with the constitutional immunity of the state and her governmental agencies from federal taxation?
Our jurisdiction to entertain certificates from the Court of Claims, and the limitations on that jurisdiction, are explained in Wheeler Lumber Bridge & Supply Co. v. United States, supra. The present certificate, when tested by the rules there stated, is unobjectionable. It presents a question of law suitably distinct and definite. And while, with the facts settled by an agreed statement accepted below, it is apparent that a decision of the question either way will be decisive of the case, this affords no ground for declining to entertain the certificate. United States v. Mayer, 235 U. S. 55, 235 U. S. 66, and cases cited.
"shall be levied, assessed, collected, and paid upon the following articles sold or leased by the manufacturer, producer, or importer a tax equivalent to the following percentage of the price for which so sod or leased."
Motorcycles are among the articles enumerated, and the applicable tax is five percentum of the price for which they are sold. Manufacturers, producers, and importers are required severally to make returns of their sales and to pay the tax.
This taxing provision is a reenactment, with minor changes not material here, of a provision which was included in the Revenue Act of 1917, c. 63, § 600, 40 Stat. 300, 316, and repeated in succeeding enactments. It is now § 600 of the Revenue Act of 1926, c. 27, 44 Stat. 9, 93, U.S.C. Title 26, § 881, note.
to the transaction or act on which it is laid. Counsel for the plaintiff insist it is laid on the sale. Counsel for the government regard it as laid on manufacture, production, or importation, or, in the alternative, on any one of these and the sale. We think it is laid on the sale, and on that alone. It is levied as of the time of sale and is measured according to the price obtained by the sale. It is not laid on all sales, but only on first or initial sales -- those by the manufacturer, producer or importer. Subsequent sales, as where purchasers at first sales resell, are not taxed. Counsel for the government base their contention on the requirement that the tax be paid by "the manufacturer, producer or importer," but we think this requirement is intended to be no more than a comprehensive and convenient mode of reaching all first or initial sales, and that it does not reflect a purpose to base the tax in any way on manufacture, production, or importation. Importation, as such, already was otherwise taxed, chapter 356, § 1, par. 369, 42 Stat. 858, 885, U.S.C. Title 19, § 121, par. 369, and, in our opinion, the words relied on fall short of expressing a purpose to subject it to a further tax.
strengthens our conclusion, drawn from the taxing provision, that the tax is laid on the sale, and on that alone.
The cases of Cornell v. Coyne, 192 U. S. 418, and American Mfg. Co. v. St. Louis, 250 U. S. 459, cited by counsel for the government, are not pertinent, for both related to taxes distinctly imposed on manufacturing.
Gillespie v. Oklahoma, 257 U. S. 501, 257 U. S. 505; Crandall v. Nevada, 6 Wall. 35, 73 U. S. 44-46.
Of course, the reasons underlying the principle mark the limits of its range. Thus, as to persons or corporations which serve as agencies of government, national or state, and also have private property or engage on their own account in business for gain, it is well settled that the principle does not extend to their private property or private business, but only to their operations or acts as such agencies; [Footnote 2] and, in harmony with this view, it also has been held where a state departs from her usual governmental functions and "engages in a business which is of a private nature," no immunity arises in respect of her own or her agents' operations in that business. [Footnote 3] While these decisions show that the immunity does not extend to anything lying outside or beyond governmental functions and their exertion, other decisions to which we now shall refer show that it does extend to all that lies within that field.
include bonds of a municipal corporation in a territory issued to raise money for municipal purposes, the decision being put on the ground that such a corporation is an instrumentality of the United States exercising delegated governmental powers. Farmers' & Mechanics' Savings Bank v. Minnesota, 232 U. S. 516, 232 U. S. 525. It also has been adjudged that bonds of municipal corporations in the several states issued to raise money for public municipal purposes, and the interest thereon, are immune from federal taxation, and this on the ground that such corporations are representatives of the states and exercise some of heir powers, and that, under the implications of the Constitution, the governmental agencies and operations of the states have the same immunity from federal taxation that like agencies and operations of the United States have from taxation by the states. Pollock v. Farmers' Loan & Trust Co., 157 U. S. 429, 157 U. S. 584-586, 157 U. S. 601-653; s.c., 158 U. S. 158 U.S. 601, 158 U. S. 618, 158 U. S. 693.
It has been further adjudged that the salary of an officer of the United States is immune from state taxation because the salary is the "means by which his services are procured and retained," and its taxation by a state would burden the exertion by the United States of powers belonging to the latter. Dobbins v. Commissioner of Erie County, 16 Pet. 435, 41 U. S. 448-449. And, "for like reasons," it has been held that the salary of a state officer is immune from federal taxation. Collector v. Day, 11 Wall. 113, 78 U. S. 124.
although exacted only of the telegraph company, is, so far as it is based on the government messages, a tax on the means employed by the United States in carrying its constitutional powers into effect, Western Union Telegraph Co. v. Texas, 105 U. S. 460, 105 U. S. 466; Williams v. Talladega, 226 U. S. 404, 226 U. S. 418-419, and that bonds exacted by a municipal corporation of a state as a condition to granting licenses the issue of which is committed by the state to such corporation cannot be taxed by the United States, even though the tax be collected only from the licensees, because such a tax would burden the exercise of a function belonging to the state and city in their governmental capacity, Ambrosini v. United States, 187 U. S. 1, 187 U. S. 8.
"It is immaterial that the seller, and not the purchaser, is required to report and make payment to the state. Sale and purchase constitute a transaction by which the tax is measured and on which the burden rests. . . . To use the number of gallons sold the United States as a measure of the privilege tax is, in substance and legal effect, to tax the sale. [Citing cases.] And that is to tax the United States -- to exact tribute on its transactions and apply the same to the support of the state. "
We think it follows from these decisions, particularly from the one last cited, that the sale of motorcycles to a state agency, such as a municipal corporation, for use in its police service is not subject to taxation by the United States. The maintenance of a police service by such a state agency, like the maintenance of a coast guard service by the United States, is a governmental function, and that function extends, in one instance as much as in the other, to the purchase of equipment and supplies needed to render the particular service efficient. Under the constitutional principle, the exertion of such a function by a state or a state agency has the same immunity from federal taxation that like exertions by the United States or its agencies have from state taxation. Here, the tax is laid directly on the sale to a governmental state agency of an article purchased for governmental purposes. The sale and purchase constitute a single transaction, in which the purchaser is an essential participant. Without that participation, the sale could not be effected. Thus, the transaction falls within the class which the United States cannot tax consistently with the constitutional principle.
The decisions in Metcalf & Eddy v. Mitchell, 269 U. S. 514, 269 U. S. 526; Wheeler Lumber Bridge & Supply Co. v. United States, 281 U. S. 572, 281 U. S. 579, and Willcuts v. Bunn, 282 U. S. 216, 282 U. S. 225 et seq., cited by counsel for the government, are all distinguishable, for the taxes there in question were not laid on transactions involving an exertion of governmental functions, and their bearing on governmental operations was so indirect or remote as to place them outside the principle which is applicable here.
MR. JUSTICE HOLMES regards Panhandle Oil Co. v. Knox as controlling in principle, and, upon that ground, acquiesces in this decision.
I think the question should be answered in the affirmative. The implied immunity of one government, either national or state, from taxation by the other should not be enlarged. Immunity of the one necessarily involves curtailment of the other's sovereign power to tax. The practical effect of enlargement is commonly to relieve individuals from a tax at the expense of the government imposing it, without substantial benefit to the government for whose theoretical advantage the immunity is invoked. Compare Metcalf & Eddy v. Mitchell, 269 U. S. 514, 269 U. S. 522-524; South Carolina v. United States, 199 U. S. 437, 199 U. S. 455; Railroad Co. v. Peniston, 18 Wall. 5, 85 U. S. 30-31; see also Missouri v. Gehner, 281 U. S. 313, 281 U. S. 323; Macallen Co. v. Massachusetts, 279 U. S. 620, 279 U. S. 637.
This is especially the case where, as here, the sole ground of the immunity is that, although the tax is an excise collected by one government from an individual normally subject to it, the incidence of the tax may conceivably be shifted to the other government. In such a case, it is not clear how a recovery by the taxpayer would benefit directly the government supposed to be burdened, and the assumption of indirect benefit in the case of a tax of this type necessarily rests upon speculation, rather than reality. See Lash's Products Co. v. United States, 278 U. S. 175. It is significant that neither the federal nor any state government has appeared, by intervention or otherwise, to support this claim of immunity in cases in which the taxpayer has urged it upon us.
to the United States or a state may be subjected to an inheritance tax by the other, United States v. Perkins, 163 U. S. 625; Snyder v. Bettman, 190 U. S. 249; see Greiner v. Lewellyn, 258 U. S. 384, although the consequent indirect burden is apparent. Even if it could be said that there is some reason, which the Court has never attempted to state, for the distinction which was made by the decision in Panhandle Oil Co. v. Mississippi, 277 U. S. 218, between an excise on sales to a government and one on legacies, the fact of the shifting of the burden would seem to be at least less apparent in the case of a sale.
Whatever factors determine whether the burden does in fact shift, I do not think it can be said that a tax paid by the seller in any given case necessarily burdens the purchaser either more or less because in form laid on the sale, as in the Panhandle Oil case, or upon transportation of goods sold f.o.b. destination, as in Wheeler Lumber Co. v. United States, 281 U. S. 572, or on manufacture alone of articles intended for sale, see Cornell v. Coyne, 192 U. S. 418, or on both manufacture and sale.
These considerations are, to me, persuasive that the broad rule announced in the Panhandle Oil case ought not to be extended, even if we were not required by our own decisions to limit it, and that we ought not to strain the words of the statute to bring this case within the authority of that one. It seems to be conceded that, if the tax in the present case were levied on manufacture alone, we would be bound to hold it valid, Cornell v. Coyne, supra; see Lash's Products Co. v. United States, supra.
of substance, rather than of form should lead us to choose that one which would restrict the doctrine of the Panhandle Oil case to the tax imposed in unqualified terms on sales to which it was applied in that case. The present tax is not levied in such terms, exclusively on sales, but is effective only when the seller both manufactures or imports and sells. With respect to the incidence of its burden on the buyer, so far as we can know, it does not differ from a tax on the manufacture of goods, payable when sold. See Lash's Products Co. v. United States, supra. I think that the Wheeler Lumber case, rather than the Panhandle Oil case, should control in determining its validity.
"With regard to taxation, no matter how reasonable, or how universal and undiscriminating, the state's inability to interfere has been regarded as established since McCulloch v. Maryland, 4 Wheat. 316. The decision in that case was not put upon any consideration of degree, but upon the entire absence of power on the part of the states to touch, in that way, at least, the instrumentalities of the United States; 4 Wheat. 17 U. S. 429-430, and that is the law today. Farmers' & Mechanics' Savings Bank v. Minnesota, 232 U. S. 516, 232 U. S. 525-526."
Thomson v. Pacific Railroad, 9 Wall. 579, 76 U. S. 591; Railroad Co. v. Peniston, 18 Wall. 5, 85 U. S. 34, 85 U. S. 36-37; Central Pacific R. Co. v. California, 162 U. S. 91, 162 U. S. 125-126; Baltimore Shipbuilding & Dry Dock Co. v. Baltimore, 195 U. S. 375, 195 U. S. 382; Alward v. Johnson, 282 U. S. 509. And see McCulloch v. Maryland, supra, p. 17 U. S. 436; Osborn v. Bank of United States, 9 Wheat. 738, 22 U. S. 867; Clallam County v. United States, 263 U. S. 341, 263 U. S. 345.
South Carolina v. United States, 199 U. S. 437.
"The right to tax the contract to any extent, when made, must operate upon the power to borrow, before it is exercised, and have a sensible influence on the contract. The extent of this influence depends on the will of a distinct government; to any extent, however inconsiderable, it is a burden on the operations of government."
Bastable, pp. 376, 548; Brown, p. 96; Lutz, p. 319; Hobson, p. 54; Marshall, pp. 413-414; all supra, Note 1; Bulletin, National Tax Association, 1923-1924, p. 170.

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