Source: https://supreme.justia.com/cases/federal/us/286/123/
Timestamp: 2019-04-26 16:02:58+00:00

Document:
1. A privilege tax on a business of licensing copyrighted motion pictures, measured by the gross receipts of royalties, is in effect a direct charge upon the royalties. Educational Films Corp. v. Ward, 282 U. S. 379, distinguished. P. 286 U. S. 126.
2. Copyrights, as granted under the Copyright Act, are the property of the author, in which the United States has no interest aside from the general benefits derived by the public from the labors of authors. P. 286 U. S. 127.
3. Copyrights are not federal instrumentalities, and income derived from them is not immune from state taxation. Long v. Rockwood, 277 U. S. 142 (holding otherwise as to patents) is overruled. Pp. 286 U. S. 128, 286 U. S. 131.
4. The principle of immunity of federal instrumentalities from state taxation and of state instrumentalities from federal taxation is confined to the protection of operation of government. P. 286 U. S. 128.
5. The mere fact that a copyright is property derived from a grant by the United states is insufficient to support the claim of exemption. Nor does the fact that the grant is made in furtherance of a governmental policy of the United states, and because of the benefits which are deemed to accrue to the public in the execution of that policy, furnish ground for immunity. P. 286 U. S. 128.
6. A nondiscriminatory tax on the royalties from copyrights does not hamper the execution of the policy of the copyright statute. P. 286 U. S. 131.
Appeal from a judgment, by a divided court, sustaining the dismissal of a suit to enjoin collection of state taxes.
Appellant, a New York corporation which is engaged within the State of Georgia in the business of licensing copyrighted motion pictures, brought this suit to restrain the collection of the state tax upon the gross receipts of royalties under such licenses. The tax was challenged upon the ground that copyrights are instrumentalities of the United States. On demurrer, the suit was dismissed, and the supreme court of the state, the justices being equally divided in opinion, affirmed the judgment. 172 Ga. 403, 157 S.E. 664. The case comes here on appeal.
deemed instrumentalities of the federal government, and hence immune from state taxation.
further efforts for the same important objects."
Kendall v. Winsor, 21 How. 327, 62 U. S. 328; Grant v. Raymond, 6 Pet. 218, 31 U. S. 241-242.
"where no direct burden is laid upon the governmental instrumentality, and there is only a remote, if any, influence upon the exercise of the functions of government."
In this instance, the mere fact that a copyright is property derived from a grant by the United States is insufficient to support the claim of exemption. Nor does the fact that the grant is made in furtherance of a governmental policy of the United States, and because of the benefits which are deemed to accrue to the public in the execution of that policy, furnish ground for immunity. The disposition by the government of public lands, in order to advance the general interest by promoting settlement, illustrates the principle and its limitation. The property of the United States is not subject to state taxation (Van Brocklin v. Tennessee, 117 U. S. 151), but the property of individual owners, although derived from the United States under its public land laws, may be taxed. The power to tax exists as soon as the ownership is changed. Witherspoon v. Duncan, 4 Wall. 210, 71 U. S. 219.
Though the legal title remains in the government, if the proceedings have reached the point where nothing more remains to be done by the entryman, and the government no longer has any beneficial interest in the land and does not exclude the entryman from the use of it, he is regarded as the beneficial owner, and the land is subject to taxation. Bothwell v. Bingham County, 237 U. S. 642, 237 U. S. 647. [Footnote 1] Again, the possessory right of a qualified locator after discovery of minerals is a property right in the full sense, unaffected by the fact that the paramount title to the land is in the United States, and such interest from early times has been held to be vendible, inheritable, and taxable. Forbes v. Gracey, 94 U. S. 762, 94 U. S. 766-767; Elder v. Wood, 208 U. S. 226, 208 U. S. 232; Union Oil Co. v. Smith, 249 U. S. 337, 249 U. S. 349; Irwin v. Wright, 258 U. S. 219, 258 U. S. 231. [Footnote 2] It is thus apparent that the mere fact that a property right is created by statute to fulfill a governmental purpose does not make it nontaxable when it is held in private ownership and exercised for private advantage. See Susquehanna Power Co. v. State Tax Commission (No. 1), 283 U. S. 291, 283 U. S. 297.
We are of the opinion that no controlling distinction can be based, in the case of copyrights, upon the character of the right granted. The argument that it is in the nature of a franchise or privilege bestowed by the government is met by the fact that it is not a franchise or privilege to be exercised on behalf of the government or in performing a function of the government. The "mining claim" above mentioned, or the possessory right to explore and work a mine under the applicable federal laws and regulations, may also be regarded as a franchise or privilege, but the Court found the right to be nonetheless taxable, observing in Forbes v. Gracey, supra, that "Those claims are the subject of bargain and sale, and constitute very largely the wealth of the Pacific Coast states." Copyright is a right exercised by the owner during the term at his pleasure and exclusively for his own profit, and forms the basis for extensive and profitable business enterprises. The advantage to the public is gained merely from the carrying out of the general policy in making such grants, and not from any direct interest which the government has in the use of the property which is the subject of the grants. After the copyright has been granted, the government has no interest in any action under it save the general one that its laws shall be obeyed. Operations of the owner in multiplying copies, in sales, in performances or exhibitions, or in licensing others for such purposes, are manifestly not the operations of the government. A tax upon the gains derived from such operations is not a tax upon the exertion of any governmental function.
hamper upon the effort of the United States to make the best terms that it can for its wards." Id., p. 257 U. S. 506. A similar result was reached in the recent ruling in relation to what was deemed to be the correlative case of leases by Oklahoma of lands held by the state for the support of its schools. Burnet v. Coronado Oil & Gas Co., 285 U. S. 393. These decisions are not controlling here. The nature and purpose of copyrights place them in a distinct category, and we are unable to find any basis for the supposition that a nondiscriminatory tax on royalties hampers in the slightest degree the execution of the policy of the copyright statute.
We agree, however, with the contention that, in this aspect, royalties from copyrights stand in the same position as royalties from the use of patent rights, and what we have said as to the purposes of the government in relation to copyrights applies as well, mutatis mutandis, to patents which are granted under the same constitutional authority to promote the progress of science and useful arts. The affirmance of the judgment in the instant case cannot be reconciled with the decision in Long v. Rockwood, 277 U. S. 142, upon which appellant relies, and, in view of the conclusions now reached upon a reexamination of the question, that case is definitely overruled.
See also Carroll v. Safford, 3 How. 441, 44 U. S. 461; Tucker v. Ferguson, 22 Wall. 527, 89 U. S. 572; Wisconsin Railroad Co. v. Price County, 133 U. S. 496, 133 U. S. 505; Irwin v. Wright, 258 U. S. 219, 258 U. S. 228-229; New Brunswick v. United States, 276 U. S. 547, 276 U. S. 556; Exchange Trust Co. v. Drainage District, 278 U. S. 421, 278 U. S. 425; Group No. 1 Oil Corp. v. Bass, 283 U. S. 279, 283 U. S. 282.
Even the reservation to the United States, in its grant of property, of a right of user for particular governmental purposes does not necessarily withdraw the property granted from the taxing power of the state. Baltimore Shipbuilding Co. v. Baltimore, 195 U. S. 375. Property in private ownership is not rendered nontaxable by the mere fact that it is the property of an agent of the government and is used in the conduct of the agent's operations and is necessary for the agency, when Congress has not provided for its exemption. Union Pacific Railroad Co. v. Peniston, 18 Wall. 5, 85 U. S. 33; Central Pacific R. Co. v. California, 162 U. S. 91, 162 U. S. 125; Gromer v. Standard Dredging Co., 224 U. S. 362, 224 U. S. 371; Choctaw, Oklahoma & Gulf R. Co. v. Mackey, 256 U. S. 531, 256 U. S. 537; Shaw v. Oil Corporation, 276 U. S. 575, 276 U. S. 581.

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