Source: https://supreme.justia.com/cases/federal/us/340/42/
Timestamp: 2019-04-23 02:14:32+00:00

Document:
1. The tax of $100 per ounce imposed by § 2590 of the Internal Revenue Code on transferors of marihuana who make transfers to unregistered transferees without the order form required by § 2591 and without payment by the transferees of the tax imposed by § 2590 is a valid exercise of the taxing power of Congress, notwithstanding its collateral regulatory purpose and effect. Pp. 340 U. S. 44-45.
(a) A tax is not invalid merely because it regulates, discourages, or deters the activities taxed, nor because the revenue obtained is negligible, or the revenue purpose is secondary. P. 340 U. S. 44.
(b) A tax is not invalid merely because it affects activities which Congress might not otherwise regulate. P. 340 U. S. 44.
2. The tax levied by § 2590(a)(2) is not conditioned on the commission of a crime, and it may properly be treated as a civil, rather than a criminal, sanction. Pp. 340 U. S. 45-46.
(a) That Congress provided civil procedure for collection indicates its intention that the levy be treated as civil in character. P. 340 U. S. 45.
(b) The civil character of the tax of $100 per ounce imposed by § 2590(a)(2) is not altered by its severity in relation to the tax of $1 per ounce levied by § 2590(a)(1). Pp. 340 U. S. 45-46.
(c) The imposition by § 2590(b) of liability on transferors is reasonably adapted to secure payment of the tax by transferees or stop transfers to unregistered persons, as well as to provide an additional source from which the expense of unearthing clandestine transfers can be recovered. Pp. 340 U. S. 45-46.
The United States brought suit in the District Court to recover taxes alleged to be due under the Marihuana Tax Act, 50 Stat. 551, now 26 U.S.C. § 2590 et seq. Defendants' motion to dismiss, attacking the constitutionality of the tax, was granted by the District Court. On direct appeal to this Court, reversed, p. 340 U. S. 46.
This is a direct appeal, 28 U.S.C. § 1252, from dismissal by the District Court of a suit for recovery of $8,701.65 in taxes and interest alleged to be due under § 7(a)(2) of the Marihuana Tax, Act, 50 Stat. 551, now § 2590(a)(2) of the Internal Revenue Code. 26 U.S.C. § 2590(a)(2). In their motion to dismiss, which was granted without opinion, defendants attacked the constitutionality of this subsection on the ground that it levied a penalty, not a tax. The validity of this levy is the issue here.
"First, the development of a plan of taxation which will raise revenue and at the same time render extremely difficult the acquisition of marihauna by persons who desire it for illicit uses and, second, the development of an adequate means of publicizing dealings in marihuana in order to tax and control the traffic effectively."
S.Rep. No. 900, 75th Cong., 1st Sess., p. 3. To the same effect, see H.R. Rep. No. 792, 75th Cong., 1st Sess., p. 2.
"every person who imports, manufactures, produces, compounds, sells, deals in, dispenses, prescribes, administers, or gives away marihuana."
businesses are located. The Code then makes it unlawful -- with certain exceptions not pertinent here -- for any person to transfer marihuana except in pursuance of a written order of the transferee on a blank form issued by the Secretary of the Treasury. § 2591. Section 2590 requires the transferee at the time he applies for the order form to pay a tax on such transfer of $1 per ounce or fraction thereof if he has paid the special tax and registered, § 2590(a)(1), or $100 per ounce or fraction thereof if he has not paid the special tax and registered. § 2590(a)(2). The transferor is also made liable for the tax so imposed, in the event the transfer is made without an order form and without the payment of the tax by the transferee. § 2590(b). Defendants in this case are transferors.
It is obvious that § 2590, by imposing a severe burden on transfers to unregistered persons, implements the congressional purpose of restricting traffic in marihuana to accepted industrial and medicinal channels. Hence, the attack here rests on the regulatory character and prohibitive burden of the section, as well as the penal nature of the imposition. But, despite the regulatory effect and the close resemblance to a penalty, it does not follow that the levy is invalid.
Second. The tax levied by § 2590(a)(2) is not conditioned upon the commission of a crime. The tax is on the transfer of marihuana to a person who has not paid the special tax and registered. Such a transfer is not made an unlawful act under the statute. Liability for the payment of the tax rests primarily with the transferee, but, if he fails to pay, then the transferor, as here, becomes liable. It is thus the failure of the transferee to pay the tax that gives rise to the liability of the transferor. Since his tax liability does not, in effect, rest on criminal conduct, the tax can be properly called a civil, rather than a criminal, sanction. The fact Congress provided civil procedure for collection indicates its intention that the tax be treated as such. Helvering v. Mitchell, 303 U. S. 391 (1938). Moreover, the Government is seeking to collect the levy by a judicial proceeding with its attendant safeguards. Compare Lipke v. Lederer, 259 U. S. 557 (1922); Tovar v. Jarecki, 173 F.2d 449 (1949).
transferors is reasonably adapted to secure payment of the tax by transferees or stop transfers to unregistered persons, as well as to provide an additional source from which the expense of unearthing clandestine transfers can be recovered. Cf. Helvering v. Mitchell, supra.

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