Source: https://www.legalcrystal.com/case/96084/united-states-vs-constantine
Timestamp: 2017-09-26 21:57:34
Document Index: 306185352

Matched Legal Cases: ['§ 3244', '§ 8', '§ 3244', '§ 701', '§ 3244', '§ 701', '§ 3244', '§ 3244', '§ 3244']

United States Vs Constantine - Citation 96084 - Court Judgment | LegalCrystal
United States Vs. Constantine - Court Judgment
LegalCrystal Citation legalcrystal.com/96084
Case Number 296 U.S. 287
Respondent Constantine
.....of the act of 1918 made prohibition a certainty; that the tax of $1,000 laid upon violators of state liquor laws, in addition page 296 u. s. 292 to the graded excises on various forms of the liquor business prescribed by r.s. § 3244 and the retention of the $1,000 tax in the 1926 act, which discarded the many existing excises on other business, evince a purpose to prohibit, rather than to tax, liquor traffic violative of state laws. for reasons presently to be stated, we find it unnecessary to decide whether the policy exhibited by the act at its inception was independent of the eighteenth amendment or in subvention of it. second. the court below and the respondent regard the administrative construction as persuasive that the section is penal in character......
United States v. Constantine - 296 U.S. 287 (1935)
U.S. Supreme Court United States v. Constantine, 296 U.S. 287 (1935)
1. An otherwise valid federal excise tax on the business of selling liquor is not rendered invalid in the particular case by the fact that the business is being conducted in violation of the state law. P. 296 U. S. 293 .
(1) The provision, if regarded as part of the machinery for enforcing the Eighteenth Amendment, fell automatically with the repeal of that Amendment. P. 296 U. S. 293 .
(2) An exaction which in reality is a penalty cannot be converted into a tax by so naming it; its purpose and operation determine its character. P. 296 U. S. 294 .
(3) The additional exaction is not a tax, but penalty for violation of state law. P. 296 U. S. 294 .
(4) The effect of the exaction in question is, under the guise of a taxing act, to usurp the police powers of the States. P. 296 U. S. 296 .
3. The United States may not impose penalties for infractions of the criminal laws of a State by her own citizens. P. 296 U. S. 296 .
4. The Court has no occasion in this case to consider whether the law in question is bad for want of the uniformity of operation required by Art. I, § 8 of the Constitution. P. 296 U. S. 297 .
Revenue Act of 1926. [ Footnote 1 ] A demurrer and a motion to quash were overruled, a plea of not guilty was entered, and a jury trial was waived. Pursuant to a stipulation of facts, the court found that, for the fiscal year July 1, 1934, to June 30, 1935, the respondent registered with the Collector of Internal Revenue as a retail liquor dealer and paid the tax of $25.00 imposed upon such dealers by Rev.St. § 3244, as amended; [ Footnote 2 ] on the date named in the information, the respondent had a restaurant in Birmingham, where he conducted the business of a retail dealer in malt liquors containing more than one-half of one percent alcohol, which business was contrary to the laws of
the state and of the city, and had not paid the $1,000 tax. Respondent's motion for judgment was denied, that of the United States was granted, and the respondent was sentenced. The Circuit Court of Appeals reversed the judgment [ Footnote 3 ] on the ground that the section became inoperative upon the repeal of the Eighteenth Amendment.
In its petition for certiorari, the United States, though admitting the absence of a conflicting decision by the Circuit Court of Appeals of any other circuit, called attention to diverse decisions in the district courts, [ Footnote 4 ] to the many other cases pending in which action is awaiting authoritative settlement of the question presented herein, to the large amount of money involved, and to the number of persons whose liability will remain uncertain until the dispute is finally settled. The question thus assumes the importance required by Rule 38, and the writ issued accordingly.
First. The government attacks, and the respondent supports, the conclusion of the court below that the section was adopted pursuant to the Eighteenth Amendment. We think little aid is to be had from the legislative history. On the one hand, it is said that the substance of the section was originally embodied in the Revenue Act of 1918, which became a law February 28, 1919; that, while under consideration by Congress in the autumn of 1918, the bill contained the section in question, and that, when enacted, it was made effective as of January 1, 1919. As the Eighteenth Amendment was not proclaimed until January 9, 1919, effective January 9, 1920, the argument is that the Act of 1918 was independent revenue legislation, and no section of it could have been intended to enforce fundamental law which was to become operative long after the passage of the act. From the fact that the provision for the additional tax of $1,000 was carried forward from the Act of 1918 through those of 1921 and 1924 into that of 1926, [ Footnote 5 ] the conclusion is drawn that the tax remained, as it was in the beginning, a means of raising revenue, and that its purpose was not altered by the existence of national prohibition when it was readopted as § 701 of the Revenue Act of 1926. Reference is also made to the fact that the section was specifically repealed by the Revenue Act of 1935, [ Footnote 6 ] and the deduction is drawn that Congress thought it had no relation to the prohibition amendment.
Second. The court below and the respondent regard the administrative construction as persuasive that the section is penal in character. After the adoption of the Revenue Act of 1926, the Treasury ruled that the so-called tax of $1,000 was a penalty. [ Footnote 7 ] Upon repeal of the Eighteenth Amendment, the position was reversed; collectors were instructed to treat the item as a special tax, and the Department proceeded to prepare and distribute appropriate revenue stamps to be issued in token of its payment. We think the administrative practice has little bearing
upon the question of the nature of the exaction. During the life of the Amendment, collection was lawful whether the demand was for a tax or a penalty, and the classification by the administrative officers was therefore immaterial. Congress then had power, in the enforcement of prohibition, to impose penalties for violations of national prohibitory laws. [ Footnote 8 ]
Third. The repeal of the Eighteenth Amendment renders it necessary to determine whether the exaction is in fact a tax or a penalty. If it was laid to raise revenue, its validity is beyond question notwithstanding the fact that the conduct of the business taxed was in violation of law. The United States has the power to levy excises upon occupations, [ Footnote 9 ] and to classify them for this purpose, and need look only to the fact of the exercise of the occupation or calling taxed, regardless of whether such exercise is permitted or prohibited by the laws of the United States [ Footnote 10 ] or by those of a state. [ Footnote 11 ] The burden of the tax may be imposed alike on the just and the unjust. It would be strange if one carrying on a business the subject of an excise should be able to excuse himself from payment by the plea that, in carrying on the business, he was violating the law. The rule has always been otherwise. The tax imposed by R.S. § 3244 [ Footnote 12 ] affords an opposite illustration. That act imposes an excise, varying in amount, upon different forms of the liquor traffic. The respondent
paid the annual tax of $25 thereby required, despite the fact that he was violating local law in prosecuting his business. Undoubtedly this was a true tax for which he was liable. The question is whether the exaction of $1,000 in addition, by reason solely of his violation of state law, is a tax or a penalty. If, as the court below thought, § 701 was part of the enforcing machinery under the Amendment, it automatically fell at the moment of repeal. [ Footnote 13 ]
But even though the statute was not adopted to penalize violations of the amendment, it ceased to be enforceable at the date of repeal if, in fact its purpose is to punish, rather than to tax. The only color for the assertion of congressional power to ordain a penalty for violation of state liquor laws is the Eighteenth Amendment, which gave to the federal government power to enforce nationwide prohibition. [ Footnote 14 ] That has been recalled, and the case must be decided in the light of constitutional principles which would have been applicable had the Amendment never been adopted. In the acts which have carried the provision, the item is variously denominated an occupation tax, an excise tax, and a special tax. If in reality a penalty, it cannot be converted into a tax by so naming it, [ Footnote 15 ] and we must ascribe to it the character disclosed by its purpose and operation, regardless of name. [ Footnote 16 ] Disregarding the designation of the exaction, and viewing its substance and application, we hold that it is a penalty for the violation of state law, and as such beyond the limits of federal power.
Since 1878, the revised statutes have classified various forms of the liquor traffic for the payment of excises differing in amount according to the nature of the business. [ Footnote 17 ] When the section exacting $1,000 additional from all persons engaged in the traffic in violation of state law was made a part of the revenue laws, the amount of the tax due by the respondent under R.S. § 3244 was $25. The so-called excise of $1,000 is forty times as great. It is ten times as great as the annual tax under R.S. § 3244 for wholesale liquor dealers and brewers, and fifty times as great as that imposed upon dealers in malt liquors. If the imposts under R.S. § 3244 were fixed in amount in accordance with the importance of the business or supposed ability to pay, the exaction in question is highly exorbitant. This fact points in the direction of a penalty, rather than a tax.
The condition of the imposition is the commission of a crime. This, together with the amount of the tax, is again significant of penal and prohibitory intent, rather than the gathering of revenue. [ Footnote 18 ] Where, in addition to the normal and ordinary tax fixed by law, an additional sum is to be collected by reason of conduct of the taxpayer violative of the law, and this additional sum is grossly disproportionate to the amount of the normal tax, the conclusion must be that the purpose is to impose a penalty as a deterrent and punishment of unlawful conduct. [ Footnote 19 ]
Reference was made in the argument to decisions of this Court holding that, where the power to tax is conceded, the motive for the exaction may not be questioned. These are without relevance to the present case. The point here is that the exaction is in no proper sense a tax, but a penalty imposed in addition to any the state may decree for the violation of a state law. The cases cited dealt with taxes concededly within the realm of the federal power of taxation. They are not authority where, as in the present instance, under the guise of a taxing act, the purpose is to usurp the police powers of the state. [ Footnote 20 ]
"Subject of internal revenue and prohibition taxes are [ sic ] divided into two classes:"
Section 2 of the Eighteenth Amendment directed that the Congress and the several states should have concurrent power of enforcement by appropriate legislation. Compare National Prohibition Cases, 253 U. S. 350 ; United States v. Lanza, 260 U. S. 377 ; Hebert v. Louisiana, 272 U. S. 312 .
United States v. Yuginovich, 256 U. S. 450 , 256 U. S. 462 ; United States v. Stafoff, 260 U. S. 477 , 260 U. S. 480 ; United States v. One Ford Coupe, 272 U. S. 321 , 272 U. S. 327 .
United States v. Chambers, 291 U. S. 217 .
United States v. LaFranca, 282 U. S. 568 , 282 U. S. 572 .
Macallen Co. v. Massachusetts, 279 U. S. 620 , 279 U. S. 625 ; United States v. One Ford Coupe, supra, 272 U. S. 328 ; Educational Films Corp. v. Ward, 282 U. S. 379 , 282 U. S. 387 .
Compare Lipke v. Lederer, 259 U. S. 557 , 259 U. S. 562 .
Helwig v. United States, 188 U. S. 605 , 188 U. S. 613 .
Bailey v. Drexel Furniture Co., 259 U. S. 20 ; Hill v. Wallace, 259 U. S. 44 ; Linder v. United States, 268 U. S. 5 , 268 U. S. 17 .
by Congress according to the nature of the calling affected by a tax ( State Board of Tax Commissioners v. Jackson, 283 U. S. 527 ) does not cease to be permissible because the line of division between callings to be favored and those to be reproved corresponds with a division between innocence and criminality under the statutes of a state. Power is not abused because the shock of its impact is equitably distributed. The practice of medicine by an unlicensed charlatan may be taxed on a different basis from its practice by a licensed physician, irrespective of the fact that the charlatan is guilty of a crime. The practice of law by a disbarred lawyer may be taxed on a different basis from the practice of the same profession by a lawyer in good standing. With as much if not greater reason, a like distinction may be drawn between the licensed and the unlicensed traffic in intoxicating liquors. The underlying principle in all these cases is as clear as it is just. A business that is a nuisance ( People v. Vandewater, 250 N.Y. 83, 164 N.E. 864), like any other business that is socially undesirable, may be taxed at a higher rate than one legitimate and useful. Fox v. Standard Oil Co., 294 U. S. 87 , 294 U. S. 100 . By classifying in such a mode, Congress is not punishing for a crime against another government. It is not punishing at all. It is laying an excise upon a business conducted in a particular way with notice to the taxpayer that, if he embarks upon that business, he will be subjected to a special burden. What he pays, if he chooses to go on, is a tax, and not a penalty. Nigro v. United States, 276 U. S. 332 , 276 U. S. 353 -354. Cf. Life & Casualty Insurance Co. v. McCray, 291 U. S. 566 , 291 U. S. 574 .
professed, may be read beneath the surface, and, by the purpose so imputed, the statute is destroyed. Thus, the process of psychoanalysis has spread to unaccustomed fields. There is a wise and ancient doctrine that a court will not inquire into the motives of a legislative body or assume them to be wrongful. Fletcher v. Peck, 6 Cranch 87, 10 U. S. 130 ; Magnano Co. v. Hamilton, 292 U. S. 40 , 292 U. S. 44 . There is another wise and ancient doctrine that a court will not adjudge the invalidity of a statute except for manifest necessity. Every reasonable doubt must have been explored and extinguished before moving to that grave conclusion. Ogden v. Saunders, 12 Wheat. 213, 25 U. S. 270 . The warning sounded by this Court in the Sinking Fund Cases, 99 U. S. 700 , 99 U. S. 718 , has lost none of its significance.