Case: THE STATE OF SOUTH CAROLINA v. THE UNITED STATES
Abbreviation: South Carolina v. United States
Decision Date: 1904-02-29
Docket Number: Nos. 22554, 23100, 24085
Citation: 39 Ct. Cl. 257
Volume: 39
Reporter: United States Court of Claims Reports
Court: United States Court of Claims
Jurisdiction: United States
Parties: THE STATE OF SOUTH CAROLINA v. THE UNITED STATES.
Judges: 
Pages: 257–290

Head Matter:
THE STATE OF SOUTH CAROLINA v. THE UNITED STATES.
[Nos. 22554, 23100, 24085.
Decided February 29, 1904.]
On the Proofs.
The State of South Carolina buys and sells alcholic liquor for a profit under and as a part of Its well-known “ dispensary system.” The internal-revenue officers of the United States compel the State dispensary commissioner to pay a special tax of $100 a year as a wholesale liquor dealer and the county dispensers $25 a year as retail liquor dealers. The dispensers have no proprietary interest in tlie liquor sold or in the profits derived tliereform, and the money is in fact paid by the State treasurer under protest.
I.The buying and selling of alcoholic liquors for a profit stamps upon the South Carolina dispensary system a commercial character in addition to that of a police regulation.
II.The framers of the Constitution had before them three purposes : The construction of a new National Government; the establishment of a dual system of government with the distribution of powers between the General or National Government and the local or State governments; the placing of certain immutable restrictions upon the powers of government to secure the individual'rights of the citizen. They attempted no restrictive legislation, but left the people of the United States free to make their own laws.
III.The national authority to “ lay and collect taxes, duties, imposts, and excises ” is expressly given; the police power, whether of the National or State governments, is neither given nor restricted by the Constitution.
IV.The police power is the power to impose those restraints upon private rights which are necessary for the general welfare. It is a power inherent in all governments, needing neither grant nor recognition by the Constitution.
Y. The general welfare is one thing; exemption from taxation is another. If a State unites in one undertaking an exercise of the police power with a commercial business, the National Government can not be compelled to aid the operation of the police power by foregoing its constitutional right to lay and collect an impost or excise on the business part of the transaction.
VI. The Constitution contains no grant of power, express or implied, which authorizes the General Government to tax a State through its means and instrumentalities of government ; but an excise on the dealer is a tax upon the consumer; and the exemption of the State from taxation extends no further than the functions belonging to a State in its ordinary capacity.
VII. The principle which rules and guides in such cases is this r The exemption of sovereignty extends no further than the attributes of sovereignty. Wright and Soiory, J. •/., concurring in the conclusion.
The Reporters’ statement of the case:
The following are the facts of the case as found by the court:
I. The general assembly of the State of South Carolina passed an act, approved December 24, 1892, entitled “An act to prohibit the manufacture and sale of intoxicating liquors as a beverage within the State excex>t as therein provided.” This act has been amended by subsequent acts of said general assembly.
The act of December 24, 1892, went into effect on the 1st day of July, 1893. In 1893 there were 66 dispensaries, and from time to time the number has increased until on the 1st of July, 1901, they numbered 101.
II. For each and every year since and including the year commencing the 1st day of July, 1893, the United States collector of internal revenue for the district of South Carolina has required the State dispensary commissioner and the county dispensers, in order that they may make sales of spirituous or malt liquors in accordance with the provisions of the dispensary laws of the State of South Carolina, to pay a special tax of $100 a year as a wholesale liquor dealer, and, in like manner, each of the county .dispensers were required to pay a special tax of $25 a year as retail liquor dealers. These taxes were claimed and required to be paid by said collector upon the ground that the said dispensers were “ liquor dealers ” Avithin the meaning of the internal-revenue laws of the United States, and as such Avere liable to pay said taxes.
Each dispenser, previous to receiving, his special tax receipt, Avas required to file and did file with the collector a so-called “ special-tax return,” the same being prepared upon a blank form prescribed by the Commissioner of Internal ReArenne under the direction of the Secretary of the Treasury (Rev. Stat., 321) and known as Form No. 11. The following is a copy (omitting the jurat) of said special tax return as made out upon said Form No. 11, all of these returns being alike except as to names and dates:
“ ÜNited States Internal Revenue.
“Return for special tax.
“ State oe So. Ca., County of Richland:
“ The undersigned, W. D. Price, being duly sworn according to law, declares that on the 1st day of July, 1900, he in tends to engage in the business or occupation of retail liquor dealer, as county dispenser, subject to special tax under the internal-revenue laws of the United States; said business or occupation to be carried on at Columbia, in the county of Richland, State of So. Ca., and that he has done no business for which he would be liable to pay a special tax without having paid the same, except as above.
W. D. PRICE.
III. In compliance with the aforesaid requirement of the collector of internal revenue, the State dispensary commissioner, for each and every year, respectively, since and including the year commencing the 1st day of July, 1893, drew his warrant upon the State treasurer of South Carolina in favor of said collector, for the special taxes claimed and demanded by him as aforesaid of the county dispensers and of the State dispenser.
IY. Said warrants were thereafter paid by the State treasurer of South Carolina to the said collector, and the amounts of money so paid were by the latter paid into the Treasury of the United States as internal-revenue taxes.
The total of the amounts so paid and received by the United States from the year commencing July 1,1895, to the year commencing July 1, 1901, both inclusive, is as follows:
V. All of the liquor sold by the dispensary agents during said years was the property of the State of South Carolina, and all the profits and losses arising from said sales accrued to the said State. The dispensers never have had "any proprietary interest of any sort in the liquors sold nor in the profits derived therefrom.
YI. Among the regulations of the dispensary are the following :
“ 1. Liquors shall only.be sold in sealed packages of not less than one-half pint nor more than five gallons.
2.. The packages shall not be opened nor the liquor drunk upon the premises of the dispensary.
“ 3. Liquor shall not be sold to minors, nor intoxicated persons, nor persons in the habit of being intoxicated, nor to persons not personally known to the dispenser as a person of good character and habits, or xipon the statement of a reliable and trustworthy person personally known to the dispenser that said person is of such character and habits.
“ 4. Liquors shall be only sold in the daytime, viz, from sunrise to sunset.
“ 5. They shall not be sold upon credit nor for barter.
“ 6. Not more than one sale a day shall be made to any one person.
“ 7. No label or .device other than those furnished by the State dispensary shall be placed upon any package containing liquor.”
VII. — Under the authority of and in pursuance to sections 3220 and 3227 of the Revised Statutes of the United States, the Secretary of the Treasury of the United States has prescribed for the use of persons making the appeal provided for by said sections certain forms, designated as Form 38 and Form 46.
Then follow the “ instructions,” which contain, among others, the following:
“ Instructions in regard to frefaration of claim.
“ No. 4. In claims arising on account of special-tax stamps and in the deputy collector’s certificates, and collector’s certificates on pages 2 and 4, must be property filled.
“ No. 4. In claims arising on account of special tax stamps it is not sufficient to state that the claimants have done no business for which they would be liable to special tax. Affidavits should be furnished containing specific denial as to each and all of the acts involving liability to special tax, as found in the statute imposing the tax; for instance, in the case of a retail liquor dealer: That from-■ to-he neither ‘ sold nor offered for sale any foreign or domestic distilled spirits, wines, or malt liquors in less quantities than five wine gallons at the same time.’
“ No. 5. In cases where two special-tax stamps of the same l?ind have been issued for the same period and place to the same person or firm, an affidavit as above should be furnished, adding thereto the words, ‘ except in one place (or more, as the case may be), for which he has paid the special tax required by law?
“ No. G. Where, in case of dissolution of a firm which had paid special- tax, the remaining partner or partners have been required to pay new special tax for the unexpired portion of the time for which tax was paid by the original firm, and claim the refunding of the tax paid, it should be established that from-to-, the successor carried on the same business as the original firm, and that during such period no person, not a member of the original firm, was taken into partnership.
“ No. 8. A claim for refunding should be made in the name of the party assessed, if living; if he is dead, there should be evidence of his death, and the claim should be made in the name of the executor or administrator. Certified copies of the letters of administration or letters testamentary, or other similar evidence, should be annexed to the claim to show that the claimant is administrator, etc.
“ The affidavit may be made by an agent of the party assessed; but, in such a case, there should be evidence of the agency, and of the sources of the agent’s knowledge concerning the case in question.”
VIII. In the administration of these laws there has been established in the city of Columbia a wholesale department where all the liquors purchased by the State commissioner are kept and stored. From this wholesale department the various retail dispensers receive their supplies and sell them to the consumers as provided in the acts. All the liquors so purchased and sold are purchased from the funds of the dispensary account. Neither the State commissioner nor the city or county dispensers have any property interests, as persons, in said goods, the same being the property of the dispensary system. The profits arising from the sale of such liquors, after the payment of all expenses of every sort arising from the conduct of the business, are distributed as follows: One-half of said profits is equally divided between the municipality and the county in which the dispensaries are located, the remaining one-half being paid into the State treasury. The profits arising from the sale of spirituous, vinous, and malt liquors under tliis dispensary system, and accruing to tlie counties, towns, and State, amounted in the year 1901 to tlie sum of $545,218.12, upon gross sales amounting to $2,328,681.21.
IX. The total number of special-license stamps issued to wholesale and retail liquor dealers in the State of South Carolina by the United States internal-revenue collector for the district of South Carolina during the year 1902 was 372. Of this number 112 were issued to the State and county dispensers and 260 to private individuals, who pay to the United States internal-revenue collector their regular special-license tax as retail liquor dealers, and for that purpose make application for the same on form No. 11 of the return for special tax, which is as follows:
State of-, County of-:
“ The undersigned, -, of the firm of -, being duly sworn according to law, declares that on the-day of-, 1902, he intends to engage in the business or occupation of retail liquor dealer, said firm consisting of the following-named persons,-, subject to the special tax under the internal-revenue laws of the United States; said business or occupation to be carried on at No.-street, in-, county of •-; — , State of South Carolina, ancl that he has done no business for which he would be liable to pay a special tax without having paid the same, except as above.”
This application, is signed by the person engaged in the retail liquor business, and forms a part of the public records of the office of the internal-revenue collector for the district of South Carolina.
X. On July 15, 1893, the State of South Carolina, by its governor, paid into the Treasury of the United States the sum of $25, and filed with the Commissioner of Patents, in conformity with the provisions of the act of Congress of 1881, and with the regulations prescribed by the Commissioner of Patents, a statement and declaration, which began by stating that “ the State of South Carolina, one of the Commonwealths comprising the United States of America, possessed in this regard of the full rights of a corporation, and doing business at its capital city of Columbia, in the county of Richmond, State aforesaid, has adopted for its use a trade-mark for chemically pure distilled liquors, consisting of the word ‘ palmetto,’ and particularly described; was accompanied by facsimiles of the trade-mark; was suported by a declaration on oath of the governor of the State that he verily believed that the foregoing statement is true; that the State at this time has the right to the use of the trade-mark therein described ; that no other person or firm or corporation has the right to use such, either in the identical form or in any such near resemblance thereto as might be calculated to deceive; that the said trade-mark is used by the said State in commerce with foreign nations or Indian tribes, and particularly with Canada; and that the descriptions and facsimiles presented for record truly represent the trade-mark sought to be registered.”
At the hearing before the Commissioner of Patents it appeared that the trade-mark had been adopted by the State board of control and that the State had sold in Canada a case of liquors with this trade-mark.
XI. The payments made for said special-license taxes were sometimes made to the United States internal-revenue collector in cash and sometimes by warrant. When paid by warrant the form thereof was as follows:
“ State of South Carolina.”
“No. 548.
“ Oppioe op State Boaed op DiReotoes,
“ South Carolina State Dispensary,
“ $1,950.00. Columbia, 8. C., July 6th, 1900.
“ The State treasurer of South Carolina:
“ Under the State dispensary act, as per voucher on file in this office, pay to the order of E. A. Webster, collector, nineteen hundred and fifty dollars, on account of revenue license.
“ H. H. Crum,
“ /State Commissioner.”
3  o o 3 o CO u O O •4J o ® M W J1 Ig If a :í J& ? ® ? ri
The receipt for said payment was as follows:
“$25.00. No.-.
iC Series of 1895. Series of 1895.
“ United States “ Stamp for special tax,
“ Internal revenue.
“ Received from W. D. Price the sum of twenty-live dollars for special tax on the business of retail dealer in liquors, to be carried on at dispensary No. —, Columbia, State of South Carolina, for the period represented by the coupon or coupons hereto attached.
“ Dated at Columbia, So. Ca.
“ E. D. Webster,
“ $25.00. Collector So. Ca. Dist.
“ Severe penalties are imposed for neglect or refusal to place and keep this stamp conspicuously in your establishment or place of business.”
Prior to April 4, 1901, none of these payments were made under protest, nor .was any objection made to the payment thereof. On April 4, 1901, the following protest was sent by the State dispensary commissioner to the ' United States internal-revenue collector for the district of South Carolina;
“ Office of State Dispensary Commissioner,
“ South Carolina Dispensary,
“ Columbia, S. C.. April A 1901.
“Hon. E. A. Webster,'
“Collector of Internal Revenue,
“Columbia, 8. C.
“ Sir : Pursuant to the advice of the attorney-general of this State and of the board of directors of the State dispensary, I beg to inform you that hereafter any applications for the issue of stamps for special taxes for Avholesale or retail liquor dealers which may be sent to you by this office or any of the State or county dispensary officials, and the payment of moneys in pursuance of said applications, are made under protest that said applications and said payments are illegally required by you, and that neither the State of South Carolina nor any of its officials or agents are liable to pay any tax whatever, whether stamp taxes or otherwise, to the United States as wholesale or retail liquor dealers by .reason of anjr sales of spiritous or malt liquors by the State and county dispensaries. The applications and the said payments are therefore made only because they are demanded by you and because to refuse compliance therewith might cause a conflict. betAveen the officials of this State and those of the United States.
“ You are further informed that after said applications and payments shall have been made, that State of South Carolina, through its proper officials, will take such steps as may be found necessary, either in the courts or other Avise, to secure reimbursement of the moneys thus illegally demanded by and paid to you.
(Signed) “ ti. H. CRUM,
“ State Dispensary Commissioner.”
XII. No appeal or application for the repayment of the aforesaid sums, paid by the various dispensers as AAholesale and retail liquor dealers, has been made by the State of South Carolina to the Commissioner of Internal Revenue under the provisions of sections 3226, 3227, and 3228, ReAdsed Statutes.
Mr. Franklin II. Mackey for the claimant:
1. The provisions of section 3244 of the Revised Statutes that “ eArery person Avho sells or offers for sale ” spirituous or malt liquors “ in less quantities than 5 Avine gallons at the same time shall be regarded as a retail dealer in liquors ” do not apply to a State which, under its police power, monopolizes to itself the sale of such liquors to its citizens.
The word “ person ” as contained in this statute is declared in section 3140 “ to mean and include a partnership, association, company or corporation as Avell as a natural person.” This section is similar to, but not as SAveeping in its terms as, the defining clause of the forty-fourth section of the act of July 13, 1866, in which it is declared that “ any Avord or Avords in any and all parts of this act, and all acts to Avhich this act is additional, indicating or referring to person or persons, shall be taken to include partnerships, firms, associations, bodies corporate or politic, or any other party whatsoever AAhen not othenvise designated or manifestly incompatible with the interest hereof.”
It will be observed that the language just quoted contains the words “ bodies politic or corporate,” a phrase not to be found in section 3140 of the present revenue act. If, therefore, this more comprehensive phrase does not include and lias no reference to a sovereign State of the Union, a fortiori the term “ corporation ” can not be held to do so.
Under the more comprehensive act of 1886 these words “person or persons ” have been repeatedly held by various Attorneys-General of the United States, in opinions advising the Treasury Department as to the' scope of that act, not to include a State of the Union as objects of taxation under the revenue laws. The Alabama Certificates, 12 Op. Atty. Gen., 176; Taxation of State Railroads and Manufactures, id., 277; Detroit House of Correction case, id., 376; case of the Hartford National Bank, id., 402, and see 13 id., 67 and 439.
In Georgia v. Atlrins (C. C. U. S., reported in 35 Ga. Rep., 315) it was contended by the collector of internal revenue that the "Western and Atlantic Railroad, which ivas owned and operated by the State of Georgia, was liable to pay a tax of $6,004.56 under the revenue laws of the United States taxing the gross passenger receipts of railroads. . Erskine, J., in granting an injunction against the collection of the tax, said:
“ I am unable to discover a- single case in the Supreme Court or in any of the circuit or district courts of the United States wherein it has been decided that the term ‘ corporation ’ — body corporate or politic — when used in a statute, in eludes a ‘ State ’ or where the one term is used as a synonym for the other.”
In the leading case {The United States v. The Baltimore and Ohio Rwy. Go., 17 Wall., 322) in which the constitutional right of the Federal Government to tax the property of a State is considered and the right denied, Mr. Justice Hunt delivering the opinion of the court, in which lie cited Georgia v. Atkins (supra) with approval, said: “ The term ‘ corporation ’ as used in the act of Congress touching internal revenue does-not include a State,” and Mr. Justice Bradley, in his concurring opinion, said “ Congress did not intend by the internal-revenue laws to tax property belonging to States.”
This view of the courts — i. e., that the internal-revenue laws do not include a State of the Union within their purview as objects of taxation — is further strengthened by the fact that on several occasions, where the statute of limitations had supervened, Congress has refunded to cities and towns (which are aliquot parts of a State, 17 Wall., 322) taxes erroneously collected from them under the revenue laws. (See United States v. Gity of Louisville, 169 U. S., 249.)
2. But even had Congress intended by its internal-revenue laws to include within its scope and scheme of taxation the property and instrumentalities of government of a sovereign State of the Union, such intention would have been futile, since there is no grant of such a power by the Federal Constitution. (Cooley, Const. Linn, sec. 480; McGuBock v. Maryland., 4 Wheat., 316, 432; Brown v. Maryland, 12 Wheat., 419; Collector v. Day, 11 Wall., 113; Dobbins v. Erie Go., 16 Pet., 435; Veazie Bank v. Fenno, 8 Wall., 533; Pollock v. Farmers'1 Loan and Trust Go., 157 U. S., 429, the “ Income tax ” case; and see an elaborate note in 23 U. S. C. C. of Appeals (“ C. C. A.” 515) upon the limitations of the taxing power from mutual interference of Federal and State governments.)
When, therefore, it is claimed that under the internal-revenue laws the agents of the South Carolina dispensaries must each pay a tax to the United States before being permitted to exercise the duties of their office, the answer is, that if the statute so declares (and we have shown that it does not), it is void, because the tax which it seeks to impose is a tax upon the instrumentalities by which the State, through its laws, seeks to minimize the evils of the liquor traffic within its borders.
The police power and the judicial power of a State are equally sacred and exempt from the taxing power of the Federal Government. If this were not so, then under the plea of the right to tax, Congress might tax the dispensary agents so heavily as to prevent them holding the office, and thus tax the dispensaries themselves out of existence. This would be nothing less than the power to destroy the police power of the State. The point is forcibly presented by the court in Fifield v. Glose (15 Mich., 505) in passing upon the constitutionality of the revenue law imposing a tax upon writs of process in State courts, wherein the court said:
“ If Congress has the right to impose a duty or tax upon suits in courts of the State, it follows as an inevitable con- elusion that such restrictions may be laid upon these proceedings as to put an end to the entire action of these courts and. for all practical purposes, to produce the same results as if they were abolished. And the question we are called upon to decide is, therefore, whether Congress has power to put an end to the exercise of the judicial power of the State.”
If the South Carolina dispensary act is an exercise by the State, of its police power, then by the same reasoning the. right of the Federal Government to impose restrictions upon the administration of that power includes the right to put an end to file dispensary system of the State by taxing it out of existence, for “ the power to tax involves the power to destroy.” Chief Justice Marshall in McCulloch v. Maryland (supra).
The dispensar}'' law of South Carolina is a legitimate exercise by the State of its police power. (Vance v. Yunder - cook, 170 U. S., 43S; Crowley v. Christensen, 137 U. S., 90; State ex rel George v. Aiken, 42 S. C., 222.)
Salt Lake City v. Hollister (118 U. S., 256) is cited by defendant as an aiithority to support the power of Congress to tax a State municipality, but there is a vast distinction between the municipality of a Federal Territory and that of a sovereign State of the Union.
It is said, however, that the dispensary system is an attempt on the part of the State to engage in trade; that it is a commercial undertaking, etc., and therefore liable to taxation by the Federal Government. The reply to this is that even conceding it to be so (Avhich in fact is denied) the internal-revenue law does not include, as we have shown, the business of a State within its purview. Moreover, it is settled by the opinions of numerous Attorney-Generals of the United States, as well as by the decisions of the Federal circuit courts and of the Supreme Court of the United States, that when a State engages in trade and manufacture it is not liable to taxation by Congress. (State Railroads and Manufactures, 12 Op. Atty. Gen., supra; Detroit House of Correction Case, Id., which case involved the question of the right of the internal-revenue officials to assess taxes upon articles manufactured by State convict labor; Georgia v. Atkins, supra, where the State of Georgia had purchased and was running a railroad as a commercial enterprise; United States v. Balt, and Ohio R. R., supra, where the State of Maryland bad entered upon the commercial enterprise of loaning the State funds to forward the construction of a railroad in the State.) The Federal post-office establishment is a commercial enterprise on the part of the Government, but no one would hold that the States for that reason may tax it. Indeed, the engaging in trade, commerce, and manufacture by a sovereign State is not unusual. France, Spain, Germany, Belgium, Russia, and almost every State of Europe exercise the right in numerous instances. It is an attribute of sovereignty. The right was possessed by the States of the Union before the adoption of the Constitution, and nothing in that instrument implies its surrender, or a grant to Congress to tax the right out of existence, as it may do if it may tax it at all.
Mr. George II. Gorman (with whom was Mr. Assistant Attorney-General Pradt) for the defendants:
The contention is made that the payment and collection of this special-license tax was illegal and void, and suit is brought for their recovery upon the theory that the person paying the same was an agent of the State under the dispensary law of the State of South Carolina, and that the imposition of the tax was really upon the property of the State, or upon one of its instrumentalities of State government properly exercised under its police power, and that the word “ person,” as used in the internal-revenue laws, can not be held to include a State of the Federal Union.
The object of the Congress undoubtedly was to levy this excise tax upon this business by whomsoever carried on, and the word “ person ” is sufficiently broad to cover a State when it is necessary to do so in order to effectuate the intention of the legislature. To this end the word “ person ” has been held to include a municipal corporation, to include a State, to include the United States of America, and to include a foreign country — dependable always upon the intent of the legislature in the use of that expression. (United States v. Allen, 38 Fed. Rep., 736.)
In the case of Salt Ladee City v. Hollister (118 U. S., 256) it was held that the municipality of Salt Lake was a person within the meaning of the revenue laws. It is true that at that time Utah was only a Territory, and that there was no-question raised in the case as to the taxation of the State instrumentalities, and the case is not cited for this purpose, but merely to show that the Supreme Court of the United States had no difficulty in determining that a municipal corporation which undertook to engage in the manufacture and sale of liquor was amenable to the special-license tax provided by the internal-revenue laws; and indeed no contention was made by counsel that such was not the case.
In the case of the /State of Indiana v. Woram (6 Hill (N. Y.), 33) it was held that a State is a corporation, and may be the payee of a promissory note, and that the word “ person ” in a statute may include the State.
In the case of Martin v. The State (24 Texas, 61) it was held that-under a statute making it an offense to falsify a public record “ with intent to defraud any person ” that the State must be taken to be a person within the meaning of such statute.
And so the Supreme Court of Nebraska has held that a county of that State is a person in the legal sense of the term. (See Lancaster County v. TrimMe, 34 Nebr., 152.)
In the case of the State of Kansas v. Iler.old (9 Nans., 194) it was held that the United States is a person within the meaning of section 1 of the “ act to prevent certain trespasses,” Avhich makes it an offense for any person to cut down, injure, or destroy, or to take or remove any tree, timber, rails, or wood, “ standing, being, or growing on the land of any other person.”
In the case of The Republic of Honduras v. Soto (112 N. Y., 310) it was held that a foreign independent government, recognized as such by the United States, is a person within the meaning of the provisions of'the Code of Civil Procedure providing that a defendant in an action brought by “ a person residing without this State ” may require security for costs.
These cases are brought to the attention of the court, not because I consider-them at all necessary in the construction of this statute, but merely for the purpose of presenting specific instances in which the word “ person ” has been held to include all sorts of legal entities which the court thought the legislature intended to embrace within the description, of the word “ person,” and to show that the courts have never hesitated, when necessary to effectuate the legislative intention, to interpret the word “ person ” so as to include a State.
On the other hand, it is of course unquestionably true that many cases can be found in which it has been held that the word “ person ” does not include, a State. Some of these, cases are collected in the brief of counsel for claimants, but upon examination it will be found that it was so held for the reason that it was apparent that the legislature did not design the word “ person ” to be so construed, and that in failing to so construe it it was done in order to effectuate the legislative intent. Indeed, in all of the cases and opinions cited in the brief of counsel to have so construed the word “ person ” would have been to have declared the law unconstitutional, for in every single instance cited by counsel to have so construed would have resulted in adjudging that the Federal Government could levy a tax upon the property of the State or upon its proper and legitimate instrumentalities as a State for State government. This, of course, can not be done; and since the Congress could not have been presumed to have passed an unconstitutional act, the word “ person ” was given its primary significance and held to exclude a State. It is not necessary to review all of the cases cited by counsel, nor the opinions of the Attorney-General cited by him, for the l’eason that they all resolve themselves into this one condition.
Under and by virtue of the express grant of power thus conferred by the States themselves upon the Federal Government, the Congress has enacted that persons engaged in the sale of liquor as a beverage shall pay the prescribed license fees for the privilege of so doing. The requirement of the payment for such license is only a mode of imposing taxes on the licensed business, and the prohibition under penalties against carrying on the business without license is only a mode of enforcing the payment of such taxes. They are imposed for the purpose of providing internal revenue for the support of the Government. They do not convey any license or authority to carry on the licensed business within a State, but merely provide that if the licensed business is carried on within the State the prescribed fees shall be paid for this privilege. (See the License Tax eases, 5 Wall., 462.)
These laws are passed to carry into effect the expressly granted power of Article I, section 8, of the Federal Constitution, and, being the enforcement of an expressly granted power to the Federal Government, it is superior to and overrides the reserved police power of a State, for it is thoroughly well settled that the police power of a State can not be set up to control the inhibitions of the Federal Constitution or the powers of the United States Government created by that instrument. The police power of the State is necessarily subordinate to the granted powers of the Federal Government. Numerous instances of this principle are to be found in the decisions of the Supreme Court. For example, it is thoroughly well settled that under the exercise of the police power a State may enact laws for the protection and preservation of the health, morals, and prosperity of its citizens, and yet such laws become entirely inoperative the moment they interfere with the expressly granted power to the Federal Government to regulate commerce with foreign nations and among the several States and with the Indian tribes. Thus in Bowman v. The Chicago and Northwestern Railway Co. (125 U. S., 4G5) it was held that a State can not, for the purpose of protecting its people against the evils of intemperance, enact laws which regulate commerce between its people and those of another State of the Union unless the consent of Congress, expressed or implied, is first obtained. And it is thoroughly well settled that it is not within the power of any State to forbid the importation of wines and liquors from foreign countries or other States, nor their sale in the original packages, nor to subject such sale to discriminatory taxes or regulations. (See Wailing v. Michigan, 116 U. S., 446; Leisy v. Hardin, 135 U. S., 100; Lyng v. Michigan, 135 U. S., 161; Bowman v. The Chicago Railway Co., 125 U. S., 465, 507.)
Since the passage of the act of August 8, 1890, commonly called the Wilson Act,, tlie consent of the Congress to permit the States to regulate the importation of liquors within its confines has to some extent been given to the States. (See 26 Stat. L., 313; Vance v. Vandercooh Oo., 170 17. S., 438.) But of course this in no wise affects the principle that in the absence of the permission of Congress the States can not, under the police power, pass any law which in any wise affects the regulation of commerce between the States.
Another illustration of the principle that the x>olice power of the State is controlled by the inhibitions or granted powers of the Federal Constitution is to be found in the case of the New Orleans Gas Go. v. Louisiana Light Go. (115 U. S., 650). In that case there had been granted to a certain gas company the exclusive privilege of furnishing the city of New Orleans with gas for a certain period, which the legislature of the State subsequently attempted to revoke, in view of a subsequent constitutional provision that no grant of monopolies should be made. It was earnestly insisted by learned counsel in the Supreme Court that as the supplying of New Orleans and its inhabitants with gas has relation to the public comfort and, in some sense, the public health and public safety, and for that reason is an object tc which the police power extends, it was not competent for one legislature to limit or restrict the power .of a subsequent legislature in respect to those subjects. It was consequently claimed .that the State might, at pleasure, recall the grant of exclusive privileges to the plaintiff, and that no agreement by her upon whatever consideration in reference to a matter connected in any degree with the public comfort, the public health, or the public safety would constitute a contract, the obligation of which is protected against impairment by the National Constitution. But the Supreme Court held otherwise, holding that the. grant to the plaintiff company was a contract within the meaning of that term as used in the Federal Constitution, and that it could not therefore be impaired or revoked by the State even under the exercise of her police power.
In the Slaughterhouse cases (16 Wall., 36, 62) it was held that the police power is, from its nature, incapable of any exact definition or limitation; and in Stone v. Mississippi (101 U. S.,.814, 818) that it is “ easier to determine whether a particular case comes within the general scope of the power than to give an abstract definition of the .power itself which will be in all respects accurate.” That there is a power, sometimes called the police power, which has never been surrendered by the States, in virtue of which they may, within certain limits, control everything within their respective territories, and upon the proper exercise of which, under some circumstances, may depend the public health, the public morals, or the public safetj^, is conceded in all the cases. In its broadest sense, as sometimes defined, it includes all legislation and almost every function of civil government. As thus defined we may not improperly refer to that power the authority of the State to create educational and charitable institutions, and provide for the establishment, maintenance, and control of public highways, turnpikes, roads, canals, walls, ferries, and telegraph lines, and the draining of swamps. Definitions of the police power must, however, as was expressly said by Mr. Justice Harlan, speaking for the court in the New Orleans Gas Go. v. The Louisiana Light Go. (115 U. S., 661), “be taken subject to the condition that the State can not, in its exercise, for any purpose whatever, encroach upon the powers of the General Government or rights granted or secured by the supreme law of the land.”
Illustrations of interference with the rightful authority of the General Government by State legislation, which was defended on the ground that it was enacted under the police power, are also to be found in the cases where enactments concerning the introduction of foreign paupers, convicts, and •diseased persons were held to be unconstitutional, as conflicting, by their necessary operation and effect, with the paramount authority of Congress to regulate commerce with the foreign nations. Thus, in Henderson v. Mayor of New York (92 U. S., 259), the court, speaking through Mr. Justice Miller, while declining to decide whether in the absence of action by Congress the States can, or how far they may, by appropriate legislation, protect themselves against actual paupers, vagrants, criminals, and diseased persons arriving from foreign countries, said that “ no definition of the police power and no urgency for its use can authorize a State to exercise it in regard to a subj'ect-matter which has been con- fidecl exclusively to the discretion of Congress by the Constitution.” (Page 271. See also Ghy Lung v. Freeman, 92 U. S., 275.)
In Railway Company v. Husen (95 U. S., 465) Mr. Justice Strong, delivering the opinion of the court, said that u the police power of a State can not obstruct foreign commerce or interstate commerce beyond the necessity for its exercise; and under color of it objects not within its scope can not be secured at the expense of the protection afforded by the Federal Constitution.”
The police power, according to its largest definition, is restricted in its exercise by the National Constitution, as is further to be seen by those cases in which grants of exclusive privileges respecting highways and bridges over navigable streams have been sustained as contracts the obligations of which are fully protected against impairment by State enactments. (See Bridge Proprietors v. Holoohen Go., 1 Wall.. 116; The Binghamton Bridge, 3 Wall., 51.)
Numerous other cases could be cited as establishing the doctrine that the State may by contract restrict the exercise of some of its most important powers. Particular reference may be had to those in which it is held that exemption from taxation for a valuable consideration at the time advanced; or for services to be thereafter performed, constitutes a contract within the meaning of the Federal Constitution. (See, for example, Asylum v. New Orleans, 105 U. S., 362,'368; Home of the Friendless, 8 Wall., 430; Humphrey v. Pegues, 16 Wall., 244, 248, 249; Farrington v. Tennessee, 95 U. S., 679, 689.)
In Wailing v. Michigan (116 TJ.' S., 446) it was held that a tax imposed by a statute of a State upon an occupation which necessarily discriminates against the introduction and sale of the products of another State, or against the citizens of another State, is repugnant to the Constitution of the United States, and can not be upheld upon any theory of the jiolice power. Mr. Justice Bradley, who delivered the opinion of the court, said (at p. 460) :
“ The police power can not be set up to control the inhibitions of the Federal Constitution or the powers of the United States Government created thereby.”
And. so by the Constitution, it is provided that the Congress shall have power “ to coin money, regulate the value thereof and of foreign coin.” Under the power thus conferred, the Congress, by the act of July 13, 1866, amendatory of prior internal-revenue acts, enacted that every national banking association, State bank, or State banking association shall pay a tax of 10 per cent on the amounts of the notes of any State bank or State banking association paid out by them after the 1st day of August, 1866. This legislation was attacked upon the ground that it was a tax upon a State instrumentality exercised by the State under its police power, but the court held that inasmuch as the express grant had been given to Congress, any appropriate legislation by Congress upon that subject was necessarily superior to the police power of the State, and that the legislation was entirely constitutional. (Veazie Bank v. Fenno, 8 Wall., 533.)
Can it be said that the indiscriminate sale of intoxicating liquors for profit and gain is one of the necessary or legitimate purposes of State government? If the State delegates authority to one or many of her citizens to sell liquors and exacts a license tax therefor, each citizen before exercising such authority or privilege must pay the Federal Government its tax. Any franchise or privilege granted by the State may become liable to Federal taxation, and yet it is claimed that because the State exercises a privilege that may be and is exercised with equal propriety by individuals she can invoke the protection of the reserved State powers to avoid the payment of Federal taxes.
The case of National Bank v. United States (101 U. S., 1) is, it seems to me, absolutely decisive of the questions presented in the case at bar.
It will be seen that the very precise question presented at. bar wTas presented in this case of National Bank v. United States, but^the court held, affirming the case of Veazie Bank v. Fenno, and again upholding the constitutionality of the taxation upon State banks, that inasmuch as the power to coin money and regulate the value thereof had been expressly granted by the States to the Federal Government in the Federal Constitution, the Congress had the power to effectuate this purpose by any appropriate legislation, even though in so doing it became necessary to prevent the States or any integral part thereof from in any wise engaging in a similar business, and that a power of the Federal Government expressly granted by the Federal Constitution was superior to any otherwise inherent right of sovereignty in the State itself.
And so in the case at bar, the license tax is not upon the liquor or other goods which is the property of the State, but it is upon the privilege of dispensing the same as a beverage. It can not be denied that a private person engaged in dispensing the liquor at a dispensary under precisely the same State regulations as are prescribed by the South Carolina dispensary law would be liable for the payment of this Federal license tax for the privilege of so doing. If the dealer sell in quantities of less than 5 gallons for consumption, then he is a retail dealer, and in quantities over 5 gallons he is a wholesale dealer.
In the -case at bar, the liquor dispensary agents obtain their • liquor from the wholesale dispensary agent and offer them for sale to whomsoever applies therefor in quantities of less than 5 gallons, subject to some minor restrictions, as to filling out a blank application, as to sale between sunset and dark, as to sale on Sundays, and sale to habitual drunkards. With the single exception of having to fill out a blank application for the liquors, there is no difference between these restrictions and the restrictions imposed on any barroom in any city, except that the purchaser of the liquor is not permitted to drink it upon the premises. But that makes no difference. In the statute requiring payment of the license there is no provision that in order to constitute him a retail liquor dealer the liquor must be drunk upon the premises. The statute merely provides that a retail liquor dealer is one who sells in quantities less than 5 gallons. It can not therefore for a moment be argued that if this person sold upon his own responsibility instead of as an agent for the State he would be liable for the payment of the Federal license tax. The fact that he is the agent of the State, and obtains his goods from the State, can make no sort of difference upon the doctrine of the ■ authorities quoted above. If the State desires to engage in the business of circulating her evidences of debt as money she must pay the 10 per cent tax for the privilege of so doing; and so, if she desires to engage in the business of wholesaling and retailing liquor as a beverage, she must pay the license tax for so doing, for the reason that in both instances she is engaged in a business lawfully subject to taxation under the Federal Constitution, and can not by any invocation of her police power or of her State sovereignty override or set at naught the powers and functions of the Federal Government expressly granted to it by the Federal Constitution.
The field is limitless, and- if the State has the right to engage in the sale of spirituous, vinous, and malt liquors as a beverage, free from Federal taxation, then she has the same right to import directly from foreign countries such goods as she thinks should be sold by her direct to her people without the payment of the import duties provided by the Federal statute. And if South Carolina has the right to engage in this business, then it is equally true that every State in the Union has the same right, and which, if exercised, would result in effacing from the Constitution the power given to the Federal Government by Article I, section 8, and thus not only deprive the Federal Government of one of its principal sources of revenue, but to ruthlessly destroy one of the most precious and essential functions of government in the original compact between the States.
It is admitted in a public message by the governor of the State, who was one of the promoters and sympathizers with the system, to the legislature of the State, that the principal concern is the State revenue to be derived from this source. The doubt is expressed whether the game is worth the candle without this feature. But the governor is hopeful, and hence he recommended that “ we might try it for a year until ” they could see if something wouldn’t turn up. If the object of the State was merely to protect and promote the health and prosperity of the citizens of the State, then why was not the legislature content to enact a law for this purpose and this purpose only? Governor Ellerbe in his message admits that “ we can certainly get rid of the original-package dealers and their demoralizing traffic by continuing the dispensary, shorn of all its profits and administered only as a police regulation to control and reduce the liquor evil.” If the object of the law was only to control and reduce the liquor evil, then why take heed of the loss of the profits? The only legitimate exercise of the police power by the State would have been in the passage of a law to control and reduce the liquor evil, and for this purpose only; and since the. governor admits that this could be done without the profit features of the dispensary act, then the legitimate function of the law had been accomplished without the addition of this commercial feature.

Opinion:
Nott, Ch. J.,
delivered the opinion of the court:
This 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 a commercial business. The exercise of the police po.wer is by legislating and limiting the sale of intoxicating liquor; the commercial business is that of buying and selling such liquors for profit; the question involved is whether the dispensary agents of the State can be required to pay the special tax or license fee imposed on dealers in liquors by the internal-revenue laws of the United States.
The counsel of the United States has offered evidence to show that the exei'cise of the police power is little more than a disguise; and he has contended that the real purpose of the assumed exercise of the police jaower — the substance and not the form — must be considered; and that the real purpose of the South Carolina dispensary system is that of making money. The evidence offered shows, or tends to show, that there are 260 persons now selling intoxicants as retail dealers under United States internal-revenue licenses; that in the city of Columbia there are numerous places in the immediate neighborhood of the dispensaries, and within sight of the State capitol, where liquor is openly sold; that where the keepers of drinking saloons purchase from the dispensaries they are not prosecuted, and that when the business of selling at a profit was once interrupted the State seriously contemplated abandoning the system. The counsel for the claimant, on the contrary, that the consumption of intoxicating liquor in the State has. been greatly reduced and the evils of intemperance consequently diminished; and he has contended that neither the-violation of the law by individuals nor the lax administration of it by State officers can be regarded as a part of the system or as sufficient reason why the exercise of the police, power should be denied to the State.
It seems to us clear — it seems, indeed, incontrovertible— that in South Carolina, as elsewhere, a large portion of the people are honestly and earnestly in favor of the system for-the single-minded purpose of repressing the many evils of intemperance; that a portion of the people there, as elsewhere, reason no further than that if intoxicants must be sold, and consequent drunkenness and crime must exist, it is fair that society, which has to support and bear the expenses incident to. crime and pauperism, should receive the profits of the business rather than the individual vendors, who, by their traffic, are the immediate cause of these evils. There is also in South Carolina, as elsewhere, a third class, who, care little for the general welfare; whose motive is their own pleasure or profit; who do not believe in prohibition, and who evade and defy this law as other laws for a similar purpose have been evaded and defied in other States. In the consideration of this case the court puts aside all of the evidence above referred to and rests its decision exclusively upon what may be called the official record — that is to say, upon the statutes of the legislature and the action of the executive.
The commercial character of the State's undertaking is stamped unmistakably upon the system. The statute establishing it authorized a profit of 50 per cent and contemplated large profits, directing the manner in which they should be utilized and distributed. As a matter of fact, the system has. been a great commercial success and lias yielded large profits. In 1898, however, -the system as a business was confronted by judicial interference in the form of an injunction which enjoined the State officers from interfering with the delivery and sale of liquor brought into the State from beyond its, borders. The governor of South Carolina regarded the injunction as a blow possibly, if not probably, fatal to the system itself. In his annual message he brought the subject before the legislature and said:
"Judge Simonton has destroyed, along with the dispensary, the license system when run for profit. What, then, is left to do ? We must either enact prohibition or continue the dispensary system without the profit feature. Many, a majority, I believe, do not think prohibition is practicable; and many have approved the dispensary system because of the profit feature. We can certainly get rid of the ' original package ' dealer and their demoralizing traffic by continuing the dispensary, shorn of all profits and administered only as o, police regulation to control and reduce the liquor evil. The Federal judge will have neither occasion nor excuse for his ever-reacly injunctions, if that system shall be inaugurated, unless he shall again reverse his own previous decision. This, then, appears to me to be the best and almost the only thing left for us to do. We might try this policy for a year, and next winter, after Congress shall have acted or failed to act, and after the Supreme Court at Washington shall have decided what is to become of the Sate's power to control liquor under the Wilson bill of 1890, we shall be in a position to take final action."
And in his annual message of the following year he said:
" The dispensaries have been forced to fight free whisky on terms of absolute equality; yet, strange to say, they have fought it successfully; for while the profits toere reduced by this lawless competition, there was still enough business to make the dispensary self-supporting and leave a small margin of profit"
The legislature apparently acquiesced in the suggestion of the executive in 1898 to " try this polic}'' for a year," and allowed the system to continue; and it continued to do business and to make a profit upon its business, as shown by the above quotation from the message of 1899, notwithstanding that imported liquor was brought into the State and sold in the original packages. But before the year of probation expired the competition which the governor of South Carolina deplored was largely, if not altogether, removed by the decision of the Supreme Court in Vance v. Vandercook (170 U. S., 438), wherein it was held that the purchaser within a State has the constitutional right to receive packages sent from another State for his own use, notwithstanding that there be State laws to the contrary, but that he can not sell'in the original packages in defiance of State law. There was thus restored to the State substantially its monopoly of the sale of intoxicating liquors, and the business yielded a net profit in the year 1901 of $545,248.12.
The right of the State of South Carolina to carry on the business of its dispensary system exempt from the Federal excise tax is rested on one or the other of two general constitutional principles: That the dispensary system is an exercise of-the police power of the State, beyond the interference of the General Government; that the National Government has no constitutional power to impose a tax upon the administrative agencies of a State government.
It will avail ns nothing to appeal to the letter of the Constitution. The framers of the Constitution had before them during one hundred days of unapproachable constructive work three great purposes. The first was the construction of a new National Government. The second was the establishment of a dual system of government and the distribution of powers between the General or National Government and the local or State governments. The third was placing certain immutable restrictions upon the powers of government— restrictions which might apply to the National Government or the State governments, or to all, for the purpose of securing the individual rights of the citizen and making constitutional liberty perpetual and secure.
There are special provisions of tlie Constitution, such as that Congress shall have power to " coin money; " to secure to " authors and inventors the exclusive right to their respective writings and discoveries; " such as that no State shall " keep troops or ships of war in time of peace " or " enter into any agreement or compact with another State; " or " make anything but gold and silver coin a tender in payment of debts," or pass a law " impairing the obligation of contracts; " such as that " full faith and credit shall be given in each State to the public acts, records, and judicial proceedings of every other State; " that the " citizens of each State shall be entitled to all privileges and immunities of citizens in the several States; " that " no preference shall be given to the ports of one State over those of another." But such provisions are always directly or indirectly in furtherance of one or the other or all of the three great purposes of the framers.
The statutory provisions, declarative and restrictive, by which the people of several States in recent constitutions have tied their representatives' hands and their own have no place in the framework of government established by the Constitution.
In the present constitution of South Carolina (1895), and in relation to this same dispensary system which is now before the court, there is a statutory regulation or proviso " that no license shall be granted to sell alcoholic beverages in less quantities than one-half pint, or to sell them between sundown and sunrise, or to sell them to be drunk on the promises." In the three systems generally known as the " Swedish system " is one regarded as the most effective of the three, which, in the country and small villages, requires the liquor sold at a government dispensary to be drunk on the premises, and prohibits its being carried away to inebriate the purchaser and destroy the peace and happiness of his home; yet the people of South Carolina have inhibited their representatives and themselves from even so much as trying that experiment. The framers of the Constitution attempted no such restrictive legislation, but left the people of the United States free to make their own laws and, by the proper discharge of the duties of citizenship, to work out their own political salvation.
Moreover, at the time of the adoption of the Constitution there probably was not one person in the country who seriously contemplated the possibility of government, whether State or national', ever descending from its primitive plane of a body politic to take up the work of the individual or body corporate. The public suspicion associated government with patents of nobility, with an established church, with standing armies, and distrusted all governments. Even in the high intelligence of the convention there were men who trembled at the power given to the President, who trembled at the power which the Senate might usurp, who feared that tlie life tenure of the judiciary might imperil the liberties of the people. Certain it is that if the possibility of a government usurping the ordinary business of individuals, driving them out of the market, and maintaining place and power by means of wliat would have been called, in the heated invective of the time, " a legion of mercenaries," had been in the public mind, the Constitution would not have been adopted, or an inhibition of such power would have been placed among Madison's amendments.
Accordingly, we find in the Constitution the power expressly delegated to the National Government to " lay and collect taxes, duties, imposts and excisesand the power expressly prohibited to the States, without the consent of Congress, to " lay any imposts or duties on imports or exports;" but no such restriction was laid upon either the National or State governments in regard to the exercise of the police power. The police power is the power " to impose those restraints upon private rights which are necessary for the general welfare." It is a power inherent in all governments, needing neither grant nor recognition in the Constitution. Without it civilized society in dense population would be constantly drifting back toward barbarism. In this country it can not be said to be wholly unrestricted, but the restrictions begin only where the exercise of it trenches upon the constitutional rights of individuals or of the States. It has been called an implied power, but is not, strictly speaking, an implied power, but an inherent power, which is neither inhibited nor regulated by the Constitution. The cases which have come before the courts have generally been cases in which the exercise of the police power has trenched upon the constitutional rights of individuals or been in conflict with the reciprocal rights of the States to interstate commerce, or in which a State legislature has sought to do something in the disguise of an exercise of the police power which is prohibited by its State constitution. In this case no such conflict exists. The right of the State to regulate or prohibit the sale of intoxicants is conceded; the right of the State to do so in this particular way is not, in the opinion of the court, involved. The National Government, in effect, says to the State, " Exercise your police power as you will, but pay to the National Government a tax which is authorized by the Constitution and imposed by statute." The National Government does not interfere with the exercise of the police, power; but the National Government can not be compelled, directly or indirectly, to aid it. The police power extends no further than the general welfare. The general welfare is one thing; exemption from taxation is another.
As regards the second ground upon which this suit rests, the ground that the Constitution contains no grant of power, express or implied, to tax -a State or its means and instrumentalities of government, the court is aware of the decisions of the Supreme Court, which may be summed up in the income-tax case, that "As the States can not tax the powers, the operations, or the property of the United States, nor the means which they employ to carry their powers into execution, so it has been held that the United States haire power under the Constitution to tax either the instrumentalities or the property of a State." (Pollock v. Farmers' Loan and Trust Company, 157 U. S., 429, 584.)
But between the principle involved in those cases and the principle involved in this case there seems to the court to be three broad and plain distinctions:
The first distinction is fundamental. The money exacted here is not a direct tax, but an excise. It was at the time of the adoption of the Constitution, and still is, the theory upon which the constitutional provision rests that an excise upon a salable article is paid by the purchaser. A tax is obligatory; from it there is no escape. An excise is voluntary; the purchaser who would pay it can not be compelled to purchase. As was said by Mr. Justice Brown in Pollock v. Farmers' Loan and Trust Company (157 U. S., 429, 491), " direct taxes are paid by the taxpayer, both immediately and ultimately; indirect taxes are paid immediately by the taxpayer and ultimately by somebody else." 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 this internal-revenue excise to the price of the liquor which it sells and let the purchaser pay it. If there be exemption, it will not be the State which will be exempted from the payment of this excise, but the purchaser of liquor within the State. That the increase of the price may invite smuggling ancl promote illicit selling and lessen the power of the State as a dealer in the struggle of competition are objections, but they bear no more heavily on' the State than on the individual dealer. These things add to his expenditures; they increase his prices; they lessen his sales; they impair his power to compete; but nevertheless in the contemplation of the Constitution and in the contemplation of the law it is the purchaser and not the dealer who pays the tax.
The second distinction is that in the income-tax cases a tax had been extended to " a function strictly belonging " to a State "in its ordinary governmental capacity." (The Collector v. Day, 11 Wall., 113; Ambrosini v. United States, 187 U. S., 1.) If, for illustration, the General Government were to tax the salaries of State officers, it would be taking money of the State by which it intended to procure the services of effective officers. It would be taking money which had been paid by the taxpayers of the State for carrying on the State government and which had been paid to the officers of the State for the necessary expenses of obtaining their official services. Raising money by taxation and employing salaried officers are ordinary instrumentalities of government. The exaction of an income tax from a State officer woidcl be but a method of diverting the revenue of the State to the revenue of the General Government. It is manifest that if the General Government could take a. part of the salary of a State officer through the instrumentality of taxation, and a. State could take a part of the salary of a national officer, there being no limitation which the judiciary can impose upon the extent of the taxing power, there would be no limitation upon the retaliatory extent to which it could be pushed. In. this case now before us the money exacted by the United States was not paid by the taxpayers of South Carolina, but by purchasers at its dispensaries; and it was not expended for ordinary governmental purposes, but as incident to carrying on its commercial business. The court does not question the power of the State to carry on this business, and does not doubt that the proceeds of the business lessen the taxes of the taxpayers. All that it decides is that the business of the dispensaries was, intrinsically, 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 business.
The third distinction is that in the income-tax case of The Collector v. Day (11 Wall., 113) the money being raised for governmental purposes and expended upon governmental purposes, the purposes, though not defined, were in their nature limited. Here, if the principle contended for is established, there seems no limitation upon the extent to which it can be carried. If the State, because it is a State, can buy and sell without being subject to the internal-revenue tax which is borne by other persons who buy and sell, at what point can it be held that exemption from taxation ceases ? It is contended by many writers that the substitution of beer and wine for distilled liquors will satisfy the craving for alcohol on the one hand and relieve abnormal humanity from its vices and evils on the other hand. If the State in the exercise of its police power should determine that an effective remedy for alcoholism would be the substitution of the light wines of -Europe for whisky and brandy, would it be at liberty to import and claim exemption from customs duties? It is generally believed that many of the evils of alcoholism are caused bjr impurities in the liquor sold, by improper manufacture, by the mixing and flavoring which bring poisonous matter into the liquor. If the State, in the exercise of its police power, should deem it for the general welfare to furnish its citizens with pure distilled liquors, and for that purpose to manufacture as well as sell, would it be exempt from the distiller's tax ? The amounts paid for licenses, set up in this suit, are trivial. The exaction of them will only theoretically affect the dealer's price, but the saving of the distiller's tax would, in effect, be an enormous bounty in favor of the State. The State could sell beyond its own borders, or at least could sell to its own citizens, who could sell beyond its own borders. To be able to sell free from taxation would be a power that would break down all competition wherever the State chose to compete. The more this subject is studied the more clearly it appears to the court .that the State has a right to the exercise of its police power, and a right to the use of all proper instrumentalities of government, and a right to enter into this commercial business of buying and selling for a profit; but that none of these rights can be exercised as an evasion of the National Government's right to impose an excise tax and to subject all persons, whether State or private corporations or individual dealers, to the same law.
There are a number of minor questions in the case which were exhaustively argued by counsel on both sides, such as (on the part of the defendants) that the claimant should have presented its claim to the Commissioner of Internal Revenue for the remission of the tax as illegally collected; such as (on the part of the claimant) that the statute (14 Stat. L., p. 1G3, sec. 44) imposing this excise uses only the term " corporation," and was not intended to apply to a State. But it seems plain, if a State is a power above and exempt from the operation of the revenue laws, that it can not be compelled to resort to them for redress; and, conversely, that if a State is not a power constitutionally exempt from all national taxation in its commercial transactions, but is, like other persons and corporate bodies, subject to the conditions which the law imposes, the court can not read into the statute an exemption which is not needed by reasonable construction or by the ordinary principles of justice, and which will be an arbitrary departure from the plain, positive language of the statute. The great question in this case is whether the United States can impose an excise tax upon a State when the State carries on a commercial business for profit, a business which, in the hands of any other person or body corporate, will be subject to the terms and conditions of the Federal revenue laws. Not until the chief, the fundamental, question in the case is disposed of can a decision be intelligently given upon the minor questions presented.
The court has not overlooked the fact that in one instance a State was carrying on an ordinary commercial business, owning and operating a railroad, and that one court of the United States held that it was not intended that a State should be included in the requirements of this statute by the term " corporation " (State of Georgia v. Atkins, Collector, 35 Ga. R., 315), and. that the decision has been referred to in an indirect way by one of the judges of the Supreme Court (United States v. Railroad Company, 17 Wall., 322, 328). But this court is constrained to say that the magnitude of .the • present question was not presented to the court in Georgia and was not considered, and that the question involved there was not involved in the case in the Supreme Court, where all that was held was that a municipal corporation is a portion of the sovereign power of the State, and is not subject to taxation by Congress upon its municipal revenues. But, as was said by tivo of the dissenting judges in that case (p. 334), " it by no means follows that the private property owned by such corporation," " and used merely in a commercial sense for the income, gains, and profits, is not taxable just the same as property owned by an individual, or any other corporation." Such decisions as in The Republic of Honduras v. Soto (112 N. Y., 310) and Salt Lake City v. Hollister (118 U. S., 256) admonish us that such terms as " person " and " corporation " are broad enough in statutory construction to include the corporate side of a government or municipality. The principle which rules and guides is this: The exemptions of sovereignty extend no further than the attributes of sovereignty.
The judgment of the court is that the petition be dismissed.