1. When a person whose income or other moneys subject to tax or
duty has been received in coined money makes his return to the
assessor, the 9th section of the Internal Revenue Act of July 13,
1866, is to be construed as denying to him the right to return the
amount thereof in the currency in which it was actually received,
and to pay the tax or duty thereon in legal tender currency, and is
to be construed to require that the difference between coined money
and legal tender currency shall be
Page 74 U. S. 434
statement of the case.
added to his return when made in coined money, and that he shall
pay the tax or duty upon the amount thus increased.
2. The income tax or duties laid by §§ 105 and 120 of
the Act of June 30, 1864, and the amendment thereto of July 13,
1866, upon the amounts insured, renewed, or continued by insurance
companies upon the gross amounts of premiums received, and
assessments made by them, and also upon dividends, undistributed
sums, and income, is not "a direct tax," but a duty or excise.
The Constitution of the United States [
Footnote 1] ordains thus:
"Direct taxes shall be apportioned among the several states
which may be included within the Union, according to their
respective numbers."
With this provision of the Constitution in existence, Congress,
by an internal revenue act of June 30, 1864, [
Footnote 2] amended by act of July 13, 1866, laid
a certain tax upon the amounts insured, renewed, or continued by
insurance companies; upon the gross amount of premiums received and
assessments by them; and a tax also upon dividends, undistributed
sums, and income. A portion of the ninth section of the Internal
Revenue Act of July 13, 1866, [
Footnote 3] and acts amendatory thereto, provide:
"That it shall be the duty of all persons required to make
returns or lists of income, and articles or objects charged with an
internal tax, to declare in such returns or lists whether the
several rates and amounts therein contained are stated according to
their values in legal tender currency, or according to their values
in coined money; and in case of neglect or refusal so to declare to
the satisfaction of the assistant assessor receiving such returns
or lists, such assistant assessor is hereby required to make
returns or lists of such persons neglecting or refusing, as in
cases of persons neglecting or refusing to make the returns or
lists required by the acts aforesaid, and to assess the duty
Page 74 U. S. 435
thereon, and to add thereto the amount of penalties imposed by
law in cases of such neglect or refusal. And whenever the rates and
amounts contained in the returns or lists as aforesaid, shall be
stated in coined money, it shall be the duty of each assessor
receiving the same, to reduce such rates and amounts to their
equivalent in legal tender currency, according to the value of such
coined money in said currency, for the time covered by said
returns. And the lists required by law to be furnished to
collectors by assessors shall in all cases contain the several
amounts of taxes or duties assessed, estimated or valued in legal
tender currency only."
Prior acts of Congress had authorized the issue of United States
notes, commonly called legal tender notes. The act first
authorizing their issue, an act of February 25, 1862, [
Footnote 4] enacted:
"Such notes shall be receivable in
payment of all taxes,
internal duties, excises, debts, and demands of every kind due to
the United States (except duties on imports), and of all
claims and demands
against the United States, of every
kind whatsoever (except for interest on bonds and notes, which
shall be paid in coin),
and shall also be lawful money and a
legal tender in payment of all debts public and private, within the
United States (except duties on imports and interest as
aforesaid). And such United States notes shall be received
the
same as coin at their par value, in payment of any loans that
may be hereafter sold or negotiated by the Secretary of the
Treasury, and may be reissued from time to time, as the exigencies
of the public interests shall require."
With these acts in force, the Pacific Insurance Company, a
corporation engaged in the business of insurance in California,
made returns upon the amounts insured, renewed &c., by it, upon
its premiums and assessments, and finally upon its dividends,
undistributed sums, and income; all as required by the statute; the
correctness of all the returns being conceded. The different
sources of income thus returned had been received by the company in
coined money
Page 74 U. S. 436
(the currency of California), and the amounts as returned were
the amounts in that form of currency. The aggregate tax under the
statute upon this sum of coin was $5,376. The assessor then
(against the protest of the insurance company) added to the amounts
as returned, the difference in value between legal tender currency
and coined money during the time covered by the returns; and fixing
the tax upon the sum as thus increased, the aggregate amount of the
tax came to $7,365. The collector demanded payment of this sum. The
company refused to pay the $7,365, but tendered the $5,376 in legal
tender notes. The collector refusing this, and having seized and
being about to sell the insurance company's property, the company
paid the larger sum, $7,365, under protest. The suit below was to
recover back the amount wrongly paid. The case coming on to be
heard upon demurrer, the court was divided in opinion upon seven
questions, reducible, as this Court considered, in substance to
these two:
"1. Whether that portion of the ninth section of the internal
revenue act of July, 1866, above quoted,"
"is to be construed as merely providing a rule as to the
currency in which accounts, returns, and lists are to be stated,
with a view to uniformity in keeping the accounts of internal
revenue, or whether it is to be construed as denying to a person
who has received in coined money, incomes or other moneys subject
to tax or duty, the right to return the amount thereof in the
currency in which it was actually received, and to pay the tax or
duty thereon in legal tender currency, and be construed to require
that the difference between coined money and legal tender currency
shall be added to his return when made in coined money, and that he
shall pay the tax or duty upon the amount thus increased?"
"2. (Sixth in the series.) Whether the taxes paid by the
plaintiff, and sought to be recovered back in this action, are not
direct taxes within the meaning of the Constitution? "
Page 74 U. S. 440
MR. JUSTICE SWAYNE delivered the opinion of the Court.
The plaintiff brought an action to recover back certain taxes
upon its business and income, which it had paid to
Page 74 U. S. 441
the defendant upon compulsion and under protest. The defendant
demurred to the plaintiff's complaint. Upon the argument of the
demurrer, the opinions of the judges of the circuit court were
opposed upon seven questions, which are set forth in the record.
According to the view which we take of the case, it will be
sufficient to answer two of them. They cover the entire grounds of
the controversy between the parties, and their determination will
be conclusive.
They are the first and the sixth. The first is:
"Whether that portion of the ninth (9th) section of the Act of
Congress, approved July 13, 1866, entitled 'An act to reduce
internal taxation,' and to amend an act, entitled 'An act to
provide internal revenue to support the government, to pay interest
on the public debt, and for other purposes,' approved June 30,
1864, and acts amendatory thereof, which provides as follows,
to-wit:"
" That it shall be the duty of all persons required to make
returns or lists of income, and articles or objects charged with an
internal tax, to declare in such returns or lists whether the
several rates and amounts therein contained, are stated according
to their values in legal tender currency, or according to their
values in coined money; and in case of neglect or refusal so to
declare, to the satisfaction of the assistant assessor receiving
such returns or lists, such assistant assessor is hereby required
to make returns or lists for such persons neglecting or refusing,
as in cases of persons neglecting or refusing to make the returns
or lists required by the acts aforesaid, and to assess the duty
thereon, and to add thereto the amount of penalties imposed by law
in cases of such neglect or refusal. And whenever the rates and
amounts contained in the returns or lists as aforesaid, shall be
stated in coined money, it shall be the duty of each assessor,
receiving the same, to reduce such rates and amounts to their
equivalent in legal tender currency, according to the value of such
coined money in said currency, for the time covered by said
returns. And the lists required by law to be furnished to
collectors, by assessors, shall, in all cases, contain the several
amounts of taxes or duties assessed, estimated or valued in legal
tender currency only"
"is to be construed as merely providing a rule as to the
currency in which accounts, returns, and lists are to be stated,
with a view to uniformity in keeping the accounts of internal
revenue,
Page 74 U. S. 442
or whether it is to be construed as denying to a person who has
received, in coined money, incomes or other moneys subject to tax
or duty, the right to return the amount thereof in the currency in
which it was actually received, and to pay the tax or duty thereon
in legal tender currency, and be construed to require that the
difference between coined money and legal tender currency shall be
added to his return, when made in coined money, and that he shall
pay the tax or duty upon the amount thus increased."
We think there can be no doubt as to the proper solution of this
question. A brief analysis of the provisions of the statute which
bear upon the subject, will be sufficient to maintain the
conclusion at which we have arrived.
1. The person making the return is required to declare whether
the amounts set forth in it are stated according to their value in
legal tender currency or in coined money.
2. If he fail to do so, he is subjected to a penalty, and the
assessor is required to make the returns for him.
3. The list, with all the amounts therein stated, according to
their values in legal tender currency, is to be placed by the
assessor in the hands of the collector.
4. The collector is charged with the aggregate amount, and
credited with his collections and otherwise, as is provided by the
statute.
5. The taxes are made a lien, and, in default of payment,
property is to be seized and sold by the collector. Both personal
and real estate are liable. Full directions are given for the
conduct of the proceedings.
The meaning of the statute, examined by its own light, is so
clear that argument or illustration is unnecessary. It was the
object of Congress to provide a uniform basis of taxation, in order
to secure uniformity in the burdens imposed. "Equality is equity."
According to the theory of the plaintiff, it had a right to have
the assessment made upon the amounts received in coin, and to pay
in currency, while others, whose receipts were in currency, were to
be taxed upon that basis, and to pay in the same medium as the
plaintiff. Such a result would be subversive of the
Page 74 U. S. 443
plainest principles of reason and justice. It cannot be supposed
that such was the intention of those who framed the law. Certainly
nothing in its language would warrant the construction contended
for.
Where the power of taxation, exercised by Congress, is warranted
by the Constitution, as to mode and subject, it is, necessarily,
unlimited in its nature. Congress may prescribe the basis, fix the
rates, and require payment as it may deem proper. Within the limits
of the Constitution it is supreme in its action. No power of
supervision or control is lodged in either of the other departments
of the government.
To this question it must be answered, that the statute did deny
to the plaintiff the right to have the assessment made otherwise
than as it was made by the assessor, and that it required the
plaintiff to pay the amount of the taxes set forth in the list
delivered by the assessor to the collector, and which was paid by
the plaintiff, under protest, as appears by the record.
II. The sixth question is:
"Whether the taxes paid by the plaintiff, and sought to be
recovered back in this action, are not direct taxes, within the
meaning of the Constitution of the United States."
In considering this subject, it is proper to advert to the
several provisions of the Constitution relating to taxation by
Congress.
"Representatives shall be apportioned among the several states
which shall be included in this Union, according to their
respective numbers,"
&c. [
Footnote 5]
"Congress shall have power to lay and collect taxes, duties,
imposts, and excises, to pay the debts and provide for the common
defense and general welfare of the United States; but all duties,
imposts, and excises shall be uniform throughout the United States.
[
Footnote 6]"
"No capitation or other direct tax shall be laid, unless in
proportion
Page 74 U. S. 444
to the census of enumeration hereinbefore directed to be
taken."
"No tax or duty shall be laid on articles exported from any
state. [
Footnote 7]"
These clauses contain the entire grant of the taxing power by
the organic law, with the limitations which that instrument
imposes.
The national government, though supreme within its own sphere,
is one of limited jurisdiction and specific functions. It has no
faculties but such as the Constitution has given it, either
expressly or incidentally by necessary intendment. Whenever any act
done under its authority is challenged, the proper sanction must be
found in its charter, or the act is
ultra vires and void.
This test must be applied in the examination of the question before
us. If the tax to which it refers, is a "direct tax," it is clear
that it has not been laid in conformity to the requirements of the
Constitution. It is therefore necessary to ascertain to which of
the categories, named in the eighth section of the first article,
it belongs.
What are
direct taxes was elaborately argued and
considered by this Court in
Hylton v. United States,
[
Footnote 8] decided in the
year 1796. One of the members of the court, Justice Wilson, had
been a distinguished member of the Convention which framed the
Constitution. It was unanimously held, by the four justices who
heard the argument, that a tax upon carriages, kept by the owner
for his own use, was not a
direct tax. Justice Chase
said:
"I am inclined to think, but of this I do not give a judicial
opinion, that the direct taxes contemplated by the Constitution are
only two, to-wit, a capitation or poll tax simply, without regard
to property, profession, or any other circumstance, and a tax on
land."
Patterson, Justice, followed in the same line of remark. He
said:
"I never entertained a doubt that the principal, I will not
Page 74 U. S. 445
say the only, object the framers of the Constitution
contemplated as falling within the rule of apportionment, was a
capitation tax and a tax on land. . . . The Constitution declares
that a capitation tax is a direct tax; and both in theory and
practice, a tax on land is deemed to be a direct tax. In this way,
the terms 'direct taxes,' and 'capitation and other direct tax,'
are satisfied."
The views expressed in this case are adopted by Chancellor Kent
and Justice Story in their examination of the subject. [
Footnote 9]
Duties are defined by Tomlin to be things due and
recoverable by law. The term, in its widest signification, is
hardly less comprehensive than "taxes." It is applied, in its most
restricted meaning, to customs; and in that sense is nearly the
synonym of "imposts." [
Footnote
10]
Impost is a duty on imported goods and merchandise. In
a larger sense, it is any tax or imposition. [
Footnote 11] Cowell says it is distinguished
from custom, "because custom is rather the profit which the prince
makes on goods shipped out." [
Footnote 12] Mr. Madison considered the terms "duties"
and "imposts" in these clauses as synonymous. [
Footnote 13] Judge Tucker thought "they were
probably intended to comprehend every species of tax or
contribution not included under the ordinary terms,
taxes and
excises.'"
Excise is defined to be an inland imposition, sometimes
upon the consumption of the commodity, and sometimes upon the
retail sale; sometimes upon the manufacturer, and sometimes upon
the vendor. [
Footnote
14]
Page 74 U. S. 446
The taxing power is given in the most comprehensive terms. The
only limitations imposed are that direct taxes, including the
capitation tax, shall be apportioned, that duties, imposts, and
excises shall be uniform, and that no duties shall be imposed upon
articles exported from any state. With these exceptions, the
exercise of the power is in all respects unfettered.
If a tax upon carriages kept for his own use by the owner is not
a direct tax, we can see no ground upon which a tax upon the
business of an insurance company can be held to belong to that
class of revenue charges.
It has been held that Congress may require direct taxes to be
laid and collected in the territories as well as in the states.
[
Footnote 15]
The consequences which would follow the apportionment of the tax
in question among the states and territories of the Union, in the
manner prescribed by the Constitution, must not be overlooked. They
are very obvious. Where such corporations are numerous and rich, it
might be light; where none exist, it could not be collected; where
they are few and poor, it would fall upon them with such weight as
to involve annihilation. It cannot be supposed that the framers of
the Constitution intended that any tax should be apportioned, the
collection of which on that principle would be attended with such
results The consequences are fatal to the proposition.
To the question under consideration it must be answered, that
the tax to which it relates is not a direct tax, but a duty or
excise; that it was obligatory on the plaintiff to pay it.
The other questions certified up, are deemed to be sufficiently
answered by the answers given to the first and sixth questions.
Answers accordingly.
[
Footnote 1]
Article I, § 2.
[
Footnote 2]
13 Stat. at Large §§ 105, 120, pp. 276, 283.
[
Footnote 3]
14
id. 98.
[
Footnote 4]
12 Stat. at Large 345, § 1.
[
Footnote 5]
Art. 1, § 2.
[
Footnote 6]
Ib., 1, § 8.
[
Footnote 7]
Art. 1, § 9.
[
Footnote 8]
3 U. S. 3 Dall.
171.
[
Footnote 9]
1 Kent's Commentary, 267; Story on the Constitution 670.
See
also Rawle on the Constitution 8; The Federalist, No. 34; and
Tucker's Blackstone, Appendix, 294.
[
Footnote 10]
Tomlin's Law Dictionary, title "Duty;" 1 Story on the
Constitution, § 952;
Hylton v. United
States, 3 Dall. 171.
[
Footnote 11]
Story's Const. Abr., § 474.
[
Footnote 12]
Cowell's Interpreter, title "Impost."
[
Footnote 13]
1 Story's Constitution 669, note.
[
Footnote 14]
Bateman's Excise Law 96; 1 Story's Constitution § 953; 1
Blackstone's Commentary 318; 1 Tucker's Blackstone, Appendix,
341.
[
Footnote 15]
Loughborough v.
Blake, 5 Wheat. 317.
