Indian Motocycle Co v. United States 24 27, 1931

Decision Date25 May 1931
Docket NumberNo. 5,5
PartiesINDIAN MOTOCYCLE CO. v. UNITED STATES. Reargued Oct. 24-27, 1931
CourtU.S. Supreme Court

Messrs. Monte Appel and Frederick Schwertner, both of Washington, D. C., for Indian Motocycle Co.

The Attorney General and Mr. Thomas D. Thacher, Sol. Gen., of Washington, D. C., for the United States.

[Argument of Counsel from page 571 intentionally omitted] Mr. Justice VAN DEVANTER delivered the opinion of the Court.

This is a certificate from the Court of Claims. At a prior term the certificate was dismissed as not in accord with applicable rules and then reinstated, as in Wheeler Lumber Bridge & Supply Co. v. United States, 281 U. S. 572, 50 S. Ct. 419, 74 L. Ed. 1047. It since has been amended, and further argument has been heard.

The facts disclosed in the certificate are: In 1925 the plaintiff, a corporate manufacturer of motorcycles in Massachusetts, sold a motorcycle of its manufacture to the city of Westfield, a municipal corporation of that commonwealth, for use by the city in its police service. A tax in respect of the sale was assessed and collected from the plaintiff under section 600 of the Revenue Act of 1924, c. 234, 43 Stat. 322 (26 USCA §§ 881 note, 882). After due but unsuccessful effort to have the same refunded, the plaintiff brought suit in the Court of Claims to recover the money so exacted from it-the tax being assailed as invalid, as it had been in the application for a refund, on the ground that it was imposed in contravention of the constitutional immunity of the state and her governmental agencies from federal taxation. The parties submitted an agreed statement showing the facts here recited, and the Court of Claims then certified to this Court the question (we state its substance), where a motorcycle is sold by its manufacturer to a municipal corporation of a state for use by such corporation in its police service, can the transaction be taxed under section 600 of the Revenue Act of 1924 consistently with the constitutional immunity of the state and her governmental agencies from federal taxation.

Our jurisdiction to entertain certificates from the Court of Claims, and the limitations on that jurisdiction, are explained in Wheeler Lumber Bridge & Supply Co. v. United States, supra. The present certificate when tested by the rules there stated is unobjectionable. It presents a question of law suitably distinct and definite. And while, with the facts settled by an agreed statement accepted below, it is apparent that a decision of the question either way will be decisive of the case, this affords no ground for declining to entertain the certificate. United States v. Mayer, 235 U. S. 55, 66, 35 S. Ct. 16, 59 L. Ed. 129, and cases cited.

Section 600 of the Revenue Act of 1924, c. 243, 43 Stat. 253, 322 (26 USCA § 881 note), is part of Title 6 entitled Excise Taxes. The section provides that there 'shall be levied, assessed, collected, and paid upon the following articles sold or leased by the manufacturer, producer, or importer, a tax equivalent to the following percentage of the price for which so sod or leased.' Motorcycles are among the articles enumerated and the applicable tax is five per centum of the price for which they are sold. Manufacturers, producers and importers are required severally to make returns of their sales and to pay the tax.

This taxing provision is a reenactment, with minor changes not material here, of a provision which was included in the Revenue Act of 1917, c. 63, § 600, 40 Stat. 300, 316, and repeated in succeeding enactments. It is now section 600 of the Revenue Act of 1926, c. 27, 44 Stat. 9, 93, U. S. C. title 26, § 881, note (26 USCA § 881, note).

Both parties rightly regard the tax as an excise, and not a direct tax on the articles named. But they differ as to the transaction or act on which it is laid. Counsel for the plaintiff insist it is laid on the sale. Counsel for the government regard it as laid on manufacture, production or importation, or, in the alternative, on any one of these and the sale. We think it is laid on the sale, and on that alone. It is levied as of the time of sale and is measured according to the price obtained by the sale. It is not laid on all sales, but only on first or initial sales-those by the manufacturer, producer or importer. Subsequent sales, as where purchasers at first sales resell, are not taxed. Counsel for the government base their contention on the requirement that the tax be paid by 'the manufacturer, producer or importer'; but we think this requirement is intended to be no more than a comprehensive and convenient mode of reaching all first or initial sales, and that it does not reflect a purpose to base the tax in any way on manufacture, production or importation. Importation, as such, already was otherwise taxed, chapter 356, § 1, par. 369, 42 Stat. 858, 885, U. S. C., Title 19, § 121, par. 369 (19 USCA § 121, par. 369), and in our opinion the words relied on fall short of expressing a purpose to subject it to a further tax.

This view of the tax is not new. The administrative bureau adopted it at the outset and has adhered to it up to the present time. The regulations issued under the Revenue Act of 1917 said on this point, 'The tax is on the sale of the articles mentioned,' 20 Tr. Dec. Int. Rev. 365; and this is repeated in the later regulations. 21 Tr. Dec. Int. Rev. 412; 23 Tr. Dec. Int. Rev. 68; 24 Tr. Dec. Int. Rev. 56; 26 Tr. Dec. Int. Rev. 592. Indeed, the tax is frequently spoken of in the regulations as a sales tax. And it is so described in reports of congressional committees dealing with revenue bills in which it was retained. Sen. Rep. No. 398, p. 40, 68th Cong., 1st Sess.; House Rep. No. 1, p. 16, 69th Cong., 1st Sess. While not controlling, this administrative and legislative action strengthens our conclusion, drawn from the taxing provision, that the tax is laid on the sale, and on that alone.

The cases of Cornell v. Coyne, 192 U. S. 418, 24 S. Ct. 383, 48 L. Ed. 504, and American Manufacturing Co. v. St. Louis, 250 U. S. 459, 39 S. Ct. 522, 63 L. Ed. 1084, cited by counsel for the government, are not pertinent; for both related to taxes distinctly imposed on manufacturing.

With this understanding of the nature of the tax, we come to the question propounded in the certificate.

It is an established principle of our constitutional system of dual government that the instrumentalities, means and operations whereby the United States exercises it governmental powers are exempt from taxation by the states, and that the instrumentalities, means and operations whereby the states exert the governmental powers belonging to them are equally exempt from taxation by the United States. This principle is implied from the independence of the national and state governments within their respective spheres and from the provisions of the Constitution which look to the maintenance of the dual system. Collector v. Day, 11 Wall. 113, 125, 127, 20 L. Ed. 122; Willcuts v. Bunn, 282 U. S. 216, 224, 225, 51 S. Ct. 125, 75 L. Ed. 304. Where the principle applies it is not affected by the amount f th e particular tax or the extent of the resulting interference, but is absolute. McCulloch v. Maryland, 4 Wheat. 316, 430, 4 L. Ed. 579; United States v. Baltimore & Ohio R. Co., 17 Wall, 322, 327, 21 L. Ed. 597; Johnson v. Maryland, 254 U. S. 51, 55, 56, 41 S. Ct. 16, 65 L. Ed. 126;1 Gillespie v. Oklahoma, 257 U. S. 501, 505, 42 S. Ct. 171, 66 L. Ed. 338; Crandall v. Nevada, 6 Wall. 35, 44-46, 18 L. Ed. 745.

Of course, the reasons underlying the principle mark the limits of its range. Thus as to persons or corporations which serve as agencies of government, national or state, and also have private property or engage on their own account in business for gain, it is well settled that the principle does not extend to their private property or private business, but only to their operations or acts as such agencies;2 and, in harmony with this view, it also has been held where a state departs from her usual governmental functions and 'engages in a business which is of a private nature' no immunity arises in respect of her own or her agents' operations in that business.3 While these decisions show that the immunity does not extend to anything lying outside or beyond governmental functions and their exertion, other decisions to which we now shall refer show that it does extend to all that lies within that field.

It has been adjudged that bonds of the United States issued to raise money for governmental purposes, and the interest thereon, are immune from state taxation, because such a tax, even though inconsiderable in amount and imposed only on holders of the bonds, would burden the exercise by the United States of its power to borrow money. Weston v. Charleston, 2 Pet. 449, 468, 7 L. Ed. 481;4 The Banks v. Mayor of New York, 7 Wall. 16, 19 L. Ed. 57; Home Savings Bank v. Des Moines, 205 U. S. 503, 513, 27 S. Ct. 571, 51 L. Ed. 901; Northwestern Insurance Co. v. Wisconsin, 275 U. S. 136, 140, 48 S. Ct. 55, 72 L. Ed. 202. And this immunity has been held to include bonds of a municipal corporation in a territory issued to raise money for municipal purposes, the decision being put on the ground that such a corporation is an instrumentality of the United States exercising delegated governmental powers. Farmers' & Mechanics' Savings Bank v. Minnesota, 232 U. S. 516, 525, 34 S. Ct. 354, 58 L. Ed. 706. It also has been adjudged that bonds of municipal corporations in the several states issued to raise money for public municipal purposes, and the interest thereon, are immune from federal taxation, and this on the ground that such corporations are representatives of the states and exercise some of heir powers, and that under the implications of the Constitution the governmental agencies and operations of the states have the same immunity from federal taxation that like agencies and...

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