310 U.S. 41 (1940), 719, Colorado National Bank of Denver v. Bedford

Docket Nº:No. 719
Citation:310 U.S. 41, 60 S.Ct. 800, 84 L.Ed. 1067
Party Name:Colorado National Bank of Denver v. Bedford
Case Date:April 22, 1940
Court:United States Supreme Court

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310 U.S. 41 (1940)

60 S.Ct. 800, 84 L.Ed. 1067

Colorado National Bank of Denver



No. 719

United States Supreme Court

April 22, 1940

Argued April 2, 3, 1940



1. This case is appealable under Jud.Code § 237(a), because a state statute affecting national banks was upheld by a state court over the objection of conflict with the federal law and Constitution. P. 47.

2. National banks are authorized to conduct a safe deposit business. Pp. 49-50.

3. In the absence of contrary legislation by Congress, a state law laying a percentage tax on the users of the safety deposit

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service of banks measured by the banks' charges for the services, and requiring the banks to collect the taxes, account for them to the State and include them in their bills for the services, but allowing them credit on future taxes for taxes paid on accounts eventually found worthless held valid as applied to a national bank. P. 52.

4. Requiring a national bank to collect and remit the tax does not impose an unconstitutional burden on a federal instrumentality. P. 53.

105 Colo. 373, 98 P.2d 1120, affirmed.

Appeal from the affirmance of a declaratory judgment entered in a suit by Bedford, Treasurer, against the Bank.

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REED, J., lead opinion

MR. JUSTICE REED delivered the opinion of the Court.

This appeal involves the validity of the Public Revenue Service Tax Act of Colorado.1 The act, section 5, imposes upon the services specified in the act a percentage tax based upon the value of the services rendered or performed by any person subject to its provisions.

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Section 5(c) imposes a tax equivalent to two percent of the value of services rendered by "banks, finance companies, trust companies and depositories. . . ." The person rendering the services "shall be liable and responsible for the payment of the entire amount. . . ." § 6. He is required to remit all taxes collected and due the state from him to the treasurer less three percent to cover the expense of the service. Under § 6(B), persons rendering or performing the services are required,

as far as practicable, [to] add the tax imposed . . . to the value of services or charges showing such tax as a separate and distinct item, and, when added, such tax shall constitute a part of such value of service or charge, shall be a debt from the user to the person rendering or performing service until paid, and shall be recoverable at law in the same manner as other debts.

By subsection (d), the person rendering the service is forbidden to hold out directly or indirectly that he will assume or absorb the tax. By § 7, the user may recover illegally collected taxes. Where services are rendered which become a part of an article subject to a sales tax, the services are exempt, and the person performing the service recovers where they are illegally assessed. § 3. By § 12, all sums paid by the user as taxes are public money and trust funds of the Colorado. It is made a misdemeanor, § 17, for any person rendering or performing services to refuse to make the returns required. The state treasurer is made administrator of the act, and given authority to issue regulations. § 19. The usual separability clause is contained in the act. § 22.

The definitions of the act appear in § 2 By its subsection (c), the term "services rendered or performed" is defined as those rendered for a valuable consideration by a person covered by the act for the ultimate user thereof. "The term `user' shall mean the person for whom or for whose benefit services are rendered or performed."

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By subsection (e), taxpayer is defined as "any person obligated to account to the state treasurer for taxes collected or to be collected or due the state under the terms of this act." Subsection (h) provides for a credit on future taxes of a tax paid on accounts eventually found worthless.

Under the rules and regulations issued by the treasurer on the Public Revenue Service Tax Act, the service tax is construed as invalid as applied to so-called banking services.2

Under rule 27, however, such service as the furnishing of safety vaults by depositories or banks is held to come within the [60 S.Ct. 802] act, and the two percent tax applies to the charges made for this service. These regulations were approved by the judgment and decree of the trial court, and that judgment was affirmed in all particulars by the Supreme Court of Colorado. 98 P.2d 1120.

While § 4(a) makes it unlawful for any person to render the defined services without "first having obtained a license therefor," the treasurer demands no license fees from a national bank. Such exception was held proper by the lower court.3

The appellant here, the Colorado National Bank, was a national banking corporation duly organized and existing under the national banking act. The bank operated a safe deposit service under its own name and in the building and vaults used for its other banking activities. The rentals received for the use of that portion of its vaults utilized for safe deposit boxes were reported to the Comptroller of the Currency as income in the bank; the fixtures employed in the business are part of the assets of the bank, and are supervised by the Comptroller of the Currency.

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The appellee Bedford, as treasurer of the State of Colorado and administrator of the Service Tax Act, demanded payment from appellant bank of two percent of the value of the services rendered by the bank to its safe deposit box customers. The bank refused payment, and the treasurer brought this action under the Uniform Declaratory Judgments Act, Colorado Stat.Ann.1935, c. 93, §§ 78, 79, for a declaration of rights to the effect that the services performed by the bank are taxable pursuant to the Service Tax Act. The bank answered claiming the state statute as applied to it was repugnant to the Constitution and laws of the United States; setting up the immunity of national banks from state taxation except as permitted by R.S. § 5219;4 claiming that the safe deposit business of national banks was authorized by Congress, and therefore was part of its federally authorized business, immune from taxation whether the bank or the user of its services is the taxpayer. The bank further contended that, even though it is not the taxpayer and the tax burden as such is not unlawful, the burden of collection, report, and visitation materially interfere with the performance of its national banking functions. A general demurrer to the answer was filed.

The trial court sustained the bank. The supreme court first affirmed by an equally divided court, and then, on rehearing,

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reversed5 and remanded the case to the district court. The trial court entered a second judgment declaring as prayed by the treasurer, which judgment was affirmed by the supreme court on the authority of the former decision.

This appeal is here under § 237(a) of the Judicial Code. The treasurer makes the point that as the federal question raised was the immunity to the exaction of the bank as a federal instrumentality withdrawn from state taxation by congressional action, the determination that the tax was on a nonbanking activity foreign to its federal character and on the user of the...

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