Alexander Theatre Ticket Office v. United States

• Decision Date: 12 December 1927
• Docket Number: No. 163.,163.
• Citation: 23 F.2d 44
• Parties: ALEXANDER THEATRE TICKET OFFICE, Inc., et al. v. UNITED STATES.
• Court: U.S. Court of Appeals — Second Circuit

23 F.2d 44 (1927)

ALEXANDER THEATRE TICKET OFFICE, Inc., et al. v. UNITED STATES.

No. 163.

Circuit Court of Appeals, Second Circuit.

December 12, 1927.

Louis Marshall, Charles H. Griffiths, Nathan D. Perlman and Francis L. Kohlman, all of New York City, for plaintiffs in error.

Charles H. Tuttle, U. S. Atty., of New York City (Samuel C. Coleman, Asst. U. S. Atty., of New York City, of counsel), for the United States.

Before MANTON, L. HAND, and SWAN, Circuit Judges.

MANTON, Circuit Judge.

The defendants below were indicted in 14 counts for making a false and incorrect tax return for 14 consecutive months, commencing March, 1926, in violation of section 500 of the Revenue Act (26 USCA § 871). In each return it is charged that they willfully and untruthfully reported that for the specific month they had not made sales at a price exceeding 50 per cent. in excess of the sum of the established price at such ticket offices, plus the amount of any tax imposed under paragraph 1, subd. (a), of section 500 of the Revenue Act, and it is charged that they in fact sold tickets at a much greater advance and that they willfully failed to pay and attempted to evade and defeat the tax under paragraph 2, subd. (a), of section 500. Section 500 (a), subd. (2) provides:

"(2) Upon tickets or cards of admission to theatres, operas, and other places of amusement, sold at news stands, hotels, and places other than the ticket offices of such theatres, operas, or other places of amusement, at not to exceed 50 cents in excess of the sum of the established price therefor at such ticket offices plus the amount of any tax imposed under paragraph (1), a tax equivalent to 5 per centum of the amount of such excess; and if sold for more than 50 cents in excess of the sum of such established price plus the amount of any tax imposed under paragraph (1), a tax equivalent to 50 per centum of the whole amount of such excess, such taxes to be returned and paid, in the manner and subject to the interest provided in section 602, by the person selling such tickets."

And paragraph (d) of the same section provides:

"(d) The price (exclusive of the tax to be paid by the person paying for admission) at which every admission ticket or card is sold shall be conspicuously and indelibly printed, stamped, or written on the face or back of that part of the ticket which is to be taken up by the management of the theatre, opera, or other place of amusement, together with the name of the vendor if sold other than at the ticket office of the theatre, opera, or other place of amusement. Whoever sells an admission ticket or card on which the name of the vendor and price is not so printed, stamped, or written, or at a price in excess of the price so printed, stamped, or written thereon, is guilty of a misdemeanor, and upon conviction thereof shall be fined not more than $100."

Section 602 of title 6 of the Revenue Act (26 USCA § 885) required the defendants below to make a monthly return under oath in duplicate and pay the taxes imposed by this section to the collector of the district in which their principal place of business was located. They were obliged to pay the tax without assessment by the Commissioner or notice from the collector that it was due and payable and if the tax was not paid when due, a penalty of tax interest at the rate of 1 per centum a month from the time when the tax became due, was imposed. There was sufficient in the proof to require submission to the jury of the question of whether or not the defendants below had, by fraudulent means and subterfuge, evaded and defeated the tax and prevented the government from ascertaining the truth as to this obligation.

On this review, the principal question presented is whether or not the statute is unconstitutional in imposing this tax. The argument is (a) that it is a direct tax, which has not been apportioned between the states in the manner provided by article 1, § 8, cl. 1, article 1, § 2, cl. 3, and article 1, § 9, cl. 4 of the Constitution of the United States; (b) because by its enactment Congress has exercised a police power which has not been conferred upon it in violation of article 10 of the Amendments of the Constitution of the United States; (c) it was a violation of the Fifth Amendment of the Constitution, in depriving the defendants below of their property without due process of law; and (d) that section 500 violated the Fifth and Sixth Amendments of the Constitution, because it proceeds on the theory of making noncompliance therewith a basis of criminal prosecution under section 1114 of the act, (26 USCA §§ 1265-1268, 1268a, 1269), and fails to provide sufficient standards of determining whether or not there has been a violation of the law.

Subdivision 2, § 500, imposes an excise tax, and not a direct tax. The tax is not upon the ticket, which is evidence of the right of admission to the theater. The privilege and selling at places other than the ticket office of the theater, the evidence which gives the privilege of admission or accommodation at the theater, is what is taxed. It is not a direct tax against persons or objects of intrinsic value, but upon the business of dealing in these tickets, which grant admission to places of amusement, when sold at places other than the place where they are originally issued. It does not cover the incident of ownership of the ticket as such.

Excises are defined as taxes laid upon the manufacture, sale, or consumption of commodities within the country, or upon licenses to pursue certain occupations and corporate privileges. Flint v. Stone Tracy Co., 220 U. S. 107, 31 S. Ct. 342, 55 L. Ed. 389, Ann. Cas. 1912B, 1312. The power to lay excise taxes conferred upon Congress by the Constitution (article 1, § 8, cl. 1) is exhaustive, and embraces all the attributes which appertain to sovereignty in the fullest sense. Brushaber v. Union Pacific R. R. Co., 240 U. S. 1, 36 S. Ct. 236, 60 L. Ed. 493; United States v. Bennett, 232 U. S. 299, 34 S. Ct. 433, 58 L. Ed. 612. The nature of the tax is to be determined from the standpoint of the Constitution. It is 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. Pacific Ins. Co. v. Soule, 7 Wall. 433, 19 L. Ed. 95. And all excises upon any use of property affect some inherent incidents of the right of property. Excise taxes are levied upon the owner in the exercise of some interest had in property, which might well be termed a right of property. Anderson v. McNeir (C. C. A.) 16 F.(2d) 970.

The most ample authority (recognized in levying excise taxes) has been recognized from the beginning to select some and omit another; to tax one class of property and forbear to tax another. Flint v. Stone Tracy Co., 220 U. S. 107, 31 S. Ct. 342, 55 L. Ed. 389, Ann. Cas. 1912B, 1312. The right to sell a ticket of admission at places other than the ticket office of the theater does not exhaust the entire right of property, either in the ticket or in the privilege which the ticket represents. The tax seems to be upon the act of selling the ticket away from the box office, which is a transaction distinct enough upon which to levy an excise tax. Nicol v. Ames, 173 U. S. 509, 19 S. Ct. 522, 43 L. Ed. 786. The Nicol Case limited the tax to sales had in an Exchange or Board of Trade, or any other similar place, and its fair meaning was said to impose a duty upon those privileges or facilities which are there found and made use of in the sale at such place of any product of merchandise. There the court said:

"A tax upon the privilege of selling property at the exchange and of thus using the facilities there offered in accomplishing the sale differs radically from a tax upon every sale made in any place. The latter tax is really and practically upon property. It takes no notice of any kind of privilege or facility, and the fact of a sale is alone regarded. Although not created by government, this privilege or facility in effecting a sale at an exchange is so distinct and definite in its character, and constitutes so clear and plain a difference from a sale elsewhere, as to create a reasonable and substantial ground for classification and for taxation when similar sales at other places are untaxed."

The courts have upheld excise taxes imposed on carriages for conveyance of persons who are keeping them for their own use or to be let out for hire or conveying passengers. Hylton v. United States, 3 Dall. 171, 1 L. Ed. 556. A tax upon manufactured tobacco intended for sale was held to be an excise tax in Patton v. Brady, 184 U. S. 608, 22 S. Ct. 493, 46 L. Ed. 713; a stamp tax on memorandum or contract of sale, in Thomas v. United States, 192 U. S. 363, 24 S. Ct. 305, 48 L. Ed. 481; a tax on oleomargarine, not artificially colored, and a higher tax on artificially colored oleomargarine, in McCray v. United States, 195 U. S. 27, 24 S. Ct. 769, 49 L. Ed. 78, 1 Ann. Cas. 561; a tax upon the use of foreign...