William Moxley v. Henry Hertz

• Decision Date: 21 February 1910
• Docket Number: No. 398,398
• Citation: 216 U.S. 344,30 S.Ct. 305,54 L.Ed. 510
• Parties: WILLIAM J. MOXLEY, a Corporation Organized and Existing under the Laws of the State of Illinois, v. HENRY L. HERTZ, Collector of Internal Revenue for the First Collection District of Illinois
• Court: U.S. Supreme Court

216 U.S. 344

30 S.Ct. 305

54 L.Ed. 510

WILLIAM J. MOXLEY, a Corporation Organized and Existing under the Laws of the State of Illinois,

v HENRY L. HERTZ, Collector of Internal Revenue for the First Collection District of Illinois.

No. 398.

Argued December 13 and 14, 1909.

Decided February 21, 1910.

Mr. John Maynard Harlan for Wm. J. Moxley.

[Argument of Counsel from page 345 intentionally omitted] Solicitor General Bowers for the Collector.

[Argument of Counsel from pages 346-347 intentionally omitted] Mr. Justice McKenna delivered the opinion of the court:

The certificate cannot easily be condensed, therefore we give it in full. It is as follows:

'In this case, which has been argued and submitted to this court, questions of law arise concerning which the court desires the instruction and advice of the Supreme Court of the United States.

'The plaintiff in error brought suit (at law) in the trial court to recover the amount paid to the defendant in error, as collector of internal revenue, under constraint, as a tax of 10 cents per pound, assessed by the commissioner of internal revenue, for the manufacture by the plaintiff in error of 284,998 pounds of oleomargarine under due authority to engage in such business. Issues were joined, and, upon written stipulation by the parties, were submitted to the court for trial without a jury. After hearing the testimony, the trial court made and filed a special finding of facts upon the several issues so submitted, and thereupon judgment was rendered against the plaintiff in error, whereof reversal is sought on writ of error.

'The tax in controversy of 10 cents per pound purports to be assessed under the provisions of § 3 of the act of Congress approved May 9, 1902, published as chap. 784, 32 Stat. at L. 193, 194, U. S. Comp. Stat. Supp. 1909, p. 864; and the present inquiry involves only the following of such finding of facts, viz.:

'(1) That in June, 1902 after the abovementioned enactment, 'the commissioner of internal revenue officially promulgated and published and issued in regular course by the United States Treasury Department, the regulation as to 'artificial coloration,' in language as follows:

"Regulation as to Artificial Coloration.

"If, in the production of oleomargarine, the mixtures of compounds set out in the law of 1886 are used, and these compounds are all free from artificial coloration, and no artificial coloration is produced by the addition of coloring matter as an independent and separate ingredient, a tax of 1/4 of 1 cent per pound only will be collected, although the finished product may look like butter of some shade of yellow. For example, if butter that has been artificially colored is used as a component part of the finished-product oleomargarine (and that finished product looks like butter of any shade of yellow), as the oleomargarine is not free from artificial coloration, the tax of 10 cents per pound will be assessed and collected. But if butter is absolutely free from artificial coloration or cotton-seed oil free from artificial coloration, or any other of the mixtures or compounds legally used in the manufacture of the finished-product oleomargarine has naturally a shade of yellow in no way produced by artificial coloration, and through the use of one or more of these unartificially colored legal component parts of oleomargarine the finished product should look like butter of any shade of yellow, this product will be subject to a tax of only 1/4 of 1 cent per pound, as it is absolutely free from artificial coloration that has caused it to look like butter of any shade of yellow.'

'Which said 'Regulation as to Artificial Coloration,' thenceforth continued to be the regulation of the commissioner's office when the oleomargarine hereinafter referred to was made and sold by the plaintiff.'

'(2) The rulings and assessments in question by the commissioner of internal revenue were made in 1903.

'(3) 'The oleomargarine, on account of which said assessment was levied by said commissioner of internal revenue, and said reduced amount thereof was required by him to be paid by said plaintiff, was composed of oleo oil, lard, milk, cream, salt, and two vegetable oils commonly known as cotton-seed oil and palm oil, and of nothing else. The proportion of palm oil present in said oleomargarine was about 1/2 of 1 per cent (1/2 per cent) of the total volume of said oleomargarine. Palm oil is a pure vegetable oil derived from the fruit of palm trees, which grow in certain parts of Africa, and has about the consistence of pure butter. Palm oil consists almost entirely of palmatine and olein, which are the chief constituents of pure butter. Palm oil is perfectly wholesome, is readily digested, and has long been used as an article of food in countries where it is produced. Palm oil was successfully employed in oleomargarine prior to May, 1902, and is a proper constituent of oleomargarine. The oleomargarine involved in this suit looked like butter of a shade of yellow, and such resemblance to butter of a shade of yellow was caused by the presence of the palm oil used in said oleomargarine, and the levy of said assessment by said commissioner of internal revenue was based upon and because of such resemblance to butter of a shade of yellow, resulting from such use of palm oil in said oleomargarine. In addition to coloring the oleomargarine in resemblance to butter, the palm oil probably gives to the oleomargarine slightly better grain of texture, causing it to act more like butter in the frying pan, and it also caused said oleomargarine to have a better physiological effect upon the persons who ate it; but such function of the palm oil, other than as coloring matter, was slight, and but for the coloring imparted to the oleomargarine would not probably have been actually used in its manufacture.

'Upon the foregoing facts,—distinguishing the case from that presented in Cliff v. United States, 195 U. S. 159, 49 L. ed. 139, 25 Sup. Ct. Rep. 1, as we understand the facts there reported,—the questions of law concerning which this court desires the instruction and advice of the Supreme Court are these:

'First. With the oleomargarine caused 'to look like butter,' by the use of natural palm oil as one of the ingredients,—'a pure vegetable oil,' named in the statute as an ingredient of oleomargarine,—which not only gives the coloration sought for the finished product, but otherwise (in some degree) improves the texture, quality, and healthfulness of the oleomargarine, can such use be denominated 'artificial coloration,' within the terms and meaning of the statute referred to, fixing the rate of taxation?

'Second. For the purpose of assessing the statutory tax on the oleomargarine described in the first question, Is the rate of taxation dependent, either (1) upon the ratio which the quantity of palm oil used bears to the other ingredients, or (2) the extent or ratio of other benefits than that of coloration given by the palm oil?

'Third. Can the fact that the manufacturer intended and used the palm oil for coloration of the oleomargarine enter into the determination of the amount taxable under the statute?'

It, as it will be observed, is implied in the certificate, and it is also contended at bar, that the facts of this case distinguish it from Cliff v. United States, supra. What the decision was in that case, therefore, becomes the first subject of inquiry. And an element of that inquiry is the act of Congress under which the tax in controversy was imposed, of which §§ 2 and 8 are only necessary to quote:

'Sec. 2. That, for the purposes of this act, certain manufactured substances, certain extracts, and certain mixtures and compounds, including such mixtures and compounds with butter, shall be known and designated as 'oleomargarine,' namely: All substances heretofore known as oleomargarine, oleo, oleomargarine oil, butterine, lardine, suine, and neutral all mixtures and compounds of oleomargarine, oleo, oleomargarine oil, butterine, lardine, suine, andneutral; all lard extracts and tallow extracts; and all mixtures and compounds of tallow, beef fat, suet, lard, lard oil, vegetable oil, anotto, and other coloring matter, intestinal fat, and offal fat made in imitation or semblance of butter, or, when so made, calculated or intended to be sold as butter or for butter.' [Act of August 2, 1886, 24 Stat. at L. 209, chap. 840, U. S. Comp. Stat. 1901, p. 2228.]

Sec. 8. That upon oleomargarine which shall be manufactured and sold, or removed for consumption or use, there shall be assessed and collected a tax of 10 cents per pound, to be paid by the manufacturer thereof; and any fractional part of a pound in a package shall be taxed as a pound: provided, when oleomargarine is free from artificial coloration that causes it to look like butter of any shade of yellow, said tax shall be 1/4 of 1 cent per pound' [italics ours]. [Act of August 2, 1886, as amended May 9, 1902, 32 Stat. at L. 194,...