South Carolina v. United States, 199 U.S. 437 (1905)

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South Carolina v. United States

No. 10

Argued April 11, 1905
Decided December 4, 1905
199 U.S. 437

APPEAL FROM THE COURT OF CLAIMS

Syllabus

Persons who sell liquor are not relieved from liability for the internal revenue tax imposed by the federal government by the fact that they have no interest in the profits of the business and are simply the agents of a state which, in the exercise of its sovereign power, has taken charge of the business of selling intoxicating liquor. They are persons within the meaning of §§ 3140, 3232 and 3214 Rev.Stat.

The national government is one of enumerated powers, and a power enumerated and delegated by the Constitution to Congress is comprehensive and complete, without other limitations than those found in the Constitution itself.

To preserve the even balance between the national and state governments and hold each in its separate sphere is the duty of all courts, and preeminently of this Court.

The Constitution is a written instrument, and, as such, its meaning does not alter. Its language, as a grant of power to the national government, is general and, as changes come in social and political life, it embraces all new conditions within the scope of the powers conferred.

In interpreting the Constitution, recourse must be had to the common law and also to the position of the framers of the instrument and what they must have understood to be the meaning and scope of the grants of power contained therein must be considered.

That which is implied is as much a part of the Constitution as that which is expressed, and amongst the implied matters is that the nation may not prevent a state from discharging the ordinary functions of government, and no state can interfere with the national government in the free exercise of the powers conferred upon it.

The framers of the Constitution, in granting to the national government full power over license taxes, intended that the power should be complete, and not to be destroyed by the states’ extending their functions in a manner not then contemplated.

A state may control the sale of liquor by the dispensary system adopted in South Carolina, but, when it does so, it engages in ordinary private business which is not, by the mere fact that it is being conducted by a state, exempted from the operation of the taxing power of the national government.

The internal revenue tax on the sale of liquor is not a tax on property or profits of a business, but a charge on the business, irrespective of the property used therein or the profits realized therefrom.

The exemption of state agencies and instrumentalities from national taxation is limited to those which are of a strictly governmental character, and does not extend to those used by the state in carrying on an ordinary private business.

By several statutes, the State of South Carolina established dispensaries for the wholesale and retail sale of liquor, and prohibited sale by other than the dispensers. The United States demanded the license taxes prescribed by the internal revenue act for dealers in intoxicating liquors, and the dispensers filed the statutory applications for such licenses. The state, sometimes in cash and sometimes by warrant on its treasury, paid the taxes. No protest was made in reference to these payments prior to April 14, 1901. On that day, a formal protest by the state dispensary commissioner was filed with the United States collector of internal revenue at Columbia, South Carolina. No appeal or application for the repayment of the sums paid by the various dispensers was made by them or by the State of South Carolina to the Commissioner of Internal Revenue, as authorized by sections 3226, 3227, and 3228, Rev.Stat.

The dispensers had no interest in the sales, and received no profit therefrom. The entire profits were appropriated by the state, one-half being divided equally between the municipality and the county in which the dispensaries were located and the other half paid into the state treasury. In the year 1901, the profits arising from these sales amounted to $545,248.12. While the laws of South Carolina prohibited the sale of liquor by individuals other than the dispensers, of 373 special license stamps issued in that state by the United States internal revenue collector, only 112 were to dispensers, while 260 were to private individuals. Three separate actions were commenced in the Court of Claims by the State of South Carolina to recover the amounts paid for these license taxes. These actions were consolidated. Upon a hearing, findings of fact were made and a judgment entered for the United States. 39 Ct.Cl. 257. Whereupon the state appealed to this Court.