We use cookies to distinguish you from other users and to provide you with a better experience on our websites. Close this message to accept cookies or find out how to manage your cookie settings.
Published online by Cambridge University Press: 02 September 2013
The rule that the national government may not burden the governmental agencies of the states by taxation is generally familiar to students of constitutional law. An interesting phase of the development of this doctrine is found in judicial and administrative rulings on the immunity of state agencies under the national stamp-tax laws.
The Early History of the Stamp Tax as Applied to State Judicial Documents. Stamps had been used as a means of securing revenue for nearly two centuries when such a method of taxation was suggested for the United States in 1797. The stamp tax originated in Holland in 1624, when, during a time of “dire necessity,” the States-General offered a reward to anyone who would invent a new kind of tax, and someone proposed “the requiring of stamps on documents and writings having a legal operation or forming necessary steps in suits in the law courts.” In 1694, England adopted this method of raising revenue. Congress first resorted to the stamp tax on legal instruments in acts of 1797 and 1813.
1 Smith, , The United States Federal Internal Tax History from 1861 to 1871 (1914), 145Google Scholar.
2 1 Stat. at L. 527, 531.
3 3 Stat. at L. 77, 79.
4 Id.
5 Woodson v. Randolph, 1 Va. Cas. 128 (1800).
6 Id., 129.
7 The doctrine that the states may not interfere with federal agencies by taxation was first laid down by the Supreme Court in McCulloch v. Maryland, 4 Wheat. 316 (1819). The Supreme Court did not affirm the converse of this principle until 1871, when it ruled in Collector v. Day, 11 Wall. 113, that the national government might not rightfully tax the salaries of state officers.
8 12 Stat, at L. 432, 481–484.
9 Cong. Globe, 37 Cong., 2 Sess., 2348, 2518 (1862).
10 12 Stat. at L. 543, 561.
11 13 Stat. at L. 234, 302, 311.
12 Id., 302.
13 14 Stat. at L. 98, 141. Thirty-nine years later, the U. S. Supreme Court adopted this rule for determining the tax-immunity of state agencies, in South Carolina v. United States. See note 93, infra.
14 Id., 471, 475.
15 17 Stat. at L. 230, 256.
16 Note 11, supra.
17 Notes 13, 14, supra.
18 Notes 8, 10, supra.
19 Report of the Commissioner of Internal Revenue (1863), 11Google Scholar.
20 Id., 13.
20a Note 7, supra.
20b See cases cited, notes 86, 92, 93, infra.
20c Boutwell, , A Manual of the Direct and Excise System of the United States (1863), 339–354Google Scholar; Estee, , The Exise Tax Law (1863), 293Google Scholar; Smith, op. cit., 145 et seq.
20d Boutwell, op. cit., 233–354; Estee, op. cit., 291.
21 Report of the Commissioner of Internal Revenue (1864), 13Google Scholar.
22 Id. (1865), 16.
23 Id. (1866), xviii–xix.
24 Cong. Globe, 37 Cong., 3 Sess., 40 (1862).
25 1 W. Va. 1 (1864). In 1863, the commissioner of internal revenue had ruled that “when a writ or summons is returned without service, a stamp is required on the alias, if issued.” Estee, op. cit., 294.
26 Hinchman, etc., v. Rutan, 31 N. J. 496 (1864).
27 Pierce v. Huddleston, 10 Minn. 131 (1865).
28 Smyth v. Ripley, 32 Conn. 156 (1864).
29 Dorman v. Bayley, 10 Minn. 383 (1865). Cf. Hugus v. Strickler, 19 Iowa 413 (1865).
30 Shay v. Henk et al., 49 Pa. St. 79 (1865).
31 Bear v. Hays, 36 Ill. 280 (1865).
32 22 Ind. 276 (1864).
33 Note 7, supra.
34 22 Ind. at 277.
35 Id. at 278.
36 Id. at 279.
37 Id. at 279–281.
38 In McCulloch v. Maryland (4 Wheat, at 435), Justice Marshall said: “It has … been insisted, that, as the power of taxation in the general and state governments is acknowledged to be concurrent, every argument which would sustain the right of the general government to tax banks chartered by the states, will equally sustain the right of the states to tax banks chartered by the general government. But the two cases are not on the same reason. The people of all the states have created the general government, and have conferred upon it the general power of taxation. The people of all the states, and the states themselves, are represented in Congress, and, by their representatives, exercise this power. When they tax the chartered institutions of the states, they tax their constituents; and these taxes must be uniform. But when a state taxes the operations of the government of the United States, it acts upon institutions created, not by their own constituents, but by people over whom they claim no control. It acts upon the measures of a government created by others as well as themselves, for the benefit of others in common with themselves. The difference is that which always exists, and always must exist, between the action of the whole on a part, and the action of a part on the whole—between the laws of a government declared to be supreme, and those of a government which, when in opposition to those laws, is not supreme.”
39 Cf. Willoughby, , Constitutional Law of the United States (1929), I, 144Google Scholar.
40 15 Mich. 504 (1867). See also Jones, etc., v. The Estate of Keep, 19 Wis. 390 (1865).
41 Smith v. Short, 40 Ala. 385 (1867).
42 Deloohery v. The State, 27 Ind. 521 (1867).
43 Black v. Nettles, 25 Ark. 606 (1869). Cf. Mussellman v. Mauk, 18 Iowa 239 (1865).
44 The Union Bank v. C. A. Hill et al., 41 Tenn. 325 (1866).
45 The German Liederkranz v. Schiemann, 25 How. Pr. (N. Y.) 388 (1863).
46 Cf. Jones, etc., v. The Estate of Keep, note 40, supra. Also Ford v. Clinton, 25 Iowa 157 (1868).
47 James G. Hotchkiss. Appeal from Probate, '32 Conn. 353 (1865).
48 Tucker v. Potter, 35 Conn. 43 (1868).
49 Note 13, supra.
50 Note 7, supra.
51 Dayton v. Mintzer, 22 Minn. 393 (1876).
52 Blake v. Hall, 19 La. Ann. 49 (1867).
53 Prather v. Pritchard, 26 Ind. 65 (1866).
54 Celley v. Gray, 37 Vt. 136 (1864).
55 Note 13, supra.
56 Nave, etc., v. King, 27 Ind. 356 (1866).
57 Ralls County v. Douglas, 105 U. S. 728 (1881).
58 Barden v. Supervisors of Columbia County, 33 Wis. 445 (1873).
59 Sayles v. Davis, 22 Wis. 217, 220–221 (1867); also Delorme v. Ferk, 24 Wis. 201 (1869).
60 32 Ind. 1 (1869).
61 City of Muscatine v. Sterneman, 30 Iowa 526 (1870).
62 See note 81, infra.
63 Note 10, supra.
64 Note 11, supra.
65 21 Mich. 162 (1870).
66 Latham v. Smith, 45 Ill. 29 (1867).
67 Cf. U. S. Express Co. v. Haines, 48 Ill. 248 (1868).
68 Duffy v. Hobson, 40 Calif. 240 (1870); also Haight v. Grist, 64 N. C. 739 (1870).
69 35 Conn. 239 (1868).
70 Cf. also People, etc., v. Gates, 43 N. Y. 40 (1870); Carpenter, etc., v. Schnelling, 97 Mass. 452 (1867); Clemens et al. v. Conrad, 19 Mich. 169 (1869).
71 The Chartiers & Robinson Turnpike Co. v. McNamara, 72 Pa. St. 278 (1872).
72 7 Albany Law Journal, 50 (1873).
73 Cf. Wayman v. Torreyson, 4 Nev. 619 (1868).
74 Note 38, supra.
75 30 Stat. at L. 448, 455; repealed by the act of April 12, 1902, 32 Stat. at L. 96, 97.
76 Note 13, supra.
77 Report of the Commissioner of Internal Revenue (1898), 87Google Scholaret seq. See also the opinion of Asst. Atty. Gen. Boyd, id., 100 et seq.
78 Treasury Decision (Internal Revenue) 356 (1901).
79 Treasury Decision 21292 (1899). Cf. Board of Trustees of the University of Illinois v. United States, 289 U. 8. 48 (1933).
80 In the period 1898–1902, several actions were begun by the United States in the federal courts, and a few suits grew out of disputes between citizens of different states.
81 Bettman v. Warwick, 108 Fed. Rep. 46 (C.C.A., 6th Circuit, 1901).
82 187 U. S. 1; 23 Sup. Ct. Rep. 1 (1902).
83 Cf. United States v. Owens, 100 Fed. Rep. 70 (Dist. Ct., E.D., Mo., 1900); also Treasury Decision (Internal Revenue) 40 (1900). The Treasury Department ruled that bonds given by state officers for alcohol to be used for scientific purposes were not taxable. Treasury Decision 20876 (1899).
84 Stirneman v. Smith, 100 Fed. Rep. 600 (C.C.A., 8th Circuit, 1900).
85 Sackett v. McCaffrey, 131 Fed. Rep. 219 (C.C.A., 9th Circuit, 1904).
86 In several recent cases, the Supreme Court, in determining the tax immunity of state agencies, has given some attention to the effect of national tax laws as applied to such agencies. Cf. Willcuts v. Bunn, 282 U. S. 216, 51 Sup. Ct. Rep. 125 (1931); Denman v. Slayton, 282 U. S. 514, 51 Sup. Ct. Rep. 269 (1931).
87 Farmers' Loan & Trust Co. v. Council Bluffs Gas & Electric Light Co., 90 Fed. Rep. 806 (Circ. Ct., S. D. Iowa, 1898).
88 Cf. The Magic Packing Co. et al. v. Stone-Ordean Wells Co., 158 Ind. 538 (1902); Noble v. Citizens' Bank, etc., 63 Neb. 847 (1902).
89 Supra, note 65 et seq. See also Knox v. Rossi, 25 Nev. 96 (1899).
90 Treasury Decision (Internal Revenue) 474 (1902).
91 Supra, note 77.
92 During the interval between the Civil War period and 1898, the U. S. Supreme Court had given its approval to this rule in upholding the immunity from national taxation of salaries of state officers, note 7, supra; of municipal revenues, United States v. Baltimore & Ohio Railway, 17 Wall. 322 (1872); and of the interest derived from municipal securities, Pollock v. Farmers' Loan & Trust Co., 157 U. S. 684 (1895).
93 Cf. South Carolina v. United States, 199 U. S. 437, 26 Sup. Ct. Rep. 110 (1905); Flint v. Stone Tracy Co., 220 U. S. 107, 31 Sup. Ct. Rep. 342 (1911); Jamestown & Newport Ferry Co. v. Commissioner of Internal Revenue, 41 Fed. (2d) 920 (C.C.A., 1st Circuit, 1930); United States v. King County, Washington, 281 Fed. Rep. 686 (C.C.A., 9th Circuit, 1922); State of North Dakota v. Olson, Collector, 33 Fed. (2d) 848 (C.C.A., 8th Circuit, 1929); Blair v. Byers, 35 Fed. (2d) 326 (C.C.A., 8th Circuit, 1929).
94 38 Stat. at L. 745, 757.
95 Cong. Record, 63 Cong., 2 Sess., 16537 (1914).
96 Treasury Decision (Internal Revenue) 2087 (1914).
97 Supra, note 77.
98 Treasury Decision (Internal Revenue) 2087 (1914).
99 Id.
100 Id.
101 Treasury Decision (Internal Revenue) 2867 (1919).
102 Treasury Decision (Internal Revenue) 2111 (1914).
103 Treasury Decision (Internal Revenue) 2091 (1914).
104 Treasury Decision (Internal Revenue) 2867 (1919).
105 Act of Oct. 3, 1917, 40 Stat. at L. 300, 319; Act of Feb. 24, 1919, 40 Stat. at L. 1057, 1133; Act of Nov. 3, 1921, 42 Stat. at L. 227, 320; Act of June 2, 1924, 43 Stat. at L. 253, 332; Act of Feb. 26, 1926, 44 Stat. at L. 99; Act of May 29, 1928, 45 Stat. at L. 791; Act of June 6, 1932, 47 Stat. at L. 169, 272.
106 Treasury Decision (Internal Revenue) 736 (1904); also 12 Op. Atty. Gen. 277, 282 (1867).
107 Treasury Decision (Internal Revenue) 3074 (1920).
108 Treasury Decision (Internal Revenue) 3021 (1920).
109 Supra, note 77 et seq.
110 The cases appearing in note 93, supra, might be cited as authorities for this statement.
111 Note 12, supra.
112 Hardy, , Tax-Exempt Securities and the Surtax (1926), 12et seq.Google Scholar
