Page 192 U. S. 408
the plaintiff, having elected to go to the circuit court of
appeals for a review of the judgment, could not thereafter, if
unsuccessful in that court upon the merits, prosecute a writ of
error directly from the circuit court to this Court.
Robinson
v. Caldwell, 165 U. S. 359;
Loeb v. Columbia Township, 179 U.
S. 472;
Ayres v. Polsdorfer, 187 U.
S. 585.
It remains to inquire whether the judgment of the circuit court
of appeals was so far final within the meaning of the sixth section
of the act of 1891 that it could not be reviewed here as of right
upon writ of error. Can the judgment of that court in this case be
reexamined here in any way except upon writ of certiorari granted
by this Court? The government insists that it cannot, because the
case -- to use the words of the sixth section of the act of 1891 --
is one "arising . . . under the revenue laws." So far as we now
remember, this precise point has not heretofore arisen for our
determination. Looking at the purpose and scope of the act of 1891,
we are of opinion that the position of the government on this point
cannot be sustained. It rests upon an interpretation of the act
that is too technical and narrow. The meaning of the words "arising
. . . under the revenue laws" in the sixth section is satisfied if
they are held as embracing a case strictly arising under laws
providing for internal revenues and which does not, by reason of
any question in it, belong also to the class mentioned in the fifth
section of that act. We do not think that the words quoted
necessarily embrace a case carried to the circuit court of appeals,
which, although arising under the revenue laws, and involving a
construction of those laws, depends, for a full determination of
the rights of the parties, upon the construction or application of
the Constitution, or upon the constitutionality of an act of
Congress. We lean to that interpretation of the act which enables
the defeated party in such a case in the circuit court of appeals
to have, as of right, upon writ of error to that court, a
reexamination here of the judgment (the requisite amount being
involved) if the correctness of the judgment depends in whole or in
part upon
Page 192 U. S. 409
the application or construction of the Constitution, or upon the
constitutionality of any act of Congress drawn in question.
What we have said is in harmony with our former decisions,
although the precise point here was not involved in any of them. In
American Sugar Refining Company v. New Orleans,
181 U. S. 277,
181 U. S.
280-281, it was said:
"It was held in
Loeb v. Columbia Township Trustees,
179 U. S.
472, where the jurisdiction of the circuit court rested
on diverse citizenship, but the state statute involved was claimed
in defense to be in contravention of the Constitution of the United
States, that a writ of error could be taken directly from this
Court to revise the judgment of the circuit court, although it was
also ruled that the plaintiff might have carried the case to the
circuit court of appeals, and that, if a final judgment were
rendered by that court against him, he could not thereafter have
invoked the jurisdiction of this Court directly on another writ of
error to review the judgment of the circuit court. . . . If
plaintiff, by proper pleading, places the jurisdiction of the
circuit court on diverse citizenship, and
also on grounds
independent of that -- a question expressly reserved in
Colorado Central Mining Company v. Turck, 150 U. S.
138 -- and the case is taken to the court of appeals,
propositions as to the latter grounds may be certified, or, if that
course is not pursued and the case goes to judgment (and the power
to certify assumes the power to decide), an appeal or writ of error
would lie under the last clause of section six, because the
jurisdiction would not depend solely on diverse citizenship.
Union Pacific Railroad Company v. Harris, 158 U. S.
326."
In
Huguley Manufacturing Company v. Galeton Cotton
Mills, 184 U. S. 290,
184 U. S. 295,
it was said:
"If, after the jurisdiction of the circuit court attaches on the
ground of diversity of citizenship, issues are raised the decision
of which brings the case within either of the classes set forth in
section 5, then the case may be brought directly to this Court,
although it may be carried to the circuit court of appeals, in
which event the final judgment of that court could not be brought
here as of right.
<|179 U.S. 472|>Loeb v. Columbia
Township Trustees,
Page 192 U. S. 410
179 U.
S. 472. If the jurisdiction of the circuit court rests
solely on the ground that the suit arises under the Constitution,
laws, or treaties of the United States, then the jurisdiction of
this Court is exclusive; but if it is placed on diverse citizenship
and
also on grounds independent of that, then, if carried
to the court of appeals, the decision of that court would not be
made final, and appeal or writ of error would lie.
American
Sugar Company v. New Orleans, 181 U. S.
277. . . . The ground on which the jurisdiction of the
circuit court was invoked was solely diversity of citizenship, and
the record does not show anything to the contrary, so that the
decree of the circuit court of appeals cannot be regarded otherwise
than as made final by the statute."
Now, as the judgment of the circuit court of appeals may be
brought to this Court, as of right, where the jurisdiction of the
circuit court rested upon the diversity of citizenship, and also
upon grounds that would bring the case within section 5 of the act
of 1891, it must be held that the judgment of the circuit court of
appeals is not final, within the meaning of the sixth section, in a
case which, although arising under a law providing for internal
revenue and involving the construction of that law, is yet a case
also involving, from the outset, from the plaintiff's showing, the
construction or application of the Constitution or the
constitutionality of an act of Congress.
For the reasons stated, we hold that the plaintiff was entitled
of right to a writ of error for the review by this Court of the
judgment of the circuit court of appeals.
Coming now to the merits of the case, we first notice the
contention of the plaintiff that the twenty-seventh section of the
act of 1898 imposes a direct tax, in violation of the
constitutional provision relating to the apportionment of taxes of
that kind among the several states.
The above section of the act of 1898 is as follows:
"SEC. 27. That every person, firm, corporation, or company
carrying on or doing the business of refining petroleum, or
refining sugar, or owning or controlling any pipeline for
transporting oil or
Page 192 U. S. 411
other products, whose gross annual receipts exceed two hundred
and fifty thousand dollars, shall be subject to pay annually a
special excise tax equivalent to one quarter of one percentum on
the gross amount of all receipts of such persons, firms,
corporations, and companies in their respective business in excess
of said sum of two hundred and fifty thousand dollars. And a true
and accurate return of the amount of gross receipts as aforesaid
shall be made and rendered monthly by each of such associations,
corporations, companies, or persons to the collector of the
district in which any such association, corporation, or company may
be located, or in which such person has his place of business. Such
return shall be verified under oath by the person making the same,
or, in case of corporations, by the president or chief officer
thereof. Any person or officer failing or refusing to make return
as aforesaid, or who shall make a false or fraudulent return, shall
be liable to a penalty of not less than one thousand dollars and
not exceeding ten thousand dollars for each failure or refusal to
make return as aforesaid and for each and every false or fraudulent
return."
The contention of the government is that the tax is not a direct
tax, but only an excise imposed by Congress under its power to lay
and collect excises which shall be uniform throughout the United
States. Art. I, § 8. Clearly the tax is not imposed upon gross
annual receipts as property, but only in respect of the carrying on
or doing the business of refining sugar. It cannot be otherwise
regarded because of the fact that the amount of the tax is measured
by the amount of the gross annual receipts. The tax is defined in
the act as "a special excise tax," and therefore it must be
assumed, for what it is worth, that Congress had no purpose to
exceed its powers under the Constitution, but only to exercise the
authority granted to it of laying and collecting excises.
This general question has been considered in so many cases
heretofore decided that we do not deem it necessary to consider it
anew upon principle. It was held in
<|7 Wall.
433|>Pacific Insurance Company v. Soule, 7 Wall. 433, that
the income tax imposed by the
Page 192 U. S. 412
Internal Revenue Act of June 30, 1864, amended July 13, 1866, 13
Stat. 223, c. 173, 14 Stat. 98, on the amounts insured, renewed,
and continued by insurance companies, on the gross amount of
premiums received, on dividends, undistributed sums and income, was
not a direct tax, but an excise duty or tax within the meaning of
the Constitution; in
<|8 Wall. 533|>Veazie Bank v.
Fenno, 8 Wall. 533, that the statute then before the court,
which required national banking associations, state banks, or state
banking associations, to pay a tax of ten percentum on the amount
of state bank notes paid out by them after a named date, did not,
in the sense of the Constitution, impose a direct tax, but was to
be classed under the head of duties which were to be sustained upon
the principles announced in
Pacific Insurance Co. v.
Soule, above cited; in
<|23 Wall. 331|>Scholey v.
Rew, 23 Wall. 331, that the tax imposed on every devolution of
title to real estate was not a direct tax, but an impost or excise,
and was therefore constitutional; in
Nicol v. Ames,
173 U. S. 509,
that the tax imposed (30 Stat. 448) upon each sale or agreement to
sell any products or merchandise at an exchange, or board of trade,
or other similar place, either for present or future delivery, was
not, in the constitutional sense, a direct tax upon the business
itself, but in effect "a duty or excise law upon the privilege,
opportunity, or facility offered at boards of trade or exchanges
for the transaction of the business mentioned in the act," which
was "separate and apart from the business itself;" in
Knowlton
v. Moore, 178 U. S. 41,
178 U. S. 81,
that an inheritance or succession tax was not a direct tax on
property, as ordinarily understood, but an excise levied on the
transmission or receipt of property occasioned by death; and, in
Patton v. Brady, 184 U. S. 60,
that the tax imposed by the Act of June 13, 1898, upon tobacco,
however prepared, manufactured, and sold for consumption or sale,
was not a direct tax, but an excise tax which Congress could
impose; that it was not "a tax upon property as such, but upon
certain kinds of property, having reference to their origin and
intended use."
In view of these and other decided cases, we cannot hold
that
Page 192 U. S. 413
the tax imposed on the plaintiff expressly with reference to its
"carrying on or doing the business of . . . refining sugar," and
which was to be measured by its gross annual receipts in excess of
a named sum, is other than is described in the act of Congress -- a
special excise tax, and not a direct one, to be apportioned among
the states according to their respective numbers. This conclusion
is inevitable from the judgments in prior cases, in which the court
has dealt with the distinctions, often very difficult to be
expressed in words, between taxes that are direct and those which
are to be regarded simply as excises. The grounds upon which those
judgments were rested need not be restated or reexamined. It would
subserve no useful purpose to do so. It must suffice now to say
that they clearly negative the idea that the tax here involved is a
direct one, to be apportioned among the states according to
numbers.
It is said that, if regard be had to the decision in the
Income Tax Cases, a different conclusion from that just
stated must be reached. On the contrary, the precise question here
was not intended to be decided in those cases. For, in the opinion
on the rehearing of the
Income Tax Cases, THE CHIEF
JUSTICE said:
"We have considered the act only in respect of the tax on income
derived from real estate, and from invested personal property, and
have not commented on so much of it as bears on gains or profits
from business, privileges, or employments, in view of the instances
in which taxation on business, privileges, or employments has
assumed the guise of an excise tax and been sustained as such."
<|
158 U.S.
601|>
158 U.S.
601.
The question of the constitutionality of the act having been
disposed of, we turn our attention to the questions involving its
construction merely.
As already stated, the judgment of the circuit court determined
certain questions for the plaintiff. But as the government did not
prosecute a writ of error to the circuit court of appeals, those
questions cannot be examined here, and we can only consider such
points on the merits of the case as are raised by the plaintiff's
assignments of error.
Page 192 U. S. 414
It was in proof that the plaintiff owned three wharves on the
Delaware River at which vessels landed, and for the use of which
those vessels paid wharfage according to the rates prescribed by a
general tariff. A large part, nearly all, of the sugar refined by
the plaintiff was brought into the Port of Philadelphia by vessels
which come to those wharves, and such vessels paid wharfage
according to that tariff. Many vessels brought raw sugar which the
refining company had purchased abroad. The wharves were built by
the plaintiff for the purpose of transacting any business that it
might have or for which it saw fit to use them. And nearly all the
business done at that time at the wharves was the unloading of
sugar consigned to the plaintiff. The exceptions were too few to be
regarded as material. Upon its receipts from such wharfage, the
plaintiff had been compelled to pay a tax. Was it required by the
act to pay a tax upon receipts of profits from that source? In
other words, were the receipts from wharfage properly included in
plaintiff's gross annual receipts upon which the amount of the
prescribed tax was to be computed?
On this question, the circuit court said:
"Scarcely any vessels lie at these wharves except the vessels
that bring raw sugar to the plaintiff, and the wharves are used for
the convenience and greater profit of the corporate enterprise. The
money paid by the vessels for wharfage is, I think, a receipt of
the business."
The view of the circuit court of appeals was thus expressed
"The use which the plaintiff really made of its wharves was in
'carrying on or doing the business of . . . refining sugar.' They
were part of the plant of that business, and, as it was actually
conducted, they were an essential condition of it. Consequently
their receipts were its receipts, and as such they were properly
comprised in the assessment.
Adams Express Company v.
Ohio, 165 U. S. 194."
This question is not wholly free from difficulty. But we think
the better reason is with the ruling in the circuit court and in
the circuit court of appeals, to the effect that the
Page 192 U. S. 415
wharves in every substantial sense constituted a part of the
plaintiff's "plant," and, if not absolutely necessary, were of
great value in the prosecution of its business, and that receipts
derived by plaintiff from the use of the wharves by vessels --
particularly because, with rare exceptions, the vessels using them
brought to the plaintiff the raw sugar which it refined -- were
receipts in its business of refining sugar. The primary use of the
wharves was in connection with, and in the prosecution of, that
business. The importation of raw sugar from abroad was not in any
proper sense a separate business, but an essential part of the
plaintiff's general business of refining sugar. The wharves were
part of the instrumentalities and conveniences employed by
plaintiff for the successful management and conduct of its business
of refining sugar. Without the wharves, the gross amount of
receipts and profits from such business would probably have been
less than they were in fact. If the receipts from the use of the
wharves were reasonably to be deemed receipts in the plaintiff's
business of refining sugar, as we think they were, then they were
properly treated as a part of its gross annual receipts, upon
which, in excess of the sum of $250,000, the tax in question was
rightly imposed.
The remaining assignment of error relates to the including in
the plaintiff's gross annual receipts of interest paid to it upon
deposits in bank and dividends received by it upon shares of stock
in other companies. Upon this point, Judge McPherson, holding the
circuit court, said:
"This interest, I think, was properly included by the collector
in determining the annual value of the business. It was corporate
property, presumably used for corporate purposes, and was as much
engaged in the business of refining as the capital invested in
machinery or raw materials."
Judge Dallas, with whom concurred Judge Acheson, delivering the
judgment of the circuit court of appeals, said:
"The interest received by the plaintiff upon its corporate
funds, either deposited in bank or invested in income-producing
deposited in bank or invested in income-producing securities, was
rightly included. The special
Page 192 U. S. 416
verdict states that it was 'interest upon its investments of
moneys and property as explained by the testimony of Mr. Ball,' and
it appears from that testimony that the only business of the
plaintiff was sugar refining, and that this interest was received
by it upon investments or deposits of such part of the capital of
that business as at the time being was not in active use therein.
Mr. Ball, it is true, also testified that it did not have anything
to do with sugar refining, but the question for our decision is not
whether this interest was derived from the refining of sugar,
which, of course, it was not, but whether or not it was received in
the business of sugar refining, and upon this very different
question the facts found are conclusive. The funds of the
corporation, however any portion of them may have been temporarily
applied or held, were all embarked in the sugar refining business,
and to it therefore all receipts which those funds produced
necessarily belonged. Any diminution of them would certainly have
been its loss, and it seems to be equally clear that their
augmentation, however occasioned, must have been its gain. Except
in connection with and as incidental to that business, the
plaintiff was neither an investor nor a depositor, and therefore,
by becoming either the one or the other, it did not engage in an
additional and separate business."
Judge Gray, dissenting, said:
"Keeping in mind the well settled rule that the citizen is
exempt from taxation unless the same is imposed by clear and
unequivocal language, and that, where the construction of a tax law
is doubtful, the doubt is to be resolved in favor of those upon
whom the tax is sought to be laid, I cannot assent to the
affirmance of the judgment of the court below in this respect. I do
not think that the income derived from such investment of funds is
in any proper sense receipts in the business of sugar refining. The
very term 'gross receipts' in 'the business,' would seem to exclude
all such receipts as the interest upon investments here referred
to."
We are of opinion that, upon the point last stated, there was
error. The gross annual receipts, upon which, in excess of a
Page 192 U. S. 417
certain amount, the tax was imposed, were, under the statute,
only receipts in the business of refining sugar, not receipts from
independent sources. But clearly neither interest paid to the
plaintiff on its deposits in bank nor dividends received by it from
investments in the stocks of other companies were receipts in the
business of refining sugar. The moneys deposited by the plaintiff
in bank were, we assume, on this record, the profits it had earned
in the business in which it was engaged. Profits did not
necessarily remain in the business, and whether they would be
divided among stockholders or be used in the further prosecution of
the business was for the plaintiff to determine. They could have
been used for purposes wholly distinct from the business of
refining sugar. We are of opinion that the receipts by the
plaintiff of interest on its bank deposits had no necessary
relation to the business of refining sugar, but rested wholly upon
some agreement or understanding between the bank and the depositor,
which had no direct connection with that business. And the same
thing may be said of plaintiff's investment of its moneys in the
stocks of other companies. In the absence of any showing to the
contrary, it must be assumed that the declaration or the receipt of
dividends on such stocks were wholly apart from the particular
business in which the holder of the stock was engaged.
We hold that, in the matter of interest received by the
plaintiff on deposits in bank, as well as in the matter of
dividends received by it on stocks in other companies, the
judgments of both the circuit court and the circuit court of
appeals were erroneous.
The judgment of each court is reversed, and the cause is
remanded for such further proceedings as may be necessary for the
correction of the errors hereinbefore specified, and as may be in
conformity with this opinion.
It is so ordered.
THE CHIEF JUSTICE: MR. JUSTICE BROWN and myself are of opinion
that the judgment of the circuit court of appeals in
Page 192 U. S. 418
this case was made final in that court by the Judiciary Act of
March 3, 1891, and that therefore the writ of error should be
dismissed.