If the taxpayer be given an opportunity to test the validity of
a tax at any time before it is made final, either before a board
having
quasi-judicial character or a tribunal provided by
the state for that purpose, due process is not denied, and if he
does not avail himself of the opportunity to present his defense to
such board or tribunal, it is not for this Court to determine
whether such defense is valid.
A state may reserve to itself the right to tax or prohibit the
sale of cigarettes, and while this Court is not bound by the
construction given to a statute by the highest court of the state
as to whether a tax is or is not a license to sell it will accept
it unless clearly of the opinion that it is wrong.
Section 5007, Iowa Code, imposing a tax against every person and
upon the real property and the owner thereof whereon cigarettes are
sold does not give a license to sell cigarettes, nor is it invalid
as depriving the owner of the property of his property without due
process of law because it does not provide for giving him notice of
the tax, §§ 2441, 2442, Iowa Code, providing for review with power
to remit by the board of supervisors.
Whether or not a state statute violates the state constitution
in not stating distinctly the tax and the object to which it is to
be applied is a local and not a federal question.
A tax to carry on a business may be made a lien on the property
whereon the business is carried, and the owner is presumed to know
the business there carried on and to have let the property with
knowledge that it might be encumbered by a tax on such
business.
This was a petition in the district court by the owner and
tenant of certain real estate in Muscatine, used for a
tobacconist's shop, to enjoin the defendants from assessing, and
collecting a tax of $240 upon the ground of the unconstitutionality
of the law.
Demurrers were interposed to the petition and to certain
amendments thereto, which were sustained, the bill dismissed, and
an appeal taken to the Supreme Court of Iowa, which affirmed the
judgment of the court below. 121 Ia. 482.
Page 196 U. S. 277
MR. JUSTICE BROWN delivered the opinion of the Court:
This case involves the same questions as those just disposed of
in
Cook v. Marshall County, and in addition thereto the
point is made that the laws of Iowa deny to the owner of property
leased for the sale of cigarettes due process of law.
To answer satisfactorily the question thus presented, it is
necessary to consider the laws of Iowa respecting the tax upon
cigarette dealers, and the methods of enforcing the same.
By section 5006 a fine and imprisonment are imposed for selling
cigarettes.
By section 5007, printed in full in the
Marshall County
case, a tax of $300 per annum is assessed "against every person . .
. and upon the real property and the owner thereof" whereon
cigarettes, etc., are sold, or kept with intent to be sold, with a
provision that
"such tax shall be in addition to all other taxes and penalties,
shall be assessed, collected, and distributed in the same manner as
the mulct liquor tax, and shall be a perpetual lien upon all
property, both personal and real, used in connection with the
business, and the payment of such tax shall not be a bar to
prosecution under any law prohibiting"
the selling of cigarettes.
This assessment is made collectible as is a similar charge made
upon dealers in liquor as follows:
By section 2433, the assessor makes quarterly returns to the
auditor of the persons liable to the tax, a description of the real
property whereon the business has been carried.
Page 196 U. S. 278
By section 2436, the charge is made payable in quarterly
installments, and shall be a lien upon the real property.
By section 2437 the auditor certifies quarterly to the county
treasurer a list of the names returned to him by the assessor, with
a description of the names of the tenant and owner.
By section 2438 the county treasurer enters upon the mulct tax
book a quarterly installment of the tax as a lien and charge upon
the real property.
By section 2439, if the tax is not paid within a month, it shall
be considered delinquent, and be collectible as other delinquent
taxes.
By section 2440, the treasurer may collect the same after it has
become delinquent by seizing and selling any personal property.
By section 2441, application may be made to the board of
supervisors to remit the tax by petition duly verified and filed
with the county auditor eight days before the time set for the
consideration of the case, notice of which must be served upon the
county attorney.
By section 2442, the owner of the property may be heard in
support of his application. A majority of the board determines
whether the tax shall stand or be remitted, and either party may
take an appeal to the district court.
These are all of the provisions of the law material to be
considered.
We do not deem it necessary to affix a definition to the charge
imposed by section 5007. It is certainly not an ordinary license
tax, as the payment of such tax is no bar to a prosecution for
selling cigarettes under section 5006. In
Smith v. Skow,
97 Ia. 640, it is said, in speaking of the mulct liquor tax, to
which this is analogous, that though called a tax in the statute,
it is not in fact a tax as we usually use the word.
"It is in reality a charge or license for carrying on the
business of vending liquors, which charge is made a lien upon all
property used or connected with the business."
In
Ferry v. Dencen, 82 N.W. 424, it is
Page 196 U. S. 279
observed by the same court, "it is apparent, taking all the
provisions of this act together, that the amount imposed, while
called a "tax," is at the same time a penalty."
But, in the opinion of the court in the case under
consideration, the charge imposed by section 5007 is said to be
"clearly not a license, for it does not grant permission to do
an act which, without such permission, would be invalid, . . .
[that] it is manifestly a tax upon the traffic which the
legislature saw fit to impose, not for the purpose of giving
countenance to the business, but as a deterrent against engaging
therein. . . . Indeed, we think it may be fairly said to be a tax
upon the business. That a tax is imposed for the double purpose of
regulation and revenue is no reason for declaring it invalid. . . .
Being a tax, it was competent for the legislature to prescribe the
proceedings and processes for its collection."
This being the latest expression of opinion of the Supreme Court
of Iowa, we accept it for the purposes of this case. If it be not a
construction binding upon us, it is at least a construction which
we ought to follow unless we are clearly of opinion that it is
wrong.
In the case of
McBride v. State, 70 Miss. 716, cited by
plaintiffs, it was held that a statute providing that a person
selling liquor unlawfully should be subject to pay, "where the
offense is committed," the sum of $500, and should also be liable
to a "criminal prosecution," imposed a penalty, and not a tax, and
that a proceeding to collect such penalty by distress was
unconstitutional; but a distinction was drawn in that case between
a penalty and a tax, and it was intimated that a proceeding by
distress to collect a tax would not be open to a like
objection.
It is not easy to draw an exact line of demarcation between a
tax and a penalty, but, in view of the fact that the statute
denominates the assessment a "tax," and provides proceedings
appropriate for the collection of a tax, but not for the
enforcement of a penalty, and does not contemplate a criminal
prosecution, we cannot go far afield in treating it as a tax,
Page 196 U. S. 280
rather than a penalty. Section 5006 does indeed impose a
penalty, but section 5007 imposes a tax, with an additional
provision that the payment of the tax shall not absolve the party
from the penalty. It would be a distortion of the words employed to
speak of section 5007 as imposing an additional penalty. The act
itself provides in terms that such a tax shall be an addition to
all other taxes and penalties, and elaborate provision is made for
its enforcement. The mere fact that the charge, whatever it may be,
is made a lien upon the real estate, and a personal claim against
the landlord, indicates that it is in the nature of a tax, rather
than a penalty.
There is no conflict between the two sections, the state
reserving to itself an election to proceed under the one or the
other. If Congress may provide that a license granted by it to sell
liquors shall not be construed to authorize the sale of such
liquors when prohibited by the laws of the state, as was held by
this Court in
McGuire v.
Massachusetts, 3 Wall. 387,
License Tax
Cases, 5 Wall. 463,
Commonwealth v. Crane,
158 Mass. 218,
Parvear v.
Massachusetts, 5 Wall. 475, we see no reason why
the state itself may not exercise the same power, and reserve to
itself the right to tax or prohibit, as in individual cases it may
see fit.
2. Coming now to the provisions for its enforcement, it is
entirely clear that, as to the person actually carrying on the
business, no notice of the assessment or levy of the tax is
necessary. If the person carries on the business, the imposition of
the tax follows as a matter of course. There is no discretion as to
the amount.
McMillen v. Anderson, 95 U. S.
37;
Hager v. Reclamation District, 111 U.
S. 701;
Turpin v. Lemon, 187 U. S.
51;
In re Smith, 104 Ia. 199.
It was within the power of the legislature to make the tax a
lien upon the property whereon the business was carried. If general
taxes upon real estate and specific taxes for improvements thereto,
including pavements, sidewalks, sewers, the opening of streets and
keeping them clean, may be made liens upon the property affected,
it is difficult to see why a tax
Page 196 U. S. 281
upon the business carried on upon such property may not be made
a lien as well as a claim against the owner. The owner is not only
chargeable with a knowledge of the law in respect thereto, but he
is presumed to know the business there carried on, and to have let
the property with knowledge that it might become encumbered by a
tax imposed upon such business.
Sheldon v. Van Buskirk, 2
N.Y. 473;
Brown Shoe Co. v. Hunt, 103 Ia. 586;
Polk
County v. Hierb, 37 Ia. 367;
State v. Snyder, 34 Kan.
425;
Hardten v. State, 32 Kan. 637;
Sears v.
Cottrell, 5 Mich. 251;
Waldron v. Lee, 5 Pick. 323;
Spencer v. M'Gowen & Shepard, 13 Wend. 256;
Simpson v. Serviss, 3 Ohio Court Decisions 433.
Acts of Congress impressing liens upon real estate for taxes or
penalties arising from business illegally carried on there have
been the frequent subject of controversy in this Court.
Conceding that the landowner is entitled to notice before he can
be personally liable, or before his property can be impressed with
a lien, we are of opinion that he is protected by sections 2441 and
2442, which permit him to make application at the meeting of the
board of supervisors next following the listing of the property,
the sessions of which board are fixed by law, Iowa Code, sec. 412,
to remit the tax. This application may be made at any time after
the property has been assessed, upon eight days' notice being given
to the county attorney. Witnesses are examined under oath before
the board, which determines by a majority vote whether the tax
shall stand or be remitted. If the petition be denied, the owner of
the property can appeal to the district court for a judicial
determination of his liability. This is sufficient. If the taxpayer
be given an opportunity to test the validity of the tax at any time
before it is made final, whether the proceedings for review take
place before a board having a
quasi-judicial character, or
before a tribunal provided by the state for the purpose of
determining such questions, due process of law is not denied. It
was held by this Court in
Pittsburgh &c. Ry. Co. v.
Backus, 154 U. S. 421,
154 U. S. 426,
that a hearing before
Page 196 U. S. 282
judgment, with full opportunity to present the evidence and the
arguments which the party deems important, is all that can be
adjudged vital.
See also King v. Mullins, 171 U.
S. 404.
In the amendment to the petition in this case, the landowner
states that she had no knowledge whatever that her real estate was
being used for the sale of cigarettes until after the assessment
was levied, and never consented to the same; that she resides in
Illinois, and rented the property through an agent, who had had no
knowledge himself of the sale of cigarettes upon the premises.
There is no allegation, however, that she did not have knowledge
within ample time to make application to the board of supervisors
for the remission of the tax. If such application had been made, it
would have been the duty of the board to take the matter into
consideration, and determine whether her want of knowledge would
justify the remission of the tax. It is not for us to determine
whether the defense be a valid one, since, having the opportunity
to make it, she declined to do so.
The question is made whether section 5007 violates the
Constitution of Iowa in not stating distinctly the tax and the
object to which it is to be applied; but as this is purely a local
question, we are not called upon to consider it.
Affirmed.
THE CHIEF JUSTICE, MR. JUSTICE BREWER, and MR. JUSTICE PECKHAM
dissented.