A so-called "pick-up man" in a type of lottery called the
"numbers game," who has no proprietary interest in the enterprise
and acts merely as a messenger transmitting records of wagers from
the "writer" (an agent who accepts wagers from the bettors) to the
"banker" (the principal for whom the wagers are accepted), is not
"engaged in receiving wagers for or on behalf of any person" within
the meaning of Subchapter B of Chapter 27A of the Internal Revenue
Code of 1939, 26 U.S.C. (1952 ed.) § 3290, and, therefore, is not
subject to the annual $50 special occupational tax imposed by that
Subchapter. Pp.
354 U. S.
351-360.
236 F.2d 182 affirmed.
MR. JUSTICE HARLAN delivered the opinion of the Court.
The question before us is whether the respondent, a so-called
"pick-up man" in a type of lottery called the "numbers game," is
subject to the annual $50 special occupational tax enacted by
Subchapter B of Chapter 27A (Wagering Taxes) of the Internal
Revenue Code of 1939, 65 Stat. 529, 530, 26 U.S.C. §3285
et
seq.
Page 354 U. S. 352
As will be seen from the statute, whose material parts are
printed in the margin, [
Footnote
1] this Chapter of the 1939 Code enacts two kinds of wagering
taxes: (1) An excise tax, imposed by § 3285(d) on persons "engaged
in the business of accepting wagers," and (2) a special
occupational tax, imposed by § 3290 not only on persons who are
subject
Page 354 U. S. 353
to the excise tax, being "engaged in the business," but also on
those who are "engaged in receiving wagers" on behalf of one
subject to the excise tax. By definition, the "numbers game" is
among the wagering transactions included in the statute.
At the outset, we must understand some professional gambling
terminology which has been given us by the parties. A numbers game
involves three principal functional types of individuals: (1) the
"banker," who deals in the numbers and against whom the player
bets; (2) the "writer," who, for the banker, does the actual
selling of the numbers to the public, and who records on triplicate
slips the numbers sold to each player and the amount of his wager;
and (3) the "pick-up man," who collects wagering slips [
Footnote 2] from the writer and
delivers them to the banker. If there are winnings to be
distributed, the banker delivers the required amount to the writer,
who in turn pays off the successful players.
The respondent here was a pick-up man for a Philadelphia banker,
receiving for his services a salary of $40 a week, but having no
proprietary interest in this numbers
Page 354 U. S. 354
enterprise. He was convicted, after a jury trial in the United
States District Court for the Eastern District of Pennsylvania, of
failing to pay the § 3290 occupational tax, and was fined $1,000.
[
Footnote 3] The Court of
Appeals reversed by a divided court, 236 F.2d 182, and, upon the
Government's petition, we granted certiorari, 352 U.S. 864, to
resolve the conflict between the decision below and that of the
Court of Appeals for the Fifth Circuit in
Sagonias v. United
States, 223 F.2d 146, as to the scope of § 3290. For reasons
given hereafter, we consider that the Court of Appeals in this case
took the correct view of this statute.
The nub of the Court of Appeals' holding was put in the
following language, with which we agree:
"In normal usage of familiar language, 'receiving wagers' is
what someone on the 'banking' side of gambling does in dealing with
a bettor. Placing and receiving a wager are opposite sides of a
single coin. You can't have one without the other. (The court here
referred to the definition of 'wager' contained in § 3285(b)(1)(C);
note 1,
supra.) Before the pick-up man enters the picture
in such a case as we have here, the wager has been received
physically by the writer and, in legal contemplation, by the
writer's principal as well. The government recognizes -- and in an
appropriate case no doubt would insist -- that what the writer does
in relation to the bettor amounts to 'receiving a wager.' Thus, the
government has to argue that the wager is received a second time
when the writer hands the yellow slip to the pick-up man. But we
think this ignores the very real difference between a wager and a
record of a wagering transaction. It is the banking record, and
Page 354 U. S. 355
not the wager, which the pick-up man receives from the writer
and transmits to the bank. The pick-up man no more receives wagers
than a messenger, who carries records of customer transactions from
a branch bank to a central office, receives deposits."
236 F.2d at 184-185.
We do not think that either the language or purpose of this
statute, as revealed by its legislative history, supports the
position of the Government. When the phrase "receiving wagers" is
read in conjunction with § 3285(b)(1), which defines "wager" in
terms of the "placing" of a bet in connection with any of the kinds
of wagering transactions embraced in the statute, [
Footnote 4] it seems evident that the Court
of Appeals was quite correct in regarding the "placing" and
"receiving" of a wager as being "opposite sides of a single coin."
[
Footnote 5] In other words, we
think that, as used in §3290, the term "receiving" a wager is
synonymous with "accepting" a wager; [
Footnote 6] that it is the making of a gambling contract,
not the transportation of a piece of paper, to which the statute
refers; and hence that, in such a case as this, it is the writer,
and not the pick-up man, who is "engaged in receiving wagers"
within the meaning of § 3290.
Page 354 U. S. 356
We consider the legislative history of the statute, such as it
is, to be fully consistent with this interpretation of § 3290. In
the Senate and House Reports on the bill, it is stated:
". . . A person is considered to be in the business of accepting
wagers if he is engaged as a principal who, in accepting wagers,
does so on his own account. The principals in such transactions are
commonly referred to as 'bookmakers,' although it is not intended
that any technical definition of 'bookmaker,' such as the
maintenance of a handbook or other device for the recording of
wagers, be required.
It is intended that a wager be considered
as 'placed' with a principal when it has been placed with another
person acting for him. Persons who receive bets for principals are
sometimes known as 'bookmakers' agents' or as 'runners.' . .
."
"
* * * *"
"As in the case of bookmaking transactions,
a wager will be
considered as 'placed' in a pool or in a lottery whether placed
directly with the person who conducts the pool or lottery or with
another person acting for such a person."
H.R.Rep. No. 586, 82d Cong., 1st Sess. 56; S.Rep. No. 781, 82d
Cong., 1st Sess. 114 (emphasis added). Again, in the case of a
numbers game, this indicates that Congress regarded the "placing"
or a wager as being complemented by its "receipt" by the banker or
by one acting for him in that transaction, that is, the writer and
not the pick-up man.
Nor, contrary to what the Government contends, can we see
anything in the registration provisions of § 3291 which points to
the pick-up man as being considered a "receiver" of wagers. Those
provisions simply provide that one liable for any tax imposed by
the statute must
Page 354 U. S. 357
register his name and address with the collector of the
district, and require in addition, (a) as to those subject to the §
3285 excise tax, the registration of the name and address "of each
person who is engaged in receiving wagers for him or on his
behalf," and (b) as to those subject to the § 3290 occupational
tax, the registration of the name and address of each person for
whom they are "engaged in receiving wagers." [
Footnote 7] It is doubtless true that these
provisions, as well as the occupational tax itself, [
Footnote 8] were designed at least in part to
facilitate collection of the excise tax. It is likewise plausible
to suppose, as the Government suggests, that the more participants
in a gambling enterprise are swept within these provisions, the
more likely it is that information making possible the collection
of excise taxes will be secured. The fact remains, however, that
Congress did not choose to subject all employees of gambling
enterprises to the tax and reporting requirements, but was content
to impose them on persons actually "engaged in receiving wagers."
Neither we nor the Commissioner may rewrite the statute simply
because we may feel that the scheme it creates could be improved
upon. [
Footnote 9]
Page 354 U. S. 358
We can give no weight to the Government's suggestion that
holding the pick-up man to be no subject to this tax will defeat
the policy of the statute because its enactment was "in part
motivated by a congressional desire to suppress wagering."
[
Footnote 10] The statute
was passed, and its constitutionality was upheld, as a revenue
measure,
United States v. Kahriger, 345 U. S.
22, and, apart from all else, in construing it, we would
not be justified in resorting to collateral motives or effects
which, standing apart from the federal taxing power, might place
the constitutionality of the statute in doubt.
See id. at
345 U. S.
31.
Finally, the Government points to the fact that the Treasury
Regulations relating to the statute purport to include the pick-up
man among those subject to the § 3290 tax, [
Footnote 11] and argues (a) that this
constitutes an administrative interpretation to which we should
give weight in construing the statute, particularly because (b)
section 3290 was carried over
in haec verba into § 4411 of
the Internal Revenue Code of 1954. We find neither argument
persuasive. In light of the above discussion,
Page 354 U. S. 359
we cannot but regard this Treasury Regulation as no more than an
attempted addition to the statute of something which is not there.
[
Footnote 12] As such, the
regulation can furnish no sustenance to the statute.
Koshland
v. Helvering, 298 U. S. 441,
298 U. S.
446-447. Nor is the Government helped by its argument as
to the 1954 Code. The regulation had been in effect for only three
years, [
Footnote 13] and
there is nothing to indicate that it was ever called to the
attention of Congress. The reenactment of § 3290 in the 1954 Code
was not accompanied by any congressional discussion which throws
light on its intended scope. In such circumstances, we consider the
1954 reenactment to be without significance.
Commissioner v.
Glenshaw Glass Co., 348 U. S. 426,
348 U. S.
431.
In conclusion, we cannot accept the alternative reasoning of the
dissenting judge below who, relying on that part of the opinion in
Daley v. United States, 231 F.2d 123, 128, relating to the
trial court's charge to the jury in a prosecution for failing to
pay the § 3285 excise tax, [
Footnote 14]
Page 354 U. S. 360
regarded the respondent's conviction here as sustainable also on
the theory that he was a person "engaged in the business of
accepting wagers" within the meaning of § 3285(d). The Government
disclaims this ground for upholding the respondent's conviction, as
indeed it must, in light of the unambiguous legislative history
showing that the excise tax applies only to one who is "engaged in
the business of accepting wagers" as a "principal . . . on his own
account." [
Footnote 15] In
this instance, that means the banker, as the Government
concedes.
We hold, therefore, that the occupational tax imposed by §3290
does not apply to this respondent as a pick-up man, and that the
judgment below must accordingly be
Affirmed.
MR. JUSTICE WHITTAKER took no part in the consideration or
decision of this case.
[
Footnote 1]
"
SUBCHAPTER A -- TAX ON WAGERS"
"SEC. 3285. TAX."
"(a) WAGERS. There shall be imposed on wagers, as defined in
subsection (b), an excise tax equal to 10 per centum of the amount
thereof."
"(b) DEFINITIONS. For the purposes of this chapter --"
"(1) The term 'wager' means (A) any wager with respect to a
sports event or a contest placed with a person engaged in the
business of accepting such wagers, (B) any wager placed in a
wagering pool with respect to a sports event or a contest, if such
pool is conducted for profit, and (C) any wager placed in a lottery
conducted for profit."
"(2) The term 'lottery' includes the numbers game. . . ."
"
* * * *"
"(d) PERSONS LIABLE FOR TAX. -- Each person who is engaged in
the business of accepting wagers shall be liable for and shall pay
the tax under this subchapter on all wagers placed with him. Each
person who conducts any wagering pool or lottery shall be liable
for and shall pay the tax under this subchapter on all wagers
placed in such pool or lottery."
"
* * * *"
"
SUBCHAPTER B -- OCCUPATIONAL TAX"
"SEC. 3290. TAX."
"A special tax of $50 per year shall be paid by each person who
is liable for tax under subchapter A or who is engaged in receiving
wagers for or on behalf of any person so liable."
"SEC. 3291. REGISTRATION."
"(a) Each person required to pay a special tax under this
subchapter shall register with the collector of the district
--"
"(1) his name and place of residence;"
"(2) if he is liable for tax under subchapter A, each place of
business where the activity which makes him so liable is carried
on, and the name and place of residence of each person who is
engaged in receiving wagers for him or on his behalf; and"
"(3) if he is engaged in receiving wagers for or on behalf of
any person liable for tax under subchapter A, the name and place of
residence of each such person."
"
* * * *"
"SEC. 3294. PENALTIES."
"(a) FAILURE TO PAY TAX. -- Any person who does any act which
makes him liable for special tax under this subchapter, without
having paid such tax, shall, besides being liable to the payment of
the tax, be fined not less than $1,000 and not more than
$5,000."
65 Stat. 529, 530, 26 U.S.C. §§ 3285-3294.
[
Footnote 2]
The pick-up man collects the "yellow" copy. The "tissue" copy is
given to the player when he places his bet, and the "white" copy is
retained by the writer.
[
Footnote 3]
137 F. Supp. 816.
[
Footnote 4]
See note 1
supra.
[
Footnote 5]
That the "placing" and "receiving" of a wager should be regarded
as simply complementing one another is recognized by Treasury
Regulations 132, § 325.24(a) of which states:
". . . Any wager or contribution received by an agent or
employee on behalf of such person [one in the business of accepting
wagers or operating a wagering pool or lottery] shall be considered
to have been accepted by and placed with such person."
26 CFR, 1957 Cum.Pocket Supp., § 325.24(a).
[
Footnote 6]
Indeed, the information filed against the respondent, which
charged him with failing to pay the § 3290 occupational tax,
alleged that he "did accept," not that he "did receive," wagers.
137 F. Supp. at 817, note 1.
[
Footnote 7]
See note 1
supra.
[
Footnote 8]
H.R.Rep. No. 586, 82d Cong., 1st Sess. 60; S.Rep. No. 781, 82d
Cong., 1st Sess. 118 (1951).
[
Footnote 9]
We do not consider as illuminating, on the issue before us, the
statement in the House and Senate Reports cited in
note 8 supra, to the effect that
"Enforcement of a tax on wagers frequently will necessitate the
tracing of transactions through complex business relationships,
thus requiring the identification of the various steps
involved."
This general statement, not necessarily referring to the numbers
game or to mere delivery systems, as distinguished from
arrangements for the "lay-off" of bets by gambling principals, is
not helpful in interpreting § 3290 in relation to the numbers game
and "pick-up men."
Cf. Federal Communications Commission v.
Columbia Broadcasting System of Calif., Inc., 311 U.
S. 132,
311 U. S. 136.
We think the same is true of the statements of Representative Reed,
97 Cong.Rec. 6896, and of Senator Kefauver, 97 Cong.Rec.
12231-12232, relied on by the Government. The significance of
Senator Kefauver's statement is further limited by the fact that he
was an opponent of the bill.
See Mastro Plastics Corp. v. Labor
Board, 350 U. S. 270,
350 U. S.
288.
[
Footnote 10]
See 97 Cong.Rec. 6892, 12236, referred to in
United
States v. Kahriger, 345 U. S. 22,
345 U. S. 27,
note 3.
[
Footnote 11]
Treas.Reg. 132, § 325.41, Example 2 (26 CFR, 1957 Cum. Pocket
Supp.), which was issued on November 1, 1951 (16 Fed.Reg. 11211,
11222), provides as follows:
"B operates a numbers game. He has an arrangement with ten
persons, who are employed in various capacities, such as
bootblacks, elevator operators, newsdealers, etc., to receive
wagers from the public on his behalf. B also employs a person to
collect from his agents the wagers received on his behalf."
"B, his ten agents, and the employee who collects the wagers
received on his behalf are each liable for the special tax."
[
Footnote 12]
Apart from this, the force of this Treasury Regulations as an
aid to the interpretation of the statute is impaired by its own
internal inconsistency. Thus, while Example 2 of that regulation
purports to make the pick-up man liable for the § 3290 occupational
tax, Example 1 of the same regulation provides that "a secretary
and bookkeeper" of one "engaged in the business of accepting horse
race bets" are not liable for the occupational tax "unless they
also receive wagers" for the person so engaged in business,
although those who "receive wagers by telephone" are so liable.
Thus, in this instance, a distinction seems to be drawn between the
"acceptance" of the wager, and its "receipt" for recording
purposes. But if this be proper, it is not apparent why the same
distinction is not also valid between a writer, who "accepts" or
"receives" a bet from a numbers player, and a pick-up man, who
simply "receives" a copy of the slips on which the writer has
recorded the bet, and passes it along to the banker.
[
Footnote 13]
See note 11
supra.
[
Footnote 14]
See the dissenting judge's opinion below, 236 F.2d 182,
185-186. The sufficiency of the instructions to the jury in
Daley apparently was not challenged on appeal. In any
event, the
Daley case was not concerned with a pick-up
man, nor was the legislative history quoted at p.
354 U. S. 356,
supra, brought to the court's attention. The court in the
Sagonias case,
supra, which accepted the
Government's contention as to the meaning of "receiving wagers,"
rejected the construction of the statute embodied in the
instructions to the jury quoted in
Daley.
[
Footnote 15]
See p.
354 U. S. 356,
supra.
MR. JUSTICE BURTON, dissenting.
For the reasons stated in
Sagonias v. United States,
223 F.2d 146, I believe that the respondent pickup man was "engaged
in receiving wagers for and on behalf" of the banker, within the
meaning of §§ 3290 and 3291(a)(3), and therefore was required to
pay the occupational tax and to register not only his name and
place of residence, but that of the banker.
Page 354 U. S. 361
The language of § 3290 does not limit the occupational tax to
persons "accepting wagers" in a contractual sense. Instead, it
imposes the tax on "each person . . . who is engaged in receiving
wagers for or on behalf of any person so liable [for the excise
tax]." Those words readily include a pickup man, for he is engaged
in receiving for the banker the slips which provide the banker with
the sole evidence of the wagers made.
The legislative history contains specific references that
indicate that the section was to apply to bookmakers' agents or
runners. [
Footnote 2/1] It shows
that the occupational tax was enacted not only as a revenue measure
on its own account, but as a measure to help enforce the much
larger excise tax placed by § 3285 upon the principal operator of
the gambling enterprise. [
Footnote
2/2] To this end, §3291(a)(1) and (3) requires each person who
is subject to the occupational tax to register not only his own
name and place of residence, but also that of the person for whom
he is receiving wagers. Registration of the pickup man aids the
Government in tracking these gambling operations to their
headquarters, and is essential to the enforcement of the excise
tax. Since the "receiving wagers" phrase in the registration
provisions includes the pickup man, it must have the same meaning
in the identical provisions imposing the occupational tax.
Furthermore, the administrative interpretation of § 3290 is
significant. Since the enactment of the section
Page 354 U. S. 362
in 1951, there has been in effect the following explanation of
its scope in Treasury Regulations 132:
"
Example (2). B operates a numbers game. He has an
arrangement with ten persons who are employed in various capacities
such as bootblacks, elevator operators, news dealers, etc., to
receive wagers from the public on his behalf. B also employs a
person to collect from his agents the wagers received on his
behalf."
"B, his ten agents,
and the employee who collects the wagers
received on his behalf are each liable for the special
tax."
(Emphasis supplied.) 26 CFR, 1957 Cum.Pocket Supp., §325.41.
This regulation should not be disregarded unless shown to be
plainly inconsistent with the statute.
Commissioner v.
Wheeler, 324 U. S. 542,
324 U. S. 547;
Brewster v. Gage, 280 U. S. 327,
280 U. S. 336.
Moreover, Congress reenacted § 3290 in 1954 as 26 U.S.C. (Supp. II)
§ 4411. It thus impliedly accepted this established interpretation
of the scope of the section.
Corn Products Refining Co. v.
Commissioner, 350 U. S. 46,
350 U. S. 53;
Helvering v. Winmill, 305 U. S. 79,
305 U. S.
83.
[
Footnote 2/1]
H.R.Rep. No. 586, 82d Cong., 1st Sess. 56; S.Rep. No. 781, 82d
Cong., 1st Sess. 114; 97 Cong.Rec. 6896 (Representative Reed);
id. at 12231-12232 (Senator Kefauver). In this connection,
it should be noted that the opinion of the court below states that
"The
numbers banker,' even as bankers and brokers in reputable
commerce, employs salaried runners and messengers. These
couriers are called `pick-up men.'" (Emphasis supplied.) 236 F.2d
182, 184.
[
Footnote 2/2]
H.R.Rep. No. 586, 82d Cong., 1st Sess. 60; S.Rep. No. 781, 82d
Cong., 1st Sess. 118.