Under the Internal Revenue Act of June 30, 1864, as amended by
the Act of March 3, 1865, the sales of stocks, bonds, and
securities made by
"brokers" for themselves are subject to
the same duties as those made by them for others.
The Internal Revenue Act of 30 June, 1864, [
Footnote 1] declares by its 99th section as
follows:
"All
brokers and bankers doing business as brokers
shall be subject to pay the following duties and rates of duty upon
the sales of merchandise, produce, gold and silver bullion, foreign
exchange, promissory notes, stocks, bonds, or other securities
&c., and shall also be subject to all the provisions &c.,
of the act for making returns, assessments, and collection of the
duties."
The ninth paragraph of the 79th section says:
"Brokers shall pay $50 for each license. Every person, firm, or
company (except such as hold a license as banker)
Page 70 U. S. 442
whose business it is as a broker to NEGOTIATE purchases or sales
of stocks, exchange, bullion, coined money, bank notes, promissory
notes, or
other securities shall be regarded as a broker
[and shall make oath or affirmation that all their transactions are
made for a commission.]"
On the 3d March, 1865, Congress passed an act to amend the
former act. [
Footnote 2] This
last act amends the former by inserting, after the words
"other
securities" (given above in italics) the words "
for
themselves or others;" and by striking out from the paragraph
that part of it included above in brackets.
In this state of the statutes, as assumed by the court, Cutting
& Co., duly licensed as
"brokers," besides having
bought and sold stocks, bonds, and securities
for others,
had sold on their
own account other stocks, bonds, and
securities, of which they were themselves the owners at the time.
On these last they refused to pay any duty, and suit being
brought by the United States to recover the duty, the question
here, on error to the New York Circuit, was whether they had
refused rightfully -- in other words, whether one licensed as a
"broker" only was liable to pay duty on his own stocks sold on his
own account. The circuit court thought that he was not.
The case, which largely concerned, of course, both the
government and great numbers of persons in all our large cities,
was thoroughly and ably argued by Mr. Speed, A.G., for the United
States, and by Messrs. Allen Burrill, and Evarts,
contra.
The matter involving, however, nothing but the construction of a
statute of immense length hastily drawn of necessity in many of its
provisions and liable to be amended indefinitely, even the ability
which marked the discussion would not compensate the general reader
for the space which any presentation of it would require.
MR. JUSTICE GRIER delivered the opinion of the Court.
The Act of 30 June, 1864, is entitled "An act to provide
Page 70 U. S. 443
ways and means for the support of government and for other
purposes." It imposes specific taxes upon a large list of articles
manufactured or sold, and prescribes the mode of assessing and
collecting them. In addition to these, it imposes certain taxes on
all persons carrying on certain "trades or professions" enumerated.
The persons on whom this tax is assessed receive what is called a
"license," which is the evidence of permission to exercise such
trade or calling in consequence of payment of this tax or duty.
Among these is the trade or employment of broker, mentioned in the
ninth paragraph of the 79th section of the act. Brokers are
required to pay fifty dollars for a license. The act also defines
the term broker to "be one whose business it is to negotiate
purchases or sales of stocks, exchange, coined money, bank notes,
promissory notes, or other securities." Other species of the genus
broker are indicated by the affix to the general term, as well as
by special definition, such as "pawn brokers," "cattle brokers,"
&c. Besides, the tax paid by auctioneers and the different
species of brokers under form of a license or permission "to
prosecute their trade, business, or profession," they were required
to pay certain duties on the sales made by them respectively.
Being by means of these licenses brought within the cognizance
of the revenue officers and into a
quasi-official relation
with them, they were required to make "returns, assessment, and
collection of these duties," under certain penalties. By the 99th
section,
"All brokers and bankers doing business as brokers shall be
subject to pay the following duties and rates of duty upon this
sales of merchandise, produce, gold and silver bullion, foreign
exchange, promissory notes, stocks, bonds, or other securities
&c., and shall also be subject to all the provisions of the act
for making returns, assessments, and collection of the duties."
Now the 9th paragraph of the 79th section, after defining a
broker to be one "whose business it is, as a broker, to negotiate
purchases or sales," &c., required him also to make oath "that
all his transactions are made for a commission." This clause might
have been construed to forbid a licensed
Page 70 U. S. 444
broker to purchase or sell stocks &c., on his own account,
so that his sales being made through the interposition of another
broker, might be made liable to tax. But it has been construed to
release him from the necessity of making any return of sales made
for himself or from paying any tax on such sales.
But there was no good reason why these transactions in stocks,
bullion &c., by a broker, for his own profit, should not be
liable to the same tax or duty imposed on those made by him for
other parties. Besides, such construction gave great opportunities
of evading the tax altogether. To obviate this difficulty, an act
was passed on 3d of March, 1865, to amend the Act of 30 June, 1864.
Among other things it amends the ninth paragraph of section 79 by
inserting after the words "other securities" the words
"for
themselves or others" and by striking out from said paragraph
the words "and shall make oath or affirmation that all his
transactions are made for a commission."
The intention of this amendment might have been better provided
for by an amendment of the 99th section, but it cannot be doubted
that the meaning of the act was to subject sales made by a broker
for himself to the same tax as those made for others.
The definition of a broker will now read, in the section as
amended, "whose business it is, as broker, to negotiate purchases
or sales of stocks, exchange, bullion, coined money, bank notes,
promissory notes, or other securities,
for themselves or
others."
That it was the intention of Congress to subject the sales made
by brokers for themselves to the same duties as those made by them
for others cannot admit of a doubt, though it must be admitted
their intention is rather obscurely expressed.
The judgment below is reversed and a venire de novo
awarded.
[See the next case -- REP.]
[
Footnote 1]
13 Stat. at Large 218.
[
Footnote 2]
13 Stat. at Large 469.
