Pacific Insurance Company v. Soule, 74 U.S. 433 (1868)
U.S. Supreme CourtPacific Insurance Company v. Soule, 74 U.S. 7 Wall. 433 433 (1868)
Pacific Insurance Company v. Soule
74 U.S. (7 Wall.) 433
1. When a person whose income or other moneys subject to tax or duty has been received in coined money makes his return to the assessor, the 9th section of the Internal Revenue Act of July 13, 1866, is to be construed as denying to him the right to return the amount thereof in the currency in which it was actually received, and to pay the tax or duty thereon in legal tender currency, and is to be construed to require that the difference between coined money and legal tender currency shall be
statement of the case.
added to his return when made in coined money, and that he shall pay the tax or duty upon the amount thus increased.
2. The income tax or duties laid by §§ 105 and 120 of the Act of June 30, 1864, and the amendment thereto of July 13, 1866, upon the amounts insured, renewed, or continued by insurance companies upon the gross amounts of premiums received, and assessments made by them, and also upon dividends, undistributed sums, and income, is not "a direct tax," but a duty or excise.
The Constitution of the United States [Footnote 1] ordains thus:
"Direct taxes shall be apportioned among the several states which may be included within the Union, according to their respective numbers."
With this provision of the Constitution in existence, Congress, by an internal revenue act of June 30, 1864, [Footnote 2] amended by act of July 13, 1866, laid a certain tax upon the amounts insured, renewed, or continued by insurance companies; upon the gross amount of premiums received and assessments by them; and a tax also upon dividends, undistributed sums, and income. A portion of the ninth section of the Internal Revenue Act of July 13, 1866, [Footnote 3] and acts amendatory thereto, provide:
"That it shall be the duty of all persons required to make returns or lists of income, and articles or objects charged with an internal tax, to declare in such returns or lists whether the several rates and amounts therein contained are stated according to their values in legal tender currency, or according to their values in coined money; and in case of neglect or refusal so to declare to the satisfaction of the assistant assessor receiving such returns or lists, such assistant assessor is hereby required to make returns or lists of such persons neglecting or refusing, as in cases of persons neglecting or refusing to make the returns or lists required by the acts aforesaid, and to assess the duty
thereon, and to add thereto the amount of penalties imposed by law in cases of such neglect or refusal. And whenever the rates and amounts contained in the returns or lists as aforesaid, shall be stated in coined money, it shall be the duty of each assessor receiving the same, to reduce such rates and amounts to their equivalent in legal tender currency, according to the value of such coined money in said currency, for the time covered by said returns. And the lists required by law to be furnished to collectors by assessors shall in all cases contain the several amounts of taxes or duties assessed, estimated or valued in legal tender currency only."
Prior acts of Congress had authorized the issue of United States notes, commonly called legal tender notes. The act first authorizing their issue, an act of February 25, 1862, [Footnote 4] enacted:
"Such notes shall be receivable in payment of all taxes, internal duties, excises, debts, and demands of every kind due to the United States (except duties on imports), and of all claims and demands against the United States, of every kind whatsoever (except for interest on bonds and notes, which shall be paid in coin), and shall also be lawful money and a legal tender in payment of all debts public and private, within the United States (except duties on imports and interest as aforesaid). And such United States notes shall be received the same as coin at their par value, in payment of any loans that may be hereafter sold or negotiated by the Secretary of the Treasury, and may be reissued from time to time, as the exigencies of the public interests shall require."
With these acts in force, the Pacific Insurance Company, a corporation engaged in the business of insurance in California, made returns upon the amounts insured, renewed &c., by it, upon its premiums and assessments, and finally upon its dividends, undistributed sums, and income; all as required by the statute; the correctness of all the returns being conceded. The different sources of income thus returned had been received by the company in coined money
(the currency of California), and the amounts as returned were the amounts in that form of currency. The aggregate tax under the statute upon this sum of coin was $5,376. The assessor then (against the protest of the insurance company) added to the amounts as returned, the difference in value between legal tender currency and coined money during the time covered by the returns; and fixing the tax upon the sum as thus increased, the aggregate amount of the tax came to $7,365. The collector demanded payment of this sum. The company refused to pay the $7,365, but tendered the $5,376 in legal tender notes. The collector refusing this, and having seized and being about to sell the insurance company's property, the company paid the larger sum, $7,365, under protest. The suit below was to recover back the amount wrongly paid. The case coming on to be heard upon demurrer, the court was divided in opinion upon seven questions, reducible, as this Court considered, in substance to these two:
"1. Whether that portion of the ninth section of the internal revenue act of July, 1866, above quoted,"
"is to be construed as merely providing a rule as to the currency in which accounts, returns, and lists are to be stated, with a view to uniformity in keeping the accounts of internal revenue, or whether it is to be construed as denying to a person who has received in coined money, incomes or other moneys subject to tax or duty, the right to return the amount thereof in the currency in which it was actually received, and to pay the tax or duty thereon in legal tender currency, and be construed to require that the difference between coined money and legal tender currency shall be added to his return when made in coined money, and that he shall pay the tax or duty upon the amount thus increased?"
"2. (Sixth in the series.) Whether the taxes paid by the plaintiff, and sought to be recovered back in this action, are not direct taxes within the meaning of the Constitution? "