The rule that the general expressions of the Fourteenth
Amendment must not be allowed to upset familiar and long
established methods is applicable to stamp taxes which are
necessarily confined to certain classes of transactions, which, in
some points of view are similar to classes that escape.
Whether a tax on transfers of stock is equivalent to a tax on
the stock itself depends on the scope of the constitutional
provision involved and whatever may be the rights of parties
engaged in interstate commerce, a sale depends in part on the laws
of the state where made and that state may make the parties pay for
the help of its laws.
There must be a fixed mode of ascertaining a stamp tax, and
equality in the sense of actual value has to yield to practical
considerations and usage.
Page 204 U. S. 153
Although a statute, unconstitutional as to one is void as to
all. of a class, the party setting up in this Court the
unconstitutionality of a state tax law must belong to the class for
whose sake the constitutional protection is given, or the class
primarily protected.
The protection of the commerce clause of the federal
Constitution is not available to defeat a state stamp tax law on
transactions wholly within a state because they affect property
without that state, or because one or both of the parties
previously came from other states.
The tax of two cents a share imposed on transfers of stock, made
within that state, by the tax law of New York of 1905 does not
violate the equal protection clause of the Fourteenth Amendment as
an arbitrary discrimination because only imposed on transfers of
stock, or because based on par, and not market, value; nor does it
deprive nonresident owners of stock transferring, in New York,
shares of stock of nonresident corporations of their property
without due process of law; nor is it as to such transfers of stock
an interference with interstate commerce.
184 N.Y. 431 affirmed.
The facts, which involve the constitutionality of the stock
transfer law of the New York, are stated in the opinion.
Page 204 U. S. 156
MR. JUSTICE HOLMES delivered the opinion of the Court.
This is a writ of error to revise an order dismissing a writ
of
Page 204 U. S. 157
habeas corpus and remanding the relator to the custody of the
defendant in error. The order was made by a single justice and
affirmed successively by the appellate division of the supreme
court, 110 App.Div. 821, and by the Court of Appeals, 184 N.Y. 431.
The facts are these: the relator, Hatch, a resident of Connecticut,
sold in New York to one Maury, also a resident of Connecticut, but
doing business in New York, 100 shares of the stock of the Southern
Railway Company, a Virginia corporation, and 100 shares of the
stock of the Chicago, Milwaukee & St. Paul Railroad Company, a
Wisconsin corporation, and on the same day and in the same place
received payment and delivered the certificates, assigned in blank.
He made no memorandum of the sale and affixed to no document any
stamp, and did not otherwise pay the tax on transfers of stock
imposed by the New York Laws of 1905, c. 241. He was arrested on
complaint, and thereupon petitioned for this writ, alleging that
the law was void under the Fourteenth Amendment of the Constitution
of the United States.
The statute in question levies a tax of two cents on each
hundred dollars of face value of stock, for every sale or agreement
to sell the same, etc., to be paid by affixing and cancelling
stamps for the requisite amount to the books of the company, the
stock certificate, or a memorandum required in certain cases.
Failure to pay the tax is made a misdemeanor punishable by fine,
imprisonment, or both. There is also a civil penalty attached. The
petition for the writ sets up only the Fourteenth Amendment, as we
have mentioned, but both sides have argued the case under the
commerce clause of the Constitution, Art. I, § 8, as well, and we
shall say a few words on that aspect of the question.
It is true that a very similar stamp act of the United States,
the Act of June 13, 1898, c. 448, § 25, Schedule A, 30 Stat. 448,
458, U.S.Comp.Stat. 1901, p. 2300, was upheld in
Thomas v.
United States, 192 U. S. 363. But
it is argued that different considerations apply to the states, and
the tax is said to be bad under the Fourteenth Amendment
Page 204 U. S. 158
for several reasons. In the first place, it is said to be an
arbitrary discrimination. This objection to a tax must be
approached with the greatest caution. The general expressions of
the Amendment must not be allowed to upset familiar and long
established methods and processes by a formal elaboration of rules
which its words do not import.
See Michigan Central Railroad
Co. v. Powers, 201 U. S. 245,
201 U. S. 293.
Stamp acts necessarily are confined to certain classes of
transactions, and to classes which, considered economically or from
the legal or other possible points of view, are not very different
from other classes that escape. You cannot have a stamp act without
something that can be stamped conveniently. And it is easy to
contend that justice and equality cannot be measured by the
convenience of the taxing power. Yet the economists do not condemn
stamp acts, and neither does the Constitution.
The objection did not take this very broad form, to be sure. But
it was said that there was no basis for the separation of sales of
stock from sales of other kinds of personal property -- for
instance, especially, bonds of the same or other companies. But
bonds in most cases pass by delivery, and a stamp tax hardly could
be enforced.
See further Nicol v. Ames, 173 U.
S. 509,
173 U. S. 522.
In
Otis v. Parker, 187 U. S. 606,
practical grounds were recognized as sufficient to warrant a
prohibition, which did not apply to sales of other property, of
sales of stock on margin, although this same argument was pressed
with great force.
A fortiori do they warrant a tax on
sales which is not intended to discriminate against or to
discourage them, but simply to collect a revenue for the benefit of
the whole community in a convenient way.
It is urged further that a tax on sales is really a tax on
property, and that therefore the act, as applied to the shares of a
foreign corporation owned by nonresidents, is a taking of property
without due process of law.
Union Refrigerator Transit Co. v.
Kentucky, 199 U. S. 194.
This argument presses the expressions in
Brown v.
Maryland, 12 Wheat. 419,
25 U. S. 444;
Fairbank v. United States, 181 U.
S. 283, and intervening cases,
Page 204 U. S. 159
to new applications, and farther than they properly can be made
to go. Whether we are to distinguish or to identify taxes on sales
and taxes on goods depends on the scope of the constitutional
provision concerned.
Compare Foppiano v. Speed,
199 U. S. 501,
199 U. S. 520.
A tax on foreign bills of lading may be held equivalent to a tax on
exports as against Article I, § 9; a license tax on importers of
foreign goods may be held an unauthorized interference with
commerce, and yet it would be consistent to sustain a tax on sales
within the state as against the Fourteenth Amendment, so far as
that alone is concerned. Whatever the right of parties engaged in
commerce among the states, a sale depends in part on the law of the
state where it takes place for its validity and, in the courts of
that state at least, for the mode of proof. No one would contest
the power to enact a statute of frauds for such transactions.
Therefore, the state may make parties pay for the help of its laws,
as against this objection. A statute requiring a memorandum in
writing is quite as clearly a regulation of the business as a tax.
It is unnecessary to consider other answers to this point.
Yet another ground on which the owners of stock are said to be
deprived of their property without due process of law is the
adoption of the face value of the shares as the basis of the tax.
One of the stocks was worth $30.75 a share of the face value of
$100, the other $172. The inequality of the tax, so far as actual
values are concerned, is manifest. But, here again, equality in
this sense has to yield to practical considerations and usage.
There must be a fixed and indisputable mode of ascertaining a stamp
tax. In another sense, moreover, there is equality. When the taxes
on two sales are equal, the same number of shares is sold in each
case -- that is to say, the same privilege is used to the same
extent. Valuation is not the only thing to be considered. As was
pointed out by the Court of Appeals, the familiar stamp tax of two
cents on checks, irrespective of amount, the poll tax of a fixed
sum, irrespective of income or earning capacity, and many others,
illustrate the
Page 204 U. S. 160
necessity and practice of sometimes substituting count for
weight.
See Bell's Gap Railroad Co. v. Pennsylvania,
134 U. S. 232;
Merchants' & Manufacturers' Bank v. Pennsylvania,
167 U. S. 461.
Without going farther into a discussion which, perhaps, could have
been spared in view of the decision in
Thomas v. United
States, 192 U. S. 363, and
the constitutional restrictions upon Congress, we are of opinion
that the New York statute is valid so far as the Fourteenth
Amendment is concerned.
The other ground of attack is that the act is an interference
with commerce among the several states. Cases were imagined which,
it was said, would fall within the statute, and yet would be cases
of such commerce, and it was argued that, if the act embraced any
such cases it was void as to them, and, if void as to them, void
altogether, on a principle often stated.
United States v. Ju
Toy, 198 U. S. 253,
198 U. S. 262.
That the act is void as to transactions in commerce between the
states, if it applies to them, is thought to be shown by the
decisions concerning ordinances requiring a license fee from
drummers, so called, and the like.
Robbins v. Shelby County
Taxing District, 120 U. S. 489;
Stockard v. Morgan, 185 U. S. 27;
Rearick v. Pennsylvania, 203 U. S. 507.
But there is a point beyond which this Court does not consider
arguments of this sort for the purpose of invalidating the tax laws
of a state on constitutional grounds. This limit has been fixed in
many cases. It is that, unless the party setting up the
unconstitutionality of the state law belongs to the class for whose
sake the constitutional protection is given, or the class primarily
protected, this Court does not listen to his objections, and will
not go into imaginary cases, notwithstanding the seeming logic of
the position that it must do so, because if, for any reason, or as
against any class embraced, the law is unconstitutional, it is void
as to all.
Albany County v. Stanley, 105 U.
S. 305,
105 U. S. 311;
Clark v. Kansas City, 176 U. S. 114,
176 U. S. 118;
Lampasas v. Bell, 180 U. S. 276,
180 U. S.
283-284;
Cronin v. Adams, 192 U.
S. 108,
192 U. S. 114.
If the law is valid when confined to the
Page 204 U. S. 161
class of the party before the court, it may be more or less of a
speculation to inquire what exceptions the state court may read
into general words, or how far it may sustain an act that partially
fails. With regard to taxes, especially, perhaps it might be
assumed that the legislature meant them to be valid to whatever
extent they could be sustained, or some other peculiar principle
might be applied.
See, e.g., People's National Bank v.
Marye, 191 U. S. 272,
191 U. S.
283.
Whatever the reason, the decisions are clear, and it was because
of them that it was inquired so carefully in the drummer cases
whether the party concerned was himself engaged in commerce between
the states.
Stockard v. Morgan, 185 U. S.
27,
185 U. S. 30,
185 U. S. 35-36;
Caldwell v. North Carolina, 187 U.
S. 622;
Rearick v. Pennsylvania, supra.
Therefore, we begin with the same inquiry in this case, and it is
plain that we can get no farther. There is not a shadow of a ground
for calling the transaction described such commerce. The
communications between the parties were not between different
states, as in
Western Union Telegraph Co. v. Texas,
105 U. S. 460, and
the bargain did not contemplate or induce the transport of property
from one state to another, as in the drummer cases.
Rearick v.
Pennsylvania. The bargain was not affected in any way, legally
or practically, by the fact that the parties happened to have come
from another state before they made it. It does not appear that the
petitioner came into New York to sell his stock, as it was put on
his behalf. It appears only that he sold after coming into the
state. But we are far from implying that it would have made any
difference if he had come to New York with the supposed intent
before any bargain was made.
It is said that the property sold was not within the state. The
immediate object of sale was the certificate of stock present in
New York. That document was more than evidence, it was a
constituent of title. No doubt, in a more remote sense, the object
was the membership or share which the certificate conferred or made
attainable. More remotely still, it was an
Page 204 U. S. 162
interest in the property of the corporation, which might be in
other states than either the corporation or the certificate of
stock. But we perceive no relevancy in the analysis. The facts that
the property sold is outside of the state, and the seller and buyer
foreigners, are not enough to make a sale commerce with foreign
nations or among the several states, and that is all that there is
here. On the general question, there should be compared with the
drummer cases the decisions on the other side of the line.
Nathan v.
Louisiana, 8 How. 73;
Woodruff
v. Parham, 8 Wall. 123;
Brown v. Houston,
114 U. S. 622;
Ement v. Missouri, 156 U. S. 296. A
tax is not an unconstitutional regulation in every case where an
absolute prohibition of sales would be one.
American Steel
& Wire Co. v. Speed, 192 U. S. 500. We
think it unnecessary to explain at greater length the reasons for
our opinion that the petitioner has suffered no unconstitutional
wrong.
Order affirmed.