1. A tax laid by a state on the amount of sales of goods made by
an auctioneer is a tax on the goods so sold.
2. The statute of Pennsylvania of May 20, 1853, modified by that
of April 9, 1859, requiring every auctioneer to collect and pay
into the state treasury a tax on his sales is, when applied to
imported goods in the original packages, by him sold for the
importer, in conflict with secs. 8 and 10 of Art. I of the
Constitution of the United States, and therefore void as laying a
duty on imports and being a regulation of commerce.
This action, which was brought in the Court of Common Pleas of
Dauphin County, Pennsylvania, was tried by the court upon the
following case, stated in the nature of a special verdict.
The Commonwealth of Pennsylvania claims from the defendant,
Samuel C. Cook, who, by the governor, was duly appointed and
commissioned an auctioneer in and for the City of Philadelphia, the
sum of $757.83, for taxes due at one-half of one percent and
three-fourths of one percent, as per his report furnished to the
auditor general, and settlement made by the auditor general and
state treasurer, dated Jan. 3, 1871, upon sales made by him of
foreign goods placed in his hands by the importer, in bulk or
original packages, to be sold at auction as an auctioneer in the
original packages as imported, and which were so sold by him at
auction as an auctioneer. The commonwealth claims the said taxes
under the Act of Assembly entitled
"An Act to incorporate the Commercial Mutual Insurance Company
of Philadelphia, relative to the state duty on domestic and foreign
articles in the Counties of Philadelphia and Allegheny,"
&c., approved the twentieth day of May, 1853, P.L. 1853,
679, and under the Act of Assembly entitled
"An Act to modify the existing laws of the Commonwealth and to
provide more effectually for the collection of the state tax or
duty on auction sales in the City of Philadelphia and County of
Allegheny,"
approved April 9, 1859, P.L. 1859, 435.
The defendant claims that said sales of foreign goods are exempt
from taxation because said acts of assembly, so far as they relate
to such taxation, are in direct conflict with secs.
Page 97 U. S. 567
8 and 10 of Art. I of the Constitution of the United States, and
for that and other reasons void, and inasmuch as the foreign goods
so taxed as aforesaid were sold in bulk, as they were imported by
the importer, said defendant, Cook, acted simply as his
salesman.
That as the said goods had never been sold for consumption or
resale by the importer and had never been divided by him into
smaller quantities by breaking up the casks or packages in which
they were originally imported, the said goods had not lost their
character as imports, and therefore that any such tax is
unconstitutional and ought not to be levied.
That if the court should be of the opinion that the acts of
assembly are constitutional, then judgment should be entered for
the commonwealth, but if not, then for the defendant, Cook, costs
to follow the judgment and either party reserving the right to sue
out a writ of error.
The court being of the opinion that the defendant was properly
charged with the tax, and that the laws under which it was assessed
were constitutional, gave judgment in favor of the commonwealth.
That judgment having been affirmed by the Supreme Court of
Pennsylvania, Cook sued out this writ of error.
The statutes of Pennsylvania referred to in the case stated are
set out in the opinion of the Court.
Page 97 U. S. 569
MR. JUSTICE MILLER delivered the opinion of the Court.
The Act of the Legislature of Pennsylvania of May 20, 1853
(Pamphlet Laws, 683), declares that:
"The state duty to be paid on sales by auction in the Counties
of Philadelphia and Allegheny shall be on all domestic articles and
groceries, one-half of one percent; on foreign drugs, glass,
earthenware, hides, marble work, and dye woods, three-quarters of
one percent."
By the sixth section of the Act of April 9, 1859, the law was
modified, as follows:
"Said auctioneers shall pay into the treasury of the
commonwealth a tax or duty of one-fourth of one percent on all
sales of loans or stocks, and shall also pay into the treasury
aforesaid a tax or duty, as required by existing laws, on all other
sales to be made as aforesaid, except on groceries, goods, wares,
and merchandise of American growth or manufacture, real estate,
shipping, or livestock, and it shall be the duty of the auctioneer
having charge of such sales to collect and pay over to the state
treasurer the said duty or tax, and give a true and correct account
of the same quarterly, under oath or affirmation, in the form now
required by law."
Pamphlet Laws, 436.
The effect of this legislation is that by the first statute, a
discrimination of one-fourth of one percent is made against
Page 97 U. S. 570
foreign goods sold at auction, and by the last statute, while
all sales of foreign or imported goods are taxed, those arising
from groceries, goods, wares, and merchandise of American growth or
manufacture are exempt from such tax.
It appears that the law also required these auctioneers to take
out a license, to make report of such sales, and to pay into the
treasury the taxes on these sales.
The defendant refused to pay the tax for which he was liable
under this law for the sale of goods which had been imported and
which he had sold for the importers in the original packages. In
the suit, in which judgment was rendered against him in the Supreme
Court of Pennsylvania, he defended himself on the ground that these
statutes were void, because forbidden by secs. 8 and 10 of Art. I
of the Constitution of the United States.
The clauses referred to are those which give to Congress power
to regulate commerce with foreign nations and forbid a state,
without the consent of Congress, to levy any imposts or duties on
imports. The case stated shows that the goods sold by defendant
were imported goods, and that they were sold by him in the packages
in which they were originally imported. It is conceded by the
Attorney General of the state, that if the statute we have recited
is a tax on these imports, it is justly obnoxious to the objection
taken to it.
But it is argued that the authority of the auctioneer to make
any sales is derived from the state, and that the state can
therefore impose upon him a tax for the privilege conferred, and
that the mode adopted by the statute of measuring that tax is
within the power of the state. That being a tax on him for the
right or privilege to sell at auction, it is not a tax on the
article sold, that the amount of the sales made by him is made the
measure of the tax on that privilege. In support of this view, it
is said that the importer could himself have made sale of his goods
without subjecting the sale to the tax. The argument is fallacious,
because without an auctioneer's license, he could not have sold at
auction even his own goods. If he had procured or could have
procured a license, he would then have been subject by the statute
to the tax, for it makes no exception. By the express language of
the statute, the auctioneer
Page 97 U. S. 571
is to collect this tax and pay it into the treasury. From whom
is he to collect it if not from the owner of the goods? If the tax
was intended to be levied on the auctioneer, he would not have been
required first to collect it and then pay it over. It was, then, a
tax on the privilege of selling foreign goods at auction, for such
goods could only be sold at auction by paying the tax on the amount
of the sales.
The question as thus stated has long ago and frequently been
decided by this Court.
In
Passenger
Cases, 7 How. 283, a statute of New York was the
subject of consideration which required an officer of the City of
New York, called the Health Commissioner, to collect from the
master of every vessel from a foreign port, for himself and each
cabin passenger on board his vessel, one dollar and fifty cents,
and for each steerage passenger, mate, sailor, or mariner one
dollar. A statute of the State of Massachusetts was also considered
which enacted that no alien passengers (other than certain diseased
persons and paupers, provided for in a previous section) should be
permitted to land until the master, owner, consignee, or agent of
such vessel should pay to the regularly appointed boarding officers
the sum of two dollars for each passenger so landing. In both
instances, although the master or the owner of the vessel was made
to pay the sum demanded, it was held to be a tax on the passengers.
It was he whose loss it was when paid, and the burden rested
ultimately and solely on him. Mr. Chief Justice Taney said:
"It is demanded of the captain, and not from every separate
passenger, for the convenience of collection. But the burden
evidently falls on the passenger, and he in fact pays it either in
the enhanced price of his passage or directly to the captain before
he is allowed to embark for the voyage."
Because it was such a tax, the majority of the Court held it to
be unconstitutional and void.
In the case of
Crandall v. State of
Nevada, 6 Wall. 35, the state had passed a law
requiring those in charge of all the stage coaches and railroads
doing business in the state to make report of every passenger who
passed through the state or went out of it by their conveyances,
and to pay a tax of one dollar for every such passenger. The
argument was urged
Page 97 U. S. 572
there that the tax was laid on the business of the railroad and
stage coach companies, and the sum of one dollar exacted for each
passenger was only a mode of measuring the business to be taxed.
But the Court said, as in
Passenger Cases, that it was a
tax which must fall on the passenger and be paid by him for the
privilege of riding through the state by the usual vehicles of
travel.
In
Case of the State Freight
Tax, 15 Wall. 232, MR. JUSTICE STRONG said:
"The case presents the question whether the statute in question
-- so far as it imposes a tax upon freight taken up within the
state and carried out of it or taken up outside the state and
delivered within it or, in different words, upon all freight other
than that taken up and delivered within the state -- is not
repugnant to the provision of the Constitution of the United
States."
It was argued here again that the tax was one on the business
and franchises of the railroad companies which were required to pay
it, but the Court, reviewing the authorities, said that the inquiry
was upon what did the burden really rest, and not upon the question
from whom the state exacted payment into its treasury. This
language was abundantly supported by the cases concerning tax on
the national banks, namely
Bank of Commerce v. New York
City, 2 Black 620;
Bank Tax
Cases, 2 Wall. 200;
Society
for Savings v. Coite, 6 Wall. 594;
Provident
Institution v. Massachusetts, id., 611.
In
Henderson v. The Mayor, 92 U. S.
259, where the owners of vessels from a foreign port
were required to give a bond as security that every passenger whom
they landed should not become a burden on the state, or pay for
every such passenger a fixed sum, it was held to be in effect a tax
of that sum on the passenger, however disguised by the alternative
of a bond which would never be given. The Court said, that
"in whatever language a statute may be framed, its purpose must
be determined by its natural and reasonable effect, and if it is
apparent that the object of this statute, as judged by that
criterion, is to compel the owners of vessels to pay a sum of money
for every passenger brought by them from a foreign shore and landed
at the port of New York, it is as much a tax on passengers, if
collected from them, or a tax on
Page 97 U. S. 573
the vessel or owner for the exercise of the right of landing
their passengers in that city, as was the statute held void in the
Passenger Cases."
To the same effect, and probably more directly in point, is the
case of
Welton v. State of Missouri, 91 U. S.
275, decided at the same term. In that case, peddlers
were required, under a severe penalty, to take out a license and
those only were held to be peddlers who dealt in goods, wares, and
merchandise which were not of the growth, produce, or manufacture
of the state. The Court, after referring to the case of
Brown
v. Maryland, relied on by defendant here, adds:
"So, in like manner, the license tax exacted by the State of
Missouri from dealers in goods which are not the product or
manufacture of the state, before they can be sold from place to
place within the state, must be regarded as a tax upon such goods
themselves, and the question presented is whether legislation, thus
discriminating against the products of other states in the
conditions of their sale by a certain class of dealers, is valid
under the Constitution of the United States."
And it was decided that it was not.
See also Waring v. The
Mayor, 8 Wall. 110.
The tax on sales made by an auctioneer is a tax on the goods
sold within the terms of this last decision, and indeed within all
the cases cited, and when applied to foreign goods sold in the
original packages of the importer, before they have become
incorporated into the general property of the country, the law
imposing such tax is void as laying a duty on imports.
In
Woodruff v.
Parham, 8 Wall. 123, and
Hinson v.
Lott, id., 148, it was held that a tax laid by a
law of the state in such a manner as to discriminate unfavorably
against goods which were the product or manufacture of another
state was a regulation of commerce between the states forbidden by
the Constitution of the United States. The doctrine is reasserted
in the case of
Welton v. State of Missouri, supra. The
Congress of the United States is granted the power to regulate
commerce with foreign nations in precisely the same language as it
is that among the states. If a tax assessed by a state injuriously
discrimination against the products of a state of the Union is
forbidden by the Constitution, a similar tax against goods imported
from a foreign state is equally forbidden.
Page 97 U. S. 574
A careful reader of the history of the times which immediately
preceded the assembling of the convention that framed the American
Constitution cannot fail to discover that the need of some
equitable and just regulation of commerce was among the most
influential causes which led to its meeting. States having fine
harbors imposed unlimited tax on all goods reaching the Continent
through their ports. The ports of Boston and New York were far
behind Newport, in the State of Rhode Island, in the value of their
imports, and that small state was paying all the expenses of her
government by the duties levied on the goods landed at her
principal port. And so reluctant was she to give up this advantage
that she refused for nearly three years after the other twelve
original states had ratified the Constitution to give it her
assent.
In granting to Congress the right to regulate commerce with
foreign nations and among the several states and with the Indian
tribes, and in forbidding the states without the consent of that
body to levy any tax on imports, the framers of the Constitution
believed that they had sufficiently guarded against the dangers of
any taxation by the states which would interfere with the freest
interchange of commodities among the people of the different
states, and by the people of the states with citizens and subjects
of foreign governments.
The numerous cases in which this Court has been called on to
declare void statutes of the states which in various ways have
sought to violate this salutary restriction, show the necessity and
value of the constitutional provision. If certain states could
exercise the unlimited power of taxing all the merchandise which
passes from the port of New York through those states to the
consumers in the great West, or could tax -- as has been done until
recently -- every person who sought the seaboard through the
railroads within their jurisdiction, the Constitution would have
failed to effect one of the most important purposes for which it
was adopted.
A striking instance of the evil and its cure is to be seen in
the recent history of the states now composing the German Empire. A
few years ago, they were independent states, which, though lying
contiguous, speaking a common language, and belonging to a common
race, were yet without a common government.
Page 97 U. S. 575
The number and variety of their systems of taxation and lines of
territorial division, necessitating customs officials at every step
the traveler took or merchandise was transported, became so
intolerable that a commercial, though not a political, union was
organized called the German Zollverein. The great value of this
became so apparent, and the community of interest so strongly felt
in regard to commerce and traffic, that the first appropriate
occasion was used by these numerous principalities to organize the
common political government now known as the German Empire.
While there is perhaps no special obligation on this Court to
defend the wisdom of the Constitution of the United States, there
is the duty to ascertain the purpose of its provisions and to give
them full effect when called on by a proper case to do so.
The judgment of the Supreme Court of Pennsylvania will be
reversed and the case remanded for further proceedings in
conformity with this opinion, and it is
So ordered.