Opinion · Supreme Court of the United States

United States v. Sanchez

United States v. Sanchez, 340 U.S. 42 (1950)

Type
Opinion
Court
Supreme Court of the United States
Jurisdiction
Federal
Date
1950-11-13
Topic
general

How later courts describe this case

  • noting penalty, severe in relation to tax, did not alter civil character of act where based on presumption tax would not realistically be paid
  • upholding a federal lax (now repealed) of $100 per ounce on transfers of marijuana
  • upholding Marihuana Tax Act and noting that “[i]t is beyond serious question that a tax does not cease to be valid merely because it regulates, discourages, or even definitely deters the activities taxed”
  • even a tax with “regulatory character and prohibitive burden” “does not cease to be valid merely because it regulates, discourages, or even definitely deters the activities taxed”
  • “[A] tax does not cease to be valid merely because ... the revenue purpose of the tax may be secondary .... ”
  • "A tax does not cease to be valid merely because it regulates, discourages, or even definitely deters the activities taxed" or because "negligible revenue" is raised.
  • where Supreme Court upheld the Federal Marihuana Tax Act, which, in contrast to G. L. c. 64K, contemplated lawfully regulated dealings in marihuana
  • sustaining the $100-per-ounce federal tax on marijuana

Citator

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Cited by
160 opinions

Headnotes

  1. Constitutional Law — Taxing Power A tax does not cease to be a valid exercise of Congress's taxing power merely because it regulates, discourages, or even definitively deters the activities taxed. 340 U.S. at 44
  2. Constitutional Law — Taxing Power A tax may be valid even though the revenue obtained is negligible or the revenue purpose is secondary to a regulatory purpose. 340 U.S. at 44
  3. Constitutional Law — Taxing Power A tax statute does not necessarily fall because it touches on activities that Congress might not otherwise be able to regulate directly; courts have long sustained taxes imposed with the collateral intent of effecting ulterior ends beyond Congress's direct constitutional power. 340 U.S. at 44
  4. Constitutional Law — Taxing Power The $100-per-ounce tax imposed on transferors of marihuana who transfer to unregistered transferees without the required order form and without payment of the tax is a legitimate exercise of Congress's taxing power notwithstanding its collateral regulatory purpose and effect. 340 U.S. at 44-45
  5. Constitutional Law — Civil vs. Criminal Sanctions A tax levy is properly characterized as civil rather than criminal where the tax liability is not conditioned on the commission of a crime, resting instead on the transferee's failure to pay the tax, and where Congress provided civil procedures for its collection. 340 U.S. at 45
  6. Constitutional Law — Civil vs. Criminal Sanctions The civil character of a tax is not altered by the severity of the tax imposed on unregistered transferees relative to that imposed on registered transferees, where the difference has a rational foundation. 340 U.S. at 45-46
  7. Constitutional Law — Taxing Power Imposing equally severe tax burdens on transferors is reasonably adapted to secure payment of the tax by transferees or to stop transfers to unregistered persons, and to provide an additional source from which the expense of unearthing clandestine transfers can be recovered. 340 U.S. at 46
UNITED STATESv. SANCHEZ,340 U.S. 42(1950)
71 S.Ct. 108
UNITED STATESv. SANCHEZ ET AL.
APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE
NORTHERN DISTRICT OF ILLINOIS.
No. 81.
Argued October 20, 1950.
Decided November 13, 1950.
1. The tax of $100 per ounce imposed by § 2590 of the Internal Revenue Code on transferors of marihuana who make transfers to unregistered transferees without the order form required by § 2591 and without payment by the transferees of the tax imposed by § 2590 is a valid exercise of the taxing power of Congress, notwithstanding its collateral regulatory purpose and effect. Pp. 44-45.
(a) A tax is not invalid merely because it regulates, discourages or deters the activities taxed; nor because the revenue obtained is negligible or the revenue purpose is secondary. P. 44.
(b) A tax is not invalid merely because it affects activities which Congress might not otherwise regulate. P. 44.


2. The tax levied by § 2590(a)(2) is not conditioned on the commission of a crime, and it may properly be treated as a civil rather than a criminal sanction. Pp. 45-46.
(a) That Congress provided civil procedure for collection indicates its intention that the levy be treated as civil in character. P. 45.
(b) The civil character of the tax of $100 per ounce imposed by § 2590(a)(2) is not altered by its severity in relation to the tax of $1 per ounce levied by § 2590(a)(1). Pp. 45-46.
(c) The imposition by § 2590(b) of liability on transferors is reasonably adapted to secure payment of the tax by transferees or stop transfers to unregistered persons, as well as to provide an additional source from which the expense of unearthing clandestine transfers can be recovered. Pp. 45-46.


Reversed.
The United States brought suit in the District Court to
recover taxes alleged to be due under the Marihuana Tax
Act,50 Stat. 551, now 26 U.S.C. § 2590et seq. Defendants'
motion to dismiss, attacking the constitutionality of
the tax, was granted by the District Court. On direct
appeal to this Court,reversed, p. 46.
Page 43
Philip Elmanargued the cause for the United States. With him on the brief wereSolicitor General Perlman,Assistant Attorney General Caudle, Ellis N. SlackandMelva M. Graney.

No appearance for appellees.
MR. JUSTICE CLARK delivered the opinion of the Court.
This is a direct appeal,28 U.S.C. § 1252, from dismissal by the District Court of a suit for recovery of $8,701.65 in taxes and interest alleged to be due under § 7(a)(2) of the Marihuana Tax Act,50 Stat. 551, now § 2590(a)(2) of the Internal Revenue Code. 26 U.S.C. § 2590 (a)(2). In their motion to dismiss, which was granted without opinion, defendants attacked the constitutionality of this subsection on the ground that it levied a penalty, not a tax. The validity of this levy is the issue here.

In enacting the Marihuana Tax Act, the Congress had two objectives: "First, the development of a plan of taxation which will raise revenue and at the same time render extremely difficult the acquisition of marihuana by persons who desire it for illicit uses and, second, the development of an adequate means of publicizing dealings in marihuana in order to tax and control the traffic effectively." S. Rep. No. 900, 75th Cong., 1st Sess. 3. To the same effect, see H.R. Rep. No. 792, 75th Cong., 1st Sess. 2.

Pursuant to these objectives, § 3230 of the Code imposes a special tax ranging from $1 to $24 on "every person who imports, manufactures, produces, compounds, sells, deals in, dispenses, prescribes, administers, or gives away marihuana." For purposes of administration, § 3231 requires such persons to register at the time of the payment of the tax with the Collector of the District in which theirPage 44businesses are located. The Code then makes it unlawful — with certain exceptions not pertinent here — for any person to transfer marihuana except in pursuance of a written order of the transferee on a blank form issued by the Secretary of the Treasury. § 2591. Section 2590 requires the transferee at the time he applies for the order form to pay a tax on such transfer of $1 per ounce or fraction thereof if he has paid the special tax and registered, § 2590(a)(1), or $100 per ounce or fraction thereof if he has not paid the special tax and registered. § 2590(a)(2). The transferor is also made liable for the tax so imposed, in the event the transfer is made without an order form and without the payment of the tax by the transferee. § 2590(b). Defendants in this case are transferors.

It is obvious that § 2590, by imposing a severe burden on transfers to unregistered persons, implements the congressional purpose of restricting traffic in marihuana to accepted industrial and medicinal channels. Hence the attack here rests on the regulatory character and prohibitive burden of the section as well as the penal nature of the imposition. But despite the regulatory effect and the close resemblance to a penalty, it does not follow that the levy is invalid.First. It is beyond serious question that a tax does not cease to be valid merely because it regulates, discourages, or even definitely deters the activities taxed.Sonzinskyv.United States,300 U.S. 506,513-514(1937). The principle applies even though the revenue obtained is obviously negligible,Sonzinskyv.United States, supra, or the revenue purpose of the tax may be secondary,HamptonCo. v.United States,276 U.S. 394(1928). Nor does a tax statute necessarily fall because it touches on activities which Congress might not otherwise regulate. As was pointed out inMagnano Co. v.Hamilton,292 U.S. 40,47(1934):Page 45
"From the beginning of our government, the courts have sustained taxes although imposed with the collateral intent of effecting ulterior ends which, considered apart, were beyond the constitutional power of the lawmakers to realize by legislation directly addressed to their accomplishment."


These principles are controlling here. The tax in question is a legitimate exercise of the taxing power despite its collateral regulatory purpose and effect.Second. The tax levied by § 2590(a)(2) is not conditioned upon the commission of a crime. The tax is on the transfer of marihuana to a person who has not paid the special tax and registered. Such a transfer is not made an unlawful act under the statute. Liability for the payment of the tax rests primarily with the transferee; but if he fails to pay, then the transferor, as here, becomes liable. It is thus the failure of the transferee to pay the tax that gives rise to the liability of the transferor. Since his tax liability does not in effect rest on criminal conduct, the tax can be properly called a civil rather than a criminal sanction. The fact Congress provided civil procedure for collection indicates its intention that the tax be treated as such.Helveringv.Mitchell,303 U.S. 391(1938). Moreover, the Government is seeking to collect the levy by a judicial proceeding with its attendant safeguards. CompareLipkev.Lederer,259 U.S. 557(1922);Tovarv.Jarecki,173 F.2d 449(C.A. 7th Cir. 1949).

Nor is the civil character of the tax imposed by § 2590(a)(2) altered by its severity in relation to that assessed by § 2590(a)(1). The difference has a rational foundation. Unregistered persons are not likely to procure the required order form prior to transfer or pay the required tax. Free of sanctions, dealers would be prone to accommodate such persons in their unlawful activity. The imposition of equally severe tax burdens on suchPage 46transferors is reasonably adapted to secure payment of the tax by transferees or stop transfers to unregistered persons, as well as to provide an additional source from which the expense of unearthing clandestine transfers can be recovered. Cf.Helveringv.Mitchell, supra.

The judgment below must be reversed and the cause remanded for further proceedings in conformity with this opinion.Reversed.Page 47