CRS Annotated Constitution

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Restriction of the Pollock Decision.—The Pollock decision encouraged taxpayers to challenge the right of Congress to levy by the rule of uniformity numerous taxes that had always been reckoned to be excises. But the Court evinced a strong reluctance to extend the doctrine to such exactions. Purporting to distinguish taxes levied “because of ownership” or “upon property as such” from those laid upon “privileges,”1750 it sustained as “excises” a tax on sales on business exchanges,1751 a succession tax which was construed to fall on the recipients of the property transmitted rather than on the estate of the decedent,1752 and a tax on manufactured tobacco in the hands of a dealer, after an excise tax had been paid by the manufacturer.1753 Again, in Thomas v. United States,1754 the validity of a stamp tax on sales of stock certificates was sustained on the basis of a definition of “duties, imposts and excises.” These terms, according to the Chief Justice, “were used comprehensively to cover customs and excise duties imposed on importation, consumption, manufacture and sale of certain commodities, privileges, particular business transactions, vocations, occupations and the like.”1755 On the same day, it ruled, in Spreckels Sugar Refining Co. v. McClain,1756 that an exaction, denominated a special excise tax, imposed on the business of refining sugar and measured by the gross receipts thereof, was in truth an excise and hence properly levied by the rule of uniformity. The lesson of Flint v. Stone Tracy Co.1757 was the same. In the Flint case, what was in form an income tax was sustained as a tax on the privilege of doing business as a corporation, the value of the privilege being measured by the income, including income from investments. Similarly,, in Stanton v. Baltic Mining Co.,1758 a tax on the annual production of mines was held to be “independently of the effect of the oper[p.355]ation of the Sixteenth Amendment . . . not a tax upon property as such because of its ownership, but a true excise levied on the results of the business of carrying on mining operations.”1759

A convincing demonstration of the extent to which the Pollock decision had been whittled down by the time the Sixteenth Amendment was adopted is found in Billings v. United States.1760 In challenging an annual tax assessed for the year 1909 on the use of foreign built yachts—a levy not distinguishable in substance from the carriage tax involved in the Hylton case as construed by the Supreme Court—counsel did not even suggest that the tax should be classed as a direct tax. Instead, he based his argument that the exaction constituted a taking of property without due process of law upon the premise that it was an excise, and the Supreme Court disposed of the case upon the same assumption.

In 1921, the Court cast aside the distinction drawn in Knowlton v. Moore between the right to transmit property on the one hand and the privilege of receiving it on the other, and sustained an estate tax as an excise. “Upon this point,” wrote Justice Holmes for a unanimous Court, “a page of history is worth a volume of logic.”1761 This proposition being established, the Court had no difficulty in deciding that the inclusion in the computation of the estate tax of property held as joint tenants,1762 or as tenants by the entirety,1763 or the entire value of community property owned by husband and wife,1764 or the proceeds of insurance upon the life of the decedent,1765 did not amount to direct taxation of such property. Similarly, it upheld a graduated tax on gifts as an excise, saying that it was “a tax laid only upon the exercise of a single one of those powers incident to ownership, the power to give the property owned to another.”1766 Justice Sutherland, speaking for himself and two associates, urged that “the right to give away one’s property is as fundamental as the right to sell it or, indeed, to possess it.”1767

Miscellaneous.—The power of Congress to levy direct taxes is not confined to the States represented in that body. Such a tax may be levied in proportion to population in the District of Colum[p.356]bia.1768 A penalty imposed for nonpayment of a direct tax is not a part of the tax itself and hence is not subject to the rule of apportionment. Accordingly, the Supreme Court sustained the penalty of fifty percent, which Congress exacted for default in the payment of the direct tax on land in the aggregate amount of twenty million dollars that was levied and apportioned among the States during the Civil War.1769

Clause 5. No Tax or Duty shall be laid on Articles exported from any State.

Taxes on Exports

This prohibition applies only to the imposition of duties on goods by reason of exportation.1770 The word “export” signifies goods exported to a foreign country, not to an unincorporated territory of the United States.1771 A general tax laid on all property alike, including that intended for export, is not within the prohibition, if it is not levied on goods in course of exportation nor because of their intended exportation.1772 Where the sale to a commission merchant for a foreign consignee was consummated by delivery of the goods to an exporting carrier, the sale was held to be a step in the exportation and hence exempt from a general tax on sales of such commodity.1773 The giving of a bond for exportation of distilled liquor was not the commencement of exportation so as to exempt from an excise tax spirits that were not exported pursuant to such bond.1774 A tax on the income of a corporation derived from its export trade was not a tax on “articles exported” within the meaning of the Constitution.1775

Supplement: [P. 356, add to text following n.1772:]

Continuing its refusal to modify its Export Clause jurisprudence,61 the Court held unconstitutional the Harbor Maintenance Tax (HMT) under the Export Clause insofar as the tax was applied to goods loaded at United States ports for export. The HMT required shippers to pay a uniform charge on commercial cargo shipped through the Nation’s ports. The clause, said the Court, “categorically bars Congress from imposing any tax on exports.” 62 However, the clause does not interdict a “user fee,” that is a charge that lacks the attributes of a generally applicable tax or duty and is designed to compensate for government supplied services, facilities, or benefits, and it was that defense to which the Government repaired once it failed to obtain a modification of the rules under the clause. But the HMT bore the indicia of a tax. It was titled as a tax, described as a tax in the law, and codified in the Internal Revenue Code. Aside from naming, however, courts must look to how things operate, and the HMT did not qualify as a user fee. It did not represent compensation for services rendered. The value of export cargo did not correspond reliably with the federal harbor services used or usable by the exporter. Instead, the extent and manner of port use depended on such factors as size and tonnage of a vessel and the length of time it spent in port.63 The HMT was thus a tax, and therefore invalid.

Supplement: [P. 356, add to text following n.1775:]

In United States v. IBM Corporation,64 the Court declined the Government’s argument that it should refine its export–tax–clause jurisprudence. Rather than read the clause as a bar on any tax that applies to a good in the export stream, the Government contended that the Court should bring this clause in line with the Import–Export Clause 65 and with dormant–commerce–clause doctrine. In that view, the Court should distinguish between discriminatory and nondiscriminatory taxes on exports. But the Court held that sufficient differences existed between the Export Clause and the other two clauses, so that its bar should continue to apply to any and all taxes on goods in the course of exportation.

Stamp Taxes.—A stamp tax imposed on foreign bills of lading,1776 charter parties,1777 or marine insurance policies,1778 was in effect a tax or duty upon exports, and so void; but an act requiring the stamping of all packages of tobacco intended for export in[p.357]order to prevent fraud was held not to be forbidden as a tax on exports.1779

Clause 6. No Preference shall be given by any Regulation of Commerce or Revenue to the Ports of one State over those of another: nor shall Vessels bound to, or from, one State, be obliged to enter, clear, or pay duties in another.


1750 Stanton v. Baltic Mining Co., 240 U.S. 103 (1916); Knowlton v. Moore, 178 U.S. 41, 80 (1900).
1751 Nicol v. Ames, 173 U.S. 509 (1899).
1752 Knowlton v. Moore, 178 U.S. 41 (1900).
1753 Patton v. Brady, 184 U.S. 608 (1902).
1754 192 U.S. 363 (1904).
1755 Id., 370.
1756 192 U.S. 397 (1904).
1757 220 U.S. 107 (1911).
1758 240 U.S. 103 (1916).
1759 Id., 114.
1760 232 U.S. 261 (1914).
1761 New York Trust Co. v. Eisner, 256 U.S. 345, 349 (1921).
1762 Phillips v. Dime Trust & S.D. Co., 284 U.S. 160 (1931).
1763 Tyler v. United States, 281 U.S. 497 (1930).
1764 Fernandez v. Wiener, 326 U.S. 340 (1945).
1765 Chase Nat. Bank v. United States, 278 U.S. 327 (1929); United States v. Manufacturers Nat. Bank, 363 U.S. 194, 198–201 (1960).
1766 Bromley v. McCaughn, 280 U.S. 124, 136 (1929). See also Helvering v. Bullard, 303 U.S. 297 (1938).
1767 Bromley v. McCaughn, 280 U.S. 124, 140 (1929).
1768 Loughborough v. Blake, 5 Wheat. (18 U.S.) 317 (1820).
1769 De Treville v. Smalls, 98 U.S. 517, 527 (1879).
1770 Turpin v. Burgess, 117 U.S. 504, 507 (1886). Cf. Almy v. California, 24 How. (65 U.S.) 169, 174 (1861).
1771 Dooley v. United States, 183 U.S. 151, 154 (1901).
1772 Cornell v. Coyne, 192 U.S. 418, 428 (1904); Turpin v. Burgess, 117 U.S. 504, 507 (1886).
1773 Spalding & Bros. v. Edwards, 262 U.S. 66 (1923).
1774 Thompson v. United States, 142 U.S. 471 (1892).
1775 Peck & Co. v. Lowe, 247 U.S. 165 (1918); National Paper Co. v. Bowers, 266 U.S. 373 (1924).
1776 Fairbank v. United States, 181 U.S. 283 (1901).
1777 United States v. Hvoslef, 237 U.S. 1 (1915).
1778 Thames & Mersey Inc. Co. v. United States, 237 U.S. 19 (1915).

Supplement: [P. 356, add to n.1778:]

In United States v. IBM Corp., 517 U.S. 843 (1996) , the Court adhered to Thames & Mersey, and held unconstitutional a federal excise tax upon insurance policies issued by foreign countries as applied to coverage for exported products. The Court admitted that one could question the earlier case’s equating of a tax on the insurance of exported goods with a tax on the goods themselves, but it observed that the Government had chosen not to present that argument. Principles of stare decisis thus cautioned observance of the earlier case. Id. at 854–55. The dissenters argued that the issue had been presented and should be decided by overruling the earlier case. Id. at 863 (Justices Kennedy and Ginsburg dissenting).

1779 Pace v. Burgess, 92 U.S. 372 (1876); Turpin v. Burgess, 117 U.S. 504, 505 (1886).

Supplement Footnotes

61 See United States v. IBM Corp., 517 U.S. 843, 850–61 (1996) .
62 United States v. United States Shoe Corp., 523 U.S. 360, 363 (1998) .
63 Id. at 367–69.
64 517 U.S. 843 (1996) .
65 Article I, Sec. 10, cl. 2, applying to the States.
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