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U.S. Supreme Court

Spreckels Sugar Refining Co. v. McClain, 192 U.S. 397 (1904)

Spreckels Sugar Refining Company v. McClain

No. 103

Argued December 3, 1903

Decided February 23, 1904

192 U.S. 397


1. Subdivision 4, section 629, Rev.Stat., was not superseded by the Judiciary Act of 1887-1888, and under it, a circuit court may take cognizance of a suit arising under an act providing for internal revenue without regard to the citizenship of the parties.

2. Where the constitutionality of an act of Congress is not drawn in question, a case involving simply the construction of the act is not embraced by the fifth section of the Judiciary Act of 1891.

3. A suit against a collector to recover sums paid under protest as taxes imposed by the War Revenue Act of 1898, 30 Stat. 448, is, within the meaning of the Judiciary Act of 1891, to be deemed one arising under both the Constitution and the laws of the United States if relief be sought upon the ground that the taxing law is unconstitutional, and, if constitutional, that its provisions, properly construed, do not authorize the collection of the tax in question.

4. A case "arising . . . under the revenue laws," section 6, Judiciary Act of 1891, and involving the construction of a law providing for internal revenue, but which, from the outset, from the plaintiff's showing, involves the application or construction of the Constitution, or in which is drawn in question the constitutionality of an act of Congress, may be carried by the plaintiff, as of right, the requisite amount being involved, from the circuit court of appeals to this Court for final determination.

5. The tax imposed by section 27 of the War Revenue Act of 1898, upon the gross annual receipts, in excess of $250,000 of any corporation or company carrying on or doing the business of refining sugar is an excise, and not a direct tax to be apportioned among the states according to numbers. In estimating the gross annual receipts of the company for purposes of that tax, receipts derived from the use of wharves used by it in connection

Page 192 U. S. 398

with its business should be included, but the receipts by way of interest received on its bank deposits or dividends from stock held by it in other

companies should be excluded.

The plaintiff in error, who was the plaintiff below, is a sugar refining company, incorporated under the statutes of Pennsylvania for the purpose

"of refining sugar, which will involve the buying of the raw material therefor and selling the manufactured products, and of doing whatever else should be incidental to the said business of refining."

The defendant is the Collector of Internal Revenue for the First District of that Commonwealth.

The plaintiff seeks by two separate actions to recover certain sums, paid by it under protest to the defendant as Collector, and which it is alleged were unlawfully exacted by that officer under the twenty-seventh section of the Act of June 13, 1898, entitled "An act to provide ways and means to meet war expenditures, and for other purposes," by which act a tax was imposed upon the gross annual receipts, in excess of a named sum, of every person, firm, corporation or company carrying on or doing the business of refining sugar, the amount of the tax to be determined by the returns of business required by the statute. 30 Stat. 448, 464, c. 448.

By agreement of the parties, the issues in the two causes were consolidated and tried as one cause.

It is conceded that, before bringing the actions, the plaintiff did all that was required in order to maintain a suit against the collector, and that the payments made by it to that officer were not voluntary.

The record contains a summary of the returns made by the plaintiff covering its entire gross receipts from June 14, 1898, to August 1, 1900, under these heads:

"period covered by return; indebtedness due before June 14, 1898; amounts received from interest, rent and wharfage, and stevedoring; sugar sold since June 14, 1898; gross receipts; amount of tax paid, and dates of payment."

The plaintiff contended that, for the purposes of the tax in

Page 192 U. S. 399

question, certain things were included as being part of its gross annual receipts arising from business which could not properly have been so included, and that no tax could legally have been exacted on account of them. The government insisted that no taxes had been exacted which the law did not require to be paid.

In its statement of demand, the plaintiff alleges that no part of its receipts from other sources than the business of refining sugar was taxable under the provisions of the act; that no tax upon receipts was payable or collectible before the end of the year from the date of the passage of the act; that the administration of the act makes arbitrary, unjust, and illegal discrimination founded on a pretended difference between the business of manufacturing and of refining sugar, between the plaintiff and other persons, firms, corporations, and companies carrying on and doing the business of refining sugar, and that all the provisions of the act subjecting the plaintiff to pay the tax in question were in violation of the Constitution of the United States and void.

That statement also shows that, upon appeal to the Commissioner of Internal Revenue, it urged the following reasons why the sums it had paid should be refunded: that the act, so far as it assumed to subject corporations or companies carrying on or doing business of refining sugar to pay a special excise tax, was unconstitutional and void; that the tax was a direct tax which had not been apportioned among the several states as required by the Constitution, was not uniform throughout the United States, and was invalid; that the plaintiff was, and at all times had been, engaged in the business of manufacturing, and not in that of refining, sugar; that it refines sugar only incidentally in the process of manufacture, and is therefore not liable for the payment of the tax; that, by the provisions of the act, the tax was payable annually at the end of each year, and the collection thereof monthly or for periods less than a year and prior to the expiration of the year was illegal, unauthorized, and void, and that the tax was assessed upon, and

Page 192 U. S. 400

collected from, gross receipts that included receipts outside of those coming from the business of refining sugar; that such gross receipts included receipts from sales of sugar made prior to the passage of the act, from interest on loans and indebtedness, from dividends upon stock owned by the plaintiff in other sugar refining companies, from wharfage collected by it upon wharves owned by it, and from receipts from other sources.

One of the contentions of the plaintiff was that, apart from its constitutionality, the act of 1898, properly construed, did not embrace the claims here in dispute, and therefore did not authorize the defendant to demand and collect the taxes here in question.

The cause was determined in the circuit court upon an agreed special verdict of a jury. Some of the positions taken by the plaintiff were sustained, while others were overruled. Judgment was rendered in favor of the plaintiff for $1,056.82, the aggregate of the sums paid (with interest thereon) by way of tax upon receipts on business done before the passage of the act, and for stevedoring. 109 F. 76. The plaintiff prosecuted a writ of error to the circuit court of appeals, which sustained the judgment except in one particular -- namely, in requiring the plaintiff to pay the tax in question otherwise than annually. 113 F.2d 4. And the case is here upon writ of error sued out by the plaintiff.

It may be stated that both courts below formally sustained the constitutionality of the act of 1898, remitting that question to this Court for full consideration and determination.

Page 192 U. S. 405

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