Spreckels Sugar Refining Company v. McClain

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 27th section of the act of June 13th, 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. at L. 448, 464, chap. 448, U.S.C.omp. Stat. 1901, p. 2306.

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 14th, 1898, to August 1st, 1900, under these heads: Period Covered by Return; Indebtedness Due Before June 14th, 1898; Amounts Received from Interest, Rent, and Wharfage, and Stevedoring; Sugar Sold Since June 14th, 1898; Gross Receipts; Amount of Tax Paid; and Dates of Payment.'

The plaintiff contended that for the purposes of the tax in 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 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 Fed. 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. 51 C. C. A. 201, 113 Fed. 244. 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.

Mr. John G. Johnson for plaintiff in error.

[Argument of Counsel from pages 400-402 intentionally omitted]

Solicitor General Hoyt for defendant in error.

[Argument of Counsel from pages 402-405 intentionally omitted]

Mr. Justice Harlan delivered the opinion of the court: