ERROR TO THE DISTRICT COURT OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF NEW YORK
White, McKenna, Holmes, Day, Van Devanter, Pitney, McReynolds, Brandeis, Clarke
MR. JUSTICE VAN DEVANTER delivered the opinion of the court.
This was an action to recover a tax paid under protest and alleged to have been imposed contrary to the constitutional
provision (Art. 1, § 9, cl. 5) that "No tax or duty shall be laid on articles exported from any State." The judgment below was for the defendant. 234 Fed. Rep. 125.
The plaintiff is a domestic corporation chiefly engaged in buying goods in the several States, shipping them to foreign countries and there selling them. In 1914 its net income from this business was $30,173.66, and from other sources $12,436.24. An income tax for that year computed on the aggregate of these sums, was assessed against it and paid under compulsion. It is conceded that so much of the tax as was based on the income from other sources was valid, and the controversy is over so much of it as was attributable to the income from shipping goods to foreign countries and there selling them.
The tax was levied under the Act of October 3, 1913, c. 16, § II, 38 Stat. 166, 172, which provided for annually subjecting every domestic corporation to the payment of a tax of a specified per centum of its "entire net income arising or accruing from all sources during the preceding calendar year." Certain fraternal and other corporations, as also income from certain enumerated sources, were specifically excepted, but none of the exceptions included the plaintiff or any part of its income. So, tested merely by the terms of the act, the tax collected from the plaintiff was rightly computed on its total net income. But as the act obviously could not impose a tax forbidden by the Constitution, we proceed to consider whether the tax, or rather the part in question, was forbidden by the constitutional provision on which the plaintiff relies.
The Sixteenth Amendment, although referred to in argument, has no real bearing and may be put out of view. As pointed out in recent decisions, it does not extend the taxing power to new or excepted subjects, but merely removes all occasion, which otherwise might exist, for an apportionment among the States of taxes
laid on income, whether it be derived from one source or another. Brushaber v. Union Pacific R.R. Co., 240 U.S. 1, 17-19; Stanton v. Baltic Mining Co., 240 U.S. 103, 112-113.
The Constitution broadly empowers Congress not only "to lay and collect taxes, duties, imposts and excises," but also "to regulate commerce with foreign nations." So, if the prohibitory clause invoked by the plaintiff be not in the way, Congress undoubtedly has power to lay and collect such a tax as is here in question. That clause says "No tax or duty shall be laid on articles exported from any State." Of course it qualifies and restricts the power to tax as broadly conferred. But to what extent? The decisions of this court answer that it excepts from the range of that power articles in course of exportation, Turpin v. Burgess, 117 U.S. 504, 507; the act or occupation of exporting, Brown v. Maryland, 12 Wheat. 419, 445; bills of lading for articles being exported, Fairbank v. United States, 181 U.S. 283; charter parties for the carriage of cargoes from state to foreign ports, United States v. Hvoslef, 237 U.S. 1; and policies of marine insurance on articles being exported, -- such insurance being uniformly regarded as "an integral part of the exportation" and the policy as "one of the ordinary shipping documents," Thames and Mersey Insurance Co. v. United States, 237 U.S. 19. In short, the court has interpreted the clause as meaning that exportation must be free from taxation, and therefore as requiring "not simply an omission of a tax upon the articles exported, but also a freedom from any tax which directly burdens the exportation." Fairbank v. ...