U.S. Supreme Court INDIAN MOTOCYCLE CO. v. UNITED STATES, 283 U.S. 570 (1931)

[Page 283 U.S. 570, 576]

Gillespie v. Oklahoma, 257 U.S. 501, 505, 42 S. Ct. 171; Crandall v. Nevada, 6 Wall. 35, 44-46.

Of course, the reasons underlying the principle mark the limits of its range. Thus as to persons or corporations which serve as agencies of government, national or state, and also have private property or engage on their own account in business for gain, it is well settled that the principle does not extend to their private property or private business, but only to their operations or acts as such agencies;2 and, in harmony with this view, it also has been held where a state departs from her usual governmental functions and 'engages in a business which is of a private nature' no immunity arises in respect of her own or her agents' operations in that business. [Footnote 3] While these decisions show that the immunity does not extend to anything lying outside or beyond governmental functions and their exertion, other decisions to which we now shall refer show that it does extend to all that lies within that field.

[Page 283 U.S. 570, 581]

to the United States or a state may be subjected to an inheritance tax by the other, United States v. Perkins, 163 U.S. 625, 16 S. Ct. 1073; Snyder v. Bettman, 190 U.S. 249, 23 S. Ct. 803; see Greiner v. Lewellyn, 258 U.S. 384, 42 S. Ct. 324; although the consequent indirect burden is apparent. Even if it could be said that there is some reason, which the Court has never attempted to state, for the distinction which was made by the decision in Panhandle Oil Co. v. Mississippi, 277 U.S. 218, 48 S. Ct. 451, 56 A. L. R. 583, between an excise on sales to a government and one on legacies, the fact of the shifting of the burden would seem to be at least less apparent in the case of a sale.

In the Panhandle Oil Case, it was held that this shifting of the burden of a state tax from the seller to the buyer was sufficient to render the tax invalid where the buyer was an agency of the United States, and it was assumed that the burden of the sales tax involved was so inevitably passed on to the buyer as to require this result. With this assumption economists would not, I believe, generally agree. Many hold that whether the burden of any tax paid by the seller is actually passed on to the buyer depends upon considerations so various and complex as to preclude the assumption a priori that any particular tax at any particular time is passed on. [Footnote 5] In some conditions of the market, the burden remains with the seller, or even may be shifted back from the seller to the producer by the reduction of the producer's price, rather than forward to the consumer by an increase of the seller's price. [Footnote 6]

[Page 283 U.S. 570, 583]

erations of substance rather than of form should lead us to choose that one which would restrict the doctrine of the Panhandle Oil Case to the tax imposed in unqualified terms on sales to which it was applied in that case. The present tax is not levied in such terms, exclusively on sales, but is effective only when the seller both manufactures or imports and sells. With respect to the incidence of its burden on the buyer, so far as we can know, it does not differ from a tax on the manufacture of goods, payable when sold. See Lash's Products Co. v. United States, supra. I think that the Wheeler Lumber Case, rather than the Panhandle Oil Case, should control in determining its validity.

Mr. Justice BRANDEIS concurs in this opinion. Footnotes

Footnote 1 Respecting the immunity from state taxes this Court there said: 'With regard to taxation, no matter how reasonable, or how iniversal and undiscriminating, the State's inability to interfere has been regarded as established since McCulloch v. Maryland, 4 Wheat. 316. The decision in that case was not put upon any consideration of degree but upon the entire absence of power on the part of the States to touch, in that way at least, the instrumentalities of the United States; Id., 4 Wheat. 429, 430; and that is the law today. Farmers' & Mechanics' Savings Bank v. Minnesota, 232 U.S. 516, 525, 526 S., 34 S. Ct. 354.'

Footnote 2 Thomson v. Pacific Railroad, 9 Wall. 579, 591; Union Pac. Railroad Co. v. Peniston, 18 Wall. 5, 34, 36, 37; Central Pacific R. R. Co. v. California, 162 U.S. 91, 125, 126 S., 16 S. Ct. 766; Baltimore Shipbuilding & Dry Dock Co. v. Baltimore, 195 U.S. 375, 382, 25 S. Ct. 50; Alward v. Johnson, , 51 S. Ct. 273 (decided February 24, 1931). And see McCulloch v. Maryland, supra, 4 Wheat. page 436; Osborn v. Bank of United States, 9 Wheat. 738, 867; Clallam County v. United States, 263 U.S. 341, 345, 44 S. Ct. 121.

Footnote 3 South Carolina v. United States, , 26 S. Ct. 110, 4 Ann. Cas. 737.

Footnote 4 This Court there said: 'The right to tax the contract to any extent, when made, must operate upon the power to borrow, before it is exercised, and have a sensible influence on the contract. The extent of this influence depends on the will of a distinct government; to any extent, however inconsiderable, it is a burden on the operations of government.'

Footnote 5 Bastable, Public Finance (3d Ed.) pp. 372-377, 387, 388, 548, 577, 578, 588; Brown, The Economics of Taxation, pp. 95, 96, 134, 135, 326-328; Bye and Hewitt, Applied Economics, pp. 453-456; Ely, Outlines of Economics ( 5th Ed.) p. 794; Hobson, Taxation in the New State, pp. 52-56; Lutz, Public Finance, pp. 317-319; Marshall, Principles of Economics (6th Ed.) pp. 413-415; Nicholson, Elements of Political Economy, pp. 456-460; Seligman, Shifting and Incidence of Taxation (5th Ed). pp. 218, 219, 253, 254; Shoup, The Sales Tax in France, pp. 322-327; Proceedings, National Tax Association, 1907, p. 432; Id., 1920, pp. 175, 176, 179, 212, 266; Id., 1922, pp. 108, 109; Id., 1923, pp. 297, 298; Id., 1924, pp. 307, 314, 347- 349, 354, 355; Id., 1929, pp. 271, 406, 407; Bulletin, National Tax Association, 1923-1924, p. 170; Id., 1929-1930, p. 260; National Industrial Conference Board, General Sales or Turnover Taxation, pp. 52-54. Others, without discussion of those factors which affect and often obscure the fact of shifting, hold the contrary: Comstock, Taxation in the Modern State, p. 121; Bulletin, National Tax Association, 1923-1924, p. 174.

Footnote 6 Bastable, pp. 376, 548; Brown, p. 96; Lutz, p. 319; Hobson, p. 54; Marshall, pp. 413-414; all supra Note 1; Bulletin, National Tax Association, 1923-1924, p. 170.