Hope Nat. Gas Co. v. Hall, 274 U.S. 284 (1927)
Case details
Citation
274 U.S. 284
Full caption
HOPE NATURAL GAS COMPANY v. HALL, STATE TAX COMMISSIONER, et al .
Country
United States
Jurisdiction
Federal
Court
Supreme Court of the United States
Decided
May 16, 1927
HOPE NATURAL GAS COMPANY v. HALL, STATE TAX COMMISSIONER, et al .
ERROR TO THE SUPREME COURT OF APPEALS OF THE STATE
OF WEST VIRGINIA.
No. 815. Argued April 21, 1927.—Decided May 16, 1927.
1
A state court’s construction of a state statute is to be gathered from the application made of it as shown by the final decree in connection with the opinion rather than by excerpts selected from the opinion. P. 288.
2
West Virginia “ annual privilege tax ” on the business of producing natural gas in the State, computed on the value of the gas produced “ as shown by the gross proceeds derived from the sale thereof by the producer ”—the measure of the tax being otherwise stated as “ the value of the entire production in this State, regardless of the place of sale, or the fact that deliveries may be made to points outside the State,”—is not unconstitutional as respects gas transported to and sold in other States, since it is construed as requiring the tax to be computed on the value of the gas at the well, before it enters interstate commerce, which is valid. P. 288.
3
The contention that the tax violates due process by taxing gross receipts from interstate commerce beyond the jurisdiction of the State, therefore, is without basis. P. 288.
(no text on this page in the source reporter)
tained it against objections based upon § 8, Art. I, Federal Constitution and the Fourteenth Amendment. The grounds relied upon for reversal are without merit and the decree must be affirmed.
The original proceeding challenged the validity of the tax prescribed by § 2-a and sought an injunction to prevent defendant State officers from attempting to enforce it. The chief objection rested upon the direction of the statute that, “ The measure of this tax is the value of the entire production in this State, regardless of the place of sale or the fact that deliveries may be made to points outside the State.” The trial court held that the tax would substantially burden and interfere with interstate commerce and ordered an appropriate injunction.
In an opinion, 102 W. Va. 272, indicating very definite purpose to follow rulings here, the court below, as shown by the authoritative head noté, declared: “ Under Section
any coal, oil, natural gas, limestone, sand or other mineral product, or felling and producing timber for sale, profit, or use, the amounts of such tax to be equal to the value of the articles produced as shown by the gross proceeds derived from the sale thereof by the producer (except as hereinafter provided), multiplied by the respective rates as follows: coal, forty-two one-hundredths of one per cent.; oil, one per cent.; natural gas, one and seventeen-twentieths of one per cent.; limestone, sand or other mineral product, nine-twentieths of one per cent. The measure of this tax is the value of the entire production in this state, regardless of the place of sale or the fact that deliveries may be made to points outside the state. p. 2872a, Chapter 1, supra, the State may take into consideration the gross proceeds of a commodity produced in this State and sold in another State, but only for the purpose of determining the value of such commodity within the State and before it enters interstate commerce.” And among other things it there said—
“ If the taxation value of the products named in the statute be limited to their value in the State, and before they enter interstate commerce, the statute does not manifest a purpose to violate Art. I of the Federal Constitution, and we so hold.” “We therefore hold, under the facts in this case, that the defendants may not treat the gross proceeds of plaintiff’s sales outside the State as the worth of its gas within the State, but that they may enforce the Act upon the value thereof within the State, and before it enters interstate commerce. The injunction herein will be accordingly so modified.”
The final order directed: “That the decree of the Circuit Court of Kanawha County, pronouhced in this cause on the 25th day of May, 1926, in so far and in so far only as it enjoins the defendants from enforcing against the plaintiff the provisions of Sec. 2-a of ... by imposing a tax upon the natural gas produced by the plaintiff, based upon the value thereof within the State and before it enters interstate commerce, be and the same hereby is modified and corrected so as to permit defendants to impose and enforce against the plaintiff a tax, under said section, upon the natural gas so produced by it, based upon the value thereof within the State and before it enters upon interstate commerce, and that in all other respects said decree as hereby modified and corrected be and the same hereby is affirmed.”
The chief business of plaintiff in error is production and purchase of natural gas in West Virginia and the continuous and uninterrupted transportation of this through pipe lines into Pennsylvania and Ohio, where it is sold, p. 288delivered and consumed. The corporation owns three thousand, one hundred and seventy-eight producing wells located in twenty-five counties of West Virginia, from which it took in the year ending June 30, 1925, more than twenty-three billion cubic feet of gas. And during the same period it purchased from other producers more than twenty-five billion cubic feet. Most of this passed into interstate commerce by continuous movement from the wells.
Here it has been argued that the challenged Act burdens interstate commerce and therefore conflicts with Section 8, Article I, of the federal Constitution. Also, that to enforce the Act would deprive plaintiff in error of property without due process of law and deny equal protection of the laws.
Counsel admit that without violating the commerce clause the State may lay a privilege or occupation tax upon producers of natural gas reckoned according to the value of that commodity at the well. American Mfg. Co. v. St. Louis, 250 U. S. 459; Heisler v. Thomas Colliery Co., 260 U. S. 245; Oliver Iron Co. v. Lord, 262 U. S. 172. But they insist that, accepting the statute under consideration as construed by the highest court of the State, plaintiff in error will be subjected to an unlawful direct tax upon gross receipts derived from interstate commerce. This argument rests chiefly upon certain language excerpted from the opinion below. But we review the final decree and must accept the statute as authoritatively construed and applied.* The plain result of the opinion and final decree is to require that the tax be computed upon the value of the gas at the well, and not otherwise. If, hereafter, executive officers disregard the approved construction and fix values upon any improper basis appropriate relief may be obtained through the courts.
The suggestion concerning deprivation of due process goes upon the assumption that the imposition is upon p. 289284 Syllabus.
gross receipts from interstate commerce, in reality upon property beyond the State’s jurisdiction. As already pointed out, this assumption conflicts with the definite ruling of the highest court of the State.
The claim that equal protection of the laws has been denied rests upon the assertion, first, that an unlawful tax has been imposed upon the gross proceeds from sales regardless of their place and, second, that the exemption of ten thousand dollars from gross income by § 2-h creates undue inequality. The true meaning of the statute and the thing actually taxed oppose the first assertion. We cannot say that the Legislature acted either arbitrarily or unreasonably by authorizing the deduction. Nothing indicates a purpose to extend different treatment to those of the same class; no actual unreasonable inequality has been shown. Plaintiff in error is permitted to deduct ten thousand dollars; the same privilege, and nothing more, is extended to all other producers. Lake Superior Mines v. Lord, 271 U. S. 577; Swiss Oil Corporation v. Shanks, 273 U. S. 407.
Affirmed.
The Chief Justice took no part in the consideration or decision of this cause.
ALSTON v. UNITED STATES.
CERTIFICATE FROM THE CIRCUIT COURT OF APPEALS FOR THE EIGHTH CIRCUIT.
No. 898.. Argued April 14, 1927.—Decided May 16, 1927.
1
Section 9 of the original Harrison Narcotic Act, prescribing that any person who violates or fails to comply with any requirements of the Act shall be punished in a manner prescribed, applies also to violations of requirements added to the Act by subsequent amendments. P. 294. 555148—28-----19
Argument for Alston. 274 U. S.
2. The provisions of § 1 of this Act, as amended, which impose a stamp tax on certain drugs and declare it unlawful to purchase or sell them except in or from original stamped packages, are within the taxing power of Congress, and have no necessary connection with any other requirement of the Act which may be subject to reasonable disputation. P. 294. District Court affirmed.
This was a prosecution for purchasing morphine and cocaine from unstamped packages. Plaintiff in error, after pleading guilty and being sentenced, took the case to the Circuit Court of Appeals, which referred certain questions to this Court upon a certificate. The entire cause was brought up and decided under Jud. Code § 239.
Messrs. Hooper Alexander and Frans E. Lindquist, with whom Messrs. John B. Boddie, Wm. H. Mason, Richard 0. Mason, and Thomas W. Hardwick were on the brief, for Alston.
The statute is invalid. United States v. Daugherty, 269 U. S. 360; Doremus v. United States, 249 U. S. 86; Veazie Bank v. Fenno, 8 Wall. 533; Bailey v. Drexel Furniture Co., 259 U. S. 20; Child Labor Tax Case, 259 U. S. 41; McCray v. United States, 195 U. S. 27; Flint v. Stone Tracy Co., 220 U. S. 107; Hammer v. Dagenhart, 247 U. S. 251; Hill v. Wallace, 259 U. S. 44; Linder v. United States, 268 U. S. 5; United States v. Jin Fuey Moy, 241 U. S. 394. The invalidity goes to the whole Act. Hill v. Wallace, 259 U. S. 70.
The amendments of 1919 and 1921 were included in the Revenue Acts of those years. Had they appeared there as independent enactments, they might be earnestly supported as bona fide excise taxes legitimately imposed in the exercise by Congress of its undoubted power under the first enumerated grant in the Constitution. We take it to be recognized law that where an act of Congress is unconstitutional and void, and must fall for that reason, it necessarily drags down with it every string that is tied p. 291289 Argument for the United States.
to it. An unconstitutional law is no law, and therefore the amendment must fall because there was nothing to amend by.
Solicitor General Mitchell, with whom Mr. Robert P. Reeder, Special Assistant to the Attorney General, was on the brief, for the United States.
These provisions of the Act are clearly valid under the power to levy taxes. They are intended to produce revenue; they actually produce substantial revenue; they do not have the effect of prohibiting transactions; the taxes are not imposed as penalties for infraction of law, and there are no discriminating provisions to indicate that by colorable use of the taxing power Congress is attempting to invade the police power of the States.
The provisions of § 2 relating to order forms and possession of drugs and which have the effect, among other things, of preventing individuals, not registered physicians or legitimate dealers who have paid the required occupation taxes, from purchasing and possessing the drug other than by means of medical prescriptions, which provisions are the only ones heretofore seriously questioned, are readily severable, and the remainder of the Act may and should be sustained regardless of their validity.
The order-form provisions, aside from the one which prohibits sale of order forms to other than registered physicians and dealers, are clearly valid as tending to enforce the stamp and occupation tax provisions. In so far as they prevent the purchase by an unregistered individual of quantities of the drug exceeding his personal requirements, they are valid as enforcing the occupation tax on dealers, because such a purchase is only made by one who proposes to sell the drug. To the same extent the order-form provisions may be sustained as in aid of the Narcotic Drugs Import and Export Act, which prohibits the importation of the drugs in excess of an amount p. 292required for medicinal and legitimate use, as they trace the use to which the imports are devoted and operate to disclose smuggling.
In addition the Opium Convention required the United States to enact such legislation. The public records show that the Harrison Act as amended has the double purpose of raising revenue and executing the treaty, and was enacted after the treaty had been signed, and the Act, by its terms, took effect after the treaty became operative. The public records show that no opium or coca leaves are produced in the United States, but all materials from which opium, morphine, or cocaine are derived are imported. The order form and possession clauses of Section 2 of the Harrison Act may not be held invalid without at the same time striking down the Opium Convention as beyond the treaty power. The narcotic problem has been historically proved to be an international problem, unsolvable except by general international agreement. If the narcotic problem is a proper subject of international agreement and the domestic legislation stipulated for in it is germane and reasonably required to make the international agreement effective, the treaty and the laws executing it are valid. That this is the case has been declared by the President and the Senate in negotiating and ratifying the treaty, by Congress in enacting this legislation to execute it, and by high Executive officials of the United States who have studied the problem.
Mr . Just ice Mc Reynol ds delivered the opinion of the Court.
In the United States District Court, Southern District of Iowa, an indictment with three counts, filed December 2, 1924, charged Alston with violating § 1, Harrison Narcotic Act, approved December 17, 1914, c. 1, 38 Stat. 785, as amended February 24, 1919, c. 18, 40 Stat. 1057, 1130, p. 2931131, by purchasing morphine and cocaine from unstamped packages. He pleaded “ guilty ” and was sentenced to the penitentiary. A writ of error took the cause to the Circuit Court of Appeals, Eighth Circuit, and it asked our instruction upon certain questions. Thereupon, we required the entire record to be sent here for final determination of the whole matter. § 239, Jud. Code.
Sections 1 and 6 of the Harrison Narcotic Act were amended by the Act of February 24, 1919, and, as thus amended, were reenacted without change by §§ 1005 and 1006, Revenue Act approved November 23, 1921, c. 136, 42 Stat. 227, 298, 300. The amending Act added the following provisions (among others) to Section 1.
“That there shall be levied, assessed, collected, and paid upon opium, coca leaves, any compound, salt, derivative, or preparation thereof, produced in or imported into the United States, and sold, or removed for consumption or sale, an internal-revenue tax at the rate of 1 cent per ounce, and any fraction of an ounce in a package shall be taxed as an ounce, such tax to be paid by the importer, manufacturer, producer, or compounder thereof, and to be represented by appropriate stamps, to be provided by the Commissioner of Internal Revenue, with the approval of the Secretary of the Treasury; and the stamps herein provided shall be so affixed to the bottle or other container as to securely seal the stopper, covering, or wrapper thereof.
“ The tax imposed by this section shall be in addition to any import duty imposed on the aforesaid drugs.
“ It shall be unlawful for any person to purchase, sell, dispense, or distribute any of the aforesaid drugs except in the original stamped package or from the original stamped package; and the absence of appropriate taxpaid stamps from any of the aforesaid drugs shall be prima facie evidence of a violation of this section by the p. 294person in whose possession same may be found; and the possession of any original stamped package containing any of the aforesaid drugs by any person who has not registered and paid special taxes as required by this section shall be prima facie evidence of liability to such special tax: Provided, . .
Section 9 of the original Harrison Act has remained without change. It provides: “ That any person who violates or fails to comply with any of the requirements of this Act shall, on conviction, be fined not more than $2,000 or be imprisoned not more than five years, or both, in the discretion of the court.”
The judgment of the trial court is assailed upon two grounds: That Congress has failed to prescribe any punishment for the purchase of drugs from unstamped packages, forbidden by amended § 1. And, that the entire Act, as amended, is invalid because Congress has undertaken thereby to regulate matters beyond its powers and within exclusive control of the States.
Section 9, above quoted, obviously applies to the requirements of the amended Act as well as to those found in the original. The first objection has no merit.
The present cause arises under those provisions of § 1 which impose a stamp tax on certain drugs and declare it unlawful to purchase or sell them except in or from original stamped packages. These provisions are clearly within the power of Congress to lay taxes and have no necessary connection with any requirement of the Act which may be subject to reasonable disputation. They do not absolutely prohibit buying or selling; have produced substantial revenue; contain nothing to indicate that by colorable use of taxation Congress is attempting to invade the reserved powers of the States. The impositions are not penalties.
The judgment of the trial court must be
Affirmed.
4
The exemption from gross proceeds of $10,000, allowed by the statute in all cases, does not violate the Equal Protection Clause. P. 289. 102 W. Va. 272, affirmed. Error to a decree of the Supreme Court of Appeals of West Virginia, which reversed a decree enjoining Hall, Tax Commissioner, and Lee, Attorney General, from enforcing against the plaintiff, Hope Natural Gas Company, the taxing act discussed in the opinion. Mr. John W. Davis, with whom Messrs. H. D. Rummel, Arthur E. Young, Charles Powell, Kemble White, Anthony F. McCue, 8. E. W. Burnside, and Edward M. Borger were on the brief, for plaintiff in error. Mr. Fred O. Blue, with whom Messrs. Howard B. Lee, Attorney General of West Virginia, and T. C. Townsend were on the brief, for defendants in error. Mr . Justi ce Mc Reynolds delivered the opinion of the Court. This writ brings up a decree by the Supreme Court of Appeals, West Virginia, which construed § 2-a, c. 1, Acts of the Legislature, Extraordinary Session 1925,* and sus-
*
An Act to provide for the raising of additional public revenue by a tax upon the privilege of engaging in certain occupations; to provide for the ascertainment, assessment, and collection of such tax; to provide penalties for violations of the terms hereof; and to repeal certain statutes, [passed by the Legislature of West Virginia June 5, 1925], Sec. 2. That from and after the thirtieth day of June, one thousand nine hundred twenty-five, there is hereby levied and shall be collected annual privilege taxes against the persons, on account of the business activities, and in the amounts to be determined by the application of rates against values or gross income, as the case may, as follows: Sec. 2-a. Upon every person engaging or continuing within this state in the business of mining and producing for sale, profit, or use, Sec. 2-h. In computing the amount of tax levied hereunder, however, for any year, there shall be deducted from the values, or from the gross income of the business, as the case may be, an exemption of ten thousand dollars of the amount of such values or gross income. Every person exercising any privilege taxable hereunder for any fractional part of a tax year shall be entitled to an exemption of that part of the sum of ten thousand dollars which bears the same proportion of the total sum that the period of time during which such person is engaged in such business bears to a whole year.