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United States v. Sanchez

U.S.
Nov 13, 1950
340 U.S. 42 (1950)

Summary

upholding a federal tax (now repealed) of $100 per ounce on transfers of marijuana

Summary of this case from Simpson v. Bouker

Opinion

APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS.

No. 81.

Argued October 20, 1950. Decided November 13, 1950.

1. The tax of $100 per ounce imposed by § 2590 of the Internal Revenue Code on transferors of marihuana who make transfers to unregistered transferees without the order form required by § 2591 and without payment by the transferees of the tax imposed by § 2590 is a valid exercise of the taxing power of Congress, notwithstanding its collateral regulatory purpose and effect. Pp. 44-45.

(a) A tax is not invalid merely because it regulates, discourages or deters the activities taxed; nor because the revenue obtained is negligible or the revenue purpose is secondary. P. 44.

(b) A tax is not invalid merely because it affects activities which Congress might not otherwise regulate. P. 44.

2. The tax levied by § 2590(a)(2) is not conditioned on the commission of a crime, and it may properly be treated as a civil rather than a criminal sanction. Pp. 45-46.

(a) That Congress provided civil procedure for collection indicates its intention that the levy be treated as civil in character. P. 45.

(b) The civil character of the tax of $100 per ounce imposed by § 2590(a)(2) is not altered by its severity in relation to the tax of $1 per ounce levied by § 2590(a)(1). Pp. 45-46.

(c) The imposition by § 2590(b) of liability on transferors is reasonably adapted to secure payment of the tax by transferees or stop transfers to unregistered persons, as well as to provide an additional source from which the expense of unearthing clandestine transfers can be recovered. Pp. 45-46.

Reversed.

The United States brought suit in the District Court to recover taxes alleged to be due under the Marihuana Tax Act, 50 Stat. 551, now 26 U.S.C. § 2590 et seq. Defendants' motion to dismiss, attacking the constitutionality of the tax, was granted by the District Court. On direct appeal to this Court, reversed, p. 46.

Philip Elman argued the cause for the United States. With him on the brief were Solicitor General Perlman, Assistant Attorney General Caudle, Ellis N. Slack and Melva M. Graney.

No appearance for appellees.


This is a direct appeal, 28 U.S.C. § 1252, from dismissal by the District Court of a suit for recovery of $8,701.65 in taxes and interest alleged to be due under § 7(a)(2) of the Marihuana Tax Act, 50 Stat. 551, now § 2590(a)(2) of the Internal Revenue Code. 26 U.S.C. § 2590 (a)(2). In their motion to dismiss, which was granted without opinion, defendants attacked the constitutionality of this subsection on the ground that it levied a penalty, not a tax. The validity of this levy is the issue here.

In enacting the Marihuana Tax Act, the Congress had two objectives: "First, the development of a plan of taxation which will raise revenue and at the same time render extremely difficult the acquisition of marihuana by persons who desire it for illicit uses and, second, the development of an adequate means of publicizing dealings in marihuana in order to tax and control the traffic effectively." S. Rep. No. 900, 75th Cong., 1st Sess. 3. To the same effect, see H.R. Rep. No. 792, 75th Cong., 1st Sess. 2.

Pursuant to these objectives, § 3230 of the Code imposes a special tax ranging from $1 to $24 on "every person who imports, manufactures, produces, compounds, sells, deals in, dispenses, prescribes, administers, or gives away marihuana." For purposes of administration, § 3231 requires such persons to register at the time of the payment of the tax with the Collector of the District in which their businesses are located. The Code then makes it unlawful — with certain exceptions not pertinent here — for any person to transfer marihuana except in pursuance of a written order of the transferee on a blank form issued by the Secretary of the Treasury. § 2591. Section 2590 requires the transferee at the time he applies for the order form to pay a tax on such transfer of $1 per ounce or fraction thereof if he has paid the special tax and registered, § 2590(a)(1), or $100 per ounce or fraction thereof if he has not paid the special tax and registered. § 2590(a)(2). The transferor is also made liable for the tax so imposed, in the event the transfer is made without an order form and without the payment of the tax by the transferee. § 2590(b). Defendants in this case are transferors.

It is obvious that § 2590, by imposing a severe burden on transfers to unregistered persons, implements the congressional purpose of restricting traffic in marihuana to accepted industrial and medicinal channels. Hence the attack here rests on the regulatory character and prohibitive burden of the section as well as the penal nature of the imposition. But despite the regulatory effect and the close resemblance to a penalty, it does not follow that the levy is invalid.

First. It is beyond serious question that a tax does not cease to be valid merely because it regulates, discourages, or even definitely deters the activities taxed. Sonzinsky v. United States, 300 U.S. 506, 513-514 (1937). The principle applies even though the revenue obtained is obviously negligible, Sonzinsky v. United States, supra, or the revenue purpose of the tax may be secondary, Hampton Co. v. United States, 276 U.S. 394 (1928). Nor does a tax statute necessarily fall because it touches on activities which Congress might not otherwise regulate. As was pointed out in Magnano Co. v. Hamilton, 292 U.S. 40, 47 (1934):

"From the beginning of our government, the courts have sustained taxes although imposed with the collateral intent of effecting ulterior ends which, considered apart, were beyond the constitutional power of the lawmakers to realize by legislation directly addressed to their accomplishment."

These principles are controlling here. The tax in question is a legitimate exercise of the taxing power despite its collateral regulatory purpose and effect.

Second. The tax levied by § 2590(a)(2) is not conditioned upon the commission of a crime. The tax is on the transfer of marihuana to a person who has not paid the special tax and registered. Such a transfer is not made an unlawful act under the statute. Liability for the payment of the tax rests primarily with the transferee; but if he fails to pay, then the transferor, as here, becomes liable. It is thus the failure of the transferee to pay the tax that gives rise to the liability of the transferor. Since his tax liability does not in effect rest on criminal conduct, the tax can be properly called a civil rather than a criminal sanction. The fact Congress provided civil procedure for collection indicates its intention that the tax be treated as such. Helvering v. Mitchell, 303 U.S. 391 (1938). Moreover, the Government is seeking to collect the levy by a judicial proceeding with its attendant safeguards. Compare Lipke v. Lederer, 259 U.S. 557 (1922); Tovar v. Jarecki, 173 F.2d 449 (C.A. 7th Cir. 1949).

Nor is the civil character of the tax imposed by § 2590(a)(2) altered by its severity in relation to that assessed by § 2590(a)(1). The difference has a rational foundation. Unregistered persons are not likely to procure the required order form prior to transfer or pay the required tax. Free of sanctions, dealers would be prone to accommodate such persons in their unlawful activity. The imposition of equally severe tax burdens on such transferors is reasonably adapted to secure payment of the tax by transferees or stop transfers to unregistered persons, as well as to provide an additional source from which the expense of unearthing clandestine transfers can be recovered. Cf. Helvering v. Mitchell, supra.

The judgment below must be reversed and the cause remanded for further proceedings in conformity with this opinion.

Reversed.


Summaries of

United States v. Sanchez

U.S.
Nov 13, 1950
340 U.S. 42 (1950)

upholding a federal tax (now repealed) of $100 per ounce on transfers of marijuana

Summary of this case from Simpson v. Bouker

upholding federal tax on marijuana

Summary of this case from Lynn v. West

upholding Marihuana Tax Act and noting that "[i]t is beyond serious question that a tax does not cease to be valid merely because it regulates, discourages, or even definitely deters the activities taxed"

Summary of this case from Waters v. Farr

upholding federal marihuana tax

Summary of this case from New Mn. Taxation Revenue Dept. v. Whitener

sustaining the $100-per-ounce federal tax on marijuana

Summary of this case from Commonwealth v. Bird

In Sanchez, we examined a federal marijuana tax, IRC § 2590(a)(2) (since repealed, but last codified at 26 U.S.C. § 4741 et seq. (1964)), that taxed the transfer of marijuana to a person who has not paid a special tax and registered. Under the statute, the transferor's liability arose when the transferee failed to pay the tax; as a result, "[s]ince his tax liability does not in effect rest on criminal conduct, the tax can be properly called a civil rather than a criminal sanction."

Summary of this case from Department of Revenue of Mont. v. Kurth Ranch

In United States v. Sanchez, 340 U.S. 42 (1950), the Court upheld the former federal tax on marijuana at the rate of $100 per ounce against a challenge that the tax was a penalty, rather than a true tax.

Summary of this case from Department of Revenue of Mont. v. Kurth Ranch

In United States v. Sanchez, 340 U.S. 42, 43-44 (1950), the Supreme Court considered the scope of the taxing clause with respect to a statute that imposed a tax on the transfer of marijuana, to be paid by either the transferor or the transferee, with the amount and the liable person both governed by whether the transferee had previously registered with the federal government, as mandated by a separate statute.

Summary of this case from U.S. v. Hall

In United States v. Sanchez, 340 U.S. 42, 46, 71 S.Ct. 108, 110-11, 95 L.Ed. 47 (1950), for example, the Supreme Court upheld the federal Marihuana Tax Act, which imposed a $100 per ounce tax on transferees of marijuana who were not registered with the Treasury Department. The rate of taxation on legally registered transferees, however, was only $1 per ounce.

Summary of this case from Lynn v. West

In United States v. Sanchez, 340 U.S. 42, 71 S.Ct. 108, 95 L.Ed. 47 (1950), the Supreme Court held that the Marihuana Tax Act was a constitutional exercise of the taxing power.

Summary of this case from United States v. Kuch

In United States v. Sanchez, 340 U.S. 42, 44 (1950), the Court noted that the tax "implements the congressional purpose of restricting traffic in marihuana to accepted industrial and medicinal channels."

Summary of this case from Commissioner of Revenue v. Mullins

In Sanchez, the court upheld the constitutional validity of a tax of $100 per ounce imposed pursuant to § 2590(a)(2) of the Internal Revenue Code (now repealed) on all transfers of marijuana to any person who had not paid the special tax on marijuana and registered under §§ 2590 and 2591 of the code.

Summary of this case from Covelli v. Commissioner of Revenue Services

In Sanchez we examined a federal marijuana tax [since repealed] that taxed the transfer of marijuana to a person who has not paid a special tax and registered. Under the statute, the transferor's liability arose when the transferee failed to pay the tax; as a result, "[s]ince his tax liability does not in effect rest on criminal conduct, the tax can be properly called a civil rather than a criminal sanction."

Summary of this case from State v. Lange

In United States v. Sanchez, 340 U.S. 42, 71 S.Ct. 108, 95 L.Ed. 47 (1950), the Supreme Court upheld a federal marijuana tax statute (now repealed) against a challenge similar to the one Gallup mounts here.

Summary of this case from State v. Gallup

In Sanchez, as in the present case, persons who possessed illegal drugs without paying the tax challenged the statute on the ground that it imposed a criminal penalty, rather than a tax.

Summary of this case from Rehg v. Illinois Department of Revenue

In Sanchez, the Supreme Court upheld the Marijuana Tax Act (now repealed) against a challenge that it imposed a penalty and not a tax.

Summary of this case from Rehg v. Illinois Department of Revenue

In United States v. Sanchez (1950), 340 U.S. 42, 71 S.Ct. 108, 95 L.Ed 47, the Court determined that taxes on illegal activities are not necessarily penal or unconstitutional.

Summary of this case from Sorensen v. State Department of Revenue

In United States v. Sanchez, 340 U.S. 42, 95 L.Ed.2d 47, 71 S.Ct. 108 (1950), the Court upheld a federal tax on marijuana.

Summary of this case from State v. Berberich

In Sanchez the Court reviewed the constitutionality of a federal tax on marijuana noting "despite the [act's] regulatory effect and the close resemblance to a penalty, it does not follow that the levy is invalid."

Summary of this case from Hill v. State

noting penalty, severe in relation to tax, did not alter civil character of act where based on presumption tax would not realistically be paid

Summary of this case from Hill v. State

In United States v. Sanchez, 340 U.S. 42, 95 L.Ed. 47, 71 S.Ct. 108 (1950), the Court upheld a federal tax on marijuana.

Summary of this case from State v. Matson

In United States v. Sanchez, 340 U.S. 42, 71 S.Ct. 108, 95 L.Ed. 47 (1950), the United States Supreme Court upheld the federal Marijuana Tax Act (now repealed) against a similar challenge.

Summary of this case from Harris v. State, Dept. of Revenue
Case details for

United States v. Sanchez

Case Details

Full title:UNITED STATES v . SANCHEZ ET AL

Court:U.S.

Date published: Nov 13, 1950

Citations

340 U.S. 42 (1950)
71 S. Ct. 108
95 L. Ed. 47

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