period. The first of such statutes imposed small excises on wines and strong waters, which were gradually increased in amount and extended to other articles. A tonnage tax was also enacted. In April 1668 an excise was imposed upon "all cyder, rum, ale and beer sold in publick houses" licensed to sell such articles. In 1670 a duty was laid on all goods, wares and merchandise with certain exceptions imported from any foreign port or other jurisdiction of one penny for every twenty shillings value. In 1680 a duty was laid on cattle brought in from other colonies.1 Under the provincial charter, although no authority was given in terms to impose duties and excises, the general court enacted numerous statutes providing for taxes of this class. These excises were "granted" as in England, for a fixed period, usually of one year. Statutes imposing duties on imports were enacted every year, and such duties formed an important source of income for the provincial government; but excises on domestic transactions were also frequently laid. At first these excises were chiefly on the sale of wines or distilled liquors at retail, or on the brewing of beer and ale and the distillation of liquors,2 but in 1737 an excise on the use of carriages was imposed 3 and in 1750 an excise upon the sale at retail of tea, coffee, arrack, snuff and china-ware. In 1755 a stamp tax upon writs, legal papers and newspapers was enacted.5 6 3 During the first eight years under the constitution of Massachusetts the state had and exercised the power of laying duties on imports, but upon the adoption of the constitution of the United States this power passed to Congress, leaving in the state the power concurrently with Congress of laying excises. on domestic transactions. During the war of the Revolution excises had been laid by the state with great freedom, not only upon the sale of liquors and tea and the use of carriages, but upon articles of various kinds manufactured within the state 1 Anc. Chart. 130. 2 St. 1692-93, c. 5, §7 (sale of liquors at retail); St. 1702, c. 7, §4 (brewing of beer and ale, distilling spirits or strong liquors); St. 1715-16 c. 9 (keepers of coffee-houses, innholders and retailers of wines and liquors); St. 1737-38. c. 1, § 1 (lemons and limes used in making punch) 3 St. 1737–38, c. 1, § 15; St 1749–50, c. 21, § 9. 4 St. 1749-50, c 21. 5 St. 1754-55, c. 18. St. 1782, c. 33; St. 1783. c. 12. such as clocks and watches and sugar, and upon sales at auction. After the war was over and the financial strain on the state grew less the only excises retained were those upon tavern keepers, retailers of liquor and sales at auction. The occupation of tavern keeper and the selling of intoxicating liquors has been subjected to regulation, and when not wholly prohibited, to the payment of fees down to the present time; but the license fee, although it yielded a considerable revenue, came to be looked upon as an incident of regulation, and was imposed as an exercise of the police power rather than of the power of taxation. Sales at auction were taxed amounts varying from one per cent to one tenth of one per cent of the value of the goods sold, the last named being the tax on the sale of municipal bonds and shares in domestic corporations.10 The tax on sales by auction was abolished in 1849.11 In 1812 an excise on the franchise of banking corporations was imposed of one half of one per cent of the capital stock,12 and this tax remained until the state banks were driven out of existence during the civil war to make way for the national banks. Insurance companies were first taxed on their business in 1860.13 Savings banks were subjected to a franchise tax in 1862 11 and business corporations generally in 1864.15 Foreign telegraph companies were subjected to an excise tax in 1864;16 ships engaged in the foreign carrying trade in 1881;" and trust companies in 1888.18 The inheritance tax first appeared on the statute books of this commonwealth in 1891.19 In 1898 a special excise tax was imposed on street railway companies 20 and in 1902 on corporations own 14 7 St. 1781, c. 17; St. 1782, c. 33; St. 1783, c. 12; St. 1789, c. 48. 8 Portland Bank v. Apthorp, 12 Mass. 252 (1815). 9 G. L. c. 138 § 21. 10 R. S. c. 9, § 5. 11 The tax on sales by auction was restricted by St. 1839, c. 111, and St. 1843, c. 21. By St. 1849, c. 138, it was repealed so far as it applied to sales of goods manufactured in the United States; and the statute as it remained being a discriminatory excise on the sale of imported goods was clearly unconstitutional. Supra § 13. For the existing statutes in regard to auctioneers' licenses, see G. L. c. 100 § 2. 12 St. 1812, c. 32. 13 G. S. c. 58, § 64. See St. 1860, c. 178 and G. L. c. 63 § § 20–29, inc. infra page 521. 14 St. 1862, c. 224. 15 St. 1864, c. 208. 16 St. 1864, c. 208. 17 St. 1881, c. 284. 18 St. 1888, c. 413. 19 St. 1891, c. 425. 20 St. 1898, c. 578. See G. L. c. 63 §§ 11-16 inc. infra page 515. See G. L. c. 63 §§ 61-66 inc., infra page 584. 24 ing ships engaged in the foreign carrying trade.21 In 1903 foreign business corporations were first subjected to an excise tax,22 and in 1907 an excise was imposed on express companies." In 1914 the stock transfer tax was established. Four other statutes imposing excises have been held unconstitutional,25 and in addition to the excises already mentioned there are a large number of statutes imposing license fees upon various acts and occupations; but as the primary purpose in each case is regulation such statutes are not an exercise of the power of taxation.26 The power to lay excises in this commonwealth is subject to two limitations by the constitutional provision already quoted, namely (1) excises may be imposed only upon produce, goods, wares, merchandise and commodities, (2) excises must be reasonable. 55. What Constitutes a Commodity Much of the discussion over the power of the legislature to levy excises has turned upon the meaning of the word "commodity" in the Massachusetts constitution. The word "commodity" in a special sense signifies an article of trade or commerce, but in a general sense denotes a privilege, convenience, advantage, benefit or profit. It was early held that "commodity" was to be taken in its general sense in the clause of the constitution relating to taxation, and consequently that it was within the power of the legislature to lay an excise upon a franchise derived from the state.1 This interpretation has never been 21 St. 1902, c. 374. See G. L. c. 63 § 67, infra, page 589. 22 St. 1903, c. 437, § 75. See G. L. c. 63 § § 39-43 inc. infra, page 560. 23 St. 1907, c. 580, repealed by St. 1918 c. 257 § 77. 24 St. 1914, c. 770. See G. L. c. 64, infra, page 600. 25 St. 1863, c. 236, imposing a tax upon dividends paid to non-resident stockholders was held unconstitutional in Oliver v. Washington Mills, 11 Allen 268 (1865); St. 1878, c. 275, subjecting partnerships the interests in which were transferable without the assent of the partners to the corporate franchise tax was held unconstitutional in Gleason v. McKay, 134 Mass. 419 (1883); St. 1904, c. 403, imposing an excise on the business of giving trading stamps in connection with the sale of other articles was held unconstitutional in O'Keeffe v. Somerville, 190 Mass. 110 (1906); St. 1914, c. 761, imposing an excise on the privilege of registering bonds and thereby rendering them tax exempt was held unconstitutional in Perkins v. Westwood, 226 Mass. 268 (1917). 26 Supra § 4. For the present statutes relating to licenses and license fees from which any substantial revenue is intended to be derived see G. L. c. 138, c. 140. 27 Supra, § 51. 1 Portland Bank v. Apthorp. 12 Mass. 252 (1815). questioned and it has been held in numerous cases that it is competent for the legislature to lay an excise upon the franchise of a domestic corporation or upon the privilege of a foreign corporation to do business in this commonwealth.3 2 5 While it is conceded that the legislature cannot constitutionally evade the limitations upon the taxation of property by imposing an excise upon the privilege of holding property,* it has been earnestly contended that the power of levying excises of all sorts as it was exercised in England and in Massachusetts during the provincial period was given to the general court by the constitution subject only to the limitation of reasonableness, and this view has been expressed obiter in the decisions of the supreme judicial court in litigated cases and by three of the members of the court in an opinion to the legislature. The view of the majority however, supported by actual decisions of the court, is that the enumeration of the permissible subjects of excise in the constitution creates a real limitation and that the meaning of "commodity" is confined to such undertakings as one may not lawfully follow in the exercise of a natural right without aid from the government and without affecting the rights or interests of others in such a way as properly to call for governmental regulation; and that consequently the legislature cannot constitutionally lay an excise upon such natural rights as the performance of simple labor or the making of simple contracts. Applying this principle it has been held that the right to do business by means of a 2 Commonwealth v. People's Five-Cents Savings Bank, 5 Allen 428 (1862); Commonwealth v. Lowell Gas Light Co., 12 Allen 75 (1866); Commonwealth v. Hamilton Manufacturing Co., 12 Allen 298 (1866); Commonwealth v. Provident Institution for Savings, 12 Allen 312 (1866); Manufacturers' Insurance Co. v. Loud, 99 Mass. 146 (1868); Commonwealth v. Lancaster Savings Bank, 123 Mass. 493 (1878); Commonwealth v. Barnstable Savings Bank, 126 Mass. 526 (1879). 3 Attorney-General v. Bay State Mining Co., 99 Mass. 148 (1868); Connecticut Mutual Life Insurance Co. v. Commonwealth, 133 Mass. 161 (1882); Attorney-General v. Electric Storage Battery Co., 188 Mass. 239 (1905); Baltic Mining Co. v. Commonwealth, 207 Mass. 381 (1911). As to corporations engaged in interstate commerce see supra, § 23. 4 Opinion of the Justices, 208 Mass. 616 (1911); Opinion of the Justices, 220 Mass. 613 (1915). 5 Portland Bank v. Apthorp, 12 Mass. 252 (1815); Minot v. Winthrop, 162 Mass. 113 (1894). 6 See the opinions of Hammond, Loring and Sheldon, JJ., in Opinion of the Justices, 196 Mass. 602 (1908). 7 See the majority opinions in the above (see also note 11, infra) and the cases cited in the two following notes. 8 9 partnership in which the interest of each partner is transferable without the consent of the others and the right to sell goods with the accompaniment of trading stamps cannot be the subject of excise; but an inheritance tax,10 a tax on the sale of corporate stock, foreign or domestic, and a tax on the privilege of doing business by means of an unincorporated association arising above the level of a simple partnership with transferable shares are valid excises on commodities. 11 It has also been held that as an act of justice is not a matter of barter, the privilege of obtaining an exemption from direct taxation for bonds secured by property which is itself taxed cannot be made the subject of an excise.12 56. Reasonableness of Excises An excise need not be proportional, but it must be reasonable. The power to determine what callings, franchises or privileges shall be subjected to an excise and the amount of such excise belongs primarily to the legislature. The provision that it must be reasonable was not designed to give to the judicial department the right to revise the decisions of the legislature as to the policy and expediency of an excise.1 The court cannot declare an excise invalid as unreasonable unless it is plainly and grossly oppres 8 Gleason v. McKay, 134 Mass. 419 (1883). 9 O'Keeffe v. Somerville, 190 Mass. 110 (1906). 10 Minot v. Winthrop, 162 Mass. 113 (1894); Minot v. Treasurer and Receiver-General, 207 Mass. 588 (1911). 11 Opinion of the Justices, 196 Mass. 602 (1908). Held by all the justices that a tax on the sales of shares or stock certificates can be sustained only as a duty or excise and such a tax can be imposed upon the sale of shares of corporations. Held by Hammond, Loring and Sheldon, JJ., that it can be imposed upon the sale of shares in unincorporated associations, because the constitution gave power to exercise every part of the system of taxation which had theretofore been exercised in England and in the province of Massachusetts Bay; and that power includes the right to tax a privilege which is the exercise of a natural right, provided the tax is reasonable. Held by Rugg, J., that the sale of such shares can be taxed because the device of voluntary unincorporated associations with transferable shares is not a natural right. Held by Knowlton, C. J., and Morton and Braley, JJ., that the sale of such shares is a natural right and untaxable and that a distinction between such associations and ordinary partnerships is based on an immaterial fact. See also Oliver v. Liverpool & London Life and Fire Insurance Co., 100 Mass. 531 (1868), and G. L. c. 63 § § 22, 23, infra page 524, as to the right to lay an excise on an unincorporated company. 12 Opinion of the Justices, 220 Mass. 613 (1915); Perkins v. Westwood, 226 Mass. 268 (1917). 1 Connecticut Mutual Life Insurance Co. v. Commonwealth, 133 Mass. 161 (1882); Minot v. Winthrop, 162 Mass. 113, 123 (1894). |