disposed of," and dismissed it by saying: "That decision, however, extended the exemption from such fees of goods brought from state to state no further than 'while the same are in the original receptacles or containers in which they are brought into the state.'" Such exemption the complainant had acquired from the court below, and it was no longer in issue. What Mr. Justice Pitney says in his ensuing paragraph, already quoted, is inconsistent with that exemption and with the recent Supreme Court decisions on which it is based. The inconsistency cannot be resolved by drawing a distinction between a general state sales tax on all commodities and a special one on the sale of selected commodities, because plainly by "discrimination" Mr. Justice Pitney means discrimination against interstate commerce, not discrimination against particular commodities, since he says that "the fact that no goods of the like kind are produced within the taxing state, and that necessarily all have come from other states, is not of itself sufficient to show a discrimination against interstate commerce." In the case at bar the inspection was made when the tank cars arrived, and the fees, concededly a source of revenue, were then payable. Such arrival was held not to "amount to 'coming to rest within the state' authorizing state taxation." The opinion then proceeded:

"And although the state may tax the first domestic sale of the products, or tax them upon their storage in stationary tank awaiting sale, it may not, without consent of the owner, impose its power upon the products while yet in the tank car, but must resort to other means of collection, if need be.

"The evidence strongly tends to show that it may be more convenient to plaintiff that inspection before unloading of tank cars, as heretofore practiced, be continued; and there is no objection to this, if done with plaintiff's free consent. Aside from this, the authority of defendants to tax the products or their storage or sale commences when they have come to rest; ordinarily, when transferred from the tank car to the storage tank and added to plaintiff's stock in trade kept therein for local distribution and sale."

III. TAXATION

1. Federal Taxes

The conundrum, "When is a tax not a tax?" received in Bailey v. Drexel Furniture Co.51 the answer: When from the face of the statute it appears that a prohibitory or regulatory penalty has been imposed for a departure from a detailed and specified course of conduct in business. Over the dissent of Mr. Justice Clarke, the court condemned as not an exercise of the federal taxing power a provision in the Revenue Act of 1918 imposing an excise of ten per cent of the net profits on all enterprises employing children under designated ages or in excess of designated periods per day and per week. Other features of the statute thought to be regulatory rather than fiscal in character were those allowing inspection of manufacturing establishments by the secretary of labor and his subordinates and excusing from the tax those who had employed children having an age certificate from federal officials or children whom the employer did not know to be under age. "Scienters," said Chief Justice Taft, "are associated with penalties, not with taxes." He puts the general background for the decision as follows:

"The difference between a tax and a penalty is sometimes difficult to define, and yet the consequences of the distinction in the required method of their collection often are important. Where the sovereign enacting the law has power to impose both tax and penalty, the difference between revenue production and mere regulation may be immaterial, but not so where one sovereign can impose a tax only and the power of regulation rests in another. Taxes are occasionally imposed in the discretion of the legislature on proper

*For the preceding instalments, see 21 MICH. L. REV. 63, 174.

51 259 U. S. —, 42 Sup. Ct. 449 (1922). See 10 CALIF. L. REV. 501; 22 COLUM. L. REV. 656; 21 MICH. L. REV. 88; 6 MINN. L. Rɛv. 606; 8 VA L. REV. 625; and 31 YALE L. J. 894. For discussions prior ot the Supreme Court decision, see 10 CALIF. L. REV. 95; 22 COLUM. L. REV. 370; 35 HARV. L. REV. 859, 881; 20 MICH. L. REV. 446; 6 MINN. L. REV. 318; and 31 YALE L. J. 310.

subjects with the primary motive of obtaining revenue from them and with the incidental motive of discouraging them by making their continuance onerous. They do not lose their character as taxes because of the incidental motive. But there comes a time in the extension of the penalizing features of the so-called tax when it loses its character as such and becomes a mere penalty. Such is the case in the law before us. Although Congress does not invalidate the contract of employment or expressly declare that the employment within the mentioned ages is illegal, it does exhibit its intent practically to achieve the latter result by adopting the criteria of wrongdoing and imposing its principal consequence on those who transgress its standard."

Earlier cases relied on by the government were characterized as ones in which the statutes involved did not show on their face that they imposed regulatory or prohibitive police measures and in which the court declined to assume such a motive merely from the selection of a particular subject for a particularly heavy burden or as cases in which such regulatory features as appeared in the act were reasonably related to its enforcement as a fiscal measure. In distinguishing such cases from the one before him, Chief Justice Taft observed:

"Out of a proper respect for the acts of a coördinate branch of the government, this court has gone far to sustain taxing acts as such, even though there has been ground for suspecting, from the weight of the tax, it was intended to destroy its subject. But in the act before us the presumption of validity cannot prevail, because the proof of the contrary is found on the very face of its provisions. Grant the validity of this law, and all that Congress would need to do hereafter in seeking to take over to its control any one of the great number of subjects of public interest, jurisdiction of which the states have never parted with, and which are reserved to them by the Tenth Amendment, would be to enact a detailed measure of complete regulation of the subject and enforce it by a so-called tax upon departures from it. To give such magic to the word 'tax' would be to break down all constitutional limitation of the powers of Congress and completely wipe out the sovereignty of the states.'

Inasmuch as the controversy came before the court in a suit to recover a tax that had been paid under protest, the decision could

rather on the detailed specification of the conditions subjecting employers to a tax sufficiently onerous to induce them generally to alter the conduct of their business so as to eliminate the elements giving rise to the demand.

The Child Labor Tax case was followed in Hill v. Wallace,52 which declared unconstitutional the provisions of the Grain Future Trading Act of August 24, 1921, which imposed a tax of twenty cents a bushel on all sales of grain for future delivery other than those made by persons who hold and own it at the time, or by owners or renters of land on which the grain is to be grown, or sales made by or through a member of a board of trade designated by the secretary of agriculture as a contract market, such sales being evidenced by a memorandum containing certain particulars required by the statute or by administrative regulations. The conditions requisite to designation as a contract market were numerous and detailed, and the statute set up an elaborate machinery for hearings to determine whether they had been complied with. Certain provisions which might in and of themselves be thought to bear a reasonable relation to the collection of the tax or to the prevention of evasion were found not sufficient to overcome the inference from the other provisions relative to dissemination of false reports, cornering, rebating, and discrimination. The tax of twenty cents a bushel was declared to be most burdensome, varying from fifteen to fifty per cent of the value of the grain sold, while the tax upon contracts for sales for future delivery imposed by the Revenue Act was only two cents per $100 of value. The amount of the tax was therefore sufficient to induce traders to form boards of trade to be designated as contract markets and thus to subject themselves to the regulatory features of the act. No one dissented from the decision that the statute did not impose a tax in the legitimate sense of the term, but Mr. Justice Brandeis thought that the plaintiffs were not in a proper position to contest the issue.

Another effort of Congress to use the taxing power as a weapon of prohibition and punishment was nipped in the bud in Lipke v. Lederer, which involved a section of the National Prohibition Act

42 Sup. Ct. 453 (1922). See 10 CALIF. L. REV. 526 and

6 MINN. L. REV. 607.

53 259 U. S.

42 Sup. Ct. 549 (1922), 21 MICH. L. REV. 68. For a note prior to the decision, see 35 HARV. L. REV. 347.

requiring the collector of internal revenue, upon evidence of illegal manufacture or sale of liquor, to assess against and collect from the person responsible a tax "in double the amount now provided by law, with an additional penalty of $500 on retail dealers and $1,000 on manufacturers." The issue in the case was whether the offending and offended Mr. Lipke could enjoin the collector from taking steps to enforce his demand. This depended upon whether the demand was for a tax or for a penalty. In holding that it was for the latter Mr. Justice McReynolds declared:

"The mere use of the word 'tax' in an act primarily designed to define and suppress crime is not enough to show that within the true intendment of the term a tax was laid. * * * When by its very nature the imposition is a penalty, it must be so regarded. *** Evidence of crime (Section 29) is essential to assessment under Section 35. It lacks all the ordinary characteristics of a tax, whose primary function 'is to provide for the support of the government' and clearly involves the idea of punishment for infraction of the law-the definite function of a penalty."

Justices Brandeis and Pitney dissented on the issue of equitable relief without passing on the substantive issue.

The ancient slogan of "taxation without representation" was raised in Heald v. District of Columbia on behalf of a resident of the District, but Mr. Justice Brandeis answered that "there is no constitutional provision which so limits the power of Congress that taxes can be imposed only upon those who have political representation." Therefore, a tax on a resident upon property located in the District was sustained notwithstanding the fact that the money raised was not held as a separate fund for the District but was subject to the disposal of Congress like other revenues raised by federal taxation. Apparently there was no contention against direct taxes or against an excise violating the requirement of geographical uniformity. Any such objections would clearly be foreclosed by the fact that Congress has exclusive jurisdiction over the District. There were complaints as to the incidence of the statute on non-residents and on certain kinds of property, but these were put to one side because the plaintiff failed to show that they in any way affected him. The definition of "income" as distinct from capital within the