97 N.Y.S. 535 | N.Y. App. Div. | 1906
Lead Opinion
The instructive arguments and excellent briefs of the learned • counsel on this appeal have enabled the court to readily appreciate the present status of judicial decisions on the interesting questions presented, and the points on ivhich the validity of the Stock Transfer Stamp Tax Law, so called, hinges. The validity of the amendment to the Tax Law is challenged upon the ground, among others, that the bill had only been upon the .desks of the members of Assembly one day prior to its passage-in that body. This objection should be considered first, because, if the constitutional requirements for the enactment of statutory law have not been observed, it is needless to inquire whether it would be competent for the Legislature to enact such legislation and the discussion of the question would be obiter. The bill.as printed in the Session Laws shows that it was duly enacted. The original certificates annexed to the act and on file with the Secretary of State are not presented by the record. It is not contended that they are not in due form to show the proper enactment of the law. It is contended that the journals may not be consulted to impeach the law. , I am of opinion, however, that they do not impeach it; an'd I prefer to put the decision, upon that ground without deciding whether, if they did, they would be competent for that purpose.
Article 15, added to the Tax Law by the amendment,- contains ten sections, 315 to 324 inclusive. Section 315, so far-as material to a decision of the questions presented, imposes a tax “ on ail sales, or agreements to sell, or memoranda of sales or deliveries or transfers of shares or certificates of stock in any domestic or foreign association,, company or corporation, made after the first day of June, nineteen hundred and five, whether made upon or shown by the books of the association, company or corporation, or by any assignment in .blank, or by any delivery,.or by any paper or agreement or memorandum or other evidence of transfer or sale whether entitling the holder in any manner to the benefit of such stock, or to secure the future payment of money or the future transfer of any stock, on" eacli hundred dollars of face value or fraction . thereof, two cents,” and provides that “ it is not intended by this act to impose a tax upon an agreement evidencing the deposit of stock certificates as collateral security for money.loaned thereon which stock certificates aré not actually sold, nor upon such stock certificates so.deposited.” The section then prescribes how the payment of the tax shall be denoted; and with respect to sales of certificates assigned in blank and delivered, as these were, it provides that the seller shall make and deliver to the buyer a memorandum or bill of sale, showing the date and the amount of the sale and the name of-the seller, and the matter or thing to which it refers, to which an adhesive stamp or stamps prescribed in the act shall be affixed, showing the payment of the tax. Sections 316 and 319 authorize and require the Comptroller of the State to prepare the stamps and put them on sale- at convenient places. Section 317 provides in substance that a person who shall make a sale without paying the
The provisions of the "amendment to the Tax Law clearly show that the stamp.tax on the transfer of stocks was intended as a sub-stantial source of general revenue. The language employed embraces every actual sale and delivery of stock anywhere within the State. Yet it is well known that the sale of such securities elsewhere than on the exchanges or on the “ curb” is only a very small percentage. The extent of the transactions in stocks on the exchange is a matter of record, and the legislators could estimate approximately tlierevenue that might'he derived from this stamp tax. It is a matter of current history that it was expected that about $5,0.00,000 per annum would flow into the State treasury from the imposition Of the tax and that the amount of such taxes thus far collected indicates that the total for the year will exceed the amount anticipated.'
In approaching the momentous questions presented, it must be. borne in mind that the power of taxation is an essential attribute of government; that, subject to constitutional restraints, it is for
It may be. that uqder the decisions of our own courts this statute could not be sustained as a tax on property owing to the fact that it is not based on value and that no opportunity is afforded the person upon whom the tax is imposed for a heai-ing on the valuation of his property or the amount of the tax, objections forcibly presented by. Mr. Justice Ing-raham. I disagree with him, however, as to the . nature of this tax. The learned Attorney-General and -his associate do not seek to sustain the law as a tax upon property. They contend that it is an excise tax or stamp duty upon the transaction or transfer of certificates of stock, the amount of the tax depending, upon -the extent of the- business, and such literally it appears to be.
The statute is not in conflict with the commerce clause of the Federal-Constitution (Art. 1, § 8, subd. 3). The tax is imposed only on trans-fers made within this State, and it operates alike on transfers made by residents'and by non-residents without discrimination. (Woodruff v. Parham, 8 Wall. 140 ; King v. Mullins, 171 U. S. 436.) What has'been said disposes of .the contention that the act,- in imposing a tax on sales of the shares of a. foreign corporation owned by a non resident, taxes, property without the jurisdiction of the State. The 'sale and- delivery within the State conf er jurisdiction to impose the tax on the transfer.
It follows that the order should be affirmed.
O’Brien, P. J., McLaughlin and Houghton^ JJ., concurred.
Dissenting Opinion
The question presented on this appeal is as to the constitutionality of the act imposing a tax on the sale of stock (Laws of 1905, chap. 241), being an amendment to the Tax Law (Laws of 1896, chap. 908). Section 315 of the Tax Law, as thus added, provides : “ There is hereby imposed and there shall immediately accrue and be collected a tax as herein provided, on all sales or agreements to sell, or memoranda of sales or deliveries or transfers of shares or certificates of stock in any domestic or foreign association, company or corporation, made after the first day of June, nineteen, hundred and five, * * * on each hundred dollars of face value or fraction thereof, two cents.”
This tax how under consideration is imposed upon the'sale of a specific kind of personal property, namely, the shares of stock in an incorporated company. The seller of stock must pay to the State a sum of money upon the sale of; or agreement to sell, the stock, and thus the right to sell is made subject to the payment to the State of the tax imposed upon that sale. The free and unrestricted right to sell property is clearly recognized in this State as .an attribute of the property itself,, which cannot be separated 'from it. . (Wright v. Hart, 182 N. Y. 330.) In that case the Court of Appeals quote with approval from the opinion in Wynehamer v. People (13 N. Y. 378), as follows: “ The right to use, buy and sell property is protected by the Constitution, and when the law annihilates the value of property, and strips it of its attributes by which alone it is distinguished as property, the owner is deprived of it according to the plainest interpretation, ánd certainly within the constitutional provision intended expressly to shield personal rights from the exercise of arbitrary power.’ ” (See, also, People ex rel. Manhattan Savings Inst. v. Otis, 90 N. Y. 48, where it is said: “Dépriving an owner of property of one of its essential attributes is depriving him of his. property within the constitutional provision.”)
In considering the validity of this tax we must, 1 think, keep this proposition clearly in mind, that a tax is imposed upon an essential attribute of property, to be paid by any one who sells or agrees to sell it, and a failure to pay that tax is made a criminal offense punishable by fine or imprisonment or by both. ..The tax is based upon
In Stuart v. Palmer (supra) an act had been passed by the Legislature to lay out,-open and grade Atlantic avenue in the town of Hew Lots, Kings county. (See Laws of 1869, chap. 217, as amd. by Laws of 1870, chap. 619.) ' It provided for two assessments, one for damages awarded to the owner of the land for taking land which was not conveyed, and another for the expenses of'regulating, grading, etc. The former assessment was to be made and confirmed after proper notice to and hearing of the persons interested. The latter assessment could be made without any notice to or hearing of any person. Judge Earl, delivering the opinion of the court, says : “ I am of opinion that the Constitution sanctions no law imposing such an assessment, without a notice to, and a hearing or an opportunity of a hearing by the owners of the property to be assessed. It is not enough that the owners may by chance have notice, or that they may as a matter of favor have a hearing. The law must require notice to them, and give them the right to a hearing and an opportunity to be heard. * * * The constitutional validity of law is to.be tested, not by what has been done under it, but by what may, by its authority, be done. The Legislature may prescribe the kind of notice and the mode in which it shall be given, but it cannot dispense with all notice. * * .* A tax-or assess
The same question was presented in Remsen v. Wheeler (105 N. Y. 573). In that case an .assessment, for Water rates, upon a vacant lot in the city of Brooklyn made under chapter 306- of the Laws of 1859, an act in reference,to the supply of said city, with' water, Where no notice was given to the owner of- the levying of the-assessment, or opportunity for him to be heard, was held to be . illegal and void: The act in that case provided ' in section 24, among other things, that the water board should, in every year,, by resolution, fix the price which should be assessed upon every vacant lot situated upon any street, lane, alley or court through or into which distributing pipes had been laid, until the bonds issued for the construction of the water works, With the interest thereon, should have been paidand that- the sums so assessed, together with the percentages for defaults, should be a. lien upon the said premises
In Nehasane Park Association v. Lloyd (167 N. Y. 431) the question of the constitutionality of chapter 347 of the Laws of 1853, authorizing the commissioners to levy a tax of fifteen cents on each
In discussing the constitutionality of the original Collateral Inheritance Tax Law (Laws of 1885, chap. 483), which imposed a tax of five dollars on every hundred .dollars of the clear market value of ■ the property transferred, Judge Earl, delivering the opinion of the court in Matter of McPherson (104 N. Y. 306) j says: “ The power- . of the Legislature over the subject of taxation, except as limited by constitutional restrictions, is unbounded. . It is for that body, in the exercise of its discretion, to select the objects of taxation. It may impose all the taxes upon, lands, pr all upon personal property, or all upon houses or upon incomes. It may raise revenue by capitation taxes, by special taxes upon carriages, horses, servants, dogs, franchises and upon every species of property and upon all kinds of busi: ness and trades. * * * It is not very important to determine in this case whether the act of 1885 is to be regarded as imposing-a tax upon property or upon the succession or devolution of property by will or intestacy. In eitjier case it is a special tax. In the one case
The case of Bell's Gap Railroad Co. v. Pennsylvania (134 U. S. 232) presented a question as to whether an assessment .of á tax of three mills upon the nominal or face value of bonds issued by a corporation, instead of- assessing it upon the actual value of the bonds, was valid. It was held that “ This might have been subject to question under the State laws; but the State courts have upheld the assessment as valid. We are to accept it, therefore, as part of the State system of taxation, authorized by its Constitution and laws.” In determining that the tax did not viqlate any provision of the Constitution of the United States, it was said: “ We do not perceive that the assessment in question transgresses this provision.
Assuming that the Legislature wpuld have the power to impose a ■tax upon the sale of stock based upon the value of the stock or' the amount for which the stock was actually sold, I think it is within the prohibition of the Constitution for the Legislature to impose' a tax not upon the valué of the property sold ; not upon the price at which the property was sold, but upon an amount which the .Legislature should fix as the value of the property sold, and as I view it this is just wliat this statute under consideration does. It fixes the face value of the stock as the basis upon which a tax is imposed and requires,the payment upon each sale of the stock of a percentage of that face value. " ,
The Attorney-Greneral in bis brief States that “ This act is-really an extension of the present Transfer Tax Laws of Hew York. * * *
We are not unmindful of the decision which involved the validity of the. United States Pevenue Tax Law of 1898 (30 U.' . S. Stat, at Large, 451, § 6; Id: 458, Schedule Á), reported-in 115 Federal Peporter; 207, affirmed by the Supreme Court of the United States in 192 United States, 363. The discussion in that case depended entirely upon the right of Congress to impose a tax upon the'sale of stock, a power which I have no doubt the Legislature of this State possesses. The question as to the method to. be' adopted in ascertaining the amount of such a tax was not discussed; and this particular question does not seem to have been presented in that case. The power of taxation given to Congress and the limitation of that power by the Federal Constitution present an entirely different question than that presented by the limitation of the power, of the Legislature in regard to taxation by the Constitution of this State, and it is with the latter question that we have to deal in this case, and the construction given to the State Constitution by the. courts of this State-is to control.. As 1 view it it is the method adopted by which'the. amount of the tax that is im-posed is ascertained, which violates the fundamental law of the State. For - that, reason the tax cannot be sustained.
‘ Other questions -are presented on this - appeal which-, in view of this conclusion, are not considered,, but for the reasons stated the order, appealed from should be reversed and the relator discharged.
Order affirmed.
U. S. Const.-14th amenclt. § 1.— [Rep.