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A compilation of several cases that all challenged the constitutionality of the corporate income tax
of 1909. The tax was not a tax on income, but an excise tax levied on the privilege of doing business in
a corporate capacity. The tax was based upon 1% of net income greater than $5,000.
The corporations claimed the tax was in fact an unapportioned direct tax. The corporations also
challenged that the federal government could not tax a state granted privilege.
The Supreme Court stated that “In other words, the tax is imposed upon the doing of business of the
character described, and the measure of the tax is to be income…”
The Court also explained excise taxes, “Duties and imposts are terms commonly applied to levies
made by governments on the importation or exportation of commodities. Excises are ‘taxes laid upon the
manufacture, sale, or consumption of commodities within the country, upon licenses to pursue certain
occupations, and upon corporate privileges.’ Cooley, Const. Lim. 7th ed. 680.”
Regarding the federal government’s authority to tax state granted privileges, the Supreme Court
stated, “We must remember, too, that the revenues of the United States must be obtained in the same
territory, from the same people, and excise taxes must be collected from the same activities, as are
also reached by the states in order to support their local government.”
Full text: Flint v. Stone Tracy
Co., 220 U.S. 107 (1911) |