the General Government," laid down a rule, in respect to the power of taxation, which has application here. After saying that "the sovereignty of a State extends to everything which exists by its authority, or is introduced by its permission, but does not extend to the means which are employed by Congress to carry into execution powers conferred on that body by the people of the United States," he said:

"If we measure the power of taxation residing in a State by the extent of sovereignty which the people of a single State possess and can confer on its government, we have an intelligible standard, applicable to every case to which the power may be applied. We have a principle which leaves the power of taxing the people and property of a State unimpaired, which leaves to a State the command of all its resources, and which places beyond its reach all those powers which are conferred by the people of the United States on the government of the Union, and all those means which are given for the purpose of carrying those powers into execution. We have a principle which is safe for the States and safe for the Union. We are relieved, as we ought to be, from clashing sovereignty; from interfering powers; from a repugnancy between a right in one government to pull down what there is an acknowledged right in another to build up; from the incompatibility of a right in one government to destroy what there is a right in another to preserve."

In Bank of Commerce v. New York City (2 Black. 620, 635) this rule was quoted and reaffirmed, the court, by Justice Nelson, saying:

"All will agree that this is the enunciation of a true principle, and it is only by a wise and forbearing application of it that the operation of the powers and functions of the two governments can be harmonized. Their powers are so intimately blended and connected that it is impossible to define or fix the limit of the one without at the same time that of the other, in respect to any one of the great departments of government. When the limit is ascertained and fixed, all plerplexity and confusion disappear. Each is sovereign and independent in its sphere of action, and exempt from the interference or control of the other, either in the means employed or functions exercised, and influenced by a public and patriotic spirit on both sides, a conflict of authority need not occur or be feared."

Upon the principles settled by McCulloch v. Maryland, it was held in Dobbins v. The Commission of Erie County (16 Peters, 435) that it was not competent for a State to levy a tax upon the salary or emoluments of an officer of the United States; and in Weston v. The City of Charleston (2 Peters, 449) it was held that a State could not lay a tax upon stocks or bonds of the United States, in the hands of a citizen of the State. None of these cases rest the exemption of the means and agencies employed by the Federal Government from State taxation upon any express provision of the Constitution. The exemption depends upon the implication that those agencies and instrumentalities adopted by the Government in the execution of its granted powers must, in the very nature of things, be beyond the control of any other sovereignty whatever. If this were not so, the Federal Government would not be supreme, even in the sphere of the powers assigned to it. The principle is, that the power to tax is the power to control, the power to destroy, and that any government is at the mercy of another which has the power to tax the instrumentalities by which it governs. These principles were applied in Buffing✦on v. Day (11 Wal., 113), where the question was whether the salary of a State judge was subject to the exactions of the income-tax law of the United States. After considering the quality of the governments under the Federal system, the court said: "The supremacy of the General Government, therefore, so much relied on in the argument of the counsel for the plaintiff in error, in respect to the question before us, can not be maintained. The two Governments are upon an equality, and the question is, whether the power 'to lay and collect taxes' enables the General Government to tax the salary of a judicial officer of the State, which officer is a means or instrumentality employed to carry into execution one of its most important functions, the administration of the laws, and which concerns the exercise of a right reserved to the States.

"We do not say the mere circumstance of the establishment of the judicial department, and the appointment of officers to administer the laws, being among the reserved powers of the State, disables the General Government from levying the tax, as that depends upon the express power to lay and collect taxes,' but it shows that it is an original inherent power never parted with, and in respect to which the supremacy of that Government does not exist, and is of no importance in determining the question ; and, further, that being an original and reserved power, and the judicial officers appointed under it being a means or instrumentality employed to carry it into effect, the right and necessity of its unimpaired exercise and the exemption of the officer from taxation by the General Government stand upon as solid a ground, and are maintained by principles and reasons as cogent as those which led to the exemption of the Federal officer in Dobbins v. The Commissioner of Erie, from taxation by the State; for in this respect—that is, in respect to the reserved powers-the State is as sovereign and independent as the General Government. And if the means and instrumentalities employed by that Government to carry into operation the powers granted to it are, necessarily, and for the sake of self-preservation, exempt from taxation by the States, why are not those of the States depending upon their reserved powers, for like reasons, equally exempt from Federal taxation? Their unimpaired existence in the one case is as essential as in the other. It is admitted that there is no express provision in the Constitution that prohibits the General Government from taxing the means and instrumentalities of the States, nor is there any prohibiting the States from taxing the means and instrumentalities of that Government. In both cases the exemption rests upon necessary implication, and is upheld by the great law of self-preservation, as any government, whose means employed in conducting its operations, if subject to the control of another and distinct government, can exist only at the mercy of that government. Of what avail are these means, if another power may tax them at discretion?"

Upon the same general principle it was decided in United States v. Railroad Company (17 Wall., 322) that a tax could not be lawfully assessed upon the interest of the bonds of the Baltimore and Ohio Railroad Company held by the city of Baltimore, such interest constituting, in part, the revenue of the city, a corporation exercising a portion of the sovereign power of the State.

That it is often a difficult question whether a tax imposed by the General Government or by a State government is one which, in fact, invades the domain of the other, may be conceded. But, in respect to the tax here involved, there can be no doubt but that a tax imposed upon the official bond required by the State law to be executed by an appointee to a State office, conditioned for the faithful discharge of the duties imposed upon him by the State, is a tax which necessarily embarrasses and impedes the State's freedom in the due exercise of its governmental authority as a State. Whether the tax be imposed before or after qualification is not important. It is a burden placed upon the right of qualification, and is, by necessary implication, forbidden. That Congress recognized the principle upon which any exemption from the taxing power of Congress must rest is very obvious from the language of the exemption clause inserted in the very forefront of the war-revenue act of 1898.

The bond which the defendant in error was required to execute as a condition to qualification was a bond which the State of Ohio imposed in the exercise of a governmental function, and was an instrument exempt from the taxes imposed by the stamp act within the plain meaning of the exemption clause of the seventeenth section, set out heretofore.

We quite agree with Judge Thompson, who heard the case below, in holding that the tax was illegally demanded from defendant in error, and that the plaintiff in error can not justify its collection under the law.

The judgment of the court below is accordingly affirmed.

(315.)

Special tax return—Broker, class 2.

If not only payment of the special tax, but also the sworn return required by the third subdivision of section 8, act of March 2, 1901, to be made by every broker who comes within the definition contained therein, be made within the month of April, the 50 per cent penalty under section 3176, Revised Statutes, is not incurred.

TREASURY DEPARTMENT,

OFFICE OF COMMISSIONER OF INTERNAL REVENUE,

Washington, D. C., March 28, 1901.

SIR: Your letter of the 23d instant has been received, stating that "while the broker No. 2 special tax is due and payable on or before April 1," you assume "that failure to pay on or before April 1 would not carry the 50 per cent penalty, providing that the tax is paid during the month of April."

This view of the law, taken in connection with section 53 of the act of October 1, 1890, amending section 3237, Revised Statutes, may be regarded as sustained by the language of the last clause of subdivision 3, section 8, of the act of March 2, 1901, provided that not only the payment of the special tax, but the sworn return required by the statute, be made within the month of April. It is for failure to make the sworn return prescribed, and not for failure to pay the special tax, that the statute (sec. 3176, Rev. Stat.) imposes the 50 per cent penalty.

Your further understanding of the law, as you state, that "those persons, firms, etc., doing a regular brokerage business and no 'bucketing', pay only a $50 yearly tax as broker, and those who do a 'bucketing' business pay tax as broker, and as broker No. 2, even though all their business is 'bucketing'," is, in the opinion of this office, correct, unless on and after July 1, 1901, they confine their business strictly to "bucketing" transactions in "grain, provisions, raw or unmanufactured cotton," and have no transactions in "stock, bonds, or other securities," in which case they are only required to pay the one special tax of $50. J. W. YERKES, Commissioner. Mr. JAMES D. GILL, Collector Third District, Boston, Mass.

Respectfully,

(316.)

Special tax-Receivers and assignees.

Receivers and assignees of firms and corporations are entitled to continue business under special-tax stamps issued to these firms and corporations without paying additional special tax. No special tax is required of them for sales made in obedience to mandates of court.

TREASURY DEPARTMENT,

OFFICE OF COMMISSIONER OF INTERNAL REVENUE,

Washington, D. C., March 30, 1901.

SIR: In reply to your letter of inquiry of the 20th instant, you are hereby advised that receivers and assignees of firms and corporations

are entitled to continue business under the special-tax stamps issued to these firms and corporations for the remainder of the period for which the stamps were issued, without being required to pay additional special tax therefor.

If the business is such as to require notice and bond under the internal revenue laws, the receivers and assignees must give such notice and bond.

Where receivers and assignees, upon orders issued to them by any court, make sales in compliance with such mandates in discharge of the duties imposed upon them by the law, they are not required to pay special tax under the internal-revenue laws of the United States on account of such sales.

Respectfully,

J. W. YERKES, Commissioner.

Mr. BERNHARD BETTMANN, Collector First District, Cincinnati, Ohio.

(317.)

Special tax-Broker, second class.

Every person engaged in the transactions described in the third subdivision of section 8, act of March 2, 1901, is imperatively required by the statute to file with the collector the "notice in writing under oath" prescribed by the law.—Where the broker takes orders from his customers with the printed or written statement "that the actual delivery of the stock is contemplated and understood," this fact will not of itself be accepted as conclusive on this point. If all the transactions are closed according to quotations of prices, without being carried to any exchange, the business is that contemplated by this statute, and the additional special tax must be paid therefor, notwithstanding the printed or written statement of an understanding as to actual delivery.

TREASURY DEPARTMENT,

OFFICE OF COMMISSIONER OF INTERNAL REVENUE,

Washington, D. C., April 1, 1901. SIR: I have received your letter of the 28th ultimo, submitting a series of questions as to the construction that is to be given to the third subdivision of section 8 of the act of March 2, 1901.

You ask:

1. As a nonmember of any exchange, is it not sufficient to simply pay the special tax of $100 per year (with the added tax on transactions) without the filing of notice under oath?

The answer to this is that if your business is that described in the third subdivision of section 8 of this statute the mere payment of the special tax and stamp taxes is not sufficient, as the statute explicitly requires "a notice in writing under oath."

You ask:

2. "As a dealer in stocks, for delivery, being a nonmember of any exchange," whether you would not be exempt from any special tax and its attending requirements; and you say: "Each and every order for the purchase or sale received by me is given by my customer and accepted by me with the distinct understanding (agreed to and s

printed on the order when given) that the actual delivery of the stock is contemplated and understood."

A mere printed or written statement of such an understanding "on the order when given" will not of itself be accepted as conclusive on this point. If all the transactions are closed according to the quotations of prices, without being carried to any exchange, the business must be regarded as that contemplated by the statute, and the additional special tax must be paid therefor, notwithstanding the printed or written statement of an understanding as to actual delivery. Again you ask:

On private wire connections with brokers, who own and control their offices, and from whom, as correspondents, I receive orders, but in whose offices I have absolutely no interest of any kind, am I not exempt from special tax?

You are not exempt.

You further ask:

4. What is meant by 2 cents per $100 face value? If my customer gives me an order for 100 shares of St. Paul, what is the amount of the tax, the par value of this stock being $100 per share? Do you consider this the face value, or do you consider the price paid for purchase the face value?

5. Does the 2 cents tax per $100 face value cover the entire transaction? For example: I buy 100 shares of St. Paul at 150 and it is sold out at 147 for want of further margin; what is the full tax to be paid?

The words "face value" in the statute are to be held to mean the par value as shown on the face of the certificates of stock. For every transaction coming within the definition contained in this statute, the stamp tax is required to be paid on the memorandum that must be issued when the order is given; but for the closing of the transaction, when the quotations of prices "reach a certain figure," no memorandum thereof being necessary or required, no stamp tax is imposed thereon. The tax, therefore, on the 100 shares of St. Paul, the par value of each share being $100 in the example which you state, is $2.

Your closing inquiry is whether there is not exemption from special tax, "as also the classification under bucket shop," in the case of “a dealer in stocks who accepts no orders whatsoever, without the distinct understanding and agreement that the actual delivery of property is contemplated and understood, the agreement being so made when orders are given."

This has already been answered in the reply to your second question. J. W. YERKES, Commissioner.

Respectfully,

Mr. G. A. FISHER, Washington, D. C.