Flint v. Stone Tracy Co.
| Flint v. Stone Tracy Co. | |
|---|---|
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| Full case name | Stella P. Flint, as General Guardian of the Property of Samuel N. Stone, Junior, a Minor, Appt. v. Stone Tracy Company, et al. |
| Citations | 220 U.S. 107 (more) |
| Holding | |
| The privilege of operating in corporate form is valuable and justifies imposition of an income tax. | |
| Court membership | |
| Case opinions | |
| Majority | Day, joined by White, McKenna, Holmes, Lurton, Hughes, Lamar. |
| Dissent | Harlan, joined by Van Devanter |
Flint v. Stone Tracy Co. 220 U.S. 107 (1911) was a United States Supreme Court case in which a taxpayer challenged the validity of a federal income tax on corporations. The privilege of incorporation is a state function and the challengers argued that the states should exclusively tax corporations. The court ruled that the privilege of operating in corporate form is valuable and justifies imposition of a federal income tax:
President William Howard Taft proposed a constitutional amendment to allow federal income taxes on individuals and an excise tax "upon the privilege of doing business as an artificial entity and of freedom from a general partnership liability enjoyed by those who own the stock" on June 16, 1909. The Sixteenth Amendment to the United States Constitution, which permitted federal income taxation without apportionment, was enacted in 1913; and the Corporation Excise Tax Act, sometimes known as the Corporation Tax Act, was enacted on August 5, 1909 and taxed corporation income at 1%, with the first $5000 exempt.
Dictionaries often cite the case for the definition of excise tax in the United States:
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.
The tax under consideration, as we have construed the statute, may be described as an excise upon the particular privilege of doing business in a corporate capacity, i. e., with the advantages which arise from corporate or quasi corporate organization; or, when applied to insurance companies, for doing the business of such companies. As was said in the Thomas Case, 192 U. S. supra, the requirement to pay such taxes involves the exercise of privileges, and the element of absolute and unavoidable demand is lacking. If business is not done in the manner described in the statute, no tax is payable.
The New International Yearbook reported:
According to the Tax History Project, "the tax was challenged on the theory that it was a direct tax that had not been apportioned among the states by population." The U.S. Constitution provides (in part):
The power to impose taxes, whether direct or indirect, is granted by Article I, section 8, clause 1. Indirect taxes (or "duties, imposts and excises," sometimes called simply "excises") are required to be geographically uniform, according to Article I, section 8, clause 1.
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