Context:

In 1934, Congress passed the National Firearms Act imposed an excise tax on the production and sale of certain firearms and requires them to be registered to their owner. The regulated categories included machine guns (which included pistols and revolvers), short barreled rifles, short barreled shotguns, suppressors, and destructive devices. The act was passed shortly after the 21st Amendment was passed, repealing prohibition (18th Amendment that prohibited the manufacture, transport, and sale of alcohol), which led to an increase of gang violence. The tax amounted to $200 for dealers, a sizable charge that is worth about $3,735.21 now (2018) and $500 for manufacturers and importers, worth about $9,338.03 in 2018. The defendant, a firearms dealer, was convicted under the 1934 NFA for not paying the annual tax. He wrote a writ of certiorari claiming that the tax was unconstitutional, especially since the tax revenue was not paid to the federal government but to their local district (in this case, eastern Illinois). Delivering the opinion for the court, Justice Stone said that the tax was permissible under Congress’s power to tax because of the revenue that it brought in. Every tax that Congress levies is in some measure regulatory, however, its regulatory effect does not constitute it any less of a tax, which Congress has the power to do as granted in the Constitution. The court found that the regulatory effect of the tax was not offensive, and that it lies within Congress’s national taxing power. In 1968 and again in 1986, Congress passed new iterations of the National Firearms Act. The current law still imposes “a tax on the making and transfer of firearms defined by the Act, as well as a special (occupational) tax on persons and entities engaged in the business of importing, manufacturing, and dealing in NFA firearms” but has since removed certain firearms from the regulatory list.

Sonzinsky v. United States

300 U.S. 506 (1937)

(Firearm License Tax; Taxing and Spending Power)


Facts: 

Petitioner was convicted by the District Court for Eastern Illinois on two counts of an indictment, the first charging him with violation of § 2, by dealing in firearms without payment of the tax.

Section 2 of the National Firearms Act requires every dealer in firearms to register with the Collector of Internal Revenue in the district where he carries on businessand to pay a special excise tax of $200 a year. Importers or manufacturers are taxed $500 a year. Section 3 imposes a tax of $200 on each transfer of a firearm, payable by the transferor, and § 4 prescribes regulations for the identification of purchasers. The term "firearm" is defined by § 1 as meaning a shotgun or a rifle having a barrel less than eighteen inches in length, or any other weapon, except a pistol or revolver, from which a shot is discharged by an explosive, if capable of being concealed on the person, or a machine gun, and includes a muffler or silencer for any firearm. As the conviction for nonpayment of the tax exacted by § 2 has alone been sustained, it is unnecessary to inquire whether the different tax levied by § 3 and the regulations pertaining to it are valid. Section 16 declares that the provisions of the Act are separable. Each tax is on a different activity and is collectible independently of the other. Full effect may be given to the license tax standing alone, even though all other provisions are invalid.

Sonzinsky v. United States, 300 U.S. 506 (1937) 

Sonzinsky v. United States, 300 U.S. 506 (1937) 

Sonzinsky v. United States, 300 U.S. 506 (1937) 

Issue:

Whether § 2 of the National Firearms Act of June 26, 1934, which imposes a $200 annual license tax on dealers in firearms, is a constitutional exercise of the legislative power of Congress.

Reasoning:

In the exercise of its constitutional power to lay taxes, Congress may select the subjects of taxation, choosing some and omitting others. Petitioner does not deny that Congress may tax his business as a dealer in firearms. He insists that the present levy is not a true tax, but a penalty imposed for the purpose of suppressing traffic in a certain noxious type of firearms, the local regulation of which is reserved to the states because not granted to the national government. To establish its penal and prohibitive character, he relies on the amounts of the tax imposed by § 2 on dealers, manufacturers and importers, and of the tax imposed by § 3 on each transfer of a "firearm," payable by the transferor. The cumulative effect on the distribution of a limited class of firearms, of relatively small value, by the successive imposition of different taxes, one on the business of the importer or manufacturer, another on that of the dealer, and a third on the transfer to a buyer, is said to be prohibitive in effect and to disclose unmistakably the legislative purpose to regulate rather than to tax.

The case is not one where the statute contains regulatory provisions related to a purported tax in such a way as has enabled this Court to say in other cases that the latter is a penalty resorted to as a means of enforcing the regulations.  Nor is the subject of the tax described or treated as criminal by the taxing statute. Here § 2 contains no regulation other than the mere registration provisions, which are obviously supportable as in aid of a revenue purpose. On its face,it is only a taxing measure, and we are asked to say that the tax, by virtue of its deterrent effect on the activities taxed, operates as a regulation which is beyond the congressional power. 

Every tax is in some measure regulatory. To some extent,it interposes an economic impediment to the activity taxed as compared with others not taxed. But a tax is not any the less a tax because it has a regulatory effect; and it has long been established that an Act of Congress which on its face purports to be an exercise of the taxing power is not any the less so because the tax is burdensome or tends to restrict or suppress the thing taxed.  

Inquiry into the hidden motives which may move Congress to exercise a power constitutionally conferred upon it is beyond the competency of courts.

Justice Stone decides Sonzinsky v. United States

Holding:

The annual tax of $200 is productive of some revenue. We are not free to speculate as to the motives which moved Congress to impose it, or as to the extent to which it may operate to restrict the activities taxed. As it is not attended by an offensive regulation, and since it operates as a tax, it is within the national taxing power.


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Key Takeaway

The Court declared that Congress can select the subjects of taxation, choosing some and omitting others, and it wasn’t for the Court to monitor Congress’s motives. It also examined the tax through a two factors:

  1. It generated some revenue
  2. It wasn’t part of an offensive regulation

Court Syllabus:

1. That part of the National Firearms Act which provides that every dealer in firearms shall register and shall pay an annual tax of $200 or be subject to fine and imprisonment, is a valid exercise of the taxing power of Congress.

The term "firearm" is defined by § 1 of the Act as meaning a shotgun or rifle having a barrel less than eighteen inches in length, or any other weapon, except a pistol or revolver, from which a shot is discharged by an explosive, if capable of being concealed on the person, or a machine gun, and includes a muffler or silencer for any firearm.

2. Congress may select the subjects of taxation, choosing some and omitting others. It may impose excise taxes on the doing of business. 

3. The tax upon dealers, supra, is not in the category of penalties imposed for the enforcement of regulations beyond the scope of congressional power.

4. A tax may have regulatory effects and may burden, restrict or suppress the thing taxed, and still be within the taxing power. 

5. Courts may not inquire into the motives of Congress in exercising its powers; they will not undertake, by collateral inquiry as to the measure of the regulatory effect of a tax, to ascribe to Congress an attempt, under the guise of taxation, to exercise another power denied by the Federal Constitution.

6. The Court declines to consider petitioner's contentions not supported by assignment of error.


How the Justices Voted

Majority: Stone