plication from the powers and functions of the national government, whenever the action of the state does not and cannot impair the usefulness and capability of the instrumentalities created by that government, there is no interference, and no reason exists for the implied exemption; the action of the state is therefore lawful and valid. In the language used by the court itself, "Exemption of agencies of the federal government from state taxation depends not on the nature of the agent, nor upon the fact that it is an agent, but upon the effect of the tax; that is, upon the question whether the tax does deprive the agency of its power to serve the government as it was intended to serve it, or does hinder the efficient exercise of that power."

"1

§ 304 6. In applying this limitation the court sustained. the validity of the following taxes imposed by various states: Upon the shareholders of national banks in respect of their shares, and made payable primarily by the banks themselves; 2 Upon a railroad company chartered by a state, but to which Congress had extended great aid, and over which it exercised a certain control; the railroad was said to be only an agent which Congress employs, or provides for employing, to do certain particular services; Upon the real and personal property of the Union Pacific Railroad, a corporation chartered by Congress, and over which the national. government exercises some control and direction, although the capital stock is all held by private persons, and which it retains the right to use for the transport of troops and for other purposes at a compensation fixed in the charter. The court, in distinguishing between the taxes which may, andthose which may not be imposed by a state, say that a tax on the property of this corporation, as was the one under discussion, did not interfere with the efficiency of this governmental agency, while one upon its operation would thus interfere and would therefore be invalid.4

1 Railroad Co. v. Peniston, 18 Wall. 5; National Bank v. Commonwealth, 9 Wall. 353.

2 National Bank v. Commonwealth, 9 Wall. 353.

Thompson v. Pacific R. R. 9 Wall. 579.

Railroad Co. v. Peniston, 18 Wall. 5.

§ 304 c. The principle of implied exemption from state taxation, which had been heretofore applied exclusively to some species of financial agency, was extended to a very different kind of subject matter in Crandall v. Nevada.1 A tax imposed by Nevada upon all passengers passing through and beyond the boundaries of the state was declared to be invalid. The reasons given by a majority of the court for their decision were the following: The United States has a right to call for the services of its citizens at all points of the national territory, and to transport its own troops. Citizens have the right to go to the seat of government, and to all other places where public offices are situated, and to ports of entry, as the necessities of their business may require. For these purposes citizens must travel. The tax in question tends to impair and might be made to destroy this common right. This judgment certainly pushes the doctrine. upon which it is rested to an extreme which is almost absurd. It demands a severe strain upon language, if not upon common sense, to call the travelling of citizens under any circumstances an instrumentality for carrying on the national government. The same reasoning might be applied with equal force to numerous other objects, - for example to the taxing of railroads and all other means of intercommunication, — and might thus virtually destroy the entire taxing function of the states. It is difficult to reconcile this case with the principle announced by the court in Railroad Co. v. Peniston, Thompson v. Pacific Railroad, and National Bank v. Commonwealth, which is stated in the last preceding paragraph. Chief Justice Chase and Mr. Justice Clifford dissented from the reasoning of the court, and held the statute void as being a regulation of interstate commerce; and their opinion is strongly supported by recent decisions which will be referred to in a subsequent paragraph.

§ 304 d. Although the United States may by its statutes provide for licensing certain trades and pursuits, such licenses when granted do not have the effect to override or

1 6 Wall. 35.

nullify the state legislation upon the same subject; the persons obtaining the licenses from the national government are still under the control of the police laws of the states. Where, for example, United States licenses are granted to persons engaged in selling spirituous liquors, the state excise or prohibitory laws continue to be fully operative as against such parties. However, in a subsequent case, Crandall v. Nevada was apparently approved, but it was there held, in distinction from Crandall v. Nevada, that a tax by a state upon a railroad of one fifth of the whole amount which it receives for the transportation of passengers is valid. Miller, J., however, dissented, holding the case to be governed by, and not distinguishable from, the former case.

§305. The conclusions to be drawn from these cases may be summarily stated as follows. States may exert their power of taxation generally upon persons and property within their boundaries; but they cannot thereby interfere with any functions of the nation. They cannot tax national property; or the evidences of the national debt owned by individuals; or banks incorporated by the nation as a part of its general scheme of finance; or salaries of national officers. In a word, all the means which are employed by the nation to carry on its legitimate functions are entirely beyond the reach of the several states.

On the other hand Congress may tax anything created t by the separate states, which is property or a franchise in the hands of individuals; banks and all other corporations; state stocks and other securities in the hands of private owners; the proceedings in state courts. Nothing, certainly, exhibits in a stronger light the inherent distinction between the paramount supremacy of the nation and the subordination of the states, than this comparison between their respective powers of taxation.

§ 306. A curious and important question has arisen from

1 License Tax Cases, 5 Wall. 462; Pervear v. Commonwealth, 5 Wall. 475. See also Home Ins. Co. v. City Council, 93 U. S. 122, as to taxes on insurance business. ED.

2 Railroad Company v. Maryland, 21 Wall. 456. ED.

the exercise by Congress of its power to tax, which may be referred to in this connection. When the United States has established a system of excise duties, and among other things has required that persons carrying on certain kinds of business shall pay a license fee and take out a license, can a state interfere with persons who have complied with these requirements, or prevent them from prosecuting the particular business for which they have received a national license? No case has arisen which answers the question thus put; for the internal revenue law specially declares that "no such license shall be construed to authorize" the carrying on a business or trade "within any state or territory in which it is or shall be specially prohibited by the laws thereof, or in violation of the laws of any state or territory." In McGuire v. The Commonwealth, the Supreme Court held, under this section of the law of Congress, that a person licensed to sell liquors in Massachusetts was still controlled by the prohibitory legislation of that state, although a strong attempt was made at the bar to convince the court that these provisions of the revenue law were repugnant to the rest of the act, were unconstitutional and void. The same doctrine has since been reaffirmed. And a state law may absolutely prohibit the manufacture and sale of intoxicating liquors.2

II. Express Limitations upon the Power of the States to Tax.

§ 307. We are now to examine the effect of those express restrictions upon the taxing power of the states, contained in the Constitution. States may levy and collect no duties upon imports or exports, except such as are absolutely necessary for the execution of their inspection laws, and no tonnage duties. The reason of this limitation is plain. As the United States government was intended to have the control of everything pertaining to commerce, any interference by the states with this subject, any attempt on their part to im

1 3 Wall. 387.

2 Foster v. State of Kansas, 112 U. S. 201, in which an interesting opinion is given by Waite, C. J. ED.

pose duties on articles imported or exported, would produce all the disorder which the Constitution was framed to ob viate.

Many cases have arisen in which a construction has been given to state statutes that seemed to trench upon these provisions of the organic law. The questions which have been discussed are, (1) whether these statutes did in effect lay duties on imports and exports, so as to bring them within the general restriction; and (2) whether they were measures absolutely necessary to carry into execution the local inspection laws, and therefore within the exception. As the limitation under consideration applies exclusively to a particular class of taxes, the whole subject is intimately connected with the regulation of commerce.

§ 308. What classes of legislation are embraced under the denomination of inspection laws? Strictly speaking, inspection laws provide for a service to be performed on land, upon articles within the country, the product of growth or manufacture. The object of such service is to improve the quality of the articles and fit them for exportation or for domestic The tax or duty necessary for the execution of inspection laws using the term in the sense now described would be in the nature of a fee or fixed compensation paid for this service.

use.

§ 309. The first of a series of cases in the Supreme Court of the United States giving construction to the clauses in question is that of Brown v. The State of Maryland.1 The legislature of Maryland had passed a statute requiring all importers of foreign goods by the bale or package to take out a license, for which they were to pay a prescribed fee, and in case of refusal they were to be subjected to certain penalties. The constitutionality of this act was brought before the court, and the statute was held to be invalid, because it did, in fact, impose a duty on imports, and it was not claimed to be in aid of any measures that are included within the general description of inspection laws. The opinion of the court, given by C. J. Marshall, is too long to be

1 12 Wheat. 419.