Helvering v. Gerhardt

304 U.S. 405, 58 S. Ct. 969, 82 L. Ed. 1427, 1938 U.S. LEXIS 1151, 1 C.B. 246, 20 A.F.T.R. (P-H) 1276

Opinions

Mr. Justice Stone

delivered the opinion of the Court.

The question for decision is whether the imposition of a federal income tax for the calendar years 1932 and 1933 on salaries received by respondents, as employees of the Port of New York Authority, places an. unconstitutional burden on the States of New York And New Jersey.,

The Port Authority is a bi-state corporation, created by compact between New York and New Jersey, Laws of N. Y., 1921, c. 154; Laws of N. J., 1921, c. 151, approved by the Congress of the United States by Joint Resolution of August 23, 1921, c. 77, 42 Stat. 174. The compact authorized the Authority to acquire and operate “any terminal or transportation facility” within a specified district embracing the Port of New York and lying partially within each state. It directed the Au-. thority to recommend a comprehensive plan for improving the port and facilitating its use, by the construction and operation of bridges, tunnels,' terminals and other facilities. The Authority made such a recommendation in its report of" December, 1921, adopted by the two states in 1922. Laws of N. Y., 1922, c. 43; Laws of N. J., 1922, c. 9.

In conformity to the plan, and pursuant to further legislation of the two states, the Authority has constructed the Outerbridge Crossing Bridge, the Goethals Bridge, the Bayonne'Bridge, and the George Washington Bridge, interstate vehicular bridges all passing over waters of the harbor or adjacent to it. It has also constructed the Holland Tunnel and the Lincoln Tunnel, interstate vehicular tunnels passing under the Hudson River. These enterprises were finánced in large part by funds advanced by the two states and by the Port Authority’s issue and sale of its bonds. In addition, the Authority operates an interstate bus line over the Goethals Bridge. It has erected and operates the Port Authority Commerce Building in New York City, which houses Inland Terminal No. 1, devoted to usé as a freight terminal in connection with a plan to coordinate transportation facilities and reduce congestion. The terminal has no physical connection with any railroad facilities, dock or pier, but is used as .a transfer terminal for interchange of freight brought by truck from and to the terminal and to and from eight railroad terminals.

The Port Authority collects tolls for the use of the bridges and tunnels, and derives income from the operation of the bus line and terminal building, but it has no stock and no stockholders, and is owned by no private persons or corporations. Its projects are all said to be operated in behalf of the two states and in the interests of the public, and none of its profits enure to the benefit of private persons. Its property and the bonds and other securities issued by it are exempt by statute from state taxation. The Joint Resolution of Congress consenting to the comprehensive plan of port improvement, Pub. Res.. No., 66, 67th Cong., H. J. Resolution No. 337, July 1, 1922, declares that the activities of the Port Authority under the plan “will the better promote and facilitate commerce between thé States and between the States and foreign nations and provide better and cheaper transportation of property and aid in providing better postal, military, and other services of 'value to the Nation.” Statutes of New York and New Jersey relating to the various projects of the Port Authority declare that they are. “in' ail respects for the benefit of the people of the two States, for the increase, of their .commerce and prosperity, and for the improvement of their health and living conditions,' and the Port Authority shall be regarded as performing a governmental function in undertaking the said construction, maintenance and operation and in carrying out the provisions of law relating to the said [bridges and tunnels] and shall be required to pay no taxes or assessments upon any of the property acquired by it for the construction, operation and maintenance of such” bridges and tunnels. Laws of N. J., 1925, c. 37, § 7; Laws of N. Y., 1925, c. 210, § .7; Laws of N J., 1926, c. 6,. § 7; Laws of N. Y., 1926, c. 761, § 7; Laws of N. J., 1927, c. 3, § 7; Laws of N. Y., 1927, c. 300, § 7; Laws of N. J., 1931, c. 4, § 14; Laws of N. Y., 1931, c. 47, 1 14.

The respondents, during the taxable years in question, were respectively a construction engineer and two assistant general managers, employed by the Authority at annual salaries ranging between $8,000 and $15,000. All tqok oaths of office, although neither the compact nor the related statutes appear to have created afiy office to which any of the respondents were appointed, or defined their duties or prescribed that they should take an oath. The several respondents having failed to return their respective salaries as income for the taxable years in question, the commissioner determined deficiencies against them. The Board of Tax Appeals found that the Port Authority was engaged in- the performance of a public function for the States of New York and New Jersey, and ruled that the compensation received ,by the Authority’s' employees was exempt from federal income tax. The Court of Appeals for the Second Circuit, 92 F. 2d 999, affirmed without opinion on the authority of Brush v. Commissioner, 85 F. 2d 32, rev’d, 300 U. S. 352; Commissioner v. Ten Eyck, 76 F. 2d 515, and New York ex rel. Rogers v. Graves, 299 U. S. 401. We granted certiorari because of the public importance of the question presented.

The Constitution contains no express limitation on the power of either a state or the national government to tax the other, or its instrumentalities. The doctrine that there is an implied limitation stems from McCulloch v. Maryland, 4 Wheat. 316, in which it was held that a state tax laid specifically upon the privilege of issuing bank notes, and in fact applicable alone to the notes of national banks, was invalid since it impeded the national government in the exercise of its power to establish and maintain a bank, implied as an incident to the borrowing, taxing, war and other powers specifically granted to the national government by Article I, § 8 of the Constitution. It was held that Congress, having power to establish a bank by laws which, when enacted under the Constitution, are supreme, also had power to protect the bank by striking down state áction impeding its operations; and it was thought that the state tax in question was so inconsistent with Congress’s constitutional action in establishing the bank as to compel the conclusion that Congress intended to forbid application of the tax to the federal bank notes.¹ Cf. Osborn v. Bank of United States, 9 Wheat. 738, 865-868.

In sustaining the immunity from state taxation, the opinion of the Court, by Chief Justice Marshall, recognized a clear distinction between the extent of the power of a. state -to tax national banks and that of the national government . to tax state instrumentalities. He was careful to point out not only that the taxing power of the national government is supreme, by reason of the constitutional grant, but that in laying a federal tax on state instrumentalities the people of the states, acting through their representatives, are laying a tax on their own institutions and consequently are subject to political restraints which can be counted on to prevent abuse. State taxation of national instrumentalities is subject to no such restraint, for the people outside the state have no representatives who participate injhe legislation; and in a real sense, as to them, the taxation is'without representation. The exercise of the national taxing power is thus subject to a safeguard, which does not operate when a state undertakes to tax a .national instrumentality.²

It was perhaps enough to have supported the conclusion that the tax was invalid, that it was aimed specifically at national banks and thus operated to discriminate against the exercise by the Congress of a national power. Such discrimination was later, recognized to be in itself a sufficient ground for holding invalid any form of state taxation adversely affecting the use or enjoyment of federal instrumentalities. Miller v. Milwaukee, 272 U. S. 713; cf. Pacific Co., Ltd. v. Johnson, 285 U. S. 480, 493. But later cases have declared that federal instrumentalities aré similarly immune from non-discriminatory state taxation — from the taxation of obligations of. the United States as an interference with the borrowing power, Weston v. Charleston, 2 Pet. 449; and from á tax on “offices” levied upon the office of a captain of a revenue cutter. Dobbins v. Erie County, 16 Pet. 435.³

That the taxing power of the federal government is 'nevertheless subject to an implied restriction when applied to state instrumentalities was first decided in Collector v. Day, 11 Wall. 113, where, the salary of a state officer, a probate judge; was held to be immune from . federal income titx. The question :there presented to the Court was riot one of interference with a granted power -in a field in which the federal government is supreme, but a limitation by implication upon the granted federal power to tax. . Iri recognizing thát implication for the first timé, the Court was concerned with the continued existence of the states as governméntal entities, and their preservation from destruction by the national taxing power.' The immunity which' it implied was sustained only because it was one deemed necessary to protect the states from destructiori by the federal taxatiori of those governmental functions which they were exercising when the Constitution wás adopted and which were essential to their continued existence.

The Court pointed out. that the states were in existence as such entities when the Constitution was adopted;.that the Constitution guaranteed to them a republican foriri of governinent arid undertook to protect them from invasion and domestic violence; that it presupposes the continued existence of the states⁴ and their continued performance, free of inhibition by the national taxing power, of “the high and responsible duties assigned to them in the Constitution . . . And, more especially, those means and instrumentalities which are the creation of their sovereign and reserved' rights, one of which is the establishment of the judicial department, and the appointment of officers to administer their laws. Without" this power, and the exercise of it,” the Court declared, “wé risk nothing in saying that no one of the States under the form of government guaranteed by the Constitution could long preserve its existence. A despotic government might. We have said that one of the reserved powers was that to establish a judicial department . . . All of the thirteen States were in the possession of this power, and had exercised it at the adoption of the Constitution; and it is not pretended that any grant of it to the general government is found in that instrument.” 11 Wall. 125, 126.

We need not stop to inquire how far, as indicated in McCulloch v. Maryland, supra, the immunity of federal instrumentalities from state taxation rests on a different basis from that of state instrumentalities; or-whether or to what degree it is more extensive. As to those questions, other considerations may be controlling which are not pertinent here. It is enough for present purposes that the state immunity from the national taxing power, when recognized in Collector v. Day, supra, was narrowly limited to a state judicial officer engáged in the performance of a function which pertained to state governments at the time the Constitution was adopted, without which no state “could long preserve its existence.”

There are cogent reasons why any constitutional restriction upon the taxing power granted to Congress, so far as it can be properly raised by Implication, should be narrowly limited. One, as was pointed out by Chief Justice Marshall in McCulloch v. Maryland, supra, 435-436, and Weston v. Charleston, supra, 465-466, is that the people of all the states have created the national government and are represented in Congress. Through that representation they exercise the national taxing power. The very fact that when they are exercising it they are taxing themselves, serves to guard against its abuse through the possibility of resort to the usual processes of political action which provides a readier and more adaptable means than any which courts can afford, for securing accommodation of the competing demands for national revenue, on the one hand, and for reasonable scope for the independence of state action, on the other. .

Another reason rests upon the fact that any allowance of a tax immunity for the protection of state sovereignty' is at the expense of the sovereign power of the nation to tax. Enlargement of the one involves diminution of the other. When enlargement proceeds beyond the necessity of protecting the state, the burden of the immunity is thrown upon the national government with benefit only to a privileged class of taxpayers. See Metcalf & Eddy v. Mitchell, 269 U. S. 514; cf. Thomson v. Pacific Railroad, 9 Wall. 579, 588, 590. With the steady expansion of the activity of state governments into new fields they have undertaken the performance of functions not known to the states when the Constitution was adopted, and have taken over the management of business enterprises once conducted exclusively by private individuals subject to the national taxing power. In a complex economic society tax burdens laid upon thoso who directly or indirectly have dealings with the states, tend, to . some . extent not capable of precise measurement, to be passed on economically and thus to burden the state government itself. But if every federal tax which is laid on some new fofm of state activity, or whose economic burden reaches ini some measure the state op those who serve it, were to be set aside as an infringement of state sovereignty, it is evident that a restriction upon national power, devised only as a shield to protect the states from curtailment of the essential operations of government which they have exercised from the beginning, would become a ready means for striking down the taxing power of the nation. See South Carolina v. United States, 199 U. S. 437, 454-455. Once impaired by the recognition of a state immunity found to be excessive, restoration of that power is not likely to be secured through the action of state legislatures; for they are without the inducements to act which have often persuaded Congress to waive immunities thought to be excessive.⁵

In tacit recognition of the limitation which the very nature of our federal system imposes on state immunity from taxation in order to avoid an ever expanding encroachment upon the federal taxing power, this Court has refused to enlarge the immunity substantially beyond those limits marked out in Collector v. Day, supra. It has been sustained where, as in Collector v. Day, the function involved was one thought to be essential to the maintenance of a state government: as where the attempt was to tax income received from the investments of a municipal subdivision of a state, United States v. Railroad Co., 17 Wall. 322; to tax income received by a private investor from state bonds, and thus threaten impairment of the borrowing power of the state, Pollock v. Farmers Loan & Trust Co., 157 U. S. 429; cf. Weston v. Charleston, supra, 465-466; or to tax the manufacture and sale to a municipal corporation of equipment for its police force, Indian Motocycle Co. v. United States, 283 U.S. 570.

But the Court has refused to extend the immunity to a state conducted liquor business, South Carolina v. United States, supra; Ohio v. Helvering, 292 U. S. 360, or to a street railway business taken over and operated by state officers as a means of effecting a local public policy. Helvering v. Powers, 293 U. S. 214. It has sustained the imposition of a federal excise tax laid on the privilege of exercising corporate franchises granted by a state to public service companies. Flint v. Stone Tracy Co., 220 U. S. 107, 157. In each of these cases it was pointed out that the state function affected was one which could be. carried on by private enterprise, and that therefore it was not one without which a state could not continue to exist as a governmental entity. The immunity has been still more narrowly restricted in those cases where some part of the burden of a tax collected not from a state treasury but from individual taxpayers, is said to be passed on to the state.' In these cases the function has been either held or assumed to be of such a character that its performance by the state is immune from direct federal interference; yet the individuals who personally derived profit or compensation from their employment in carrying out the function were deemed to be subject to federal income tax.⁶

In a period marked by a constant expansion of government activities and the steady multiplication of the complexities of taxing systems, it is perhaps too much to expect that the judicial pronouncements marking the boundaries of state immunity should present a completely logical pattern. But they disclose no purposeful departure from, and indeed definitely establish, two guiding principles of limitation for holding the tax immunity of state instrumentalities to its proper function. The one, dependent upon the nature of the function being performed by the state or in its behalf, excludes from the immunity activities thought not to be essential to the. preservation of state governments even though the tax be collected from the state treasury. The state itself was taxed for the privilege of carrying on the liquor business in South Carolina v. United States, supra, and in Ohio v. Helvering, supra; and a tax on the income of a state officer engaged in the management of a state-owned corporation operating a street railroad was sustained in Helvering v. Powers, supra, because it was thought that the functions discouraged by these taxes were not indispensable to the maintenance of a state government. The other principle, exemplified by those cases where the tax laid upon individuals affects the state only as the burden is passed on to it by the taxpayer, forbids recognition of the immunity when the burden on the state is so speculative and uncertain that if allowed it would restrict the federal taxing power without affording any corresponding tangible protection to the state government; even though the function be thought important enough to demand immunity from a tax upon the state itself, it is not necessarily protected from a tax which well may be substantially or entirely absorbed by private persons. Metcalf & Eddy v. Mitchell, supra; Willcuts v. Bunn, 282 U. S. 216.

With these controlling principles in mind we turn to their application in the circumstances of the present case. The challenged taxes laid under § 22, Revenue Act o£ 1932, c. 209, 47 Stat. 169, 178, are upon the net income of respondents, derived from their employment in common occupations not shown to be different in their methods or duties from those of similar employees in private industry. The taxpayers enjoy the benefits and protection of the laws of the United States. They are under a, duty to support its government and are not beyond the reach of its taxing power. A non-discriminatory tax laid on their net income, in common with that of all other members of the community, could by no reasonable probability be considered to preclude the performance of the function, which New York and New Jersey have undertaken, or to obstruct it more than like-private enterprises are obstructed by our taxing system. Even though, to some unascertainable extent, the tax deprives the states of. the advantage -of paying less than the standard rate for the services which they engage, it does not curtail any of those functions which have been thought hitherto to be. essential to their continued- existence as states. At most it may be said to increase somewhat the cost of the state governments because, in an interdependent economic society, the taxation of income tends to raise (to some extent which economists are not able to measure, see Indian Motocycle Co. v. United States, supra, p. 581, footnote 1) the. price of labor and materials. The effect of- the immunity if allowed would be to relieve respondents of their duty of financial support to the national government, in order to secure to the state a theoretical advantage so speculative in its character and measurement as to be unsubstantial. A tax immunity devised for protection of the states as governmental entities cannot be pressed so far.

The fact that the expenses of the state government might be lessened if all those who deal with it were tax exempt was not thought to be an adequate basis for tax immunity in Metcalf & Eddy v. Mitchell, supra, in Group No. 1 Oil Corp. v. Bass, 283 U. S. 279, in Burnet v. Jergins Trust, 288 U. S. 508; or in Helvering v. Mountain Producers Corp., 303 U. S. 376.⁷ When immunity is claimed .from a tax laid on private persons, it must clearly appear that the burden upon the state function is actual and substantial, not conjectural. Willcuts v. Bunn, supra, 231. The extent to which salaries in business or professions whose standards'of compensation are otherwise fixed by competitive conditions may be affected by the immunity of state employees from income tax is to a high degree conjectural.

The basis upon which constitutional tax immunity of a state has been supported is the protection which it. affords to the continued existence of the state. To attain that end it is not ordinarily necessary to confer on the state a competitive advantage over private persons in carrying on the operations of its government. There is no such necessity here, and the resulting impairment of the federal power to tax argues against the advantage. Thé state and national governments must co-exist. Each must be supported by taxation of those who are citizens of both. The mére fact that the economic burden of such taxes may be passed on to a state government and thus increase to some extent, here wholly conjectural, the expense of its operation, infringes no constitutional immunity. Such, burdens are but normal incidents of the organization within’ the samé territory of two governments, each possessed of the taxing power.

During the present term we have held that the compen- . sation of a state employee paid from the state treasury for his service in liquidating an insolvent corporation, where the state was reimbursed from the corporate assets, was subject to income tax. McLoughlin v. Commissioner, 303 U. S. 218. But the Court has never ruled expressly on the precise question whether the Constitution grants immunity from federal’ income tax to the salaries of state employees performing, at the expense' of the state, services of the character ordinarily carried on by private citizens. The Revenue Act of 1917, considered in Metcalf & Eddy v. Mitchell, supra, exempted the salaries of all state employees from income tax. But-it was held in that case that neither thé constitutional immunity nor the statutory exemption extended to independent contractors. In Brush v. Commissioner, supra, the applicable treasury regulation upon which the Government relied exempted from income tax the compensation of “state officers and employees” for “services rendered in connection with the exercise of an essential governmental function of the State.” The sole contention of the Government was that the maintenance of the New York City water supply system was not an essential governmental function of the state. The Government did not attack the regulation. No contention was made by it or considered or decided by the Court that the burden of the tax on the state was so indirect or conjectural as to be but an incident of the coexistence of the two governments, and - therefore not within the constitutional immunity. If determination of that point was implicit in the decision it must be limited by what is now decided.

The pertinent provisions of the regulation applicable in the Brush case were continued in Regulations 77, Article 643, under the 1932 Revenue Act, until January 7, 1938, when they were amended to provide that “Compensation received for services rendered to a State is to be included in gross income unless the person receives such compensation from the State as an officer or employee thereof and such compensation is immune from taxation under the Constitution of the United States.” The applicable provisions of § 116 of the 1932 Act do not authorize the exclusion from gross income of the salaries of employees of a state or a state-owned corporation. If the regulation be deemed to embrace the employees of a state-owned corporation such as the Port Authority, it was unauthorized by the statute. But we think it plain that employees of the Port Authority are not employees of the state or a political subdivision of it within the meaning of the regulation as originally promulgated — an additional reason why the regulation, even before the 1938 amendment, was ineffectual to exempt the salaries here involved. -

The reasoning upon which the decision in Indian Motocycle Co. v. United States, supra, was rested is not controlling here. Taxation of the sale to a state, which was thought sufficient to support the immunity, there, is not now involved. Whethér the actual effect upon the performance of the state function differed from that of the present tax we do not now inquire. Compare Wheeler Lumber Bridge & Supply Co. v. United States, 281 U. S. 572.

As was pointed out in Metcalf & Eddy v. Mitchell, supra, 524, there may be state agencies of such a-character and so intimately associated with the performance of an indispensable function of state government that any taxation of them would threaten such interference with the functions of government itself as to be considered beyond the reach of the federal taxing power. If the tax considered in Collector v. Day, supra, upon the salary of an officer engaged in the performance of an .indispensable function of the state which cannot be delegated to private individuals, may be regarded as such an instance, that is not the case presented here.

Expressing no opinion whether a federal tax may beimpósed upon the Port Authority-itself with respect to its receipt of income or its other activities, we decide only that the present tax neither precludes nor' threatens unreasonably to obstruct any function essential to the continued- existence of the state government. So much of the burden of the tax laid upon respondents’ income as may reach the state is but a necessary incident to the co-existence within the same organized government of the two taxing sovereigns, and hence is a burden the existence .of which the Constitution presupposes. The immunity, if allowed, would impose to an inadmissible extent a restriction upon the taxing power which the Constitution has granted to the federal government.

Reversed.

Mr. Justice Cardozo and Mr. Justice Reed took no part in the consideration or decision of this case.

1 It follows that in considering the immunity of federal instrumentalities from state taxation two factors may be of importance which are lacking in the case of a claimed immunity of state instrumentalities from federal taxation. Since the acts of Congress within its constitutional power are supreme, the validity of state taxation of federal instrumentalities must depend (a) on the power of Congress to create the instrumentality and (b) its intent to protect it from state taxation. Congress may curtail an immunity which might otherwise be implied, Van Allen v. The Assessors, 3 Wall. 573, or enlarge it beyond the point where, Congress being silent, the Court would set its limits. Bank v. Supervisors, 7 Wall. 26, 30, 31; see Thomson v. Pacific Railroad, 9 Wall. 579, 588, 590; Shaw v. Gihson-Zahniser Oil Corp., 276 U. S. 575, 581, and cases cited; James v. Dravo Contracting Co., 302 U. S. 134, 161.

The analysis' is- comparable where the question is whether federal corporate instrumentalities are immune from state judicial process. Federal Land Bank v. Priddy, 295 U. S. 229, 234-235.

2 “The. people of all the States have created the general government, and have conferred upon it the general power of taxation. The people of all the States, and the States themselves, are represented in Congress, and, by their representatives, exercise this power. When they tax the chartered institutions.of the States, they tax their constituents; and these taxes must be uniform. But, when a State taxes the operations of the government of the United States, it acts upon institutions created, not by their own constituents, but by people over whom they claim.no control. It acts upon the measures of a government created by others as well as themselves, for the benefit of others in common with themselves. The difference is that which always exists, and always must exist, between the action of the whole bn a part, and the action of a part on the whole — between the laws of a government declared to be supreme, and those of a government which, when in opposition to those laws, is not supreme.” Chief Justice Marshall in McCulloch v. Maryland, 4 Wheat. 316, 435-436.

3 In these cases, and particularly in Weston v. Charleston, 2 Pet. 449, as in McCulloch v. Maryland, emphasis was laid on the fact that by state action an impediment was laid upon the exercise of a power with respect to which Aihe national government was supreme. In Weston v. Charleston, supra, Chief Justice Marshall said (pp. 465, 466):

“Can anything be more dangerous, or more injurious, than the admission of a principle which authorizes every state and every corporation in the union which possesses the right of taxation, to burthen the exercise of this power [the borrowing power] at their discretion?

“'If the right to impose the tax exists, it is a right which in its nature acknowledges no limits.- It may be carried to any extent within the jurisdiction of the state or corporation which imposes it, which the will of each state and corporation may prescribe. A power which is given by the whole American people for their common good, which .is to be exercised at the most critical periods for the most important purposes, on the free exercise of which the interests certainly, perhaps the liberty of the whole may depend; may be burthened, impeded, if not arrested, by any of the organized parts of the confederacy.” Compare Holmes, J., in Panhandle Oil Co. v. Knox, 277 U. S. 218, 223.

4 In 1871, when Collector v. Day was decided, the Court had not yet been called on to determine how far the Civil War Amendments had broadened the federal power at the expense of the states. The Slaughterhouse Cases, 16 Wall. 36; had not yet been decided, although they had already been once before the Court on motion for supersedeas, 10 Wall. 141. The fact that the taxing power had recently been used with destructive effect upon a state instrumentality, Veazie Bank v. Fenno, 8 Wall. 533, had suggested the possibility of similar attacks upon the existence of states themselves. Compare Lane County v. Oregon, 7 Wall. 71, 76-77; Slaughterhouse Cases, 16 Wall. 36, 82.

5 Compare notes 1 and 2, supra.

6 The following classes of taxpayers have been held subject to federal income tax notwithstanding its possible economic burden on the state: Those who derive income or profits from their performance of state functions as independent engineering contractors, Metcalf & Eddy v. Mitchell, 269 U. S. 514, or from the resale of state bonds, Willcuts v. Bunn, 282 U. S. 216; those engaged as lessees of the state in producing oil from state lands, the royalties from which, payable to the state, are devoted to public purposes, Group No. 1 Oil Corp. v. Bass, 283 U. S. 279; Burnet v. Jergins Trust, 288 U. S. 508; Bankline Oil Co. v. Commissioner, 303 U. S. 362, Helvering v. Mountain Producers Corp., 303 U. S. 6, overruling Burnet v. Coronado Oil & Gas Co., 285 U. S. 393. Similarly federal taxation of property transferred at death to a state or one of its municipalities was upheld in Snyder v. Bettman, 190 U. S. 249, cf. Greiner v. Lewellyn, 258 U. S. 384; and a federal tax on the transportation of merchandise in performance .of a'contract to-sell and deliver it to a county was sustained in Wheeler Lumber Bridge & Supply Co. v. United States, 281 U. S. 572; cf. Indian Motocycle Co. v. United States, 283 U. S. 570. A federal excise tax on corporations, measured by income, including interest received from state bonds, was upheld in Flint v. Stone Tracy Co., 220 U. S. 107, 162, et seq.; see National Life Ins. Co. v. United States, 277 U. S. 508, 527; compare the discussion in Educational Films Corp. v. Ward, 282 U. S. 379, 389, and in Pacific Co., Ltd. v. Johnson, 285 U. S. 480, 490.

7 Upon full consideration, the same principle was recently applied in James v. Dravo Contracting Co., 302 U. S. 134, although the limitation there was upon the immunity of the federal government.