OPINION OF THE JUSTICES TO THE SENATE AND HOUSE OF REPRESENTATIVES.

ORDERED , That the opinion of the Justices of the Supreme Judicial Court be required upon the following important questions of law:

First. Is it within the power of the Legislature, under that clause of Article IV. of Section 1, Chapter 1, of the Constitution, which gives the Legislature power and authority to impose and levy proportional and reasonable assessments, rates, and taxes upon all the inhabitants of, and persons resident, and estates lying, within the Commonwealth, to enact a law imposing a tax on all sales of shares or certificates of stock in any domestic or foreign association, company, or corporation?

Second. Is it within the power of the Legislature, under that clause of said Article IV. which gives the Legislature power to impose and levy reasonable duties and excises upon any produce, goods, wares, merchandise, and commodities whatsoever brought into, produced, manufactured, or being within the Commonwealth, to enact a law imposing such a tax?

Third. Is it within the power and authority of the Legislature under any other provision of the Constitution to enact a law imposing such a tax?

These questions are propounded with a view to consideration of a pending bill, the same being House No. 84, to provide for a tax upon transfers of stock, a copy of which is herewith submitted.

To the Honorable the Senate and the House of Representatives of the Commonwealth of Massachusetts:

We, the undersigned Justices of the Supreme Judicial Court, having duly considered the three questions stated in the order of the Honorable Senate and the Honorable House of Representatives, dated April 28, 1908, respectfully submit the following answers:

The three questions put to us are propounded with a view to the consideration of a pending bill, being House bill No. 84, a copy of which accompanies the questions. Briefly, this is a bill to impose a duty or excise upon all transfers and all agreements for transfer, made in Massachusetts, of shares in the capital stock

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of corporations, unincorporated associations or companies, domestic or foreign.

1. To the first question we answer no, because (if for no other reason) a tax on property must be proportional, and the proposed duty or excise is not proportional.

2. An answer to the second question involves the construction of that clause of c. 1, § 1, art. 4 of the Constitution of the Commonwealth which gives to the Legislature power and authority to "impose and levy reasonable duties and excises upon any produce, goods, wares, merchandise, and commodities, whatsoever, brought into, produced, manufactured, or being within the same," to wit, the said Commonwealth.

This clause of the Constitution was not included in the original draft submitted to the Constitutional Convention of 1779-80. The only power or authority in the matter of taxation given to the General Court by the original draft was in these words: "to impose and levy proportional and reasonable assessments, rates and taxes, upon the persons of all the inhabitants of and residents within the said Commonwealth, and upon all estates within the same." See Journal of Convention, 1779-80, p. 198.

When this paragraph of the draft Constitution was reached for consideration by the Convention, the words "duties, excises," were inserted after the word "rates," and then the whole paragraph was referred to a committee consisting of Mr. Pickering, Mr. Lowell (afterwards judge of the District Court of the United States for the District of Massachusetts), and Judge Lincoln. Journal of Convention, p. 60. This committee changed to some extent the wording of the clause as to proportional taxes without changing its meaning, and added the clause now in question, to wit: "also to impose and levy reasonable duties and excises upon any produce, goods, wares, merchandize and commodities whatsoever, brought into, produced, manufactured or being within the same." This was adopted by the Convention. Journal of Convention, p. 62.

The question to be answered by us then is: What was intended by the Constitutional Convention when it added this clause to the clause giving power and authority to impose and levy proportional taxes?

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In answering that question it must be remembered that in 1780, when the Constitution of the Commonwealth was adopted, Massachusetts had declared herself to be an independent commonwealth, and that she, in confederation with the other colonies, was then engaged in a war to make good that declaration. The primary object of the constitutional convention was to establish a strong government, able to meet the financial demands of that war. And in 1780, when the Constitution was adopted, the financial stress was intense under which Massachusetts (together with the other colonies) was suffering and was likely to suffer.

Again, the Constitution then adopted was the Constitution of a sovereign State not subject to higher authority with respect to its affairs, external or internal.

Lastly, in construing this addition to the power of taxation given in the original draft of the Constitution, we must take the words there used ("duties and excises") in the sense in which they were used then. In other words, we must strip them of the meaning which has come to be attached to them in more recent years. Duties, as that word is ordinarily used in the United States to-day, mean duties imposed by Congress on goods imported into the United States. But in 1780 no Constitution of the United States had been thought of. Doubtless the word "duties" (in the added clause now in question) was intended to authorize duties on goods imported into Massachusetts. But the word "duties" is not necessarily confined to an impost laid on the importation of foreign goods, and was not so confined in 1780. It included (as we shall see hereafter more at length) imposts on domestic goods as well as on goods imported from foreign countries.

The word "excise," as the name implies, means something cut off. In the accurate use of the word it means something cut off from the price paid in a sale of goods, as a contribution to the support of the government. 2 Dowell, History of Taxation and Taxes in England, pp. 8, 9. It now has come (in the United States at any rate) to have a more generic meaning, and to include any impost which is not a tax on property.

Coming then to the question put above, namely: What power of taxation did the Constitutional Convention intend to

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give to the General Court when it added the clause now being considered?

To that question we cannot give a satisfactory answer until we have laid before you the system of taxation then in use in England and in the Province of Massachusetts Bay under the Province Charter.

The system of taxation then (to wit, in 1780) in use in England consisted of two parts: one, a proportional tax laid on property; the other, duties and excises, laid (first) on the importation of foreign goods and (second) on domestic goods, privileges, or transactions.

With duties on the importation of foreign goods Massachusetts to-day has nothing to do. That power was unquestionably included in the addition to the Constitution now under consideration, which went into effect in 1780. But that power passed to Congress on the adoption of the Constitution of the United States, eight years later. We have to do here with the system of laying duties and excises on domestic property, privileges and transactions.

This was a new system taken from Holland, and was begun by an ordinance of Parliament in 1643, being chapter 14 for that year. The terms of this ordinance are not given in Scobell's Ordinances of the Parliament during the time of the Commonwealth. All that is stated there is, "Cap. 14. New Impost laid on several Commodities mentioned in a Schedule." 1 Scobell, 49. Dowell, in his "History of Taxation and Taxes in England," vol. 2, p. 9, says that the new impost was laid "upon a variety of articles of consumption, specified in a schedule, including ale and beer, cider and perry, strong waters, and several other articles." On November 28, 1643, another ordinance was enacted by Parliament, being chapter 26. All that Scobell gives of that is: "Additional Articles to the Ordinance of Excise." 1 Scobell, 59. On January 9, 1643, Parliament passed another ordinance (chapter 29) entitled "An Excise on Flesh, Victuals, and Salt" (1 Scobell, 60), and on July 8, 1644, an ordinance (chapter 41) was passed, entitled: "A New Excise set upon Allom, Copperas, Monmouth Caps, Hats of all sorts, Hops, Saffron, Starch, and all manner of Silks or Stuffs, and several other Commodities made or growing in England not formerly charged

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with Excise." 1 Scobell, 73. These excises were modified and continued by ordinances passed in 1644 and 1645, (1 Scobell, 68, 74, 75, 98,) and finally, by an ordinance enacted on August 14 and September 20, 1649, (which is chapter 26, and is given in full in 2 Scobell, 130,) these "Rates and Charges by way of New Impost or Excise" were established and commissioners were appointed to collect all sums due and payable "for the excise of any goods, wares, merchandizes and manufactures, imported or made, or growing or put to sale, or consumed within England and Wales, and Town of Berwick upon Tweed." Afterward, by ordinance 1656, c. 19, (2 Scobell, 452,) there was a codification of the acts on this subject, and therein was laid an excise on certain "native or inland goods," such as: "Hops English" and "Saffron English," "to be paid by the Planter": "Tyn," "all Starch," "all Salt made or to be made within this Commonwealth, which is or shall be shipped or conveyed by water," and "all other Salt, made or to be made within this Commonwealth and not shipped or conveyed by water," "to be paid by the first Buyer": all "Silver or Gold, prepared, melted down or disgrossed for Wire," and "any Copper, or other Mettal, that shall be prepared, made fit, or disgrossed," "to be paid at the Bar where the same shall be disgrossed": and the following, "to be paid by the Maker": "Iron English," "all Pots, Backs for Chimneys, Plates, Weights, Anvils, and all other Commodities of cast Iron (except Ordnance and Shot)," "upon the making or casting thereof "; "Ordnance and Shot," "upon sale and delivery thereof "; "Soap made within this Commonwealth," "Linseed-oyl, Whale-oyl, Blubber-oyl, Rape-oyl, Pilchard-oyl, and all other Oyls made within this Commonwealth," "every Fother of Lead," "all sorts of Glass or Glasses," and "all Salt upon Salt, that is made of Salt within this Commonwealth."

The "new impost or excise" was continued after the Restoration. By 12 Car. II. c. 23, temporary excises were granted to the king during his life, and by 12 Car. II. c. 24, hereditary excises were granted to him and his successors in perpetuity in lieu of revenue from the incidents of feudal tenures, duties and excises. The same articles were the subject of each act. These articles were Beer, Ale, "Cyder," Perry, Metheglin or Mead, strong water or aqua vitae, spirits made of "Wine or

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Cyder," coffee, chocolate, sherbet and tea. In case of beer and ale "brewed by the Common Brewer or any other Person or Persons who doth or shall sell or tap out Beer or Ale publickly or privately," the excise was to be paid "by the Common Brewer or by such other Person or Persons respectively"; on "cyder and perry" it was to be paid "by the Retailer thereof" ; and on metheglin or mead and "on every gallon of" strong-water or aqua vitae, coffee, chocolate, sherbet and tea "made and sold," it was to be paid "by the maker thereof."

The next year (1662) an excise tax was imposed upon every hearth or stove in every dwelling-house. 13 & 14 Car. II. c. 10. 2 Dowell, 29. In 1670 duties were imposed on proceedings at law. 22 & 23 Car. II. c. 9. 2 Dowell, 31. In 1695, an excise tax was laid on seaborn coal coming from one part of the kingdom to another, and upon all glass wares manufactured in Great Britain. 6 & 7 Wm. III. c. 18. In 1696 an excise was laid on the manufacture of tobacco pipes, (7 & 8 Wm. III. c. 31,) in 1697 on the manufacture of leather, (8 & 9 Wm. III. c. 21,) and upon malt. (8 & 9 Wm. III. c. 22.)

A duty by way of a stamp tax was laid for the first time in England in 1694. (5 Wm. & M. c. 21.) This, as well as the excise duties heretofore spoken of, was taken from Holland. 2 Dowell, 62. The stamp taxes imposed varied from forty shillings to one penny. The list covers three quarto pages in the Statutes at Large published in 1770. The paper writings subject to the tax include everything from a grant under the Great Seal of England to "any Indenture, Lease or Deed Poll not hereby otherwise charged," each and every pleading in court, and "any Charter-party, Policy of assurance, Passport, Bond, Release, Contract, or other obligatory Instrument." Bills and notes were not included. See 5 Wm. & M. c. 21, § 5. These stamp taxes, after being changed by subsequent acts and continued by 5 Anne, c. 19, were made perpetual by 1 Geo. I. St. 2, c. 12, § 7, and were in force in 1780. The revenue derived from it in 1778 was £442,000. 3 Dowell, 327. In 1695, (6 & 7 Wm. III. c. 6,) an act was passed "granting to His Majesty certain Rates and Duties upon Marriages, Births and Burials, and upon Bachelors and Widowers, for the Term of five Years, for carrying on the War against France with Vigour."

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In 1709 a duty was laid "for and upon all Candles . . . made in Great Britain." (8 Anne, c. 9.) In 1711, (10 Anne, c. 19,) duties were laid on the manufacture of "Sope" (§§ 1-29); and on the manufacture of "any Paper, Pastbord, Mildboard or Scaleboard" (§§ 38 et seq."); on printing of silks, calicoes and other goods (§§ 71 et seq.); and on "all News Papers or Papers containing publick News, Intelligence, or Occurrences," printed in Great Britain. (§§ 101 et seq.)

From this time on new articles upon which to lay imposts and excises were resorted to, until Parliament, in despair of finding more subjects of that kind, undertook to tax the American colonies and so lost them for England.

The excises referred to above are not all the excises imposed during the period in question, but enough has been stated to show what the "new impost or excise" was which had obtained in England before 1780, when the Constitution of Massachusetts was adopted.

It should be added that this system of "new impost or excise" produced about half, and sometimes more than half, of the whole revenue of Great Britain raised for carrying on the government. For instance, in 1755, the revenue derived from imposts and excises on domestic goods and from stamp taxes was £3,797,000 out of £6,750,000, the whole revenue of the government. See 2 Dowell, 130.

The complement of imposts and excises was the proportional tax on property. Roughly speaking, these two branches made up the whole system of taxation in England in 1780. This also had its origin in an ordinance of Parliament during the Commonwealth. Ord. 1656, c. 12. 2 Scobell, 400. The tax there provided for was imposed upon "Lands, Tenements, Hereditaments, Annuities, Rents, Profits, Parks, Warrens, Goods, Chattels, Stock, Merchandizes, Offices, or any other Real or Personal Estate whatsoever, according to the value thereof." See 2 Scobell, 419.

This tax was imposed upon what is called a pound rate, namely, "so much upon every Twenty shillings rent, or yearly value of Land and real Estate, and so much upon Money, Stock, and other personal Estate, by an equal Rate (wherein every twenty pounds in Money, Stock, or other personal Estate, shall bear the like

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charge, as shall be laid upon every Twenty shillings yearly Rent, or yearly value of Land) as will raise the monethly sum or sums charged upon the respective Counties, Cities, Towns and Places aforesaid." 2 Scobell, 419.

This system ceased for a time after the Commonwealth, but in 1692 Parliament returned to the imposition of a proportional tax on property. In place however of laying such a rate as was necessary to produce a sum stated (as in the ordinance of 1656), it laid a tax for that year of four shillings for each pound of annual income value of property real and personal. 4 Wm. & M. c. 1.

These property taxes were in terms laid on all property real and personal, but practically no personal property was listed; the tax was in fact paid on land, and it came to be known as "The Annual Land Tax." 3 Dowell, 97.

Thereafter in England the tax on property was granted each year by Parliament on that basis, namely, one, two, three or four shillings on the pound yearly value. Parliament never granted more than four shillings on the pound, apparently thinking that to be the maximum amount which land could bear.

In 1755, when the whole revenue was £6,750,000, and the excise and stamp tax yielded £3,797,000, the land tax yielded, at two shillings on the pound, £1,000,000. 2 Dowell, 130.

The system of taxation which was in use in England in 1780 (when the Constitution of Massachusetts was adopted), taken as a whole was this: A tax of a specified number of shillings on a pound yearly value (never exceeding four shillings on the pound) was granted each year. In theory this was a tax on all property real and personal, — in fact it was a tax on land. The balance of the revenue to be raised for the support of the government was derived from imposts or excises, including duties on domestic manufactures, occupations, transfers of property and contracts for the same.

This brings us to the system of taxation under the Province Charter, which was granted in 1691.

The only power of taxation contained in it was: "To Impose and leavy proportionable and reasonable Assessments Rates and Taxes upon the Estates and Persons of all and every the Proprietors and Inhabitants of our said Province or Territory."

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In spite of that the General Court, during the eighty-nine years the charter was in force, not only imposed and levied proportional taxes, but imposed duties and excises of every kind, as is pointed out by Chief Justice Field in Minot v. Winthrop, 162 Mass. 113, 116. Both taxes and excises were "granted" (in the Province as in England) for a fixed period, usually for one year. Examples of such "grants" will be enough without making a collection of all of them.

At the first session of the General Court under the Province Charter a tax on property was granted. Prov. St. 1692-93, c. 4; 1 Prov. Laws, (State ed.) 29. The act next following this act granting a tax on property (Prov. St. 1692-93, c. 5; 1 Prov. Laws [State ed.] 30,) was an act by which "the several duties, impost and excise" enumerated therein were also granted "for the term and space of one whole year." (§ 12.) Sections 1-6 imposed duties on "goods, wares and merchandizes" imported into the Province. Section 7 imposed "an excise upon all wines, brandy, rhum and other distilled liquors, perry, beer, ale, cyder and metheglin, that shall be sold [by] retail," to be paid "by those that shall retail the same." By § 8 this excise applies to all who "shall make his own cyder and metheglin, brew his own beer or ale, or distill strong liquors."

In 1702, brewers were required to "pay an excise for each barrel of strong beer or ale by him brewed," and each distiller of spirits or strong liquors an excise "for every gallon of spirits or strong liquors by him drawn or distilled." Prov. St. 1702, c. 7, § 4; 1 Prov. Laws, (State ed.) 502. In 1737 a "grant" was made of "an excise" "upon lemmons and limes taken in and used in making of punch or other liquors mixed for sale, or otherwise consumed in taverns or other licensed houses within this province." Prov. St. 1737-38, c. 1; 2 Prov. Laws, (State ed.) 849. Later, it appearing that "sowre oranges are frequently used in punch and other mixt liquors, as well as lem[m]ons [or] [and] limes," a duty was laid on "sowre oranges" as well as on "lemmons and limes." Prov. St. 1745-46, c. 12, § 5; 3 Prov. Laws, (State ed.) 258.

Again, in 1737, "the several rates and duties following," to be paid yearly, were laid on all persons "owning or possessing and making use of any coach, chariot, chaise, calash and chair

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(such excepted as belong to the governour, lieutenant governour, president and fellows of Harvard Colle[d]ge and settled ministers.)" Prov. St. 1737-38, c. 1, § 15; 2 Prov. Laws, (State ed.) 853. See also Prov. St. 1749-50, c. 21, § 9; 3 Prov. Laws, (State ed.) 497.

In 1716, an excise duty amounting to £1300 was granted, and that sum was laid upon "keepers of coffee houses" and on retailers of liquors, wines and ale, and on taverners, innholders and common victuallers. By § 4 (which requires coffee house keepers to be licensed), a coffee house is defined to be one "for the selling tea, chocolate or any distilled liquors." Prov. St. 1715-16, c. 9; 2 Prov. Laws, (State ed.) 15.

In 1750, "an excise upon sundry articles hereafter enumerated" was granted, viz., tea, coffee, arrack, snuff and china-ware sold at retail. Prov. St. 1749-50, c. 21; 3 Prov. Laws, (State ed.) 495, 496.

Finally, in 1755, an act imposing a stamp tax was passed. The act included a variety of instruments, among others writs issuing from the clerks' offices of the various courts, "any charter-party, policy of assurance or protest," "any deed or mortgage of any real estate," any "paper, upon which any newspaper shall be printed," "any bill of sale for any ship or vessell," and "any bill for sale for servants." Prov. St . 1754-55, c. 18; 3 Prov. Laws, 793, 794. It is worthy of remark that the language used, as well as the nature of the provisions adopted, show that the act was taken from the English stamp act already referred to. 5 Wm. & M. c. 21.

We are now in a position to answer the question put above, viz.: What power did the Constitutional Convention intend to give to the General Court of the Commonwealth when it added these words to the draft Constitution, to wit: "also to impose and levy reasonable duties and excises upon any produce, goods, wares, merchandizes and commodities whatsoever, brought into, produced, manufactured or being within the same"? We are of opinion that when it added this clause, the Constitutional Convention intended to give to the General Court power and authority to exercise that system of taxation (and every part of it) which theretofore had been exercised in England and in the Province of Massachusetts Bay. This is confirmed by what was

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done by the General Court under the Constitution immediately after its adoption.

The year following the adoption of the Constitution "duties" were imposed upon the sale of wine, rum, brandy and spirits, at so much a gallon. And "every Person who shall sell or any Way dispose of" bohea or India tea, was required to pay so much a pound. Also "every Owner or Possessor of any Coach, Chariot, Four-wheel Carriage, Phaeton, Chaise or Sulkey Chair, shall annually pay" for each coach five pounds and for the others a less sum. The act is entitled "An act laying certain duties of excise on certain articles therein mentioned, for the purpose of paying the interest on government securities." St. 1781, c. 17. It would seem from St. 1781, c. 33, that so far as the wines, rum, liquors and tea were concerned, this was regarded as an impost duty. But that is not true of the duty laid on chariots and other vehicles. The whole subject was carefully gone over in the following year, in St. 1782, c. 33. That act imposed duties not only on goods imported into Massachusetts, but also on articles manufactured therein, for example, New England rum distilled within the State, sugar manufactured within the State, cider and perry, iron, wrought silver, wrought gold, various carriages, and every clock or watch made within this State. New acts laying duties on articles of home manufacture as well as on imported goods were passed in St. 1783, c. 12, and St. 1789, c. 48.

The only thing that ever has raised a doubt as to the limits of the power of the General Court in imposing and levying duties and excises under this clause of the Constitution was the reasoning employed by the Supreme Judicial Court in its opinion in Gleason v. McKay, 134 Mass. 419, decided one hundred years after the Constitution of the Commonwealth was adopted. That case called in question the constitutionality of an act of the Legislature extending the excise tax previously laid on corporations to unincorporated companies, copartnerships and associations with a capital stock divided into shares which could be transferred by the owner without the specific consent of the other owners to such transfer. It was held that the act was unconstitutional because such companies, copartnerships and associations do not enjoy any special privileges. "The peculiar

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feature that the interest of each member may be transferred without the special assent of the other members, is created by agreement of the partners under their natural rights at common law. We do not see how this peculiar feature can be called a commodity, subject to a special excise, any more than the agreement of copartnership itself, or any clause or part of it, or any other agreement, right or mode of transacting any business, can be called a commodity, and so liable to taxation at the will of the Legislature." p. 425.

Twelve years later (in 1884), the true construction of the clause of the Constitution now in question was exhaustively considered by the Supreme Judicial Court in Minot v. Winthrop, 162 Mass. 113. In that case the constitutionality of an excise on inheritances was up for decision. It was held that Gleason v. McKay could not be supported on the ground that an unincorporated company, copartnership or association does not exercise a special privilege granted by the Legislature. It was further held that the conclusion arrived at in Gleason v. McKay was right on another ground, namely, because the excise there in question not having been imposed on all unincorporated companies, copartnerships and associations, did not come within the limits of the Constitution which confines the power of the General Court to imposing and levying "reasonable" duties and excises. The exact language of the opinion in this connection was: "It is to be noticed that the tax intended to be imposed was not upon a business or employment. The statute in terms applied only to certain kinds of partnership, leaving other partnerships and persons doing the same kinds of business untaxed, and the partnerships taxed possessed no special privileges derived from the Legislature. In Portland Bank v. Apthorp, [12. Mass. 252,] it was said of excises: 'Taxes of this sort must undoubtedly be equal; that is, they must operate upon all persons who exercise the employment which is so taxed.' As the tax considered in Gleason v. McKay was not upon a business or employment, and as there was no franchise or privilege conferred by the Legislature, the distinction between partnerships with transferable shares and those without rendered the tax unequal and unreasonable, because it was a discrimination founded upon an immaterial fact." pp. 121, 122.

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The Supreme Judicial Court, in thus overruling the reasoning of the opinion in Gleason v. McKay, was returning to what was practically a cotemporaneous construction of this clause of the Constitution made of it in Portland Bank v. Apthorp, 12 Mass. 252, 256. In delivering the opinion in that case, Chief Justice Parker, speaking for the full court, said: "The term excise is of very general signification, meaning tribute, custom, tax, tollage, or assessment. It is limited, in our Constitution, as to its operation, to produce, goods, wares, merchandise, and commodities. This last word will perhaps embrace every thing, which may be a subject of taxation, and has been applied by our Legislature, from the earliest practice under the Constitution, to the privilege of using particular branches of business or employment, as the business of an auctioneer, of an attorney, of a tavern keeper, of a retailer of spirituous liquors, &c. It must have been under this general term, commodity, which signifies convenience, privilege^ profit and gains, as well as goods and wares, which are only its vulgar signification, that the Legislature assumed the right, which has been uniformly, and without complaint, exercised for thirty years, of exacting a sum of money from attorneys, and barristers at law, vendue masters, tavern keepers, and retailers." And he adds what is most significant, if not prophetic: "For every man has a natural right to exercise either of these employments free of tribute, as much as a husbandman or mechanic has to use his particular calling."

This had been accepted as the true exposition of this clause of the Constitution for one hundred years until the opinion in Gleason v. McKay. Chief Justice Bigelow, in delivering the opinion of the Supreme Judicial Court in Commonwealth v. People's Five Cents Savings Bank, 5 Allen 428, 431, said of the case of Portland Bank v. Apthorp "a decision which has long been acquiesced in, and the reasoning and conclusion of which we see no ground to deny or call in question."

The view put forward in Gleason v. McKay and denied in Minot v. Winthrop was again put forward in O'Keeffe v. Somerville, 190 Mass. 110. But the decision in that case, if not ultimately put on the ground on which Gleason v. McKay was upheld in Minot v. Winthrop, was at least put on both grounds. In O'Keeffev. Somerville, the constitutionality of an act imposing

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an excise upon the business of selling, giving or delivering trading stamps was in question. The opinion on this point begins with the statement that the word commodities "is not broad enough to include every occupation which one may follow, in the exercise of a natural right, without aid from the government, and without affecting the right or interests of others in such a way as properly to call for governmental regulation." pp. 112, 113. The opinion on this point, however, concluded with these words: "Even if the Legislature might constitutionally impose an excise tax upon the business of selling articles in the usual way, it has not attempted to do so, and this statute, if it were construed in reference to the general business of selling alone, would be unreasonable and unconstitutional, because it would impose a tax upon some vendors and not upon others. We are therefore brought to the question whether the peculiar way of selling, to which the statute relates, involves a material difference in the nature of the business, such as to warrant the imposition of an excise tax on that account. The only difference referred to is the giving or delivering, as a part of the sale or in connection with it, of a stamp, or other similar device, which represents an additional right of property. Because this is entirely legitimate (see cases above cited) the attempt to tax it, as a peculiar kind of sale, is 'a discrimination founded upon an immaterial fact,' which renders such a statute invalid. Minot v. Winthrop, 162 Mass. 113, 122."

It appears therefore that to-day there is no decision of the Supreme Judicial Court which establishes the doctrine that under this clause of the Constitution an excise cannot be imposed and levied upon a privilege which is the exercise of a natural right. The question therefore is not concluded by authority.

There is nothing in the terms of the clause now in question, nor in the circumstances under which it was passed, which limits the power of imposing and levying imposts and excises, except that they must be reasonable. On the contrary, having regard to the circumstances under which this clause was adopted and the words in which the clause was put by the Convention, we are of opinion that the intention of the Convention was to give to the General Court of the Commonwealth, under the Constitution, the same power of imposing and levying imposts and

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excises which had been theretofore practised in England and in the Province. And we are further of opinion that the power of the General Court in imposing and levying an excise duty is not less extensive than that of Congress or that of the Legislature of New York.

The bill accompanying the questions propounded to us is a copy (in substance) of U. S. St. 1898, c. 448, § 6, (see Schedule A, lines 7-14; 30 U. S. Sts. at Large, 458,) and of N. Y. St. 1905, c. 241. The Supreme Court of the United States and the Court of Appeals of New York have each held the particular act before it to be a valid exercise of the power of imposing and levying an excise duty. Thomas v. United States, 192 U. S. 363. People v. Reardon, 184 N. Y. 431.

Practically all the excise duties imposed by U. S. St. 1862, c. 119, (12 U. S. Sts. at Large, 432,) and by U. S. St. 1898, c. 448, (30 U. S. Sts. at Large, 448,) were invalid if the distinction taken in Gleason v. McKay is law. Chief Justice Fuller, speaking for the Supreme Court in Thomas v. United States, 192 U. S. 363, 370, said: "There is no occasion to attempt to confine the words duties, imposts and excises to the limits of precise definition. We think that they were used comprehensively to cover customs and excise duties imposed on importation, consumption, manufacture and sale of certain commodities, privileges particular business transactions, vocations, occupations and the like."

We are of opinion that a transfer of shares in the capital stock of a corporation, company or unincorporated association (domestic or foreign) made in Massachusetts, and all agreements made in Massachusetts for such transfers, may be made the subject of an excise tax under the Constitution of the Commonwealth. Such a transfer and such an agreement are each the exercise of a privilege included in the word "commodities" in the clause of the Constitution here in question.

For the reasons given in the answer of Mr. Justice Rugg it is not necessary to lay down so broad a construction as we have already stated to be in our opinion the true construction of the excise clause of the Constitution. For if we should take the view of Gleason v. McKay, 134 Mass. 419, and O 'Keeffe v. Somerville, 190 Mass. 110, which is taken by him, we should answer

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the second question in the affirmative for the reasons stated by him.

On both grounds we answer the second question in the affirmative.

3. The third question we answer in the negative.

JOHN W. HAMMOND.

WILLIAM CALEB LORING.

HENRY N. SHELDON.

To the Honorable the Senate and the House of Representatives of the Commonwealth of Massachusetts.

I respectfully answer no to the first and third questions in your order of April 28, 1908, for the reasons stated in the opinion signed by the Chief Justice.

The second question cannot be answered in the affirmative unless "the sales . . . of shares or certificates of stock in any domestic or foreign association, company or corporation" are commodities within the meaning of that word in art. 4, § 1, c. 1 of the Constitution of Massachusetts. For the reasons set forth in the opinion signed by the Chief Justice, I think that sales of shares in domestic and foreign corporations, and in such associations and companies, wherever formed, as enjoy privileges under, or have been regulated by, the laws of this Commonwealth, are "commodities." I assume that the words "association" and "company," as used in your order, also include organizations not now regulated by statute, in which fractional interests, under agreement may be transferred from one to another by means of a piece of paper in form similar to the ordinary certificate of stock in a corporation. Although the Legislature of this Commonwealth never has undertaken to regulate organizations of this character, such regulation is within its power. Statutes respecting the formation of such associations have been enacted in England, New York, Pennsylvania, and perhaps in other jurisdictions. Phillips v. Blatchford, 137 Mass. 510. Edwards v. Warren Linoline & Gasoline Works, 168 Mass. 564. The most recent definition of the clause in the Constitution, which authorizes the levying of an excise on commodities, is that it "may well be held to authorize the laying of excises upon all such gainful employments and privileges as are created or may be

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regulated by law, and commonly have been considered legitimate subjects of taxation in other States and countries." Field, C. J., in Minot v. Winthrop, 162 Mass. 113, 122. If the last part of this definition is treated as a limitation, it does not bar the proposed excise, because such excises have been often imposed in other States. The transfer of title to fractional interests in the property of a voluntary association by the use of certificates more or less complicated in form, seems to me to be a "gainful privilege" which "may be regulated by law" within the meaning of these words in the above quoted definition. While sales and purchases of shares in a voluntary association are not now "dependent for their legality upon the legislative will," (O'Keeffe v. Somerville, 190 Mass. 110, 114,) they may call for legislative regulation at any time when the Legislature in its wisdom covers the subject by statute. The device of voluntary unincorporated associations, with complicated contractual provisions for the transfer of fractional interests therein by certificates, depending for their validity upon an elaborate and intricate trust agreement, for the enforcement and interpretation of which resort is frequently and necessarily had to the courts, does not belong to that class of natural rights which is above the power of the Legislature.

The proposed legislation levies a stamp excise tax upon all contracts of a certain class. It is imposed only upon the paper or writing, which is the evidence of the rights of the holder and is essential to their enforcement. It is not an excise upon the existence of the association or upon its holding of property. Such an excise would be unconstitutional under Gleason v. McKay, 134 Mass. 419. This case does not decide that such associations have any immunity from general and legal excises, but simply that they cannot be singled out for a special excise. The classification of contracts for purposes of excise in the proposed bill is not an arbitrary one, and is valid respecting those relating to foreign corporations and associations and domestic corporations. When a domestic association adopts the same kind of contract as the means by which the fractional interests in it shall be transferred from one owner to another, availing itself thus of one important characteristic of corporations, I am of opinion that a statute including these in an excise tax, with

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all other like transfers, is not "a discrimination founded upon an immaterial fact." Minot v. Winthrop, 162 Mass. 113, 122. This method of transfer of property seems to me also to come within the familiar definitions of "commodity" given in Attorney General v. Bay State Mining Co. 99 Mass. 148, 152; Commonwealth v. Lancaster Savings Bank, 123 Mass. 493; Connecticut Ins. Co. v. Commonwealth, 133 Mass. 161, 163; and Minot v. Winthrop, 162 Mass. 113, 120, 121.

There is nothing inconsistent with this result in Gleason v. McKay, 134 Mass. 419, and O'Keeffe v. Somerville, 190 Mass. 110. They are both authorities by which I am bound. Gleason v. McKay seems to me to have been affirmed and not in any part overruled by Minot v. Winthrop, 162 Mass. 113. To hold the proposed statute constitutional does not impair the authority and is not in conflict with the language or the principles of any of these decisions.

Although, speaking generally, the right to own property is absolute, the right to contract with reference to all sales of property is not equally absolute. The right of sale is in many respects subject to limiting regulations by the Legislature. See for example R. L. c. 56, § 1; c. 74; c. 198. Neither Gleason v. McKay nor O 'Keeffe v. Somerville seem to me expressly or by fair intendment to lay down the doctrine that a sale of an interest in such an association may not be the subject of an excise tax when included in a legal general classification.

For these reasons I answer the second question in the affirmative.

ARTHUR P. RUGG.

To the Honorable the Senate and the House of Representatives of the Commonwealth of Massachusetts.

Your order, bearing date April 28, 1908, requiring the opinion of the Justices of the Supreme Judicial Court upon certain important questions of law has been received, and we, the undersigned, three of the justices, respectfully answer the questions as follows:

In the article of the Constitution of Massachusetts referred to in your order, there is a provision authorizing the Legislature to impose taxation for the necessary defence and support of the government of the Commonwealth. This provision purports to

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cover the whole subject of Legislation for the raising of revenue by taxation. There is no power in the Legislature to provide for taxation otherwise than as prescribed in this article.

The language authorizes two methods of obtaining revenue. The first is by direct taxation upon the persons resident and estates lying within the Commonwealth. The second is by the imposition of "duties and excises upon any produce, goods, wares, merchandise, and commodities, whatsoever, brought into, produced, manufactured or being within the same." Taxation by the first method must be proportional as well as reasonable. It includes the assessment of poll taxes upon persons, and of direct taxes upon property. Taxation by the second method must be reasonable, but need not be proportional.

It is plain that the tax referred to in the questions submitted to us is not a tax upon property under the first part of the constitutional provision, and it is equally plain that a tax upon property which included such an imposition would not be proportional within the meaning of this part of the provision. See Opinion of the Justices, 195 Mass. 607; State v. U. S. & Canada Express Co. 60 N. H. 219. The first question is answered in the negative.

An excise tax is of a different kind. In reference to the language of the Constitution, the imposition now contemplated clearly is not a tax upon the introduction, production, manufacture, sale or use of "produce, goods, wares or merchandise," within the Commonwealth. Is it an excise tax upon a commodity? We are not now concerned with what has been done in former centuries in the taxation of produce, goods, wares or merchandise. The power to levy excise taxes has been much restricted by our Constitution. Such taxes can no longer be levied upon the mere ownership of property. Taxation upon property is provided for in the earlier clause of the Constitution, and it must be proportional upon all property alike. Excise taxes upon "produce, goods, wares or merchandise" can be imposed only when these articles are introduced, produced, manufactured, sold or used in a way of which the State may take cognizance, as having some relation to the government or affecting the public interests. We are interested in the meaning of a single word in our Constitution, the word "commodities."

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Our inquiry relates to the taxation of "sales or agreements to sell, or memoranda of sales or deliveries, or transfers of shares or certificates of stock in any domestic or foreign association, company or corporation." Let us first consider sales of stock in corporations. The word "commodity," in its broad, general signification, includes privileges and conveniences, especially those derived from some external source. It has been held many times that the word is used in the Constitution in this broad sense. A corporation is a creature of the State, and it has often been decided that the exercise of its franchise and of the various rights and privileges which are conferred by its charter is a commodity which may be a proper subject for the imposition of an excise tax. Commonwealth v. People's Five Cents Savings Bank, 5 Allen 428. Oliver v. Washington Mills, 11 Allen 268. Commonwealth v. Hamilton Manuf. Co. 12 Allen 298. Connecticut Ins. Co. v. Commonwealth, 133 Mass. 161. The right to own and transfer shares of the capital stock of a corporation is a part of the franchise, exercised by the stockholders under the charter, and it may be taxed in this way. As to so much of the second question as relates to shares of the capital stock of domestic corporations an answer can be given without hesitation. One who transfers such shares is thereby enjoying a commodity derived directly from the government.

As to so much of the question as relates to stock in foreign corporations the answer is more difficult. In such a case the franchise or privilege is derived primarily from the government of another State or country. The property to which it relates is presumably outside of the Commonwealth, in the home of the corporation. If the proposal were to tax the holder of the shares upon the shares as property, and if at the time of the transfer he was a non-resident, temporarily staying here, there would be no jurisdiction for such a purpose, either over him or over the property. But the proposed excise is upon an act which is done here, under the protection of our laws, whether the owner of the shares is a resident of this Commonwealth or a non-resident. It is an act which changes the position and legal rights of the parties, in reference to a certain kind of property which has no recognition or existence except under the legislation of the foreign State. It is different from the sale of an ordinary,

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tangible chattel in one's possession here, which may be merely the exercise of a natural right. As it is an act which could not be done were it not for the franchise of the foreign State which created the property, we are inclined to the opinion that the transfer may be treated as the enjoyment of a benefit in this State which is something more than the exercise of a natural right, and is thus a commodity within the meaning of our Constitution. See Gleason v. McKay, 134 Mass. 419, 425; Commonwealth v. Lancaster Savings Bank, 123 Mass. 493, 495. In reference to such transactions, with some hesitation, we answer the second question in the affirmative.

In some of the States there is no constitutional provision in regard to taxation, and under decisions in some of these States this question might be answered in the affirmative on broader grounds. In New York, while there is no such provision, it is so answered in the case of People v. Reardon, 184 N. Y. 431, which arose under a similar statute. It is said in the opinion in that case that there is no restriction upon the Legislature as to subjects of taxation, and that excise taxes, to be enforceable, need not even be reasonable. The doctrine stated is, in substance, that the Legislature may impose an excise tax upon any kind of business or occupation, or contract or transaction, even though it involves nothing more than the exercise of a natural right. There are other opinions containing similar language, but we are not aware of any case in which an excise tax is shown to have been imposed upon the use of one's hands in simple manual labor, or upon the making of a simple contract, without the use of any auxiliary method, device, or machinery that might be availed of to establish one's rights under the government in courts and elsewhere. Stamp taxes on various kinds of contracts are upon paper writings which are recognized by law as important evidence in the enforcement of legal rights.

In this Commonwealth, in dealing with the term "commodity," it has been held that an ordinary "agreement or mode of transacting business" is not within its meaning, and cannot be made the subject of an excise tax. Gleason v. McKay, 134 Mass. 419, 425. O'Keeffe v. Somerville, 190 Mass. 110. In the last case it was said that the word "is not broad enough to include every occupation which one may follow in the exercise of

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a natural right, without aid from the government, and without affecting the rights or interests of others in such a way as properly to call for governmental regulation." It was held that sales of goods accompanied by a delivery of trading stamps could not be made the subject of an excise tax.

The decision in Minot v. Winthrop, 162 Mass. 113, was put upon the ground that the making of a will, or the transmission of property to one's heirs after his death, is something more than the exercise of a natural right. It is treated as a privilege or commodity which properly may be regulated by the government, and which is now regulated in every well ordered system of government. See pp. 117, 118. The opinion contains no intimation of an intention to hold that a mere exercise of a natural right in the performance of labor of the simplest kind, or in making an ordinary simple contract, is a commodity within the meaning of the Constitution.

The fact that the constitutionality of inheritance taxes, even where there is no constitutional limitation upon the right to impose excise taxes, is generally sustained on the ground that the government has a right to take away or limit the right of testamentary disposition of property, or to impose conditions on its exercise, tends strongly to support our view that an excise tax, under our Constitution, cannot be imposed upon the mere exercise of a natural right which is not a proper subject for governmental regulation. United States v. Perkins, 163 U. S. 625. Magoun v. Illinois Trust & Savings Bank, 170 U. S. 283. Mager v. Grima, 8 How. 490. Orr v. Gilman, 183 U. S. 278. See also Clark v. Titusville, 184 U. S. 329. There is a large class of occupations in regard to which the State may well legislate by regulation in the public interest, and they frequently have been subjected to excise taxes in this Commonwealth and elsewhere. Attorneys at law, auctioneers, tavern keepers and retailers of spirituous liquors are among those engaged in occupations of this class.

Referring to stock in corporations, Chief Justice Fuller said in Thomas v. United States, 192 U. S. 363, 371: "The sale of stocks is a particular business transaction in the exercise of the privilege afforded by the laws in respect to corporations of disposing of property in the form of certificates." So in

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Nicol v. Ames, 173 U. S. 509, 521, the constitutionality of the statute taxing sales of property on the exchange was sustained on the ground that such sales are the enjoyment of a privilege involving advantages different from those afforded by ordinary sales, and that therefore they may be made the subject of an excise tax.

The questions before us relate also to shares or certificates of stock in associations or companies, as well as corporations. Associations and companies are of many different kinds. Some associations organized under the laws of this Commonwealth are technically corporations. See Pub. Sts. c. 115; R. L. c. 38, § 1 ; c. 126, § 1; c. 12, § 5. In regard to these, of course, there is no question. Many others are organized in other States or countries, under statutes which give them many of the privileges of corporations, so that they partake more of the nature of corporations than of partnerships or mere combinations of tenants in common. These are often treated by our laws as corporations. St. 1903, c. 437, § 56, provides that "the term 'foreign corporation' as used in this act shall mean every corporation, association or organization which has been established, organized or chartered under laws other than those of the Commonwealth for the purposes for which domestic corporations may be organized under the provisions of section seven." All such associations, and all others which are organized and enjoy privileges in this Commonwealth under the legislative authority of this or any other State, may be subject to an excise tax upon the commodity so enjoyed, including, of course, a tax upon the transfer of shares. Such an organization may be described in the language of Mr. Justice Hoar in Oliver v. Liverpool & London Ins. Co. 100 Mass. 531, 538, as "an association so far clothed with the functions and attributes of a corporation as to come within the just application of principles relating to corporations above stated."

The business of insurance, of banking, of transportation, and other similar occupations affecting largely the public interests, have long been subject to governmental regulation in the exercise of the police power, and often have received valuable franchises. These are generally taxed, not because of incorporation, or the form of the organization, but because of the nature of the business and the privileges and regulations that relate to

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it. The language referring to the proprietors is generally broad, including associations and partnerships, and sometimes "individuals" and "a person," as well as corporations. St. 1906, c. 347, §§ 1-4; c. 66, § 1; St. 1907, c. 576, §§ 1, 66, 91; c. 586, § 1. R. L. c. 70, § 3; c. 14, § 55. All such associations and companies may be subjected to an excise tax upon the transfer of their shares, if they have shares, or otherwise, within reasonable limits.

But none of these statutes implies that an excise tax may be laid upon a company, association, or partnership engaged in a simple business, like husbandry, merely because the members agree among themselves that their ownership shall be represented by transferable certificates of shares. Such an arrangement between two or more associates is a simple contract which they have a right to make, and which gives them no franchise or privilege from the government. Such an arrangement does not distinguish them in any way that the State can recognize and make the foundation of an excise tax. This was expressly decided in Gleason v. McKay, 134 Mass. 419.

If the bill before us should be passed in its present form, there might be two partnerships on the same street, doing the same kind of business, and differing only in the fact that the interests of the partners in one of them were represented under the partnership articles by transferable shares. The decision just referred to is that, for such a difference, an excise tax cannot constitutionally be imposed. The decision is fundamental. In reference to the matter decided, the form of the proposed tax is of no consequence. Whether it be in the form of a percentage on the value of the whole property, or of a price to be paid when a transfer of an interest is made, is immaterial. The distinctive feature that characterizes the company is the same in Gleason v. McKay and in the case just supposed. It is the right, under the agreement, to transfer one's ownership with the certificate that represents it. It is a right enjoyed by all the members, and it affects alike the property of all. In either case the right can be exercised at any time. In neither case can this right be treated as a commodity for which a tax of any kind can be imposed. In the language of Chief Justice Field, speaking from his own point of view in the later case of Minot v. Winthrop, 162 Mass. 113, 121, 122,

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"The statute in terms applied only to certain kinds of partnership, leaving other partnerships and persons doing the same kinds of business untaxed, and the partners taxed possessed no especial privileges derived from the Legislature. . . . As the tax considered in Gleason v. McKay was not upon a business or employment, and as there was no franchise or privilege conferred by the Legislature, the distinction between partnerships with transferable shares and those without rendered the tax unequal and unreasonable, because it was a discrimination founded upon an immaterial fact." His view was not at variance with that of the writer of the opinion in Gleason v. McKay, but entirely in harmony with it. He meant to say that, inasmuch as the statute was not directed to a kind of business or employment like insurance, banking or transportation by a common carrier, which the Legislature ought to regulate and well might tax, and as there was no such foundation for a distinguishing excise, there was no material or legal foundation for it at all. That is precisely the condition in the case supposed. The two partnerships, companies or associations would be just alike, except in the arrangement made by the members of one of them in regard to their shares. There is no tax upon the business or employment. This difference is decided to be no reason for the imposition of an excise tax. In reference to the question whether there is a commodity which gives the government a right to compel the owners, or any of them, to make an additional payment towards the public expenses, it is "an immaterial fact." Members of a company that have this contractual right of transfer cannot be taxed if members of a similar corporation that have it not are left untaxed. If the assignability of their interests by a transfer of certificates could subject the members of one company to an excise tax in the case supposed, when other similar companies were free from the tax, the same condition would have had the same effect upon the defendants in Gleason v. McKay.

The decision in Gleason v. McKay was re-affirmed and given a new application in O'Keeffe v. Somerville, 190 Mass. 110. The arbitrary methods of taxation which were sometimes adopted in early times, when power was unrestricted and written constitutions were unknown, were familiar to the judges who decided

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these cases. The question which they were considering was not what had been done in England or elsewhere, in early colonial times, but what was the proper interpretation of our Constitutution under conditions then existing, and in reference to the liberty secured by it to all the people of the Commonwealth. In agreeing to the decision in each of these cases, the five sitting justices were unanimous. Those who sat in the first case were not members of the court when the second case was decided. In neither of the decisions did they overlook the broad language of Chief Justice Parker, used in dealing with a corporate charter in Portland Bank v. Apthorp, 12 Mass. 252. In each of them this case was cited, and in the latter of them the language was quoted. In the opinion in each the discussion of the term "commodity," in reference to the impossibility of its application to an ordinary, simple contract which does not reasonably call for legislative regulation, is so full and plain as to leave no ground for doubt in regard to what the judges meant in laying down the law. It is not to be assumed that these cases will be overruled by the court hereafter. They have stood unquestioned, the first of them for more than twenty-five years, until now. As individual justices giving to the Legislature our opinions as to what the law of Massachusetts is to-day, we consider ourselves bound by them.

As the bill includes voluntary associations and companies organized and doing business without legislative authority derived from any State or country, whose only business or function is of a kind that does not call for legislative regulation under the Constitution of this Commonwealth, we answer the second question in the negative. If such associations and companies were excepted from the operation of the act, we should answer it in the affirmative.

For reasons already stated, the third question is answered in the negative.

MARCUS P. KNOWLTON.

JAMES M. MORTON.

HENRY K. BRALEY.