[269 U.S. 475, 476] Mr. E. R. Morrison, of Kansas City, Mo., for plaintiff in error.
[269 U.S. 475, 477] Messrs. W. D. Mitchell, Sol. Gen., and Robert P. Reeder, both of Washington, D. C., for defendant in error.
Mr. Justice McREYNOLDS delivered the opinion of the Court.
Plaintiff in error seeks to recover two hundred dollars paid for internal revenue stamps which, after due protest, he affixed to a written 'privilege or option for a contract for the sale of grain in the form commonly known as an indemnity,' as required by section 3 of the 'Future Trading Act,' approved August 24, 1921. 42 Stat. 187, c. 86. If, as he insists, that section is beyond congressional power and therefore invalid, he must prevail; otherwise, the judgment below must be affirmed.
That statute is entitled:
Section 2 declares that the term "contract of sale' shall be held to include sales, agreements of sale, and agreements to sell'; the word " grain' shall ... mean wheat, corn, oats, barley, rye, flax, and sorghum'; the words "board of trade' shall be held to include and mean any exchange or association, whether incorporated or unincorporated, of persons who shall be engaged in the business of buying or selling grain or receiving the same for sale on consignment.'
Sections 4 to 10 impose a charge of 20 cents per bushel upon all grain involved in sale contracts for future delivery, with two exceptions. But, as declared by Hill v. Wallace, 259 U.S. 44, 66 , 42 S. Ct. 453, 457 ( 66 L. Ed. 822) their real purpose was to regulate 'the conduct of business of boards of trade through supervision of the Secretary of Agriculture and the use of an administrative tribunal consisting of that Secretary, the Secretary of Commerce, and the Attorney General.'
Sections 4 to 10 were challenged in Hill v. Wallace, decided upon demurrer to the bill, and we held:
We there said:
Of course, the quoted statement concerning section 3 was intended to preclude any posible inference that he had passed upon a matter not directly in issue and to indicate that it remained open for discussion.
The present cause was tried upon a agreed statement of facts and it appears-
That at Emporia, Kan., October 23, 1923, plaintiff in error, a member of the Chicago Board of Trade, in consideration of one dollar, signed and delivered the following privilege or option, in the form commonly known as an 'indemnity,' addressed to R. F. Teichgraeber, for a contract for the sale of grain:
The transaction was one of those described by section 3 as 'privileges, bids, offers, puts and calls, indemnities, or ups and downs.'
After duly advising the collector that he denied validity of the tax plaintiff in error affixed to this written instrument $200 of internal revenue stamps.
For many years prior to August 24, 1921, members of grain exchanges bought and sold in large quantities agreements for contracts for purchase or sale of grain subject to acceptance within a definite time thereafter, commonly known as 'indemnities.' When the holder of one of these elected to exercise his rights the specified amount of grain was bought or sold on the exchange indicated for future delivery, and the agreement was thus finally consummated.
By far the larger percentage of such agreements were subject to acceptance during the following day at a price [269 U.S. 475, 482] ordinarily within one-fourth to three-fourths of a cent of the price prevailing when the market closed on day of the agreement. During many years the uniform consideration paid was one dollar per thousand bushels.
When the holder elected to exercise the option the transaction could be carried out only through and by members of exchanges open to sales for future delivery.
The stipulated facts reveal the cost, terms and use of 'indemnity' contracts together with their relation to boards of trade and indicate quite plainly that section 3 was not intended to produce revenue but to prohibit all such contracts as part of the prescribed regulatory plan. The major part of this plan was condemned in Hill v. Wallace, and section 3, being a mere feature, without separate purpose, must share the invalidity of the whole. Wolff Packing Co. v. Industrial Court, 267 U.S. 552, 569 , 45 S. Ct. 441.
This conclusion seems inevitable when consideration is given to the title of the act, the price usually paid for such options, the size of the prescribed tax (20 cents per bushel), the practical inhibition of all transactions within the terms of section 3, the consequent impossibility of raising any revenue thereby, and the intimate relation of that section to the unlawful scheme for regulation under guise of taxation. The imposition is a penalty, and in no proper sense a tax. Child Labor Tax Case, 259 U.S. 20 , 42 S. Ct. 449; Lipke v. Lederer, 259 U.S. 557, 561 , 42 S. Ct. 549; Linder v. United States, 268 U.S. 5 , 45 S. Ct. 446.
The judgment of the court below must be reversed, and the cause remanded for further proceedings in conformity with this opinion.