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A tax does not cease to be valid merely because it regulates, discourages, or even definitely deters the activities taxed. The principle applies even though the revenue obtained is obviously negligible or the revenue purpose of the tax may be secondary. Nor does a tax statute necessarily fall because it touches on activities that Congress might not otherwise regulate. Courts sustain taxes although imposed with the collateral intent of effecting ulterior ends which, considered apart, are beyond the constitutional power of the lawmakers to realize by legislation directly addressed to their accomplishment.
Section 2950 of the Marihuana Tax Act imposed the tax of $100 pr ounce on transferors of marihuana who made transfers to unregistered transferees without the order form required by § 2591 and without payment by the transferees of the tax imposed by § 2590. The government brought suit against defendant taxpayers to recover taxes and interest due under the Act. The defendant taxpayers filed a motion to dismiss, which was granted by the district court. According to the court, the tax was unconstitutional in that it levied a penalty, not a tax. The government appealed.
Was Section 2950 of the Marihuana Tax Act unconstitutional for levying a penalty?
On appeal, the court reversed and remanded for further proceedings, holding that the tax at issue was a legitimate exercise of the taxing power despite its collateral regulatory purpose and effect. Moreover, the tax was not conditioned upon the commission of a crime and, because the tax liability did not, in effect, rest on criminal conduct, the tax was properly called a civil rather than a criminal sanction. The court noted that, despite the regulatory effect and the close resemblance of the tax to a penalty, it did not follow that the levy was invalid.