Opposition Brief — Sailor v. United States

In the Supreme Court of the United States

OcToBER TERM, 1972

No. 71-1673

FREEMAN W. SAILOR, PETITIONER

v.

UNITED STATES OF AMERICA

Louis R. KLOTTER, PETITIONER

v.

UNITED STATES OF AMERICA

ON PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS FOR

THE SIXTH CIRCUIT

BRIEF FOR THE UNITED STATES IN OPPOSITION

OPINIONS BELOW

The court of appeals affirmed the judgment of the

district court without opinion (Pet. App. 29). The

opinions and orders of the district court (Supp. R.

5, 16)’ are not officially reported.

—— pe ae oO ee Oe ll ee eS ee VS ee

_ *“Supp. R.” references are to the supplemental appendix in

_ the court of appeals.

a! TF

(1)

2

JURISDICTION

The judgment of the court of appeals was entered

on April 25, 1972 (Pet. App. 29). The petition for

a writ of certiorari was filed on June 23, 1972. The

jurisdiction of this Court is invoked under 28 U.S.C.

1254(1).

QUESTION PRESENTED

Whether the courts below correctly held that the

assessments of wagering excise and occupational

taxes made against petitioners pursuant to Sections

4401 and 4411 of the Internal Revenue Code of 1954

were constitutionally permissible.

STATUTES INVOLVED

Internal Revenue Code of 1954 (26 U.S.C.):

Sec. 4401. IMPOSITION OF TAX.

(a) Wagers.—There shall be imposed on

wagers, as defined in section 4421, an excise tax

equal to 10 percent of the amount thereof.

* * * x *

(c) Persons Liable for Tax.—Each person

who is engaged in the business of accepting

wagers shall be liable for and shall pay the tax

under this subchapter on all wagers placed with

him. Each person who conducts any wagering

pool or lottery shall be liable for and shall pay

the tax under this subchapter on all wagers

placed in such pool or lottery. * * *

Src. 4411. IMPOSITION OF TAX.

There shall be imposed a special tax of $50

per year to be paid by each person who is liable

for tax under section 4401 or who is engaged

in receiving wagers for or on behalf of any

person so liable.

STATEMENT

Timely and proper assessments of wagering excise

and occupational taxes were made against petitioners.

The assessments of the wagering excise taxes covered

a period of appoximately one and one-half years for

each petitioner and were based on the average gross

wagers reported on wagering tax returns (Form

730) filed by petitioners in the prior year (1967).

Petitioners each paid the assessed occupational tax and

interest and one month’s assessed wagering excise

tax and interest, and initiated these actions for re-

fund of the amounts so paid. The government coun-

terclaimed for the assessed but unpaid wagering ex-

cise taxes and interest. The district court granted

the government’s motions for judgments on the plead-

ings and entered judgments for the government.

(Supp. R. 2-3, 4-9, 13-14, 16-18.) The court of ap-

peals affirmed (Pet. App. 29).

The decision below, affirming the district court’s

orders, is correct and is in accord with the decisions

of this and other courts. There is no conflict or other

reason for further review.

4

ARGUMENT

1. Petitioners apparently contend (Pet. 17-18) that

the wagering excise and occupational taxes were held

unconstitutional by this Court in Marchetti v. United

States, 390 U.S. 39; Grosso v. United States, 390

U.S. 62; and United States v. U.S. Coin & Currency,

401 U.S. 715. These cases, however, merely held that

criminal punishment, or sanctions tantamount to

criminal punishment (forfeiture), for noncompliance

with the wagering excise and occupational tax pro-

visions contravene the privilege against self-incrimi-

nation. In Grosso (390 U.S. at 70 fn. 7), the Court

carefully pointed out that it was not holding “that

a proper claim of privilege extinguishes liability for

taxation * * * [but only that it] precludes a criminal

conviction.” Likewise, in Marchetti (390 U.S. at 61)

the Court emphasized—

that we do not hold that these wagering tax

provisions are as such constitutionally impermis-

sible; we hold only that those who properly as-

sert the constitutional privilege as to these pro-

visions may not be criminally punished for fail-

ure to comply with their requirements.

In U.S. Coin & Currency (401 U.S. at 717), supra,

the Court reaffirmed its position in Marchetti and

Grosso by stating that it “in no way doubted the

Government’s power to assess and collect taxes on un-

lawful gambling activities.” Here, of course, unlike

the situation in the aforementioned cases, the gov-

ernment is seeking neither a criminal conviction nor

a forfeiture, but only to assess and collect taxes. All

5

other courts of appeals which have passed on the

question have resolved the issue in the same way as

did the court below. E.g., Hamilton v. United States,

429 F,. 2d 427 (C.A. 2), certiorari denied, 401 U.S.

913; Washington v. United States, 402 F. 2d 3 (C.A.

4), certiorari denied, 402 U.S. 978; Urban v. United

States, 445 F. 2d 641 (C.A. 5), certiorari denied,

404 U.S. 1015; Cole v. Cardoza, 441 F, 2d 1887 (C.A.

6); Collins v. Daly, 487 F. 2d 736, 739 (C.A, 7).

. 2. Petitioners next contend (Pet. 19-21, 25-26)

that the government’s method of assessing and col-

lecting these taxes violates their Fifth Amendment

rights since, it is argued, they can only defend against

the assessments by incriminating themselves. But

. if defense against assessment of these taxes required

disclosure of incriminating information, petitioners’

remedy would be to move to suppress the incriminat-

ing testimony and its fruits in any subsequent crimi-

nal prosecution in which its use might be sought.

United States v. Blue, 384 U.S. 251. Since there

was no substantial danger to petitioners that they

would prejudice themselves by self-incriminating

statements in defeating the assessments or maintain-

ing their refund suits, they cannot claim the advan-

tage of the privilege. See Ullmann v. United States,

350 U.S. 422, 489; Zicarelli v. New Jersey State

Commission, No. 69-4, decided May 22, 1972; Bowers

v. United States, 423 F. 2d 1207 (C.A. 5); Urban v.

United States, supra.

The petitioners also argue (Pet. 19, 26) that the

assessments violate their constitutional rights since

6

they are based upon information obtained from wag.

ering excise tax returns filed by them for a prior

pre-Marchetti year. The government, however, ig

required to make assessments of the correct tax due,

and where a taxpayer refuses (even upon constitu-

tional grounds) to furnish the information on which

such assessments are based, the taxing authorities, re-

lying on their own knowledge or on such information

as can be otherwise obtained, are permitted to pre-

pare returns on which the assessments can be predi-

cated. See Section 6020(b) of the Internal Revenue

Code of 1954. In this instance, the district director

used information obtained from returns filed by the

taxpayers for prior periods. The evidentiary use of

pre-Marchetti returns has been upheld by this Court

in Mackey v. United States, 401 U.S. 667. And in

United States v. Knox, 396 U.S. 77, 80 fn. 3, this

Court stated that the requirement that wagering tax

returns be filed had not been held unconstitutional in

Marchetti.

3. Petitioners finally assert (Pet. 22-24) that the

district court erred in dismissing their refund suits

on the government’s motion for judgment on the

pleadings. The sole ground for recovery set forth by

petitioners in their claims for refund and in their

complaints was the constitutionality of the wagering

occupational and excise taxes. As pointed out above,

this Court in Grosso and Marchetti specifically stated

that these taxes are not constitutionally impermis-

sible. Thus, since petitioners have failed to set forth

even an arguable legal basis on which they could

7

prevail, the district court properly granted the gov-

ernment’s motions for judgment on the pleadings.

CONCLUSION

For the reasons stated, the petition for a writ of

certiorari should be denied.

Respectfully submitted.

ERWIN N. GRISWOLD,

Solicitor General.

FRED B. UGAST,

Acting Assistant Attorney General.

JOHN P. BURKE,

BRUCE I. KOGAN,

Attorneys.

JULY 1972.

WW ov. S. GovERNMENT pRintine oFrice; 1972 472267 32