## Facts

- Veazie Bank was a Maine state-chartered bank that issued notes used as circulating currency.
- Congress enacted the Act of July 13, 1866, imposing a 10% tax on the amount of notes of any person or state bank “used for circulation and paid out” after August 1, 1866.
- A federal internal-revenue officer assessed the 10% tax on Veazie Bank’s circulating notes.
- Veazie Bank paid the tax under protest and sued the tax collector in federal circuit court to recover the payment, arguing the tax was unconstitutional.
- The circuit court certified the constitutional questions to the Supreme Court on a division of opinion.

## Issues

1. Whether the 10% levy on state-bank notes “used for circulation and paid out” is a “direct tax” requiring apportionment among the states.
2. Whether Congress may constitutionally use its taxing power to restrain or effectively suppress the circulation of state-bank notes in favor of a national currency, notwithstanding state-granted banking privileges.

## Decision

- The Supreme Court upheld the federal statute and sustained the tax.
- The Court held the 10% tax was not a direct tax subject to apportionment.
- The Court held Congress, having undertaken to provide a national currency, may restrain the circulation of notes not issued under federal authority through suitable enactments.
- The judgment below was affirmed.

## Legal Principles

- For constitutional apportionment purposes, a tax on the use of state-bank notes in circulation is an excise (or duty), not a “direct tax.”
- Congress’s enumerated powers over taxation and the national monetary system permit legislation designed to secure a uniform currency, including measures that burden competing instruments used as money.
- A federal tax may serve regulatory ends, including strong discouragement of targeted conduct, when used as a means reasonably related to an enumerated federal objective.
- Valid exercises of federal power may prevail over state-created banking arrangements that depend on the circulation of state-bank notes.

## Conclusion

The Court sustained Congress’s use of a substantial excise on state-bank notes, concluding it was not an unapportioned direct tax and that Congress could employ taxation to protect and secure a national currency even if the measure effectively curtailed state-bank note circulation.


Veazie Bank v. Fenno, 75 U.S. 533 (1869)