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LOUIS K. LIGGETT CO. ET AL. v. LEE

decided: March 13, 1933.

LOUIS K. LIGGETT CO. ET AL
v.
LEE, COMPTROLLER, ET AL.



APPEAL FROM THE SUPREME COURT OF FLORIDA.

Hughes, Van Devanter, McReynolds, Brandeis, Sutherland, Butler, Stone, Roberts, Cardozo

Author: Roberts

[ 288 U.S. Page 528]

 MR. JUSTICE ROBERTS delivered the opinion of the Court.

Chapter 15624 of the laws of Florida, 1931, declares it unlawful for any person, firm, corporation, association, or copartnership, foreign or domestic, to operate any store within the State without first having obtained a license, designates the officer to whom application shall be made, regulates the procedure for issuance of licenses, and provides for annual renewal. The act requires the payment of a filing fee, and by § 5, which is copied in the margin,*fn*

[ 288 U.S. Page 529]

     fixes the amount of the license fee. A tax greater than that exacted for a single store is fixed for each store in excess of one, but not exceeding fifteen, owned or operated by the same person or corporation. The fee for each store is stepped up in amount as the number constituting the chain reaches certain specified limits. This graduated scale applies to stores all of which are within a single county; but if the same number of stores is located in more than one county the license fee for each is materially increased.

The act imposes the tax only on retail stores and excludes from the definition of a store filling stations engaged exclusively in the sale of gasoline and other petroleum products. It provides for a separate county license tax equal to twenty-five per cent. of the state license fee, and authorizes a municipal tax of the same amount, measuring the graduated tax in the case of counties and municipalities by the number of stores situate

[ 288 U.S. Page 530]

     in the county or municipality, notwithstanding the applicant may own other stores beyond the limits of the governmental subdivision.

In addition to the described license taxes the act imposes a levy of $3.00 for each $1,000 of value of stock carried in each store, or for sale in such store, and this is defined to include merchandise owned by the taxpayer and held in storage to be sold in or through such store.

Three chain store owners filed in the Circuit Court of Leon County, Florida, a class bill, in which twelve others intervened and became co-plaintiffs, praying that the tax officials be enjoined from enforcing the act. The complainants are corporations of Florida and other states. They challenged the statute as violative of various provisions of the constitution of Florida, of the due process and equal protection clauses of the Fourteenth Amendment, and of the commerce clause of the Federal Constitution.

[ 288 U.S. Page 531]

     The bill sets forth in great detail facts claimed to assimilate the operation of chain stores to that of stores individually owned and operated in the state of Florida. So-called voluntary chains of retail stores are described at length and their methods of operation compared with those of chain stores, the purpose being to demonstrate that there is no essential difference between the two methods of conducting business. On the basis of the facts recited the bill charges that to tax a store operated in the one manner and exempt an establishment conducted in the other is arbitrary and unreasonable. The difference in the amount of tax laid upon the operator of a given number of stores in a single county and another conducting the same number in two or more counties is challenged as an unconstitutional discrimination. The imposition of a tax of $3.00 per $1,000 on retail merchants not only as respects the stock actually contained in their stores, but also on goods in warehouse intended for sale in such stores, is attacked as discriminatory, for the reason that under another statute wholesale merchants are taxed only $1.50 per $1,000 of merchandise carried in their stores or warehouses. The exemption of filling stations is alleged to discriminate against the appellants in violation of the Fourteenth Amendment. The bill further avers that certain of the plaintiffs receive their goods from warehouses maintained outside the state of Florida, or order shipments to their stores from wholesale houses situate without the State, whereas many operators of single stores who are members of voluntary chains obtain their supplies from wholesalers in Florida, or from a warehouse in the State conducted by a voluntary chain corporation. The unequal effect of the act on these transactions is charged to be an unconstitutional burden upon interstate commerce.

The defendants moved to dismiss. The cause was heard upon this motion and a decree entered dismissing the bill at complainants' costs. The Supreme Court of

[ 288 U.S. Page 532]

     Florida affirmed the decree. The present appeal presents only the questions arising under the Federal Constitution.

1. In support of the allegation of arbitrary and unreasonable discrimination the bill recites facts from which appellants claim the conclusion is inevitable that there is no difference between the methods of conducting chain stores and those employed in department stores, so-called voluntary chains, and singly operated units. This is but a reiteration of the contention made and overruled in State Board of Tax Commissioners v. Jackson, 283 U.S. 527. It was there held that whatever may be said of individual similarities and differences between chain store operation and the conduct of a single shop or a department store, the former employ distinguishable methods of conducting business, and the legislature may make the difference in method and character of the business the basis of classification for taxation. In their bill the complainants aver that the fact situation in Florida at the date of suit differed materially from that set forth in the Jackson case. Each of the features of chain store operation enumerated in this court's opinion is singled out, and as respects each the averment is that as to some chain store operators, or some operators of individual stores, the present case differs from the Jackson case.

In their endeavor thus to distinguish the earlier case, the appellants stress mere details, but ignore the underlying reason for sustaining the classification there attacked. The decision in the Jackson case was based not upon any single feature of chain store management, but upon the ultimate fact of common knowledge, illustrated and emphasized by the evidence, that the conduct of a chain of stores constitutes a form and method of merchandising quite apart from that adapted to the practice of the ordinary individually operated small store or department store; and that the difference between an integrated and a voluntary chain is fundamental. While

[ 288 U.S. Page 533]

     incidents of the operation of the one may be quite similar to those found in the other, there is a clear distinction between one owner operating many stores and many owners each operating his own store with a greater or less measure of cooperation voluntarily undertaken. The legislature may make the distinction the occasion of classification for purposes of taxation. Neither similarity of opportunities and advantages in some aspects, nor the fact that the one kind of store competes with the other, is enough to condemn the discrimination in the taxes imposed. It is needless to repeat what was said in the Jackson case to the effect that the difference between the subjects taxed need not be great, and that if any reasonable distinction can be found the duty of the court is to sustain the classification embodied in the law.

2. The statute lays a tax of a stated sum per store on any given number of stores in the same ownership located within the same county; but if one happens to be in a county other than that in which the remainder are situate, imposes an increased tax not only on the single one lying in the second county, but on all. Thus if an owner has fourteen stores he may add a fifteenth in the same county and the only additional tax will be in the amount of $10 attributable to the privilege of conducting the new store. But if the new store happens to be in another county the license fee for it will be increased to $15, and that for each of the other fourteen, which have long since been opened and operated in the original county, will be increased from $10 to $15.

We are unable to discover any reasonable basis for this classification. As we have held, gradation of the tax according to the number of units operated cannot be said to be so unreasonable as to transcend the constitutional powers of the legislature. The addition of a store to an existing chain is a privilege, and an increase of the tax on all the stores for the privilege of expanding the chain cannot

[ 288 U.S. Page 534]

     be condemned as arbitrary; but an increase in the levy not only on a new store but on all the old stores, consequent upon the mere physical fact that the new one lies a few feet over a county line, finds no foundation in reason or in any fact of business experience. There is no more reason for adopting the county line as the measure of the tax than there would be for taking ward lines in cities, or arbitrary lines drawn through the state regardless of county boundaries. It is suggested that the license fee for extending operations into a great and populous city, or for doing business upon crowded business streets, should be greater than for the same privilege in a village or a sparsely settled suburb. But the adoption of a county line can have no reference either to density of population, congregation of the buying public, or any other factor bearing upon the choice of a business site.

The appellees suggest that an owner reaps greater advantage by the establishment of a new store in a county not previously occupied. This may be conceded. It is evident, however, that the mere spatial relation between the store and a county line, cannot, in and of itself, affect the value of the privilege enjoyed. The appellees fail to show how the fact that the new place of business lies in another county increases the advantage over that to accrue from a location within the same county. The classification is solely of different chains, and the difference between them consists neither in number, size, surrounding population, nor in any factor having a conceivable relation to the privilege enjoyed.

It cannot justifiably be said that the section draws a distinction between national and local chains. The operation of the statute forbids any such assumption; for if a national chain keeps multiple units within a single county the tax on each is at the lower rate, while if a so-called local chain has one store in a given county and another just over the county line both places of business

[ 288 U.S. Page 535]

     take the higher rate. This difference in treatment has no discernible relation to the sort of chain which establishes a store across a county line. The Act is not a rough and ready but honest effort to differentiate what the Federal Census Bureau for its purposes denominates local chains on the one hand and what the Bureau terms sectional or national chains on the other. Neither the phraseology nor the method of operation of the Act is consistent with an attempt at any such classification.

The suggestion is made that the statute is in reality aimed solely at large corporate chains; and that as none other are parties to this suit, we may ignore any discriminatory features as respects individual owners of multiple units. But this is to construe the act by pure speculation and not by what it says, nor by any declared purpose, nor by anything contained in the record. Conceding for the purpose of the argument that in levying the tax the legislature might have drawn a distinction between corporate owners and individuals, and again between small owners, whether corporate or individual, and large owners, we are not permitted to guess at any such undisclosed purpose in the minds of those who adopted the statute. Assuming power to suppress by taxation a form of organization deemed inimical to the public interest, we can attribute no such motive to the present statute in the absence of legislative declaration or record proof. The Act taxes ownership and operation of stores, not corporate nor large corporate operation. The exaction is based on the doing of a business, not on the personality of the merchant.

The title declares it "An act requiring licenses for the operation, maintenance, opening or establishment of stores in this State" . . . Section 1 enacts "That from and after the first day of October, A.D. 1931, it shall be unlawful for any person, firm, corporation, association or co-partnership, whether foreign or domestic, to operate,

[ 288 U.S. Page 536]

     maintain, open or establish any store in this State without first having obtained a license . . ."

It would violate every principle of statutory construction to hold that this plain language really means that individuals and small local corporations are not within the intendment of the Act, but that it in fact applies only to so-called giant corporations. To attribute such a covert, hidden, and indirect purpose to those who passed the statute is, in effect, to charge the lawmakers with saying one thing and meaning another. Nothing said in O'Gorman & Young v. Hartford Fire Insurance Co., 282 U.S. 251, or any other decision of this court, justifies such a pronouncement. The legislature of Florida has declared the purpose and object of the statute to be to tax every store owner and operator, and we should not go behind that declaration and attribute to the lawmakers some other ulterior design. Corporations are as much entitled to the equal protection of the laws guaranteed by the Fourteenth Amendment as are natural persons. Southern Ry. Co. v. Greene, 216 U.S. 400; Kentucky Finance Corp. v. Paramount Exchange, 262 U.S. 544; Power Mfg. Co. v. Saunders, 274 U.S. 490; Liggett Co. v. Baldridge, 278 U.S. 105; Iowa-Des Moines National Bank v. Bennett, 284 U.S. 239. Unequal treatment and arbitrary discrimination as between corporations and natural persons, or between different corporations, inconsistent with the declared object of the legislation, cannot be justified by the assumption that a different classification for a wholly different purpose might be valid.

Those provisions of § 5 which increase the tax if the owner's stores are located in more than one county are unreasonable and arbitrary, and violate the guaranties of the Fourteenth Amendment.

3. Section 11 of the act provides:

"A County license tax of twenty-five per cent of the State license tax shall be levied and imposed upon each

[ 288 U.S. Page 537]

     store as herein defined and each incorporated municipality of the State of Florida is authorized to levy a municipal license tax of twenty-five per cent of the State tax imposed by this Act, provided that the tax levied by or for the several counties and municipalities shall be graduated only on the number of stores situate in such county or municipality, respectively, notwithstanding the applicant may own other stores beyond the limits of such county or municipality, as the case may be. . . ."

The attack upon this section is the same as that leveled against § 5, which ordains the license tax for state purposes. If, as we have held, it is permissible for the state for its own purposes to impose a tax on a graduated scale depending upon the number of units operated by the chain, it is equally so for a municipality to grade its taxation by the same method, when duly authorized by state authority.

4. Section 5, in addition to the graduated license fee, lays a tax of $3.00 on each $1,000 value of stock carried in each store, or for sale in such store, and § 2 includes within the goods, wares and merchandise from which sales are to be made those owned by the taxpayer and held in storage to be sold in or through such stores. The appellants insist that this requirement deprives them of the equal protection of the law for the reason that wholesale merchants not taxed by the act in question are assessed under § 926 of the Revised General Statutes of Florida a tax of only $1.50 per $1,000 of value on stock carried in their stores or warehouses. The result is said to be that a chain store operator must pay double the amount paid by the wholesaler who supplies individual stores competing with the chain.

Chain stores do not sell at wholesale. What they store, if they warehouse any goods in the state of Florida, is for the purpose of retail sale at their shops. On the other hand, goods held by a wholesaler are stored for sale to

[ 288 U.S. Page 538]

     retail establishments, to be resold by the latter. What has been said with respect to difference in methods and operation of the two kinds of warehouses applies in this instance. The diverse purposes of the storage and the difference in the nature of the business conducted are sufficient to justify a different classification of the two sorts of warehouses for taxation.

5. Section 8, which defines a store, contains a proviso to the effect that the term shall not include "filling stations engaged exclusively in the sale of gasoline or other petroleum products." The appellants assert the exemption deprives them of equal protection, since it is arbitrary and unreasonable. It appears, however, that all dealers in gasoline, including those conducting filling stations, are required by statute to pay a license tax of $5 per annum and in addition a tax of seven cents per gallon for every gallon of gasoline or other like products of petroleum sold (chaps. 15659 and 15788, Laws of Florida, Acts of 1931). It has long been settled that the Fourteenth Amendment does not prevent a state from imposing differing taxes upon different trades and professions or varying the rates of excise upon various products. Bell's Gap R. Co. v. Pennsylvania, 134 U.S. 232, 237; Southwestern Oil Co. v. Texas, 217 U.S. 114, 121-122. Clear and hostile discriminations against particular persons and classes, especially such as are of an unusual character, unknown to the practice of our governments, may be obnoxious to the Constitution, but in view of the imposition of taxes on the operation of filling stations by other acts, pursuant to the legislature's power of classification, we cannot declare their exemption from the tax laid by the chain store act offensive to the guaranties of the Fourteenth Amendment.

6. It is asserted that the act bears unevenly upon those who purchase directly from a wholesale house or manufacturer whose plant is outside the State, some of whom

[ 288 U.S. Page 539]

     also store the goods in Florida preparatory to retail sale, and those who purchase from a wholesaler within the State; that the former are engaged in interstate commerce, and the tax is as to them a burden upon that commerce. The claim merits no serious discussion. The tax is obviously laid for the privilege of operating stores in Florida, and attempts no discrimination between merchandise imported from another state and that produced in Florida. Compare Emert v. Missouri, 156 U.S. 296; Armour & Co. v. Virginia, 246 U.S. 1; Sonneborn Bros. v. Cureton, 262 U.S. 506. It levies no tax and lays no burden on the purchase in interstate commerce of articles for sale in Florida. Kehrer v. Stewart, 197 U.S. 60, 65; East Ohio Gas. Co. v. Tax Commission, 283 U.S. 465, 471. The tax on the value of merchandise in a retail store, or warehoused in Florida for sale in that store, even though incident on articles which have moved in interstate commerce, is laid after interstate commerce has ceased. Compare American Steel & Wire Co. v. Speed, 192 U.S. 500; Bacon v. Illinois, 227 U.S. 504; Texas Co. v. Brown, 258 U.S. 466, 475; Gregg Dyeing Co. v. Query, 286 U.S. 472, 478.

7. The bill avers that the state officials charged with the administration of the act have failed to demand the tax and do not intend to collect it from the owners of stores in certain lines of business, such as furniture dealers. This alleged official dereliction is claimed to be an unconstitutional discrimination in the enforcement of the act. For this proposition appellants rely upon decisions such as Cumberland Coal Co. v. Board of Revision, 284 U.S. 23, and Iowa-Des Moines Nat. Bank v. Bennett, 284 U.S. 239, holding a failure to assess all property taxed ad valorem at the same proportion of its value to be a denial of equal protection. The principle upon which those cases rest is that where a statute lays a tax upon property ad valorem at an even and equal rate, discrimination

[ 288 U.S. Page 540]

     may result from the fact that the assessing officials systematically and intentionally value some property subject to the tax at a proportion of its true value different from that fixed with respect to other like property. They do not support the appellants' contention that where the taxing officials fail and neglect to exact the tax from some persons alleged to owe it, all others who are subject to the levy are in virtue of such omission exempt. This court has said that in the case of unequal and discriminatory assessment, to hold that the complaining taxpayer's only remedy is to have the assessments on all the other property raised to a level equal with that of his own is in effect to deny any remedy whatever. As a consequence redress is afforded by requiring the assessing body to revise the complainant's assessment to the level of those upon other like property. Appellants insist that by analogy they are entitled to be exempt, if others are improperly relieved from taxation.

Under the law of Florida every unit of the taxpaying public has an interest in having all property subject to taxation legally assessed, and may in behalf of himself and others in like situation require that all property subject to taxation be placed on the tax books and bear its proportionate part of the expense of government. The appellants, if they deem the tax illegally omitted in certain cases, may apply for a writ of mandamus to compel the taxing officials to do their duty. State ex rel. Dofnos Corp. v. Lehman, 100 Fla. 1401; 131 So. 333. Failure to collect the tax from some whose occupations fall within the provisions of the act, cannot excuse the appellants from paying what they owe. And certainly the remedy afforded by state law assures them equal treatment along with all others similarly situated.

8. We are told that the legislature of Florida would not have passed the act if any of its provisions were for

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     any reason to be inoperative, and we are asked, therefore, to declare ...


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