283 U.S. 527 (1931), 183, State Board of Tax Commissioners of Indiana v. Jackson

Docket Nº:No. 183
Citation:283 U.S. 527, 51 S.Ct. 540, 75 L.Ed. 1248
Party Name:State Board of Tax Commissioners of Indiana v. Jackson
Case Date:May 18, 1931
Court:United States Supreme Court

Page 527

283 U.S. 527 (1931)

51 S.Ct. 540, 75 L.Ed. 1248

State Board of Tax Commissioners of Indiana



No. 183

United States Supreme Court

May 18, 1931

Argued March 5, 1931




1. Failure of the District Court to make findings of fact as now required by Equity Rule 70 1/2 does not necessitate remanding a case tried before the rule was adopted. P. 533.

2. In classifying businesses for taxation, the legislature is not confined to the value of the business taxed, but may have regard for other elements. P. 536.

3. As applied to the fundamental state power of taxation, the equal protection clause does not compel the adoption of an iron rule of equal taxation, nor prevent variety or differences in taxation, or discretion in the selection of subjects, or the classification for taxation of properties, businesses, trades, callings, or occupations. P. 537.

4. The fact that a statute discriminates in favor of a certain class does not make it arbitrary if the discrimination is founded upon a reasonable distinction, or if any state of facts reasonably can be conceived to sustain it. Id.

5. In determining the validity of a tax under the equal protection clause, it is not for the court to consider the propriety or justice

Page 528

of the tax, or to seek for the motive, or criticize the public policy, which prompted its adoption by the legislature. P. 537.

6. A legislative classification of occupation for taxation must be sustained if there are substantial differences between them, and the differences need not be great. Id.

7. An Indiana statute lays an annual license tax on stores, increasing progressively with the number of stores under the same general management, supervision, or ownership, such that, in the present case, the owner of a "chain" of some 225 stores selling groceries, fresh vegetables, and meats was obliged to pay $5,443.00, whereas the owner of a single store only, though it involved a much greater investment and income, would pay but $3.00. Held not violative of the equal protection clause in view of the distinctions and advantage which combine and are exerted in a single ownership and management of a series of like stores in different locations, as compared with mere cooperative associations of independent stores, or with department stores selling many kinds of goods under the same roof. Pp. 532, 541.

8. The statute is not repugnant to Art. I, § 23, of the Indiana Constitution, providing:

The General Assembly shall not grant to any citizen or class of citizens privileges and immunities which, upon the same terms, shall not equally belong to all citizens,

nor to Art. 10, § 1, requiring a uniform and equal rate of assessment and taxation and just valuations, which, as declared by the state supreme court, applies only to the assessment made under a general levy, and not to occupation or license taxes. P. 542.

38 F.2d 652 reversed.

Appeal from a decree enjoining the Board of Tax Commissioners from instituting prosecutions against the appellee Jackson for failure to pay license taxes.

Page 530

ROBERTS, J., lead opinion

MR. JUSTICE ROBERTS delivered the opinion of the Court.

[51 S.Ct. 541] This is an appeal from the decree1 of a specially constituted district court2 perpetually enjoining the appellants from enforcing against the appellee the provisions of Act No. 107 of 1929 of the General Assembly of the State of Indiana. The appellee, by bill filed on behalf of himself and all others similarly situated, charged that the

Page 531

statute violates the Fourteenth Amendment of the Federal Constitution and two sections of the Constitution of Indiana. It averred, and the answer admitted, that, unless enjoined, appellants would institute prosecutions against appellee under certain sections of the act. After hearing, the district court entered a perpetual injunction holding the law offensive to the federal and to the state constitution.

The statute provides that it shall be unlawful for any person, firm, association, or corporation, foreign or domestic, to establish or operate any store3 within the state without first obtaining from the appellants a license, which must be renewed annually. It makes the operation of a store without a license a misdemeanor punishable by a fine of not less than $25 nor more than $100 for each day it is so operated.

Section 5 of the act provides:

Every person, firm, corporation, association, or copartnership opening, establishing, operating, or maintaining one or more stores or mercantile establishments within this state under the same general management, supervision, or ownership shall pay the license fees hereinafter prescribed for the privilege of opening, establishing, operating, or maintaining such stores or mercantile establishments. The license fee herein prescribed shall be paid annually, and shall be in addition to the filing fee prescribed in §§ 2 and 4 of this act.

The license fees herein prescribed shall be as follows:

(1) Upon one store, the annual license fee shall be three dollars for each such store;

Page 532

(2) Upon two stores or more, but not to exceed five stores, the annual license fee shall be ten dollars for each such additional store;

(3) Upon each store in excess of five, but not to exceed ten, the annual license fee shall be fifteen dollars for each such additional store;

(4) Upon each store in excess of ten, but not to exceed twenty, the annual license fee shall be twenty dollars for each such additional store;

(5) Upon each store in excess of twenty, the annual license fee shall be twenty-five dollars for each such additional store.

It is this section which appellee asserts renders the act unconstitutional as applied to him.

The bill of complaint alleges, and it is admitted, that the appellee is engaged in the business of selling groceries, fresh vegetables, and meats at wholesale and retail in Indianapolis, and has been so engaged for more than ten years, has capital invested in his business in excess of $200,000, and annual sales of over $1,000,000. He operates two hundred and twenty-five stores in the said city, and more than five hundred persons, firms, associations, and corporations, foreign and domestic, are engaged in the operation of two or more stores in the state.

The bill charges that the graduation of the tax per store according to the number of stores under a single ownership and management is based on no real difference between a store part of such a group and one individually and separately owned and operated, or between the business transacted in them; that the number of stores conducted by one owner bears no relation to the public health, welfare, or safety, none to the size of the enterprise as a whole, to its capital, its earnings, or its value; that the classification made by the statute is without basis in fact, is unreasonable and arbitrary, and results

Page 533

in depriving him of his property without due process and denying him the equal protection of the laws.

In the court below, appellants defended on the grounds that the statute was an exercise of the police power and was also a revenue measure which levied an ordinary occupation tax. They offered no evidence to sustain the first ground mentioned, and do not press it here. They now stand only upon the power of the legislature, in prescribing an occupation tax, to classify businesses so long as its action is not unreasonable and arbitrary. They say that the act fulfills the constitutional requirement that, in so classifying, the lawmaking body shall apply the same means and methods to all persons of the same class, so that the law will operate equally and uniformly, and all similarly circumstanced will be treated alike. The district court held that the statute failed to conform to this standard.

The act adopts a different measure of taxation for stores known as chain stores from that applied to those owned and operated as individual units. Evidence was offered by the appellee intended to demonstrate that there are no substantial or significant differences between the business and operation of the two kinds of stores such as would justify [51 S.Ct. 542] the classification, and by the appellants to prove the existence of such differences.

The district court failed to make findings of fact and law as now required by Equity Rule 70 1/2, but contented itself with a partial summary of the facts and certain general conclusions of law. Had the rule been in force at the time of the trial, we should feel constrained to remand the case with directions to make such findings. We shall, in the circumstances, summarize the proofs.

In addition to the facts averred in the bill, above set forth, the appellee offered uncontradicted evidence on the following points. Of the retail stores of the country, approximately

Page 534

63 percent are independent or community stores, 16 percent are department stores, 12 percent are chain stores, and 4 percent are mail order houses. Several department stores in Indianapolis doing a much larger business than the appellee pay a tax of only $3, as contrasted with his tax of $5,443, although their business is highly competitive with that of chain stores. Persons owning a greater number of stores, and with more money invested, in a business similar to that of appellee, but having only one store in Indiana, pay $3 because they have but one store in the state. Large numbers of stores independently owned and controlled are members of associations or "voluntary chains" under which cooperative buying is conducted for the group, but each of them is required to pay a license fee of only $3...

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