301 U.S. 412 (1937), 652, Great Atlantic & Pacific Tea Co. v. Grosjean
|Docket Nº:||No. 652|
|Citation:||301 U.S. 412, 57 S.Ct. 772, 81 L.Ed. 1193|
|Party Name:||Great Atlantic & Pacific Tea Co. v. Grosjean|
|Case Date:||May 17, 1937|
|Court:||United States Supreme Court|
Argued March 30, 31, 1937
[57 S.Ct. 773] APPEAL FROM THE DISTRICT COURT OF THE UNITED STATES
FOR THE EASTERN DISTRICT OF LOUISIANA
1. Without contravening the equal protection clause of the Fourteenth Amendment, a State may separately classify for taxation the conduct of a chain store, and may increase the rate in proportion to the increase in the number of stores within the State, since the opportunities and powers of a chain store operator become greater with the growth of the number of units maintained. Fox v. Standard Oil Co., 294 U.S. 87, 100. P. 419.
2. In adjusting the rate for a chain store within the State, the legislature may take into account the size of the chain to which the store belongs by counting the total number of its units, wherever located. P. 419.
3. Act No. 51, of Louisiana, 1934, which lays a progressively increasing rate of taxation on the operation of chain stores within the State, taking into account all the stores in the chain, whether within the State or outside, does not arbitrarily discriminate against sectional or national chains in favor of intrastate chains. P. 421.
The findings on evidence showed that the competitive advantage of chains increased with the number of component links, and that the addition of units to a chain increased the competitive advantage of each store in the chain.
4. That the statute, by taking into account all units indiscriminately in fixing the rate, may fail accurately to adjust the fee charged to the value of the local privilege taxed is not a good reason for adjudging it arbitrary. P. 423.
5. The subject of the Louisiana tax is the prosecution of a defined business activity within that State, viz., the conduct of a retail
store which is part of a chain under a single management, ownership, or control; the measure of the tax is the number of units of the chain within the State; the fact that the rate of tax for each such unit is fixed by reference to all the units of the chain, including those operated elsewhere, does not, in legal effect, result in taxation of property or privileges enjoyed by the taxpayer beyond the borders of the State. P. 424.
6. The Louisiana tax, supra, may be further upheld as taxation in aid of a policy of the State to mitigate evils of competition as between single stores and chains, or a policy to neutralize disadvantages of small chains in their competition with larger ones, or to discourage merchandising within the State by chains grown so large as to become a menace to the general welfare. P. 425.
7. Within its police power, the State may forbid the prosecution of a particular type of business inimical to the public welfare, or regulate such business to abate evils arising from its pursuit. P. 425.
8. Whatever a State may forbid or regulate it may permit upon condition that a fee be paid in return for the privilege, and such a fee may be exacted to discourage the prosecution of a business or to adjust competitive or economic inequalities. P. 426.
9. The policy a State is free to adopt with respect to the business activities of her own citizens she may apply to the citizens of other States who conduct the same business within her borders, and this irrespective of whether the evils requiring regulation arise solely from operations in the State or are in part the result of extra-state transactions. P. 427.
10. A party subjected to a state tax only in respect of local activities cannot have an advisory decree against a possible administration of the taxing Act which would burden or regulate his related activities in interstate commerce. Pp. 427, 429.
16 F.Supp. 499 affirmed.
Appeal from a decree of the District Court of three judges dismissing a bill to enjoin the enforcement of a tax on chain stores. The Atlantic & Pacific Tea Company was the original plaintiff. Other chain store operators intervened.
ROBERTS, J., lead opinion
MR. JUSTICE ROBERTS delivered the opinion of the Court.
This cause presents the questions whether the method prescribed by a chain store tax act for ascertaining the
rate of taxation offends the Fourteenth Amendment and the commerce clause of the Federal Constitution.
[57 S.Ct. 774] In 1932, the legislature of Louisiana adopted an act levying an occupation or license tax upon chain stores1 under which the exaction was fifteen dollars upon each of two or more stores, not in excess of five; upon each store in excess of five, but not exceeding ten, $25, and the amount increased in brackets for additional stores, the last bracket embracing stores in excess of fifty upon each of which the tax was $200.
By Act No. 51 of 1934,2 the earlier law was amended to lay the tax on
persons, firms, partnerships, corporations, or associations of persons engaged in the business of operating two or more stores or mercantile establishments, one or more of which is located in this State, . . . under the same general management, supervision, ownership or control.
Section 1. Section 3 provides that the tax
shall be based on the number of stores or mercantile establishments included under the same general management, supervision, ownership or control, whether operated in this State or not, and shall be fixed and graded as follows, to-wit: (1) Upon stores or mercantile establishments operated in this State and belonging to a chain or group having a total of not more than ten stores, the annual license shall be Ten ($10.00) Dollars for each such store operated in this State.
There are fifteen additional paragraphs progressively increasing the rate per store in Louisiana of larger chains, the last fixing the rate for a store belonging to a chain of more than five hundred at $550.
The Great Atlantic & Pacific Tea Company, an Arizona corporation, owning, operating, or controlling 15,082 stores in the United States, Canada, and elsewhere, 106 of which are in Louisiana, filed its bill in the District
Court to restrain the appellees, state officers, from enforcing the statute. Other corporations operating chains, some units of which are located in Louisiana, intervened as plaintiffs. A temporary restraining order issued, the appellees answered the bill, and the case was heard upon pleadings and proofs by a specially constituted court of three judges, which upheld the statute and dismissed the bill.3
The constitutional infirmity of the act is said to consist in arbitrary discrimination in favor of local as against national chains in the attempt to tax property and activities which are beyond the state's jurisdiction and in burdening interstate commerce. We hold the legislation impregnable to attack on these grounds.
First. The exaction is an occupation or license tax. The subject is the conduct of a business within Louisiana. Without contravening the equal protection clause of the Fourteenth Amendment, a state may separately classify for taxation the conduct of a chain store,4 and may increase the rate in proportion to the increase in the number of stores within the state, since the opportunities and powers of a chain store operator become greater with the growth of the number of units maintained.5 The appellants assert that, in adjusting the rate for a chain store in Louisiana, the legislature may not take into account the size of the chain to which the store belongs by counting the total number of its units wherever located. So to do, it is claimed, is arbitrarily to discriminate against sectional or national chains in favor of intrastate chains.
The District Court found that the testimony offered by the State was similar to that in Tax Commissioners v. Jackson, supra; established the difference in type of operation
between the operator of one store and the operator of many, and the variance in advantage and mode of operation with the number of units in the chain. In addition, the court found that all the stores of a retail chain contribute to the central purchasing power of the chain, irrespective of state lines and location of stores, and increase the per unit multiple advantage enjoyed by the operator of the system; that the greater the number of units, the greater the purchasing [57 S.Ct. 775] power of the chain, the greater the rebates and allowances, the greater the advantages in advertising, the greater the capital employed, the greater the social and economic consequences, and the lower the cost of distribution and overhead.
In fine, the record in this case shows the contribution to the advantages made by each unit in the chain, and the per unit advantage made possible by the whole system, and in that respect only does it differ materially from the proof which was before the court in the Jackson case.
These findings are assigned as error, but they have substantial support in the record, and we therefore accept them.
If the competitive advantages of a chain increase with the number of its component links, it is hard to see how these advantages cease at the state boundary. Under the findings, a store belonging to a chain of one hundred, all located in Louisiana, has not the same competitive advantages as one of one hundred Louisiana stores belonging to a national chain of one thousand. The appellants lean heavily on the findings of the court respecting the relative business in New Orleans of the Great Atlantic & Pacific Company and the H. G. Hill Stores, Inc., a Louisiana corporation....
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