Company v. Commonwealth of Kentucky

• Decision Date: 16 May 1910
• Docket Number: BROWN-FORMAN,No. 6,6
• Citation: 30 S.Ct. 578,54 L.Ed. 883,217 U.S. 563
• Parties: COMPANY, Plff. in Err., v. COMMONWEALTH OF KENTUCKY
• Court: U.S. Supreme Court

217 U.S. 563

30 S.Ct. 578

54 L.Ed. 883

BROWN-FORMAN COMPANY, Plff. in Err.,

v COMMONWEALTH OF KENTUCKY.

No. 6.

Argued April 11, 12, 1910.

Decided May 16, 1910.

Messrs. Levi Cooke, W. M. Hough, A. B. Hayes, and Hough, Hough, & Walker for plaintiff in error.

[Argument of Counsel from pages 564-567 intentionally omitted] Messrs. James S. Morris, James Breathitt, and Charles H. Morris for defendant in error.

[Argument of Counsel from pages 567-568 intentionally omitted] Mr. Justice Lurton delivered the opinion of the court:

The commonwealth of Kentucky instituted this proceeding to collect an occupation tax imposed by an act of the general assembly of that state of March 28, 1906 whereby every corporation or person engaged in the state 'in the business or occupation of compounding, rectifying, adulterating, or blending distilled spirits' is required to pay 'a license tax of 1 1/4 cent upon every wine gallon of such compounded, rectified, blended, or adulterated distilled spirits.' The defenses presented were, first, that the plaintiff in error had paid the tax due for the rectification of 'single-stamp spirits,' and that the act does not cover 'double-stamp spirits,' used as a basis for its operations; second, that the act was requgnant to the Constitution of the state; and, third, that the act is repugnant to the Constitution of the United States, in that it is a regulation of interstate commerce, and operates as a denial of the equal protection of the law. The questions concerning the validity of the act under the state Constitution, and as to the liability of the plaintiff in error under the act as construed and enforced by the highest court of Kentucky, may be laid on one side, for the only contentions which concern us under this writ of error to the state court are those which arise under the Constitution of the United States.

The two sections of the act which need be examined are the first and seventh, which are set out in the margin.

Sec. 1. Every corporation, association, company, copartnership, or individual engaged in this state in the business or occupation of compounding, rectifying, adulterating, or blending distilled spirits, known and designated as single-stamp spirits, shall pay to the commonwealth of Kentucky a license tax of 1 1/4 cent upon every wine gallon of such compounded, rectified, blended, or adulterated distilled spirits.

Sec. 7. Any corporation, association, company, copartnership, or individual who shall ship any compounded, rectified, blended, or adulterated distilled spirits, known and designated as single-stamp spirits, into this state, for the purpose of labeling, branding, marking, or stamping the same as Kentucky whisky, product or spirits, or which, before shipment into this state, shall have been, or may thereafter be, labeled, branded, marked, or stamped as Kentucky whisky, product or spirits, shall be deemed compounders, rectifiers, blenders, or adulterators under the provisions of this act, and shall pay the license tax imposed herein on compounders, rectifiers, blenders, or adulterators of such spirts in this state, and shall make the report required herein to the auditor of public accounts. Any corporation, association, company, copartnership, or individual who shall violate this section of this act shall be deemed guilty of a misdemeanor, and fined in any sum not less than $500 nor more than $1,000. Each shipment shall be deemed a separate offense. The Franklin circuit court shall have jurisdiction of all offenses committed under this act. The other sections provide for reports, and impose penalties for delinquencies in reporting or paying.

It is said that the 7th section of the act imposes a license tax upon the business of shipping into the state of goods like those made by the plaintiff in error, when deceptively marked or labeled 'as Kentucky whisky,' or intended to be so deceptively branded or labeled when received in the state; and that such a burden is illegal as a regulation of interstate commerce. But as plaintiff in error concedes that it is not engaged in bringing into the state spirits deceptively marked as a Kentucky product, nor intended to be so branded, and has not been proceeded against under that section, it is clear, the section being a separable provision, that we need not deal with either of these objections, save only as the presence of that section in the act may have a bearing upon the question of discrimination between the domestic and foreign product, which is the real question in the case.

The question upon which the case must turn comes to this: Has the state denied to the plaintiff in error the equal protection of the law, guaranteed by the 14th Amendment, by the imposition of the tax provided under the 1st section of the act? It is urged that that section falls under the condemnation of the provision of the Federal Constitution, because, to quote from the brief of counsel, it 'creates an unjust discrimination against Kentucky rectifiers and blenders included within the provisions of the act, in favor of the three other classes engaged in the same business, to wit: (1) Kentucky distillers who vend unrectified and unblended spirits; (2) distillers of other states or countries who vend in Kentucky unrectified and unblended spirits; and (3) rectifiers and blenders of other states or countries who vend in Kentucky untaxed rectified or blended spirits, in direct competition with the spirits of Kentucky rectifiers or blenders, subject to the tax.'

It has been urged that the tax is not imposed as a license upon the doing of business, but is laid upon the goods produced, and is therefore arbitrary and discriminatory as one not imposed upon all other like kinds of liquor, whether produced in or out of the state. This contention, if good, would only carry the case back to the underlying objection that the classification is arbitrary and unreasonable, and therefore void, as denying the equal protection of the law,—a question which at last must be answered, whether the tax be an occupation or a property tax. But the Kentucky court of appeals has construed the act as not a property tax, but as one imposing a license or occupation tax upon the business. Speaking by Judge Hobson, the Kentucky court of appeals said: 'A license tax is imposed. The amount of the license tax is determined by the amount of spirits produced. The tax is not upon the spirits. It is a license tax upon the business. To hold it a tax upon the property, we must disregard the word 'license' in both the title and the body of the act. That a license tax was contemplated is also shown by § 3, which requires that notice shall be given to the auditor, stating certain facts, before the business shall be engaged in; by § 4, that upon such notice the auditor shall thereupon issue to each applicant a certificate showing that he has complied with the act, and by § 5, that upon the payment of the license tax to the treasurer, the auditor shall issue to such persons authority to continue in the business, if such authority is desired. Under the statute, a man may not legally engage in the business without giving the notice and having the certificate from the auditor. The payment of the tax at the times required by the statute is the condition upon which authority to continue in the business is made to depend. This is manifestly a tax on the business, and not upon the property. The amount of the tax is simply regulated by the amount of the...