Division of Alcoholic Beverages and Tobacco, Dept. of Business Regulation v. McKesson Corp.

• Decision Date: 18 February 1988
• Docket Number: No. 70368,70368
• Citation: 524 So.2d 1000,13 Fla. L. Weekly 120
• Parties: 13 Fla. L. Weekly 120 DIVISION OF ALCOHOLIC BEVERAGES AND TOBACCO, DEPARTMENT OF BUSINESS REGULATION, and Office of the Comptroller, State of Florida, et al., Appellants/Cross-Appellees, v. McKESSON CORPORATION, et al., Appellees/Cross-Appellants.
• Court: Florida Supreme Court

Page 1000

524 So.2d 1000

13 Fla. L. Weekly 120

DIVISION OF ALCOHOLIC BEVERAGES AND TOBACCO, DEPARTMENT OF BUSINESS REGULATION, and Office of the Comptroller, State of Florida, et al., Appellants/Cross-Appellees, v. McKESSON CORPORATION, et al., Appellees/Cross-Appellants.

No. 70368.

Supreme Court of Florida.

Feb. 18, 1988.

Rehearing Denied May 2, 1988.

Robert A. Butterworth, Atty. Gen. and Daniel C. Brown, Asst. Atty. Gen., Tax Section, Tallahassee, for the Div. of Alcoholic Beverages and Tobacco, Dept. of Business Regulation.

John K. Aurell and Ricky L. Polston of Aurell, Fons, Radey & Hinkle, Tallahassee, and Howell Ferguson, Tallahassee, for Jacquin-Florida Distilling Co., Inc.

Bruce Rogow, Fort Lauderdale, and M. Stephen Turner, Tallahassee, for Todhunter Intern., Inc.

David G. Robertson and Neil S. Berinhout of Morrison & Foerster, San Francisco, Cal., and Chris W. Altenbernd and Charles A. Wachter of Fowler, White, Gillen, Boggs, Villareal and Banker, P.A., Tampa, for McKesson Corp.

Harold F.X. Purnell of Oertel & Hoffman, P.A., Tallahassee, for Tampa Crown Distributors, Inc. and Florida Beverage Corp.

Barry R. Davidson and Cheryl A. Bell of Steel, Hector & Davis, Miami, for Brown-Forman Corp.

EHRLICH, Justice.

On June 29, 1984, the United States Supreme Court decided the case of Bacchus Imports Ltd. v. Dias, 468 U.S. 263, 104 S.Ct. 3049, 82 L.Ed.2d 200 (1984). In Bacchus, the Court struck down a Hawaii alcoholic beverage excise tax which exempted okolehao, a brandy distilled from the root Three separate complaints were filed against the Division of Alcoholic Beverages and Tobacco (DABT) challenging the revised tax preference scheme: one by Tampa Crown Distributors, Inc. and Florida Beverage Corporation, licensed wholesale distributors of alcoholic beverages in Florida, one by McKesson Corporation, also a licensed wholesale distributor and the third by Brown-Forman Corporation, a manufacturer of wine coolers in California who sells its products to wholesalers in Florida for resale in the state. Tampa Crown, Florida Beverage and McKesson challenge the preference and disqualification provisions of both sections 564.06 and 565.12. Brown-Forman challenges only those of section 564.06. The primary claim in all three complaints was that the preference and disqualification provisions under the new tax scheme discriminated in favor of local commerce and against interstate commerce contrary to the mandates of Bacchus.

of an indigenous shrub of Hawaii, and fruit wine manufactured in the state as being violative of the Commerce Clause, concluding that the exemption had both the purpose and effect of discriminating in favor of locally produced products. At the time of the Bacchus decision, sections 564.06 and 565.12, Florida Statutes (Supp.1984), granted tax preferred treatment to alcoholic beverages made from certain base agricultural crops grown in Florida and manufactured and bottled in Florida. In response to the Bacchus decision, the Florida Legislature amended sections 564.06 and 565.12 in Chapters 85-203 and 85-204, Laws of Florida. The amended provisions, as codified in sections 564.06 and 565.12 Florida Statutes (1985), among other things, grant exemptions or tax preferences to wines and distilled spirits manufactured from citrus, sugar cane and certain grape species, all of which will grow in Florida, or from by-products or concentrates thereof, no matter where the point of manufacture and disallow the tax preference to eligible alcoholic beverages under certain circumstances.

Jacquin-Florida Distilling and Todhunter International, manufacturers who benefit from the challenged preference scheme, intervened as defendants. The DABT raised a number of defenses to each complaint, including a claim that each plaintiff lacked standing to challenge the provisions in question. Tampa Crown/Florida Beverage and Brown-Forman filed motions for summary judgment and supporting affidavits. McKesson filed a motion for partial summary judgment and preliminary injunction. The trial court entered final summary judgments in favor of Tampa Crown/Florida Beverage and Brown-Forman and entered a partial summary judgment and preliminary injunction in favor of McKesson. In all three judgments, the trial judge found:

These amendments were an effort by the legislature to overcome the constitutional problems in the Florida Alcoholic Beverages laws resulting from the Bacchus decision. This Court, having reviewed the challenged amendments finds, however, that this legislation failed to surmount the constitutional violations addressed in Bacchus.

The rulings were prospective in nature.

The DABT appealed those portions of the judgements finding the tax preference scheme unconstitutional. McKesson and Tampa Crown filed cross-appeals challenging the prospective nature of the rulings and the denial of their claims for a refund. The District Court consolidated the cases and certified the cause to this Court as involving a question of great public importance requiring immediate resolution. We have jurisdiction, article V, section 3(b)(5), Florida Constitution, and affirm.

First we address the DABT's claim that the appellees lack standing to challenge the "disqualification provisions" because none of them have "alleged or proved any harm to their business flowing from those provisions." Each of the appellees claims that the overall tax preference scheme for alcoholic beverages, which is made up of both the exemption provisions and the disqualification provision of sections 564.06 and 565.12, discriminates against interstate commerce and thus, has an adverse competitive impact on their

                businesses.  It is clear, under the Bacchus decision, that, as wholesale distributors and manufacturers of alcoholic beverages who are liable for taxes under Florida's alcoholic beverage tax scheme, the appellees have standing to litigate whether the allegedly discriminatory scheme has had an adverse competitive impact on their businesses.  104 S.Ct. at 3053;   see also Eastern Air Lines, Inc. v. Department of Revenue, 455 So.2d 311, 317 (Fla.1984).  Further, we agree that the appellees clearly have standing to assert their constitutional right to engage in interstate commerce free of burdens violative of the commerce clause.   See Boston Stock Exchange v. State Tax Commission, 429 U.S. 318, 320 n. 3, 97 S.Ct. 599, 602 n. 3, 50 L.Ed.2d 514 (1977);   Mapco Inc. v. Grunder, 470 F.Supp. 401, 405 (N.D.Ohio 1979)
                

COMMERCE CLAUSE

We next address the merits of the appellees' challenge under the Commerce Clause of the United States Constitution. The United States Supreme Court employs a two-tiered approach to analyzing state economic regulation under the Commerce Clause. Brown-Forman Distillers Corp. v. New York State Liquor Authority, 476 U.S. 573, 106 S.Ct. 2080, 90 L.Ed.2d 552 (1986). This approach was recently explained by the Court in Brown-Forman as follows:

When a state statute directly regulates or discriminates against interstate commerce, or when its effect is to favor in-state economic interests over out-of-state interests, we have generally struck down the statute without further inquiry. See, e.g., Philadelphia v. New Jersey, 437 U.S. 617, 98 S.Ct. 2531, 57 L.Ed.2d 475 (1978); Shafer v. Farmers Grain Co., 268 U.S. 189, 45 S.Ct. 481, 69 L.Ed. 909 (1925); Edgar v. MITE Corp., 457 U.S. 624, 640-43, 102 S.Ct. 2629, 2639-41, 73 L.Ed.2d 269 (1982) (plurality opinion). When, however, a statute has only indirect effects on interstate commerce and regulates evenhandedly, we have examined whether the State's interest is legitimate and whether the burden on interstate commerce clearly exceeds the local benefits. Pike v. Bruce Church, Inc., 397 U.S. 137, 142, 90 S.Ct. 844, 847, 25 L.Ed.2d 174 (1970). We have also recognized that there is no clear line separating the category of state regulation that is virtually per se invalid under the Commerce Clause, and the category subject to the Pike v. Bruce Church balancing approach. In either situation the critical consideration is the overall effect of the statute on both local and interstate activity. See Raymond Motor Transportation, Inc. v. Rice, 434 U.S. 429, 440-441, 98 S.Ct. 787, 793-94, 54 L.Ed.2d 664 (1978).

106 S.Ct. at 2084-85.

The DABT argues that because any effect which the challenged tax preference scheme might have on interstate commerce is indirect and the tax is applied evenhandedly, the Pike balancing approach must be employed in this case. The DABT maintains that under that approach, the trial court erred in finding the challenged tax scheme violative of the Commerce Clause. The appellees, on the other hand, take the position that because the challenged provisions have both the purpose and effect of discriminating against interstate commerce, they were properly struck down by the trial court as "simple economic protectionism." They argue in the alternative that the preference scheme cannot withstand scrutiny under the Pike balancing test. After reviewing the challenged provisions, in light of the record in this case, we agree with the appellees that, even under the Pike balancing test, summary judgment was properly entered in their favor. ¹

Section 564.06, Florida Statutes (1985) provides in pertinent part:

Excise taxes on wines and beverages; exemptions.--

(1) As to beverages including wines, except natural sparkling wines and malt beverages, containing more than 1 percent alcohol by weight and less than 14 (2) As to all wines, except natural sparkling wines, containing more than 1 percent alcohol by weight and less than 14 percent alcohol by weight, of which the alcoholic content is manufactured exclusively from citrus fruits or varieties of the species Vitis rotundifolia, Vitis aestivalis ssp. simpsoni, Vitis aestivalis ssp. smalliana, Vitis shuttleworthii, Vitis munsoniana, or Vitis berlandieri, or from concentrates thereof, except for flavoring extracts, and upon all other...