Great A. & P. Tea Co. v. Kentucky Tax Com'n.
| Decision Date | 21 March 1939 |
| Citation | 278 Ky. 367 |
| Court | United States State Supreme Court — District of Kentucky |
| Parties | Great Atlantic & Pacific Tea Co. v. Kentucky Tax Commission et al. |
3. Constitutional Law; Eminent Domain; Licenses. — Constitutional provision authorizing Legislature to impose occupational taxes for purpose of raising revenue, to tax some occupations and exempt others, and to impose different rates of taxation on different occupations must be read in connection with the Bill of Rights, and a license tax which amounts in effect to confiscation of taxpayer's property or suppression of a legitimate occupation is forbidden (Constitution, secs. 1, 2, 13, 26, 59, 181).
4. Constitutional Law. — The state may, under the police power, regulate occupations that are affected with a public interest, but the power must be exercised so as not to be unduly oppressive.
5. Licenses. — Only certain occupations which are subject to regulation under the police power may be taxed to the point of prohibition.
6. Licenses. — Constitutional provision requiring taxes to be equal and uniform applies only to direct taxation of property, yet principle of equality and uniformity must be observed in imposing license and occupation taxes (Constitution, sec. 171).
7. Taxation. — Constitutional requirement that taxes be uniform does not prevent classification of businesses, trades, professions or occupations and taxation of different classes at different rates, but tax must be uniform on all subjects within the class to which it is applied, and classification must be made according to natural and well-recognized lines of distinction (Constitution, sec. 171).
8. Taxation. — The difference on which a classification for tax purposes is based must be substantial (Constitution, sec. 171).
9. Taxation. — Mere differences in details in the manner of conducting a business are not sufficient to justify classification for purposes of taxation (Constitution, secs. 171, 181).
10. Licenses. — The principle of equality and uniformity of taxation should be jealously preserved as a safeguard for all alike and only where the public welfare is clearly involved should the power to tax be exercised for purpose of regulating or prohibiting an occupation under the police power (Constitution, sec. 171).
11. Constitutional Law; Licenses. — Provision in chain store tax act, enacting as a purely revenue measure, classifying merchants for purpose of imposing an annual license fee into groups based on number of stores operated, without respect to volume of business and bearing no relation to the advantages alleged to attach to multiple store operation, such as abundant capital, etc., is unconstitutional because unreasonable and arbitrary in classification (Ky. Stats. 1936, sec. 4202a-17; Constitution, secs. 1, 2, 13, 26, 59, 171, 181).
Appeal from Franklin Circuit Court.
CARROLL & McELWAIN for appellant.
HUBERT MEREDITH, Attorney General, and A.E. FUNK, Assistant Attorney General, for appellees.
Before William B. Ardery, Judge.
Reversing.
In this case we are called upon to determine whether Chapter 26 of the Acts of the Extraordinary Session of the General Assembly of 1934, as amended in 1936 (3d Ex. Sess. c. 11), is valid. The Act imposes a license tax on retail merchants, graduated according to the number of stores operated in this state. Section 5 of the 1934 Act divided merchants into five classes for the purpose of assessing annual license fees and provided that the fees should be as follows:
At the Third Extraordinary Session of the General Assembly of 1936, Section 5 of the 1934 Act was repealed and reenacted (Kentucky Statutes 1936, Section 4202a-17) so as to read as follows:
"(6) On all chains of more than fifty, seven thousand three hundred and fifty-two dollars ($7,352.00) plus three hundred dollars ($300.00) for each said store in excess of fifty." Section 1.
The Act as amended is now Section 4202a-13 to and including Section 4202a-24, Carroll's Kentucky Statutes, 1936 Edition. By Chapter 66, Acts of 1938, the Act was further amended by eliminating the tax of $2 on single stores, but this amendment has no bearing on this appeal.
On July 1, 1936, the appellant owned and operated 200 stores in Kentucky, and it paid, under protest, to the Auditor of Public Accounts, $52,352, the amount of the tax due under the Act as amended. On November 6, 1936, it brought an action in the Franklin circuit court under the Declaratory Judgment Act, Section 639a — 1 et seq., Civil Code of Practice, against the members of the Kentucky Tax Commission, the Attorney General, and the Auditor of Public Accounts, asking that Section 5 of the 1934 Act, Section 1 of the 1936 Act, be declared unconstitutional and void, and that an order be directed to the Auditor of Public Accounts requiring him to issue his warrant on the State Treasury in favor of the plaintiff in the sum of $52,352.
The petition was in five paragraphs. In paragraph 1 the plaintiff alleged that it was a merchant as defined in Section 1 of the Act of 1934 (Kentucky Statutes 1936, Section 4202a-13), and was engaged in the business of selling goods, wares, and merchandise, and particularly food stuffs, in various stores in the state of Kentucky, and that on July 1, 1936, it was the owner and operator of 200 stores. It alleged that there were other merchants in the state of Kentucky having larger gross sales and gross receipts than the plaintiff, and, also having larger net receipts and net income than the plaintiff, who, by virtue of the fact that they owned and operated only one store within the state of Kentucky, paid an annual license tax under the act of only $2; that Section 5 of the Act of 1934, as amended by Section 1 of the Act of 1936, constituted an unreasonable, arbitrary, and unlawful classification and discrimination in favor of those merchants operating a single store or operating only a few stores; that the classification of merchants, as defined in the Act, into the five groups named therein was arbitrary, unreasonable, and capricious; and that Section 5 of the Act as amended was unconstitutional and in contravention of the provisions of the Constitution of the state of Kentucky, and particularly Sections 1, 2, 13, and 26 of the Bill of Rights thereof, and also Sections 59, 171 and 181a thereof. Paragraph 2 alleged that Section 5 of the Act as amended is unconstitutional in that the rates of taxation provided therein are arbitrary and unreasonable and unjustly discriminatory against the appellant as a merchant owning and operating more than 50 stores in favor of other merchants owning and operating a single store or less than 50 stores. Paragraph 3 alleged that Sections 5 and 12 of the Act as amended (Kentucky Statutes 1936, Sections 4202a-17, 4202a-24) are unconstitutional in that the taxes therein provided for are unreasonable, arbitrary, and confiscatory as applied to the plaintiff and all other merchants owning and operating more than 50 stores within the state of Kentucky. Paragraph 4 charged that Section 2 of the amendatory act, repealing the credits theretofore allowable against the merchants license tax, was invalid as constituting double taxation against the appellant. Paragraph 5 sought the recovery of the sum of $52,352 which had been paid by the plaintiff on July 1, 1936.
On March 11, 1937, an amended petition was filed in which it was alleged that the plaintiff had operated its stores in the state of Kentucky for the fiscal year ending February 28, 1937...
To continue reading
Request your trial