Hewin v. City of Atlanta
| Decision Date | 27 January 1905 |
| Citation | 49 S.E. 765,121 Ga. 723 |
| Parties | HEWIN et al. v. CITY OF ATLANTA. |
| Court | Georgia Supreme Court |
Syllabus by the Court.
1. An agreement between a number of merchants and a corporation provided that the latter should print the names of the former in its subscribers' directory, and circulate a number of copies of the book in a named city, and that the merchants should purchase of the corporation a number of so-called trading stamps, to be delivered to customers with their purchases (and not to be otherwise disposed of), and by them preserved and pasted in the books furnished by the corporation until a certain number had been secured, when they should be presented to the corporation in exchange for the customers' choice of certain articles kept in stock by the corporation.
Held: (1) That the furnishing of the trading stamps by a merchant to his customers did not constitute a business separate and distinct from that of selling merchandise, but was merely an instrumentality in or an incident to that business, being in its nature incapable of such separate existence as to constitute of itself a business in either a commercial or a legal sense. (2) That authority in a municipal charter "to make just and proper classification of business for taxation," and "to classify business, and arrange the various business, trades and professions carried on in said city into such classes of subjects for taxation as may be just and proper," did not authorize the passage of an ordinance separating from the business of selling merchandise the incident of furnishing trading stamps for the purpose of increasing the sale of merchandise, and classifying the furnishing of such stamps as a separate business, subject to taxation. (3) That whether the furnishing of the trading stamps be treated as a gift, or as a part of the contract of sale of the merchandise, which is delivered at the time the stamps are furnished, the furnishing of the stamps does not constitute a business subject to be taxed under charter authority to classify and tax business. (4) That the word ""business," in a commercial or legal sense, means something done or carried on for a livelihood, profit, or the like. (5) That even if the General Assembly is authorized to impose a tax upon one who gives away his property, the giving away of property is not a business, within the meaning of a charter provision authorizing the taxation of business.
2. An application for an injunction, filed jointly by the trading stamp company and one or more merchants who are its customers, seeking to enjoin the collection of a tax imposed under an ordinance of the character above referred to, is not bad for misjoinder of parties.
3. Persons against whom an unlawful exaction in the form of a tax is sought to be made may unite in an application for an injunction to restrain the collection of the tax, and are not compelled to pay the same, and bring separate suits against the tax officer for damages.
Error from Superior Court, Fulton County; J. H. Lumpkin, Judge.
Action by S.W. Hewin and the Atlanta Trading Stamp Company against the city of Atlanta. W. D. Payne and the Atlanta Milling Company filed interventions. From an order denying an injunction, Hewin, Payne, and the Atlanta Trading Stamp Company bring error. Reversed.
S. W. Hewin and the Atlanta Trading Stamp Company, a corporation, filed a petition against the city of Atlanta, in which an injunction was prayed to restrain the city from enforcing an ordinance under which a business tax had been levied upon all persons furnishing "trading stamps to their customers." W. D. Payne filed an intervention, and was duly made a party. The Atlanta Milling Company, a corporation, also filed an intervention, and was made a party, but its name was subsequently stricken from the case. The defendant filed both a demurrer and an answer. At the hearing the judge refused the injunction prayed for, and Hewin, Payne, and the Atlanta Trading Stamp Company excepted.
The trading stamp company entered into an agreement with its coplaintiffs and other merchants in the city of Atlanta, the material parts of which are as follows: The trading stamp company agrees The merchant agrees: The nature of the trading stamp business, and the elements which compose it, are fully set forth in the record, and it appears that three distinct factors co-operate to produce the business: (1) The trading stamp company; (2) the retail merchant; and (3) the stamp collector.
The stamp company maintains a store in which is kept a large number of articles commonly used as necessaries and adornments for the house and kitchen. These articles are matters of general commerce. Their sale is not prohibited by the state, nor do they affect the public health or safety. They are not sold by the stamp company. The stamp company issues small books, which contain a directory of the merchants who give its stamps, with the address of the merchant and the character of his stock. These books contain a sufficient number of blank pages in which are pasted the stamps as collected by the retail purchaser. A book is completed when it contains 990 of the stamps. Canvassers are sent out into the city by the stamp company, who invite the proposed retail purchaser to visit the store and inspect the stock of goods carried by the company. When he does this, it is explained to him that, by paying cash for his purchases from any of the merchants whose names are in the book, he will be given a stamp for each 10 cents, 10 stamps for $1, and so on. He is informed that in order to obtain the stamps he will pay no more for the article actually purchased than he would pay if he purchased either on credit, or the same article from a merchant who did not give the stamp; the cash purchase, with a request for the stamp, does not increase the price paid for the article which is the subject-matter of the sale. He is told to paste his stamps in the book given him, and when he has accumulated 990 stamps he will then be free to select any article he may desire in the store of the company. The company explains to the merchant that it will sell him the pad of stamps for $5; that by using the stamps he will increase his cash trade; his business will be advertised by the stamp company through its canvassers, by its books, and by it in the newspapers. He contracts to give the stamps at the ratio of one for each 10 cents only upon cash purchases. He stipulates that he will not give the stamps for credit purchases, nor will he sell the stamp by itself.
Briefly stated, the company sells to the merchant a pad of stamps and, in return, advertises his business. The merchant gives the stamps to his customers for cash purchases. The customer, when he obtains a book, presents it to the trading stamp company, and takes away the article selected by him. There are advantages derived by each of the three parties to this transaction. The pad of stamps cost the company but little for the printing. They are upon common paper, with mucilage applied to the back. From a mere sale of the stamp it derives a large gross profit. Its expenses consist of taxes, license fee, clerk hire, canvassers, salaries, insurance, and the price paid for the articles with which it redeems the book. The merchant, by getting cash, is enabled to discount his own bills by the payment of cash. He is saved the losses which are incident to a credit business, such as failure, expense of litigation incurred in the attempt to collect accounts, bookkeeper's hire, stationery, and so on. But the chief benefit derived by the merchant is the novel way in which his business is advertised. In place of paying a high price for an advertisement in the newspaper, which is read by but a few of the total subscribers, and followed up by a still less number, he pays, by using the trading stamps, only for an advertisement which actually produces a customer with cash. It is a system of advertising which is claimed to involve no waste, and to be direct, effective, and immediate in producing material results. The consumer pays no more for the article purchased when the stamp accompanies it than he does by purchasing the article either for credit, or from a merchant who does not give the stamp. By paying cash he avoids, to a large extent, the evils which are incident to credit purchases. By merely preserving the stamps until his book is completed, he ultimately obtains an article of considerable value. When the cost of conducting the business is deducted, the trading stamp company realizes whatever profit is derived from the sale of the stamps...
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