J. C. Penney Company v. Diefendorf

• Citation: 54 Idaho 374,32 P.2d 784
• Decision Date: 28 April 1934
• Docket Number: 6092
• Parties: J. C. PENNEY COMPANY, a Corporation, Appellant, v. BEN DIEFENDORF, Commissioner of Finance of the State of Idaho, and B. H. MILLER, Attorney General of the State of Idaho, Respondents
• Court: Idaho Supreme Court

32 P.2d 784

54 Idaho 374

J. C. PENNEY COMPANY, a Corporation, Appellant, v. BEN DIEFENDORF, Commissioner of Finance of the State of Idaho, and B. H. MILLER, Attorney General of the State of Idaho, Respondents

No. 6092

Supreme Court of Idaho

April 28, 1934

"CHAIN STORE TAX"-CONSTITUTIONAL LAW-EQUAL PROTECTION-DISCRIMINATION.

1. Court must sustain classification adopted by legislature in levying excise taxes, if there are substantial differences between occupations separately classified (Const. U.S Amend. 14).

2. If reasonably possible, court must adopt such construction of statute as will sustain its constitutionality.

3. Provision exempting gasoline filling stations and distributing plants from progressively graduated license tax on multiple stores operating under single management held not violative of constitutional provisions requiring due process uniformity, and equal protection (Laws 1933, chap. 113, secs 7, 8; Const. Idaho, art. 7, sec. 5; art. 1, sec. 13; Const. U.S. , Amend. 14; I. C. A., sec. 70-113).

4. Provision permitting single owner of multiple stores to offset taxes paid upon real property used in connection with its business against progressively graduated excise tax on chain store held not violative of constitutional provision requiring uniformity (Laws 1933, chap. 113, sec. 5-a; Const Idaho, art. 7, secs. 2, 5).

5. License or excise tax is not tax on "property" within constitutional provisions requiring property to be taxed uniformly by value (Const. Idaho, art. 7, secs. 2, 5).

6. Provision of Chain Store Tax Law, permitting taxpayer to offset taxes paid by it upon real property or improvements thereon owned and used in connection with its business, held not void as ambiguous or uncertain (Laws 1933, chap. 113, sec. 5-A).

7. Commissioner of finance in case of reasonable doubt as to taxpayer's right to offset payment of real property taxes against chain store license tax may refuse to allow offset or accept official receipts, and thereby permit court test (Laws 1933, chap. 113, sec. 5-A).

8. Statute imposing progressively graduated license fees on owners of multiple stores, with maximum of $500 and with increased fee on additional stores covering each store in chain, held not void as imposing unreasonable classification or as retroactive or confiscatory (Laws 1933, chap. 113, sec. 5; Const. Idaho, art. 2; art. 7, sec. 5; Const. U.S. , Amend. 14).

9. State has right to exclude certain kinds of businesses from taxation and to tax other businesses more heavily, provided all within a certain class receive same treatment (Const. U.S. , Amend. 14).

10. Fourteenth Amendment merely requires that same means and methods be applied impartially to all constituents in each class (Const. U.S. , Amend. 14).

11. Facts alleged in complaint must be taken as true on appeal where case was decided below on demurrer to complaint.

12. Earnings of all stores conducted in state under one management as single business must be used as basis for consideration whether progressively graduated tax on stores was confiscatory as to that business (Const. U.S. , Amend. 14).

13. Whether excise tax is unreasonable or confiscatory depends on its operation on class taxed, and not upon isolated cases (Const. U.S. , Amend. 14).

14. Allegations of complaint, in suit to enjoin enforcement of tax statute, that tax is excessive, unreasonable, confiscatory, or arbitrary, are merely conclusions of law not admitted by demurrer.

15. Plaintiff in suit to enjoin enforcement of tax statute must allege facts, values, and amounts to show tax is excessive, unreasonable, or confiscatory.

APPEAL from the District Court of the Third Judicial District, for Ada County. Hon. Charles E. Winstead, Judge.

Action attacking the constitutionality of chapter 113, Idaho Session Laws, 1933. From judgment dismissing plaintiff's complaint, upon failure to further plead after the court had sustained defendants' general demurrer to the complaint, plaintiff appeals. Affirmed.

Judgment affirmed, with costs awarded to respondents. Petition for rehearing denied.

Hoyt E. Ray and Frawley and Barnes, for Appellant.

The court erred in sustaining the demurrer and in failing to hold chapter 113 unconstitutional because of the proviso in sections 7 and 8 of said act exempting gasoline filling stations. (Chaddock v. Day, 75 Mich. 527, 42 N.W. 977, 13 Am. St. 468, 4 L. R. A. 809; Crom v. Frahm, 33 Idaho 314, 193 P. 1013; Diefendorf v. Gallet, 51 Idaho 619, 10 P.2d 307; Idaho Const., sec. 5, art. 7, sec. 13, art. 1; Liggett Co. v. Lee, 288 U.S. 517, 53 S.Ct. 481, 77 L.Ed. 929, 85 A. L. R. 699; Louisville G. & E. Co. v. Coleman, 277 U.S. 32, 48 S.Ct. 423, 72 L.Ed. 770; State Board of Tax Commrs. v. Jackson, 283 U.S. 527, 51 S.Ct. 540, 75 L.Ed. 1248, 73 A. L. R. 1464.)

The court erred in sustaining the demurrer and in failing to hold chapter 113 unconstitutional because of the real estate offset provided in section 5-A of said act. (Albert v. Gibson, 141 Mich. 698, 105 N.W. 19; City of Seattle v. Dencker, 58 Wash. 501, 108 P. 1086, 137 Am. St. 1076, 28 L. R. A., N. S., 446; City of Covington v. Dahlheim, 126 Ky. 26, 102 S.W. 829; City of Danville v. Quaker Maid Inc., 211 Ky. 677, 278 S.W. 98, 43 A. L. R. 590.)

The court erred in sustaining the demurrer and in failing to hold chapter 113 unconstitutional because of the retroactive and confiscatory schedule of fees in section 5 of said act. ( F. W. Woolworth Co. v. Harrison, 172 Ga. 179, 156 S.E. 904; Great Atlantic & Pacific Tea Co. v. Doughton, 196 N.C. 145, 144 S.E. 701; Great Atlantic & Pacific Tea Co. v. Maxwell, 199 N.C. 433, 154 S.E. 838.)

B. H. Miller, Attorney General, Leo M. Bresnahan, Assistant Attorney General, and Richards and Haga, for Respondents.

The provisions of sections 7 and 8 of chapter 113, Laws 1933, excluding gasoline filling stations, are not in violation of any constitutional provisions, and as to these provisions the demurrer was properly sustained. (Southern Grocery Stores v. South Carolina Tax Com., (S. C.) 55 F.2d 931; Wadhams Oil Co. v. State, 210 Wis. 448, 245 N.W. 646, (on rehearing) 210 Wis. 457, 246 N.W. 687.)

The provisions of section 5-A of said act providing for an offset of the amount paid in real estate taxes are not in violation of any constitutional provisions, and are within the plenary power of the state in taxation matters. (Moore v. State Board of Charities, etc., 239 Ky. 729, 40 S.W.2d 349; Ludlow-Saylor Wire Co. v. Wallbrinck, 275 Mo. 339, 205 S.W. 196; Diefendorf v. Gallet, 51 Idaho 619, 10 P.2d 307.)

The schedule of fees in section 5 of said act is neither confiscatory nor retroactive, and does not violate any constitutional provisions. (State Board of Tax Com. of Indiana v. Jackson, 283 U.S. 527, 51 S.Ct. 540, 75 L.Ed. 1248, 73 A. L. R. 1464; Penny Stores, Inc., v. Mitchell, (Miss.) 59 F.2d 789; Great Atlantic & Pacific Tea Co. v. Maxwell, 199 N.C. 433, 154 S.E. 838, affirmed 284 U.S. 575, 52 S.Ct. 26, 76 L.Ed. 500.)

WERNETTE, J. Budge, C. J., and Givens, Morgan and Holden, JJ., concur.

OPINION

WERNETTE, J.

Appellant instituted this action to enjoin the enforcement of chapter 113, Idaho Session Laws, 1933, commonly known as the "Chain Store Tax Law." In its complaint it challenged the constitutionality of the act, alleging that it not only violates the Fourteenth Amendment to the federal Constitution, but also various provisions of the Idaho Constitution.

Respondents filed a general and special demurrer to appellant's complaint, which general demurrer was sustained by the lower court on the ground that the complaint failed to state facts sufficient to constitute a cause of action. Appellant refusing to plead further, judgment was entered by the lower court dismissing the action, from which this appeal is prosecuted.

Appellant is a foreign corporation authorized to do business within the state of Idaho. During the time in question it was engaged in the business of selling dry-goods, clothing and general merchandise at retail in a chain of thirty stores located in thirty cities in the state. The business so owned and conducted by appellant was under one management, control and superintendence. It had invested in business in the state of Idaho the sum of $ 650,985.24, and during the year of 1932 the annual sales of the business for thirty-one stores within the state, one of which had been closed at the time of the institution of this action, totalled the sum of $ 2,589,137.79. The appellant, in 1932, had 364 employees within the state and a pay-roll of $ 222,665.72. In only three instances did it own the buildings in which it conducted its stores, while the other twenty-eight stores were conducted in rented properties, it having paid rental for the same, during the year of 1932, the sum of $ 62,743.23.

The act under consideration, in general, provides for the requiring of licenses for the operation, maintenance or establishment of stores within the state, prescribing the license and filing fees to be paid therefor, and providing that there may be offset against such license fees all taxes paid on real property or improvements thereon in the state of Idaho owned and used in connection with the business of the person or company conducting the same, upon which is imposed the license fees under the act.

The appellant particularly attacks the constitutionality of the act with reference to sections 5, 5-A, 7 and 8, which read as follows:

"Sec 5. ANNUAL LICENSE FEES.--Every person, firm, corporation association or co-partnership opening, establishing, operating or maintaining one or more stores or mercantile establishments within this state, under the same general management, supervision or ownership, shall pay the license fees hereinafter...