Jenkins v. Ewin

• Decision Date: 09 March 1872
• Citation: 55 Tenn. 456
• Parties: R. P. JENKINS v. W. G. EWIN, Clerk.
• Court: Tennessee Supreme Court

55 Tenn. 456

R. P. JENKINS

v.W. G. EWIN, Clerk.

Supreme Court of Tennessee.

Mar. 9, 1872.

FROM DAVIDSON.

Appeal by plaintiffs from the judgment of the Circuit Court at its January Term, 1872, on an agreed case before J. C. GUILD, J.

The agreed case was as follows:

1. That the plaintiff is a wholesale druggist, doing business at Nashville, Tennessee, and has been during the time for which the tax in question was assessed and collected.

2. That $20,000 was the cash value of the largest amount of goods which the plaintiff had in stock at any one time, subject to taxation, during the year commencing on the 18th day of January, 1871, and ending the 18th day of January, 1872.

3. That under the acts of the Legislature of 1869--70, ch. 45, secs. 1-10, and act of 1870-71, ch. 51, sec. 2, W. G. Ewin, Clerk of the County Court of Davidson county, Tennessee, assessed and collected from the plaintiff $240 tax for the State, of which $120 was collected as ad valorem tax on capital stock, and $120 was collected as a license or privilege tax as a merchant, for the year commencing on the 18th day of January, 1871, and ending on the 18th day of January, 1872, and the said Ewin collected $220 for the county of Davidson for the same year, of which six mills on the dollar, or $120, was collected as a license or privilege tax as a merchant, and five mills on the dollar, or $100, was collected as the ad valorem tax on capital stock.

4. That the plaintiff paid this tax under protest, alleging it was not lawful for the said Ewin, clerk, etc., to collect this tax, and this action is brought to recover the amounts so paid by the plaintiff.

5. That if the court should be of opinion that said tax was illegally collected from the plaintiff, then judgment shall be for the plaintiff, otherwise for the defendant.

Jarnagin & Frazier, of Memphis, being employed for the State in a case at Memphis involving the same questions, filed the following brief:

Under the act of 24th January, 1871, Shankland, p. 210, the defendant claims the right to assess a tax upon the capital of the petitioner, and also requires the petitioner to pay for a license as a merchant. He has paid the ad valorem tax on his capital, but refuses to pay for a license, upon the grounds that the Legislature has no power to require it--that it is a double tax; that it is an assumption of power to regulate commerce between the United States and foreign countries, and between the States.

I. The proceedings are in conformity with the law.

II. The “manner” of taxing is in conformity with long established usage.

By the act of 1803, ch. 3, sec. 4, merchants and peddlers were required to obtain license.

By the Constitution of 1834, the Legislature had power “to tax merchants, peddlers, and privileges, in such manner as they may from time to time direct.”

By act of 1835, ch. 13, sec. 5, Car. & Nic., p. 604, commission merchants were taxed $150, and retail merchants had to pay the same, unless they would make a statement on oath, showing stock on hand “at the invoice cost where purchased.” Both had to obtain a license.

Sec. 7 shows the graduated scale upon which the cost of the license was predicated.

Sec. 5 was construed in State v. Smith, 5 Hum., 395, defines merchant.

Art. 2, sec. 28, Constitution, was construed in Mabry v. Tarver, 1 Hum., 94. Vide, French v. Baker, 4 Head, 193; Mays v. Erwin, 8 Hum., 290; City of Nashville v. Althorp, 5 Col., 554.

Under Code, 544-5, a peddler who sold articles manufactured out of the State, had to pay as a merchant, although he had a peddler's license: Naff v. Russell, 2 Col., 36; State v. Crawford, 2 Head, 460.

The power of the Legislature is without restriction: Adams v. Mayor, etc., 2 Head, 365.

By act of 18th January, 1870, sec. 202, the tax upon sales and privileges of merchandizing was abolished. By the new mode the cash capital invested was taken as the basis for an ad valorem tax, thus reaching the merchant's property directly, as land or other property.

Merchandizing, by the law, is a privilege; and the largest amount of goods on hand at any one time in the year, is the basis for fixing the cost of the license.

The mode of assessment is equal, and applies to all merchants. The petitioners must deny that the Constitution gives the power to create and regulate and tax a privilege, or if given, it is nullified by the provision which prohibits one species of property from being taxed higher than another.

This erroneously assumes that a privilege is property. When a license has been issued, it has some resemblance to a franchise, but it is not one. It is a simple authority or permit to do what can not be done without it, for the time specified. The capital of the citizen is taxed without reference to its investment. If he chooses to invest in merchandizing, he must pay for the privilege. If he is already engaged in that business, he must give in all his other property and pay the ad valorem tax, and then go to the privilege tax collector and show how much he has in merchandizing. The two lists bring him to the same basis as other citizens, upon the question of mere property.

Paying for a license is not, therefore, a double tax. The cost of the license may be greater or less, it can hardly be the same. The rate per hundred dollars is restricted in one case to the ad valorem tax, by reason of the provision inserted in the new Constitution: “The portion of a merchant's capital used in the purchase of merchandize sold by him to non-residents and sent beyond the State, shall not be taxed at a rate higher than the ad valorem tax on property.” Sec. 28, 2d clause, art. 2, Constitution.

By act of 24th January, 1871, the license tax can be no more. The law and Constitution together fix the amounts. Previous to the act of 18th January, 1870, a per cent. upon sales had been collected from merchants; and by that act, a specific tax upon each additional $10,000 capital used. Either of these modes might have taxed the merchant's capital higher than other property; so it was provided in the new Constitution that capital used in purchasing goods sold actually to non-residents, should not be taxed at a higher rate than the ad valorem tax. Hence, the act of 24th January, 1871, changed the manner of assessing. The greatest stock of goods on hand is the calculus by which the amount of the license tax is made certain. It is a license, and not a property, tax.

III. Does the tax for the license contravene the Constiution of the United States?

Not, unless it shall regulate or control commerce, foreign or inter-state.

Foreign goods in original packages, held by the importer, can not be subjected to such a tax as this: Brown v. State of Maryland, 12 Wheat, 419.

It does not appear that any such goods are involved. Nor does it appear that the goods have been brought from another State. It is wholly immaterial, as Congress has not legislated upon inter-state commerce.

In same case, p. 449 (273 in Curtis's Ed.), Chief Justice Marshall says: “It may be proper to add, that we suppose the principles laid down in this case apply equally to importations from a sister State. We do not mean to give any opinion on a tax discriminating between foreign and domestic articles.”

This was not the point in judgment.

In the license cases, 5 How., 594 (p. 537, C. Ed.), Justice McLean dissented from the dictum, and gives good reasons for the contrary opinion.

Justice Catron said, p. 609 (553, C. Ed.): “Until such regulation is made by Congress, the States may exercise the power within their respective limits.”

This power of taxing by a license has always been exercised in Tennessee.

The goods, then, which are used as a basis for fixing the amount of the license tax, have entered into the general stock of goods or property of the country, and are not protected by any notion of foreign or inter-state commerce: 12 Wheat, 419; 8 Wallace.

Generally, there is no restriction on the exercise of this power. It has been exercised in a variety of methods. Standing a jack is a privilege (Cate v. State, 3 Sneed, 120); and the price of a season has been made the price of the license. The value of the jack is subject to the ad valorem tax: Act February 25, 1870, Shankland, p. 205.

It may be conceded that the license tax is a tax upon the property, in the sense of Brown v. State of Maryland, 12 Wheat; and in the license cases, 5 How. (p. 547, C. Ed.), where Judge Catron says: “1. That a tax on the importer is a tax on the import;” and yet it is plain that operating the jack in this particular way is a privilege, and that the exercise of it is the occasion of the assessment.

In this case the largest stock on any one day is the incident upon which the amount of license tax is determined. The specific articles of that day's stock are not the only merchandize affected by it. A dozen stocks may be sold during the year. The aggregate of goods sold may be ten times the amount of the stock on hand when the tax is fixed. The aggregate of sales may be ten times as much as the capital. There is no limit by law upon the merchant. He has the privilege of selling what he can, for which he is now required only to pay sixty cents per hundred dollars of the value of the largest stock on hand any one day during the year. In the exercise of his privilege, he may buy on a credit exclusively--having no capital of his own. It is not true, therefore, in any sense, that it is a double tax.

It has been suggested that the new provision in the Constitution about capital used in buying goods which are sold to non-residents, makes this assessment illegal, because it does not discriminate or allow an exemption. The ad valorem tax is sixty cents, and that is the assessment on these merchants' capital. This provision does not affect the case.

H. E. JONES, for the plaintiff, said:

1. “The Merchants Tax Law” is in violation of the Constitution of the United States, in that it levies a tax, indiscriminately, on imports,...