Kroger Co. v. Schneider

• Decision Date: 16 November 1965
• Citation: 212 N.E.2d 76,4 Ohio App.2d 226
• Parties: , 33 O.O.2d 276 The KROGER CO. et al., Appellees, v. SCHNEIDER, Tax Commr., Appellant.
• Court: Ohio Court of Appeals

Page 226

4 Ohio App.2d 226

212 N.E.2d 76, 33 O.O.2d 276

The KROGER CO. et al., Appellees, v. SCHNEIDER, Tax Commr., Appellant.

Court of Appeals of Ohio, Tenth District, Franklin County.

Nov. 16, 1965.

George, Greek, King & McMahon and Kiehner Johnson, Columbus, for appellees.

William B. Saxbe, Atty. Gen., and Edgar L. Lindley, Columbus, for appellant.

BRYANT, Presiding Judge.

This is an appeal on questions of law. The Kroger Company, The Great Atlantic & Pacific Tea Company, Inc., and Colonial Stores, Inc. (Albers Super Markets), corporations which operate chains of grocery supermarkets, food processing and atorage facilities in many taxing districts in Ohio and elsewhere, brought suit in the court below for a declaratory judgment that Section 5711.22(B), Revised Code, is unconstitutional because it denies them the equal protection of the law guaranteed by the state and federal Constitutions.

These three corporations, appellees herein, were plaintiffs below. Louis J. Schneider, Jr., who was, as Tax Commissioner of Ohio, defendant below, has since assumed the office of a judge of the Supreme Court of Ohio. While he is the nominal appellant, we will judicially notice, without objection, that Gerald A. Donahue assumed office as Tax Commissioner of Ohio on January 4, 1965, and is appellant herein.

In the amended petition, it was alleged that the three plaintiffs are engaged in both interstate and intrastate commerce in the manufacture, processing, purchase, distribution and sale to ultimate consumers and not for resale of 'food, household goods and other merchandise.' It was also alleged that plaintiffs maintain and operate 'manufacturing and processing plants, warehouses, business offices, retail food stores and supermarkets' in this state. It was alleged that the plaintiffs have such facilities in Ohio located as follows: Kroger, 183 different taxing districts; the A & P, 198 different taxing districts; and Colonial Stores, 53 different taxing districts.

Plaintiffs further allege that under Section 5711.13, Revised Code, they are required to file a combined return listing taxable personal property each year with the Tax Commissioner of Ohio.

Section 5711.22(B), Revised Code (hereinafter called subdivision (B)), as amended effective December 9, 1963 (130 Ohio Laws 1312, 1313, and 1853), which it is alleged is unconstitutional, reads as follows:

'Personal property of a merchant which is sold or held for sale for the use or consumption by the purchaser from the merchant, and not for resale, and which is required to be returned on the average basis as provided in section 5711.15 of the Revised Code, and personal property as defined in section 5701.03 of the Revised Code used in the business of preparing, serving, and selling food in the form of meals suitable for immediate consumption by the purchaser, shall be listed and assessed as follows:

'(1) In the return filed for the year 1964, the first one hundred thousand dollars thereof at sixty-six per cent, and the amount thereof over one hundred thousand dollars at seventy per cent;

'(2) In the return filed for the year 1965, the first one hundred thousand dollars thereof at sixty-two per cent, and the amount thereof over one hundred thousand dollars at seventy per cent;

'(3) In the return filed for the year 1966, the first one hundred thousand dollars thereof at fifty-eight per cent, and the amount thereof over one hundred thousand dollars at seventy per cent;

'(4) In the return filed for the year 1967, the first one hundred thousand dollars thereof at fifty-four per cent, and the amount thereof over one hundred thousand dollars at seventy per cent;

'(5) In the returns filed for the years 1968, and thereafter the first one hundred thousand dollars thereof at fifty per cent, and the amount thereof over one hundred thousand dollars at seventy per cent;

'(6) Where such property is located in more than one taxing district, the listing of the first one hundred thousand dollars thereof shall be apportioned to the various taxing districts wherein such property is located in the same ratio as the true value of such property in a taxing district bears to the total true value of such property wherever located in this state.'

The petition complains of the difference in the percentage of taxable personal property of the class described above required to be filed as to the first $100,000, true value in money, as compared with the percentage of true value of personal property in excess of $100,000. Prior to the 1963 amendments, there was no distinction as to such personal property, whether the value of personal property owned by a taxpayer was greater or less than $100,000.

It is contended by plaintiffs in their petition that (a) identical items of personal property in a taxing district must be taxed the same without regard to the identity or total tax value of taxable personal property owned by a taxpayer; (b) that it is contrary to law to fix a varying rate on taxable personal property based upon the total value of such property owned by different taxpayers; and (c) that Section 5711.22(B), Revised Code, results in an unequal burden of taxation and is a denial of equal protection of the law as provided in Section 2, Article I, Constitution of Ohio, and Section 1, Article XIV, Constitution of the United States.

The answer filed on behalf of the Tax Commissioner of Ohio alleges that at the tiem of the filing of the amended petition on January 10, 1964, tangible personal property of merchants had become taxable for the year 1964 in accordance with the provisions of Section 5711.22(B), amended effective December 9, 1963. This was followed by a first defense claiming that the facts alleged in the amended petition fail to set forth a cause of action, and a second defense denying that Section 5711.22(B), Revised Code, is unconstitutional.

Thereafter, plaintiffs filed a motion for judgment on the pleadings, after which the court below rendered a decision upholding the contentions advanced by plaintiffs.

The appellant has set forth eight assignments of error which will be considered together here, the question being whether the trial court erred in holding subdivision (B) unconstitutional. The court below stated in its opinion that neither it nor counsel have found any reported decision by any court 'which directly bears upon the constitutional issue here presented.' Counsel for the parties and as amicus curiae have submitted briefs following exhaustive research, which is appreciated by the court. The matter has been fully and carefully presented to the court.

There was discussion in the decision of the court below to the question whether subdivision (B) did or did not provide an exemption. In Black's Law Dictionary (Fourth Ed.) 681, the term 'exemption' is given a number of definitions, and it is stated 'As applied to taxation, 'exemption' is freedom from burden of enforced contributions to expenses and maintenance of government,' citing Washington Chocolate Co. v. King County, 21 Wash.2d 630, 636, 152 P.2d 981, 984.

It would appear to us that the exclusion of a fixed percentage of true value from the amount required to be listed and assessed is in the nature of an exemption.

In Cleveland-Cliffs Iron Co. v. Glander, Tax Commr. (1945), 145 Ohio St. 423, 62 N.E.2d 94, paragraph three of the syllabus reads in part as follows:

'The provision of any statute which purports to except certain property from general provisions governing taxation is a measure of exemption, * * *.'

At the outset in a case such as this, there is a presumption in favor of the constitutionality of the tax law which may only be overcome by explicit demonstration that the law operates in an unconstitutional manner. See 51 Ohio Jurisprudence 2d 92, Taxation, Section 68.

Since the...