Louis Liggett Co v. Lee 12 8212 13, 1933

Decision Date13 March 1933
Docket NumberNo. 301,301
PartiesLOUIS K. LIGGETT CO. et al. v. LEE, Comptroller of State of Florida, et al. * Argued Jan. 12—13, 1933
CourtU.S. Supreme Court

Appeal from the Supreme Court of the State of Florida. [Argument of Counsel from pages 518-520 intentionally omitted] Messrs. Thomas B. Adams and W. E. Kay, both of Jacksonville, Fla., and Roy M. Sterne, of New York City, for appellants.

[Argument of Counsel from pages 520-525 intentionally omitted] Mr. W. H. Dannat Pell, of New York City, for appellant J. C. Penney co.

[Argument of Counsel from pages 525-527 intentionally omitted] Mr. H. E. Carter, of Tallahassee, Fla., for appellees.

Mr. Justice ROBERTS delivered the opinion of the Court.

Chapter 15624 of the Laws of Florida, 1931 (Ex. Sess.), declares it unlawful for any person, firm, corporation, association, or copartnership, foreign or domestic, to operate any store within the state without first having obtained a license, designates the officer to whom application shall be made, regulates the procedure for issurance of licenses, and provides for annual renewal. The act requires the payment of a filing fee, and by section 5, which is copied in the margin,* fixes the amount of the license fee. A tax greater than that exacted for a single store is fixed for each store in excess of one, but not exceeding fifteen, owned or operated by the same person or corporation. The fee for each store is stepped up in amount as the number constituting the chain reaches certain specified limits. This graduated scale applies to stores all of which are within a single county; but, if the same number of stores is located in more than one county, the license fee for each is materially increased.)

The act imposes the tax only on retail stores and excludes from the definition of a store filling stations engaged exclusively in the sale of gasoline and other petroleum products. It provides for a separate county license tax equal to 25 per cent. of the state license fee, and authorizes a municipal tax of the same amount, measuring the graduated tax in the case of counties and municipalities by the number of stores situate in the county or municipality, notwithstanding the applicant may own other stores beyond the limits of the governmental subdivision.

In addition to the described license taxes the act imposes a levy of $3 for each $1,000 of value of stock carried in each store, or for sale in such store, and this is defined to include merchandise owned by the taxpayer and held in storage to be sold in or through such store.

Three chain store owners filed in the circuit court of Leon county, Fla., a class bill, in which twelve others intervened and became coplaintiffs, praying that the tax officials be enjoined from enforcing the act. The complainants are corporations of Florida and other states. They challenge the statute as violative of various provisions of the Constitution of Florida, of the due process and equal protection clauses of the Fourteenth Amendment, and of the commerce clause of the Federal Constitution. The bill sets forth in great detail facts claimed to assimilate the operation of chain stores to that of stores individually owned and operated in the state of Florida. So-called voluntary chains of retail stores are described at length and their methods of operation compared with those of chain stores; the purpose being to demonstrate that there is no essential difference between the two methods of conducting business. On the basis of the facts recited, the bill charges that to tax a store operated in the one manner and exempt an establishment conducted in the other is arbitrary and unreasonable. The difference in the amount of tax laid upon the operator of a given number of stores in a single county and another conducting the same number in two or more counties is challenged as an unconstitutional discrimination. The imposition of a tax of $3 per $1,000 on retail merchants, not only as respects the stock actually contained in their stores, but also on goods in warehouse intended for sale in such stores, is attacked as discriminatory, for the reason that under another statute wholesale merchants are taxed only $1.50 per $1,000 of merchandise carried in their stores or warehouses. The exemption of filling stations is alleged to discriminate against the appellants in violation of the Fourteenth Amendment. The bill further avers that certain of the plaintiffs receive their goods from warehouses maintained outside the state of Florida, or order shipments to their stores from wholesale houses situate without the state, whereas many operators of single stores who are members of voluntary chains obtain their supplies from wholesalers in Florida, or from a warehouse in the state conducted by a voluntary chain corporation. The unequal effect of the act on these transactions is charged to be an unconstitutional burden upon interstate commerce.

The defendants moved to dismiss. The cause was heard upon this motion and a decree entered dismissing the bill at complainants' costs. The Supreme Court of Florida affirmed the decree. The present appeal presents only the questions arising under the Federal Constitution.

1. In support of the allegation of arbitrary and unreasonable discrimination, the bill recites facts from which appellants claim the conclusion is inevitable that there is no difference between the method of conducting chain stores and those employed in department stores, so-called voluntary chains, and singly operated units. This is but a reiteration of the contention made and overruled in State Board of Tax Commissioners v. Jackson, 283 U.S. 527, 51 S.Ct. 540, 75 L.Ed. 1248, 73 A.L.R. 1464. It was there held that, whatever may be said of individual similarities and differences between chain store operation and the conduct of a single shop or a department store, the former employ distinguishable methods of conducting business, and the Legislature may make the difference in method and character of the business the basis of classification for taxation. In their bill the complainants aver that the fact situation in Florida at the date of suit differed materially from that set forth in the Jackson Case. Each of the features of chain store operation enumerated in this court's opinion is singled out, and as respects each the averment is that as to some chain store operators, or some operators of individual stores, the present case differs from the Jackson Case.

In their endeavor thus to distinguish the earlier case, the appellants stress mere details, but ignore the underlying reason for sustaining the classification there attacked. The decision in the Jackson Case was based, not upon any single feature of chain store management, but upon the ultimate fact of common knowledge, illustrated and emphasized by the evidence, that the conduct of a chain of stores constitutes a form and method of merchandising quite apart from that adapted to the practice of the ordinary individually operated small store or department store; and that the difference between an integrated and a voluntary chain is fundamental. While incidents of the operation of the one may be quite similar to those found in the other, there is a clear distinction between one owner operating many stores and many owners each operating his own store with a greater or less measure of co-operation voluntarily undertaken. The Legislature may make the distinction the occasion of classification for purposes of taxation. Neither similarity of opportunities and advantages in some aspects, nor the fact that the one kind of store competes with the other, is enough to condemn the discrimination in the taxes imposed. It is needless to repeat what was said in the Jackson Case to the effect that the difference between the subjects taxed need not be great, and that, if any reasonable distinction can be found, the duty of the court is to sustain the classification embodied in the law.

2. The statute lays a tax of a stated sum per store on any given number of stores in the same ownership located within the same county; but, if one happens to be in a county other than that in which the remainder are situate, imposes an increased tax, not only on the single one lying in the second county, but on all. Thus, if an owner has fourteen stores, he may add a fifteenth in the same county, and the only additional tax will be in the amount of $10 attributable to the privilege of conducting the new store. But, if the new store happens to be in another county, the license fee for it will be increased to $15, and that for each of the other fourteen, which have long since been opened and operated in the original county, will be increased from $10 to $15.

We are unable to discover any reasonable basis for this classification. As we have held, gradation of the tax according to the number of units operated cannot be said to be so unreasonable as to transcend the constitutional powers of the Legislature. The addition of a store to an existing chain is a privilege, and an increase of the tax on all the stores for the privilege of expanding the chain can- not be condemned as arbitrary; but an increase in the levy, not only on a new store, but on all the old stores, consequent upon the mere physical fact that the new one lies a few feet over a county line, finds no foundation in reason or in any fact of business experience. There is no more reason for adopting the county line as the measure of the tax than there would be for taking ward lines in cities, or arbitrary lines drawn through the state regardless of county boundaries. It is suggested that the license fee for extending operations into a great and populous city, or for doing business upon crowded business streets, should be greater than for the same privilege in a village or a sparsely settled suburb. But the adoption of a county line can have no reference either to density of population, congregation of...

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