Moore v. State Bd. of Charities and Corrections
| Decision Date | 19 June 1931 |
| Citation | 239 Ky. 729 |
| Parties | Moore et al. v. State Board of Charities and Corrections et al. |
| Court | United States State Supreme Court — District of Kentucky |
4. Constitutional Law — Licenses. — Law imposing gross sales tax held not unconstitutional as denial of equal protection of law to taxpayers coming within its scope (Acts 1930, c. 149).
5. Taxation. — State has right to classify in its taxation program and even to discriminate in favor of certain classes if discrimination be founded on reasonable distinction.
6. Licenses. — Law imposing gross sales tax held not unconstitutional as confiscatory (Acts 1930. c. 149).
7. Commerce. — Law imposing gross sales tax held not in violation of commerce clause of federal Constitution (Acts 1930, c. 149; Const. U.S. art. 1, sec. 8, cl. 3).
8. Constitutional Law. — Courts must always presume that Legislature intended to write constitutional act and must construe law with that end in view.
9. Licenses. — Classification exempting farmers and gardeners from operation of gross sales tax law is valid (Acts 1930, c. 149).
10. Constitutional Law. — Presumption is that Legislature in enacting law did not intend to violate any provision of federal Constitution.
11. Commerce. — Courts, where subjects of taxation can be separated so as to differentiate that arising from interstate commerce from that arising from commerce within state, will permit tax on commerce solely within state (Const. U.S., art. 1, sec. 8, cl. 3).
Appeal from Franklin Circuit Court.
GUY H. BRIGGS and ALLEN PREWITT for appellants.
J.W. CAMMACK, Attorney General, S.H. BROWN and HOWARD GENTRY, Assistant Attorneys General, LESLIE W. MORRIS and H. W. BATSON for appellees.
TRABUE, DOOLAN, HELM & HELM, amici curiae.
Affirming.
This suit was brought to test the constitutionality of chapter 149 of the Acts of 1930, now sections 4202a-1 to 4202a-12 of the 1930 Supplement to Carroll's Statutes, and popularly known as the Gross Sales Tax Law. The suit was brought by the appellant Forrest Moore as a general taxpayer. In his petition, he averred that, relying on so much of the act as appropriates to it one-half of the proceeds of the gross sales tax, less collection costs, for the purpose of "repairing, maintaining and constructing" permanent improvements for the use of the institutions under its control, the state board of charties and corrections had entered into a contract with F.M. Perkins, the owner of a tract of land adjoining that upon which the state reformatory at Frankfort stands, whereby Perkins agreed to convey that tract to the state board of charities and corrections for the sum of $24,000, it being expressly agreed in the contract that this consideration was to be payable only out of the board's revenue arising from the collection of the gross sales tax. In the event this law should be declared unconstitutional, the contract provided that either party should have the right to terminate it. Pending the determination of that question, the state board of charities and corrections agreed by the terms of the contract to pay as rental for the use of the land a sum equal to 5 per cent. of the purchase price. It was and is the intention of the board to erect upon this land an addition to the state reformatory. Further alleging that the board was threatening to carry out this contract by using its general funds which it intended to reimburse later out of its part of the collections from the gross sales tax, Moore prayed that the board be enjoined from going ahead with the contract. He based his prayer mainly on the unconstitutionality of the Gross Sales Tax Law. The trial court upheld the constitutionality of the act, the right of the board to anticipate its revenues from the tax and its power to buy the land with part of the proceeds of the gross sales tax. Moore appealed. We reversed the judgment of the court solely on the ground that the record failed to show that Moore was one of the class of taxpayers who would have to pay the gross sales tax if that law were upheld, and that a decision on the constitutionality of that law should not be had without some taxpayer who would have to pay the tax being made a party. Moore v. State Board of Charities and Corrections, 238 Ky. 243, 37 S.W. (2d) 41. On return of the case to the circuit court, the appellant D.T. Bohon Company, a corporation operating a number of retail stores in the state and one of the class of taxpayers who will have to pay the gross sales tax if that law be held constitutional, was made a party defendant to the suit. On being made such, it filed its answer and cross-petition against the state board of charities and corrections, the state auditor, and the state tax commission, in which it asked relief against these cross-defendants similar to the relief asked by Moore in his petition. The real basis of the Bohon prayer for such relief is the unconstitutionality of the Gross Sales Tax Law. The defendants in the Moore suit and the cross-defendants in the Bohon cross-petition, they being the same, joined issue with Moore and the Bohon Company as to the constitutionality of the act. After proof had been introduced, the case was submitted and the trial court again upheld the constitutionality of the Gross Sales Tax Law, adjudged the state board of charities and corrections had the right to anticipate its revenues from the gross sales tax in carrying out the Perkins contract as it was doing, held that the right to purchase land upon which to erect permanent improvements was within the powers vested in the board by the Gross Sales Tax Act, and also adjudged that, by the terms of the act, the state had given its consent to be sued, not only in the state, but also in the federal courts by any aggrieved taxpayer of the gross sales tax to adjust, after he had paid the tax, any grievance he had arising out of the collection of such tax. From this judgment Moore and Bohon have both appealed.
That the state board of charities and corrections, under the power given it by section 9 of the act to use its part of the gross sales tax for "the specific purpose of repairing, maintaining and constructing permanent improvements," has the right to expend part of the proceeds of such tax in the purchase of land upon which to erect an addition to the state reformatory is clear to us. It is necessary, in order to erect this addition to the state reformatory, that additional land be purchased, for there is no available room upon the present site of the reformatory for the addition planned. The addition itself is a permanent improvement, and the Legislature undoubtedly intended that the board should have the power and right to expend the funds given it by this section 9 of the act in the purchase of all things needful in the construction of permanent improvements, and, if land be needed for that purpose, then also, the right to buy such land for the erection and completion of the improvement.
We are further of the opinion that, inasmuch as the probable collections from the gross sales tax can be reasonably calculated and ascertained, the state board of charities and corrections has the right to include within its budget of expenditures the estimated revenue it will receive from this source. Premier Construction Co. v. Kimmell, 230 Ky. 439, 20 S.W. (2d) 77. It follows, therefore, that the board had the right to make the contract it did with Perkins and to carry it out as it was proposing to do if the Gross Sales Tax Law itself be constitutional.
The attack made by the appellants upon the constitutionality of that act is based upon these grounds: (1) It denies the equal protection of the law to the various classes of taxpayers who come within its purview; (2) it is confiscatory; (3) it violates the commerce clause of the federal Constitution; and (4) its title does not comply with the requirements of section 51 of our state Constitution. As to this last proposition, appellants do not point out in what particular the title fails to measure up to the requirements of that section of our state Constitution, and, without more ado, we may say summarily that we are unable to discover any such failure.
We pass now to the more important grounds of attack upon the constitutionality of this act. Does it deny the equal protection of the law to the various classes of taxpayers who come within its scope? The standards by which this law is to be tested, in order that the question propounded may be answered, are well known and well established. Thus in the recent case of State Board of Tax Commissioners of the State of Indiana v. Jackson, 51 S. Ct. 540, 543, 75 L. Ed. ___, which involved the right of the state of Indiana to impose a graduated occupational tax upon the operation of mercantile establishments measured by the number of stores operated, the Supreme Court of the United States wrote:
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...at most accidental and occasional. In the view of the Legislature of Kentucky and of its highest court (Moore v. State Board of Charities and Correction, 239 Ky. 729, 40 S.W.(2d) 349), the relation, far from being accidental or occasional, has a normal or average validity, attested by exper......