Sperry & Hutchinson Co. v. City of Owensboro

• Decision Date: 20 December 1912
• Citation: 151 S.W. 932,151 Ky. 389
• Parties: SPERRY & HUTCHINSON CO. v. CITY OF OWENSBORO et al.
• Court: Kentucky Court of Appeals

151 S.W. 932

151 Ky. 389

SPERRY & HUTCHINSON CO. v. CITY OF OWENSBORO et al.

Court of Appeals of Kentucky.

December 20, 1912

Appeal from Circuit Court, Daviess County.

Suit by the Sperry & Hutchinson Company against the City of Owensboro and others to enjoin the enforcement of an ordinance imposing a license tax on persons engaged in the business of selling trading stamps. Judgment for defendants, and plaintiff appeals. Reversed and remanded.

Birkhead & Wilson, of Owensboro, and John Hall Jones, for appellant.

R. S Todd, of Owensboro, for appellees.

HOBSON C.J.

The common council of the city of Owensboro enacted an ordinance which was approved by the mayor, levying license taxes on trades, professions, and occupations in the city of Owensboro during the year commencing on May 1, 1910, and ending April 30, 1911. Section 26 of the ordinance is in these words "To engage in the business of selling or giving stamps, known as trading stamps, to be used in connection with the sale of goods, wares or merchandise, $300.00." The Sperry & Hutchinson Company brought this suit against the city of Owensboro and its officers to enjoin the collection of the tax on the ground that the ordinance is void, in that it is discriminatory, and the amount fixed to be paid is unreasonable, oppressive, and prohibitory. The appellant is a corporation formed under the laws of the state of New Jersey, and has complied with the laws of the state of Kentucky relating to foreign corporations doing business here. It is authorized to buy, sell, and exchange merchandise, to do a general advertising business, to contract and be contracted with. It is carrying on business in the city of Owensboro, where it maintains a store similar to other housefurnishing stores, stocked with goods, wares, and merchandise for household use and ornamentation, and it disposes of its goods in the following manner: It enters into contracts with various merchants in the city of Owensboro called subscribers, who desire to give their customers attractive articles of merchandise as an inducement for cash trade. Under these contracts, it furnishes its subscribers stamps which they agree to deliver to their customers at the rate of one stamp for each 10 cents represented in a cash purchase. It agrees with its subscribers that it will give in exchange for these stamps in certain specified numbers the articles of merchandise carried by it in its store. The subscribers pay for the stamps at so much a thousand; and it also delivers to them books in which the stamps are to be placed by the customers of the subscribers, and, when a book is filled, the book may be presented to it and an article of merchandise obtained. The subscribers are furnished with metal and card advertising signs to display in their stores to inform the public that they are offering this inducement for cash trade. For a number of years it has not been uncommon for a merchant to give coupons to his customers making cash purchases, and agreeing when a certain number of these coupons are presented to deliver to the purchaser free of charge some household article kept in the store. The business of the plaintiff seems to have taken its origin from this custom. It relieves the merchant of keeping the articles in stock to be delivered to his customers, and it offers the customers a wider range of choice in the articles to be obtained. In addition to this under the old system, the coupons issued at each store could only be redeemed at that store, but, under the plaintiff's plan, it furnishes its stamps to grocers, butchers, bakers, dry goods merchants, druggists, and all other trades, and the stamps obtained in any of these stores can be put in the same book, and presented to the plaintiff for redemption. In this way a book can be filled out very much more quickly, and all the stamps received by a customer anywhere may be used.

Section 4224, Ky. St., provides: "All resident or foreign trading stamp companies or corporations doing business in this state shall annually pay a license tax to the county court clerk of each county wherein such business is conducted, ten dollars." We had this statute before us in Commonwealth v. Gibson, 125 Ky. 440, 101 S.W. 385, 31 Ky. Law Rep. 51, and it was there held that a company conducting a general retail merchandise business that gave to a cash purchaser a check representing 4 per cent. of his purchase, which could be exchanged for articles in the store or for cash, did not come within the statute; and in that case the difference between a merchant and a company like the plaintiff was pointed out, it being held that the statute was intended to cover such a business as is done by the plaintiff. The circuit court dismissed the plaintiff's petition, and it appeals.

Under subsection 12 of section 3290, Ky. St., pursuant to section 181 of the Constitution, the city may impose license fees "on franchises, trades, occupations, and professions and provide for the collection thereof." The business of the appellant is substantially different from that of an ordinary merchant. The city may classify business and levy the tax on business as classified. There must be a reasonable basis for the classifications; but, as appellant's business is entirely different from that of an ordinary merchant, we agree with the circuit court that there is a reasonable basis for the...