The State ex rel. International Shoe Co. v. Chapman

• Decision Date: 09 October 1925
• Docket Number: 25782
• Parties: THE STATE ex rel. INTERNATIONAL SHOE COMPANY v. OLIVER CHAPMAN, License Collector of City of St. Louis, ROBERT WYCOFF, JR., EDWIN NOLTE and EDWARD E. BUTLER, Members of Merchants' and Manufacturers' Board of Tax Equalization
• Court: Missouri Supreme Court

276 S.W. 32

311 Mo. 1

THE STATE ex rel. INTERNATIONAL SHOE COMPANY v. OLIVER CHAPMAN, License Collector of City of St. Louis, ROBERT WYCOFF, JR., EDWIN NOLTE and EDWARD E. BUTLER, Members of Merchants' and Manufacturers' Board of Tax Equalization

No. 25782

Supreme Court of Missouri

October 9, 1925

Order of assessment quashed.

Frank Y. Gladney and R. E. Blake for relator.

(1) Certiorari is a proper method for reviewing and determining the legality of the assessment. State ex rel v. Stephens, 146 Mo. 662; Western Union v Seay, 132 U.S. 472. (2) The sales against which the protested part of the assessment was made are transactions in interstate commerce. Butler Bros. Shoe Co. v. Rubber Co., 156 F. 1; Swift & Co. v. United States, 196 U.S. 398; Text Book Co. v. Pigg, 217 U.S. 107; Kansas City v. McDonald, 175 S.W. 917; Pennsylvania Railroad Co. v. Clark Bros., 238 U.S 466; Norfolk & Western Railroad Co. v. Sims, 191 U.S. 441; Addyston Pipe Co. v. United States, 175 U.S. 246. (3) The ordinance has no extra-territorial effect and the court will presume that it is confined to domestic commerce and does not embrace interstate commerce. Stanley v. Wabash Railroad, 100 Mo. 435; Connell v. W. U. Tel. Co., 108 Mo. 459; State v Gritzner, 134 Mo. 512. (4) If the ordinance is susceptible of two constructions, one of which includes receipts derived from interstate transactions and the other excludes such receipts, the court by an elementary rule of construction will adopt the latter view. Lumber Co. v. Railroad, 216 Mo. 671; Dorrance v. Dorrance, 242 Mo. 652; State v. Tax Comm., 221 S.W. 724; Stack v. General Baking Co., 223 S.W. 93. (5) The ordinance cannot be held to embrace transactions in interstate commerce without doing violence to most elementary principles. Standard Oil Case, 218 Mo. 376; Kansas City v. McDonald, 175 S.W. 917; Crutcher v. Kentucky, 141 U.S. 47; Vance v. Vandercrook, 170 U.S. 438; Tel. Co. v. Pennsylvania, 190 U.S. 160; West v. Kansas Gas Co., 221 U.S. 260.

Oliver Senti and Daniel Bartlett for respondents.

(1) The manufacturers' license tax is a tax, not upon property or upon sales, but is levied upon the privilege of doing a manufacturing business. Am. Mfg. Co. v. St. Louis, 270 Mo. 40, 250 U.S. 459, 63 L.Ed. 1084. (2) The receipt by relator of shoes produced in its factories situated outside of St. Louis, the unpacking and commingling of such shoes with shoes produced in its local factories, the assorting of all shoes as to size and variety regardless of place of origin and subsequent sale of such lots of shoes, constitute part of the "privilege" of doing a manufacturing business as that business is defined in the ordinance licensing that privilege. St. Louis Revised Code 1914, sec. 396. (3) A municipal license tax upon the privilege of conducting a manufacturing business in the city is not an unconstitutional regulation of interstate commerce merely because the amount of tax is measured by the amount of goods sold by the manufacturer under such license, whether such goods are sold within or without the State, either in domestic or interstate commerce. Am. Mfg. Co. v. St. Louis, 250 U.S. 459, 63 L.Ed. 1084.

Lindsay, C. Seddon, C., concurs.

OPINION

LINDSAY

This is a proceeding under writ of certiorari, issued out of this court, whereby the relator seeks to set aside and annul in part the order of assessment of taxes made by respondents as members of the Merchants' and Manufacturers' Board of Equalization of the city of St. Louis, upon relator's license as a manufacturer.

The relator is a Delaware corporation, licensed to do business in this State, having its offices and principal place of business in the city of St. Louis, and is engaged in the manufacture and sale of shoes. Relator operates 43 factories, seven of which are located in the city of St. Louis, seventeen in other cities and towns in the State of Missouri, and nineteen in cities and towns in other states.

Under an ordinance of the city of St. Louis there is levied, in addition to other taxes, a license tax upon manufacturers of one dollar per $ 1000, of the value of their finished products. The amount of the tax is computed upon the sales price of the finished products. The sole issue made here is the validity of the tax levied against relator upon its license as a manufacturer, on account of shoes manufactured by it outside of the city of St. Louis, and sold and delivered to customers in other states. The amount in dispute is the sum of $ 76,871. Upon the issue here, and upon the question of the validity of the assessment of said sum of $ 76,871 by said board, there is and was no dispute as to the facts.

From the stipulated return we take the following, which sets forth the manner in which relator's business is conducted, and the values of its products in the year for which the tax was levied:

"While the petitioner produces a large variety of shoes for men, women and children, a given one of its aforesaid factories produces only one or at most a few varieties. When the shoes are finished at the various factories, they are dealt with thus: Each pair is placed in a pasteboard box or carton, on which is printed the name or brand of the shoe, together with the size and stock number. A dozen pairs are then packed in wooden or paper crates or cartons, and shipped to petitioner's warehouses located in the city of St. Louis. From such warehouses the shoes are shipped and delivered to customers on orders procured by petitioner, in some instances before the shoes are manufactured, and in others after they are manufactured. Again in some instances the shoes are sold and delivered in unbroken cases, or dozen lots, without being removed from the crate or box in which they were packed at the factory. But in other instances (and perhaps in most) the cases containing a dozen pairs are broken and parts of two or more cases are assorted to meet the specification of a particular order. When the assortment has been made, the shoes selected are re-packed and forwarded to the customer by parcel's post, by express or by freight.

"Petitioner solicits and obtains orders by three agencies: (1) by traveling salesmen or drummers who go to the customer's place of business and there procure written orders which are signed by the customer and forwarded to petitioner's main office in St. Louis; (2) by printed catalogues and circulars sent to customers through the mails; and (3) by the personal presence of the customer's representative at the office and sample room of petitioner in the city of St. Louis. The great bulk of petitioner's orders is procured through the solicitation of its traveling salesmen or drummers, who, periodically each season, call upon customers at the latter's places of business.

"All orders, regardless of how the particular transaction is initiated, are by express terms made subject to approval by the petitioner at its main office in St. Louis, and no order is binding upon the petitioner until so approved and accepted.

"Bills for shoes sold by petitioner are payable in St. Louis, and the proceeds are deposited there, where the books and records of the petitioner are kept.

"Under the foregoing method of doing business the petitioner during the tax year (that is to say, from June 1, 1923, to May 31, 1924) manufactured in its factories located in the city of St. Louis shoes of the value (and which were sold for the amount) of $ 12,749,541.77, and during the same period it sold to customers in the State of Missouri shoes in the amount and value of $ 5,678,226.98. During the same period it manufactured in its factories located outside of the city of St. Louis shoes in the amount and value of $ 76,870,630, which it sold and shipped from its place of business in St. Louis to customers in states other than Missouri. These facts appear from entries in petitioner's books and records. They have been verified by the said License Collector and are not disputed."

Under the foregoing, the relator expressed and here expresses its willingness to pay the sum of $ 18,428, being one dollar per thousand on $ 18,427,768.75, which is the entire value of (a) all shoes made during the year in its factories located in the city of St. Louis, regardless of where said shoes were sold, and of (b) all shoes sold by petitioner during the year in the State of Missouri, regardless of where such shoes were manufactured by it. The proceedings had before the board included the fixing of relator's ad valorem tax upon its raw materials, finished products, tools, machinery and appliances, but none of these matters was, or is now, the subject of dispute.

The contention of relator was and is that in respect of shoes manufactured by it in states other than Missouri, and sold and delivered by it to customers in other states, it was engaged in interstate commerce, which constituted a right or privilege not subject to taxation under said ordinance. The view of the Board of Equalization was that the sales made in the manner aforesaid, through traveling salesmen and otherwise, constituted local sales within the meaning and intent of the ordinance of the city, and were properly included in the computation of the total sales made by relator, as a manufacturer, for the ascertainment of its license tax.

In undertaking to reach the ultimate conclusion in this case it seems more convenient to consider first, and chiefly, the grounds of the defense of respondents. That defense is attacked in the reply brief for relator. It is founded upon the ruling made in American Mfg. Co. v. St. Louis, 270 Mo. 40, and the ruling of the Supreme Court of the United States in American Mfg. Co. v. St. Louis, 250 U.S 459, and next, upon the ordinance of the city, defining the term "manufacturer,"...