Title: LOGAN'S SUPERMARKET v. Atkins

State: tennessee

Issuer: Tennessee Supreme Court

Document:

304 S.W.2d 628 (1957) LOGAN'S SUPERMARKETS, Inc., et al. v. Z. D. ATKINS, Commissioner of Finance and Taxation of the State of Tennessee, et al. Supreme Court of Tennessee. July 29, 1957. *629 George F. McCanless, Atty. Gen., Allison B. Humphries, Sol. Gen., Nashville, Milton P. Rice, Asst. Atty. Gen., for appellants. Larry B. Creson, Memphis, Edwin F. Hunt and Cecil Sims, Nashville, Robert W. Sweet, New York City, for appellees. PREWITT, Justice. The bill was filed by complainants, Logan's Supermarket Inc., et al., seeking a declaratory judgment with respect to Chapter 97 of the Public Acts of Tennessee of 1957, known as the Trading Stamp Act. This Act provides as follows: Item 106 of Code Section 67-4203, which was amended by the foregoing Act is in words and figures as following: The questions presented here are: (1) Whether or not the Legislature had the right to levy the tax on stamp companies in the manner and amount which it did, and, (2) Whether the classifications contained in said Act are unconstitutional. The Chancellor was of the opinion that the Legislature had the right to levy the tax on stamp companies as it did. See Jenkins v. Ewin, 55 Tenn. 456; Railroad Co. v. Harris, 99 Tenn. 684, 43 S.W. 115, 53 L.R.A. 921; H. G. Hill Co. v. Whitice, 149 Tenn. 168, 258 S.W. 407. These cases observe that the Legislature is not bound by the rule of uniformity prescribed in cases of taxes on property. The power of the Legislature to declare and tax privileges is unlimited, and its discretion in this regard cannot be constrained or controlled by the Courts. Section 28 of Article II of the Constitution of Tennessee. It is therefore our opinion that said Section I of Chapter 97 of the Public Acts of 1957 violates no constitutional provision. The second proposition is the validity of the second section of said Act. The lower Court was of the opinion that the proper construction to be placed upon the Act is that the 2% gross tax applies only to merchants who use the services of trading stamp companies, or have their stamps, etc., redeemed by some person other than the merchant, who gives said stamps, etc., and it does not apply in any way to merchants, who give and redeem their own stamps, even though said merchant operates a separate redemption center. The lower court was further of the opinion that there is not any real and substantial difference between a merchant, who uses stamps and redeems his own stamps, and a merchant who uses stamps and for a consideration has some one else to redeem them for him. The Chancellor considered the classification to be arbitrary, capricious and unreasonable and in violation of Article XI Section 8, of our Constitution, which forbids class legislation unless there be some reason for the discrimination. The precise question to be determined by us has not been passed upon in Tennessee, but many other states have decided the question and with virtual unanimity of opinion. These cases from other jurisdictions demonstrate that court after court have held the classification attempted by Section 2 of the challenged Act unconstitutional as arbitrary and discriminatory. It would unnecessarily prolong this opinion to take up and discuss the many cases from other jurisdictions. However, in Sperry & Hutchinson Co. v. Hoegh, 1954, 246 Iowa 9, 65 N.W.2d 410, 416, the Court said: The Iowa Court then proceeded to consider the statute under the equal protection clause of the State Constitution and held that the statute could not be sustained under that clause. The Court said in part: In this connection see State v. Holtgreve, 58 Utah 563, 200 P. 894, 26 A.L.R. 696; Sperry & Hutchinson Co. v. State of Indiana, 188 Ind. 173, 122 N.E. 584; People ex rel. Attorney General v. Sperry & Hutchinson Co., 197 Mich. 532, 164 N.W. 503, L.R.A. 1918A, 797; State v. Dodge, 76 Vt. 197, 56 A. 983; People ex rel. Appel v. Zimmerman, 102 App.Div. 103, 92 N.Y.S. 497; In re Opinion of Justices to Senate, 226 Mass. 613, 115 N.E. 978; State v. Dalton, 22 R.I. 77, 46 A. 234, 48 L.R.A. 775; Publix Super Markets, The Sperry and Hutchinson Company v. City of Orlando, 8 Fla. Supp. 96. It is well settled in this State that the Legislature may not arbitrarily exclude one class of individuals from the operation of a privilege tax and include another. Corn v. Fort, 170 Tenn. 377, 95 S.W.2d 620, 106 A.L.R. 647; Wilson v. Beeler, 193 Tenn. 213, 245 S.W.2d 620. In 1916 there were three cases decided in the Supreme Court of the United States which held that statutes passed by state legislatures which virtually prohibited the use of trading stamps did not contravene the Fourteenth Amendment to the Federal Constitution. These cases were Rast v. Van Deman & Lewis Co., 240 U.S. 342, 36 S. Ct. 370, 60 L. Ed. 679; Tanner v. Little, 240 U.S. 369, 36 S. Ct. 379, 60 L. Ed. 691; and Pitney v. State of Washington, 240 U.S. 387, 36 S. Ct. 385, 60 L. Ed. 703. There are five decisions in three states which follow these decisions. They were rendered within three years of the Supreme Court decisions, State v. Wilson, 1917, 101 Kan. 789, 168 P. 679, L.R.A. 1918B, 374; State v. Crosby Bros. Mercantile Co., *632 1918, 103 Kan. 733, 176 P. 321; In re Trading Stamp Cases, 1918, 166 Wis. 613, 166 N.W. 54; Sperry & Hutchinson Co. v. Weigle, 1919, 169 Wis. 562, 173 N.W. 315. The last case which held that the prohibition of the issuance of trading stamps was within the police powers of the legislature was decided in 1919. However, the weight of authority and the later cases hold that such prohibition statutes are not valid, because violative of state constitutions. We therefore conclude that there is no real and substantial difference between a merchant who uses stamps and redeems his own stamps, and a merchant who uses stamps and for a consideration has someone else to redeem them for him. In one instance he is taxed and in the other he is not. It follows therefore that the Court considers the classification to be arbitrary, capricious and unreasonable and in violation of Article XI, Section 8 of our Constitution. The Chancellor was then of the opinion that this unconstitutional section of the statute could be elided. In Jones v. City of Jackson, 195 Tenn. 329, 336, 259 S.W.2d 649, 652, it is said: The Act in question was in the form of an amendment to an existing Act taxing trading stamp companies which tax item was only increased in amount. The original Act was valid and enforceable in and of itself, and the amendment to the Act did not change it in this respect. It follows that the second section of said Chapter 97 will be elided and the first section upheld. It results that the decree of the Chancellor will be affirmed.