Evening star. [volume] (Washington, D.C.) 1854-1972, 1931-03-07
CHAIN STORES PUSH
FIGHT AGAINST TAX
State ImpoSts Declared
"CIaSS Legislation" in Case
Before Supreme Court.
BY JOHN F. MILLER.

Chain store operators today were con-
fident that they would have little diff
Guilty in winning the next battle in their
long war with various State taxing au-
thorities.
For the first time the issue is squarely
before the Supreme Court of the United
States in cases from three different
States. These case, one of which was
argued this week, will establish a prece-
dent, chain store operators believe, that
viii render invalid the proposals now
before more than 20 State Legislatures
requiring them to pay special license
taxes.
Lower Court UphOIds Tax.
There is, however. another angle to
the story. Down in Kentucky, a few
weeks ago, one of the lower State courts
sustained the State sales tax. and I'M
less the chain stores can get that deci-
sion reversed they are in for a hard
tire in many of the States, which will
undoubtedly copy the Kentucky law.
The Kentucky statute is aimed not
only at the chain stores, but at big busi-
ness in general. Probably no piece of
legislation ever before devised gives a
State more power to limit the amount
OF business which single concern can
do. within its borders. The Kentucky
tax is simply graduated sales tax. III
the sales are 100000 or less, the tax is
only cents on each 500. Then the
step-up begins and on all sales in excess
OF 100000 the State. demands 81 for
every 500 worth of goods sold.
II the contention of the retailers is
correct-that their average profit is 2 rer
cent-then the tax Is equal to a levy of
80 per cent on the net income. Doubling
the rates would absorb practically all
the profits of concerns doing more than
81 900 gross business. Clearly. If the
statute stands the test, the corner
grocery and mail order houses will gain
a tremendous advantage in their com
petition with the chain and department
stores.
Under the Indiana and North Caro-
lima laws, the validity of which is
now being attacked before the Supreme
Court, the amount of tax depends
upon the number of stores which a
single concern has in the state. The
Mississippi tax is sales tax, but
the rate on chain stores is double
that on others.
Class Legislation Claimed.
All of these laws amount to class
legislation, the chains assert. A chain
may have 100 stores, but the amount
of capital invested, gross sales, net
income and value of the business may
be less than that of single depart
ment store, they point out They
assert that to impose tax on them
and not on the department store in
such case violates the equal pro-
lection clause of the Federal Constitu-
ton
In the Indiana and Mississippi cases,
the Federal District Courts held in
favor of the chain stores; the North
Carolina Supreme Court held against
them. At the time the Indiana case
was decided the Kentucky Legislature
had before 1t bill proposing q tax,
the amount of which depended on the
number of stores. That bill was amend
ed Immediately to include all other
big business with the chains
No better illustration than the
Kentucky law can be. cited to show
the tremendous influence which de-
cisionS of the Supreme Court may
have on business. Attorneys agree
that the fundamental question which
that court will be called upon to de-
eide is. simply this: May a State
Legislature put big business in a
separate class and then impose a tax
on that class which may mean its
destruction?
Copyright, 1917