Case Name: VOLUSIA COUNTY KENNEL CLUB, Inc., et al. v. HAGGARD et al.
Court: Florida Supreme Court
Jurisdiction: Florida
Decision Date: 1954-06-01
Citations: 73 So. 2d 884
Docket Number: 
Parties: VOLUSIA COUNTY KENNEL CLUB, Inc., et al. v. HAGGARD et al.
Judges: ROBERTS, C. J., SEBRING, J., and LEWIS, Associate Justice, concur.
Reporter: Southern Reporter, Second Series
Volume: 73
Pages: 884–899

Head Matter:
VOLUSIA COUNTY KENNEL CLUB, Inc., et al. v. HAGGARD et al.
Supreme Court of Florida. En Banc.
June 1, 1954.
Rehearing Denied July 6, 1954.
Loftin, Anderson, Scott, McCarthy & Preston, Robert H. Anderson and D. P. S. Paul, Miami, for appellants. ■
Richard E. Ervin, Atty. Gen., Fred M. Burns and George E. Owen, Asst. Attys. Gen., John D. Moriarty, Sp. Asst. Atty. Gen., and Walter E. Dence, Miami, for appellees.

Opinion:
MATHEWS, Justice.
This case involves the legality of an additional tax upon the operator's permissible "take" from legalized gambling at dog racing tracks based upon a new or additional classification.
Chapter 28058, Laws of 1953-, F.S.A. § 550.16, appears to provide an additional classification within • a classification of another classification for the sole purpose of imposing an additional tax, based upon the amount of daily gross receipts for each of the new classifications.
Prior to 1931 all gambling was illegal. In 1931, F.S.A. § 550.01 et seq., the Legislature classified gambling into two classes; first, gambling at enclosed race tracks was purified and washed clean of its sin by legislative enactment, and second, gambling on races outside of an enclosure, and all other gambling still remained sinful and clothed with a noxious odor. Then the Legislature further classified race track gambling into two classes, dog tracks and horse tracks, and based upon this classification, different taxes were imposed. In 1953 the Legislature made a further classification of dog tracks for taxation or revenue purposes, and it is upon this classification an additional graduated tax is now imposed.
The new classification for dog tracks is based upon the amount of the daily gross receipts or daily pool and a different rate of taxation is imposed upon each pool according to size or amount.
The appellants contend that they are now engaged in lawful businesses and are entitled to the protection of the Constitution to the same extent as any other lawful business and that the additional tax based upon the new classification between dog tracks denies to them the equal protection of the laws guaranteed by the Fourteenth Amendment of the United States Constitution and the Declaration of Rights of the Constitution of the State of Florida.
Sixty percent of the new tax is to be divided equally between the sixty-seven counties and forty percent is to be used for Old Age Assistance. It is urged that the 'tax should be upheld because it serves a -useful purpose. In oral argument, particular emphasis was placed upon the fact that forty percent of the tax would be used where it was so badly needed for Old Age Assistance. Nó - one questions the fact that the proceeds of the tax would be used for a needful purpose and that assistance to the aged has a particular appeal. Money could hardly be put to a more useful purpose than Old Age Assistance.
Only a few months ago we were urged to ignore sound principles of taxation and plain language of the Legislature in order that race tracks might run additional 'days because the money would be used for a useful purpose in providing college football scholarships.
Recently it was proposed to the Legislature that certain types of gambling should be legalized if the gambling was conducted by some church and such church received a part of the proceeds of the gambling. Public officials are constantly asked to look the other way at gambling at fairs and expositions. Recently there was a proposal that gambling at jai alai frontons be ignored on Sundays because a part of the proceeds would go to a cancer society. Such proposals are made from time to time because it is said a part of the proceeds of the operation will be used for a good purpose. Even a good purpose must be accomplished in a lawful manner and it would be a dangerous doctrine to say that the government may or should ignore fundamental principles of the Constitution and the laws in order to accomplish a good purpose.
It is also urged that the tax should be sustained because it is a tax in the exercise of the police power to further regulate a business with a noxious odor, although legal.
This Court has held that race track gambling establishments are now legal and that those in a like situation should be treated fairly and impartially. State ex rel. West Flagler Amusement Co. v. Rose, 122 Fla. 227, 165 So. 60; Hialeah Race Course Inc., v. Gulfstream Park Racing Association, Fla., 37 So.2d 692; and Simmons v. Hanton, Fla., 65 So.2d 42. All doubt with reference to the legality of these enterprises was removed by the adoption of Section 15, Article IX of the State Constitution, F.S.A., whereby the fundamental law recognized the operation of pari-mutuel pools as being legal. As further evidence of the legislative intent to eliminate the odor theretofore surrounding the operation of race track gambling and to recognize the importance of such businesses it declared that the same "is a substantial business compatible to' the best interests of the state and the taxes derived therefrom constitute an integral part of the tax structures of the state and counties. and development of this business and influences and affects the financial stability of the state and counties." F.S. § 550.081, F.S.A.
At the time of the new and additional classification upon which the new and additional tax is based, there was no suggestion nor thought of additional regulation of the dog race track business. In his message to the Legislature the Governor (Journal of the House of Representatives, April 7, 1953, page 11) discussed dog tracks and said:
" These businesses are not now paying a fair share of the cost of government.
‡ sK *
"I recommend that a Bill be passed for a graduated tax scale that will increase the state's 'take'
The law making the new classification for the purpose of the additional tax does not contain any word or suggestion with reference to further regulation of the business of race track gambling, either in. the title or body of the Act.
There may have been a time when all money from gambling was considered! "tainted" money, but now the only complaint about money from legalized racetracks appears to be "taint enough of it"..
In deciding this case we must, therefore,, eliminate from consideration any theory that the tax is imposed under the police-power' for the purpose of regulation and conclude that it is a tax question and its. legality must be measured by the fundamental principles with reference to taxation-for revenue and that the principles of law-with reference to police power and regulation are not involved.
If it is an income tax, it violates. Section 11, Article IX of the State Constitution. It is not an income tax. The lower Court held: "The tax here under-consideration is a tax upon a privilege."' It further held that the amount of the tax was based upon the amount of the gross-income based upon the different classifications, that the tax was levied upon each. " 'daily pool' and the tax as regards each-single daily pool is assessed as a tax upon a. single taxable transaction." The Chancellor further found an indication that-there is a reasonable basis for the Legislature to determine that there is a definite relationship between the size of the daily pools operated by the various tracks and the profits made by such tracks and then-held: "The making of such Legislative- determination, when justified by the facts, will be presumed for the purpose of sustaining the constitutionality of a Legislative enactment." We find no legislative determination of anything except the desire to .get more money from the race tracks. There is no legislative determination that there is any difference in the various classifications except the size of the gross daily income.
A mere examination of the formula set forth in Chapter 28058, Laws of Florida 1953, as a basis of the tax shows that it is nothing more than an additional graduated tax against race tracks in the higher brackets and they are compelled to pay larger sums than the smaller tracks simply because of larger gross receipts. The transactions in the smaller and larger tracks are identical.
The appellants contend that the case of Stewart Dry Goods Company v. Lewis, 1935, 294 U.S. 550, 55 S.Ct. 525, 529, 79 L.Ed. 1054, and other similar cases are controlling in this case. The Stewart case appears to be the leading case on the subject. In that case Mr. Justice Roberts (U. S. Supreme Court) said: "We think the graduated rates imposed were not intended to bear any relation to net profits."
In the present case, the Chancellor, in his final decree, stated:
"The contention that the equal protection clause is violated is based largely upon the decision of the Supreme Court of the United States in the case of Stewart Dry Goods Company v. Lewis, 294 U.S. 550, 55 S.Ct. 525, 79 L.Ed. 1054. That case involved a tax upon the gross sales of all retail stores based upon a fixed percentage of the amount of sales in each of several brackets specified in the law, the tax being a larger percentage of the gross sales in each higher bracket as the volume of sales increased. Emphasis is laid upon the summary of the holding of the court found in the dissenting opinion of Mr. Justice Cardozo, who said:
" 'The prevailing opinion commits the court to a holding that a tax upon gross sales, if laid upon a graduated basis, is always and inevitably a denial of the equal protection of the laws, no matter how slight the gradient or -moderate the tax.' "
The Stewart case was followed by the case of Valentine v. Great Atlantic & Pacific Tea Co., 1936, 299 U.S. 32, 57 S.Ct. 56, 81 L.Ed. 22. That case involved tax on certain types of retail stores based upon an accumulated graduated scale. The Valentine case was first heard by a three-judge District Court, Great Atlantic & Pacific Tea Co. v. Valentine, 12 F.Supp. 760, 765, in which it was said:
"In these particulars the cases are different, but we are unable to say that such differences permit the escape of a similar condemnation as being arbitrary and discriminatory under the pronouncements in the Stewart Case. The additional and higher brackets with corresponding increase in the gross sales tax in the Iowa statute make the discrimination more apparent. The limitation in the classification to the taxation of chain stores only could not change the nature of the tax, and this would be true, giving consideration to the distinctive business species of the chain stores and- all economic and welfare questions which are brought about by their advantages in making sales. Such questions might well bear on the propriety of the classification, but not on what constitutes the form or nature of a tax.

"In section 4(b) of the Iowa statute we find the tax determined on a basis of the amount of gross sales of merchandise on an accumulative graduated scale and at a fixed rate on each such classification. It thereby becomes indirectly a tax upofi each sale and results in an exaction of taxes in the larger graduated class in a greater amount and proportion than those exacted from a business doing the same thing where the amount of the gross sales is smaller. For instance, a merchant in the first class under section 4(b) doing a business of $50,000 a year would pay a tax of 1/20 of 1 per cent, on each dollar of goods sold; the eighth class' chain store doing a business of $500,000 would pay a tax of 14/20 of 1 per cent, on each dollar; the chain store in the last class doing a business of more than $9,000,000 'would pay a tax of approximately 120/20 of 1 per cent., or 6 per cent., on each dollar of goods sold, and 120 times the rate provided for the gross sales in the smallest classification."
The essence of the Stewart Dry Goods decision is that the amount of the tax must bear a reasonable relation to the value of the thing taxed. If the tax is deemed a license tax, it must bear a reasonable relation to the value of the privilege obtained in return. If it is a gross receipts tax, it must bear a reasonable relation to the value of the gross receipts.
Typical computations of the taxes operation are as follows:
Amount of daily pool Tax rate Total commission Tax Net comm.
$ 50,000. 5%, $ 8,500.00 $ 2,500.00 $ 6,000.00
50,001. $2500 & 8% 8,500.17 2,500.08 6,000.09
75,000. same 12,750.00 4,500.00 8,250.00
75,001. $4500 & 9% 12.750.17 4,500.09 8,250.08
100,000. same 17,000.00 6,750.00 10,250.00
100,001. $6750 & 10% 17,000.17 6.750.10 10,250.07
125,000. same 21,250.00 9,250.00 12,000.00
125,001. $9250 & 11% 21.250.17 9.250.11 12,000.06
150,000. same 25,500.00 12,000.00 13,500.00
150,001. $12,000 & 12% 25.500.17 12,000.12 13,500.05
200,000. same ,34,000.00 18,000.00 16,000.00
The question here to determine is whether the collection of $8,500 gross receipts out of a $50,000 pool may be taxed $2,500; whether the collection of $17,000 gross receipts out of a $100,000 pool may be taxed $6,750; whether the collection of $34,000 gross receipts out of a $200,000 pool may be taxed $18,000; and whether each status bears a reasonable relation to the others.
This Court applied the holdings of the United States Supreme Court in the Stewart and Valentine cases in the cases of State ex rel. Lane Drug Stores v. Simpson, 122 Fla. 582, 166 So. 227; State ex rel. Adams v. Lee, 122 Fla. 639, 166 So. 249; Chavers v. Harrell, 122 Fla. 669, 166 So. 261. In the case of State ex rel. Lane Drug Stores v. Simpson, supra, two taxes were sought to be imposed. The first was a graduated license tax based on the number of stores in the chain, and the second was based on gross receipts graduated according to the number of stores in the chain. In an opinion by Associate Justice Frank A. Smith, this Court upheld a graduated license tax based on the number of stores in the chain as having a reasonable basis in the advantages of multi-store operation. The second tax based on gross receipts graduated according to the number of stores in the chain was held invalid as denying equal protection of the laws. In the opinion it was held [122 Fla. 582, 166 So. 236]:
"Under subdivision A the store or chain of stores pays for the privilege of enlarging or continuing in business and there is no unjust discrimination as between the different classes. Under class 1 of subdivision B, all stores are treated alike, so that none can complain, for each store or each store in a chain of stores must pay identically the same rate of tax. However,, under the different classes of subdivision B w.e find that the chain store would not merely be paying for a privilege of greater opportunity which it has already obtained by complying with the law and paying the flat tax applicable to its classification, but it is being charged also according to, if not for, what it has collected during the preceding month without any logical relationship between the amount of its collections (receipts) and a commensurately enhanced opportunity to be enjoyed in the new month. We see no logical reason for saying that A should pay a higher tax because he has sold and collected for an article of merchandise a certain price than B should pay for selling and collecting for the same article at the same price, simply because B had a greater number of stores and had collected more money during the previous month."
In the case of State ex rel. Adams v. Lee, supra, the same result was reached in an opinion of this Court, written by Mr. Justice Davis, [122 Fla. 639, 166 So. 258] when he said:
" The 'realization' privilege, when contrived to be burdened with a license tax measured solely by the gross sales or gross receipts realized in the •course of exercise of the taxable privilege, so proposed to be charged for as a means •of raising revenue, is in its nature variable solely and only according to the amount of 'the realization, and not by the nature or quality of the instrumentality of realization. To put it another way, the privilege of enjoyment (or realization) is the same as to each dollar realized, whether the realization be from a single place of business or from a group of business places •considered in the aggregate. A privilege "tax measured by the amount of gross receipts realized in the conduct of a business during a specified period of computation, if classified as is done in subdivision B for the imposition of a varying rate of taxation •solely predicated upon the character of business by which the same given amount •of gross receipts might be realized, would -inherently so operate as to exact from two persons, enjoying exactly the same privilege, different amounts for doing exactly -similar acts merely because the one has adopted one method of exercising the privilege while the otjier has chosen a different method."
In a Special Concurring Opinion in the .'Simpson case, Mr. Justice Brown said:
"All members of the court are agreed that a gross receipts tax cannot, under the Constitution, be graduated in the manner attempted by subdivision B of section 4 of the act here under review. "
It, therefore, appears that the doctrine established by the Supreme Court of the United States in the Stewart and Valentine cases has been strictly followed in Florida and is the controlling law in Florida on the subject now under consideration.
In the case of State ex rel. Cole v. Keller, 129 Fla. 276, 176 So. 176, in an opinion by Mr. Justice Terrell, a tax levied by the City of Tampa upon the graduated gross income of attorneys at law was held to be invalid. See also City of DeLand v. Florida Public Service Company, 119 Fla. 804, 161 So. 735.
One main difference in the Stewart case and,the case now before the Court is that in the Stewart case the graduated gross receipts tax was on an annual basis while in this case the graduated gross receipts tax is on a daily basis. The fact of discrimination is the same but is probably greater when the tax is figured on a daily basis rather than an annual basis.
It should be borne in mind that the total amount which the track may take from the daily pool is 17‡ on the dollar of the gross. From that 170 the- State, prior to 1953, exacted- 50, leaving the track 120 on the dollar to pay all losses, expenses and for profits. The additional tax imposed in 1953 was upon several different classifications based upon the size of the daily gross receipts for the new classifications. The size of the gross daily take is based upon many features such as the number of people who attend and the amounts they bet, weather conditions, the attractiveness of the track, the advertising which may be done at the expense of the track, the class of dogs racing at the track which is largely determined by the purses offered at the expense of. the track. It is naturally concluded that the amount of money the track spends in sales promotion will have a direct bearing and influence upon the amount of the gross receipts making up the daily pool. The daily pool is made up from all of the bets of all of the people who attend the track that day and it makes no difference whether each bet is taxed or the sum total of the bets is taxed, the result is the same. The sole basis for the increased tax on the different pools of the different tracks in the different classifications is the size of the pool.
In his final decree the Chancellor stated:
" the tax is imposed upon the track operator for the privilege, not of selling individual chances, hut of conducting the pool, regarding the operation of the pool as a single taxable transaction, $ »
The Chancellor overlooked the fact that the flat tax paid by the operator gave him the privilege of selling individual chances and of conducting a pool. The tax involved is an additional tax upon additional classifications based upon the amount of the daily pool and with a different rate of taxation for each such classification. There could be no daily pool without the sale of individual chances. The number of individual chances and the amounts bet determines the gross daily receipts and the daily pool.
The additional tax imposed based upon the new classifications determined solely by the size of the daily gross receipts is a gross receipts tax. The classifications are for tax or revenue purposes and such classifications are not based upon any substantial difference between the various classes established but appear to be purely arbitrary and capricious. The effect of the attempted imposition of the tax is a denial of the equal protection of the laws guaranteed by the Fourteenth Amendment of the Constitution of the United States and the Declaration of Rights of the Constitution of the State of Florida.
Reversed.
ROBERTS, C. J., SEBRING, J., and LEWIS, Associate Justice, concur.
TERRELL, THOMAS and DREW, JJ.» dissent.