Court Opinion

ID: 9418717
Source: CourtListenerOpinion
Date Created: 2023-08-02 22:37:12.210503+00
Date Added: 2024-06-11T17:22:08.826509
License: Public Domain

Me. Justice Sutherland,
dissenting.
By the statute here under review, the operation of any “ store ” within the state without a license is made unlawful. The license fees to be paid are graduated according to the number of “ stores ” to be operated “ under the same general management, supervision or ownership.” Upon one store, the annual license fee is $3; upon two or more up to five, $10 for each additional store; in excess of five but not exceeding ten, $15 for each additional store; in excess of ten but not exceeding twenty, $20 for each additional store; and in excess of twenty, $25 for each additional store.
Upon the face of the statute the sole differentiation on which the graduated and rapidly mounting license fees depend consists in the number of stores operated. But the tax is imposed in respect of a single “ store,” without regard to kind, value, size, amount invested, amount or character of business done, income derived, or other distinguishing feature. The number of stores is a collateral circumstance used only to determine the amount of the license fee to be exacted in respect of each of them. A retailer pays the same as a wholesaler; the owner of a small corner grocery, operated by him alone, the same as the owner of a large department store employing hundreds of clerks. To determine that a tax of $25, instead of $3, $10, $15, or $20, shall be imposed in respect of any store, it is necessary only to have an affirmative answer to the inquiry: Is this store operated by a person who already owns or operates twenty or more stores? These facts are of controlling importance because they give rise to the *544point upon which the question of constitutionality depends.
It is settled that the power of the State to classify for purposes of taxation is of wide range and flexibility; but that, while the difference upon which the classification is based need not be great, mere difference is not enough. Classification, to be legitimate, must rest upon some ground of difference having a reasonable and just relation to the object of the legislation. All persons similarly circumstanced must be treated alike. Louisville Gas Co. v. Coleman, 277 U. S. 32, 37, and cases cited. These principles, repeatedly stated by this Court, are fundamental; and it reasonably cannot be doubted that their application to the present act, unless saved by certain extrinsic circumstances to be considered later, necessarily condemns it as unconstitutional. I am unable to find in any of these circumstances, or in all of them together, justification for a classification which results in distributing the burden of taxation with such evident inequality.
The purpose of the act is to raise revenue, and upon that theory the decision of this Court is based. The contention that the act constitutes an exercise of the police power finds no support in the record and was but faintly urged at the bar. Whether the classification could be justified if the statute were other than a revenue measure, is a question, therefore, with which we are not now concerned. The pertinent and only question is whether between a store constituting one of a series under unified management, supervision or ownership, and a store under single and distinct management, supervision or ownership, there are such differences as to justify putting them in separate categories with the object of imposing, for the sole purpose of revenue, a larger tax in respect of one than in respect of the other. If the differences bear no just and reasonable relation to that object, the classification cannot be sustained, although the same differences *545might bear such a relation to some other and different object.
In the State of Indiana there are approximately 44,000 retail stores engaged in the same general lines of business, only eight per cent, of which are so-called “ chain stores.” Among them are single stores each of greater value than all the stores of appellee combined, and each doing a business in excess of all that done by appellee. For example, there are two large department stores in the City of Indianapolis each doing a business of more than $8,000,000 per annum, one operating 124 separate departments and the other, 86 separate departments, but each pays a license fee under the statute of only $3 per annum; while appellee, owning 225 separate stores and doing a total business of approximately $1,000,000 per annum, pays license fees of $5,443 per annum—eighteen hundred times as much! Each of several owners of a large number of stores, (145 in one instance) who happens to have only one store in Indiana, pays a license fee of $3, contrasted with the payment of $25 for each store over twenty owned by appellee. Appellee, upon 205 of his stores, pays the aggregate sum of $5,125; while the proprietors of 205 stores, held and operated separately, pay in the aggregate only $615, although they or some of them may be of equal or greater value, equally well or better located, doing as much or more business, and producing as much or more income. The evidence further shows that a “ cooperative volunteer chain ” consisting of several hundred stores in Indiana paying an annual license fee of only $3 each, operates under an association called the Independent Grocers’ Alliance. The association carries on cooperative buying and advertising for the benefit of the members of the group; and it seems clear that as to most, if not all, of the advantages said to be enjoyed by the chain stores the volunteer cooperative group occupies a position of equality.
*546These are obvious and flagrant discriminations which put upon the act the clear stamp of unconstitutionality, unless the differences relied upon are germane to, and reasonably sufficient in substance to sustain, the proposed imposition of license fees of such unequal amounts upon different persons following identical occupations.
What, then, are the differences, or so-called advantages, relied upon to justify the classification? They were, in their strongest aspect, stated by an expert witness called by the appellants in support of the act, as follows: The ability of the chain stores to make large quantity purchases; to pay cash and thus obtain the advantage of discounts; skill in buying so as to avoid either overstocking or understocking; warehousing in, and distribution from, a single warehouse for numerous stores; large capital with the advantages flowing therefrom; certain pricing and sales policies resulting in slightly lower prices on the part of the chain stores as compared with single stores; more rapid turn-over of goods; cheaper and better advertising; superior management; standardization in the matter of display; standardization of store management; and similar elements thought to have a beneficial effect upon the disposition of goods.
But the effect of this enumeration of supposed advantages is completely swept away by the testimony of the same witness on cross-examination, which stands upon the record without dispute, that they are not confined to the chain stores, but are enjoyed as well by such of the favored taxpayers as aré engaged in large business, whether in a single establishment or in many establishments.
“ Every advantage that I have spoken of as relating to the chain group is that which inheres, primarily, in volume and management without respect to whether it is involved in a chain group or in a single store. Good management makes for volume and volume makes for the *547possibility of making or acquiring more capital, and more capital makes for the possibility of employing the highest grade of experts, so that there is constant intercommunication or revolving. I would find the same advantage adhering in a large department store over a small one. Every quality that I have enumerated as going to the manner of organization relates itself, primarily, to there being a sufficient capital structure and volume of business to permit it to be carried on and I would add management in that it is an essential part of it.
“Q. So that it does not relate itself to the form of organization—whether they are administering fifty or a hundred stores, or administering one store.
“A. No, no.
“ Q. The fact that it is administering multiply-owned stores has nothing to do with it, but it- is the fact that it is administering a large business that develops the situation that you have referred to?
"A. That is true. But I might add that the management of a large number of stores may contribute to the more rapid increases in the size.
“ Q. Just as the manager of a large unit store, with many departments, may develop the ability to strengthen and enlarge those departments?
“A. Yes.
“ Q. And the problem would be identical, wouldn’t it in the case of Macy or Gimbel—or, taking it locally, in connection with Ayres, or Block?
“A. Yes, I would say the problem would be the same. There is no difference in the functions that are performed here—the function-of retailing.”
It thus appears that the advantages attributed to the chain store lie not in the fact that it is one of a number of stores under the same management, supervision or owner*548ship, but in the fact that it is one of the parts of a large business. In other words, the advantages relied upon arise from the aggregate size of the entire business, and not from the number of parts into which it is divided. For the want of a valid ground upon which to stand, therefore, the classification should fall, because it is made to depend not upon size or value or character, amount of capital invested or income received, but upon the mere circumstance—wholly irrelevant so far as any of the advantages claimed are concerned—that the business of one is carried oh under many roofs, and that of the other under one only. Reduced to this single detail of difference, what fairly conceivable reason is there in the policies or objects of taxation which gives countenance to the requirement that the former shall make an annual contribution to the revenues of the state eighteen hundred times as much as the latter? A classification comparable in principle would be to make the amount of an income tax depend upon the number of sources from which the income is derived, without regard to the character of the sources or the amount of the income itself.
Since the supposed differences thus are reduced to the one of number only, and, since that turns out to be irrelevant and wholly without substance, it follows that the act is a “ clear and hostile discrimination” against a selected body of taxpayers, Bell’s Gap R. Co. v. Pennsylvania, 134 U. S. 232, 237—a mere subterfuge by which the members of one group of taxpayers are unequally burdened for the benefit of the members of other groups similarly circumstanced. All of which is to say that the legislature has misapplied its power to classify with the result of reaching an end forbidden by the Fourteenth Amendment.
To this situation the language of Mr. Justice Field in County of Santa Clara v. Southern Pac. R. Co., 18 Fed. 385, 399, seems peculiarly applicable.
*549“ Unequal taxation, so far as it can be prevented, is, therefore, with other unequal burdens, prohibited by the amendment. There undoubtedly are, and always will be, more or less inequalities in the operation of all general legislation arising from the different conditions of persons, from their means, business, or position in life, against which no foresight can guard. But this is a very different thing, both in purpose and effect, from a carefully devised scheme to produce such inequality; or a scheme, if not so devised, necessarily producing that result. Absolute equality may not be attainable, but gross and designed departures from it will necessarily bring the legislation authorizing it within the prohibition. The amendment is aimed against the perpetration of injustice, and the exercise of arbitrary power to this end. The position that unequal taxation is not within the scope of its prohibitory clause would give to it a singular meaning. It is a matter of history that unequal and discriminating taxation, leveled against special classes, has been the fruitful means of oppressions, and the cause of more commotions and disturbance in society, of insurrections and revolutions, than any other cause in the world.”
It seems plain enough that we have in the present case “a carefully devised'scheme to produce such inequality; or a scheme, if not so devised, necessarily producing that result.”
In Quaker City Cab Co. v. Pennsylvania, 277 U. S. 389, this Court held invalid a Pennsylvania statute which imposed a tax upon the gross receipts of a corporation engaged in the general taxicab business, but not upon like receipts of individuals and partnerships engaged in the same business. The differences relied upon as justifying the tax'are fairly comparable with those relied upon in the present case. It was said that there were advantages peculiar to the corporate organization not enjoyed by indi*550viduals or partnerships, such as those pointed out in Flint v. Stone Tracy Co., 220 U. S. 107, 162: “ The continuity of the business, without interruption by death or dissolution, the transfer of property interests by the disposition of shares of stock, the advantages of business controlled and managed by corporate directors, the general absence of individual liability, these and other things inhere in the advantages of business thus conducted, which do not exist when the same business is conducted by private individuals or partnerships.”
These advantages, although brought sharply to the attention of the Court, were not considered as constituting differences having a reasonable relation to the object of the taxing act, and the tax was held unconstitutional as denying to the corporation the equal protection of the laws. It is hard to see how that conclusion can be reconciled, in principle, with the present-decision. See also Royster Guano Co. v. Virginia, 263 U. S. 412, 415; Bethlehem Motors Co. v. Flynt, 256 U. S. 421; Kansas City So. Ry. v. Road Imp. Dist. No. 6, 256 U. S. 658; Air-Way Corp. v. Day, 266 U. S. 71, 83, 85; Louisville Gas Co. v. Coleman, 277 U. S. 32, 37. A long list of illustrative cases which tend to support the view that the act in question is violative of the equal protection clause of the Fourteenth Amendment readily could be added; but nothing would be gained by doing so.
A large number of decisions are cited in support of the act. They,- as well as those cited above, demonstrate the impossibility of stating precisely or categorically the distinction between such statutes as fall within, and such as fall without, the ban of the Constitution. The decisions have depended not only upon the varying facts which constituted the background for the particular legislation under consideration, but also, to some extent, upon the point of view of the courts or judges who have been called upon to deal with the question. Some of the cases press *551.to the limit fixed by the Constitution; and that fact, while affording no ground for objection to the cases themselves, admonishes us to use caution in applying them to other sets of substantially dissimilar circumstances, lest, by doing so, we pass into the forbidden territory which lies wholly beyond the verge. I am unable to discover in any of the prior decisions of this Court, including those cited, anything, which in the light of the facts and circumstances herein set forth, lends support to the claim of validity for the classification here under consideration.. To attempt an extended review of the cases thought to do so is not necessary. It will be enough to refer to those which seem to be regarded as most strongly in point.
American Sugar Rfg. Co. v. Louisiana, 179 U. S. 89, involved the validity of a license tax upon those carrying on the business of refining sugar and molasses, but exempted planters and farmers grinding and refining their own sugar and molasses. The classification was upheld upon the ground that the steps taken by planters and farmers to perfect their product for the market were an incident to the original growth of the cane; and that this distinction saved the classification from being purely arbitrary, oppressive or capricious. It was, as this Court pointed out in Connolly v. Union Sewer Pipe Co., 184 U. S. 540, 561, a tax upon the business of refining sugar and molasses, exempting therefrom those who refined only their own sugar and molasses.
In Cargill Co. v. Minnesota, 180 U. S. 452, the statute required that the owner of an elevator or warehouse situated on the right of way of a railroad, etc., should procure a license therefor at a nominal fee. The act was assailed because it did not apply to elevators and warehouses not so situated. The Court sustained the classification because the railroad was a public highway, the use of which could be so regulated as to promote the ends for which the corporation was created and thus subserve the interests *552of the general public. Moreover, it was neither alleged nor proved in that case that there were in the state any elevators or warehouses not situated upon a railroad right of way.
In Quong Wing v. Kirkendall, 223 U. S. 59, the statute involved imposed .a license fee on hand laundries, but not upon steam laundries, and exempted from its operation laundries not employing more than two women. The •classification was sustained, principally upon the authority of the two cases referred to immediately above.
In Metropolis Theatre Co. v. Chicago, 228 U. S. 61, a classification of theatres for license fees graded according to the prices of admission was held not to be arbitrary or unreasonable, because, although there might be exceptional cases, there was a natural relation between the price of admission and revenue.
While opinions might differ in respect of the wisdom or fairness of some of the statutes involved, as, for example, the laundry tax statute which taxed the small hand laundry and exempted the large steam laundry, the differences were germane to the object and sufficiently substantial to save the classification in each case from being condemned as purely arbitrary or capricious.
It may be that here the maximum tax of $25 for each store, while relatively high, is not, if considered by itself, excessive; but to sustain it will open the door of opportunity to the state to increase the amount to an oppressive extent. This Court frequently has said, and it can not be too often repeated in cases of this character, that the power to tax is the power to destroy; and this constitutes a reason why that power, however moderately exercised in given instances, should be jealously confined to the limits set by the Constitution. Compare Knowlton v. Moore, 178 U. S. 41, 60. In Veazie Bank v. Fenno, 8 Wall. 533, a tax of ten per cent, imposed on the notes of state banks was upheld, although it “ drove out of existence every state *553bank of circulation within a year or two after its passage,” Loan Association v. Topeka, 20 Wall. 655, 663-664. In the face of this decision, and others which might be cited, there, does not seem to be any sure comfort in the suggestion, sometimes made, that this Court may be expected to intervene whenever the tax reaches the point of destruction.
For the foregoing reasons, the judgment below should be affirmed.
Me. Justice Van Devanter, Mr. Justice McReynolds, and Mr. Justice Butler concur in this opinion.