Great Atlantic & Pacific Tea Co. v. Grosjean
301 U.S. 412 (1937)

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U.S. Supreme Court

Great Atlantic & Pacific Tea Co. v. Grosjean, 301 U.S. 412 (1937)

Great Atlantic & Pacific Tea Co. v. Grosjean

No. 652

Argued March 30, 31, 1937

Decided May 17, 1937

301 U.S. 412

Syllabus

1. Without contravening the equal protection clause of the Fourteenth Amendment, a State may separately classify for taxation the conduct of a chain store, and may increase the rate in proportion to the increase in the number of stores within the State, since the opportunities and powers of a chain store operator become greater with the growth of the number of units maintained. Fox v. Standard Oil Co.,294 U. S. 87, 294 U. S. 100. P. 301 U. S. 419.

2. In adjusting the rate for a chain store within the State, the legislature may take into account the size of the chain to which the store belongs by counting the total number of its units, wherever located. P. 301 U. S. 419.

3. Act No. 51, of Louisiana, 1934, which lays a progressively increasing rate of taxation on the operation of chain stores within the State, taking into account all the stores in the chain, whether within the State or outside, does not arbitrarily discriminate against sectional or national chains in favor of intrastate chains. P. 301 U. S. 421.

The findings on evidence showed that the competitive advantage of chains increased with the number of component links, and that the addition of units to a chain increased the competitive advantage of each store in the chain.

4. That the statute, by taking into account all units indiscriminately in fixing the rate, may fail accurately to adjust the fee charged to the value of the local privilege taxed is not a good reason for adjudging it arbitrary. P. 301 U. S. 423.

5. The subject of the Louisiana tax is the prosecution of a defined business activity within that State, viz., the conduct of a retail

Page 301 U. S. 413

store which is part of a chain under a single management, ownership, or control; the measure of the tax is the number of units of the chain within the State; the fact that the rate of tax for each such unit is fixed by reference to all the units of the chain, including those operated elsewhere, does not, in legal effect, result in taxation of property or privileges enjoyed by the taxpayer beyond the borders of the State. P. 301 U. S. 424.

6. The Louisiana tax, supra, may be further upheld as taxation in aid of a policy of the State to mitigate evils of competition as between single stores and chains, or a policy to neutralize disadvantages of small chains in their competition with larger ones, or to discourage merchandising within the State by chains grown so large as to become a menace to the general welfare. P. 301 U. S. 425.

7. Within its police power, the State may forbid the prosecution of a particular type of business inimical to the public welfare, or regulate such business to abate evils arising from its pursuit. P. 301 U. S. 425.

8. Whatever a State may forbid or regulate it may permit upon condition that a fee be paid in return for the privilege, and such a fee may be exacted to discourage the prosecution of a business or to adjust competitive or economic inequalities. P. 301 U. S. 426.

9. The policy a State is free to adopt with respect to the business activities of her own citizens she may apply to the citizens of other States who conduct the same business within her borders, and this irrespective of whether the evils requiring regulation arise solely from operations in the State or are in part the result of extra-state transactions. P. 301 U. S. 427.

10. A party subjected to a state tax only in respect of local activities cannot have an advisory decree against a possible administration of the taxing Act which would burden or regulate his related activities in interstate commerce. Pp. 301 U. S. 427, 301 U. S. 429.

16 F.Supp. 499 affirmed.

Appeal from a decree of the District Court of three judges dismissing a bill to enjoin the enforcement of a tax on chain stores. The Atlantic & Pacific Tea Company was the original plaintiff. Other chain store operators intervened.

Page 301 U. S. 417

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