A privilege tax may perform the double function of regulating
the business under the police power and of producing revenue if
authorized by the law of the state.
Under the Fourteenth Amendment, neither the state nor its
municipality can confer or exercise arbitrary power in classifying
for purpose of regulating, licensing, or taxing.
Whether the power of classifying be exercised by the state
directly or by the municipality, it is the exercise of legislative
discretion and subject to the guarantee of the Fourteenth
Amendment.
The power of the state to determine what occupations shall be
subject to license and tax is subject to no limitations save those
of the due process and equal protection clauses of the Fourteenth
Amendment, and nothing in the Fourteenth Amendment prohibits the
state from delegating this power.
Gundling v. Chicago,
177 U. S. 183.
An ordinance imposing a license on business, dividing it into
several classes, and giving the power of classification to a
committee of the council with power of review by the entire council
is not an arbitrary exercise of power within the prohibitions of
the Fourteenth Amendment, and so
held as to the banker's
license tax of Richmond, Virginia.
An ordinance imposing license taxes and authorizing
classification which provides for a review will not be held
unconstitutional because
Page 227 U. S. 478
the reviewing power might approve of an unjust classification --
such an objection would apply to any tribunal.
The presumptions are that the tribunal charged with the duty of
determining whether a classification is proper will not perform its
duty unjustly.
If the right to be heard and obtain a review does not avail to
protect rights under the Constitution, the right to judicial review
remains under the general principle of jurisprudence.
Kentucky
Railroad Tax Cases, 115 U. S. 321.
The burden is on the one who complains of his classification
under a legal ordinance to how that he was denied equal protection
of the law by such classification.
Where errors of administration in classifying for taxation can
be corrected on review, one complaining that he was denied equal
protection of the laws must avail of the method provided before
applying to the federal courts for protection under the Fourteenth
Amendment.
Where it is a clearly apparent error, this Court will take
notice of evident omission in the transcript of record of the word
"not."
110 Va. 521 affirmed.
The facts, which involve the constitutionality under the due
process and equal protection provisions of the Fourteenth Amendment
of a license ordinance of the City of Richmond, Virginia, are
stated in the opinion.
Page 227 U. S. 480
MR. JUSTICE LURTON delivered the opinion of the Court.
Plaintiff in error was convicted in the Hustings Court of
Richmond for the violation of an ordinance forbidding the carrying
on of the business of a "private banker" without a license. This
judgment was affirmed by the supreme court of the state.
Numerous objections to the ordinance and to the tax, arising
under the law and Constitution of the state, were decided adversely
to the plaintiff in error. With these we have no concern. The case
comes here upon the claim made in the state court, and denied, that
the ordinance denies both the equal protection of the law and due
process as guaranteed by the Fourteenth Amendment.
The ordinance in question requires all persons desiring to
pursue certain businesses and occupations to pay a special license
tax for the privilege of prosecuting such business. Many pursuits
are named, among them real estate agents, commission merchants,
brokers, auctioneers, private bankers, etc. The persons required to
pay such special license tax are to be divided by the finance
committee of the city council into thirteen classes. The amount
required to be paid by each class is as follows: first class, $800;
second class, $600; third class, $400; fourth class, $300; fifth
class, $250, and so on in decreasing amounts to the thirteenth
class, which is required to pay only $10. This classification by
the finance committee is to be made with the advice and assistance
of "the commissioner of revenue, the city tax collector, or any
city officer."
The tax imposed is not merely an exercise of the police power
regulating a business, but is a tax assessed as a condition upon
which the license issues. Though it fulfills the double function of
both regulating the business and producing revenue, it was fully
authorized by the law of the state, as adjudged by the very
judgment under review:
Page 227 U. S. 481
Gundling v. Chicago, 177 U. S. 183,
177 U. S. 189.
Since the purpose of the statute is double, it is plain that the
exact the same amount from each person or firm subject to the tax
might result in inequality of burden under like circumstances and
conditions. Therefore it was that the ordinance provided for a
division into classes, those in each class paying the same tax.
The objection to the ordinance does not grow out of any
contention that there may not exist just and reasonable
distinctions justifying a greater tax upon some of these persons or
firms engaged in doing what is called a "private banking" business
than upon others engaged in the same general business, but arises
from the fact that the law provides no rule by which some are to be
placed in one class and some in another. An ordinance which commits
to a board, committee, or single official the power to make an
arbitrary classification for purposes of taxation would meet
neither the requirement of due process, nor that of the equal
protection of the law.
But this ordinance does not authorize any arbitrary
classification, nor could the state or the council legally confer
or exercise arbitrary power in classifying for the purpose of
either regulating or licensing or taxing. T he guaranty of the
Fourteenth Amendment would forbid.
But whether the power of classifying be exercised by the state
directly or by a city council authorized to require the payment of
such a tax as a condition to the issuance of a license, it is at
last the exercise of legislative discretion, and is subject, in
either case, to the guaranty referred to.
But when the matter concerns the determination of the business
or occupation which may be required to take out a license and pay a
tax as a condition of obtaining such a license, the power of the
state is subject to no limitations save those found in the guaranty
of due process and the equal protection of the law. In the present
instance, the state has delegated this power of selecting the
businesses
Page 227 U. S. 482
and occupations carried on within the City of Richmond, and of
dividing them into classes and determining the amount of the tax to
be paid by the members of each class. The state supreme court has
decided that there can be no objection under the constitution of
the state to such delegation. Neither do we see any reason under
the Fourteenth Amendment why the state may not delegate to either
the council of the city or to a board appointed for that purpose
the power to divide such occupations or privileges into classes or
subclasses, and prescribe the tax to be paid by the members of each
such class.
Gundling v. Chicago, 177 U.
S. 183;
Fischer v. St. Louis, 194 U.
S. 361,
194 U. S. 372;
Leiberman v. Van De Carr, 199 U.
S. 552,
199 U. S. 560.
In the case last cited, this Court said:
"That this Court will not interfere because the states have seen
fit to give administrative discretion to local boards to grant or
withhold licenses or permits to carry on trades or occupations, or
perform acts which are properly the subject of regulation in the
exercise of the reserved power of the states to protect the health
and safety of its people, there can be no doubt."
That this ordinance does not contemplate any arbitrary
discrimination between the persons or firms subject to the license
tax is evident from the direction that they shall be divided into
thirteen classes, the members of each class to pay the particular
amount named as a condition to the issuance of a license. It is
also evident from the provisions in respect of notice, right to be
heard, and a right to a review by the council itself. These are
obvious guards against unjust and capricious inequalities.
The authority to classify is given to the finance committee of
the city council. That was a committee of eleven members of a city
council composed of forty members. The ordinance required this
committee to make a tentative classification with the advice and
assistance of certain city officials supposed to be acquainted with
the general
Page 227 U. S. 483
subject. W hen made, the classification is required to be filed
in the office of the city auditor for public inspection. The
auditor is then required to give notice through two city newspapers
that the tentative assessment is so filed in his office for
examination, and that all persons affected may be heard by the
finance committee at times and places specified. From the final
classification made by the committee, the ordinance permits any
aggrieved person to appeal to the full city council, and there
obtain a review.
But it is said that, after all, there is no security that the
city council will not, in the end, approve of a scheme of
classification operating most unjustly. The same objection might be
made with reference to any tribunal required to determine such a
matter. The presumptions which must be indulged run counter to the
suggestion made.
If the right to appear and be heard and to obtain a review
should prove illusory, there would, under general principles of
jurisprudence, remain the right to judicial review if the result
should violate either a right secured under the law of the state or
that of the United States. This is the right which plaintiff in
error has in this very case asserted.
Kentucky Railroad Tax
Cases, 115 U. S. 321,
115 U. S.
335-336.
There was obviously no want of due process of law in the
imposition of the tax.
Finally, the plaintiff in error says that the actual operation
of the ordinance has brought about an unjust and illegal
discrimination in that he has been classified in such manner as to
subject him and his business to a higher tax, as a condition of
issuing to him a license, than that required of many other private
bankers. This was a defense made in the state court. But that
court, after saying that it was competent for the council to assign
private bankers to different classes, and that the plaintiff in
error
Page 227 U. S. 484
had been required to pay no greater license tax than all others
in the same class, said:
"In order to render the classification illegal, the party
assailing it must show that the business discriminated against is
precisely the same as that included in the class which is alleged
to be favored.
Norfolk &c. v. Norfolk, 105 Va. 139.
This has not been shown in the present case. On the contrary, it
appears that the business of the plaintiff in error is not
precisely the same with that of other private bankers who are put
in a different class and assessed with a less license tax."
That some private bankers were put into classes which subjected
them to less taxation than the class into which the plaintiff in
error was placed is the only allegation which would tend to show
discrimination. But there was evidence tending to show that the
business done by the plaintiff in error and ten other persons or
firms was that of lending money at high rates upon salaries and
household furniture, while the kind of business done by others in
the same general business was the lending of money upon commercial
securities. Obviously the burden was upon the plaintiff in error to
show an illegal and capricious classification. The state court said
that he had failed to show that these private bankers favored in
the classification were doing the same business.
In
Home Telephone Company v. Los Angeles, 211 U.
S. 265,
211 U. S.
280-281, the complaint was that the city, under an
authority to regulate the charges for telephone service, had given
a more favorable rate to a rival company and had thereby illegally
discriminated. After saying that the allegation of such difference
was "too vague to pass upon," this Court said:
"Whether the two companies operated in the same territory, or
afforded equal facilities for communication, or rendered the same
services, does not appear. For aught that appears, the other
company may have brought its
Page 227 U. S. 485
patrons into communication with a very much larger number of
persons, dwelling in a much more widely extended territory, and
rendered very much more valuable services. In other words, a just
ground for classification may have existed. Every presumption
should be indulged in favor of the constitutionality of the
legislation."
See also Sweet v. Rechel, 159 U.
S. 380,
159 U. S.
392.
But it is not necessary to rest our judgment upon the question
as to whether the plaintiff in error was rightly or erroneously
classified, because we are of opinion that he is not in a situation
to complain. There was obviously no want of due process of law in
the scheme of the ordinance. The occupations to be subjected to the
tax were defined. There was a maximum and minimum limitation as to
the amount of the tax, dependent upon the classification. The
classification was to be made after notice and a hearing and an
appeal from the final action of the committee was permissible. The
plaintiff in error might have appeared and shown the character and
extent of the business he was doing, and compared it with that of
others more favored in classification. He did nothing of the kind.
He seems to have stood by and let the matter of classification go
by without contest. It is no answer to say that it would have been
unavailing. The presumption is otherwise. The authority to classify
was committed primarily to the finance committee, subject to review
by the council. It was expected to use its judgment and knowledge.
If it erred, there was ample opportunity to show that by an appeal
to the council. Of the right to appear and to be heard plaintiff in
error elected not to avail himself. Under the circumstances, he is
not warranted in resorting to the extraordinary jurisdiction of
this Court to arrest an administrative error susceptible of
correction by an appeal to the council.
Gundling v.
Chicago, 177 U. S. 183,
177 U. S. 186;
Chicago B. & Q. R. Co. v. Babcock, 204 U.
S. 585,
204 U. S.
598.
Page 227 U. S. 486
It is true that, in the opinion of the Hustings Court, it is
inadvertently said that of the opportunities afforded by the act
for curing any wrong he had "availed himself." It is likely that
the word "not" has been accidentally omitted. This we say because
the brief of the defendant in error says that he did not appeal to
the city council, and in the brief of the plaintiff in error this
is admitted. In addition, we add that there is no evidence that he
in any way appeared or pointed out any injustice done him.
Judgment affirmed.
MR. JUSTICE LAMAR concurs in the result.