1. Failure of the District Court to make findings of fact as now
required by Equity Rule 70 1/2 does not necessitate remanding a
case tried before the rule was adopted. P. 283 U. S.
2. In classifying businesses for taxation, the legislature is
not confined to the value of the business taxed, but may have
regard for other elements. P. 283 U. S.
3. As applied to the fundamental state power of taxation, the
equal protection clause does not compel the adoption of an iron
rule of equal taxation, nor prevent variety or differences in
taxation, or discretion in the selection of subjects, or the
classification for taxation of properties, businesses, trades,
callings, or occupations. P. 283 U. S.
4. The fact that a statute discriminates in favor of a certain
class does not make it arbitrary if the discrimination is founded
upon a reasonable distinction, or if any state of facts reasonably
can be conceived to sustain it. Id.
5. In determining the validity of a tax under the equal
protection clause, it is not for the court to consider the
propriety or justice
Page 283 U. S. 528
of the tax, or to seek for the motive, or criticize the public
policy, which prompted its adoption by the legislature. P.
283 U. S.
6. A legislative classification of occupation for taxation must
be sustained if there are substantial differences between them, and
the differences need not be great. Id.
7. An Indiana statute lays an annual license tax on stores,
increasing progressively with the number of stores under the same
general management, supervision, or ownership, such that, in the
present case, the owner of a "chain" of some 225 stores selling
groceries, fresh vegetables, and meats was obliged to pay
$5,443.00, whereas the owner of a single store only, though it
involved a much greater investment and income, would pay but $3.00.
not violative of the equal protection clause in view
of the distinctions and advantage which combine and are exerted in
a single ownership and management of a series of like stores in
different locations, as compared with mere cooperative associations
of independent stores, or with department stores selling many kinds
of goods under the same roof. Pp. 283 U. S. 532
283 U. S.
8. The statute is not repugnant to Art. I, § 23, of the Indiana
"The General Assembly shall not grant to any citizen or class of
citizens privileges and immunities which, upon the same terms,
shall not equally belong to all citizens,"
nor to Art. 10, § 1, requiring a uniform and equal rate of
assessment and taxation and just valuations, which, as declared by
the state supreme court, applies only to the assessment made under
a general levy, and not to occupation or license taxes. P.
283 U. S.
38 F.2d 652
Appeal from a decree enjoining the Board of Tax Commissioners
from instituting prosecutions against the appellee Jackson for
failure to pay license taxes.
Page 283 U. S. 530
MR. JUSTICE ROBERTS delivered the opinion of the Court.
This is an appeal from the decree [Footnote 1
] of a specially constituted district court
enjoining the appellants from enforcing against the appellee the
provisions of Act No. 107 of 1929 of the General Assembly of the
State of Indiana. The appellee, by bill filed on behalf of himself
and all others similarly situated, charged that the
Page 283 U. S. 531
statute violates the Fourteenth Amendment of the Federal
Constitution and two sections of the Constitution of Indiana. It
averred, and the answer admitted, that, unless enjoined, appellants
would institute prosecutions against appellee under certain
sections of the act. After hearing, the district court entered a
perpetual injunction holding the law offensive to the federal and
to the state constitution.
The statute provides that it shall be unlawful for any person,
firm, association, or corporation, foreign or domestic, to
establish or operate any store [Footnote 3
] within the state without first obtaining from
the appellants a license, which must be renewed annually. It makes
the operation of a store without a license a misdemeanor punishable
by a fine of not less than $25 nor more than $100 for each day it
is so operated.
Section 5 of the act provides:
"Every person, firm, corporation, association, or copartnership
opening, establishing, operating, or maintaining one or more stores
or mercantile establishments within this state under the same
general management, supervision, or ownership shall pay the license
fees hereinafter prescribed for the privilege of opening,
establishing, operating, or maintaining such stores or mercantile
establishments. The license fee herein prescribed shall be paid
annually, and shall be in addition to the filing fee prescribed in
§§ 2 and 4 of this act."
"The license fees herein prescribed shall be as follows:"
"(1) Upon one store, the annual license fee shall be three
dollars for each such store; "
Page 283 U. S. 532
"(2) Upon two stores or more, but not to exceed five stores, the
annual license fee shall be ten dollars for each such additional
"(3) Upon each store in excess of five, but not to exceed ten,
the annual license fee shall be fifteen dollars for each such
"(4) Upon each store in excess of ten, but not to exceed twenty,
the annual license fee shall be twenty dollars for each such
"(5) Upon each store in excess of twenty, the annual license fee
shall be twenty-five dollars for each such additional store."
It is this section which appellee asserts renders the act
unconstitutional as applied to him.
The bill of complaint alleges, and it is admitted, that the
appellee is engaged in the business of selling groceries, fresh
vegetables, and meats at wholesale and retail in Indianapolis, and
has been so engaged for more than ten years, has capital invested
in his business in excess of $200,000, and annual sales of over
$1,000,000. He operates two hundred and twenty-five stores in the
said city, and more than five hundred persons, firms, associations,
and corporations, foreign and domestic, are engaged in the
operation of two or more stores in the state.
The bill charges that the graduation of the tax per store
according to the number of stores under a single ownership and
management is based on no real difference between a store part of
such a group and one individually and separately owned and
operated, or between the business transacted in them; that the
number of stores conducted by one owner bears no relation to the
public health, welfare, or safety, none to the size of the
enterprise as a whole, to its capital, its earnings, or its value;
that the classification made by the statute is without basis in
fact, is unreasonable and arbitrary, and results
Page 283 U. S. 533
in depriving him of his property without due process and denying
him the equal protection of the laws.
In the court below, appellants defended on the grounds that the
statute was an exercise of the police power and was also a revenue
measure which levied an ordinary occupation tax. They offered no
evidence to sustain the first ground mentioned, and do not press it
here. They now stand only upon the power of the legislature, in
prescribing an occupation tax, to classify businesses so long as
its action is not unreasonable and arbitrary. They say that the act
fulfills the constitutional requirement that, in so classifying,
the lawmaking body shall apply the same means and methods to all
persons of the same class, so that the law will operate equally and
uniformly, and all similarly circumstanced will be treated alike.
The district court held that the statute failed to conform to this
The act adopts a different measure of taxation for stores known
as chain stores from that applied to those owned and operated as
individual units. Evidence was offered by the appellee intended to
demonstrate that there are no substantial or significant
differences between the business and operation of the two kinds of
stores such as would justify the classification, and by the
appellants to prove the existence of such differences.
The district court failed to make findings of fact and law as
now required by Equity Rule 70 1/2, but contented itself with a
partial summary of the facts and certain general conclusions of
law. Had the rule been in force at the time of the trial, we should
feel constrained to remand the case with directions to make such
findings. We shall, in the circumstances, summarize the proofs.
In addition to the facts averred in the bill, above set forth,
the appellee offered uncontradicted evidence on the following
points. Of the retail stores of the country, approximately
Page 283 U. S. 534
63 percent are independent or community stores, 16 percent are
department stores, 12 percent are chain stores, and 4 percent are
mail order houses. Several department stores in Indianapolis doing
a much larger business than the appellee pay a tax of only $3, as
contrasted with his tax of $5,443, although their business is
highly competitive with that of chain stores. Persons owning a
greater number of stores, and with more money invested, in a
business similar to that of appellee, but having only one store in
Indiana, pay $3 because they have but one store in the state. Large
numbers of stores independently owned and controlled are members of
associations or "voluntary chains" under which cooperative buying
is conducted for the group, but each of them is required to pay a
license fee of only $3. The mere addition of a new unit or store to
an existing chain of stores does not increase the sales more than
arithmetically. The additional unit has its own expenses, and the
volume of sales of the former stores in the chain to which it
constitutes an addition is not increased by adding it.
The appellants produced evidence to prove that there are many
points of difference between chain stores and independently owned
units. These consist in quantity buying, which involves the
application of the mass process to distribution, comparable to the
mass method used in production; buying for cash and obtaining the
advantage of a cash discount; skill in buying, so as not to
overbuy, and at the same time keep the stores stocked with products
suitable in size, style, and quality for the neighborhood customers
who patronize them; warehousing of goods and distributing from a
single warehouse to numerous stores; abundant supply of capital,
whereby advantage may be taken of opportunities for establishment
of new units; a pricing and sales policy different from that of the
Page 283 U. S. 535
store, involving slightly lower prices; a greater turnover, and
constant analysis of the turnover to ascertain relative profits on
varying items; unified and therefore cheaper and better advertising
for the entire chain in a given locality; standard forms of display
for the promotion of sales; superior management and method;
concentration of management in the special lines of goods handled
by the chain; special accounting methods; standardization of store
management, sales policies, and goods sold.
The appellants' evidence indicated that all of these advantages
are interrelated and interdependent in the chain store business.
The witnesses conceded that some of them may be found in large
independent grocery or drug stores or the like, but they did not,
as appellee claims, state that all of them combined exist therein,
as in chain stores.
The record shows that the chain store has many features and
advantages which definitely distinguish it from the individual
store dealing in the same commodities. With respect to associations
of individual stores for purposes of cooperative buying, exchange
of ideas as to advertising, sales methods, etc., it need only be
remarked that these are voluntary groups, and that series of
independent units cannot, in the nature of things, be as
efficiently and successfully integrated as a chain under a single
ownership and management.
But the appellee, in proof and argument, drew a comparison
between the chain store and the department store which he insists
exhibits the classification of the statute as illusory and
arbitrary. He proved that there are two department stores in
Indianapolis, each doing a business in excess of $8,000,000 a year,
one having 124 and the other 86 separate departments, and that,
under the law, each pays a tax of only $3. He uses these facts to
give point to
Page 283 U. S. 536
his assertion that a store is not a unit of value. This argument
ignores the fact that, in determining how it shall classify
occupations for taxation, the legislature is not confined merely to
the value of the business taxed, but may have regard to other
While it is true that large department stores reap many of the
advantages and employ many of the methods of a chain store group,
such as large capital, buying in quantity, and the ability to
command the highest type of management, it is nevertheless evident
that, whereas a department store spreads its efforts over a number
of different sorts of shops under one roof, the chain store owner
concentrates its energy upon the conduct of but one kind of stores
located in many neighborhoods. Obviously greater specialization in
management and methods is possible in the latter type of enterprise
than in the former, whose management, however capable, must, after
all, consist of many separate types each devoted to a single store
similar to an independent retail store. The mass buying done by a
chain store owner for a number of units selling the same goods, is
not comparable to the individuated purchasing of a department store
for its grocery, its shoe, its drug, and each of its other
departments. It is not to be expected that the management problems
of stores, essentially separate and differing entirely in the
character of their business, under the aegis of a single department
store, will be the same as those involved in the intensive selling
of a chain store owner operating an equal number of units all
devoted to a single line of business.
Notwithstanding the differences disclosed between chain and
other stores, the court below found that
"all persons engaged in the operation of one or more stores . .
. belong to the same class, for occupational tax purposes, as
plaintiff, and should pay the same license fee, regardless of the
number of stores owned and operated by them,"
and that any other classification is arbitrary
Page 283 U. S. 537
and unconstitutional. It is this holding which the appellants
The principles which govern the decision of this cause are well
settled. The power of taxation is fundamental to the very existence
of the government of the states. The restriction that it shall not
be so exercised as to deny to any the equal protection of the laws
does not compel the adoption of an iron rule of equal taxation, nor
prevent variety or differences in taxation, or discretion in the
selection of subjects, or the classification for taxation of
properties, businesses, trades, callings, or occupations.
Bell's Gap R. Co. v. Pennsylvania, 134 U.
; Southwestern Oil Co. v. Texas,
217 U. S. 114
Brown-Forman Co. v. Kentucky, 217 U.
. The fact that a statute discriminates in favor
of a certain class does not make it arbitrary if the discrimination
is founded upon a reasonable distinction, American Sugar
Refining Co. v. Louisiana, 179 U. S. 89
, or if
any state of facts reasonably can be conceived to sustain it.
Rast v. Van Deman, 240 U. S. 342
Quong Wing v. Kirkendall, 223 U. S.
. As was said in Brown-Forman Co. v. Kentucky,
at p. 217 U. S.
"A very wide discretion must be conceded to the legislative
power of the state in the classification of trades, callings,
businesses, or occupations which may be subjected to special forms
of regulation or taxation through an excise or license tax. If the
selection or classification is neither capricious nor arbitrary,
and rests upon some reasonable consideration of difference or
policy, there is no denial of the equal protection of the law."
It is not the function of this Court in cases like the present
to consider the propriety or justness of the tax, to seek for the
motives, or to criticize the public policy which prompted the
adoption of the legislation. Our duty is to sustain the
classification adopted by the legislature if there are substantial
differences between the occupations
Page 283 U. S. 538
separately classified. Such differences need not be great. The
past decisions of the Court make this abundantly clear.
In American Sugar Refining Co. v. Louisiana, supra,
license tax imposed upon persons and corporations carrying on the
business of refining sugar and molasses, which excepted planters
and farmers grinding and refining their own sugar and molasses, was
held not to work an unconstitutional discrimination.
In Cargill v. Minnesota, 180 U.
, a state statute requiring the proprietors of
warehouses situated on the right of way of a railroad to secure a
license from a state commission, and containing no such requirement
with respect to warehouses not so situated but doing exactly the
same business, was held valid.
In Armour Packing Co. v. Lacy, 200 U.
, a North Carolina statute imposed an occupation
tax upon every meatpacking house doing business in that state. The
Armour Company, which was taxed under this statute, had its packing
house at Kansas City and shipped its packed products to various
depots in the state, where they were sold and delivered in
competition with wholesalers and commission merchants who were not
required to pay the tax. The statute was sustained.
In Quong Wing v. Kirkendall, supra,
a statute of
Montana imposing a license fee on hand laundries was held not to
constitute a denial of the equal protection of the laws because it
did not apply to steam laundries, and because it exempted from its
operation laundries not employing more than two women.
In Bradley v. Richmond, 227 U.
, an ordinance imposed a tax on the conduct of
various businesses and gave a power of classification to a
committee of the council. That committee classified private
bankers, placing a tax of one amount on certain of them and of a
different amount on others. It appeared that the business
Page 283 U. S. 539
of those in the one class was that of lending money at high
rates upon salaries and household furniture, while that done by the
other class was that of lending money upon commercial securities.
The classification was held not to offend the constitutional
provision for equal protection of the laws.
In Metropolis Theater Co. v. Chicago, 228 U. S.
, an ordinance classified theaters for license fees
based on and graded according to the admission charged. It was
shown that some of the theaters charging a higher admission had
less revenue than those charging a smaller price, and therefore
paying lower license fees. This Court held the classification
In Singer Sewing Machine Co. v. Brickell, 233 U.
, there was drawn in question a statute of Alabama
which provided that every person, firm, or corporation selling or
delivering sewing machines in person or through agents should pay a
tax of $50 annually for each county in which they might sell or
deliver said articles, and for each wagon and team used in
delivering or displaying the same an additional sum in each county
of $25 annually. It exempted merchants selling sewing machines at
their regularly established places of business. The Singer Company,
a foreign corporation, was engaged in many counties in the state in
selling and renting sewing machines, in part from regularly
established places of business and in part by means of wagons going
from place to place in counties where its stores were located. It
attacked the statute on the ground that it involved an arbitrary
discrimination between merchants selling at their stores and
merchants selling by means of wagons. It was shown that the
merchants who sold at their stores usually delivered the articles
sold by wagon. This Court sustained the tax, saying with respect to
the two kinds of business (p. 233 U. S.
Page 283 U. S. 540
"But there is an evident difference in the mode of doing
business between the local tradesman and the itinerant dealer, and
we are unable to say that the distinction made between them for
purposes of taxation is arbitrarily made. In such matters, the
states necessarily enjoy a wide range of discretion, and it would
require a clear case to justify the courts in striking down a law
that is uniformly applicable to all persons pursuing a given
occupation on the ground that persons engaged in other occupations
more or less like it ought to be similarly taxed."
In Rast v. Van Deman, supra,
a statute placing taxes
additional to the usual occupations taxes on persons who offered,
with merchandise bargained or sold in the course of trade, coupons,
profit-sharing certificates, or the like was attacked as being
arbitrary and unreasonable in that the only difference between the
other merchants and those who used trading stamps was a difference
in the method of advertising. This Court said, however:
"The difference between a business where coupons are used, even
regarding their use as a means of advertising, and a business where
they are not used is pronounced. Complainants are at pains to
display it. The legislation which regards the difference is not
arbitrary within the rulings of the cases. It is established that a
distinction in legislation is not arbitrary if any state of facts
reasonably can be conceived that would sustain it. . . ."
In Armour & Co. v. Virginia, 246 U. S.
, the statute under attack laid a tax on merchants
doing business in the state based on the amount of their purchases
during the license period, including as purchases all goods and
merchandise manufactured by the licensee and sold or offered for
sale in the state. It excluded from its operation domestic
manufacturers, taxed on capital, who offered for sale at the place
of manufacture goods and merchandise
Page 283 U. S. 541
manufactured by them. It applied alike to citizens and residents
of Virginia and noncitizens and nonresidents who manufactured in
Virginia. The state supreme court held that it applied to Armour
& Co., who manufactured part of their products without the
state and sold them within it. This Court said (p. 246 U. S. 6
"In the first place, we are of opinion that the distinction upon
which the classification in the statute rests between a
manufacturer selling goods by him made at their place of
manufacture and one engaged as a merchant in whole or in part in
selling goods of his manufacture at a place of business other than
where they were made is so obvious as to require nothing but a mere
statement of the two classes. All question concerning the equal
protection clause of the Fourteenth Amendment may therefore be put
out of view."
In view of the numerous distinctions above pointed out between
the business of a chain store and other types of store, we cannot
pronounce the classification made by the statute to be arbitrary
and unreasonable. That there are differences and advantages in
favor of the chain store is shown by the number of such chains
established and by their astonishing growth. More and more persons
like the appellee have found advantages in this method of
merchandising, and have therefore adopted it. What was said in
Metropolis Theater Co. v. Chicago, supra,
". . . The distinction obtains in every large city of the
country. The reason for it must therefore be substantial, and if it
be so universal in the practice of the business, it would seem not
unreasonable if it be adopted as the basis of governmental
The court below fell into the error of assuming that the
distinction between the appellee's business and that of the other
sorts of stores mentioned was solely one of ownership.
Page 283 U. S. 542
It disregarded the differences shown by the record. They consist
not merely in ownership, but in organization, management, and type
of business transacted. The statue treats upon a similar basis all
owners of chain stores similarly situated. In the light of what we
have said, this is all that the Constitution requires. Clark v.
Titusville, 184 U. S. 329
Magoun v. Illinois Tr. & Savings Bank, 173
U. S. 283
Article 1, § 23, of the Constitution of Indiana, [Footnote 4
] which the court below held the
statute violates, seems to us not to set any different standard
than does the Fourteenth Amendment. No decision of the Indiana
courts is cited in support of the court's conclusion, and those
referred to by appellants demonstrate that the section permits
classification for purposes of taxation and that the same
principles are applicable as under the Fourteenth Amendment.
Kersey v. Terre Haute,
161 Ind. 471, 68 N.E. 1027;
Gafill v. Bracken,
195 Ind. 551, 145 N.E. 312, 146 N.E.
109. Article 10, § 1, [Footnote
] is declared by the supreme court of the state to be
applicable only to the assessment made under a general levy, and
not to occupation or license taxes. Thomasson v. State,
Ind. 449; Bright v. McCullough,
27 Ind. 223; Gafill v.
We cannot therefore hold the statute repugnant
to the clauses of the state constitution on which the appellee
Page 283 U. S. 543
The judgment of the district court must be reversed, and the
cause remanded with instructions to dismiss the bill.
Pursuant to U.S.C. Tit. 28, § 380.
Section 8 defines a store as follows:
"The term 'store,' as used in this act, shall be construed to
mean and include any store or stores or any mercantile
establishment or establishments which are owned, operated,
maintained, or controlled by the same person, firm, corporation,
copartnership, or association, either domestic or foreign, in which
goods, wares or merchandise of any kind are sold either at retail
"The general assembly shall not grant to any citizen or class of
citizens privileges and immunities which, upon the same terms,
shall not equally belong to all citizens."
"The general assembly shall provide by law for a uniform and
equal rate of assessment and taxation, and shall prescribe such
regulations as shall secure a just valuation for taxation of all
property, both real and personal, excepting such only, for
municipal, educational, literary, scientific, religious, or
charitable purposes as may be especially exempted by law."
MR. 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
for 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
Page 283 U. S. 544
point 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.
, 277 U. S. 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
Page 283 U. S. 545
might bear such a relation to some other and different
In the State of Indiana there are approximately 44,000 retail
stores engaged in the same general lines of business, only eight
percent 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.
Page 283 U. S. 546
These 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
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 turnover 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 are engaged in large
business, whether in a single establishment or in many
"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
Page 283 U. S. 547
possibility 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 multiplely 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
"Q. Just as the manager of a large unit store, with many
departments, may develop the ability to strengthen and enlarge
"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
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 ownership,
Page 283 U. S. 548
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 on 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 up on 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
134 U. S. 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 F. 385,
399, seems peculiarly applicable:
Page 283 U. S. 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 that 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
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.
, 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
Page 283 U. S. 550
or partnerships, such as those pointed out in Flint v. Stone
Tracy Co., 220 U. S. 107
220 U. S.
"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
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, 253 U.
, 253 U. S. 415
Bethlehem Motors Corp. v. Flynt, 256 U.
; Kansas City So. Ry. v. Road Imp. Dist. No.
6, 256 U. S. 658
Air-Way Corp. v. Day, 266 U. S. 71
266 U. S. 83
Louisville Gas Co. v. Coleman, 277 U. S.
, 277 U. S. 37
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
Page 283 U. S. 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 Refining Co. v. Louisiana, 179 U. S.
, 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
184 U. S. 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.
, 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
Page 283 U. S. 552
of 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.
, 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 Theater Co. v. Chicago, 228 U. S.
, a classification of theaters 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
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 cannot 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
178 U. S. 60
Veazie Bank v.
8 Wall. 533, a tax of 10 percent imposed on
the notes of state banks was upheld although it "drove out of
existence every state
Page 283 U. S. 553
bank of circulation within a year or two after its passage."
Citizens' Sav. & Loan
Association v. Topeka,
20 Wall. 655, 87 U. S.
-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
MR. JUSTICE VAN DEVANTER, MR. JUSTICE McREYNOLDS, and MR.
JUSTICE BUTLER concur in this opinion.