1. Filling stations and distribution plants where gasoline,
other petroleum products, and automobile accessories are sold are
"stores" within the meaning of the West Virginia Chain Store
License Tax Act, defining the term store as including any
mercantile establishment in which goods, wares, or merchandise of
any kind are sold, etc. P.
294 U. S. 95.
2. The legislative history of this Act and contemporaneous
interpretation by the agent charged with its enforcement help to
confirm the above-stated conclusion. P.
294 U. S.
96.
3. Although administrative constructions of state statutes by
state officials are not binding in cases coming from federal
tribunals, this Court will lean to an agreement with them. P.
294 U. S.
96.
4. A chain of gasoline stations maintained in a single
ownership,
held constitutionally subject to a different
measure of taxation from stations in separate ownership.
State
Board of Tax Commissioners v. Jackson, 283 U.
S. 527;
Liggett Co. v. Lee, 288 U.
S. 517. P.
294 U. S.
97.
5. Graduated state taxes on a chain of gasoline stations in
single ownership
held valid against objections that the
accumulated exactions were so oppressive and disproportionate to
benefits as to amount to arbitrary discrimination and confiscation
repugnant to the Fourteenth Amendment. P.
294 U. S.
99.
6. A chain of stores is a distinctive business species, with its
own capacities and functions; broadly speaking, its opportunities
and powers become greater with the number of the component links,
and the greater they become, the more far-reaching are the economic
and social consequences. P.
294
U.S. 100.
7. For that reason, the State may tax large chains more heavily,
upon a graduated basis, and it may make the tax so heavy as to
discourage multiplication of units and, by the incidence of the
burden, develop other forms of industry. P.
294 U.S. 100.
8. The graduated tax law being uniform in its application to
chains of gasoline stations and chains of other stores, the fact
that the tax
Page 294 U. S. 88
burden falls very largely on the former chains, because of the
great multiplication of their units, does not render the
classification arbitrary. P.
294 U. S.
101.
9. The West Virginia graduated tax on stores does not violate §
1 of Art. 10 of the West Virginia Constitution, which requires that
taxation shall be equal and uniform throughout the State. P.
294 U.S. 102.
6 F. Supp.
494 reversed.
Appeal from a decree of the District Court, constituted of three
judges, enjoining the Tax Commissioner of West Virginia from paying
into the state treasury a sum of money exacted by him, and paid to
him under protest, as license taxes on a chain of filling stations
owned by the plaintiff Oil Company. The decree also commanded that
the money be repaid to the plaintiff.
Page 294 U. S. 91
MR. JUSTICE CARDOZO delivered the opinion of the Court.
The controversy hinges upon the meaning and validity of the
chain store license tax of West Virginia in its application to
distributing plants and service stations for the sale of gasoline
and kindred products.
On March 8, 1933, the Legislature of West Virginia passed a law
whereby all persons and corporations operating or maintaining a
store as therein defined were required to obtain an annual license
from the state tax commissioner. The license fee was graduated
according to the number of stores. Upon one store, the fee was to
be $2; upon two stores or more, but not to exceed five, the fee was
to be $5 for each additional store; upon six or more, but not to
exceed ten, $10 for each additional store; upon each store in
excess of ten, but not to exceed fifteen, $20; upon each in excess
of fifteen, but not to exceed twenty, $30; upon each in excess of
twenty, but not to exceed thirty, $35; upon each in excess of
thirty, but not to exceed fifty, $100; upon each in excess of
fifty, but not to exceed seventy-five, $200, and upon each in
excess of seventy-five, $250.
Appellee, complainant in the court below, is a Delaware
corporation, engaged in the business of refining, transporting, and
distributing petroleum products. It owns or controls in West
Virginia 949 service or filling
Page 294 U. S. 92
stations, and 54 bulk plants, a total of 1,003. Of the 949
stations, there are 101 which are described as "company owned;"
these are both owned and operated by the complainant itself.
"Leased outlets," 388 in number, and "vending privilege outlets,"
460 in number, are leased by the complaint and operated by agents
under commission contracts. By concession, its control over these
outlets is so complete as to amount to operation within the meaning
of the statute. Finally, there are 54 "bulk or distributing
plants," maintained chiefly for the storage of petroleum products
to be distributed to the stations, but in part as a source of
supply from which deliveries are made to buyers.
Chains for the sale of gasoline have units many times more
numerous than chains for other purposes. The longest "general
commodity" chain is that of the Great Atlantic & Pacific Tea
Company, with 198 stores within the boundaries of West Virginia.
Not only are the gasoline units more numerous, but the sales from
any one unit are, comparatively speaking, small, as must always be
the case when subdivision is so minute. The result is to cast upon
the complainant and upon competing chains in the same business a
burden much heavier, both absolutely and relatively to earnings,
than any that is borne by others. This is brought out clearly
through statistical tables in the record. The store license fees
from all sources during the year 1933 amounted to $569,693. Of this
total, stores other than gasoline stations contributed $83,525
(single stores $21,723, and multiple stores $61,802). Single
gasoline stations, maintained by independent dealers, 2,000 in
number, contributed $5,000, and chain gasoline stations $481,168,
or 84.46% of the whole. Five oil companies, including the
complainant, paid $476,171, or 83.5%, and the complainant alone
paid $240,173, or 42.16%. Other tables supply the data for a
comparison between the business done by the gasoline chains and
that
Page 294 U. S. 93
of chains for other purposes. If we look to the year 1932, the
latest year for which complete figures are forthcoming, 2,453
gasoline chain stations did an aggregate business of $15,198,638,
or 4.6% of the total chain business of the state, yet they would
have paid 84.46% of the tax if the law had been in force during
that year; 1,889 general retail stores in chain organizations did a
total business of $75,454,257, or 22.9% of the whole, and would
have paid 10.7% of the tax, this because the number of the units
was relatively small. In 1932, the average gross revenue of the
complainant's gasoline stations was $26,822 for each of the
company-owned stations, and $3,892 for each of the agency stations,
the company owned stations making by far the better showing. During
the same year, the average net income for company stations was
$1,782.78 (it had been more than double in 1931), and for agency
stations only $89.75. Upon that basis, a tax of $250 would have
left a profit for the one group, but a loss for the other. In the
computation of this loss, a word may be of use as to the
bookkeeping methods in vogue in the complainant's business. The
complainant's practice has been to bill the gasoline to its
stations at the current market prices, as if there were a sale to
strangers. Such a mode of segregation, unless corrected by other
data, will give at times a partial picture of the economic
situation. If the price at which the oil is billed includes a
reasonable profit for refining and transporting, the business may
show a gain when viewed in all its parts, though the later work of
marketing is carried on at cost or less. Stations scattered far and
wide address a mass appeal to customers, and thus stimulate them to
buy at the sign that has made itself familiar. True, the
complainant lost money in the process of refining from 1930 to
1933, but, for anything that is shown, the loss had its origin in
the general economic depression prevailing in those years. Even so,
there can be no denial that service filling stations, when
organized
Page 294 U. S. 94
in chains, bear a heavier and harsher burden than chains whose
units are fewer and yet individually larger.
Impatient of that burden, the complainant brought this suit in
June, 1933, to restrain the state tax commissioner from paying into
the treasury of the state the sum of $240,173.50 paid under protest
as the license taxes of the year. The reason for resort to equity
was the uncertainty as to the existence of any remedy at law for
the recovery of the taxes when once the moneys were deposited in
this treasury, and subjected thereby to the state's ownership and
power. In its bill of complaint, the complainant took the ground
that the exactions were illegal, first, because the gasoline
stations were not stores within the meaning of the statute, and,
second, because, even though they were, the imposition of taxes was
a denial to the complainant of immunities secured by the equal
protection clause and the due process clause of the Fourteenth
Amendment, and also by provisions of the Constitution of the state.
A District Court of three judges, organized in accordance with §
266 of the Judicial Code (28 U.S.C. § 380), heard the complainant's
application for interlocutory and permanent relief. The court
decided, after a careful review of the West Virginia statutes, that
there was an imperfect remedy at law which made permissible resort
to equity. In that conclusion, we concur. The court decided also
that the operation of the tax in its application to chains of
gasoline stations was so much harsher and heavier than the
operation of the tax when applied to other chains as to constitute
a denial to the complainant of the equal protection of the laws.
Finally, the court decided that gasoline stations were not stores
within the meaning of the statute.
6 F. Supp.
494. The decree enjoined the payment of the contested fees into
the treasury of the state, and ordered restitution. An appeal to
this Court followed.
Page 294 U. S. 95
First. The filling stations and distribution plants are
stores or mercantile establishments within the meaning of the
statute.
By § 8,
"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 and/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 or
wholesale."
There is no doubt that goods, wares, and merchandise of a kind,
i.e., gasoline and other petroleum products, and even
tires and other automobile accessories, are sold by the complainant
and its agencies at its plants and service stations. This satisfies
the test of the statute, and subjects the seller to the tax. We are
told that the average man, if requested to point out to a stranger
the store nearest by or even the nearest mercantile establishment,
would not be likely to think of a filling station as within the
range of the inquiry.{1}
Wadhams Oil Co. v. State, 210
Wis. 448, 245 N.W. 646, 649, 246 N.W. 687. There might be force in
this suggestion if the statute had left the meaning of its terms to
the test of popular understanding. Instead, it has attempted to
secure precision and certainty by rejecting a test so fluid and
indeterminate and supplying its own glossary. The goods offered for
sale are to be understood as having reference to goods "of any
kind," and the place at which the sale is made shall include not
only places that in the common speech of men would be designated as
stores, but, broadly speaking, any mercantile establishment,
Page 294 U. S. 96
whether a store or something else. In such circumstances,
definition by the average man, or even by the ordinary dictionary
with its studied enumeration of subtle shades of meaning, is not a
substitute for the definition set before us by the lawmakers with
instructions to apply it to the exclusion of all others.
Cf.
Midwestern Petroleum Corp. v. State Board of Tax
Commissioners, 206 Ind. 688, 187 N.E. 882. There would be
little use in such a glossary if we were free in despite of it to
choose a meaning for ourselves.
Extrinsic tokens of intention, however, are not lacking
altogether, and, though their force may not be great, they point us
the same way. In the passage of the bill through the Senate, an
amendment was proposed whereby the definition of a store in § 8 was
to be supplemented by the following proviso:
"Provided, however, that the term 'store' shall not include
filling stations engaged exclusively in the sale of gasoline and
other petroleum products."
The amendment was put to a vote and rejected. What was done in
that connection is doubtless not conclusive as to the meaning of
the bill in the unamended form.
Murdock v.
Memphis, 20 Wall. 590,
87 U. S. 618.
It is, however, a circumstance to be weighed along with others when
choice is nicely balanced.
Finlayson v. Shinnston, 113
W.Va. 434, 437, 168 S.E. 479;
cf. United States v. United Shoe
Machinery Co., 264 F. 138, 174;
Lapina v. Williams,
232 U. S. 78,
232 U. S. 89.
Reinforcing this token is the contemporaneous interpretation of the
statute by the tax commissioner of the state, the administrative
agent charged with its enforcement.
Fawcus Machine Co. v.
United States, 282 U. S. 375,
282 U. S. 378.
We give to such construction "respectful consideration," though we
have power to disregard it.
United States v. Moore,
95 U. S. 760,
95 U. S. 763;
Fawcus Machine Co. v. United States, supra. The
complainant was at liberty to maintain a suit in the state courts,
where the meaning of the statute could have
Page 294 U. S. 97
been determined with finality. It chose to have recourse to the
courts of the nation. In such circumstances, we are charged with a
duty of independent judgment (
Siler v. Louisville &
Nashville R. Co., 213 U. S. 175,
213 U. S. 194;
Hurn v. Oursler, 289 U. S. 238,
289 U. S.
243), but, in default of other tests, we lean to an
agreement with the agents of the state.
Second. The statute, in its application to the
complainant and others similarly situated, does not deny to the
taxpayer the equal protection of the laws.
The inquiry divides itself into two branches which call for
separate consideration. Is a series of filling stations a chain of
such a kind as to be subject to a different measure of taxation
from stations in separate ownership? This question was answered by
the court below in favor of the state, but it is still pressed in
this Court by counsel for the complainant. If the stations in a
chain may be taxed differently from independent units and the
amount of the tax fixed upon a graduated basis, is the graduation
in its consequences so extreme, so disproportionate to benefits, as
to be an arbitrary discrimination between longer chains and shorter
ones, or between chains for the sale of gasoline and for the sale
of other products? This question was answered by the court below in
favor of the taxpayer.
(1) We think a series of gasoline stations maintained in a
single ownership has the benefit of chain organization in such a
sense and measure as to fall within the scope of the decisions of
this Court in
State Board of Tax Commissioners v. Jackson,
283 U. S. 527, and
Liggett Co. v. Lee, 288 U. S. 517. The
opinion in Jackson's case enumerates some of the advantages of
chain store operation, and finds a sufficient basis for taxing
chains differently from stores separately owned. The opinion in
Liggett's case makes it clear that the list of benefits was for
illustration only, but that, in every "integrated chain," whatever
its particular quality, there is something constant and distinctive
which marks it off from stores maintained
Page 294 U. S. 98
in separate ownership, and even from those combining in
cooperative leagues. 288 U.S. at
288 U. S. 532.
The complainant in this suit returns to the same method of attack,
picking out one feature of management after another from the list
in Jackson's case, as if what was enumerated there were a code to
which every chain is to conform if it is to be subject to taxation
in accordance with a special system. The method is deceptive, yet
many of the chief benefits found in the structure of other
integrated chains will be discovered to be present here.
We have here abundant capital; standardization in equipment and
display; superior management; more rapid turnover; uniformity in
store management; special accounting methods, and a unified sales
policy coordinating the diverse units. The complainant receives the
crude oil from a subsidiary company, which produces one-third of
what it sells and buys two-thirds from others, these others, for
all that appears, being affiliated corporations. The oil, when
delivered, is refined by the complainant, and then billed to itself
-- that is, to its stations and agencies -- at current market
rates. Through all these far-flung instruments, it distributes its
own products and spreads through every hamlet its repute as a
distributor. Ownership or control of a host of well appointed
depots, uniform in design and color, has put the chains in a
position to bring home to the consuming public the knowledge of
their wares and of the quality of their service in a way far beyond
the capacity of the independent dealer with one station or a few.
The mere statement of the number of depots maintained by the
complainant -- 1,000 separate centers of attraction and
distribution -- must bear persuasive witness to the tremendous
potencies of advertisement, of reiterated suggestion, inherent in a
business conducted on such a scale. The results confirm the
prophecy. There are 4,453 filling stations in West Virginia. Of
these, only 55% are members of a chain, yet this 55%
Page 294 U. S. 99
has been able to make 75% of the sales of motor fuel. True, the
complainant has been willing to loan its distinctive labels and
equipment to independent operators dealing in its products, and
even to paint their stations so that they will seem to be its own.
This practice has been discontinued since the passage of the
National Industrial Recovery Act and the adoption of a code
thereunder. Even before that time, however, the gasoline was billed
to independents at a price one-half cent per gallon higher than the
price payable by agencies acting on a commission basis. The
discrimination may mean the difference between a profit and a loss.
More important is this -- that the effect of multitudinous
agencies, reaching into every corner, and yet subject to regulation
at a center, is to fix a uniform retail price to which independents
must conform as the price of their existence. They are independent
in name only, for the chain sets the pace, and even in competing
they are subject to its mastery. They are reminded every hour that
a chain efficiently conducted, with ample capital behind it, is
able to attract the public in a degree impossible for others.
Indeed, some of them are driven to pose as members of the chain by
borrowing its insignia in order to share its popularity. The
popularity would be unattainable without a multiplicity of units
repeating the same message.
(2) Chains of gasoline stations being subject like other chains
to a graduated tax, the question remains whether the rates are so
oppressive as to amount to arbitrary discrimination or to unlawful
confiscation.
When the power to tax exists, the extent of the burden is a
matter for the discretion of the lawmakers. The subject was fully
considered in
Magnano Co. v. Hamilton, 292 U. S.
40, decided at the last term.
"Even if the tax should destroy a business, it would not be made
invalid or require compensation upon that ground alone. Those who
enter upon a business take that risk."
Alaska Fish Salting &
By-Products
Page 294 U. S. 100
Co. v. Smith, 255 U. S. 44,
255 U. S. 48,
quoted in
Magnano Co. v. Hamilton, supra, p.
292 U. S. 46.
True, the reservation was made (292 U.S. at
292 U. S. 44)
that an act might be so arbitrary as not to be an exercise of the
taxing power at all, the form of a tax being a cloak for something
else.
Cf. Child Labor Case, 259 U. S.
20. In respect of the challenged act, there is neither
evidence nor even claim of any such abuse. On the contrary, the
complainant has stated in its bill that the "act is, in effect, a
tax measure," its validity or invalidity to be adjudged upon that
basis. A chain, as we have seen, is a distinctive business species,
with its own capacities and functions. Broadly speaking, its
opportunities and powers become greater with the number of the
component links, and the greater they become, the more far-reaching
are the consequences, both social and economic. For that reason,
the state may tax the large chains more heavily than the small
ones, and upon a graduated basis, as indeed we have already held.
State Board of Tax Commissioners v. Jackson, supra; Liggett Co.
v. Lee, supra. Not only may it do this, but it may make the
tax so heavy as to discourage multiplication of the units to an
extent believed to be inordinate, and by the incidence of the
burden, develop other forms of industry.
Quong Wing v.
Kirkendall, 223 U. S. 59;
American Sugar Refining Co. v. Louisiana, 179 U. S.
89,
179 U. S. 95;
Southwestern Oil Co. v. Texas, 217 U.
S. 114,
217 U. S. 126;
Sproles v. Binford, 286 U. S. 374,
286 U. S. 394;
Stephenson v. Binford, 287 U. S. 251. In
principle, there is no distinction between such an exercise of
power and the statute upheld in
Magnano Co. v. Hamilton,
supra, whereby sales of butter were fostered, and sales of
oleomargarine repressed. A motive to build up through legislation
the quality of men may be as creditable in the thought of some as a
motive to magnify the quantity of trade. Courts do not choose
between such values in adjudging legislative powers. They put the
choice aside as beyond their lawful competence.
"Collateral
Page 294 U. S. 101
purposes or motives of a Legislature in levying a tax of a kind
within the reach of its lawful power are matters beyond the scope
of judicial inquiry."
Magnano Co. v. Hamilton, supra at p.
292 U. S. 44;
McCray v. United States, 195 U. S. 27,
195 U. S. 56.
The tax now assailed may have its roots in an erroneous conception
of the ills of the body politic or of the efficacy of such a
measure to bring about a cure. We have no thought in anything we
have written to declare it expedient or even just, or, for that
matter, to declare the contrary. We deal with power only.
The argument against the statute rings the changes upon a
comparison between the position of the gasoline chains and that of
chains for other products. The gasoline chains,{2} as already noted
in this opinion, have units more numerous by far than those that
deal in other things, and, because of their size, must pay a large
percentage of the tax, though it is not to be forgotten that there
are general commodity chains also within the upper brackets. The
outcome is no evidence of an arbitrary discrimination, defiant of
the restraints of law. All members of a class within the same
graduated levels are treated impartially, and subjected to an equal
rule.
Magoun v. Illinois Trust & Savings Bank,
170 U. S. 283,
170 U. S. 293,
170 U. S. 296.
If only one form of chain chooses so to multiply its units, after
arriving at the topmost levels, as to make the burden heavy, it
owes its position on the scale and the aggravation of the tax to
the exigencies of business, and not to those of law. The
classification is not arbitrary, but, in its normal operation, has
a rational relation to the subject matter to be taxed, the capacity
to pay, and the justice of the payment.
Cf. Magoun v. Illinois
Trust & Savings Bank, supra; Knowlton v. Moore,
178 U. S. 41,
178 U. S. 54;
Lindsley v. Natural Carbonic Gas Co., 220 U. S.
61;
Lake Shore &
Michigan
Page 294 U. S. 102
Southern R. Co. v. Clough, 242 U.
S. 375,
242 U. S. 385;
Maxwell v. Bugbee, 250 U. S. 525,
250 U. S.
540-541;
Watson v. State Comptroller,
254 U. S. 122,
254 U. S. 124;
State Board of Tax Commissioners v. Jackson, supra, at p.
283 U. S. 537.
We have never yet held that government, in levying a graduated tax
upon all the members of a class, must satisfy itself by inquiry
that every group within the class will be able to pay the tax
without the sacrifice of profits. The operation of a general rule
will seldom be the same for everyone. If the accidents of trade
lead to inequality or hardship, the consequences must be accepted
as inherent in government by law, instead of government by
edict.
Third. The statute does not violate the Constitution of
West Virginia, which requires that taxation shall be equal and
uniform throughout the state. Article 10, § 1.
The Constitution of Indiana has a like provision which was
considered by this Court when sustaining the chain store tax in
State Board of Tax Commissioners v. Jackson, supra, at p.
283 U. S. 542.
The view was expressed that the standard of uniformity under the
Constitution of the state was substantially the same as the
standard of equality under the Fourteenth Amendment of the
Constitution of the nation.
Not finding that the courts of West Virginia have spoken on the
subject differently, we reach the same conclusion now.
Louisville & Nashville R. Co. v. Garrett, 231 U.
S. 298,
231 U. S. 305.
Cf. Laing v. Fow, 175 S.E. 354, 359;
Hope Natural Gas
Co. v. Hall, 102 W.Va. 272, 135 S.E. 582;
Eureka Pipe Line
Co. v. Hallanan, 87 W.Va. 396, 105 S.E. 506;
Virginia v.
Bibee Grocery Co., Inc., 153 Va. 935, 151 S.E. 293;
Great
Atlantic & Pacific Tea Co. v. Maxwell, 199 N.C. 433, 154
S.E. 838;
Moore v. State Board of Charities and
Corrections, 239 Ky. 729, 40 S.W.2d 349;
Standard Lumber
Co. v. Pierce, 112 Or. 314, 228 P. 812.
Page 294 U. S. 103
Fourth. What has been said in respect of the contention
that the tax has the effect of an arbitrary discrimination is a
sufficient answer to the contention that property has been taken
without due process of law.
The decree is reversed, and the cause remanded for further
proceedings in accordance with this opinion.
Reversed.
MR. JUSTICE VAN DEVANTER, MR. JUSTICE McREYNOLDS, MR. JUSTICE
SUTHERLAND, and MR. JUSTICE BUTLER, accepting the opinion and
concurring opinion of the court below as embodying a sound and
correct view of the law applicable to the first and second points
discussed in the opinion just delivered, think the judgment should
be affirmed.
Filling stations are ranked as stores by students of the chain
store problem. Zimmerman, The Challenge of Chain Store
Distribution, p. 52.
The Standard Oil Company of New Jersey, Sinclair Refining
Company, Ashland Refining Company, Pure Oil Company and Gulf
Refining Company.