1. A state statute which levies an annual privilege tax of $250
on every person or corporation, not a regular retail merchant in
the State, who displays samples in any hotel room or house rented
or occupied temporarily for the purpose of securing retail orders
held invalid under the Federal Constitution as a
discrimination against interstate commerce. P.
311 U. S.
456.
So held as applied to a nonresident merchant who took orders in
the State and shipped interstate directly to customers, and where
the only corresponding fixed-sum license tax exacted of "regular
retail merchants" was $1 per annum for the privilege of doing
business.
2. The freedom of commerce which allows the merchants of each
State a regional or national market for their goods may not be
fettered by legislation the actual effect of which is to
discriminate in favor of intrastate businesses. P.
311 U. S. 457.
216 N.C. 114; 3 S.E.2d 292, reversed.
Appeal from a judgment reversing a judgment for the plaintiff in
a suit for refund of a license tax.
See also 217 N.C. 134;
6 S.E.2d 893.
MR. JUSTICE REED delivered the opinion of the Court.
Appellant, a New York retail merchandise establishment, rented a
display room in a North Carolina hotel for several days during
February, 1938, and took orders
Page 311 U. S. 455
for goods corresponding to samples; it filled the orders by
shipping direct to the customers from New York City. Before using
the room, appellant paid under protest the tax required by chapter
127, section 121(e), of the North Carolina Laws of 1937, which
levies an annual privilege tax of $250 on every person or
corporation, not a regular retail merchant in the state, who
displays samples in any hotel room rented or occupied temporarily
for the purpose of securing retail orders. [
Footnote 1] Appellant, not being a regular retail
merchant of North Carolina, admittedly comes within the statute.
Asserting, however, that the tax was unconstitutional, especially
in view of the commerce clause, art. 1, § 8, cl. 3, it brought this
suit for a refund and succeeded in the trial court. The Supreme
Court of North Carolina reversed, and then, being evenly divided on
rehearing, allowed the reversal to stand. [
Footnote 2] The prevailing opinion characterized the
tax as one on the commercial use of temporary quarters, which in
its operation did not discriminate against interstate commerce, and
therefore did not come into conflict with the commerce clause.
The commerce clause forbids discrimination, whether forthright
or ingenious. [
Footnote 3] In
each case, it is our duty to
Page 311 U. S. 456
determine whether the statute under attack, whatever its name
may be, will, in its practical operation, work discrimination
against interstate commerce. This standard, we think, condemns the
tax at bar. Nominally, the statute taxes all who are not regular
retail merchants in North Carolina, regardless of whether they are
residents or nonresidents. We must assume, however, on this record,
that those North Carolina residents competing with appellant for
the sale of similar merchandise will normally be regular retail
merchants. The retail stores of the state are the natural outlets
for merchandise, not those who sell only by sample. Some of these
local shops may, like appellant, rent temporary display rooms in
sections of North Carolina where they have no permanent store, but
even these escape the tax at bar, because the location of their
central retail store somewhere within the state will qualify them
as "regular retail merchants in the North Carolina." The only
corresponding fixed-sum license tax to which appellant's real
competitors are subject is a tax of $1 per annum for the privilege
of doing business. [
Footnote 4]
Nonresidents wishing to display their wares must either establish
themselves as regular North Carolina retail merchants at
prohibitive expense or else pay this $250 tax that bears no
relation to actual or probable sales, but must be paid in advance
no matter how small the sales turn out to be. Interstate commerce
can hardly survive in so hostile an atmosphere. A $250 investment
in advance, required of out-of-state retailers but not of
Page 311 U. S. 457
their real local competitors, can operate only to discourage and
hinder the appearance of interstate commerce in the North Carolina
retail market. Extrastate merchants would be compelled to turn over
their North Carolina trade to regular local merchants selling by
sample. North Carolina regular retail merchants would benefit, but,
to the same extent, the commerce of the Nation would suffer
discrimination.
The freedom of commerce which allows the merchants of each state
a regional or national market for their goods is not to be fettered
by legislation the actual effect of which is to discriminate in
favor of intrastate businesses, whatever may be the ostensible
reach of the language. [
Footnote
5]
Reversed.
[
Footnote 1]
"(e) Every person, firm, or corporation, not being a regular
retail merchant in the North Carolina, who shall display samples,
goods, wares, or merchandise in any hotel room, or in any house
rented or occupied temporarily, for the purpose of securing orders
for the retail sale of such goods, wares, or merchandise so
displayed, shall apply for in advance and procure a State license
from the Commissioner of Revenue for the privilege of displaying
such samples, goods, wares, or merchandise, and shall pay an annual
privilege tax of two hundred fifty dollars ($250.00), which license
shall entitle such person, firm, or corporation to display such
samples, goods, wares, or merchandise in any county in this
State."
[
Footnote 2]
216 N.C. 114, 3 S.E.2d 292; 217 N.C. 134, 6 S.E.2d 893.
[
Footnote 3]
Welton v. Missouri, 91 U. S. 275,
91 U. S. 282,
283;
Guy v. Baltimore, 100 U. S. 434;
Webber v. Virginia, 103 U. S. 344;
Hale v. Bimco Trading Co., 306 U.
S. 375. In
McGoldrick v. Berwind-White Coal Min.
Co., 309 U. S. 33, we
pointed out that the line of decisions following
Robbins v.
Shelby County Taxing Dist., 120 U. S. 489,
read in their proper historical setting, rested on the actual and
potential discrimination inherent in certain fixed-sum license
taxes. 309 U.S. at
309 U. S. 55-57.
There is no occasion now to reexamine the particular tax statutes
involved in those cases.
[
Footnote 4]
North Carolina Laws of 1937, c. 127, § 405.
[
Footnote 5]
Cf. Bacardi Corp. v. Domenech, ante, p.
311 U. S. 150.