The question whether a state law or tax deprives a party of
constitutional rights depends upon its practical operation and
effect. P.
250 U. S.
462.
An ordinance conditioning the right to manufacture goods within
a city upon the payment of a license tax computed upon the amount
of the sales of the goods so manufactured
held a tax upon
the business of manufacture within the city, and not a tax upon the
sales. P.
250 U. S.
463.
Such a tax, when computed upon the sales of goods manufactured
in the city under the license but removed and afterwards sold
beyond the state does not impose a direct burden on interstate
commerce or, when the manufacturer is a sister-state corporation,
deprive it of property without due process. P.
250 U. S.
464.
198 S.W. 1183 affirmed.
Page 250 U. S. 460
The case is stated in the opinion.
MR. JUSTICE PITNEY delivered the opinion of the Court.
The question is whether an ordinance of the City of St. Louis
levying against manufacturers, especially as against plaintiff in
error, a West Virginia corporation, a tax imposed as a condition of
the grant of a license to carry on a manufacturing business in that
city, but the amount of which is ascertained by and proportioned to
the amount of sales of the manufactured goods, whether sold within
or without the state and whether in domestic or interstate
commerce, is void as amounting to a regulation of commerce among
the states and thus entrenching upon the power of the national
Congress under Art. I, § 8, of the Constitution or as amounting to
a taking of plaintiff's property without due process of law in
contravention of the Fourteenth Amendment.
A statute of the state (Rev.Stats. Mo.1909, § 9857) authorizes
cities to license, tax and regulate for local purposes the
occupations of merchants and manufacturers and to graduate the
amount of annual license imposed upon them in proportion to the
sales made by such merchant or manufacturer during the year next
preceding any fixed date. Pursuant to this authority, the city, by
the ordinance in question, in addition to an
ad valorem
property tax, requires every manufacturer in the city, before doing
or offering to do business as such, to take out a license, and at a
specified time to render a sworn statement of the aggregate amount
of sales made by him during
Page 250 U. S. 461
the year next preceding the first Monday of June, and within a
short time thereafter to pay a license tax of $1 on each $1,000 of
sales made. Failure or refusal to deliver the required statement or
to pay the license tax within the time specified is made a
misdemeanor punishable by fine, and false statement under oath is
made punishable by forfeiture of the license in addition to a
fine.
In a previous case (
Manufacturing Co. v. St. Louis, 238
Mo. 267, 278), the supreme court of the state held that this tax
did not apply to sales made of goods shipped from plaintiff's
factory in the State of New York directly to purchasers in Texas,
but only to sales from its St. Louis factory.
In the present case, which was a suit brought in a state court
by plaintiff in error against the city to recover so much of a
disputed tax as is measured by sales of goods manufactured by
plaintiff in the city, afterwards removed to storage warehouses
outside of the state, and later sold from these warehouses to
purchasers in states other than Missouri, the trial court at first
gave judgment in favor of plaintiff on this item, and, this having
been reversed by the supreme court of the state (270 Mo. 40), a new
trial resulting in favor of the city, and the second judgment
having been affirmed (198 S.W. 1183), the case comes here on writ
of error.
In construing the statute and ordinance and defining the nature
and effect of the tax, the supreme court expressed itself as
follows (p. 45):
"It is not disputed that, under the broad provision of its
charter, the City of St. Louis has the power to license and tax
manufacturers within its limits; nor that the power includes the
right to impose a tax upon the transaction of their business.
Adopting substantially the definition we have quoted from the
statute, it has, by ordinance, forbidden them to pursue their
business within the city
Page 250 U. S. 462
without procuring a license, and has prescribed the additional
tax they shall pay for that purpose, which is graduated to accord
with the amount of business they shall carry to the point of
realizing the profit or liquidating the loss by the sale of the
product of their work. They may only buy and sell in pursuance of
their business as manufacturers. That his right to pursue this
business is the one thing he receives as compensation for this tax
is evident, and that the method of fixing its amount by the amount
that he realizes from the licensed activity is a just and equitable
one is not disputed; nor is the inherent justness and fairness of
postponing the payment until the realization of the result of the
work. The tax is nonetheless a tax upon the business of manufacture
pursued in the City of St. Louis under the protection of the laws
of this state and the ordinances of the city. . . . We hold that
the tax in question is a tax upon the privilege of pursuing the
business of manufacturing these goods in the City of St. Louis;
that, when the goods were manufactured, the obligation accrued to
pay the amount of the tax represented by their production when it
should be liquidated by their sale by the manufacturer; that their
removal from the City of St. Louis and storage elsewhere, whether
within or without the state, worked no change in this obligation;
that their sale by the respondent wherever they may have been
stored at the time, whether it was done through its home office in
New York or the office of its factory in St. Louis, should have
been reported in its return to the license collector of the City of
St. Louis and the amount included in fixing the amount payable on
account of its license tax."
As a matter of construction, this, upon familiar principles, is
conclusive upon us. But, as has been held very often, the question
whether a state law or a tax imposed thereunder deprives a party of
rights secured by the federal Constitution depends not upon the
form of the act, nor
Page 250 U. S. 463
upon how it is construed or characterized by the state court,
but upon its practical operation and effect.
St. Louis
Southwestern Ry. Co. v. Arkansas, 235 U.
S. 350,
235 U. S. 362;
Mountain Timber Co. v. Washington, 243 U.
S. 219,
243 U. S. 237;
Crew Levick Co. v. Pennsylvania, 245 U.
S. 292,
245 U. S.
294.
The admitted facts show that the operation and effect of the
taxing scheme now under consideration are correctly described in
what we have quoted from the opinion of the state court. No tax has
been, or is to be imposed upon any sales of goods by plaintiff in
error except goods manufactured by it in St. Louis under a license
conditioned for the payment of a tax upon the amount of the sales
when the goods should come to be sold. The tax is computed
according to the amount of the sales of such manufactured goods,
irrespective of whether they be sold within or without the state,
in one kind of commerce or another, and payment of the tax is not
made a condition of selling goods in interstate or in other
commerce, but only of continuing the manufacture of goods in the
City of St. Louis.
There is no doubt of the power of the state, or of the city
acting under its authority, to impose a license tax in the nature
of an excise upon the conduct of a manufacturing business in the
city. Unless some particular interference with federal right be
shown, the states are free to lay privilege and occupation taxes.
Clark v. Titusville, 184 U. S. 329;
St. Louis v. United Railways Co., 210 U.
S. 266,
210 U. S.
276.
The city might have measured such tax by a percentage upon the
value of all goods manufactured, whether they ever should come to
be sold or not, and have required payment as soon as, or even
before, the goods left the factory. In order to mitigate the
burden, and also perhaps, to bring merchants and manufacturers upon
an equal footing in this regard, it has postponed ascertainment and
payment of the tax until the manufacturer can bring
Page 250 U. S. 464
the goods into market. A somewhat similar method of postponing
payment has been pursued for many years by the federal government
with respect to the internal revenue tax upon distilled spirits.
Rev.Stats. §§ 3251, 3253; Act August 27, 1894, c. 349, § 48, 28
Stat. 509, 563.
To the suggestion that the tax burdens the mercantile, rather
than the manufacturing, business, because it would be possible for
one to manufacture goods to an unlimited extent and pay no tax
unless they were sold, or to sell goods and be required to pay the
tax although they were not manufactured by the seller, it is
sufficient to say, answering the second point first, (a) that,
according to the state law as laid down by the court of last resort
in this case, a manufacturer has no right to sell goods except
those of his own manufacture, and (b) it is not to be supposed
that, for the purpose of evading a tax payable only upon the sale
of his goods, a manufacturer would pursue the ruinous policy of
making goods and locking them up permanently in warehouses. In the
outcome, the tax is the same in amount as if it were measured by
the sale value of the goods but imposed upon the completion of
their manufacture. The difference is that, for reasons of practical
benefit to the taxpayer, the city has postponed payment until
convenient means have been furnished through the marketing of the
goods.
In our opinion, the operation and effect of the taxing ordinance
are to impose a legitimate burden upon the business of carrying on
the manufacture of goods in the city; it produces no direct burden
on commerce in the goods manufactured, whether domestic or
interstate, and only the same kind of incidental and indirect
effect as that which results from the payment of property taxes or
any other and general contribution to the cost of government.
Therefore it does not amount to a regulation of interstate
commerce. And, for like reasons, it has not the effect of imposing
a tax upon the property or the business
Page 250 U. S. 465
transactions of plaintiff in error outside of the State of
Missouri, and hence does not deprive plaintiff in error of its
property without due process of law.
Our recent decisions cited in opposition to this view,
Crew
Levick Co. v. Pennsylvania, 245 U. S. 292,
245 U. S. 297,
and
Looney v. Crane Co., 245 U. S. 178,
245 U. S. 188,
and other cases of the same kind referred to therein, are so
obviously distinguishable that particular analysis is
unnecessary.
Judgment affirmed.