1. A municipal ordinance imposed upon persons "engaged in
business as solicitors" an annual license tax of "$50.00 and
one-half of one percentum of the gross earnings, receipts, fees, or
commissions for the preceding license year in excess of $1,000." A
permit from the Director of Public Safety was a prerequisite to
issuance of the license, and violators were subject to criminal
penalties. Upon a record which showed that appellant had been
soliciting in the city for five days, without a license, orders for
out-of-state confirmation and shipment into the State, appellant
was convicted and fined.
Held that the ordinance as so applied violated the
commerce clause of the Federal Constitution. Pp.
327 U. S. 417,
327 U. S.
434.
2.
Robbins v. Shelby County Taxing Dist., 120 U.
S. 489, and later cases, followed;
McGoldrick v.
Berwind-White Co., 309 U. S. 33,
distinguished. Pp.
327 U. S.
417-418,
327 U. S.
420.
3. The tax here cannot be sustained as one upon the "local
incident" of "solicitation." Whether a "local incident" related to
or affecting interstate commerce may be made the subject of state
taxation depends upon considerations of constitutional policy
having reference to the substantial effects, actual or potential,
of the particular tax in suppressing or burdening commerce unduly.
Pp.
327 U. S.
422-424.
4. The effects of the tax here in question are not only
prohibitive in an absolute sense, in many applications, but are
discriminatory in favor of the local merchant as against the
out-of-state one. P.
327 U. S.
431.
(a) The ordinance is not saved by the fact that it is neither
prohibitive nor discriminatory on its face, nor by the fact that it
is applicable also to all local distributors operating similarly.
P.
327 U. S.
431.
Page 327 U. S. 417
(b) The very difference between interstate and local trade,
taken in conjunction with the inherent character of the tax, makes
equality of application as between those two classes of commerce,
generally speaking, impossible. P.
327 U. S.
432.
5. Local governments may not impose a tax which, though
applicable to all commerce, strikes down or discriminates against
large volumes of that commerce, in order to reach other portions as
to which the application of the tax would produce no such
consequences or only negligible ones. P.
327 U. S.
433.
6. The tax here in question involves too many probabilities and
actualities for exclusion of or discrimination against interstate
commerce in favor of local competing business to be sustained in
any such application as that given it in this case. P.
327 U. S.
434.
183 Va. 689, 33 S.E.2d 206, reversed.
Appeal from a Judgment which affirmed a conviction for violation
of a municipal ordinance imposing a license tax.
Reversed,
p.
327 U. S.
435.
MR. JUSTICE RUTLEDGE delivered the opinion of the Court.
The question is whether a license tax laid by an ordinance of
the City of Richmond, Virginia, upon engaging in business as
solicitor can be applied in the facts of this case consistently
with the commerce clause of the Federal Constitution, Article I, §
8. As the case has been made, the issue is substantially whether
the long line of so-called "drummer cases" [
Footnote 1] beginning with
Robbins
v. Shelby
Page 327 U. S. 418
County Taxing District, 120 U.
S. 489, shall be adhered to in result or shall now be
overruled in the light of what attorneys for the city say are
recent trends requiring that outcome.
The ordinance lays an annual license tax in the following
terms:
"[Upon] . . . -- Agents -- Solicitors -- Persons, Firms or
Corporations engaged in business as solicitors . . . $50.00 and
one-half of one percentum of the gross earnings, receipts, fees or
commissions for the preceding license year in excess of $1,000.00.
Permit of Director of Public Safety required before license will be
issued. . . . [
Footnote 2]
"
Page 327 U. S. 419
Appellant was arrested in Richmond for having engaged in the
business of a solicitor there without previously procuring the
required license. After hearing before a police court justice, she
was fined $25 and costs and ordered to secure a license. An appeal
was noted to the Hustings Court of the City of Richmond, where a
trial
de novo was had upon the agreed statement of facts
set forth in the margin. [
Footnote
3] The Hustings Court held the ordinance applicable
Page 327 U. S. 420
to appellant in the circumstances disclosed by the facts, and
was of the opinion that, so applied, it was not in conflict with
the commerce clause. Accordingly, the court found the appellant
guilty and fined her five dollars and costs. The Supreme Court of
Appeals of Virginia affirmed. 183 Va. 689, 33 S.E.2d 206. From that
judgment of the state's highest court, the case comes here by
appeal.
If the matter is to be settled solely on the basis of authority,
nothing more is required than bare reference to the long list of
drummer decisions, which have held unvaryingly that such a tax as
Richmond has exacted cannot be applied constitutionally to
situations identical with or substantially similar to the facts of
this case. Among the latest of these is
Real Silk Hosiery Mills
v. Portland, 268 U. S. 325, in
which a municipal ordinance requiring solicitors to pay a license
fee was held unconstitutional as a forbidden burden upon interstate
commerce when applied to an out-of-state corporation whose
representatives solicited orders for subsequent interstate
shipment.
Cf. Best & Co. v. Maxwell, 311 U.
S. 454.
Counsel for Richmond, however, insist that other cases decided
here have seriously impaired the "drummer" line of authority, so
much so that those rulings no longer can stand consistently with
the later ones. Their principal reliance is on
McGoldrick v.
Berwind-White Co., 309 U. S. 33, in
which the Court sustained the application of New York City's sales
tax to the delivery there at the end of its interstate journey, of
coal shipped from Pennsylvania pursuant to contracts of sale
previously made in New
Page 327 U. S. 421
York. [
Footnote 4] It is
urged that the case is indistinguishable from the present one on
any tenable basis relating to the bearing or effect of the tax upon
interstate commerce, although the opinion reviewed at some length
the drummer cases, among others, and expressly distinguished them.
[
Footnote 5]
Unless, therefore, this latest pronouncement upon their
continuing authority is to be put aside with the cases themselves,
the application made of the ordinance in this case must be stricken
down. For the tax thus laid is precisely the "fixed sum license
taxes imposed on the business of soliciting orders for the purchase
of goods to be shipped
Page 327 U. S. 422
interstate" which the
Berwind-White opinion
distinguished from the New York tax. [
Footnote 6]
But we are told that the rationale of the decision requires the
distinction to be discarded. As counsel state it, this was
"that the tax was imposed upon events which occurred within the
taxing jurisdiction, which events are separate and distinct from
the transportation or intercourse which is interstate commerce.
[
Footnote 7]"
The logic is completed by noting that the New York tax was upon
the "local incident" of "delivery," while, in this case, it is on
the like incident of "solicitation," and by adding the contention,
given mere substance since the argument by our decision in
International Shoe Co. v. Washington, 326 U.
S. 310, that "mere solicitation" when it is regular,
continuous, and persistent, rather than merely casual, constitutes
"doing business," contrary to formerly prevailing notions. Hence,
it is concluded, since the delivery in the
Berwind-White
case could be taxed, so can the solicitation in this case.
Page 327 U. S. 423
Appellee's rationalization takes only partial account of the
reasoning and policy underlying the
Berwind-White decision
and its differentiation of the drummer authorities. If the only
thing necessary to sustain a state tax bearing upon interstate
commerce were to discover some local incident which might be
regarded as separate and distinct from "the transportation or
intercourse which is" the commerce itself and then to lay the tax
on that incident, all interstate commerce could be subjected to
state taxation, and without regard to the substantial economic
effects of the tax upon the commerce. For the situation is
difficult to think of in which some incident of an interstate
transaction taking place within a state could not be segregated by
an act of mental gymnastics and made the fulcrum of the tax. All
interstate commerce takes place within the confines of the states,
and necessarily involves "incidents" occurring within each state
through which it passes or with which it is connected in fact. And
there is no known limit to the human mind's capacity to carve out
from what is an entire or integral economic process particular
phases or incidents, label them as "separate and distinct" or
"local," and thus achieve its desired result.
It has not yet been decided that every state tax bearing upon or
affecting commerce becomes valid if only some conceivably or
conveniently separable "local incident" may be found and made the
focus of the tax. This is not to say that the presence of so-called
local incidents is irrelevant. On the contrary, the absence of any
connection in fact between the commerce and the state would be
sufficient, in itself, for striking down the tax on due process
grounds alone, and even substantial connections, in an economic
sense, have been held inadequate to support the local tax.
[
Footnote 8] But, beyond the
presence of a sufficient connection
Page 327 U. S. 424
in a due process or "jurisdictional" sense, whether or not a
"local incident" related to or affecting commerce may be made the
subject of state taxation depends upon other considerations of
constitutional policy having reference to the substantial effects,
actual or potential, of the particular tax in suppressing or
burdening unduly the commerce. [
Footnote 9] Some of these at least were emphasized in the
Berwind-White opinion.
Thus, the Court, referring to the
Shelby County line of
decisions, stressed that,
"read in their proper historical setting, these cases may be
said to support the view that this kind of a tax is likely to be
used as 'an instrument of discrimination against interstate or
foreign commerce . . . ,' [
Footnote 10]"
and that the tax,
"in its practical operation, was capable of use, through
increase in the tax, and in fact operated to some extent to place
the merchant thus doing business interstate at a disadvantage in
competition with untaxed sales at retail stores within the state.
[
Footnote 11]"
Noting that the state in some instances can suppress or curtail
one kind of local business for the advantage of another type of
competing business, the opinion denied that interstate commerce
"may be similarly affected by the practical operation of a state
taxing statute," and also denied that the New York tax had any such
actual or potential effect.
Thus, the essence of the distinction taken in the
Berwind-White case was that the taxes outlawed in the
drummer
Page 327 U. S. 425
cases in their practical operation worked discriminatorily
against interstate commerce to impose upon it a burden, either in
fact or by the very threat of its incidence, which they did not
place upon competing local business and which the New York sales
tax did not create. [
Footnote
12]
See Best & Co. v. Maxwell, 311 U.
S. 454;
cf. Nelson v. Sears, Roebuck & Co.,
312 U. S. 359.
As has been so often stated but nevertheless seems to require
constant repetition, not all burdens upon commerce, but only undue
or discriminatory ones, are forbidden. [
Footnote 13] For, though "interstate commerce must pay
its way," [
Footnote 14] a
state consistently with the commerce clause cannot put a barrier
around its borders to bar out trade from other states, and thus
bring to naught the great constitutional purpose of the fathers in
giving to Congress the power "To regulate Commerce with foreign
Nations, and among the several States. . . ." [
Footnote 15] Nor may the prohibition
Page 327 U. S. 426
be accomplished in the guise of taxation which produces the
excluding or discriminatory effect. [
Footnote 16]
Appellee argues, as the Virginia Supreme Court of Appeals held,
[
Footnote 17] that the
Richmond tax is not discriminatory or unduly burdensome in effect.
In support of this view, it relies mainly on two contentions,
first, that the tax is no more discriminatory or burdensome than
was the tax in the
Berwind-White case, and second, that it
applies alike to all solicitors, whether they are engaged in
soliciting for local or for interstate business. Apart from the
fact that the tax as applied here is laid directly upon sales
arising only under contracts requiring interstate shipment of
goods,
cf. 309 U. S. 48 ff
[argument of counsel -- omitted], the contentions entirely
misconceive what is meant by discrimination or undue burden in the
sense applicable to these problems.
In view of the ruling in
International Shoe Co. v.
Washington, supra, we put aside any suggestion that
"solicitation," when conducted regularly and continuously within
the state, so as to constitute a course of business, may not be
"doing business" just as is the making of delivery at any rate for
the purpose of focusing a tax which in other respects would be
sustainable. But we do not think the tax as it was applied in this
case either conforms to those conditions of regularity and
continuity or avoids other prohibited effects.
The sales and the deliveries in the
Berwind-White case
were regular, continuous, and persistent. They constituted a
"course of business." There was no suggestion, nor any basis in the
facts for one, that they were only casual, spasmodic or irregular.
On the present record, the
Page 327 U. S. 427
only showing is that appellant "on January 20, 1944, was
soliciting orders" in Richmond, for later out-of-state confirmation
and fulfillment, and that, for four days prior to that date, she
had been engaged in such solicitation "from place to place in the
City of Richmond," including particularly solicitation of the
clerks in the department store of Miller & Rhoads,
Incorporated, and in a five and ten cent store. There was no
showing that, apart from these five days, appellant had solicited
previously in Richmond, that she intended to return later for the
same purpose, or, if so, whether regularly and indefinitely or only
occasionally and spasmodically.
This difference in the facts would be sufficient in itself to
distinguish the cases. But there are other differences. The tax
here was a fixed substantial sum for the first year, to which in
subsequent years would be added one-half of one percent of the
gross returns in excess of $1000. And, regardless of the
discretionary element in the issuing function of the Director of
Public Safety, his permit was required with payment of the tax
before the license could issue or the act of solicitation could
lawfully take place, criminal sanction being prescribed for
violation. So far as appears, a single act of unlicensed
solicitation would bring the sanction into play. The tax thus
inherently bore no relation to the volume of business done or of
returns from it. The New York sales tax, on the other hand, was
limited to a percentage of the gross returns, being thus directly
proportioned to the volume of business transacted and of returns
from it. Although the seller was put under duty to pay the tax
within a specified time from the sale, he was not required to
obtain a permit or license beforehand in order to initiate or
complete the transaction. Moreover the economic incidence of the
tax fell only upon completed transactions, not, as in this case, on
the very initial step toward bringing one about.
Page 327 U. S. 428
Obviously different, therefore, are the two taxes, first, in
their exclusionary effects, especially upon small out-of-state
operators, whether casual or regular, and also, it would seem
clear, in discriminatory effects as between such operators and
local ones of the same type or other competing local merchants. The
New York tax bore equally upon all, whether local or out-of-state
and whether making a single sale or casual ones or engaging
continuously in them throughout the year. As the Court said, it is
difficult to see how the New York tax could bear in any case more
heavily upon out-of-state operators than upon local ones, apart
from possible multiple state taxation or the threat of it such as,
among other considerations, [
Footnote 18] was thought to forbid the levy and
collection of the tax in
Adams Mfg. Co. v. Storen,
304 U. S. 307. The
incidence of the tax was the same upon both types of transactions,
as was its amount, and if in any instance there was exclusionary
effect or tendency, this did not appear from the record or from the
inherent character of the tax. Neither did any possibility appear
that it would strike more heavily upon out-of-state sellers than on
local ones, apart from that of multiple state taxation. [
Footnote 19]
Page 327 U. S. 429
In addition to that possibility, the Richmond tax imposes
substantial excluding and discriminatory effects of its own. As has
been said, the small operator particularly, and more especially the
casual or occasional one from out of the state, will find the tax
not only burdensome but prohibitive, with the result that the
commerce is stopped before it is begun. And this effect will be
extended to more substantial and regular operators, particularly
those whose product is of highly limited or special character and
whose market in any single locality for that reason or others
cannot be mined more than once in every so often. [
Footnote 20]
The potential excluding effects for itinerant salesmen become
more apparent when the consequences of increasing the amount of the
tax are considered.
Cf. McGoldrick v. Berwind-White Co.,
supra, at
309 U. S. 58.
And they are magnified many times by recalling that the tax is a
municipal tax, not one imposed by the state legislature for uniform
application throughout the state.
It is true that, in legal theory, the municipality exercises by
delegation the state's legislative power, and that prior decisions
here have not rested squarely upon any difference between a tax
municipally imposed and one laid by the legislature. But the
cumulative effect, practically
Page 327 U. S. 430
speaking, of flat municipal taxes laid in succession upon the
itinerant merchant as he passes from town to town is obviously
greater than that of any tax of statewide application likely to be
laid by the legislature itself. And it is almost as obvious that
the cumulative burden will be felt more strongly by the
out-of-state itinerant than by the one who confines his movement
within the state or the salesman who operates within a single
community or only a few. [
Footnote 21] The drummer or salesman whose business
requires him to move from place to place, exhausting his market at
each periodic visit or conducting his business in more sporadic
fashion with reference to particular localities, would find the
cumulative burden of the Richmond type of tax eating away all
possible return from his selling. A day here, a day there, five
days now and five days a year or several months later, with a flat
license tax annually imposed lacking any proportion to the number
or length of visits or the volume of the business
Page 327 U. S. 431
or return can only mean the stoppage of a large amount of
commerce which would be carried on either in the absence of the tax
or under the incidence of one taking account of these
variations.
These effects, not present in the
Berwind-White type of
tax, [
Footnote 22] are
inherent in the Richmond type in relation to a wide variety of
selling activities. They are not only prohibitive in an absolute
sense, for many applications. They are discriminatory in favor of
the local merchant as against the out-of-state one.
It is no answer, as appellee contends, that the tax is neither
prohibitive nor discriminatory on the face of the ordinance, or
that it applies to all local distributors doing business as
appellant has done. Not the tax in a vacuum of words, but its
practical consequences for the doing of interstate commerce in
applications to concrete facts, are our concern. [
Footnote 23] To ignore the variations in
effect which follow from application of the tax, uniform on the
face of the ordinance, to highly different fact situations is only
to ignore those practical consequences. In that blindness lies the
vice of the tax, and of appellee's position.
Page 327 U. S. 432
The tax, by reason of those variations, cannot be taken to apply
generally to local distributors in the same manner and with like
effects as in application to out-of-state distributors. The very
difference in locations of their business headquarters, if any, and
of their activities makes this impossible. This, of course, is but
another way of saying that the very difference between interstate
and local trade, taken in conjunction with the inherent character
of the tax, makes equality of application as between those two
classes of commerce, generally speaking, impossible.
It is true that the tax may strike as heavily upon some Virginia
solicitors, and even upon some who confine themselves to Richmond,
as it does upon others who come periodically or otherwise from
Washington, New York, or Cedar Rapids. And it may bear upon a few
of the former more heavily than upon most of the latter. But
neither consequence is the more probable one for the larger number
of cases. The strong likelihood is the other way. And to point to
either of those possibilities is only to say, in a different way,
that the tax is highly variable in its incidence and effects with
reference to the manner in which one organizes his business, and
especially in respect to its location and spread in relation to
state lines. It was exactly these variations, when they bear with
undue burden upon commerce that crosses state lines, which the
commerce clause was intended to prevent.
We are not unmindful that large enterprise which "does business"
by sending solicitors regularly and continuously into several
states,
cf. International Shoe Co. v. Washington, supra,
may have the financial resources and established course of business
enabling it to absorb the tax and justifying its doing so in an
economic sense; or that, therefore, if the ruling should extend to
such a situation, the business so situated would escape to that
extent bearing the burden of the tax borne by local business
similarly
Page 327 U. S. 433
situated, absent some other form of tax to equalize the burden.
But, in the first place, no such case is presented by the facts
here. [
Footnote 24] And even
if such a result should be thought necessary in order to avoid the
forbidden consequences in so many other applications, that fact
would not justify sustaining the tax and permitting those
consequences to occur.
There is no lack of power in the state or its municipalities to
see that interstate commerce bears with local trade its fair share
of the cost of local government, more especially in view of recent
trends in this field.
McGoldrick v. Berwind-White Co.,
supra. But this does not mean, and the trends do not signify,
that the state or municipal governments may devise a tax applicable
to all commerce alike, which strikes down or discriminates against
large volumes of that commerce in order to reach other portions as
to which the application of the tax
Page 327 U. S. 434
would produce no such consequences, or only negligible ones.
Other types of tax are available for reaching both portions which
do not involve the forbidden evils or the necessity for putting
them upon some commerce in order to reach other. The problem comes
down therefore to whether the state or municipal legislative bodies
in framing their taxing measures to reach interstate commerce shall
be at pains to do so in a manner which avoids the evils forbidden
by the commerce clause and puts that commerce actually upon a plane
of equality with local trade in local taxation, not, as is said, to
a question of whether interstate trade shall bear its fair share of
the cost of local government, the benefit and protection of which
it enjoys on a par with local business.
The tax here in question inherently involves too many
probabilities, and we think actualities, for exclusion [
Footnote 25] of or discrimination
against interstate commerce, in favor of local competing business,
to be sustained in any application substantially similar to the
present one. Whether or not it was so intended, those are its
necessary effects. Indeed, in view of that fact and others of
common knowledge, we cannot be unmindful, as our predecessors were
not when they struck down the drummer taxes, that these ordinances
lend themselves peculiarly to creating those very consequences, or
that, in fact, this is often, if not always, the object of the
local commercial influences which induce their adoption. Provincial
interests and local political power are at their maximum weight in
bringing about acceptance of this type of legislation. With the
forces behind it, this is the very kind of barrier the commerce
clause was put in the fundamental law to guard against. It may be,
as the Court said in the
Berwind-White
Page 327 U. S. 435
case, that the state is free to allow its municipal subdivisions
to erect such barriers against each other, to some extent, as to
the commerce over which the state has exclusive control. It cannot
so outlaw or burden the commerce of the United States.
The drummer is a figure representative or a by-gone day.
[
Footnote 26] But his modern
prototype persists under more euphonious appellations. So endure
the basic reasons which brought about his protection from the kind
of local favoritism the facts of this case typify.
We have considered appellee's other contentions, and find them
without merit.
The judgment is
Reversed.
MR. JUSTICE BLACK dissents.
MR. JUSTICE JACKSON took no part in the consideration or
decision of this case.
[
Footnote 1]
See the authorities cited in
McGoldrick v.
Berwind-White Co., 309 U. S. 33,
309 U. S. 55-57,
and the Court's discussion, particularly in note 11. As there
stated, in the
Shelby County case, the Court was cognizant
of the rapidly growing tendency of states and municipalities to lay
license taxes upon drummers "for the purpose of embarrassing this
competition with local merchants," and, following the
Shelby
County decision, nineteen such taxes were held invalid.
For a discussion of distinction between drummers and peddlers,
see Comment, 40 Yale L.J. 1094.
[
Footnote 2]
Chapter 10, § 23, Richmond City Code (1939).
Chapter 10, § 166 1/2(a) reads:
"Every person, firm and corporation desiring a license, under
sections 14, 16, 23, 94, 120, and 143 of this chapter shall first
apply to the Director of Public Safety for a permit on behalf of
said individual, firm or corporation, as the case may be, to
conduct the business which is desired to be conducted and shall
produce to that Director evidence of the good character of the
individual, the members of the firm, or the chief officers of the
corporation, as the case may be, and it shall thereupon be the duty
of the Director of Public Safety to make a reasonable investigation
of the character of said individual, each of the members of the
firm, or each of the chief officers of the corporation, as the case
may be, and if he be satisfied that the individual, the members of
the firm or the principal officers of the corporation, as the case
may be, be of good moral character and a person or persons fit to
engage in the proposed business, he shall issue the permit. The
form of the application for such permit and the form of the permit
itself shall be prepared and furnished by the Director of Public
Safety."
Appellant has argued in this Court that the ordinance's
requirements relating to permits, particularly insofar as they may
vest in the Director of Public Safety discretionary power to grant
or withhold the permit, of their own force and without reference to
the character of the tax in other respects render it invalid in the
present application. Appellee insists that the point was not
presented in the state courts, and therefore is not open for
consideration here. In view of the disposition we make of the cause
on other grounds, it is not necessary to consider these
questions.
[
Footnote 3]
"The American Garment Company, which is owned and operated by
John V. Rosser, with its main office at 3617 12th Street, N.E.,
Washington, is engaged in the manufacture and sale of certain
ladies' garments. The American Garment Company employs solicitors
who travel from City to City throughout the country and obtain
orders for this particular garment, which is sold for $2.98, and
the solicitor receives from the purchaser a downpayment usually
sufficient to pay the commission of the solicitor, and the order is
then sent to the home office of the American Garment Company and
the garment is then sent through the United States mails C.O.D. for
the balance to the purchaser. The solicitors at no time make a
delivery of the article."
"The defendant herein was not and is not carried on the rolls of
the American Garment Company as an employee, and her sole
compensation is the commission received from the sale of each
article."
"The defendant, Dorothy Nippert, on January 20, 1944, was
soliciting orders for the American Garment Company, as above set
forth, in the City of Richmond, and that Dorothy Nippert had been
engaged for four days prior to January 20, 1944, in going from
place to place in the City of Richmond and in soliciting orders for
the sale of merchandise on behalf of the American Garment Company
and had, during that time, been engaged in going from place to
place within the places of business of Miller & Rhoads,
Incorporated, a large department store in the City of Richmond and
within the place of business of one of the Five and Ten Cent stores
in the City of Richmond, and therein soliciting the Clerks in those
stores so as to procure from those Clerks orders for the sale of
merchandise on behalf of the American Garment Company, and that
such solicitation occurred on the 20th of January, 1944, and that
she, the said Dorothy Nippert, had not there[to]fore procured a
City revenue license from the City of Richmond."
[
Footnote 4]
Some reliance appears to be placed also upon other more recent
cases, including
International Harvester Co. v. Department of
Treasury, 322 U. S. 340, and
General Trading Co. v. State Tax Commission, 322 U.
S. 335,
322 U. S. 349.
[
Footnote 5]
Pointing out, with a reference to the
Shelby County
case itself, that, in some of the cases, the tax appeared to be
aimed at the suppression of this type of business or putting it at
disadvantage with competing intrastate sales, the opinion
continued:
"In all [the cited cases], the statute, in its practical
operation, was capable of use, through increase in the tax, and in
fact operated to some extent to place the merchant thus doing
business interstate at a disadvantage in competition with untaxed
sales at retail stores within the state. While a state, in some
circumstances, may, by taxation, suppress or curtail one type of
intrastate business to the advantage of another type of competing
business which is left untaxed, . . . it does not follow that
interstate commerce may be similarly affected by the practical
operation of a state taxing statute. . . . It is enough for present
purposes that the rule of
Robbins v. Shelby County Taxing
District, supra, has been narrowly limited to fixed sum
license taxes imposed on the business of soliciting orders for the
purchase of goods to be shipped interstate . . . , and that the
actual and potential effect on the commerce of such a tax is wholly
wanting in the present case."
309 U.S. at
309 U. S. 56-57.
In
Best & Co. v. Maxwell, the Court said:
"In
McGoldrick v. Berwind-White Co., . . . we pointed
out that the line of decisions following
Robbins v. Shelby
County Taxing Dist. . . . rested on the actual and potential
discrimination inherent in certain fixed sum license taxes."
311 U. S. 311 U.S.
454,
311 U. S. 455,
note 3.
[
Footnote 6]
See note 5 Whether
or not the "fixed sum" reference would apply to a tax measured in
part by gross receipts (
cf. the language of the ordinance
in this case relating to earnings, etc., in excess of $1000), the
tax as applied here presumably would not involve that feature,
since, by the explicit wording, it applies only to earnings, etc.,
"for the preceding license year," and there is no showing relating
to such earnings in this case.
See also note 7
[
Footnote 7]
Counsel cite the Court's statement made in differentiating
Adams Mfg. Co. v. Storen, 304 U.
S. 307,
"The rationale of the
Adams Manufacturing Co. case does
not call for condemnation of the present tax. Here, the tax is
conditioned upon a local activity, delivery of goods
within the state upon their purchase for consumption."
309 U.S. at
309 U. S. 58.
(Emphasis added.) However, the Court went on immediately to
say,
"It is an activity which, apart from its effect on the commerce,
is subject to the state taxing power. The effect of the tax, even
though measured by the sales price [
cf. note 6 supra], as has been shown,
neither discriminates against nor obstructs interstate commerce
more than numerous other state taxes which have repeatedly been
sustained as involving no prohibited regulation of interstate
commerce."
Ibid.
[
Footnote 8]
The latest instance decided here being
McLeod v. Dilworth
Co., 322 U. S. 327,
322 U. S. 349.
[
Footnote 9]
It is old doctrine, notwithstanding many early deviations, that
the practical operation of the tax, actual or potential, rather
than its descriptive label or formal character is determinative.
See the authorities cited in
note 23 The
Berwind-White and other recent
cases, including
Best & Co. v. Maxwell, 311 U.
S. 454, only bring that doctrine down to date.
Cf. Lockhart, The Sales Tax in Interstate Commerce (1939)
52 Harv.L.Rev. 617, 621.
[
Footnote 10]
309 U.S. at
309 U. S. 56,
note 11;
see note 5
supra.
[
Footnote 11]
See note 6
[
Footnote 12]
See Lockhart, The Sales Tax in Interstate Commerce
(1939), 52 Harv.L.Rev. 617, 621.
[
Footnote 13]
Cf. Postal Telegraph-Cable Co. v. Richmond,
249 U. S. 252,
249 U. S. 259;
Western Live Stock v. Bureau of Revenue, 303 U.
S. 250,
303 U. S. 254;
McGoldrick v. Berwind-White Co., 309 U. S.
33,
309 U. S. 46;
Nelson v. Sears, Roebuck & Co., 312 U.
S. 359.
[
Footnote 14]
Postal Telegraph Cable Co. v. Richmond, 249 U.
S. 252,
249 U. S. 259;
New Jersey Bell Telephone Co. v. State Board of Taxes,
280 U. S. 338,
280 U. S. 351.
[
Footnote 15]
Walling v. Michigan, 116 U. S. 446,
116 U. S.
455-458. Thus, even the commerce in intoxicating
liquors, over which the Twenty-first Amendment gives the states the
highest degree of control, is not altogether beyond the reach of
the federal commerce power, at any rate, when the state's
regulation squarely conflicts with regulation imposed by Congress
governing interstate trade or traffic,
United States v.
Frankfort Distilleries, 324 U. S. 293,
whether or not also in some instances in addition to complete
exclusion from passing through the state,
Collins v. Yosemite
Park Co., 304 U. S. 518, in
the absence of such congressional action.
Cf. Carter v.
Virginia, 321 U. S. 131,
321 U. S. 137;
Ziffrin v. Reeves, 308 U. S. 132,
308 U. S.
140.
[
Footnote 16]
Cf. Western Live Stock v. Bureau of Revenue,
303 U. S. 250,
303 U. S. 256;
Baldwin v. G.A.F. Seelig, 294 U.
S. 511,
294 U. S.
522-523;
Best & Co v. Maxwell, 311 U.
S. 454,
311 U. S. 455,
and authorities cited in note 3 therein.
[
Footnote 17]
See, in addition to the instant case,
Dunston v.
Norfolk, 177 Va. 689, 15 S.E.2d 86.
[
Footnote 18]
The Court said:
"The vice of the statute as applied to receipts from interstate
sales is that the tax includes in its measure, without
apportionment, receipts derived from activities in interstate
commerce, and that the exaction is of such a character that, if
lawful, it may in substance be laid to the fullest extent by states
in which the goods are sold as well as those in which they are
manufactured. Interstate commerce would thus be subjected to the
risk of a double tax burden to which intrastate commerce is not
exposed, and which the commerce clause forbids. We have repeatedly
held that such a tax is a regulation of, and a burden upon,
interstate commerce prohibited by article 1, section 8, of the
Constitution. The opinion of the State Supreme Court stresses the
generality and nondiscriminatory character of the exaction, but it
is settled that this will not save the tax if it directly burdens
interstate commerce."
304 U.S. at
304 U. S.
311-312.
[
Footnote 19]
It should be noted that no question has been raised in this case
concerning any issue of so-called "multiple state taxation."
Cf. note 7 But if a
nondiscriminatory state tax may become discriminatory or unduly
burdensome by virtue of the fact that other states also may impose
a similar tax bearing upon the transaction, the possibilities for
such multiplication would seem obviously to be magnified many times
by the application of municipal taxes like that involved here.
[
Footnote 20]
The established merchant maintaining a local place of business
where he deals in a variety of commodities, for instance, is much
more favorably placed to absorb the cost of the tax than the
itinerant vendor who deals in or takes orders for a single
specialized commodity or only a few.
The record does not show whether appellant would have been
compensated by the company for whom she solicits, had she paid the
tax.
[
Footnote 21]
The discriminations against solicitors constitute only part of
the more general problem of interstate trade barriers.
See
Hearings before the Temporary National Economic Committee, 76th
Cong., 2nd Sess., Pt. 29; Melder, State and Local Barriers to
Interstate Commerce in the United States (1937). But, as to the
different types of statutes and ordinances designed to favor local
business as against itinerant solicitors and peddlers and "gypsy
truckers,"
see Hearings,
supra, 15965-15987 and
Exhibit No. 2394 (not included in the printed Hearings); Gould,
Legislative Intervention in the Conflict between Orthodox and
Direct-Selling Distribution Channels (1941) 8 Law &
Contemp.Prob. 319. One method used to discourage solicitors has
been to require elaborate information. It is said that "In some New
Jersey cities, this method has reduced the number of canvassers by
35 percent." 18 Public Management 83. And in Arizona at one time,
an itinerant trucker, who went through all the counties of the
state, would have been obliged to pay $4,400 in fees in addition to
posting a $5,000 bond. Hearings,
supra, Ex. 2353. In
addition, licensing statutes, otherwise fair on their face, are
said to have been discriminatorily enforced against itinerant
merchants.
See note (1940) 16 Ind.L.J. 247, 251.
[
Footnote 22]
The
Berwind-White case furnishes an illustration that
the difference between municipal and statewide taxes may not be
controlling or even relevant in relation to a tax which, apart from
the possibility of multiple state taxation, presents neither the
prohibitive consequences inherent in Richmond's tax nor any element
of discrimination in favor of local business. The itinerant
out-of-state merchant could pay the New York sales tax and survive,
according to its general effect, without any disadvantage as
compared with local merchants, itinerant or established, resulting
from the tax excepting only the possibility of multiple state
taxation.
[
Footnote 23]
Cf. Galveston, H. & S.A. Ry. Co. v. Texas,
210 U. S. 217,
210 U. S. 224,
210 U. S. 227;
Lawrence v. State Tax Commission, 286 U.
S. 276,
286 U. S. 280;
Southern Pacific Co. v. Gallagher, 306 U.
S. 167,
306 U. S. 177;
Wisconsin v. J. C. Penny Co., 311 U.
S. 435,
311 U. S.
444-445;
Nelson v. Sears, Roebuck & Co.,
312 U. S. 359,
312 U. S. 363,
312 U. S.
366.
[
Footnote 24]
Since appellant works for an out-of-state firm and the record
contains nothing to show her presence in Richmond at any time other
than during the one five-day period, or any intention to return,
whether periodically or casually, no presumption can arise that she
was a resident of Richmond or was regularly engaged in solicitation
there. The presumption on the facts before us is the other way.
Moreover, here as in
Best & Co. v. Maxwell,
311 U. S. 454, the
"real competitors" of petitioner are, among others, the local
retail merchants. The Richmond ordinance, unlike the North Carolina
statute, does not discriminate on its face between such merchants
and transient solicitors; nor does it fix a lower rate for the
former. But the opinion in the
Best case expressly pointed
out that, nominally, the statute treated local and out-of-state
transients alike. Nevertheless, since the latters' principal
competition obviously came from "regular retail merchants" and the
tax bore "no relation to actual or probable sales," the Court found
the North Carolina atmosphere too hostile to allow survival of
interstate commerce. The discrimination resulting from the present
application of the Richmond ordinance, as between out-of-state
solicitors and regular retail merchants, is only less obvious. It
is not less real.
Cf. note
5
[
Footnote 25]
Obviously a total exclusion of commerce is itself the most
effective form of discrimination in favor of the local merchant who
is so situated that he can continue in the business.
[
Footnote 26]
See, for the part played by itinerants in our history,
Wright, Hawkers and Walkers in Early America (1927). Peddlers were
discriminated against in favor of town merchants as early as 1700.
Wright,
supra at 90.
MR. JUSTICE DOUGLAS, with whom MR. JUSTICE MURPHY concurs,
dissenting.
The Court has not shared the doubts which some of us have had
concerning the propriety of the judiciary acting to nullify state
legislation on the ground that it burdens interstate commerce.
See Southern Pacific Co. v. Arizona, 325 U.
S. 761,
325 U. S. 784,
325 U. S. 795,
dissenting opinions. But the policy of the Court is firmly
established to the contrary.
Even in that view, however, this judgment should not be
reversed. The Court has held drummer taxes unconstitutional where
they were discriminatory on their face or where it appeared that
necessarily or in practical operation
Page 327 U. S. 436
they worked to the disadvantage of interstate commerce.
See
McGoldrick v. Berwind-White Co., 309 U. S.
33,
309 U. S. 45,
46, note 2. But the present ordinance, on its face, seems to
reflect no more than a
bona fide effort to make interstate
commerce pay its way.
Western Live Stock Co. v. Bureau of
Revenue, 303 U. S. 250,
303 U. S. 254.
It treats a solicitor for a Virginia manufacturer exactly the same
as it treats solicitors for manufacturers located in other States.
Under this type of tax, the solicitor for a Virginia manufacturer
pays as much as Nippert, whether he confines himself to one
locality or works his way through the State.
In that view, a grant of immunity to Nippert is the grant of a
preference to interstate commerce.
The problem, however, does not end there.
Best & Co. v.
Maxwell, 311 U. S. 454. In
that case, a North Carolina tax on those who displayed goods in any
hotel room or temporary office in order to obtain retail orders was
applicable to solicitors representing local as well as out-of-state
distributors. We held that that parity of treatment did not save
the tax. We said that the tax must be compared with the tax on the
local retail merchants -- the "real competitors" of the
out-of-state solicitor. Finding that the tax on the local retail
merchants was lighter, we held that that tax discriminated against
the out-of-state solicitor, and was therefore invalid.
In the present case, the tax on Nippert may or may not, in
practical operation, work to the disadvantage of this interstate
business. It would be one thing if Nippert's business took her from
town to town throughout the State. But, so far as we know, Nippert
may be a resident of Richmond working exclusively there, full or
part time. In that event, we could not determine the issue of
discrimination without knowing what taxes the retail merchants in
Richmond must pay. If the facts were known, it might appear
Page 327 U. S. 437
that the tax now struck down in fact resulted in parity of
treatment between Nippert and her local competitors. The record
does not enlighten us on any these matters.
I think that one who complains that a state tax, though not
discriminatory on its face, discriminates against interstate
commerce in its actual operation should be required to come forward
with proof to sustain the charge.
See Southern Railway Co. v.
King, 217 U. S. 524,
217 U. S.
534-537. This does not, of course, require proof of the
obvious. But, as Mr. Justice Brandeis pointed out, cases of this
type should not be decided on the basis of speculation; the special
facts and circumstances will often be decisive.
Hammond v.
Schappi Bus Line, 275 U. S. 164,
275 U. S.
170-172. Without evidence and findings, we frequently
can have no "sure basis" for the informed judgment that is
necessary for decision.
Terminal Railroad Assoc. v.
Brotherhood, 318 U. S. 1,
318 U. S. 8. That
seems to me to be the case here. Proof should be required to
overcome the presumptive validity of this local legislation as
applied to Nippert.