This proceeding in mandamus is one of a number of cases pending in this court, all of which attack the validity of Chapter 16848, Laws of Florida, 1935, and which is commonly known as The Chain Store Tax Act, also as Senate Bill No. 724, which *Page 584 last reference will hereinafter be used for the sake of convenience.
Also because of the necessity for frequent reference thereto as a discussion of the case progresses, it is considered well to copy here the following portions of the Act, to-wit:
"AN ACT to provide for the relief of the public free schools of the State of Florida by raising revenue for the county school fund by levying and imposing a tax upon the privilege of operating a store or stores within this State, to classify such stores for the purpose of such taxation and of graduating the tax in accordance with the number of stores operated under a single ownership, management or control, to declare the public policy on which this Act is founded, to provide for the administration and enforcement of this Act and for the promulgation and enforcement of rules and regulations to facilitate such enforcement to provide for the creation and enforcement of a lien upon the property of persons liable for the payment of such tax; to provide penalties for the violation of this Act and of rules or regulations lawfully made under the authority hereof; to repeal conflicting laws, expressly but on condition including Chapter 16071, Laws of Florida of 1933; and to appropriate the revenues derived hereunder.
"Be It Enacted by the Legislature of the State of Florida:
"Section 1. DECLARATION OF POLICY. It is hereby determined and declared that extensive new revenues are required to promote education and to preserve the common school system of the State of Florida; and that in the raising of such revenue it is expedient to levy a privilege tax upon the occupation of engaging in and continuing in the business of operating of retail stores in the State of Florida in lieu of that heretofore provided by Chapter 16071 of the Laws of Florida, 1933, and in addition to all other *Page 585 taxes; and that due to the greater specialization in management and methods and advantages of mass buying, of intensive selling, of more efficient utilization of capital assets, of the specialized character of their merchandising and the more efficient coverage and results obtained from their advertising, stores operated in multiple units enjoy an advantage over individually owned and operated single stores to the extent that it is fit and proper that such stores should be separately classified for the purpose of such privilege taxation; and further, that the increasing growth of chains and greater multiplication of units of stores tend to foster monopoly and to create unemployment by driving out of business their competitors who do not enjoy such advantage and that therefore the multiplication and extension of such units of chain stores should be discouraged as a matter of public policy.
"Section 4. TAX. For the privilege of continuing in or engaging in the business of a retailer as defined in this Act, there is hereby imposed upon every person, firm, corporation, association or co-partnership, trust or joint stock company, and any firm however organized or whatever be the plan or operation, shall under the terms of this Act be required to obtain a permit or license to operate a store in this State, a tax which shall be equal to the amount due under the provisions of Subdivision A, and the amount due under the provisions of Subdivision B of Section 4 of this Act; in order to equitably and properly fix the formula upon which the herein license fees shall be based and so that the factor of number of stores and the factor of amount of business done under the privilege shall be included in the formula. The specific amount to be determined as follows: *Page 586
"SUBDIVISION A "CLASS 1. Upon one store, the flat sum of $10.00.
"CLASS 2. Upon chains of more than one but not more than three stores, the flat sum of $50.00 for each said store.
"CLASS 3. Upon chains of more than three but not more than six stores, the flat sum of $100.00 for each said store.
"CLASS 4. Upon chains of more than six but not more than ten stores, the flat sum of $200.00 for each said store.
"CLASS 5. Upon chains of more than ten but not more than fifteen stores, the flat sum of $300.00 for each said store.
"CLASS 6. Upon chains of more than fifteen stores the flat sum of $400.00 for each said store.
"SUBDIVISION B "CLASS 1. Upon one store, also an amount equal to one-half of one per cent. of the gross receipts from all sales as defined in this Act.
"CLASS 2. Upon chains of more than one but not more than three stores, also an amount equal to one per cent of the gross receipts from all sales as defined in this Act.
"CLASS 3. Upon chains of more than three but not more than six stores, also an amount equal to two per cent. of the gross receipts from all sales as defined in this Act.
"CLASS 4. Upon chains of more than six but not more than ten stores also an amount equal to three per cent. of the gross receipts from all sales as defined in this Act.
"CLASS 5. Upon chains of more than ten but not more than fifteen stores, also an amount equal to four per cent. of the gross receipts from all sales as defined in this Act.
"CLASS 6. Upon chains of more than fifteen stores, also an amount equal to five per cent. of the gross receipts from all sales as defined in this Act. *Page 587
"The tax imposed under Subdivision B of this section shall be calculated upon the gross receipts of the total number of stores in each respective chain concerned at the rate prescribed in the applicable class bracket of the foregoing schedules.
"If the tax in Subdivision B of this section be, for any reason, held invalid and inoperative, then the taxes in each of the six classes of stores enumerated in Subdivision A of this Section shall be twice the amount set forth in said Schedule A, in lieu of the rates therein prescribed.
"Section 7. AMOUNT OF TAX. The taxes levied and imposed by Subdivision A of Section 4 of this Act shall be due and payable on the first day of July of each and every year, at which time the Comptroller of the State of Florida shall issue the license after ascertaining from the applicant therefor the facts with reference to the number of stores owned or controlled by said applicant. The taxes levied and imposed by Subdivision B of Section 4 of this Act shall be paid monthly and for the purpose of ascertaining the amount every person coming within the provisions of this Act, on or before the fifteenth day of August, 1935, and on or before the fifteenth day of every calendar month thereafter, individually or by duly authorized officer or agent, shall make and file with the Comptroller a written return, in the manner and form designated or prescribed by said Comptroller, and upon blanks furnished by him showing the amount of gross receipts from sales by such person during the preceding calendar month and the amount of tax for which such person is liable for the current calendar month, and with such written return such person shall remit to the Comptroller the amount of said tax due from such person.
"(a) In case of credit and time sales the amount thereof *Page 588 shall be included in the gross receipts for the month in which payments are received by the person, without any deduction therefrom on account of the cost of the property sold, the cost of materials used. labor or service cost, interest paid, losses or other expense whatsoever.
"(b) If the amount due by any person as the tax imposed by this Act is not paid on or before the date prescribed for its payment, there shall be collected, as a part of the tax, interest upon said unpaid amounts, at the rate of two per centum (2%) per month from the date prescribed for its payment until it is paid.
"(c) It shall be the duty of every person required to make a report and pay any tax under this Act, to keep and preserve suitable records of the gross proceeds of sales taxable under this Act, and such other books of account as may be necessary to determine the amount of tax due hereunder; and it shall be the duty of every person to keep and preserve, for a period of two years, all invoices and other records of goods, wares or merchandise purchased for resale; and all such books, invoices and other records shall be open to examination, at any time, by the Comptroller or any one of his duly authorized agents.
"(d) Any permit holder may take credit on any tax payable for the privilege of doing business under Section 4 of this Act on tax due under Subdivision A or in the months of August or September, 1935, due under Subdivision B for the proportional unexpired portion of the amount paid for any license heretofore obtained by him under the provisions of Chapter 16071, aforesaid.
"Section 9. TIME of PAYMENT. At the time of transmitting the return required hereunder, to the Comptroller, the person shall remit therewith, to said Comptroller, the amount of the tax due under the applicable provisions of *Page 589 this Act, and failure to pay such tax, at the time for filing the return, shall cause said tax to become delinquent. All taxes provided for herein are due and payable at the offices of the State Comptroller at Tallahassee, Florida.
"Section 16. REPEALER. That Chapter 16071, of the laws of Florida, 1933, be and the same is hereby repealed, provided that this section shall not be effective in the event that Section 4 of this Act should be invalid.
"Section 18. SAVING CLAUSE. If any section, subsection, sentence, clause, phrase or word of this Act, is for any reason, held or declared to be unconstitutional, inoperative or void, such holding or invalidity shall not affect the remaining portions of this Act; and it shall be construed to have been the legislative intent to pass this Act without such unconstitutional, inoperative or invalid part therein; and the remainder of this Act after the exclusion of such part or parts shall be deemed and held to be valid as if such excluded parts had not been included herein; or if this Act or any provision thereof shall be held inapplicable to any person, groups of persons, property, kind of property, circumstances or set of circumstances, such holding shall not affect the applicability thereof to any other person, property or circumstance."
The Act was approved June 1, 1935.
Opposing counsel have agreed upon the statement as to the allegations of the alternative writ as follows, to-wit:
"In the mandamus proceedings, it is made to appear that Lane Drug Stores, Incorporated, which operates eleven retail drug stores in the State of Florida, all of which are located in Duval County, has tendered the filing fees and license fees prescribed by Chapter 16071, Laws of Florida, 1933, for the opening and operation of retail stores, and has demanded of the Respondent R.H. Carswell (now deceased) *Page 590 and of his successor, Clyde H. Simpson, the licenses to which it is entitled under the provisions of Chapter 16071, Laws of 1933. The tenders were refused by the respondent Carswell and by his successor, the respondent Simpson, on the sole ground that before obtaining a license to operate its retail stores, Lane Drug Stores was required to pay the tax sought to be imposed by Section 4 of Senate Bill No. 724 (Chapter 16848, Laws of Florida, 1935), viz.: As an operator of eleven retail drug stores, Lane Drug Stores is required to pay the fees and taxes sought to be imposed by Class 5 of Subdivision A and Class 5 of Subdivision B of Section 4 of Senate Bill No. 724.
"Lane Drug Stores asserts that it is not required to pay the tax imposed by Senate Bill No. 724, and that it is not required to comply with any of the terms or provisions of Senate Bill No. 724, because of the fact that the Act is effective to deprive it of its constitutional rights under the Fourteenth Amendment to the Constitution of the United States and under Sections 1 and 12 of the Declaration of Rights of the Constitution of Florida, and has been held to be void in its entirety by the Circuit Court of Leon County, Florida. In particular, it is asserted that Senate Bill No. 724 is void, because the classifications made in the Act rest upon no rational foundation, nor upon any difference which bears any reasonable and just relation to the nature and purpose of the Act, and that the classifications are whimsical and arbitrary. Likewise, it is asserted that the taxes sought to be imposed by Senate Bill No. 724 are unjustly discriminatory and unequal, and that they are confiscatory and will destroy a substantial number of efficiently managed and lawful businesses. And in the mandamus proceedings it is sought to compel the respondent *Page 591 (Simpson) to accept the tendered fees and issue licenses as it is his duty to do under the provisions of Chapter 16071, Laws of Florida, 1933, or show cause why he refuses so to do."
The respondent filed a pleading styled "Answer to Alternative Writ" to which relator has filed a motion to strike numerous portions and a demurrer, and the case is before the court on this motion and demurrer. While the briefs and argument were made applicable to both motion and demurrer, we find it expedient to first devote our attention to a consideration of the demurrer.
The question of lack of jurisdiction of the court to deal with the legality of a tax having been suggested, we will first dispose of that matter, as a court should always promptly determine any question of its jurisdiction.
The contention is presented that the circuit court has exclusive jurisdiction to determine the validity of a tax under Article V of the Constitution, and that although under the Constitution this Court has original jurisdiction to issue the writ of mandamus, yet it may not do so if the determination of the validity of a tax is involved. In numerous cases in the past this court has taken jurisdiction in mandamus when the legality of a "tax, assessment, or toll" was involved in the attack made therein upon the validity of the law under which such "tax, assessment, or toll" was sought to be levied and collected and we have exercised such original jurisdiction without question. We do not construe the Constitution of Florida to so limit the power of this court.
The provision of Section 11, Article V that "the circuit courts shall have exclusive original jurisdiction * * * in all cases involving the legality of any tax, assessment, or toll," does not limit the jurisdiction conferred by Section 5, Article *Page 592 V upon the Supreme Court to "issue writs of mandamus, certiorari, prohibition, quo warranto, habeas corpus and also all writs necessary or proper to the complete exercise of its jurisdiction." As used in Section 11, the provision first above quoted is intended to exclude from inferior courts of original jurisdiction "all cases involving the legality of any tax, assessment, or toll."
The allegation (Par. XVI) that Senate Bill No. 724 was not passed by the Legislature until after midnight of May 31, 1935, and the Legislature had become functus officio is contradicted by the records of the Legislature and of the Secretary of State, of which the court takes judicial notice and will follow as correct. Before any attack upon the legislative proceedings can be sustained, the relator must overcome the binding effect of those governmental records by procuring their change to support his contentions.
Paragraph XVII of the alternative writ alleges the granting of an injunction in the Circuit Court in and for Leon County in the case of Bond-Howell Lumber Co., a corporation, et al., Plaintiffs, versus J.M. Lee, as Comptroller, adjudging Senate Bill No. 724 to be unconstitutional and void in its entirety, and enjoining the Comptroller from enforcing the Act, and that the relator (petitioner) was a party to said cause and that the judgment of the court in that case is still in full force and effect and has not been superseded or set aside and there has been no appeal therefrom. Of course, the respondent not being a party to that proceeding, is not bound by the judgment, and the allegations as to same do not add anything to the writ herein.
For the reasons hereinafter stated, we are of the opinion that we cannot uphold the portion of the Act levying a graduated tax upon the chain stores equal to a prescribed percentage of the gross receipts from all sales, the rate and amount *Page 593 of tax being fixed according to the class in which any chain may fall, the classes being established according to the number of stores. This construction eliminates Subdivision B except the first paragraph thereof. This brings us to a discussion of whether such part of the Act may be stricken and the remainder sustained without doing violence to the intention of the Legislature — whether the lawmaking body would have passed the Act as it will stand with that portion stricken.
Counsel have argued that the graduated gross receipts tax factor is invalid, to which we agree, and they say its invalidity "renders the entire Act unconstitutional, for it is an essential part of the scheme, and its elimination works a result not intended by the Legislature," and cited in support cases decided by this court as follows, to-wit: Almeriggoto v. Jarvis, 95 Fla. 914, 117 So.2d 793 (1928); Ex parte Smith, 100 Fla. 1, 128 So.2d 864 (1930); Teuton v. Thomas, 100 Fla. 78, 129 So.2d 330 (1930); Ramsey v. Martin, 111 Fla. 798, 150 So.2d 256 (1933); also State v. Hilburn, 70 Fla. 55, text 62, 69 So.2d 784, and quote from it the rule that "If any of the provisions of the Act are held to be illegal induced to any appreciable extent its passage, the entire Act fails in view of the interdependence of the provisions."
Their brief also states: "Likewise, if the legislative record shows that an Act would not have been passed with the unconstitutional provision eliminated, then the entire Act is void," and cites therefor Ramsey v. Martin, supra. They say these rules apply notwithstanding a legislative declaration that any invalid provision shall not affect the remainder of the Act, and cite Railroad Retirement Board v. Alton R. Co., 295 U.S. 330, 55 Sup. Ct. 758, 79 L. Ed. 1468, and authorities cited therein at text page 1482.
Their brief then states: "They apply to scheme of taxation, *Page 594 and where an invalid section is part of an entire scheme, the courts may be required to declare the whole scheme invalid," for which proposition they cite Pollock v. The Farmers' Loan Trust Co., 158 U.S. 601, 39 L. Ed. 1108; 15 Sup. Ct. Rep. 912; and Hill v. Wallace, 259 U.S. 44, 66 L. Ed. 822, 42 Sup. Ct. Rep. 452.
We construe the tax imposed to be for revenue and for the privilege of engaging in or continuing in business. It is clear that the Legislature wanted to have two factors used in computing the amount of tax that any store or chain of stores should pay, although it was evidently in doubt as to the validity of Subdivision B for use as a factor, hence the inclusion of the last paragraph of Section 4, attempting to double the amount of tax set forth in Subdivision A in event Subdivision B should be held invalid and inoperative.
Surely if a "saving clause" can ever be framed so as to be effective to protect a legislative Act against an onslaught upon its validity, Section 18 is broad and comprehensive enough to accomplish such result. The Legislature solemnly declared that if any section, sub-section * * * of this Act is for any reason held or declared to be unconstitutional, inoperative or void, such holding of invalidity shall not affect the remaining portions of this Act; and it shall be construed to have been the legislativeintent to pass this Act without such unconstitutional,inoperative or invalid part therein; and the remainder of this Act after the exclusion of such part or parts shall be deemed and held to be valid as if such excluded parts had not been included herein," etc.
That is unmistakably clear and strong language, and if possible to do so without offending against some recognized *Page 595 canon of statutory interpretation, full effect should be given thereto.
In the case of Di'Lustro v. Penton, Sheriff, the court expressed serious doubt as to the validity of certain exemptions contained in the statute which was under attack, and speaking through Judge Barns, said: "but assuming, without adjudicating, that to allow the exemptions to stand would make the Act unconstitutional, we are then confronted with Section 24, supra, and the general principle of law, that,
"If a duly enacted statute contains provisions that are invalid because in conflict with organic law, and such invalid portions may be severed, and the remainder of the statute then be made effective for the purpose designed, and will not cause results not intended by the Legislature, and it does not appear that the statute would not have been enacted without the invalid portions, the invalid portions of the Act should be disregarded and the valid portions enforced, if it can be done, to effectuate the legislative intent." State v. Phillips, 70 Fla. 340, 70 So.2d 367, 370, Ann. Cas. 1918 A, 138. See, also, Cooley's Constitutional Limitations (8th Ed.) 360.
"If on the one hand the exemptions are to stand and the result is to make the Act invalid, or on the other hand the exemptions enumerated can be stricken out and that which remains is complete in itself, and capable of being executed in accordance with the apparent legislative intent, wholly independent of that which is rejected, the law must be sustained with the unconstitutional portion stricken. See Cooley's Constitutional Limitations (8th Ed.) 359-363." Di'Lustro v. Fenton, Sheriff, 106 Fla. 198,142 So.2d 899.
An examination of Section 24 of Chapter 14650, Laws of Florida, 1931, shows that it is in effect substantially *Page 596 the same as Section 18 of Senate Bill No. 724, but if there is any difference in the proficiency of the two respective provisions to preserve the unobjectionable part or parts of a statute, Section 18 is in our opinion the stronger and more effectual of the two.
It is noteworthy that this Court, speaking through an able opinion by Mr. Justice TERRELL in the case of Liggett, v. Lee,109 Fla. 477, 149 So.2d 8, upheld the remaining provisions of the 1931 Chain Store Tax Act after the Supreme Court of the United States had held certain other provisions thereof invalid.
It will be observed that there is a striking similarity between Sec. 18 of Senate Bill 724 and Sec. 15 of Chapter 15624, which was quoted in that opinion and which we quote again, as follows:
"If any section, provision or clause, of this Act shall be declared invalid or unconstitutional, or if this Act as applied to any circumstances shall be declared invalid or unconstitutional, such invalidity shall not be construed to affect the portions of this Act not so held to be invalid or the application of this Act to other circumstances not so held to be invalid."
If there is any substantial difference between the two sections, that in the later Act is the broader and more efficacious.
In the Liggett-Lee case, supra, it was ably stated:
"Under the terms of Section 15 as here quoted, such an elimination is warranted. The Act as a whole evinces a purpose on the part of the Legislature to impose a license tax on chain stores, and Section 15 provides that if any section, provision, or clause thereof, or if the Act as applied to any circumstances shall be declared invalid or unconstitutional, such invalidity shall not affect other portions *Page 597 of the Act held valid nor shall it extend to other circumstances not held to be invalid.
"Under the liberal terms of Section 15 it may be reasonably discerned that the Legislature intended that the Act under review should be held good under any eventuality that did not produce an unreasonable, unconstitutional, or an absurd result. Such provisions as are contained in Section 15 have been frequently upheld by the courts. Citing authorities.
"Such legislative declarations as are contained in Section 15 serve notice on the courts of a legislative intent to uphold separable portions of an Act partially invalid which would have been eliminated in passage if the Legislature had been advised of the invalidity. The test to determine workability after severance, and whether the remainder of the Act should be upheld, rests on the fact of whether or not the invalid portion is of such import that the valid part would be incomplete or would cause results not contemplated by the Legislature. If the objectionable part of the Act can be severed in such a way that the Legislature would be presumed to have enacted the valid portion without the invalid part, the failure of the latter will not render the entire statute invalid." Citing authorities.
Moreover, this construction is further supported by the attitude of the court as expressed in the case of City of DeLand v. Florida Public Service Co., and later quoted at great length, in which the entire ordinance was held void without any attempt to reject the objectionable portions and sustain the rest, because the exercise of the legislative authority of a municipality is not limited to being done only at limited and long separated seasons, such as is the case where a law made by the Legislature itself is involved. 119 Fla. 804, 161 735, text 740. *Page 598
Even as it was judicially determined in Liggett v. Lee, supra, that "the Act as a whole evinces a purpose on the part of the Legislature to impose a license tax on chain stores," etc., so it is equally true that Senate Bill 724 evinces a purpose on the part of the Legislature to raise the required extensive new revenues to promote education and to preserve the common school system of the State of Florida; to levy a privilege tax upon the occupation of engaging in and continuing in the business of operating retail store in lieu of Chapter 16071, Laws of Florida, 1933, and in addition to all other taxes; and to grade that tax according to the superior advantages that might be obtained by more extensively operated stores. When the declaration of policy is kept in mind and the strong and unequivocal language of Section 18 is considered, and especially in conjunction with the holding in the Liggett-Lee case, supra, we feel warranted in reaching the conclusion that the Act without the graduated gross receipts tax factor is in conformity with the intention of the Legislature; that if they had been advised of the invalidity of these provisions (as they did have misgivings about the entire Subdivision B), they would have eliminated them from the bill and enacted the remainder of the bill.
The respondent contends that it was the intention of the Legislature to impose a single tax upon each chain of stores, as well as a single tax upon any one retail store which was not a part of a chain as that term is defined in the Act. We agree such is the whole tenor of the Act and the fact that two separate and distinct and not necessarily related factors are provided as factors to be used in the computation of the tax in nowise changes the character of the tax, but it continues as a single tax imposed upon a single retail store which is not part of a group or chain, *Page 599 but is the only store under the same ownership, management or control, likewise it is the same when applied to the composite group unit, consisting of more than one store under the same ownership, management or control and falling within the classification of a "chain," "chain stores" or "chain of stores" as defined in the Act.
Such a tax is permissible, unless it is so framed as to violate some provision of organic law.
The respondent relies upon the case of City of DeLand v. Florida Public Service Co., 119 Fla. 804, 161 So.2d 735, and in their brief counsel have in presenting that case, very clearly and tersely stated:
"The Court there had under consideration an ordinance of the City of DeLand imposing a tax upon the gross receipts from the sale of electricity. Mr. Justice DAVIS, speaking for the Court in his characteristic way, drew a clear line of demarcation between a tax upon gross receipts as such and a tax upon the privilege of future operations, the former, a tax upon an act already done, namely, the collection of gross receipts, `because it has been so collected,' as said the Court, and the latter, a tax upon a privilege desired to be enjoyed in the future, the amount of the latter tax to be measured by the application of a particular rate to gross receipts collected during a preceding period.
The brief then quotes from the opinion in that case, to-wit:
"Since a tax must be determined by its practical effect and operation rather than by particular descriptive language applied to it, a tax that can be levied only where an individual, firm or corporation both seeks, or exercises, a taxable privilege of doing business in one year and has been in receipt of profits, income, or gross receipts during its preceding fiscal year which is made the basis of computation *Page 600 of the tax on the privilege proposed to be renewed and continued for another year, such tax is obviously not a direct tax on the income or receipts of such a person, firm or corporation, but is to be construed as an excise tax on the privilege exercised, or proposed to be exercised, computed on the basis of past receipts or income and paid in advance for the next succeeding year computed for the current tax period on the basis of the person, firm, or corporation's receipts or income for its preceding fiscal year. Educational Films Corp. v. Ward, 282 U.S. 379, 51 S. Ct. 170, 75 L. Ed. 400, 71 A.L.R. 1226. Thus it is not a direct tax upon the gross receipts or gross income realized in a given year collectible upon a report and ascertainment thereof, but it is a tax for the privilege of doing business in one year measured by the gross receipts of income accruing from the business in the preceding fiscal year. Bass, Ratcliff Gretton v. State Tax Commission, 266 U.S. 271, 45 S. Ct. 82, 69 L. Ed. 282."
As was so aptly stated by the author in the above quoted paragraph in reference to the character of the tax, "a tax must be determined by its practical effect and operation rather than by particular descriptive language applied to it."
In the same opinion it was further stated:
"But, like all tax measures when called in question in the courts, the nature of the instant tax ordinance is to be determined by its practical operation and effect rather than by what it is named. Thus it must be tested by the character of its incidence upon the subject at which it is directed and by the manner in which it affects the taxpayer in its practical operation in the course of its administration, and in that view of it only will the courts undertake to weigh and determine its validity in the light of the limitations of the state and national Constitutions. Spoliation under the *Page 601 guise of taxation always will be declared unconstitutional, whatever its name or form." (Authorities cited.)
And further on in the same case we find the statement: "What controls the judgments of the courts in matters like the present is the underlying reality of the tax ordinance as it is intended to put into practical operation and effect."
In analyzing the DeLand ordinance, the court, among other features, pointed out: "* * * (5) it constitutes a direct and immediate burden upon each transaction of sale of electricity by the company in proportion to its magnitude and irrespective of whether the transactions singly, or en grosse, are profitable or otherwise; (6) it arises against the power company whether or not its profits are large or small and irrespective of whether any gain at all is realized by the power company over and above expenses and losses; (7) it is more than a reasonable statutory corporate net income tax, which under Section 11 of Article 9 of the State Constitution may or may not, be prohibited as to corporations, in that it may conceivably take all of the prodecer's net income and leave him no residue whatever."
And the writer further proceeds to say:
"The difference in effect between a tax measured by gross receipts and one measured by net income is recognized in many decisions. It is manifest and substantial. Moreover, it affords a convenience and workable basis of distinction between a direct burden upon the business affected and a charge that it is only indirect and incidental.
"A tax upon gross receipts, or gross income from all transactions of a business corporation, for the privilege of doing the business in which the taxed gross receipts or income are realized, affects each transaction in proportion to its magnitude and irrespective of whether it is profitable or otherwise. Conceivably it is often sufficient to make the *Page 602 difference between profit and loss, or to so diminish the profit as to impede or entirely discourage the conduct of the business affected. Thus it is materially variant from a tax upon net profits which has no such effect. (Authorities cited.)
"It is generally conceded as a matter of common knowledge that the gross sales of a saleable commodity or service do not bear any constant relation to the net profits of the seller and that gross receipts yield differing ratios of profit dependent upon the character of what is sold as well as the volume of transactions. (Citing authority.) * * *
"This court is committed to the doctrine that the privilege of selling, buying, using, or distributing for use, electricity, gas, and like public utility services, is a proper object of taxation in the form of an excise tax on the privilege so enjoyed computed according to any reasonable or lawful method of ascertainment. (Citing authorities.)
"There is a logical and practical distinction, however, between a tax laid directly upon the gross receipts or gross income of a business to be assessed and collected upon the gross receipts or gross income already collected, because it has been so collected, and a tax on gross receipts or gross income which can in no case have any incidence unless the taxpayer seeks to enjoy, or enjoys, a privilege which is the proper object of excise taxation on such privilege, and which would not be open to judicial interference if its amount were arrived at by any other nondiscriminatory method of computation than according to the measure of gross receipts or gross income enjoyed or realized on the privilege during a preceding period of time."
The final discussion then about a privilege tax for one year computed upon the basis of the receipt of profits, income or gross receipts during its preceding fiscal year, is *Page 603 dealing with yearly periods, one year used as a basis for determining the tax for the next year. Although the tax levied under Subdivision A is for the yearly period (Sec. 7), and it is to be noted that occupational taxes in this State have always, with few exceptions, been payable annually. Yet there is no constitutional requirement to prevent the Legislature in its wisdom providing for the payment of license taxes in installments or to require or permit more frequent than annual payments; still in our scheme and system of taxation and the collection thereof in its several different forms, that is ad valorem licenses, and poll taxes, a yearly plan for enforcement has been almost universal.
The practical effect of the payment of a tax along the first of the month (not later than the 15th) in an amount equal to a certain percentage or part of the gross receipts of the preceding month is that it is a tax upon the very receipts which have been collected for the previous month, notwithstanding the statute says that it is exacted for the month which is being entered.
We hold that the imposition of the flat taxes as specified in the several classes under Subdivision A and the one-half of one per cent. of the gross receipts as specified in Class I of Subdivision B from all sales as defined in the Act (Subdivision B, Class I) constitutes a lawful tax upon the privilege of engaging or continuing in business. The superior advantages and the greater opportunity for obtaining business and operating more efficiently and successfully because of the grading of stores and the larger the group the correspondingly broader opportunities derived, afford just and reasonable classification for the graduated tax according to the number of stores. While we are not aware of a statute of another State that has so broadly classified by such large steps instead of graduating the tax *Page 604 by the increase of each store, yet we do not perceive that such a classification is unreasonable. Some injustice is bound to result from any general rule of classification, and equal protection demands only reasonable conformity in dealing with parties similarly circumstanced. Stewart Dry Goods Co. v. Lewis,et al., 294 U.S. 550, 55 Sup. Ct. 525 (March 11, 1935), 79 L. Ed. 1054.
Whatever part of the graduated tax imposed is sustained must be upheld upon the legal ground as being for a privilege enjoyed or to be enjoyed and not based contrary to any recognized principle of law.
Under Subdivision A the store or chain of stores pays for the privilege of enlarging or continuing in business and there is no unjust discrimination as between the different classes. Under Class I of Subdivision B all stores are treated alike, so that none can complain, for each store or each store in a chain of stores must pay identically the same rate of tax. However, under the different classes of Subdivision B we find that the chain store would not merely be paying for a privilege of greater opportunity which it has already obtained by complying with the law and paying the flat tax applicable to its classification but it is being charged also according to if not for what it has collected during the preceding month without any logical relationship between the amount of its collections (receipts) and a commensurately enhanced opportunity to be enjoyed in the new month. We see no logical reason for saying that A should pay a higher tax because he has sold and collected for an article of merchandise a certain price than B should pay for selling and collecting for the same article at the same price, simply because B had a greater number of stores and had collected more money during the previous month.
It has been strongly urged that the statute is retroactive *Page 605 in its operation because when the number of stores is increased so as to progress into the higher bracket or class and thereby increase the amount of tax per store throughout the entire chain as it has been increased by the addition of stores, and not merely make the higher rate applicable to the added stores. In considering this question, it should be kept in mind that the tax is against the composite group of stores constituting the "chain" or system and the privilege of operating it, and is not a tax against the individual stores making up the "chain," which is the unit of taxation, although the number of stores is used for determining the classification of the chain unit of which they are parts and the amount of license fees to be paid by the chain unit so formed and classified.
While the tax was quite different, yet the same underlying principle was present in the Mangoun inheritance tax case, so that we deem it applicable in the instant case. There the United States Supreme Court held that the frame of the tax act whereby a higher rate was required upon the entire amount of a higher sum was not an arbitrary classification. Mr. Justice McKenna speaking for the court first quoted the section of the statute under attack and proceeded to discuss its effect, as follows, to-wit:
"There are four classes created, and manifestly there is equality between the members of each class. Inequality is only found by comparing the members of one class with those of another. It is illustrated by appellant as follows: One who receives a legacy of $10,000, pays three per cent., or $300, thus receiving $9,700, net, while one receiving a legacy of $10,001 pays four per cent. on the whole amount, or $400.04, thus receiving $9600.96, or $99.04 less than the one whose legacy was actually $1 less valuable. This method is applied throughout the class. *Page 606
"These, however, are conceded to be extreme illustrations, and we think, therefore, that they furnish no test of the practical operation of the classification. When the legacies differ in substantial extent, if the rate increased, the benefit increases to greater degree.
"If there is unsoundness, it must be in the classification. The members of each class are treated alike; that is to say, all who inherit $10,000 are treated alike — all who inherit any other sum are treated alike. There is equality, therefore, within the classes. If there is inequality, it must be because the members of a class are arbitrarily made such, and burdened as such, upon no distinctions justifying it. This is claimed. It is said that the tax is not in proportion to the amount, but varies with the amounts arbitrarily fixed, and hence that an inheritance of $10,000 or less pays three per cent., and that one over $10,000 pays, not three per cent. on $10,000, and an increased percentage on the excess over $10,000, but an increased percentage on the $10,000 as well as on the excess; and it is said, as we have seen, that in consequence one who is given a legacy of $10,001 by the deduction of the tax receives $99.04 less than one who is given a legacy of $10,000. But neither case can be said to be contrary to the rule of equality of the fourteenth amendment. That rule does not require, as we have seen, exact equality of taxation. It only requires that the law imposing it shall operate on all alike, under the same circumstances. That tax is not on money; it is on the right to inherit, and hence a condition of inheritance, and it may be graded according to the value of that inheritance. The condition is not arbitrary because it is not determined by that value; it is not unequal in operation because it does not levy the same percentage on every dollar — does not fail to treat all alike under like circumstances and conditions, *Page 607 both in the privilege conferred and the liabilities imposed. * * * All license laws and all specific taxes have in them an element of inequality. Nevertheless they are universally imposed, and their legality has never been questioned. We think the classification of the Illinois law was in the power of the Legislature to make, and the decree of the circuit court is affirmed." Magoun v. Illinois Trust and Savings Bank, et al.,170 U.S. 283, 18 S.C. Rep. 594; 42 L. Ed. 1037.
The Supreme Court of Idaho in a very forceful opinion upheld its statute which provided that whenever a chain of stores would be increased so as to pass into the higher bracket, then the higher tax which was specified for the higher bracket should be applicable to all stores in the chain and not be confined to the excess above that allowable in the lower class from which it had advanced. The opinion was rendered in the decision of the case of Penney Co. v. Diefendorf, 32 Pac. (ed) 784, in which the Magoun case, supra, is cited and quoted; likewise the State Board of Tax Commissioners of Indiana v. Jackson and Liggett v. Lee, two other leading cases decided on chain stores taxation and hereinafter extensively quoted and discussed. There in dealing with the alleged retroaction, the court pointed out the difference in the fee schedule of their Act and those of Indiana and Florida, which gave rise to the Liggett-Lee and the Jackson cases, saying "in the Idaho Act the increased fee on the additional stores covers each store in the chain * * *. But the Idaho Legislature made a classification based on groups, the fee depending upon the number of units comprising each group." After stating that the provisions of Section 5 were not retroactive, the court said:
"The word retroactive, generally speaking, has reference *Page 608 to the time element involved. A statute which takes away or impairs vested rights acquired under existing laws is retroactive. Construing Section 5, time element is not involved, for the statute simply means that when an additional store is added to the chain automatically a new classification of the group is created, and not only the additional store but all other stores are taxed on a new basis. This tax in question is a license or privilege tax on store operations. (Quotation from Liggett Co. v. Lee.) * * *
The expanding of the chain is obviously advantageous or the expansion of chains throughout the country would not have progressed. When one store is added the reaction is the same upon all of the stores. The advantages of all sorts of so-called chain store merchandising methods are equally applicable to all of the stores even though the chain is expanded by only one store. Otherwise, manifestly, such expansion would not be advantageous. With the advantages of chain store merchandising affecting every store by reason of the privilege of expanding by one or more stores, it cannot be said that the Legislature was unreasonable in increasing the tax upon all stores in the chain for the privilege of such expansion."
In reaching our conclusions as to the validity of Subdivision A we have been considerably influenced by the decision to similar effect by the three-judge Federal court and the views so ably expressed in the opinion of Honorable A.V. Long, District Judge, who, until he recently accepted the call to the Federal bench, was a most distinguished jurist of the Florida bench. That court seems to have relied somewhat upon the Jackson case, as we have, and the recent case of Fox v. Standard Oil Co., recently decided by the Supreme Court of the United States, which is quite a strong precedent for our decision and from which we wish *Page 609 to repeat the same quotation therefrom used by Judge Long, to-wit:
"When the power to tax exists, the extent of the burden is a matter for the discretion of the lawmakers. * * * `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.' * * *
"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. * * *
"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. * * *
"We have never yet held that the 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 consequence must be accepted as inherent in government by law instead of government by edict." Fox v. Standard Oil Co.,294 U.S. 87, 55 Sup. Ct. 333, 79 L. Ed. 780; Lane Drug Stores, etal., v. Lee, as Comptroller, *Page 610 Dist. Court. of U.S. Northern Dist. of Fla., July 29, 1935,11 F. Supp. 672-675.
In the last cited case following the above repeated quotations, the writer then stated:
"We have reached the conclusion that so far as Subdivision `A' of the section is concerned, the classification is not so discriminatory, arbitrary, and unreasonable as to destroy the legislation.
"As was said in Fox v. Standard Oil Company, supra:
"`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 passage of the Act by the Legislature had but one purpose, the collection of revenue by imposing a license tax upon certain businesses operating in the State that sufficient funds might be available for the relief of the public schools." Lane Drug Stores v. Lee, supra.
The language used in the Stewart-Lewis case, supra, decided recently, is quite appropriate here, and we quote Mr. Justice ROBERTS, saying:
"The appellees seek to avoid the arbitrary character of the classification of sales for the purpose of imposing the levy by the claim that the Act, properly construed, lays an excise upon the privilege of merchandising at retail and the exaction is made only for this privilege. They insist the amount of tax is merely measured by the volume of sales, and in this view the classification is not arbitrary if any reasonable relation can be found between the amount demanded and the privilege enjoyed. They endeavor to deduce such a relation from the alleged fact that a merchant's *Page 611 net income and his consequent ability to pay increase as the volume of his sales grows. The argument does not advance the case for the validity of the statute. Even in this aspect the classification is arbitrary, for the claimed relation of gross sales — the measure of the tax — to net profits fails to justify the discrimination between taxpayers.
"The district court found that `generally speaking' he who sells more is in receipt of a greater profit and hence has larger ability to pay, and upon this basis justified the classification. But it is to be remembered that the Act in question taxes gross sales and not net income. As stated in United States Glue Co. v. Town of Oak Creek, 247 U.S. 321, 328:
"`The difference in effect between a tax measured by gross receipts and one measured by net income, recognized by our decisions, is manifest and substantial, and it affords a convenient and workable basis of distinction between a direct and immediate burden upon the business affected and a charge that is only indirect and incidental. A tax upon gross receipts affectseach transaction in proportion to its magnitude and irrespectiveof whether it is profitable or otherwise. Conceivably it may besufficient to make the difference between profit and loss, or toso diminish the profit as to impede or discourage the conduct ofthe commerce. A tax upon the net profits has not the same deterrent effect, since it does not arise at all unless a gain is shown over and above expenses and losses, and the tax cannot be heavy unless the profits are large.'" (Italics ours.)
Although not in all respects applicable to the instant case, because the Kentucky statute involved in the Stewart case was only a graduated gross sales tax, ranging from 1/20th of one per cent. on the first $400,000 sales and graduated up by degrees to one per cent. on sales over $1,000,000, yet *Page 612 it is so much in point that we find it useful to quote the last paragraph as a medium of expressing our thought along that line:
"In several recent cases we sustained the classification of chain stores for taxation at rates higher than those applicable to single stores, and graduated upward on each store as the total number of units in one ownership increased. We found this classification reasonable because of advantages incident to the conduct of multiple stores and obvious differences in chain methods of merchandising as contrasted with those practised in the operation of one store. The instant cases present a classification of quite another kind. The Kentucky statute ignores the form of organization and the method of conducting business. The taxable class is retail merchants whether individuals, partnerships or corporations; those who sell in one store or many; those who offer but one sort of goods and those who through departments deal in many lines of merchandise. The law arbitrarily classifies these vendors for the imposition of a varying rate of taxation, solely by reference to the volume of their transactions, disregarding the absence of any reasonable relation between the chosen criterion of classification and the privilege the enjoyment of which is said to be the subject taxed. It exacts from two persons different amounts for the privilege of doing exactly similar acts because one has performed the act oftener than the other. We hold the act unconstitutional, and reverse the judgment."
Having determined that Senate Bill 724 is valid in part without reference to any allegations of the answer to support it, it follows that the alternative writ is insufficient so that the demurrer to the return must be visited back upon the writ and sustained against same. *Page 613
WHITFIELD, C.J., and TERRELL, BROWN and DAVIS, J.J., concur.
BUFORD, J., dissents in part.