Nelson v. Sears, Roebuck & Co.

Mr. Justice Douglas

delivered the opinion of the Court.

This case involves the constitutionality of the Iowa Use Tax (la. Code 1939, §§ 6943.102-6943.125) as applied to respondent’s mail order business conducted directly between customers in Iowa and respondent’s mail order houses located outside Iowa. The Supreme Court of Iowa, in a five to four decision, held for respondent *361on that issue. 228 Ia. 1273; 292 N. W. 130. We granted certiorari because of the importance of the constitutional question presented. Jud. Code § 237 (b); 28 U. S. C. § 344 (b).

The Iowa Use Tax is complementary to the Iowa Retail Sales Tax. Ia. Code 1939, §§ 6943.074, et seq. It is a tax on the use in Iowa of tangible personal property at the rate of two per cent of the purchase price.1 “Use,” so far as material here, is defined as “the exercise by any person of any right or power over tangible personal property incident to the ownership of that property.” § 6943.102. While the tax is imposed on “every person using such property within this state until such tax has been paid” (§ 6943.103), it is further provided (§ 6943.109) that every “retailer maintaining a place of business in this state and making sales of tangible personal property for use in this state . . . shall at the time of making such sales, whether within or without the state, collect the tax imposed by this act from the purchaser . . .” By § 6943.112 the tax constitutes a “debt owed by the retañer” to the state.2 And if the retaüer *362fails to collect the tax, etc., his retailer’s permit (§ 6943.084) may be revoked; and in case of a foreign corporation, its permit to do business in the state as weh. § 6943.122.

Respondent is a New York corporation authorized since 1928 to do business in Iowa. It has various retail stores there. It pays the tax on sales made at those stores. It also pays the tax on orders placed at those stores, though shipment is made direct to the purchaser from one of respondent’s out of state branches. But it has refused to collect the tax on mail orders sent by Iowa purchasers to its out of state branches and filled by direct shipments through the mails or a common carrier from those branches to the purchasers.3 On threat of petitioners to revoke respondent’s permit because of such refusal, respondent brought this suit for an injunction, alleging, inter alia, that the Act as applied violates § 8 of Article I of the Constitution and the Fourteenth Amendment.

The Iowa Supreme Court held that if respondent had limited its activities to a mail order business of the kind here involved, it would not be doing business in Iowa; *363that, although technically the tax may be on the purchaser, it must be collected when the sale is made, at which time the property is outside the state; that these sales are separate and distinct from respondent’s activities in Iowa. It therefore concluded that the tax as applied was unconstitutional since Iowa has no power to regulate respondent’s activities outside the state or to regulate such activities as a condition to respondent’s right to continue to do business in the state.

In passing on the constitutionality of a tax law “we are concerned only with its practical operation, not its definition or the precise form of descriptive words which may be applied to it.” Lawrence v. State Tax Comm’n, 286 U. S. 276, 280; Southern Pacific Co. v. Gallagher, 306 U. S. 167, 177; Wisconsin v. J. C. Penney Co., 311 U. S. 435. The fact that under Iowa law the sale is made outside of the state does not mean that the power of Iowa “has nothing on which to operate.” Wisconsin v. J. C. Penney Co., supra. The purchaser is in Iowa and the tax is upon use in Iowa. The validity of such a tax, so far as the purchaser is concerned, “has been withdrawn from the arena of debate.” Henneford v. Silas Mason Co., 300 U. S. 577, 583; Southern Pacific Co. v. Gallagher, supra. It is one of the well-known functions of the integrated use and sales tax to remove the buyers’ temptation “to place their orders in other states in the effort to escape payment of the tax on local sales.” Henneford v. Silas Mason Co., supra, p. 581. As pointed out in that case (p. 582), the fact that the buyer employs agencies of interstate commerce in order to effectuate his purchase is not material, since the tax is “upon the privilege of use after commerce is at an end.” And see Southern Pacific Co. v. Gallagher, supra. Use in Iowa is what is taxed regardless of the time and place of passing title and regardless of the time the tax is required to be paid. Cf. McGoldrick v. Berwind-White Coal Mining Co., 309 U. S. 33, 49.

*364So the nub of the present controversy centers on the use of respondent as the collection agent for Iowa. The imposition of such a duty, however, was held not to be an unconstitutional burden on a foreign corporation in Monamotor Oil Co. v. Johnson, 292 U. S. 86, and Felt & Tarrant Mfg. Co. v. Gallagher, 306 U. S. 62. But respondent insists that those cases involved local activity by the foreign corporation as a result of which property was sold to its local customers, while in the instant case there is no local activity by respondent which generates or which relates to the mail orders here involved. Yet these orders are still a part of respondent’s Iowa business. The fact that respondent could not be reached for the tax if it were not qualified to do business in Iowa would merely be a result of the “impotence of state power.” Wisconsin v. J. C. Penney Co., supra. Since Iowa has extended to it that privilege, Iowa can exact this burden as a price of enjoying the full benefits flowing from its Iowa business. Cf. Wisconsin v. J. C. Penney Co., supra. Respondent cannot avoid that burden though its business is departmentalized. Whatever may be the inspiration for these mail orders, however they may be filled, Iowa may rightly assume that they are not unrelated to respondent’s course of business in Iowa. They are nonetheless a part of that business though none of respondent’s agents in Iowa actually solicited or placed them. Hence to include them in the global amount of benefits which respondent is receiving from Iowa business is to conform to business facts.

Nor is the mode of enforcing the tax on the privileges of these Iowa transactions any discrimination against interstate commerce. As we have seen, the use tax and the sales tax are complementary. Sales made wholly within Iowa carry the same burden as these mail order sales. A tax or other burden obviously does not discriminate against interstate commerce where “equality *365is its theme.” Henneford v. Silas Mason Co., supra, pp. 583-586; McGoldrick v. Berwind-White Coal Mining Co., supra, pp. 48—49.

Respondent, however, insists that the duty of ta¡x collection placed on it constitutes a regulation of and substantial burden upon interstate commerce and results in an impairment of the free flow of such commerce. It points to the fact that in its mail order business it is in competition with out of state mail order houses which need not and do not collect the tax on their Iowa sales. But those other concerns are not doing business in the state as foreign corporations. Hence, unlike respondent, they are not receiving benefits from Iowa for which it has the power to exact a price. Respondent further stresses the cost to it of making these collections and its probable loss as a result of its inability to collect the tax on all sales.4 But cost and inconvenience inhered in the same duty imposed on the foreign corporations in the Monamotor and Felt & Tarrant cases. And so far *366as assumed losses on tax collections are concerned, respondent is in no position to found a constitutional right on the practical opportunities for tax avoidance which its method of doing business affords Iowa residents, or to claim a constitutional immunity because it may elect to deliver the goods before the tax is paid.

Prohibited discriminatory burdens on interstate commerce are not to be determined by abstractions. Particular facts of specific cases determine whether a given tax prohibitively discriminates against interstate commerce. Hence a review of prior adjudications based on widely disparate facts, howsoever embedded in general propositions, does not facilitate an answer to the present problem.

The judgment is reversed and the cause is remanded to the Iowa Supreme Court for proceedings not inconsistent with this opinion.

Reversed.

Me. Justice Stone took no part in the consideration or disposition of this case.

The Use Tax Act provides in § 6943.103,

“An excise tax is hereby imposed on the use in this state of tangible personal property purchased on or after the effective date of this act (April 16, 1937) for use in this state, at the rate of two per cent of the purchase price of such property. Said tax is hereby imposed upon every person using such property within this state until such tax has been paid directly to the county treasurer, to a retailer, or to the commission as hereinafter provided.”
The sales tax is a two per cent tax on gross receipts from sales of tangible personal property sold at retail in the state to consumers or users. § 6943.075. So far as material here, the Use Tax need not be paid on property where a tax is required to be paid under the Sales Tax Act. § 6943.104.

The retailer must also make quarterly returns. § 6943.113. Penalties are imposed for delay in filing returns (§ 6943.118), for failure to do so or for failure to furnish data required by the commission. § 6943.120.

In 1937 respondent mailed to residents of Iowa about 600,000 small catalogues and 427,000 large ones. Respondent maintains 12 retail stores in Iowa, its investment therein exceeding $500,000. The aggregate sales of the retail stores in Iowa for 1936 amounted to $5,080,000; for 1937, $5,600,000. Its mail order sales in Iowa for 1936 aggregated about $5,900,000; for 1937,.about $5,400,000. It estimates that it has some 300,000 Iowa customers of its mail order houses and that in 1937 there were about 1,200,000 orders received from Iowa customers.

One of respondent’s witnesses testified that the catalogues and bulletins mailed out were “our sole means of securing” the mail order business. But he also testified, “If a customer inquired from a clerk in the store as to whether or not he would have to pay a use tax upon an order, I believe the clerk would inform him that if he himself mailed the order that there would be no sales tax or use tax charged.”

In Illinois respondent undertakes to collect the sales tax on mail orders from its Illinois customers. A notice and schedule of the tax for various amounts of orders are contained in the Illinois catalogue. It asserts that approximately 65% of those orders include an allowance for the tax. Where the orders are not accompanied by an amount covering the Illinois sales tax; respondent does not hold up the order but fills it and sends the customer a bill for the difference. It says that it collects approximately 36% of those deficiencies where the amount is less than 250; 70% to 75%, where the amount is more. On the assumption that on sales to Iowa purchasers the use tax would amount to $100,000 a year, respondent asserts that, based on its Illinois experience, the maximum that would be collected would be $68,000. To do. that, it says, would entail a direct cost to it of approximately $13,700 a year. Those calculations are on the assumption that respondent would put a notice in its Iowa catalogues similar to the one used in Illinois. If such a notice were not given, it asserts that collections of the Iowa use tax would not exceed $35,000 (out of an assumed $100,000) and that its cost would be approximately $18,000.