State v. . French

Clark, J.:

By the Act to Raise Revenue (Laws of 1891, ch. 323, § 22), it is enacted as follows: “Every merchant, jeweler, grocer, druggist, or other dealer, who shall buy and sell goods, wares and merchandise of whatever name or description, not specially taxed elsewhere in this act, shall, in addition to his advalorem tax upon his stock, pay as a license tax one-tenth of one per centum on the total amount of his purchases in or out of the State (except purchases of farm products from the producer) for cash or credit, whether such persons herein mentioned shall purchase as principal or through an agent or commission merchant”

The special verdict brings the defendants completely within the provisions of the act, and finding, among other facts that the defendants purchased goods in other States, brought them info this State and sold them here, but made no purchases within this State.

The policy or advisability of such taxation rests with the legislative branch of the government alone. The sole question committed to the Courts is as to the Constitutional power of the Legislature to lay the tax.

It is conceded by the learned counsel of the defendants that such tax is not a property tax, but as truly stated on the face of the act is a license tax for the privilege of carrying on the business specified. Such license tax is not prohibited by the Constitution of North Carolina, but is expressly authorized by section 3, article 5 thereof. Albertson v. Wallace, 81 N. C., 479; State v. Cohen, 84 N. C., 771. Nor is this mode of taxation forbidden by the Fourteenth Amendment to the United States Constitution, which guarantees to all persons the equal protection of the law. It has been repeatedly held that the Fourteenth Amendment in nowise affects the right of the State to adjust its system of taxation in accordance with its own Constitution; “ to classify property for taxation, subjecting one kind of property to one rate of taxation and another kind to auo’lier rate, distinguishing between franchises, licenses and privileges, and visible and tangible property, and between real and personal property.” Insurance Co. v. New York, 134 U. S. Rep., 594 (606); Railroad v. Pennsylvania, Ibid, 232 (237); Both of these cases are cited and approved by the same Court in a very recent case, Express Co. v. Seibert, in which the opinion was filed January 4th, 1892.

The defence, indeed, rests its case upon the position that the tax, so far as it respects goods purchased in other States and brought into this State, is void, as being in violation of the Federal Constitution, Art. 1, § 8, which gives to Congress the power to “ regulate commerce with foreign nations and among the several States, and with the Indian tribes.”

Under the decisions of the Supreme Court of the United States, if the “ business,” the carrying on of which is made liable to the tax, was that of interstate commerce, such as the offering for sale, or selling goods in one State to be shipped to the buyer who is in another State, as in Robbins v. Shelby Taxing District, 120 U. S. Rep., 480 (known commonly as the “Drummers’” Case), or if this impost was laid on the transportation of passengers or freight from one State to another (State Freight Cases, 15 Wallace, 232; Freight Discrimination Cases, 95 N. C., 428 and 434), or the transmission of telegrams across State lines (Leloup v. Mobile, 127 U. S. Rep., 640), such tax would be inhibited. But the business here subjected to the privilege tax is neither, by the terms of the law nor in its purport, to be gathered by any reasonable construction, “interstate dealings.” The tax is not on any dealings between the parties outside of the State and the defendants within the State, nor on the transportation of goods into the State. The “business” taxed, and intended to be taxed, is that of “buying and selling goods, wares and merchandise,” i. e., carrying.on a mercantile business in this Slate. The fact that such trade or occupation exercised in this State, is carried on in goods, wares or merchandise which had their origin out of the State, cannot make it “ interstate commerce.” The commerce is “ intrastate.” It is carried on in this State between the defendants and other parties in the State. It is an occupation or trade exercised here under North Carolina laws, and protected by them from violence and illegal interference, from robbery and thieves. Should the purchaser of “goods, wares and merchandise” from the defendants subsequently ship the goods to another State, this would not make the dealing between them “ interstate,” even though the defendants, at the time of such sale, knew: of the buyer’s intention toso ship the goods. Brown v. Houston, 114 U. S., 622. Neither, for like reasons, could the fact that the “ occupation ” taxed deals in merchandise, some or all of which originated elsewhere than in North Carolina, make it “ interstate” traffic. Woodruff v. Parham, 8 Wall., 123. The interstate dealings were terminated when the goods were delivered at the store of the defendants. The “business” subsequently carried on of vending and disposing of them is intrastate traffic, upon which the State can levy its license tax. The tax is not laid on the purchases nor on the sales. It is laid as a “ license tax” on every “ merchant,” etc., who shall “buy and sell goods, wares and merchandise,” evidently meaning to tax the occupation of carrying on such business in this State. As a mode merely of graduating the tax by some approximation to the volume of business done (which is just), it is provided that such license tax shall be “one-tenth of one per centum on the total amount of purchases in or out of the State.” In the late case of State of Maine v. Grand Trunk Railway of Canada, U. S. Supreme Court, 12 Supreme Court Rep., 120 (opinion filed December, 1891), this is adverted to, and the Court say: “ This ruling (of the Court below, which is reversed) was founded on the assumption that a reference by the statute to the transportation receipts and to a certain percentage of the same, in determining the amount of the excise tax, was, in effect, the imposition of the tax upon such receipts, and, therefore, an interference with interstate and foreign commerce. But a resort to those receipts was simply to ascertain the value of the business done by the corporation, and thus obtain a guide to a reasonable conclusion as to the amount of the excise tax which should be levied, and we are unable to perceive in that resort any interference with transportation, domestic or foreign, over the road of the railroad company, or any regulation of commerce which consists in such transportation. If the amount ascertained were specifically imposed as the tax, no objection to its validity would be pretended. And if the inquiry of the State as to the value of the privilege were limited to the receipts of certain past years, instead of the year in which the tax is collected, it is conceded that the validity of the tax would not be affected, and if not, we do not see how a reference to the results of any other year could affect its character. There is no levy by the statute on the receipts themselves, either in form or in fact. They constitute, as said above, simply the means of ascertaining the value of the privilege conferred. This conclusion is sustained by the decision in Insurance Co. v. New York, 134 U. S. Rep., 594.” And the Court go on to cite with approval from the latter decision the following: “The validity of the tax can, in no way, be dependent upon the mode which the State may deem fit to adopt in fixing the amount for any year which it will exact for the franchise. No' constitutional objection lies in the way of a legislative body prescribing any mode of measurement to determine the amount it will charge for the privilege it bestows.”

The tax in our case is not on the business of buying goods out of the State, but on the business of buying and selling goods in the State irrespective of the place of origin of the goods, and the extent of the purchases, whether “ in or out of the State,” is only referred to as a basis by’which to measure the tax which shall be levied on the business proportionate with such approximation to its volume. It is admitted that there is no discrimination against goods bought out of the State, and the sole question is whether the State in taking, as the ba-is of a license tax, the value of the goods dealt in, must exclude the value of goods manufactured or raised out of the State. If this were so, no license tax could be imposed for merchandising in this State when the articles dealt in were manufactured in other countries or other States, or were the products of a soil other than our own, leaving the full weight of the tax to fall upon the privilege of dealing in articles manufactured, or the products of the soil in this State. This would require a discrimination against our own citizens, and is not within the letter or spirit of the Constitution. The power of the State to exact a license tax from its own citizens doing business in its borders is beyond question, and a discrimination in favor of non-residents is as much forbidden as a discrimination against them, by the United States Revised Statutes, 1977: “All persons within the jurisdiction of the United States shall have the same right in every State and Territory to make and enforce contracts etc., and shall be subject to like punishments, pains, penalties, taxes, licenses and exactions of every kind, and to no other.”

The rule deducible from the authorities seems to be that if the dealings or transactions are between parties in different States, or the transportation of freight or passengers from one State to another, a tax by State law is prohibited, irrespective of whether there is “discrimination” or not; but where the tax is on an “ occupation ” carried on in a State, or on property therein, the State has power to levy the tax, unless it “ discriminates” against the articles brought from other States, with the sole exception that the sale of such articles in the original package cannot be taxed by the State. Even this exception, which is laid down in Leisy v. Hardin, 135 U. S., 100, is strongly controverted by the able dissenting opinions of Justices Gray, HarlaNand Brewer, in that case.