Knisely v. Cotterel

46 A. 861, 196 Pa. 614, 1900 Pa. LEXIS 567

• Court: Supreme Court of Pennsylvania
• Decided: July 11, 1900
• Docket: Appeal, No. 18; Appeal, No. 182
• Status: Published

Opinion

Opinion by

Mr. Justice Mitchell,

These two cases may conveniently be considered together as both raise the same question of the constitutionality of the Act of May 2, 1899, P. L. 184, “ to provide revenue by imposing a mercantile license tax on vendors of or dealers in goods, ” etc.

The act is frankly and professedly a revenue act, and therefore we have no complication with questions under the police power.

The act provides that “ each retail vendor of or retail dealer in goods, 'wares and merchandise shall pay an annual mercantile license tax of $2.00, and all persons so engaged shall pay one mill additional on each dollar of the whole volume, gross, of business transacted annually. Each wholesale vendor of or wholesale dealer in goods, wares and merchandise shall pay an annual mercantile license tax of $3.00, and all persons so engaged shall pay one half mill additional on each dollar of the whole volume, gross, of business transacted annually. Each dealer in or vendor of goods, wares or merchandise at any exchange or board of trade shall pay a mercantile license tax of twenty-live cents on each one thousand dollars’ worth, gross, of goods so sold.”

• 1. The first and most strenuous objection made is that the act violates section 1 of article 9 of the constitution requiring that “ all taxes shall be uniform upon the same class of subjects, within the territorial limits of the authority levying the tax, and shall be levied and collected under general laws; ” and that it does so because being a tax upon property it taxes property at different rates as against retailers and against wholesalers, and again as against those dealing through an exchange or board' of trade. The objection is thus clearly summed up with great compactness in the argument of the distinguished counsel for appellant in the first case: “ The distinction here made, which is legislatively regarded as the justification for this arbitrary taxation, is, not the amount of the property of merchandise vendors; not a difference in the amount of the property vended; not a difference in the manner of vending it; not a difference in the persons vending it; but solely a difference in the persons to whom that vending is done.” And it is added that the provision in reference to dealers at an exchange is open to the further objection that it is bgsed “ exclusively and arbitrarily upon the place where the sales are made, irrespective of those who participate in them, either as vendors or as vendees.”

The foundation on which this argument rests, it will be perceived, is that the tax is laid specifically upon property. Conceding for present purposes that this is its true character, does the consequence necessarily follow that it is so wanting in uniformity as to transgress the constitutional restrictions ? Assuming it to be intended as a tax on property, the basis of distinction in the legislative intent clearly was property kept for sale by regular dealers in the course of their business, and the tax was graduated and classified by the amount and method of the sales. The purpose for which property is kept or used has long been a recognized and to some extent a favorite basis for distinction in taxation. Thus household and kitchen furniture in private use have been exempted while the same articles as stock in trade have been taxed; carriages kept for pleasure and watches for private use have been taxed as such, while carriages in livery stables and watches in a jeweler’s stock have been exempted or taxed in a different manner or at a different rate. Other examples might be given, and the very tax in controversy here upon dealers-, distinguished into retailers and wholesalers, has in one form or another, closely analogous, been on the statute books so long that it is one of the most familiar in the history of our taxation. This subject will be further considered later on, but enough has been said here, we think, to show that even as a tax on property it is not unconstitutional for want of uniformity.

But another and even clearer ground upon which this act can be sustained is that the tax imposed is not specifically on property but on the business of selling.

The argument that the tax is upon property is based on two cases in this court, City of Allentown v. Gross, 132 Pa. 319 and Williamsport v. Wenner, 172 Pa. 173, and not upon the decisions themselves, but upon language supposed to indicate the ratio' decidendi. Both were per curiam opinions in which the grounds of decision were not discussed further than by approval of the judgments of the court below. It is necessary therefore to examine just what such approval involves. In Allentown v. Gross an ordinance had been passed imposing a tax upon all dealers, graduated according to the amount of their gross annual sales, and another ordinance providing for the issue of licenses, inter alia, to hotel and restaurant keepers. The report of the case does not give the latter, ordinance further than the statement that the license was to be “ at certain specified rates,” presumably based as under the prior ordinance on the gross annual sales. The defendant, appellant, was assessed as a restaurant keeper in class eight. His contention as stated by the learned judge below was “ that the grading of the license tax according to the amount of the gross sales is illegal because it is not uniform; that all liquor sellers should be required to pay the same amount; and that by making the amount of sales a basis, it is in effect an income tax. But this is not a taxing of the person of the liquor seller, but of his property estimated by the volume of the annual sales.” This last sentence is the expression on which appellant bases his argument that the tax now in controversy is a tax upon property. But it is apparent that the learned judge there had in his mind no such distinction as that between the tax on property as such, and property as an incident of business measurable by the amount of sales. It had been, held in Banger’s Appeal, 109 Pa. 79, cited by the judge in connection with the language above quoted, that a tax on occupations graduated according to the amount earned by each individual, was an income tax not authorized by law. This was what the judge referred to and the distinction in his mind was that between a tax on the person of the licensee, as an occupation or income tax, and'a tax directly or indirectly upon property. The language must be read in connection with the facts to which it was applied, and so read it has no bearing on the present question. The decision however is exactly in point in favor of the present judgment, for what it actually decides' is that a tax upon vendors of merchandise graduated according to the amount of annual sales is not unconstitutional for want of uniformity.

The other case relied on by appellant, Williamsport v. Wenner, 172 Pa. 173, raised a very similar question. The city by ordinance had imposed a license tax on all persons “doing business,” and after fixing a definite sum for each kind of a large number of specified occupations it grouped together “merchants of all kinds .... butchers .... produce or merchandise vendors,”, etc., classified them by the amount of annual sales and graduated the tax accordingly. The court below in sustaining the tax used some expressions that it was a tax on property, but as in the other case, clearly with reference only to the argument made that it was a personal license or occupation tax and, therefore, under Banger’s Appeal, 109 Pa. 79, not subject to variation in amount. This court affirmed the decision as already said in a per curiam opinion, and what it really decided was that the grading of the tax on dealers according to the amount of sales did not make it void for want of uniformity.

This court, as thus appears, has not decided that a tax such as now before us is a tax upon property, requiring uniformity in the rate. On the contrary, though the question in its present aspect has never been directly discussed, it has in effect been twice decided in favor of the validity of the tax.

As already said, even regarding it as a tax upon property directly, it could be sustained as a classification according to the use and purposes for which the property is held. But an examination of the details of the provisions of the present act makes it clear that the tax, as held by the learned judge below, is upon the business of vending merchandise, and that the classification is based on the manner of sale, and within each class the tax is graduated according to the gross annual volume of business transacted. This is apparent from the fact that the amount of the tax over the small fixed license fee is determined in every case by the volume of business, measured in dollars, and the rate at which it is to be levied is according to the manner of sale. The act divides vendors of merchandise into four classes, retailers in general, wholesalers in general, retailers at an exchange or board of trade, wholesalers at an exchange or board of trade. For each of these classes a uniform rate is fixed per dollar of business transacted. Such a tax is “ uniform upon the same class of subjects ” within the requirements of the constitution.

It is not necessary at this late day to enter on a defense of classification. In reference to subjects of taxation it has always existed, and the power is explicitly recognized in the section of the constitution which requires uniformity. In Durach’s Appeal, 62 Pa. 491, it was said by Shabswood, J., certainly as strict a constructionist as ever sat on this bench, “ In the legitimate exercise of the power of taxation persons and things always have been and may constitutionally be classified. No one has ever denied this proposition.” In Com. v. Del. Div. Canal Co., 123 Pa. 594, 620, our late Brother Clabk said: “ The new constitution does not withdraw the power of classification from the legislature. . . . The power to impose taxes for the support of the government, subject to the limitations of the constitution, still belongs to the legislature; the selection of the subjects, their classification, and the method of collection are purely legislative matters.” And in Seabolt v. Comrs. of Northumberland County, 187 Pa. 318, it is said, “ Classification is a legislative question, subject to judicial revision only so far as to see that it is founded on real distinctions in the subjects classified, and not on artificial or irrelevant ones used for the purpose of evading the constitutional prohibition. If the distinctions are genuine the courts cannot declare the classification void though they may not consider it to be on a sound basis. The test is not wisdom but good faith in the classification.”

The division of vendors into wholesale and retail is perhaps the most obvious and familiar that could be made. It is founded on a known or presumed difference in the percentage of profit to bulk of sales, and has been on our statute books for more than a century. It is equally clear that the subclassification of dealers at an exchange or board of trade is not based merely on location as complained, but on the mode of sale. Such dealers are not supposed in the ordinary course of their business to carry an actual stock of goods in a store or defined location, with its accompaniments of rent, clerk hire, expenses of delivery, etc., but to deal largely if not entirely on samples, orders, bills of lading, warehouse receipts, etc., by which title passes without actual handling of the goods. If such differences in the manner of transacting the business exist, they are a legitimate basis for classification, and whether they do in fact exist is a question for legislative determination. We are unable to see that the classification in the act before us violates the constitutional requirement of uniformity.

2. The further objection is made that the tax is not to be “levied and collected under a general law” as required by section 1 of article 9. This objection is founded on those sections of the act which provide for a difference in the number and mode of appointment of the appraisers in the counties generally and in cities of the first class. In the counties they are to be appointed annually by the county commissioners, while in cities of the first class they are to be appointed by the auditor general and the city treasurer jointly, are to be five in number, to hold office for three years, and not all to be of the samé political party. Certain variations in the duties of the treasurers in hearing appeals, etc., are involved, in these differences in regard to appraisers. These differences however are all merely incidental to the purpose of the statute, to provide revenue. All the provisions relating to the tax itself, the classes of persons subject to it, and its amount in each case, the mode of assessment and the duties of assessors, in relation to it, and the right of ultimate appeal by the citizen to the court, ai’e uniform and prescribed by a general law applicable alike over all the state. The sole variations are in the number and mode of appointment of the appraisers. The generality of the law is not destroyed by such slight differences in its machinery of application. In Com. v. Del. Div. Canal Co., 123 Pa. 594, already cited, the act of 1885 had classed loans, money at interest, etc., together at a uniform rate of taxation, and it was objected (see p. 616) that all other subjects are valued and taxed by the local assessors, while corporate loans, without being valued, are directed to be assessed by the treasurer of the corporation which issued them. But this court held that “amere diversity in the methods of assessment and collection violates no rule of constitutional right, if when they are applied there is substantial uniformity' in the result.” There are counties of large population and business where the work of assessment is necessarily greater in amount and importance than in the average counties of the commonwealth. The legislature might have recognized the necessity for a somewhat different system of assessment in such cases and classified them accordingly. But it found a classification of cities already made, well suited to the requirements of the occasion and adopted it pro tanto for the purposes of the act. It was entirely competent to do so. The basis of classification of cities is entirely germane to such use. They are divided into classes for the purpose of legislation with reference to their municipal and governmental functions, and the highest of these is taxation, the power of taking the property of the citizen without his consent for purposes he may or may not approve. The city of Philadelphia, the only present city of the first class, has always both before and since the constitution of 1874 had its own special system of municipal taxation, and the state might well adopt a special system for the assessment and collection of its own tax from the same population in the same territory without thereby destroying either the uniformity of the tax or the generality of the law.

3. It is further objected that the act violates the prohibition in section 7 of article 3 against local or special laws “ regulating the affairs of counties, cities,” etc., or “ prescribing the powers and duties of officers in counties, cities,” etc. What has already been said in the discussion of the classification by the act, practically disposes of this objection. The “ affairs ” which are regulated are not the affairs of the city, but of the state. The rights of the citizens are not made any different in cities from those in counties. Both are assessed at the same rate in the same classes by single assessors from whom there is an appeal, first to the assessor with others so that he may not sit alone in judgment on his previous action, and finally to the courts. The fact that in one case the first appeal is to the assessor and the county treasurer and in the other to the board of five assessors makes no substantial variation in the citizen’s rights any more than the fact that his further appeal is to a court of common pleas with a greater number of judges. In regard to prescribing duties of officers- in cities, that provision relates to the duties of such officers in their municipal capacity. There is no prohibition to the state to impose additional duties to itself on city officers virtute officii. -The state may appoint its own agents to collect its own tax, even though such agent be also for other purposes a municipal officer, and his duties as state agent will not necessarily blend or become part of his duties as a city officer. This was practically decided in Philadelphia v. Martin, 125 Pa. 583, where it was held that the compensation of the city treasurer of Philadelphia in the collection of the state license fees from vendors of merchandise, etc., was due to him as a separate agent of the state and was not required to be paid by him into the city treasury. In commenting on that case in Schuylkill County v. Pepper, 182 Pa. 13, our Brother Dean stated the rule thus: “ The state may by law appoint any county officer its agent for the transaction of its business, and as such state officer or agent he may be entitled to fees for such services ; but for the performance of any and every duty as a county officer, the fees must be paid into the county treasury.” And I cannot close this branch of the subject better than by a quotation from an opinion of an eminent jurist whose decisions on constitutional questions during his long and honorable career on the bench derived additional weight from his previous distinguished service in the halls of congress during the most critical period in the history of the nation. In Bartley v. Patton, 19 Phila. 496; 46 Leg. Int. 168, on this exact point then arising under the similar act of 1887, Thayer, P. J., said; “ The particular provision objected to relates to the subject of taxation, the appointment of mercantile appraisers, and the publication of the lists and classification prepared by them. The act enacts that the appraisers shall be appointed by the county commissioners, except in cities of the first class, in which they are to be appointed by the auditor general and the city treasurer. In cities of the first class five such appraisers are to be appointed, whereas in the other counties of the state only one is appointed for each county. . . . The truth is that this being a law relating to state taxation, it was perfectly competent for the legislature to provide for the appointment of one set of agents to attend to the levying and collection of this tax'in one part of the state and another set of agents to attend to it in another part. Indeed, it appears to me that it would have been entirely competent for the legislature to do this by an enactment in direct terms, without resorting to the expedient of putting the provision which is objected to in the form of an enactment for cities of the first class, for the object of the law is not to prescribe the powers and duties of city, borough and county officers, but simply to designate what persons shall act as the agents of the state in the collection of the tax, and the fact that some of the agents selected are state officers, some county officers and some city officers, affords no pretext to say that the constitution is violated by an infraction of the provision already quoted. There is no such infraction. The legislature could appoint whatever agents it chose for this purpose, and the state would be in a sorry plight if it could not.”

4. Another objection made is that the 10th section of the act providing that the rate of commissions, mileage, etc., shall remain the same as now fixed by existing law, offends against section 6 of article 8 of the constitution which requires all laws revived, amended or the provisions thereof extended or conferred shall be re-enacted at length. Section 10 was plainly put in merely ex rnajore cautela and has no practical effect. It must be read as if it said this act shall not be held to repeal by implication any existing law relating to commissions, fees or mileage. No act can be rendered unconstitutional by a section which makes no change whatever in the law as it was beforé, and which might have been omitted without any effect whateve'r.

5. The last objection, evidently thrown in as a makeweight, is that the provisions of the act are an invasion of the individual liberty of the citizen, contravening the bill of rights of our own constitution, and the fourth, fifth and fourteenth amendments to the constitution of the United States. When these irrelevant and overworked generalities are thus called in, it may be safely assumed that the advocate has little confidence in his more definite and substantial arguments. The learned judge below said that “ this objection seems to be somewhat belated,” and he might truly have said that it was not only belated but exceedingly flimsy. All taxes and methods of collecting them are interferences with the natural man and his individual rights, but he must give up something of them when he comes into society under an orderly government. Universal experience has shown that the average citizen does not come forward voluntarily and make frank disclosure of his taxable property, and the state must be conceded authority and adequate means of discovering it in invitum. In Bells Gap R. R. Co. v. Penn., 134 U. S. 232, it was said by Mr. Justice Bradley : “ The provision in the fourteenth amendment, that no state shall deny to any person within its jurisdiction the equal protection of the laws, was not intended to prevent a state from adjusting its system of taxation in all proper and reasonable ways. It may, if it chooses, exempt certain classes of property from any taxation at all, .... may impose different specific taxes upon different trades and professions, and may vary the rates of excise upon various products. . . . All such regulations, and those of like character, so long as they proceed within reasonable limits and general usage, are within the discretion of the state legislature, or the people of the state in framing their constitution. But clear and hostile discriminations against particular persons and classes, especially such as are of an unusual character, unknown to the practice of our governments, might be obnoxious to the constitutional prohibition. It would, however, be impracticable and unwise to attempt to lay down any general rule or definition on the subject that would include all cases. They must be decided as they arise. We think that we are safe in saying that the fourteenth amendment was not intended to compel the state to adopt an iron rule of equal taxation. If that were its proper construction, it would not only supersede all those constitutional provisions and laws of some of the states, whose object is to secure equality of taxation, and which are usually accompanied with qualifications deemed material, but it would render nugatory those discriminations which the best interests of society require, which are necessary for the encouragement of needed and useful industries, and the discouragement of intemperance and vice, and which every state, in one form or another, deems it expedient to adopt.”

After this explicit decision by the supreme authority on the subject, even the enthusiastic ingenuity of counsel might have considered the question as settled.

Judgments affirmed.