Stewart Dry Goods Co. v. Lewis, 294 U.S. 550 (1935)

Please note: this case begins in mid-page. It therefore shares a citation with the last page of the previous case. If you are attempting to follow a link to the last page of 294 U.S. 532, click here.

Stewart Dry Goods Co. v. Lewis

No. 454

Argued February 8, 1935
Decided March 11, 1935
294 U.S. 550

APPEAL FROM THE DISTRICT COURT OF THE UNITED STATES

FOR THE WESTERN DISTRICT OF KENTUCKY

Syllabus

1. In determining the validity of a state tax under the Federal Constitution, this Court is not concluded by the name or description found in the Act, but must ascertain for itself the nature and effect of the tax. P. 555.

2. Chapter 149 of the Kentucky Acts of 1930 imposed a tax on the sales of retail merchants determined by the amount of gross sales. On the first $400,000 of gross sales the rate of tax was 1/20 of 1%; a different and increasing rate applied to each additional $100,000 of gross sales up to $1,000,000; the rate on sales over $1,000,000 was 1%. Held, the classification of sales for the purpose of the tax was arbitrary, and violated the equal protection clause of the Fourteenth Amendment. P. 557.

3. A tax on sales is, in effect, a tax on the goods sold. P. 556.

4. The tax cannot be sustained as an excise on the privilege of merchandising, for there is no reasonable relation between the amount of the tax and the value of the privilege; there is no such relation between gross sales -- the measure of the tax -- and net profits as will justify the discrimination between taxpayers. P. 557.

5. The contention that the graduation of the tax was adjusted with reasonable approximation to the net earnings of the taxpayers, based upon a claimed relation between gross sales and net profits, held not supported by the evidence. P. 558.

6. Convenience of administration does not justify the State in employing this method of taxing gains and ignoring the consequent inequalities of burden. P. 559.

7. The claim that the tax, in its actual operation, is not shown to be unduly burdensome or harmful to any of the complaining taxpayers, or to amount to confiscation of their property, held irrelevant to the issue of inequality, and contradicted by the record. P. 561.

8. Parties challenging the validity of a state statute under the Fourteenth Amendment are not to be denied relief by resort to a forecast of possible amelioration of their situation by the state courts. P. 561.

9. The unrestricted power of a state legislature to determine the amount of an otherwise valid tax applies to excises, as well as to other forms of taxation. P. 562.

10. Clark v. Titusville, 184 U.S. 329; Metropolis Theater Co. v. Chicago, 228 U.S. 61, and recent chain store tax cases distinguished. Pp. 564-566.

7 F.Supp. 438 reversed.

Appeals from judgments of the three-judge District Court upholding the constitutionality of the Kentucky Gross Sales Tax and dismissing the bills in four suits brought to enjoin its enforcement. The District Court, on a previous hearing, had dismissed the bills on the ground that complainants had an adequate remedy at law, which judgments were reversed and remanded on appeals to this Court. 287 U.S. 9.