Rast v. Van Deman & Lewis Company
[Syllabus from pages 342-344 intentionally omitted]

A statute of Florida passed in 1913, imposing licenses and other taxes, provides that merchants, druggists, and storekeepers shall pay a license tax upon the cash value of the 'stock of merchandise' of $3 for the first $1,000 or fraction thereof, and $1.50 for each additional $1,000 or fraction thereof. The tax upon wholesale dealers is $1.50 upon each $1,000. The statute has this proviso:

'Provided, further, That each and every person, firm or corporation, who shall offer with merchandise bargained or sold in the course of trade any coupon, profit-sharing certificate, or other evidence of indebtedness or liability, redeemable in premiums, shall pay annually a state license tax of five hundred ($500) dollars and a county license tax of two hundred and fifty ($250) dollars in each and every county in which said business is conducted or carried on, and if more than one place of such business shall be operated by any person, firm or corporation, a separate state and county license shall be taken out for each such place; and no person, firm or corporation shall offer with merchandise, bargained or sold as aforesaid, any coupon, profit-sharing certificate or other evidence of indebtedness or liability, redeemable by any other person, firm or corporation than the one offering the same without paying the above license for each other person, firm or corporation who may redeem the same. The license prescribed in this section shall be in addition to other licenses prescribed by this act. Any person violating any of the provisions of this section, whether acting for himself or as the agent of another, shall on conviction thereof be punished by fine not exceeding one thousand ($1,000) dollars or by imprisonment in the county jail not exceeding six months.

'Mercantile agencies: Shall pay a license tax of one hundred ($100) dollars in each county in which an office is established.

'Merchants using trading stamps, shall pay a license tax of two hundred and fifty ($250) dollars for each place of business where they use such stamps.

'Merchant tailors shall pay a license tax of ten ($10) dollars for each place of business.'

This suit was instituted by appellees (Florida merchants) against appellant Rast as tax collector of Duval county, Florida, and the tax collectors of each county in the state, the different state's attorneys, county solicitors, and prosecuting attorneys of the circuits and counties of Florida. The purpose of the suit was to restrain those officers from proceeding under the statute or enforcing it. A preliminary and perpetual injunction was prayed, and that the act be declared unconstitutional, illegal, and void.

The bill is very elaborate and we select from its repetitions and condense the following: It alleges the various businesses in which the complainants are engaged. The Van Deman & Lewis Company is a Florida corporation and a wholesale grocer, doing business as such and selling groceries in certain counties in the state; Harkisheimer Company is also a Florida corporation and is a retail grocer; J. S. Pinkussohn Cigar Company is a corporation organized under the laws of South Carolina and is a wholesale and retail merchant, buying and selling cigars and other tobacco products in the cities of Jacksonville and Pensacola, Florida. With these complainants were joined others, corporations and individuals, doing business in Florida.

It is alleged that complainants and each of them, in the conduct of their business, offer for sale and deal in various and numerous articles of merchandise manufactured and produced in other states than Florida by persons and corporations in those states and shipped into Florida to be sold therein, and who, for the purpose of advertising their businesses and increasing their sales, inclose in the packages in which the merchandise is put up for market and sale coupons, slips, certificates, and other profit-sharing discount or premium tokens. The articles and the persons and companies producing them are enumerated.

The manner or method of disposing of and redeeming and taking up such coupons, etc., is alleged to be that the same are inclosed in packages or the wrappers thereof, or are a part of the wrappers, the packages are put into boxes, cases, or other receptacles or inclosures and shipped by the manufacturer or producer from his place of business outside of Florida to the merchants in Florida, generally to a wholesale merchant or jobber, and are received by such in Florida and sold to the retail merchants in that state. The retail merchant sells them to his customers. When the latter have accumulated a sufficient number of the coupons, etc., to entitle them to receive a premium or article or payment therefor according to some list, catalogue, or rule promulgated by the manufacturer, producer, or original shipper, they send such coupons, etc., to such manufacturer, producer, or original shipper, or, in some instances, to a company or agency in some state other than Florida, where they are redeemed or paid, or the articles which the purchasers have selected are sent to them in consideration of such coupons, etc., or for the same and a postage stamp or stamps, or a small sum of money in addition thereto. And this in accordance with the contract, agreement, or sale made to the purchasers by the manufacturer, shipper, or producer outside of the state. And it is alleged that the transactions so detailed, the manufacture without the state and shipment to wholesale merchants within the state, the sale by the latter to retail merchants, and by the latter again to customers, constitute interstate commerce.

That the form of the coupons, etc., varies, and when its identity is secured as prescribed it is evidence that each purchaser of a package has bought a definite part of some article, to be selected by him or her from a certain list, the list showing a number of valuable articles which can be paid for by a certain number of the tokens and a two-cent stamp.

In another case there is an accumulation of the tokens which are to be sent to the redemption or coupon agency or corporation and exchanged for a valuable article of merchandise to be selected by the purchaser from a list or catalogue furnished him.

Another form of coupons, etc., is where each of them is good for a certain value; for instance, one-half cent in presents or premiums, the coupons being sent from the state of Florida to another state. There are also other forms in which the coupons or tokens are to be redeemed, paid for, or used in the purchase of other articles of merchandise or in the accumulation of premiums or the like. All of the articles are known and largely used as legitimate articles of commerce, and the transactions detailed are interstate commerce.

That divers forms of coupons, etc., in connection with the sale of merchandise, are used by the merchants of the state substantially in similar form mentioned above, and the payment or redemption is made by the Florida merchant in Florida, sometimes by the delivery of some valuable article of merchandise; sometimes by the payment of cash or the allowance of credit on account of purchases in the nature of a discount, or for or on account of a certain amount having been purchased of the merchant by the customer. The tokens are sometimes in the form of a cash register slip or memorandum.

That the methods detailed are a form of advertising and the use of such coupons, etc., induces purchasers to trade more largely with and to make more of their purchases from complainants on account of the additional inducement of such coupons, etc.; that they increase the businesses of complainants and their profits, and enable them to carry and sell stocks of goods covering the various articles of merchandise, and are of great importance and value to complainants in their several businesses; and if they are prevented from using them, their businesses will be decreased to the amount of many thousands of dollars.

That at the time of the passage of the statute complainants had on hand large amounts and quantities of goods, and if they are prevented from selling them in the manner detailed they will be subjected to great loss and damage, will be embarrassed and injured in their businesses, and the value of their property destroyed or greatly lessened.

That the transactions and methods give an additional value to purchasers and they are substantially benefited thereby. That there is no element of gambling or chance in the transactions, and nothing in them or their methods prejudicial to the public health, safety, morals, or welfare.

That if there is a cessation of the transactions, purchasers and customers who have received tokens, but have not accumulated a sufficient number of them, will be unable to have the same redeemed or paid, or secure articles therewith. That about 500 merchants are similarly affected with complainants.

That certificates or tokens commonly called trading stamps, and so designated in the statute, are substantially like some of the tokens hereinbefore mentioned and described, and when delivered by retail merchants with the various articles sold to purchasers, such purchasers are entitled to purchase or receive various valuable articles of merchandise, according to a list or catalogue, upon the presentation of the stamps to some person or company that has issued the trading stamps, and that redeems them according to the provisions of such list or catalogue.

That under the statute every person, firm, or corporation offering with merchandise any coupon, profit-sharing certificate, or other evidence of indebtedness or liability redeemable in premiums, is not only liable to pay the license tax for himself or itself, but to pay such tax for every other person, firm, or corporation who may redeem any such coupon, etc.

That such taxes are unreasonable, enormous, and prohibitive on account of the number of articles sold, and by reason of the provision requiring complainants and each and every other person in like situation to pay the license tax to the state, and it is alleged with much circumstance that, from their number and the number of the articles that each sells, each and every person would be required to pay for license tax to the state and for one county or one place of business alone $15,000 per year, or one half that amount for six months or less time.

That as a result of the statute, if the tax be paid for only 100 persons, or persons, firms, or corporations, it would amount to $75,000 per annum; if for 1,000 persons, or persons, firms, or corporations in Florida for one place of business, it would amount to $750,000, and so on as to any number to be paid by and for each and every manufacturer, producer, or shipper.

That such coupons, etc., inclosed in packages of tobacco and so delivered, are authorized and rendered lawful by § 3394 of the Revised Statutes of the United States, as amended by § 10 of the act of July 24, 1897 [30 Stat. at L. 206, chap. 11], and by § 2 of the act of July 1, 1902 [32 Stat. at L. 715, chap. 1371, Comp. Stat. 1913, § 6204], of the statutes of the United States.

That the provision of § 35 (the provision quoted above) of the Florida statute and all provisions and enactments for its enforcement are in violation of the Constitution of the United States in that they violate (1) the commerce clause, (2) the due process clause of the 14th Amendment, and (3) the equal protection clause of that Amendment. There are many specifications of the particulars and it is alleged: (1) The statute discriminates between merchants in similar lines of business. (2) Between merchants who advertise in a certain manner and those who advertise in another manner. (3) The taxes are not upon the business or occupation of complainants, but upon the mere incidents of the business, and are an unreasonable and illegal interference with the method and manner of conducting the business. (4) The taxes are unreasonable, arbitrary, oppressive, discriminatory, and prohibitory for the reasons already detailed, and are far in excess of the amounts of taxes or licenses fixed or imposed when other methods of advertising or inducing custom are used, and will prevent complainants from carrying on their legitimate business. (5) They are not productive of revenue, are in excess of the profits of the businesses, and are in fact prohibitory. (6) That the methods employed by complainants in no wise affect the public health, morals, or welfare, and the imposition of the taxes is in no way a legitimate or lawful exercise of the police power of the state. (7) That the fines are so onerous, drastic, excessive, and enormous as to deter complainants in going on and doing business as they have heretofore done, and testing the validity of the statute in a court of law.

That by the statute and in § 59 thereof a violation of its provisions is made a misdemeanor, and it is provided in § 35 that, for failure to pay any of the license taxes, any person, whether acting for himself or as agent of another, may be imprisoned in the county jail, not exceeding six months.

It is further alleged that the statute impairs the obligations of the contracts entered into between complainants and their customers, in violation of clause 1, § 10, article I., of the Constitution of the United States.

That the officers of the state threaten to enforce the statute, and that the state's attorneys, county solicitors, and prosecuting attorneys of the several circuits and counties of the state are respectively empowered and authorized to prosecute in the several courts of the state, and such officers are threatening to prosecute divers of the complainants, and it is alleged that a multitude of prosecutions will be instituted, with seizures, sales, and injury to property, if a temporary restraining order be not granted. There is a prayer for such order and for a perpetual injunction.

A restraining order was issued. The defendants appeared specially and filed motions to dismiss the suit, and as grounds thereof denied the allegations and implications of the bill as to the various grounds of infringement of the Constitution of the United States charged against the statute, and set up that complainants had a complete and adequate remedy at law. That the bill sought a restraint of the enforcement of a criminal statute of the state, and to enjoin an alleged threatened seizure of property in the enforcement of the alleged illegal tax, and the enforcement of the collection of a tax imposed by a statute of the state of a general and public nature.

A motion was made for an interlocutory injunction, hearing upon which was referred to three judges. Upon the hearing the injunction was ordered (214 Fed. 827), to review which this appeal has been prosecuted.

Mr. Thomas F. West, Attorney General of Florida, for appellants.

[Argument of Counsel from page 352 intentionally omitted]

Mr. Charles M. Cooper for appellees.

[Argument of Counsel from pages 353-354 intentionally omitted]

Mr. Justice McKenna, after stating the case as above, delivered the opinion of the court: 

Notes
United States Supreme Court decisions on taxation
United States Supreme Court decisions on due process