Summary
In Carolina Music Company v. Query, 192 S.C. 308, 6 S.E.2d 473, the plaintiff, which sold or operated only musical machines, attacked the constitutionality of the act on the ground that it discriminated unlawfully in favor of merchandise-vending machines.
Summary of this case from Fox v. GallowayOpinion
14978
December 11, 1939.
Before THURMOND, J., Richland, August, 1939. Affirmed.
Action by the Carolina Music Company, Inc., and others, on behalf of themselves and all others similarly situated who would come into action and participate in costs thereof, against W.G. Query, chairman, and others, as members of the South Carolina Tax Commission, challenging the constitutionality of Act July 1, 1939, 41 St. at Large, page 650. From a decree dismissing the complaint and dissolving a temporary injunction, plaintiffs appeal.
The portions of the decree requested to be reported follow:
Plaintiffs, suing in behalf of themselves and all others similarly situated who will come into the action and participate in the costs thereof, challenge the constitutionality of Section 101, page 650, of Act No. 346 of the General Assembly enacted at the 1939 session. The defendants compose the Tax Commission of the State of South Carolina, which Commission is charged by law with the duty of enforcing the provisions of the Act.
The challenged statute is as follows:
"§ 101. (1) (a) That every person, firm or corporation owning or maintaining any place of business, or other place, wherein or in connection with which is operated or located any machine for the playing of music, games or amusements, operated by a slot wherein is deposited any coin or thing of value or any machine in which is kept any article to be purchased by depositing any coin or thing of value, shall apply for and procure from the South Carolina Tax Commission a license for the privilege of operating any and every such machine and shall pay for such license a tax of Fifteen ($15.00) Dollars per machine: Provided, That the tax on machines vending any article to be purchased therefrom shall be Ten ($10.00) Dollars per machine: Provided further, That the provisions of this subdivision shall not apply to any machine requiring a deposit of less than five cents: Provided further, That the provisions of this subdivision shall not apply to any billiard or pocket billiard table.
"(b) No machine shall be licensed under this subsection unless said machine shall bear a permanently attached identifying serial number and in making application for license under this subsection, the applicant shall specify the manufacturer's serial number of the machine for which license is desired. The license shall carry the serial number of the machine and no license shall be transferable. It shall be the duty of the person in whose place of business the machine is operated or located to see that the proper State license is attached to the machine before its operation is commenced. Failure to do so shall make such person liable for the penalties imposed in this section.
"(c) Upon application being made for license to operate any machine or apparatus under this section, the Tax Commission is hereby authorized to presume that the operation of such machine or apparatus is lawful and when a license has been issued for the operation thereof, the sum paid for such license shall not be refunded notwithstanding that the operation of such machine or apparatus shall be prohibited."
Plaintiffs take the position that the Act is violative of Article I, Sections 5 and 6, and Article X, Sections 1, 2, 3 and 13, of the South Carolina Constitution of 1895, and Article I, Section 8, Subsection 3 of the Constitution of the United States, U.S.C.A., and the Fourteenth Amendment to that Constitution. The constitutional provisions of the State Constitution, which are relied upon, relate to "due process of law," "the equal protection of the laws" and the taxation of plaintiffs' property without regard to its value and without uniformity or graduation. The constitutional provisions of the United States Constitution which are relied upon relate to regulation of commerce between the States, "due process of law" and "equal protection of the laws." In addition it is alleged that the tax levied is ambiguous in that it is impossible to say from a reading of the statute whether the plaintiffs, by virtue of the statutory enactment, are required to pay a tax of $15.00 or $10.00.
As to the contention last adverted to, the construction which has been placed upon the Act by the Tax Commission is that any machine which vends a tangible article of merchandise which is purchased therefrom by the deposit of a coin or thing of value of 5¢ or more is taxable at the rate of $10.00 per year and that any machine which does not vend a tangible article of merchandise but which plays music or merely affords amusement upon the deposit of 5¢ or more, is taxable at the rate of $15.00 per year.
Section 1 (a) of Section 101 of the Act seems clearly to justify the construction placed upon it by the Tax Commission. It is, of course, a familiar principle of law that "the construction given a statute by those charged with the duty of executing it is always entitled to the most respectful consideration, and ought not to be overruled without cogent reasons." Hadden v. South Carolina Tax Commission, 183 S.C. 38, 190 S.E., 249, 253.
Plaintiffs' contention based upon the alleged ambiguity of the Act cannot be sustained.
The contention that the statute violates the "due process" and "equal protection" clauses of the State and Federal Constitutions apparently is based upon the view that the statute discriminates against plaintiffs, who sell or operate only music producing machines, as compared with owners or operators of slot machines which vend a tangible article of merchandise, the former being required to pay $15.00 per year for each machine, whereas the latter required to pay only $10.00 per year per machine. Complaint is further made that no tax is imposed upon machines which require a deposit of less than 5¢ for this operation, whereas a tax is imposed upon those requiring 5¢ or more. It is alleged that this is an arbitrary and unreasonable classification.
Yet these are precisely the type of distinctions which the law is often called upon to make. "It is only a difference in numbers which marks the moment when day ends and night begins, when the disabilities of infancy terminate and the status of legal competency is assumed. It separates large incomes which are taxed from the smaller ones which are exempt, as it marks here the difference between the proprietors of larger businesses who are taxed and the proprietors of smaller businesses who are not." Carmichael v. Southern Coal Coke Co., 301 U.S. 495, 57 S.Ct., 868, 873, 81 L.Ed., 1245, 109 A.L.R., 1327.
In the case of Gundling v. City of Chicago, 177 U.S. 183, 20 S.Ct., 633, 635, 44 L.Ed., 725, the Court had before it a Chicago ordinance requiring a special license for the sale of cigarettes, the fee for which was $100.00 per year. The ordinance was attacked upon the grounds, inter alia, that it contravened the due process and equal protection clauses of the Federal Constitution. It was contended that the ordinance discriminated against vendors of cigarettes. In overruling these contentions the Federal Court said:
"Regulations respecting the pursuit of a lawful trade or business are of very frequent occurrence in the various cities of the country, and what such regulations shall be and to what particular trade, business, or occupation they shall apply are questions for the state to determine, and their determination comes within the proper exercise of the police power by the state, and unless the regulations are so utterly unreasonable and extravagant in their nature and purpose that the property and personal rights of the citizens are unnecessarily, and in a manner wholly arbitrary, interfered with or destroyed without due process of law, they do not extend beyond the power of the state to pass, and they form no subject for Federal interference. * * *
"It it not a valid objection to the ordinance that it partakes of both the character of a regulation and also that of an excise or privilege tax. The business is more easily subjected to the operation of the power to regulate where a license is imposed for following the same, while the revenue obtained on account of the license is none the less legal because the ordinance which authorized it fulfills the two functions, one a regulating and the other a revenue function. So long as the state law authorizes both regulation and taxation, it is enough, and the enforcement of the ordinance violates no provision of the Federal Constitution."
Statutes imposing a tax or license either upon automatic vending machines or their proprietors have been sustained in the comparatively few cases in which the question has arisen. And the exemption of certain kinds of such machines has been held not to constitute an unlawful discrimination. For example, in the case of Ex parte Walker, 121 Tex.Crim. 145, 52 S.W.2d 266, a tax upon the operation of various vending machines but exempting pay telephones and gas meters was held not to offend a provision of the Texas Constitution requiring the taxes be equal and uniform upon the same class of subjects, the exemption not being an unlawful discrimination against the operators of the slot machines in favor of the telephone and gas companies.
A later Texas statute exempting "pay toilets and/or sanitary drinking cup vending machines which are operated with coins" was held not to amount to an unlawful discrimination. Ex parte Day, 127 Tex.Crim. R., 76 S.W.2d 1066.
Other cases from Texas, Alabama, Arkansas and Virginia upholding the validity of statutes imposing licenses upon the operation of vending machines, which statutes contain various exemptions, are to be found in an Annotation in 111 A.L.R., at page 756.
The General Assembly of South Carolina has made a distinction in the amount of license required from operators of machines dispensing music on the one hand and machines dispensing tanglible articles of merchandise on the other. It has further made a distinction, between machines requiring a deposit of less than 5¢ for their operation on the one hand and more than 5¢ on the other. The very fact that such distinctions are made is the best evidence that the Legislature took into consideration certain factors of moment in determining the rate of the license. Unless the regulations are utterly unreasonable and extravagant in their nature and purpose they cannot be held to offend those constitutional provisions which guarantee to the citizen due process of law and equal protection of the laws. Gundling v. Chicago, supra. The regulations here under consideration cannot be said to be unreasonable or arbitrary.
While some showing is made before me that the imposition of the license would destroy the business of operating music vending machines, the showing is by no means conclusive or satisfactory. The same contention was made by processors of fertilizer from salmon who were required to pay a license by virtue of the provisions of an Act of Congress, an Act which, incidentally, contained various exemptions and classifications. In disposing of that contention, Justice Holmes, speaking for the Court, says: "Even if the tax should destroy a business it would not be made invalid or require compensation upon that ground alone. Those who enter upon a business take that risk." Alaska Fish Salting By-Products Co. v. Smith, 255 U.S. 44, 41 S. Ct., 219, 220, 65 L.Ed., 489.
On the point that the State has power to establish reasonable classifications for purposes of taxation see: Alderman v. Wells, 85 S.C. 507, 67 S.E., 781, 27 L.R.A. (N.S.), 864, 21 Ann. Cas., 193; Rast v. Van Deman Lewis Co., 240 U.S. 342, 36 S.Ct., 370, 60 L.Ed., 679, L.R.A., 1917-A, 421, Ann. Cas., 1917-B, 455; American Sugar Refining Co. v. Louisiana, 179 U.S. 89, 21 S.Ct., 43, 45 L.Ed., 102.
The objections that the statute deprives the plaintiffs of their property without due process of law and denies them the equal protection of the law cannot be sustained.
While plaintiffs contend in their pleadings that the Act violates Sections 2, 3, and 13 of Article X of the State Constitution, such contentions were not seriously urged. They cannot be sustained. Plaintiffs do rely very strongly, however, upon Section 1 of Article X, which is as follows:
"Taxation and Assessment. — The General Assembly shall provide by law for a uniform and equal rate of assessment and taxation, and shall prescribe regulations to secure a just valuation for taxation of all property, real, personal and possessory, except mines and mining claims, the products of which alone shall be taxed; and also excepting such property as may be exempted by law for municipal, educational, literary, scientific, religious or charitable purposes: Provided, however, That the General Assembly may impose a capitation tax upon such domestic animals as from their nature and habits are destructive of other property: And provided, further, That the General Assembly may provide for a graduated tax on incomes, and for a graduated license on occupations and business."
Plaintiffs' contention is that the tax here involved constitutes a license on an occupation or a business; that it is not graduated and, hence, is in conflict with the constitutional provision above quoted.
Of course, the General Assembly does not derive its powers from the Constitution but the Constitution is merely a limitation upon such powers. The General Assembly may do anything which the Constitution does not forbid it to do. And it is to be observed that the last proviso above quoted does not forbid the imposition of any form of license on occupations and businesses. It does not therefore, detract to any extent from the pre-existing legislative power.
As was said by Justice Woods in McDowell v. Burnett 92 S.C. 469, 75 S.E., 873, 875: "In essaying the task the primary principle must be kept in view that, in construing the Constitution of the state, the court should not take the liberty of limiting the meaning of plain language, used without express limitation, further than it can be made plain with reasonable certainty that such limitation was intended."
If the framers of the Constitution had intended to forbid the enactment of legislation concerning licenses on occupations and businesses unless such licenses were graduated, they could have done so in language free from doubt. They did so with reference to freedom of worship, speech and the right of petition. Article I, Section 4. They did so with reference to taxation of property in proportion to its value. Article I, Section 6. (Incidentally, plaintiffs concede, as it is proper they should, that no question of a property tax is here involved.) They did so with reference to bills of attainder, ex post facto laws, etc. Article I, Section 8. Many other sections might be cited, but these would seem to be sufficient to make the point that the Constitution does not in language which is "plain with reasonable certainty that such limitation was intended," limit the power of the Legislature to deal with licenses on occupation and businesses.
While the language may be viewed as a dictum, the Supreme Court in the case of Ware Shoals Manufacturing Co. v. Jones, 78 S.C. 211, 58 S.E., 811, 814, uses this language: "The object of the graduation is to make such taxes as far as possible uniform. A just imposition is the end in view. Now, it will readily be conceded that, had the Legislature seen fit, instead of imposing a tax of one-half of a mill on the capital stock of its corporations, to impose a definite amount, say $500, or a like amount, as a privilege of doing business in the state, its power would not have been questioned." (Italics added.)
No better statement of the power of the Legislature to act within the orbit of the Constitution has come to our attention than the following language from the case of Duke Power Co. v. Bell, 156 S.C. 299, 152 S.E., 865, 869: "Proceeding to a consideration of the constitutional questions raised by the defendant, I think those questions may all resolved by the proper application of certain fundamental principles of constitutional law and certain cardinal rules of construction, which are too well settled to require the extensive citation of authority. These are as follows: The supreme legislative power of the State is vested in the General Assembly. State v. Aiken, 42 S.C. 222, 20 S.E., 221, 26 L.R.A., 345. The provisions of the State Constitution are not a grant but a limitation of legislative power, so that the Legislature may enact any law not expressly, or by clear implication, prohibited by the Constitution of the State or nation. Fripp v. Coburn, 101 S.C. 312, 85 S.E., 774. The power of taxation is a legislative power, and knows no limitations, except those imposed expressly or by plain implication in the State or Federal Constitution. 26 R.C. L., 86. `The power to prescribe what property shall be taxed implies the power to prescribe what property shall be exempt, and, in the absence of a special constitutional provision to the contrary, the Legislature may exempt such classes of property from taxation as in its opinion the public policy of the State requires.' 26 R.C.L., 297, § 262; Gibbons v. District of Columbia, 116 U.S. 404, 6 S.Ct., 427, 29 L.Ed., 680; Note 19 L.R.A., 78. Within such constitutional limitations `the necessity, utility, and expediency of legislation are for the determination of the Legislature alone.' Santee Mills v. Query, 122 S.C. 158, 115 S.E., 202, 203. `Every presumption must be indulged in favor of the constitutionality of an act of the Legislature, and to justify a court in pronouncing legislation unconstitutional, the case must be so clear as to be free from doubt and the conflict of the statute with the Constitution must be irreconcilable.' Santee Mills v. Query, supra."
For the foregoing reasons the answer and return of the defendants are deemed sufficient, the complaint dismissed and the temporary injunction heretofore granted is dissolved.
Messrs. C.T. Graydon and Odom, Bostick Taylor, for appellants, cite: Indirect tax: 88 So., 4; 260 S.W. 144; 266 S.W. 700; 26 R.C.L., 236. Tax must be reasonable: 17 R.C.L., 539; 192 U.S. 55; 78 P., 900; 2 S.E.2d 647; 179 S.E., 837; 100 S.E., 104; 82 S.E., 26; 81 S.E., 114; 36 S.E., 627; 91 So., 104; 156 S.C. 299; 152 S.E., 865; 112 S.C. 383; 99 S.E., 841; 63 S.C. 60; 41 S.E., 13; 54 S.C. 564; 127 S.C. 167; 120 S.E., 717; 26 R.C.L., 238. Constitutionality of Act: 44 So., 113; 54 S.C. 564; 112 S.C. 383; 99 S.E., 841; 63 S.C. 60; 41 S.E., 13; 179 U.S. 27; 45 L.Ed., 186.
Messrs. John M. Daniel, Attorney General and Claude K. Wingate, for respondents, cite: Construction of statute: 25 R.C.L., 231; 126 S.E., 622; 255 U.S. 48; 65 L.Ed., 489; 164 S.E., 439; 85 S.C. 507; 67 S.E., 781; 27 L.R.A. (N.S.), 864; 240 U.S. 342; 179 U.S. 89; 255 U.S. 44; 260 U.S. 245; 19 L.Ed., 482; 292 U.S. 40; 85 S.C. 507; 67 S.E., 781; 170 U.S. 283; 147 N.E., 401; 92 S.C. 469; 75 S.E., 873; 111 S.C. 205; 97 S.E., 58; 116 S.C. 412; 107 S.E., 581; 135 S.E., 544; 58 S.E., 814; 75 S.E., 875.
December 11, 1939.
After a careful study of the record in this case, we are satisfied with the result of the Circuit Court decree, and direct that it be reported, omitting that portion thereof which deals with the position of appellants that the statute violates Article I, Section 8, Subsection 3 of the Constitution of the United States, U.S.C.A. (folios 166-170). This position has been abandoned by appellants.
The tax imposed by the statute attacked is more in the nature of a privilege tax than an occupational tax, though it partakes of both. And, of course, the tax attaches only to machines being operated — not to those in storage.
Except for the decision of this Court in State v. Reeves, 112 S.C. 383, 99 S.E., 841, 842, the position of appellants that the tax is not graduated as provided for in Section I of Article X of the State Constitution, would indeed be a most difficult one to overcome. It is possible, having regard to the considerations that led to the enactment of the law, that the tax in question can be related to the exercise of the police power. However, there is language in the above cited case which would tend to uphold the Act even outside of the police power.
The view that the constitutional provision as to graduated license charges is mandatory, in the light of the fact that the Constitution is not a grant of power, but a limitation of power, appeals to reason, but as already indicated, the Reeves case is against such view.
In that case (an emigrant agent case) defendant appealed to this court alleging the trial Judge erred in refusing to quash the indictment, in that: "(1) * * * (2) it placed upon a business a license fee, which was not a graduated license fee, but a prohibitory and discriminating license fee, in violations of the provisions of Section I of Article X of the Constitution, * * *." In passing on this exception Mr. Chief Justice Gary, writing the opinion of the Court, in which the exception was overruled, had this to say: "There is another reason why the statute is not unconstitutional, on the ground that it failed to provide for a graduated license fee. In section 1, art. 10, the word `shall' is used in requiring provision to be made for a uniform rate of taxation; but the word `may' is used in that part of the section referring to a graduated license on occupations. The context shows that the word `shall' was intended to be mandatory, but that the word `may' was merely advisory. This interpretation is in accordance with the rules announced in Massey v. Glenn, 106 S.C. 53, 90 S.E., 321. In that case the word `shall' was used in one section of the Constitution, and the word `may' was used in another and inconsistent section. The court held that — `In such a case the rule is applicable that, when two sections of a Constitution are inconsistent, effect will ordinarily be given to that which is in harmony with other provisions, rather than to that which is inconsistent with more than one provision.'"
In the light of the statements contained in the record reflecting the returns on the machines and the expense involved in connection therewith, we admit we have been perplexed as to whether the tax is confiscatory, but the thought occurs to us that these machines could be so located for operation that any tax would be confiscatory. In the same manner that Section 6347 of the Code economically regulates the number of poor or billiard tables in operation in the confines of municipal corporations, so will this statute economically regulate the number of these machines placed in operation.
All exceptions are overruled.