Brown-Foreman Co. v. Commonwealth

Opinion of the • Court by Judge Hobson Affirming. At the last session of ■ the • General Assembly the following act was passed: “An act relating to revenue and taxation, providing — 408 — for license taxes on compounded, rectified, adulterated or blended distilled spirits, known and designated as single stamp spirits, and providing penalties for violations of its provisions. “Be it enacted by the General Assembly of tbe commonwealth of Kentucky: “Section 1. Every corporation, association, company, copartnership or individual engaged in this State in the business or occupation of compounding, rectifying, adulterating or blending distilled spirits, •known and designated as single stamp spirits, shall pay to the commonwealth of Kentucky a license tax .of.one and one-fourth cent upon every wine gallon of such compounded, rectified, blended or adulterated distilled spirits. “Sec. 2. It shall be the duty of each corporation, association, company, copartnership* or individual engaged in this State in the business or occupation of compounding, rectifying, adulterating or blending distilled spirits, known and designated as single stamp spirits, to make’and deliver to the Auditor of Public Accounts, on the thirtieth day of June, one thousand nine hundred and six (or within ten days thereafter), and at the end of each six months thereafter, a report sw'orn to, upon blanks to be furnished by the Auditor, stating the name, place of business and the number of wine gallons of compounded, rectified, adulterated or blended distilled spirits, known and designated as single stamp spirits, made during the six months then ended, and.such other information as the Auditor may require, and at the same time pay into the State treasury, througu the'Auditor, the amount of taxes due the State, as herein provided, imposed by the last preceding section. “Sec. 3. Before any corporation, association, com — 409 — pany, copartnership or individual shall engage in the business or occupation of compounding, rectifying, adulterating or blending, in this State, the Auditor of Public Accounts shall be given notice of the intention of such corporation, association, company, co-partnership or individual to engage in such business or occupation. The notice shall contain the name and place of residence of such corporation, association, company, copartnership or individual, and the approximate number 'of wine gallons of such compounded, rectified, adulterated or blended spirits the applicant contemplated making prior to the first date at which he is required to report the number of gallons made to the Auditor of Public Accounts under •this act. ‘ ‘ Sec. 4. Upon receipt of such notice by the Auditor of Public Accounts, he shall issue to each applicant a certificate, showing that he has complied with this act. Any corporation, association, company, copartnership or individual, who shall engage in the business of compounding, rectifying, adulterating or. blending, distilled spirits, known and designated as single stamp spirits, without first receiving said certificate herein provided for from the Auditor of Public Accounts, shall be guilty of a misdemeanor and subject to indictment in the Franklin circuit court, and fined any sum not less than five hundred dollars nor more thamtwo thousand dollars. “Sec. 5. Upon the payment of the license tax to the Treasurer through the Auditor of Public Accounts, as provided in this act, the Auditor of Public Accounts shall issue to such corporation, association, company, copartnership or individual authority to continue in the business or occupation of compounding, rectifying, adulterating or blending — 410 — distilled spirits known and designated as single stamp-spirits, if such authority is desired for six months or until the date provided in this act when reports are-to be made. “Sec. 6. Any compounder, rectifier, adulterator or blender liable' for taxes imposed by this act, or embraced by its provisions, who shall fail or refuse to make and deliver to the Auditor of Public Accounts a sworn report, containing all the facts required to-be reported, and pay the lieénse tax as required by this act, shall be deemed guilty of a misdemeanor, and, upon conviction, shall be fined not less than fifty nor xnore than one hundred dollars for each day of such failure or refusal, to be recovered by indictment in the Franklin circuit court, and shall forfeit his right to engage in said business in this State. “Sec. 7. Any corporation, association, company,, copartnership or individual who shall ship any compounded, rectified, blended or adulterated distilled, spirits, known and designated as single stamp spirits, into this State for the purpose of labeling, branding,, marking or stamping the same as Kentucky whisky, product or spirits, or which, before shipment into this State, shall have been, or may thereafter be’ labeled, branded, marked or stamped as Kentucky whisky, p>roduct or spirits, shall be deemed compounders, rectifiers, blenders or adulterators under the provisions of this act, and shall pay the licexxse tax imposed herein on compounders, rectifiers, blexxders or adulterators of such spirits in this State, and shall make the report required herein to the Auditor of Public Accounts. “Any corporation, association, company, copartnership or individual who shall violate this section of this act shall be deemed guilty of a misdemeanor*, — 411 — and fined in any sum not less than five hundred nor . more than one thousand dollars. Each shipment shall be deemed a separate offense. The Franklin circuit court shall have jurisdiction of all offenses committed under this act. “Sec. 8. All laws or parts of laws in conflict with this act are hereby repealed. ’ ’ See Acts 1906, p. 549. On June 30, 1906, the Brown-Foreman Company filed a report with the Auditor showing that it had compounded or rectified distilled spirts, from what is known as “single stamp spirits,” 2,795.64 wine gallons; also that it had compounded or rectified distilled spirits, from what is known as “double stamp spirits,” 17,100 wine gallons. It paid the' tax óf 11-4 cents on the 2,795.64 gallons made from the single stamp spirits, but declined to pay the tax on the 17,100 gallons made from the double stamp spirits. The commonwealth brought this suit to recover the taxes, amounting to $201.25. The defendant filed a demurrer .to the petition, and also filed an answer. In the answer it was averred that all distilled spirits in the United States are divided into' two classes, and known as “double stamp spirits” from the fact that they carry two stamps under the internal revenue laws, and “single stamp spirits” by reason of the fact that they carry but a single stamp ; that single stamp spirits are of two classes, those which carry a rectifier’s stamp indicating that there has been a mixing of distilled spirits, and those carrying a whole^sale liquor dealer’s stamp, which does not indicate a mixing of distilled spirits, but only a transfer of packages. The court overruled the demurrer to the petition, and sustained the demurrer to the answer, and, the defendant failing to plead further, entered! — 412 — judgment in favor of the plaintiff. Prom this judgment the defendant appeals. It is insisted for the appellant that the act is invalid ■under section 51 of the Constitution, which requires that an act shall relate to only one subject, and that this subject shall be expressed in the1 title. It is said that the purpose of the act, as shown by the title, is to impose a tax on rectified spirits, and not a license tax on the occupation. If the title of the act had stopped with the words “An act relating to revenue and taxation,” it would have been sufficient under the rule repeatedly laid down by this court. Commonwealth v. Godshaw, 92 Ky. 435, 13 Ky. Law Rep. 572, 17 S. W. 737; Conly v. Commonwealth, 32 S. W. 285, 17 Ky. Law Rep. 678, 98 Ky. 125; Rosenham v. Commonwealth, 2 S. W. 230, 8 Ky. Law Rep. 519. The remainder of the title in no way narrows the meaning of the words “An act relating to revenue and taxation.” On the contrary, the remaining-words of the title clearly show that the Legislature had in mind a license tax on compounded, rectified, adulterated, or blended distilled spirits. This court has steadily enforced the rule that section 51 of the Constitution should receive a reasonable, not a technical, construction, and no provision of a statute fairly within the purview of the subject expressed in the title shall be deemed within the constitutional inhibition. Jacobs v. L. & N. R. R. Co., 10 Bush 263; Allen v. Hall, 14 Bush 85; Trustees of Augusta v. Maysvlle, etc., R. R. Co., 30 S. W. 1, 97 Ky. 145, 16 Ky. Law Rep. 890. It is also insisted for appellant that the act levies a property tax, and that it is invalid, under section ■171 of the Constitution, for the reason that it is not ■uniform upon all property subject to taxation within — 413 — the territorial limits of tile authority levying the tax. It is insisted that rectified spirits, like other property, must be taxed ad valorem, and that the act imposes an additional tax upon this class of property. The power to provide for taxation based on income, licenses, or franchises is expressly reserved in section 174, which provides that all property shall be taxed in proportion to its value; and by.section 181 the General Assembly is authorized to provide for the payment of license fees on trades and occupations, or a special or excise tax. In Strater Bros. Tobacco Co. v. Commonwealth, 117 Ky. 604, 78 S. W. 871, 25 Ky. Law Rep. 1717, it was held that a license tax is valid, although the amount of it is made to depend upon the value of goods produced. In that case the manufacturer was required to pay on the manufactured product, for each factory, “one dollar on the marketable value of each one thousand dollars of such product,” and it was insisted there, as here- thát a tax upon property was levied. The court held otherwise. Among other things, it said: “The tax imposed is not levied upon property. It is simply a license tax, as declared by the General Assembly in the act. The Constitution not only does not prohibit the imposition of such a tax, but it expressly recognizes the right of the Legislature to impose it. It not only does so, but it authorizes it to be done in addition to an ad valorem tax. * * * The larger manufacturer is required to pay more than the smaller,one, based upon the value of the product manufactured. If all manufacturers of tobacco, regardless of the manufactured product manufactured by each, had been made to pay the same license tax, then a more potential argument could be made against the validity of the law for the lack of uniformity — 414 — and inequality of burden than has been made against the law here sought to be enforced. While this is true, we would not hold it sound. If we did, then it would logically follow that a license tax on retail liquor dealers would be invalid, because the one who sold a small quantity of liquor paid the same as the one who sold many times as much. This court has upheld ordinances imposing a license or occupation tax on liverymen based upon the number of vehicles employed in their business. Such taxes are not based upon the value of the vehicles or the profit derived from their use, but upon the number employed.” We are unable to see any substantial difference between that act and the one now before'us. A license tax is imposed. The amount of the license tax is determined by tire amount of spirits produced. The tax is not upon the spirits. It is a license tax upon the business. To hold it a tax. upon the property, we must disregard the word “license” in both the title and the body of the act. That a license tax was contemplated is also shown by section 3, which requires that notice shall be given to the Auditor, stating certain facts, before the business shall .be engaged in; by section 4, that upon such notice the Auditor shall thereupon issue to each applicant a certificate showing that he has complied with the act; and by section 5, that upon the payment of the license tax to the Treasurer the Auditor shall issue to such persons authority to continue in the business, if such authority is desired. Under the statute a man may not legally engage in the business without giving the notice and having the certificate from the Auditor. The payment of the tax at the times required by the statute is the condition upon which authority to continue in the business is'made to depend. This is mem' — 415 — festly a tax on the business, and not upon the property. The amount of the tax is simply regulated by the amount of the product, but it is a license tax upon the business. To hold otherwise would be to say that the Legislature cannot impose a graduated license tax based upon the amount of product manufactured. Section 7 also sustains this conclusion. That section makes it unlawful for any person to ship any rectified spirits into this State for the purpose of marking same as “Kentucky whisky,” or which before shipment into the' State shall have been so marked. All such shippers are to be treated as rectifiers in this State. No tax is levied upon rectified whisky brought into this State, unless brought in as provided in section 7. The tax under this section is not laid as a burden upon the property, but to prevent rectifying from being done out of the State and the goods sold as the product of this State without the payment of the rectifying tax. No tax is levied upon rectified whisky in existence. The whole aim of the act is to tax the business of rectifying after it goes into effect. It is further insisted for appellant that the act is in conflict with section 180 of the Constitution in this: That' the act does not specify the purpose for which the tax is levied. The part of section 180 relied on is as follows: “Every act enacted by the General Assembly, and every ordinance^ and resolution passed by any county, city, town, or municipal board or local legislative body, levying a tax, shall specify distinctly the purpose for which said tax is levied, and no tax levied and collected for • one purpose shall ever be devoted to another purpose. ” The Constitution went into effect in the year 1891. Pursuant to its provisions a commission of learned lawyers was ap — 416 — pointed to revise tlie statutes of the State so as to conform them to the provisions of the Constitution. Their revision was submitted to the first General Assembly which met after the adoption of the Constitution, which was composed of not a few members of tire constitutional convention, and has since been known as the “Long Parliament,” owing to the length of its sessions. In the revision of the laws relating to taxation, as made by them, it appears that they understood section 180 of the Constitution not to refer to license taxes. At least, in the acts passed by them levying license taxes, the purpose for which the tax is levied is not specified. Though the revenue laws of the State have been several times revised since 1891, in every revision the same course was-followed. In none of the acts passed since the new Constitution levying license taxes has the purpose for which the tax is levied been specified. This contemporaneous construction of the Constitution, concurred in by so many Legislatures, ought not now to be lightly departed from. In addition to this, this court has time and again enforced fines based on the failure to pay licenses under the statutes referred to, and while the point now made does not appear to have been presented in any of these cases, still some effect must be given to the acquiescence of the bench and the bar in the legislative construction of the Constitution. Section 170, provides what property shall be exempt; section 171, for an annual tax uniform upon all property subject to taxation; section .172, for the assessment of property; section 174, for taxation of property in proportion to its value;, and section 180, as to how taxes shall be levied. Manifestly section 174 does not apply to franchise taxes, and section 180 was not intended to apply to them as shown — 417 — by section 181, "which is in these words: 11 The General Assembly shall not impose taxes for the purposes of any county, city, town or other municipal corporation, but may, by general laws, Confer on the proper authorities thereof, respectively, the power to assess and collect such taxes. The General Assembly may, by general laws only, provide for the payment of license fees on franchises, stock used for breeding purposes, the various trades, occupations and professions, or a special or excise tax; and may, by general laws, delegate the power to counties, towns, cities and other municipal corporations, to impose and collect license fees on stock used for breeding purposes, on franchises, trades, occupations and professions.” The second clause of this section is the authority of the General Assembly for license taxes. The first clause of the section refers to other taxes for municipal purposes, and the third clause to municipal license taxes, showing that the constitutional convention kept in mind that it had not in its previous provsions covered the subject of license taxes. We announced this conclusion in the recent case of Shugar v. Hamilton, 122 Ky. 606, 92 S. W. 564, 29 Ky. Law Rep. 127, and upon a reconsideration of the question we adhere to the rule then announced. Lastly, it is insisted that the license tax is to be paid by the rectifier upon the amount of rectified spirits which he makes by blending distilled spirits known and designated as “single stamp spirits,” but that he is not taxed at all on rectified spirits which he makes by using double stamp spirits. The act was not aimed at the spirits used in rectifying. It levies a license tax upon the business. ' The thing in the mind of the Legislature was the business of rectifying, and the license tax is regulated by the amount — 418 — of the product. What the Legislature has in mind was the rectified product, not the character of spirits used in producing it. Omitting other words, as shown by the title of the áet, it provides for a license tax on rectified distilled spirits. The first section of the act requires the payment of the license tax of 11-4 cents upon every gallon of rectified distilled spirits. The words “compounded, blended or adulterated” are simply used to make clearer the meaning. That this is the meaning is shown by section 2, which describes the business upon which the tax is levied as “the business or occupation of compounding, rectifying or blending in this State, ’ ’ and requires a statement of “the approximate number of wine gallons of such compounded, rectified or blended spirits the applicant contemplate® making prior to the first date •at which he is required to report.” That this is the meaning of the act is also shown by section 7, punishing any person “who shall ship any compounded, rectified, blended, or adulterated spirits” into this State for the purpose of stamping same as “Kentucky whisky.” It is a matter of common knowledge that a large part of the whisky used in the United States is rectified; that is, that a barrel of whisky as it comes out of the distillery is adulterated by the rectifiers, so as to make five or six barrels of whisky out of it. See Taylor v. Taylor, 85 S. W. 1085, 27 Ky. Law Rep. 628. And it is this business of multiplying the whisky which is distilled that the Legislature imposed the license tax upon! The act is not in conflict with section 202 of the Constitution: “No corporation organized outside the limits of this State shall be allowed to transact business within the State on more favorable conditions than are» prescribed by law to similar corpora — 419 — tions organized under the laws of, this commonwealth.” The license tax is imposed upon the occupation of rectifying in this State. A foreign corporation, pursuing the business in this State, must pay the tax, no less than a home corporation doing the same business in the State. The home corporation, engaged in the rectifying business, not in Kentucky, but elsewhere, is no more liable to the tax than a foreign corporation, engaged in the business in another state, but not in Kentucky. The home corporation and the foreign corporation stand just alike under the statute. Both are liable to the tax if they engage in rectifying in the State, and neither is liable if it does not so engage in the business. The Legislature cannot regulate interstate commerce, but may regulate the occupation of rectifying in this State, and to this end may provide against rectified whisky made elsewhere being brought here, branded as “Ken-, tucky whisky,” and sold as such in the State. Section 7 of the act is a legislative exercise of the police power to protect the people of the State against deleterious compounds, to prevent shifts or devices to evade the tax, and to protect the manufacturers of the State against competition with rivals who falsely mark their goods “Kentucky whisky” to deceive purchasers. The act is not in violation of the fourteenth amendment of the Constitution of the United States, or of any provision of that instrument. Residents of the State and nonresidents are treated just alike. A resident of Kentucky may have his establishment outside of .Kentucky, and be no more liable to the tax than the nonresident of the State following the same business in the same locality. No person within the State is denied the equal protection of its laws. The tax — 420 — is on the occupation, añd is imposed on all alike who are engaged iii the occupation irt the State. Judgment affirmed;