## Facts

- Florida enacted a 1931 “chain store” licensing law making it unlawful to operate a store without a state license, a filing fee, and annual renewal.
- The statute imposed a graduated annual license tax on retail chain stores, increasing per store as the number of commonly owned or operated stores rose.
- The statute imposed materially higher per-store taxes when stores in the same chain were located in more than one county than when all stores were within a single county.
- Counties and municipalities were authorized to impose additional license taxes equal to 25% of the state license fee, measured by the number of stores within their borders.
- The statute imposed an additional levy of $3 per $1,000 of value of stock carried in each store, including merchandise held in storage for sale through the store.
- The statute applied only to retail stores and excluded filling stations engaged exclusively in selling gasoline and other petroleum products.
- Thirteen chain store operators sued Florida tax officials to enjoin enforcement, alleging violations of state constitutional provisions, the Fourteenth Amendment (due process and equal protection), and the Commerce Clause.
- The trial court dismissed the complaint, and the Florida Supreme Court affirmed; the U.S. Supreme Court reviewed and reversed in part.

## Issues

1. Whether a progressive, per-store privilege tax on chain stores, distinguishing them from single-store and cooperative arrangements, violates the Equal Protection Clause.
2. Whether imposing a higher per-store tax when a chain operates in more than one county is an arbitrary classification that denies equal protection.
3. Whether the additional inventory-based levy and differential treatment of chain retailers and wholesalers deny equal protection.
4. Whether excluding petroleum-only filling stations from the definition of “store” denies equal protection.
5. Whether alleged discriminatory enforcement or burdens on interstate commerce invalidate the statute.

## Decision

- The Court held that a progressive per-store privilege tax on chain stores, based on number of stores under common ownership or operation, does not violate equal protection.
- The Court held unconstitutional the provision imposing higher per-store taxes solely because stores are located in more than one county, finding the county line an irrational basis for classification.
- The Court upheld the statute’s authorization for counties and municipalities to impose additional license taxes tied to the number of stores within their limits.
- The Court upheld the inventory-based levy as applied, rejecting the claim that differing treatment of chain-store storage stock and wholesalers’ stock lacked a rational basis.
- The Court upheld the exclusion of petroleum-only filling stations from the statutory definition of stores.
- The judgment sustaining the statute in full was reversed and remanded for further proceedings consistent with these rulings.

## Legal Principles

- A state may impose a privilege or license tax on chain stores calculated per store and graduated by the number of commonly owned or operated stores without violating equal protection, if the classification has a rational basis.
- Equal protection forbids classifications that impose materially different tax burdens without a rational relation to a legitimate state objective; geographic boundaries alone may be arbitrary if unrelated to the taxed privilege.
- Corporations are entitled to the same equal protection guarantees as natural persons.
- Distinctions among types of businesses (e.g., chain retailers vs. wholesalers; general retail stores vs. petroleum-only filling stations) may be sustained if the legislature could rationally view the businesses as materially different for taxation.
- Allegations of selective enforcement, without an adequate record establishing unlawful administration, do not alone invalidate an otherwise valid taxing scheme.

## Conclusion

The Court approved Florida’s general approach of taxing chain-store operations more heavily through a progressive per-store license, but invalidated the statute’s increased rates triggered solely by operating across county lines because that geographic distinction lacked a rational basis under the Equal Protection Clause.


Louis K. Liggett Co. v. Lee, 288 U.S. 517 (1933)