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Allied Stores of Ohio, Inc. v. Bowers, 358 U.S. 522, 79 S.Ct. 437, 3 L.Ed.2d 480, 82 Ohio Law Abs. 312, 9 O.O.2d 321

Facts

Allied Stores of Ohio, Inc., an Ohio corporation, operates department stores in four Ohio cities and maintains private warehouses for storing merchandise sold in those stores. The Tax Commissioner proposed an ad valorem tax on the merchandise stored in these warehouses, which Allied contested, arguing that the tax unfairly discriminated against Ohio residents by exempting nonresidents' merchandise held for storage. The Board of Tax Appeals upheld the tax, leading to appeals through the state courts and ultimately to the U.S. Supreme Court.

The facts are stipulated. So far as pertinent, they are that appellant, Allied Stores of Ohio, Inc., an Ohio corporation, owns and operates a department store in each of four Ohio cities. It also maintains in each of those cities a private warehouse where it stores stocks of merchandise of the kinds sold in its stores.

Issue

Does the Ohio statute that exempts from taxation merchandise belonging to nonresidents held in storage warehouses violate the Equal Protection Clause of the Fourteenth Amendment by discriminating against Ohio residents?

The principal question presented is whether an Ohio statute that exempts from ad valorem taxation ‘merchandise or agricultural products belonging to a nonresident * * * if held in a storage warehouse for storage only’ denies to appellant, a resident of the State, the equal protection of the laws guaranteed by the Fourteenth Amendment of the Constitution.

Rule

The Equal Protection Clause allows states to impose different taxes on different classes of property, provided that the classification is not arbitrary and has a reasonable relation to a legitimate state interest.

Title 57, Page's Ohio Rev.Code Ann.1953, s 5709.01, provides, inter alia, that ‘All personal property located and used in business in this state (shall be) subject to taxation, regardless of the residence of the owners thereof. * * *’

Analysis

The court analyzed the Ohio statute and determined that the classification between residents and nonresidents was not arbitrary. It reasoned that the statute aimed to encourage nonresidents to store their goods in Ohio, which could benefit the state's economy. The court concluded that the distinction made by the statute was based on a rational basis and did not violate the Equal Protection Clause.

But there is a point beyond which the State cannot go without violating the Equal Protection Clause. The State must proceed upon a rational basis and may not resort to a classification that is palpably arbitrary.

Conclusion

The Supreme Court affirmed the judgment of the Ohio courts, holding that the tax law did not violate the Equal Protection Clause by treating nonresidents differently from residents regarding the taxation of stored merchandise.

Affirmed.

Who won?

The Tax Commissioner prevailed in the case, as the court upheld the tax assessment against Allied Stores, finding the statute's classification to be reasonable and not in violation of constitutional protections.

The Board of Tax Appeals upheld the tax, and so did the Court of Appeals of Cuyahoga County.

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