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Keywords

tax lawcorporation
corporationrespondent

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Nelson v. Montgomery Ward & Co., 312 U.S. 373, 61 S.Ct. 593, 85 L.Ed. 897

Facts

Montgomery Ward, an Illinois corporation, operated retail stores and mail order houses in Iowa, collecting taxes on in-state sales but refusing to collect taxes on mail orders shipped from out-of-state facilities. The company argued that the Iowa Use Tax, as applied to these mail orders, was unconstitutional. The case involved stipulations regarding the solicitation of mail order sales through advertisements in Iowa, despite the orders being filled from outside the state.

Respondent is an Illinois corporation authorized to do business in Iowa. Respondent operates retail stores and mail order houses throughout the United States. It has 29 retail stores and several order offices in Iowa.

Issue

Is the application of the Iowa Use Tax to mail order sales made by Montgomery Ward from out-of-state facilities unconstitutional?

The issue in this case is identical with that in Nelson v. Sears, Roebuck & Co., 312 U.S. 359, 61 S.Ct. 586, 85 L.Ed. –, No. 255, decided this day.

Rule

The court applied principles regarding the constitutionality of state tax laws as they pertain to interstate commerce and the obligations of businesses operating within a state.

The fact that other of its employees who work in the mail order houses and handle the mail orders here involved are not in Iowa is wholly irrelevant.

Analysis

The court determined that Montgomery Ward's solicitation of mail order sales in Iowa through local advertisements constituted sufficient business activity to warrant the collection of the Iowa Use Tax. The presence of employees in Iowa and the nature of the business conducted were deemed relevant, despite the fulfillment of orders occurring out-of-state.

Some of respondent's employees are in Iowa representing it in the course of business which it is conducting pursuant to its permit to do business in that state.

Conclusion

The court reversed the Iowa Supreme Court's decision, ruling that Montgomery Ward was obligated to collect the Iowa Use Tax on mail orders sent to Iowa customers.

Reversed.

Who won?

The state board of assessment and review prevailed in the case, as the court found that Montgomery Ward's business activities in Iowa justified the imposition of the use tax.

The effect of admitted facts is a question of law.

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