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Keywords

plaintiffstatutediscriminationtax lawcorporation
plaintiffstatutediscriminationtax lawcorporation

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Royster Guano Co. v. Virginia

Facts

Plaintiff in error is a corporation created by and existing under the laws of Virginia, engaged in the business of manufacturing and selling commercial fertilizers. It operates a manufacturing plant in the County of Norfolk in that State and several plants in other States. From the operation of its plant in Virginia it made net profits during the year ending December 31, 1916, amounting in round figures to $260,000; and from the operation of its plants in other States during the same year made net profits amounting to about $270,000. Under the revenue law of the State, plaintiff in error returned for taxation as income the former amount, omitting the latter. The state officials added the latter amount, and assessed an income tax against plaintiff in error upon the aggregate.

Plaintiff in error is a corporation created by and existing under the laws of Virginia, engaged in the business of manufacturing and selling commercial fertilizers. It operates a manufacturing plant in the County of Norfolk in that State and several plants in other States. From the operation of its plant in Virginia it made net profits during the year ending December 31, 1916, amounting in round figures to $260,000; and from the operation of its plants in other States during the same year made net profits amounting to about $270,000. Under the revenue law of the State, plaintiff in error returned for taxation as income the former amount, omitting the latter. The state officials added the latter amount, and assessed an income tax against plaintiff in error upon the aggregate.

Issue

Whether the imposition of an income tax on the part of the corporation's business transacted outside of Virginia, while exempting other corporations doing no business within the State, violates the equal protection clause of the Fourteenth Amendment.

Whether the imposition of an income tax on the part of the corporation's business transacted outside of Virginia, while exempting other corporations doing no business within the State, violates the equal protection clause of the Fourteenth Amendment.

Rule

The equal protection of the laws required by the Fourteenth Amendment does not prevent the States from resorting to classification for the purposes of legislation, but the classification must be reasonable, not arbitrary, and must rest upon some ground of difference having a fair and substantial relation to the object of the legislation.

The equal protection of the laws required by the Fourteenth Amendment does not prevent the States from resorting to classification for the purposes of legislation, but the classification must be reasonable, not arbitrary, and must rest upon some ground of difference having a fair and substantial relation to the object of the legislation.

Analysis

The Court analyzed the two statutes in question and determined that the classification created by the Virginia tax law was arbitrary. It found that the law imposed a tax on the income derived from business done outside of Virginia for the plaintiff in error, while exempting other corporations that did no business within the State. The Court concluded that this discrimination had no fair or substantial relation to the object sought to be accomplished by the legislation, thus violating the equal protection clause.

The Court analyzed the two statutes in question and determined that the classification created by the Virginia tax law was arbitrary. It found that the law imposed a tax on the income derived from business done outside of Virginia for the plaintiff in error, while exempting other corporations that did no business within the State. The Court concluded that this discrimination had no fair or substantial relation to the object sought to be accomplished by the legislation, thus violating the equal protection clause.

Conclusion

The Court reversed the judgment and remanded the cause for further proceedings not inconsistent with this opinion.

The Court reversed the judgment and remanded the cause for further proceedings not inconsistent with this opinion.

Who won?

The plaintiff in error, F. S. Royster Guano Co., prevailed because the Court found that the tax imposed on its income derived from business outside Virginia was discriminatory and violated the equal protection clause of the Fourteenth Amendment.

The plaintiff in error, F. S. Royster Guano Co., prevailed because the Court found that the tax imposed on its income derived from business outside Virginia was discriminatory and violated the equal protection clause of the Fourteenth Amendment.

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