217 U.S.

563
30 S.Ct. 578
54 L.Ed. 883

BROWN-FORMAN COMPANY, Plff. in Err.,

v.
COMMONWEALTH OF KENTUCKY.
No. 6.
Argued April 11, 12, 1910.
Decided May 16, 1910.

Messrs. Levi Cooke, W. M. Hough, A. B. Hayes, and Hough, Hough, &

Walker for plaintiff in error.
[Argument of Counsel from pages 564-567 intentionally omitted]
Messrs. James S. Morris, James Breathitt, and Charles H. Morris for
defendant in error.
[Argument of Counsel from pages 567-568 intentionally omitted]
Mr. Justice Lurton delivered the opinion of the court:

The commonwealth of Kentucky instituted this proceeding to collect an

occupation tax imposed by an act of the general assembly of that state of March
28, 1906, whereby every corporation or person engaged in the state 'in the
business or occupation of compounding, rectifying, adulterating, or blending
distilled spirits' is required to pay 'a license tax of 1 1/4 cent upon every wine
gallon of such compounded, rectified, blended, or adulterated distilled spirits.'
The defenses presented were, first, that the plaintiff in error had paid the tax
due for the rectification of 'single-stamp spirits,' and that the act does not cover
'double-stamp spirits,' used as a basis for its operations; second, that the act was
requgnant to the Constitution of the state; and, third, that the act is repugnant to
the Constitution of the United States, in that it is a regulation of interstate
commerce, and operates as a denial of the equal protection of the law. The
questions concerning the validity of the act under the state Constitution, and as
to the liability of the plaintiff in error under the act as construed and enforced

by the highest court of Kentucky, may be laid on one side, for the only
contentions which concern us under this writ of error to the state court are those
which arise under the Constitution of the United States.
2

The two sections of the act which need be examined are the first and seventh,
which are set out in the margin.

Sec. 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 1 1/4 cent
upon every wine gallon of such compounded, rectified, blended, or adulterated
distilled spirits.

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, product or spirits, shall be deemed compounders, rectifiers, blenders, or
adulterators under the provisions of this act, and shall pay the license tax
imposed herein on compounders, rectifiers, blenders, or adulterators of such
spirts 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, and fined in any sum not less than $500 nor more than $1,000.
Each shipment shall be deemed a separate offense. The Franklin circuit court
shall have jurisdiction of all offenses committed under this act. The other
sections provide for reports, and impose penalties for delinquencies in reporting
or paying.

It is said that the 7th section of the act imposes a license tax upon the business
of shipping into the state of goods like those made by the plaintiff in error,
when deceptively marked or labeled 'as Kentucky whisky,' or intended to be so
deceptively branded or labeled when received in the state; and that such a
burden is illegal as a regulation of interstate commerce. But as plaintiff in error
concedes that it is not engaged in bringing into the state spirits deceptively
marked as a Kentucky product, nor intended to be so branded, and has not been
proceeded against under that section, it is clear, the section being a separable
provision, that we need not deal with either of these objections, save only as the
presence of that section in the act may have a bearing upon the question of

discrimination between the domestic and foreign product, which is the real
question in the case.
6

The question upon which the case must turn comes to this: Has the state denied
to the plaintiff in error the equal protection of the law, guaranteed by the 14th
Amendment, by the imposition of the tax provided under the 1st section of the
act? It is urged that that section falls under the condemnation of the provision
of the Federal Constitution, because, to quote from the brief of counsel, it
'creates an unjust discrimination against Kentucky rectifiers and blenders
included within the provisions of the act, in favor of the three other classes
engaged in the same business, to wit: (1) Kentucky distillers who vend
unrectified and unblended spirits; (2) distillers of other states or countries who
vend in Kentucky unrectified and unblended spirits; and (3) rectifiers and
blenders of other states or countries who vend in Kentucky untaxed rectified or
blended spirits, in direct competition with the spirits of Kentucky rectifiers or
blenders, subject to the tax.'

It has been urged that the tax is not imposed as a license upon the doing of
business, but is laid upon the goods produced, and is therefore arbitrary and
discriminatory as one not imposed upon all other like kinds of liquor, whether
produced in or out of the state. This contention, if good, would only carry the
case back to the underlying objection that the classification is arbitrary and
unreasonable, and therefore void, as denying the equal protection of the law,
a question which at last must be answered, whether the tax be an occupation or
a property tax. But the Kentucky court of appeals has construed the act as not a
property tax, but as one imposing a license or occupation tax upon the business.
Speaking by Judge Hobson, the Kentucky court of appeals said: 'A license tax
is imposed. The amount of the license tax is determined by the 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 3, which requires that notice shall be given to
the auditor, stating certain facts, before the business shall be engaged in; by 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 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 manifestly 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.' [125 Ky. 414, 101 S. W. 323.] Such
a construction and interpretation of the statute here involved, by the highest
court of the state, should be accepted as definitely determining that the tax
complained of is not a property tax, but a license tax imposed upon the doing of
a particular business plainly subject to the regulating power of the state.
8

We come, then, to the question as to whether this act makes an arbitrary and
illegal discrimination in favor of other persons or corporations engaged in the
same business. The question is at last one of classification of subjects, trades, or
pursuits, for the purpose of taxation, and concerns the power of the states to
exercise discretion in the methods, subjects, and rates of taxation. Fundamental
to the very existence of the governmental power of the states as is this function
of taxation, it is nevertheless subject to the beneficent restriction that it shall not
be so exercised as to deny to any the equal protection of the law. But this
restriction does not compel the adoption of 'an iron rule of equal taxation,' nor
prevent variety in methods of taxation, or discretion in the selection of subjects,
or classification for purposes of taxation of either properties, businesses, trades,
callings, or occupations. This much has been over and over announced by this
court. Bell's Gap R. Co. v. Pennsylvania, 134 U. S. 232, 33 L. ed. 892, 10 Sup.
Ct. Rep. 533; W. W. Cargill Co. v. Minnesota, 180 U. S. 452, 45 L. ed. 619, 21
Sup. Ct. Rep. 423; American Sugar Ref. Co. v. Louisiana, 179 U. S. 89, 45 L.
ed. 102, 21 Sup. Ct. Rep. 43; Cook v. Marshall County, 196 U. S. 268, 49 L.
ed. 473, 25 Sup. Ct. Rep. 233; Williams v. Arkansas, 217 U. S. 79, 54 L. ed.
, 30 Sup. Ct. Rep. 493; Southwestern Oil Co. v. Texas, 217 U. S. 114, 54
L. ed. , 30 Sup. Ct. Rep. 496.

The answer of the plaintiff in error concedes that it is 'doing business in this
state, and engaged in the business or occupation of compounding, rectifying,
adulterating, or blending distilled spirits, known and designated as single-stamp
spirits.' Plaintiff in error now says that it has been arbitrarily singled out and its
business or occupation taxed, thereby discriminating in favor of 'three other
classes engaged in the same business.' The first class which is named as favored
are distillers who neither rectify, compound, adulterate, nor blend their
products. Manifestly there is nothing capricious in putting the occupation
carried on by the plaintiff in error in a class distinct from that of the whisky
distillers whose straight product is the basis for the manipulated product of
those engaged in the taxed business. A very wide discretion must be conceded
to the legislative power of the state in the classification of trades, callings,
businesses, or occupations which may be subjected to special forms of
regulation or taxation through an excise or license tax. If the selection or

classification is neither capricious nor arbitrary, and rests upon some reasonable
consideration of difference or policy, there is no denial of the equal protection
of the law. The reasons for discriminating between distillers and rectifiers is not
obscure, and a classification which includes one and omits the other is by no
means arbitrary or unreasonable. In American Sugar Ref. Co. v. Louisiana,
cited above, a license tax imposed upon the business of refining sugar and
molasses was sustained, although planters grinding and refining their own
sugar were excluded. In W. W. Cargill Co. v. Minnesota, 180 U. S. 452, 469,
45 L. ed. 619, 627, 21 Sup. Ct. Rep. 423, 429, a state statute requiring elevator
companies operating elevators situated upon railway rights of way to take out a
license, without requiring those not so situated to do so, was held not to be an
illegal discrimination. This court there said, in reference to the insistence that
the discrimination was a denial of the equal protection of the law, that 'no such
judgment could be properly rendered unless the classification was merely
arbitrary, or was devoid of those elements that are inherent in the distinction
implied in classification. We cannot perceive that the requirement of a license is
not based upon some reasonable ground,some difference that bears a proper
relation to the classification made by the statute.' In Williams v. Arkansas, cited
above, a classification in a state statute which prohibited drumming on trains
for business for any hotel, lodging house, bath house, physicians, etc., was
sustained as not a capricious classification, although it did not apply to
drumming for other business not mentioned, but distinguishable by reason of
local conditions. In Southwestern Oil Co. v. Texas, supra, it was held that an
occupation tax on all wholesale dealers in certain articles did not deny to the
class taxed the equal protection of the law because a similar occupation tax was
not imposed on wholesale dealers in other articles.
10

It is next said that 'distillers of other states and countries who vend in Kentucky
unrectified and unblended spirits' are untouched by the law. This is answered
by what we have said as to such distillers manufacturing within the state, as
well as by the obviousness of the fact that the state of Kentucky had no more
right to impose an occupation tax upon a business conducted outside of the state
than it had to lay a property tax upon property outside of the state.

11

Finally, it is said that 'rectifiers and blenders of other states or countries who
vend in Kentucky untaxed rectified or blended spirits, in direct competition with
the spirits of Kentucky rectifiers or blenders, are not subject to the tax.'

12

The contention comes to this: A state may not impose a tax upon the privilege
of carrying on a particular business or occupation in the state, unless it can
impose a similar tax upon the same business or occupation carried on outside of
the state, if the latter may, through interstate commerce, compete by shipments

into the state with the product of the taxed resident. A system of taxation
discriminating in favor of residents and domestic products, and against
nonresidents and foreign products, might result in commercial nonintercourse
between the states, and as a regulation of interstate commerce would clearly be
invalid. The objection, however, would not apply to a uniform tax upon goods
which does not discriminate in favor of residents or products of the state.
Woodruff v. Parham, 8 Wall. 123, 19 L. ed. 382; Hinson v. Lott, 8 Wall. 148,
19 L. ed. 387; Emert v. Missouri, 156 U.S. 296, 39 L. ed. 430, 5 Inters. Com.
Rep. 68, 15 Sup. Ct. Rep. 367.
13

There is no pretense here that there has been any discrimination in favor of
either the residents or the products of Kentucky, but the reverse, in that the
resident rectifier is discriminated against because the product of the untaxed
nonresident rectifier meets those of the taxed rectifier in competition for the
trade of Kentucky. But counsel say that discrimination against residents or
products of the state is as much a denial of the equal protection of the law as
any other method of unequal taxation, and cite State v. Hoyt, 71 Vt. 59, 64, 42
Atl. 973. That was a case involving the validity of a license tax by the state of
Vermont upon peddlers of goods, 'the manufacture of this state.' The Vermont
court held that when a business consists in selling goods, the exaction of a
license for its pursuit was in effect a tax upon the goods themselves; and that as
this tax discriminated arbitrarily against the products of the state, it was void, as
denying the equal protection of the law. But the ground of the decision was that
the discrimination against the goods of the state, and in favor of the products of
other states, both classes of goods being within and subject to the taxing power
of the state, was an illegal discrimination, as arbitrary and capricious. The court
said:

14

'The question, therefore, is one of classification. If, in the case supposed, the
resident and the nonresident manufacturer or their goods can be differently
classed, the statute can be sustained; otherwise not. The rule on this subject is,
that the mere fact of classification is not enough to exempt a statute from the
operation of the equality clause of said Amendment, but that in all cases it must
appear, not only that a classification has been made, but that it is one based on
some reasonable ground, some difference that bears a just and proper relation to
the attempted classification, and is not a mere arbitrary selection. Gulf, C. & S.
F. R. Co. v. Ellis, 165 U. S. 150, 41 L. ed. 666, 17 Sup. Ct. Rep. 255.'

15

The case has no bearing upon the present case. In that case, the license might
have been exacted from one peddling in Vermont, whether he peddled domestic
or foreign goods. Here the exaction is not upon the product at all, but upon the
business of producing the product in the state. The same business carried on

beyond the state could not have been subjected to a like tax. There has therefore
been no arbitrary or capricious discrimination against the resident rectifier.
16

There is no error in the judgment, and it is affirmed.