Decided March 24, 1937.
Intoxicating liquors — Liquor Control Act — Liquor traffic limited to licensees — State may prohibit or discourage importation by impost — State license fee for importation, constitutional — Statute or regulation imposing greater burdens on non-Ohio liquors, constitutional — Reciprocal additional taxes, fees and charges, constitutional — Legislative power not delegated to State Tax Commission — Section 6064-67, General Code — Statute in pari materia with Liquor Control Act — Constitutional law — Prohibition repeal, interstate commerce, equal protection and taxation — Article I, Section 8, and Articles XIV and XXI, Amendments to U.S. Constitution — Article I, Section 2, Article II, Section 1, and Article XII, Section 5, Ohio Constitution.
1. The Ohio Liquor Control Act is a measure designed to regulate and control the traffic in beer and other intoxicating beverages and, to effectuate that purpose, it excludes from engaging in such traffic all persons except those to whom licenses are issued by the Department of Liquor Control pursuant to and under the authority conferred by the law.
2. The state may either entirely prohibit importations of intoxicating liquors, or it may discourage or limit such importation by laying a heavy impost.
3. By reason of the provisions of the Twenty-first Amendment of the Constitution of the United States prohibiting the importation of intoxicating liquors into a state in violation of its laws, the exaction of a license fee by a state for the privilege of importing beer cannot be held violative of the commerce clause of the Constitution of the United States.
4. Statutory provisions and regulations authorized thereby which prohibit or limit the importation of intoxicating liquors, or levy a license fee or tax thereon in excess of that imposed upon liquors manufactured in Ohio, are not violative of the equal protection clause of the federal Constitution, or of Section 2 of Article I of the state Constitution. A classification recognized by the Twenty-first Amendment cannot be deemed forbidden by the Fourteenth Amendment.
5. Section 6064-67, General Code, authorizing the levy and collection of additional taxes, fees and charges on the products of manufacturers of wines or manufacturers or brewers of beer and other malt liquors manufactured in another state and shipped into this state, in the same proportion or in the same amount as taxes, fees and charges levied and collected in such other state upon or against the products of Ohio manufacturers of wines or manufacturers or brewers are in excess of those levied and collected on the products of manufacturers and brewers of such other state, constitutes a valid exercise of the police power of the state of Ohio under the Twenty-first Amendment of the Constitution of the United States.
6. The provisions of Section 6064-67, General Code, and regulations of the Tax Commission of Ohio adopted pursuant to authority therein conferred, do not constitute a delegation of legislative power and are not violative of Section 1 of Article II, or Section 5 of Article XII, of the state Constitution.
7. Section 6064-67, General Code, is in pari materia with other provisions of the Ohio Liquor Control Act and, when so construed, is not violative of Section 5 of Article XII of the state Constitution, requiring laws imposing a tax to state the object of the same.
This is an original action in this court, the issue in which is presented by a demurrer to the petition.
The facts essential to a consideration of the legal questions involved are as follows:
The relator is a domestic corporation having its principal place of business in Toledo, and is engaged in the business of importing, selling and distributing in this state beer and other intoxicating malt beverages at wholesale, under and by virtue of a B-1 permit issued by the Department of Liquor Control pursuant to Section 6064-15, General Code. The relator imports into the state beer manufactured by a brewing company in Michigan and, from October 1, 1935, to and including May 31, 1936, relator purchased from that brewing company and sold and distributed within this state beer in large quantities at a total cost of $596,014.27.
The Legislature of the state of Michigan, in 1933, enacted a Liquor Control Law which provided in part as follows:
"Section 40. Beer; inspection and taxation. There shall be levied and collected by the commission on all beer an inspection fee at the rate of twenty-five cents per barrel: Provided, however, that any manufacturer of this state who shall have during the current year paid for a manufacturer's license issued under this act or under act number sixty-four of the public acts of nineteen hundred thirty-three shall be exempt from payment of the inspection fee: Provided further, that any manufacturer duly licensed as aforesaid and who has paid said license fee shall be exempt from payment of any tax imposed under the provisions of act number one hundred of the public acts of nineteen thirty-one or amendments thereto, commonly known as the Malt Tax Act, for all malt products taxed by said act used in its manufacturing process.
"There shall be levied and collected by the commission on all beer manufactured and/or sold in this state a tax at the rate of one dollar and twenty-five cents per barrel if sold in bulk, and in like ratio if sold in smaller quantities: Provided, however, that the tax imposed by this act upon beer manufactured in this state shall be rebated to such manufacturer upon satisfactory proof being furnished to the commission by affidavit or otherwise, as the commission may determine, that such beer was shipped out of the state for sale and consumption outside the state of Michigan.
"For the purposes of taxation a barrel shall be construed to contain thirty-one gallons." (Act 8, 1933, Ex. Sess. Imd. Eff. Dec. 15, Legislature of the state of Michigan.)
The respondents, constituting the Tax Commission of Ohio, by reason of the enactment of the Michigan statute, and acting pursuant to authority vested in it by the provisions of Section 6064-67, General Code, on January 17, 1936, adopted and promulgated the following regulation:
"The following taxes or charges are hereby levied upon beer (of alcoholic content not exceeding 3.2 per centum by weight), and malt beverages (of alcoholic content of more than 3.2 per centum and not more than seven per centum by weight), imported from the state of Michigan into the state of Ohio, in addition to the regular Ohio tax upon such beer or such other malt beverages manufactured in Ohio, to wit: Upon barrels of such beer or malt beverages, 25 cents per barrel; upon half barrels of such beer or malt beverages, 12 1/2 cents; upon one-fourth barrels of such beer or malt beverages, 6 1/4 cents; upon one-eighth barrels of such beer or malt beverages, 3 1/8 cents; upon such beer or malt beverages in sealed 12-ounce bottles, 4 cents per case of 24 bottles; upon such beer or malt beverages in sealed 24-ounce bottles, 4 cents per case of 12 bottles.
"The taxes specified shall be paid by the first consignee (wholesale distributor) within Ohio through the medium of monthly tax returns, substantially in the manner provided for tax returns and payments for barrel beer. (Section 6212-50, General Code.) Each such tax return shall specify that the payment of the regular Ohio tax has been made by tax return or affixation of stamps in accordance with the respective rates and methods in effect for all beer and malt beverages sold for consumption within Ohio.
"This regulation shall be effective on and after the seventeenth day of January, 1936, until such time as the Tax Commission shall change the rates of the taxes or charges imposed thereby to conform to any subsequent changes in inspection fees or charges imposed by the laws of Michigan upon such beer or other malt beverages imported into the state of Michigan from the state of Ohio, as aforesaid.
"The said order of the Tax Commission adopting said regulation on September 18, 1935, is hereby amended so as to approve and adopt said regulation as set out above as an amendment of and substitute for said regulation adopted on September 18, 1935."
Pursuant to Section 6064-67, General Code, and the above regulation, there has been levied, assessed and charged upon all beer and other intoxicating malt beverages manufactured in the state of Michigan and imported into this state and here sold, a tax at the rate of twenty-five cents per barrel in addition to all other taxes imposed upon beer and other intoxicating malt beverages. This tax of twenty-five cents per barrel is not levied or assessed or required to be paid upon beer or other intoxicating malt beverages manufactured in the state of Ohio.
Challenging the statute and regulation issued in pursuance thereof as violative of the state and federal Constitutions in several respects enumerated, the relator prays for a writ of mandamus requiring the respondents to repeal, rescind and cancel that regulation.
Mr. H.S. Ballard and Mr. Howard Dresbach, for relator.
Mr. John W. Bricker and Mr. Herbert S. Duffy, attorneys general, Mr. Isadore Topper, Mr. John D. Marshall, Mr. Hugh M. Bennett and Mr. Morton B. Icove, for respondents.
The paramount issue presented by the demurrer to the petition is the constitutional validity of Section 6064-67, General Code, and particularly whether that statute is violative of Section 8 of Article I of the federal Constitution, in that it constitutes an unreasonable and unfair burden on interstate commerce, and is violative of Section 1 of the Fourteenth Amendment of the federal Constitution, in that it denies the equal protection of the law and deprives the relator of property without due process of law. It is the contention of the state that the provisions of Section 2 of the Twenty-first Amendment of the federal Constitution supersede and render ineffective the provisions of Section 8 of Article I of that Constitution in so far as the latter may have any application to the shipment of intoxicating liquors in interstate commerce. It is the position of the state upon the issue presented that, by reason of the adoption of the Twenty-first Amendment to the federal Constitution, the several states now have complete power and full authority to prohibit shipment of intoxicating beverages into each such state and hence may provide and enforce any regulation of such traffic without limitation or restraint. It is manifest that the decision of that question will be the determination of the principal issue in this controversy.
Many cases have been cited involving the application of the provisions of the Webb-Kenyon Act restricting shipment of intoxicating liquors in interstate commerce, which would be quite pertinent in the absence of the recent constitutional amendment; but, in the view we take of the force and effect of that amendment, it is wholly unnecessary to consider the provisions of the Webb-Kenyon Law or to discuss the numerous decisions applying and enforcing that act, announced prior to the adoption of the Twenty-first Amendment. Section 2 of that Amendment is as follows: "The transportation or importation into any State, Territory, or possession of the United States for delivery or use therein of intoxicating liquors, in violation of the laws thereof, is hereby prohibited."
Let us examine the provisions of the Ohio Liquor Control Act in so far as they affect the consideration of this case, and ascertain its purpose and scope and also the duties assigned to and the powers conferred upon the Department of Liquor Control and the Tax Commission of the state. It is a measure designed to regulate the traffic in beer and other intoxicating beverages; and to effectuate that purpose it excludes from engaging in that traffic all persons except those to whom licenses are issued by the Department of Liquor Control pursuant to and under the authority conferred by the law. Specific regulatory provisions and restrictions are made applicable to the importation and transportation of beer, wine and spirituous liquor. Under this act, beer manufactured outside of the state cannot be imported into this state by anyone who is not the holder of a proper permit issued by the Department of Liquor Control of this state. Pursuant to the plan adopted, no tax is imposed upon the manufacturer of beer imported into Ohio; but the tax is imposed upon the original consignee of that beer in Ohio. Hence that original consignee must be a distributor licensed by the Ohio Department of Liquor Control with a place of business in this state. There is no attempt to tax the brewer or manufacturer of such beer; but the tax is imposed upon the distributor importing into Ohio beer which is manufactured elsewhere. It is that action that is challenged as being violative of constitutional rights in the respect heretofore stated.
Every argument advanced by the relator upon this branch of the case has been answered adversely by the unanimous decision of the Supreme Court of the United States in the case of State Board of Equalization of California et al. v. Young's Market Co. et al., which was announced November 9, 1936, and is found in 299 U.S. 59, 81 L.Ed., 37. In that suit, the validity of the statute of the state of California and regulations thereunder imposing a license fee of $500 for the privilege of importing beer were challenged as violative of rights guaranteed by the federal and state Constitutions. The plaintiffs were engaged in selling at wholesale beer imported from other states. Each refused to apply for an importer's license, claiming that the requirement discriminated against the wholesalers of imported beer and that the statute, therefore, violated both the commerce clause and the equal protection clause of the federal Constitution. The opinion of Mr. Justice Brandeis discloses that in that case the principal contention of the plaintiffs was that the exaction of an importer's license fee was violative of the commerce clause. There, as in the case at bar, the language of Mr. Justice Brandeis is so applicable and so decisive of the principal contention made in the instant case, and is so concise in statement, that it is deemed advisable to quote in full that portion of the opinion.
"The plaintiffs argue that, despite the Amendment, a state may not regulate importations except for the purpose of protecting the public health, safety or morals; and that the importer's license fee was not imposed to that end. Surely the state may adopt a lesser degree of regulation than total prohibition. Can it be doubted that a state might establish a state monopoly of the manufacture and sale of beer, and either prohibit all competing importations, or discourage importation by laying a heavy impost, or channelize desired importations by confining them to a single consignee? Compare Slaughter House Cases, 16 Wall., 36, 21 L.Ed., 394; Vance v. W. A. Vandercook Co., 170 U.S. 438, 447, 42 L.Ed., 1100, 1104, 18 S. Ct., 674. There is no basis for holding that it may prohibit, or so limit, importation only if it establishes monopoly of the liquor trade. It might permit the manufacture and sale of beer, while prohibiting absolutely hard liquors. If it may permit the domestic manufacture of beer and exclude all made without the state, may it not, instead of absolute exclusion, subject the foreign article to a heavy importation fee? Moreover, in the light of history, we cannot say that the exaction of a high license fee for importation may not, like the imposition of the high license fees exacted for the privilege of selling at retail, servee as an aid in policing the liquor traffic. Compare Phillips v. Mobile, 208 U.S. 472, 479, 52 L.Ed., 578, 581.
"The plaintiffs argue that limitation of the broad language of the Twenty-first Amendment is sanctioned by its history; and by the decisions of this court on the Wilson Act, the Webb-Kenyon Act and the Reed Amendment. As we think the language of the amendment is clear, we do not discuss these matters. The plaintiffs insist that to sustain the exaction of the importer's license fee would involve a declaration that the amendment has, in respect to liquor, freed the states from all restrictions upon the police power to be found in other provisions of the Constitution. The question for decision requires no such generalization."
The contention in that case, that the statute and regulations adopted pursuant thereto were violative of the equal protection clause of the Constitution, was conclusively disposed of by the very terse statement that "a classification recognized by the Twenty-first Amendment cannot be deemed forbidden by the Fourteenth."t is further observed that "the classification in taxation made by California rests on conditions requiring difference in treatment. * * * The brewer of the domestic article may be required to pay a license fee for the privilege of manufacturing it. * * * The brewer of the foreign article cannot be so taxed; only the importer can be reached."
The validity of Section 40 of the Michigan Liquor Control Act has recently been sustained in the United States District Court for the Western Division of Michigan, in which three judges participated. ( Zukaites v. Fitzgerald, Governor, unreported.)
It was because of that provision of the Michigan statute that the resolution of the Ohio Tax Commission was issued pursuant to the authority of Section 6064-67, General Code. In the course of the opinion in the Zukaites case, it is said: "It is apparent that the statute and regulations complained of impose discriminatory burdens upon out-state liquor, but we are not convinced that such discriminations are so wholly unrelated to the powers now returned to the states by the Twenty-first Amendment to regulate or forbid the importation of liquors into Michigan that we can say with that clearness which is imperative that such rules and regulations are unconstitutional."
In reaching its conclusion, that court followed and applied the decision of the Supreme Court of the United States in the Young's Market Co. case, supra, and held that neither the commerce clause nor the equal protection clause of the federal Constitution was violated by the Michigan statute or regulations.
It is urged that Section 6064-67, General Code, and the regulations of the Tax Commission adopted pursuant thereto constitute an invalid delegation of legislative power to the Tax Commission, in violation of Section 1 of Article II and Section 5 of Article XII of the state Constitution. Let us examine that section of the statute to ascertain the nature and extent of authority conferred upon the Tax Commission and then determine whether that authority may be properly denominated legislative power.
That section of the statute, by reason of its terms and effect, has been referred to as a retaliatory act. There is nothing new or novel about such a statutory provision. Though the constitutionality thereof was not in issue, this court recognized as valid a statute retaliatory in character and of similar import and effect, by enforcing it. State, ex rel. New England Mutual Life Ins. Co., v. Reinmund, 45 Ohio St. 214, 13 N.E. 30. Under certain conditions stated in Section 6064-67, the Legislature not merely authorizes but directs the levy and collection of certain taxes, fees and charges. Nothing is left to the commission to do with reference to the imposition of such additional taxes, fees and charges except to ascertain the facts. If it be found that certain conditions exist, then the additional taxes, fees and charges are to be imposed and collected. In this provision, there is nothing left to the discretion of the commission. The condition, the existence of which results in the imposition of such extra taxes, fees and charges, is the levy and collection of taxes, fees and charges levied and enforced by another state against products of Ohio manufacturers of wine or brewers of beer and other malt liquors, when such products are sold in or delivered or shipped into that state which are in excess of the taxes, fees and charges levied and collected on the products of manufacturers or brewers in that state. If and when it is ascertained that such extra taxes, fees and charges are levied in such other state against the enumerated Ohio products sold in that state, it becomes the mandatory duty of the Tax Commission in this state to likewise collect such additional taxes, fees and charges "in the same proportion or in the same amount as taxes, fees and charges, levied and collected in said state upon or against the products of Ohio manufacturers of wine or manufacturers or brewers are in excess of those levied and collected on the products of manufacturers and brewers of said state." Conferring such authority and giving such direction to the Tax Commission does not constitute an abandonment by the law-making power of its legislative function, or a delegation thereof to the commission.
Language used by the Supreme Court of Illinois in the case of Home Ins. Co. v. Swigert, Aud., 104 Ill. 653, in the consideration of a statute of similar import, is quite pertinent. The court there said:
"Where the contingency upon which the ultimate operation of a law is made to depend, consists of a vote of the people, or the action of some foreign deliberative or legislative body, as is the case here, it is erroneous to suppose the Legislature in such case abandons its own legislative functions, or delegates its powers to the people in the one case, or to such foreign deliberative or legislative body in the other."
In the extent of the authority conferred upon the commission, this statute is quite limited in comparison with statutory provisions which have been considered by this court in various cases and there held as valid when challenged upon the ground that they constituted a delegation of legislative power. A discussion or even an enumeration of the cases involving the question of the delegation of legislative power would serve no useful purpose. Undoubtedly there are inconsistencies difficult of reconciliation in the decisions involving this question. Some of the cases lose sight of the test which, when applied, is determinative of the question. This test was pointed out by Judge Ranney in Cincinnati, W. Z. Rd. Co. v. Commrs. of Clinton County, 1 Ohio St. 77, 88, when he said: "The true distinction, therefore, is between the delegation of power to make the law, which necessarily involves a discretion as to what it shall be, and conferring an authority or discretion as to its execution, to be exercised under and in pursuance of the law. The first cannot be done; to the latter no valid objection can be made."
Upon the matter of delegation of legislative power, a test applied by the Supreme Court of the United States is stated in Mutual Film Corp. v. Industrial Commission of Ohio, 236 U.S. 230, 59 L.Ed., 552, 35 S.Ct., 387, as follows: "Undoubtedly the Legislature must declare the policy of the law and fix the legal principles which are to control in given cases; but an administrative body may be invested with the power to ascertain the facts and conditions to which the policy and principles apply. If this could not be done there would be infinite confusion in the laws, and in an effort to detail and to particularize, they would miss sufficiency both in provision and execution."
As we have previously observed, in the instant case not only was the legislative policy declared and the legal principle applicable fixed by the statute, but specific action of the commission was authorized and directed upon the existence of certain ascertainable facts and conditions, which were clearly and definitely set forth. When those facts and conditions arise and are found to exist, the exactions of the law become effective. There is here no delegation of legislative power, but only the authority to execute it and the express direction to do so in the manner prescribed by the statute itself.
In the case of State v. Arluno, — Iowa, —, 268 N.W. 179, the Supreme Court of Iowa had before it the question of the constitutional validity of the Liquor Control Act of that state. That statute, just as the Ohio law, was enacted in the exercise of the state's police power. It made it unlawful "to manufacture for sale, sell, offer or keep for sale, possess, and/or transport vinous, fermented, spirituous or alcoholic liquor * * * for any purpose whatsoever, except upon the terms, conditions, limitations and restrictions set forth herein."
It was contended in that case that the reservation of the power to import liquor into the state by the Iowa Liquor Control Commission, and a refusal to permit liquor to be imported by a person lawfully owning and possessing the same in a sister state was a violation of the interstate commerce clause of the federal Constitution. It was there held that the law forbidding any importation of intoxicating liquor otherwise than upon the terms, conditions, limitations and restrictions imposed thereby in nowise violated the federal Constitution.
It is contended further that Section 6064-67, General Code, and the regulations adopted pursuant thereto are violative of Section 5 of Article XII of the Constitution of the state of Ohio because of failure to state the object of the tax imposed, to which only it is to be applied. In the determination of that question, the provisions of Section 6064-67, General Code, must be considered with the other sections of the Liquor Control Act, for all are in pari materia. The language of Minshall, J., in the opinion in the case of Ashley v. Bryan, 49 Ohio St. 504, 31 N.E. 721, is quite pertinent. In discussion of a claim that a particular statute was violative of Section 5 of Article XII of the Constitution, he said: "It is not necessary that the object should be stated in the very statute imposing the tax; it is sufficient, we apprehend, if the object distinctly appear from the statute read in connection with some other provision found elsewhere in the statutes of the state."
That all taxes provided for and authorized by the Liquor Control Act are for the general revenue funds of the state is not only set forth in the title as one of the purposes of the act, but it is specifically stated in Section 6064-44, General Code (a portion of the Liquor Control Act), as follows: "Moneys received into the state treasury from the taxes levied, penalties assessed and sums recovered under the provisions of this act shall be credited to the general revenue fund therein."
It is our conclusion, therefore, that the provisions of the statute and the regulation adopted pursuant thereto by the state Tax Commission, which has been challenged by the relator, are not violative of any provision of the state or federal Constitution; but, on the contrary, in the respects presented and considered in this case, are valid and enforceable. It follows that the demurrer to the petition is sustained and a writ is, denied.
WEYGANDT, C.J., JONES, DAY, ZIMMERMAN, WILLIAMS and MYERS, JJ., concur.