MR. JUSTICE WHITTAKER delivered the opinion of the Court.
The principal question presented is whether an Ohio statute that exempts from ad valorem taxation "merchandise or agricultural products belonging to a nonresident
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. As needed, merchandise is transferred from the warehouse to the store, and when merchandise is sold by sample in the store—usually a heavy or bulky article—it is delivered from the warehouse directly to the customer.
Title 57, Page's Ohio Rev. Code Ann., 1953, § 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. . . ." (Emphasis added.) During the tax year involved another Ohio statute, Title 57, Page's Ohio Rev. Code Ann., 1953, § 5701.08 (A), provided, in pertinent part, that:
The first and preliminary question thus is whether the Supreme Court of Ohio correctly held that appellant lacked standing to prosecute the constitutional question sought to be presented. It is settled that "[w]hether a pleading sets up a sufficient right of action or defense, grounded on the Constitution or a law of the United States, is necessarily a question of federal law; and where a case coming from a state court presents that question, this Court must determine for itself the sufficiency of the allegations displaying the right or defense, and is not concluded by the view taken of them by the state court." First National Bank v. Anderson, 269 U.S. 341, 346; Staub v. City of Baxley, 355 U.S. 313, 318.
In reaching its conclusion, the Ohio court said "In our opinion, it is not necessary to consider the constitutional question raised by the taxpayer in the instant case because, if its contention with regard to that question is sound, it necessarily leads to the conclusion that the entire proviso in subdivision (A) of Section 5701.08, which read, `but merchandise or agricultural products belonging to a nonresident of this state is not used in business in this state if held in a storage warehouse for storage only,' was void and should be stricken. That being so, it is apparent that any of taxpayer's `merchandise . . . held in a storage warehouse for storage only' would be taxable because described by the preceding words remaining in the statute and reading, `stored . . . as . . . merchandise.' " But the court did not hold that the proviso was invalid, nor did it strike it from the statute. Instead, it held that the proviso expressed the valid legislative purpose to exempt the merchandise and agricultural products of nonresidents when held in a storage warehouse for storage only and that the court was powerless to strike it. In
This brings us to the merits. Does the proviso exempting "merchandise or agricultural products belonging to a nonresident . . . if held in a storage warehouse for storage only" deny to appellant, a resident of the State, the equal protection of the laws within the meaning of the Fourteenth Amendment? The applicable principles have been often stated and are entirely familiar. The States have a very wide discretion in the laying of their taxes. When dealing with their proper domestic concerns, and not trenching upon the prerogatives of the National Government or violating the guaranties of the Federal Constitution, the States have the attribute of sovereign powers in devising their fiscal systems to ensure revenue and foster their local interests. Of course, the States, in the exercise of their taxing power, are subject to the requirements of the Equal Protection Clause of the Fourteenth Amendment. But that clause imposes no iron rule of equality, prohibiting the flexibility and variety that are appropriate to reasonable schemes of state taxation. The
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. The rule often has been stated to be that the classification "must rest upon some ground of difference having a fair and substantial relation to the object of the legislation." Royster Guano Co. v. Virginia, 253 U.S. 412, 415; Louisville Gas & Electric Co. v. Coleman, 277 U.S. 32, 37; AirWay Electric Appliance Corp. v. Day, 266 U.S. 71, 85; Schlesinger v. Wisconsin, 270 U.S. 230, 240; Ohio Oil Co. v. Conway, 281 U.S. 146, 160. "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." Brown-Forman
Coming directly to the concrete problem now before us, it has repeatedly been held and appears to be entirely settled that a statute which encourages the location within the State of needed and useful industries by exempting them, though not also others, from its taxes is not arbitrary and does not violate the Equal Protection Clause of the Fourteenth Amendment. Bell's Gap R. Co. v. Pennsylvania, supra, 134 U. S., at 237; Ohio Oil Co. v. Conway, 281 U. S., at 159; Williams v. Baltimore, 289 U.S. 36; Colgate v. Harvey, 296 U.S. 404, 439 (dissenting opinion). Similarly, it has long been settled that a classification, though discriminatory, is not arbitrary nor violative of the Equal Protection Clause of the Fourteenth Amendment if any state of facts reasonably can be conceived that would sustain it. Lindsley v. Natural Carbonic Gas Co., 220 U.S. 61, 78; Quong Wing v. Kirkendall, 223 U.S. 59; Rast v. Van Deman & Lewis Co., 240 U.S. 342, 357; State Board of Tax Comm'rs v. Jackson, 283 U. S., at 537.
In the light of the law thus well settled, how stands appellant's case? We cannot assume that state legislative enactments were adopted arbitrarily or without good reason to further some legitimate policy of the State. What were the special reasons, motives or policies of the Ohio Legislature for adopting the questioned proviso we do not know with certainty, nor is it important that we should, Southwestern Oil Co. v. Texas, 217 U.S. 114, 126, for a state legislature need not explicitly declare its purpose. But it is obvious that it may reasonably have
Appellant heavily relies on Wheeling Steel Corp. v. Glander, 337 U.S. 562. We think that case is not apposite. There Ohio statutes exempted from taxation certain accounts receivable owned by residents of the State but taxed those owned by nonresidents. The statutes, on their face admittedly discriminatory against nonresidents, themselves declared their purpose. That purpose was to proffer to other States a scheme of "reciprocity" for taxing accounts receivable.
MR. JUSTICE STEWART took no part in the consideration or decision of this case.
MR. JUSTICE BRENNAN, with whom MR. JUSTICE HARLAN joins, concurring.
We hold today that Ohio's ad valorem tax law does not violate the Equal Protection Clause in subjecting the property of Ohio corporations to a tax not applied to
The question presented in the two cases, if stated generally, and as I shall show, somewhat superficially, is: Measured by the demands of the Equal Protection Clause, is a State constitutionally permitted separately to classify domestic and foreign corporations for the purposes of payment of or exemption from an ad valorem tax? In both cases the distinction complained of as denying equal protection of the laws is that the incidence of the tax in fact turns on "the different residence of the owner." With due respect to my Brethren's view, I think that if this were all that the matter was, Wheeling and this case would be indistinguishable.
Why is the "different residence of the owner" a constitutionally valid basis for Ohio's freeing the property of the foreign corporation from the tax in this case and an invalid basis for its freeing the property of the domestic corporation from the tax involved in the Wheeling case?
I think that the answer lies in remembering that our Constitution is an instrument of federalism. The Constitution furnishes the structure for the operation of the States with respect to the National Government and with respect to each other. The maintenance of the principles of federalism is a foremost consideration in interpreting any of the pertinent constitutional provisions under which this Court examines state action. Because there are 49 States and much of the Nation's commercial activity is carried on by enterprises having contacts with more States than one, a common and continuing problem of constitutional interpretation has been that of adjusting the demands of individual States to regulate and tax these enterprises in light of the multistate nature of our federation. While the most ready examples of the Court's function in this field are furnished by the innumerable cases in which the Court has examined state taxation and regulation under the Commerce and Due Process Clauses, still the Equal Protection Clause, among its other roles, operates to maintain this principle of federalism.
Viewing the Equal Protection Clause as an instrument of federalism, the distinction between Wheeling and this case seems to me to be apparent. My Brethren's opinion today demonstrates that in dealing with as practical and complex a matter as taxation, the utmost latitude, under the Equal Protection Clause, must be afforded a State in defining categories of classification. But in the case of