Request By:
Honorable James Terry Hodges
City Attorney
City of Columbia
108 North Reed Street
Columbia, Kentucky 42726
Opinion
Opinion By: Robert F. Stephens, Attorney General; By: Walter C. Herdman, Assistant Deputy Attorney General
This is in answer to your letter of May 1 in which you state that the city of Columbia, a fourth class city, has an occupational license ordinance covering all businesses and occupations in the city. You further relate that Tony's Pizza Service is engaged in interstate commerce and does business in a number of different communities within the state, among them being the city of Columbia where a truck delivers Tony's pizzas to a few grocery stores operating in the city. Under the circumstances, you raise the following questions:
". . . Our question is, 'Can the City of Columbia require Tony's Pizza Service to obtain an occupational license for doing business within the city limits or would such a tax be an interference with interstate commerce due to the fact that if every community which Tony's Pizza Service serves levied such a tax it would constitute a multiple burden on the company and an unreasonable interference with such interstate commerce? '. . ."
You did not send a copy of the licensing ordinance which we usually require in order to give an official opinion, however, in determining whether or not an ordinance imposing a license fee violates the commerce clause of the Federal Constitution, the terms of the ordinance are not to be judged on its face but it is the operation of the license tax, both actual and potential, that is determinative of its true nature as indicated in the case of
Olan Mills v. City of Elizabethtown, Ky., 269 S.W.2d 201 (1954). This basically means that your question is one for the courts to determine based on all the related facts. Nevertheless, the Olan Mills case, supra, went into some detail as to whether or not a particular ordinance became, in fact, a burden on interstate commerce, and for your information we quote the following excerpt:
"The incidence of the tax is not the same for residents and nonresidents. It applies equally to the casual out-of-state operation making a single sale of the article subject to the license ordinance as well as to the established merchant engaging continuously in selling the same commodity throughout the year. Thus, the small, occasional, nonresident solicitor who takes orders for a single specialized product will find the tax not only burdensome but prohibitive, with the result that commercial activity upon his part is stopped before it is begun. On the other hand, one maintaining a local place of business where he deals in a variety of goods and wares is practically unaffected by the imposition of the tax. Unquestionably, the tax affects more heavily the out-of-state seller than the local one. We therefore conclude the license imposes actual discriminatory effects in its practical application, although on its face it purports to treat all persons equally.
"The potential excluding result of the tax becomes apparent when it is realized that the license is a municipal tax and not one imposed by the Legislature for uniform application throughout the state. The cumulative effect of flat municipal taxes laid in succession upon a nonresident salesman as he passes from town to town is obviously greater than that of any tax of state-wide application likely to be laid by the Legislature itself. The out-of-state itinerant whose business requires him to move from place to place, exhausting his market at each periodic visit, would find that Elizabethtown type of tax, if it existed in each city, eating away all possible return from his sales. It is evident that such a cumulative burden would constitute an absolute interstate trade barrier. In
City of Winchester v. Lohrey Packing Co., Ky., 237 S.W.2d 868, we condemned a tax of this character because of the possibility that it could be multiplied many fold throughout the state.
"For the foregoing reasons, the tax involved is a regulation of, and a burden upon, interstate commerce prohibited by the commerce clause of the Federal Constitution. See
Nippert v. Richmond, 327 U.S. 416, 66 S. Ct. 586, 90 L. Ed. 760, 162 A.L.R. 844."
Some additional cases on the subject are
Cordell v. Commonwealth, Ky., 254 S.W.2d 848 (1953);
Olan Mills, Inc. v. City of Maysville, Ky., 272 S.W.2d 460 (1954); and
Olan Mills v. City of Nicholasville, Ky., 280 S.W.2d 522 (1955).
In view of the above cited cases and from the limited information presented in your letter, it would appear that the delivery transactions on behalf of Tony's Pizza Service would not, in all probability, be subject to the city's occupational license on the grounds that such license tax would, in effect, be a burden on interstate commerce as prohibited under the Federal Constitution, however, as we mentioned previously, the question really is one that only the courts can decide.