Sears, Roebuck & Co. v. McGoldrick

By Local Law No. 24 (published as No. 25) of 1934, enacted pursuant to authorization granted by the State Legislature (Laws of 1934, ch. 873), the city of New York imposes a tax of two per cent upon receipts from every sale of tangible personal property sold within the city. The tax must be paid by the purchaser to the vendor, who is required to keep records and make a return to the Comptroller of his receipts and of the tax payable thereon. A sale is defined as any transfer of title or possession, or both, for a consideration. A sale at retail is a sale for any purpose other than for resale. Although ordinarily the tax is collected by the vendor

Sears, Roebuck & Co. has been required to pay a tax for the years 1934 and 1935 upon sales made at its stores in New York city, the goods or merchandise being sent from its warehouses or plants in other States. Payment has been resisted under the plea that such a tax is unconstitutional, as a burden upon interstate commerce. This tax has been sustained by the Appellate Division.

The petitioner conducts and operates nine retail stores within the city of New York. The principal office of the petitioner, which is a New York corporation, is at Chicago, Illinois. It has no factory or warehouse in the city of New York except a piano factory and except one warehouse in the borough of Brooklyn, which stores ready to wear suits, dresses, coats and other articles of clothing, piece goods, notions and other light merchandise. Sears, Roebuck & Co. maintains a control store at Philadelphia, Pennsylvania, which is a distributing plant for all of the New York stores and other stores in various parts of the east of the United States, and the executives at this control store have charge of and supervision over the New York stores. The company also maintains a factory at Port Newark, New Jersey, where there are manufactured and assembled bulky articles, such as mill work, roofer materials, heating equipment and the like. The articles involved on this review are described as “ ship direct orders.” Certain articles . which are large and bulky, or which must be assembled and put together before they are ready for delivery to the customer, are not kept in stock in the company’s New York stores, but are kept either at the control store in Philadelphia, or are kept or manufactured upon order, at the factory at Port Newark, New Jersey. At Boston, Massachusetts, there is the Boston mail order control store.

The practice, so the petitioner stated in its petition for review, is for a customer to come to one of the retail stores in New York city and order the merchandise in question. He is informed by the salesman that the merchandise is not kept in stock, but must be ordered from either Philadelphia or Port Newark, as the case may be. His order is taken and if it is a cash transaction, he pays his money, or, if it is a credit transaction, his credit is checked. A sales slip is made out, which states that the merchandise is to be shipped either from the Philadelphia control store or Port Newark direct to the customer at his home within the city of New, York. A duplicate of the sales slip is sent to Port Newark or Philadelphia. The order is filled and is shipped by United States mail or by common carrier. The sample of sales slip, taxpayer’s exhibit No. 6, for horsehide coat, size 48, simply has written diagonally across the bottom in lead pencil, “ Ship from Phila control Store.” These sales slips are not signed by the purchaser.

Approximately eighty-five per cent of the sales at New York city stores are filled from a stock of merchandise kept in New York city. As to the remaining fifteen per cent, the goods are standard merchandise regularly carried in stock by the company as a retail dealer, none of which is manufactured to order, with the exception of mill work. At the nine retail stores during the period in question the appellant sold $2,750,857.99 worth of goods. Of these sales, $2,288,113.59 represented orders filled from stock kept in New York city stores or in the warehouse maintained in Brooklyn. The balance of $462,744.40 consisted of sales filled from stock held in

The two per cent tax on the sales of merchandise in the stores in New York city has been paid. This appeal involves solely the tax on the “ shipped direct orders.” All parties to the controversy concede that the contracts of sale or the sales were made in New York city. The delivery was made from the company’s warehouse or control stores according to shipping directions directly to the purchaser’s home.

When the purchaser entered one of the defendant’s stores and made a contract to buy certain merchandise, according to the sample displayed, his purpose and object were to procure the article, irrespective of the place from which it was delivered. It made no difference to him whether it came from Philadelphia, Port Newark or Boston, as long as he got it on time and in good condition. The delivery from the warehouses of the appellant outside the State was a matter of convenience or economy in the methods of conducting the appellant’s business. It cannot be said that the shipments out of the State were one of the important features of the contract. It was incidental, to the contract, the obligation of the defendant being to deliver the article purchased. From where it should come was a matter of its choice.

On these facts, has interstate commerce been burdened or interfered with in such a way as to make this city tax upon the proceeds of these “ shipped direct orders ” unconstitutional? In the first place, Sears, Roebuck & Co. paid no more tax on these articles which it had delivered from its stores in Philadelphia or Port Newark or Boston than it paid on the goods sold and delivered from its nine stores in New York city. It paid no more tax than a seller would have paid or, to be more exact, a purchaser would have paid, if the goods had been purchased and delivered in New York city from any other vendor. There was here no. discrimination against

The counsel have relied upon Matter of National Cash Register Co. v. Taylor ( 276 N. Y. 208 ). The sales there were made and consummated in Ohio where the company approved, accepted and executed the orders or sales. To the same effect was Matter of West Publishing Co. v. Taylor ( 276 N. Y. 535 ). The reasons and principles here expressed find their source or, rather, their support, in such cases as Adams Manufacturing Co. v. Storen ( 304 U. S. 307 ); Coverdale v. Arkansas-Louisiana Pipe Line Co. ( 303 U. S. 604 ); Western Live Stock v. Bureau of Revenue ( 303 U. S. 250 ); Henneford v. Mason Co. ( 300 U. S. 577 ); Wiloil Corp. v. Pennsylvania ( 294 U. S. 169 ); Monamotor Oil Co. v. Johnson ( 292 U. S. 86 ); Banker Brothers Co. v. Commonwealth of Pennsylvania ( 222 U. S. 210 ).

The order should be affirmed, with costs.

Lehman, O’Brien, Hubbs, Loughran, Finch and Rippey, JJ., concur.

Order affirmed.