Allied Stores of Ohio, Inc. v. Bowers

1959-02-24

Headline: Ohio tax exemption for nonresidents’ warehouse goods upheld, allowing the State to tax resident retailers’ stored merchandise while exempting identical out-of-state-owned goods for storage-only purposes.

Holding: The Court held that Ohio’s tax exemption for nonresidents’ merchandise stored in warehouses did not violate the Fourteenth Amendment’s equal protection guarantee, and that the resident retailer had standing to raise the claim.

Real World Impact:

Allows states to exempt nonresident-owned warehouse goods without automatically violating equal protection.
Resident retailers may be taxed on stored inventory while identical nonresident-owned goods are exempt.
Encourages states to pursue policies to attract warehouse use by out-of-state owners.

Topics: state taxation, property tax, equal protection, warehouse storage rules

Summary

Background

An Ohio-based department store company owned four stores and private warehouses in four Ohio cities. The company kept merchandise in those warehouses and moved items to stores or delivered directly to customers. Ohio law generally taxed personal property used in business, but a proviso said merchandise or farm products owned by nonresidents were not "used in business" if held in a storage warehouse for storage only. The State sought to assess a property tax on the company’s warehouse stocks, and the company argued the law violated the Constitution’s promise of equal protection because it taxed resident-owned goods but exempted identical goods owned by nonresidents.

Reasoning

The Court first found the company had the right to raise the constitutional claim. On the merits the Court asked whether the exemption was arbitrary. Relying on long-settled principles that states may treat taxpayers differently when a reasonable basis exists, the Court concluded Ohio could reasonably have aimed to attract nonresident warehouse use or stimulate local markets. Because a plausible state policy could justify the distinction, the exemption did not amount to an unconstitutional denial of equal protection. The Court therefore upheld the tax assessment for the resident company.

Real world impact

This ruling means states have some latitude to exempt certain out-of-state owners from property taxes for policy reasons like encouraging warehouse activity without automatically violating equal protection. Resident businesses with similar property can be taxed differently so long as a reasonable state purpose can be conceived. The Court distinguished prior cases that struck down clearly discriminatory statutes.

Dissents or concurrances

Justice Brennan, joined by Justice Harlan, agreed with the outcome but emphasized federalism: equal protection helps preserve the national balance among states, and the classification here did not threaten that balance.