Allied Stores of Ohio, Inc. v. Bowers

Background

Allied Stores of Ohio, an Ohio retail company, kept stocks of merchandise in private warehouses in four Ohio cities. The Ohio Tax Commissioner assessed an ad valorem tax on merchandise stored there. Ohio law said that merchandise or farm products 'belonging to a nonresident' and 'held in a storage warehouse for storage only' were not 'used in business' and were exempt. Allied sued, saying taxing resident-owned stored goods while exempting nonresident-owned goods denied it equal protection.

Reasoning

The Court framed the issue as whether the exemption was arbitrary and denied equal protection. It said states have wide discretion in tax rules but must have a rational basis for classifications. The Court gave plausible reasons for the exemption, like encouraging nonresidents to build or operate warehouses in Ohio or helping markets for Ohio products by letting outside buyers hold goods tax-free in state storage. Because a reasonable state purpose could be imagined, the classification was not plainly arbitrary and the tax survived the challenge.

Real world impact

The ruling lets states adopt tax rules that treat resident and nonresident ownership differently when a rational policy supports the distinction. In practice, Ohio resident businesses that store goods in-state may be taxed while similar goods owned by nonresidents and held only for storage may remain untaxed. This affects business choices about warehouse location and who pays taxes. The decision confirms that the Constitution does not demand perfect uniformity in tax laws.

Dissents or concurrances

Justice Brennan, joined by Justice Harlan, concurred in the result but wrote separately. He emphasized federalism and explained why an earlier case that struck down a different Ohio tax preference did not control this case. Brennan argued the present rule burdens residents rather than favoring them, and federalism concerns differ depending on which side of the discrimination is affected.