Kehrer v. Stewart

Background

Nelson Morris & Co., an Illinois meat packer with a sales house in Atlanta, employed the petitioner as chief clerk and manager for $25 per week. The firm had no packing house in Georgia; orders were filled in Chicago and meats were shipped to Atlanta for distribution. Some meats were also kept in Atlanta as regular inventory and sold there. Georgia imposed a tax on the managing agents of packing houses. The Georgia Supreme Court held the tax invalid for meats sold in Chicago and shipped to Georgia, but valid as applied to the firm’s in-state wholesale sales; the U.S. Supreme Court reviewed that ruling.

Reasoning

The core question was whether the state tax unlawfully reached interstate commerce or otherwise discriminated. The Court confirmed that a tax on the seller can be a tax on the goods, so meats sold in Chicago and shipped to Georgia for delivery were part of interstate commerce and not taxable by the State. By contrast, meats kept in Atlanta as inventory and sold there became part of the State’s taxable property, so the managing agent’s local wholesale sales could be taxed. The Court also found no unequal treatment: the tax applied alike to managing agents of domestic and foreign firms, and the petitioner failed to show the local business was only an incidental part of interstate operations. The contract argument failed because taxation power survives private employment agreements.

Real world impact

Businesses that keep goods in-state for local sale may be taxed there, while goods sold and shipped from another State remain protected as interstate commerce. If a firm’s in-state sales are merely incidental to interstate business, those sales might still escape taxation, and separate local establishments can be taxed independently.