nothing to about 25 percent in only a couple of decades. Chains had become particularly important in the grocery business, where by 1929 they accounted for almost 40 percent of retail grocery sales.1 In an earlier article in this Journal I discussed, in some detail, the struggles between independent retailers and the chains of this period.2 There my main concern was with how these struggles produced the Robinson-Patman Act of 1936. Here I want to focus on the chain tax movement that began a number of years earlier. This paper studies the cross-sectional pattern of these taxes in order to answer two specific questions. First, why did some states pass chain taxes while others did not? Second, did these taxes have any real effect on chain growth? To answer the first question I test a simple model based on the economic theory of regulation. This may seem like a somewhat ambitious