Title: Iron Fireman Manufacturing Co. v. STATE TAX COM'N

State: oregon

Issuer: Oregon Supreme Court

Document:

445 P.2d 126 (1968)
IRON FIREMAN MANUFACTURING COMPANY (ELECTRONIC SPECIALTY COMPANY), Respondent.
v.
STATE TAX Commission, Appellant.

Supreme Court of Oregon In Banc.
Argued and Submitted July 9, 1968.
Decided September 18, 1968.
Theodore W. de Looze, Asst. Atty. Gen., Salem, argued the cause for appellant. With him on the briefs were Robert Y. Thornton, Atty. Gen., and G.F. Bartz, Asst. Atty. Gen., Salem.
Thomas S. Moore, Portland, argued the cause for respondent. With him on the brief were Morrison & Bailey, Portland.
Before PERRY, C.J., and McALLISTER, SLOAN, O'CONNELL, GOODWIN, DENECKE and RODMAN, JJ.
McALLISTER, Justice.
The State Tax Commission appeals from a decree of the Oregon Tax Court, 3 OTR Adv.Sh. 35 (1967), holding that plaintiff, *127 Iron Fireman Manufacturing Company, was entitled to exclude from its income taxable in Oregon that portion of its income derived during 1960 and 1961 from business done within the state of Washington.
The plaintiff Iron Fireman Manufacturing Company, now merged into Electronic Specialty Co., and hereinafter known as ESCO, is an Oregon manufacturing corporation, with its plant in Portland. During the years 1960 and 1961 plaintiff manufactured, sold and delivered to Boeing Aircraft Company in Seattle, some 700 different airplane parts incorporated by Boeing into the airplanes manufactured by it.
The usual test of ESCO's right to apportion is whether Washington, if it had Oregon's tax laws, could tax ESCO on that portion of its income derived from its Washington activities. Cal-Roof Wholesale, Inc. v. State Tax Commission, 242 Or. 435, 445, 410 P.2d 233 (1966). It is conceded that during 1960 and 1961 ESCO was engaged in business in Washington within the meaning of ORS 314.280, and except for Public Law 86-272, 15 U.S.C. § 381 (1964), was entitled to apportion its income between Oregon and Washington.
The case turns on whether Public Law 86-272 is applicable. The portion of that statute pertinent to this case reads as follows:
It will be noted that the above statute would prohibit Washington from taxing ESCO's income derived from its business in Washington if that business consisted only of solicitation of orders, and if the orders were sent outside Washington for approval or rejection, and, if approved, were filled by shipment or delivery from a point outside Washington.
In Smith Kline & French Laboratories v. State Tax Commission, 241 Or. 50, 403 P.2d 375 (1965), we held that P.L. 86-272 was constitutional. In Cal-Roof Wholesale, Inc. v. State Tax Commission, supra, we held that the term "solicitation" as used in P.L. 86-272 should not be given a broad interpretation. In Herff Jones Co. v. State Tax Commission, Or., 430 P.2d 998, 1001 (1967), we quoted with approval our holding on this point in Cal-Roof Wholesale, Inc. v. State Tax Commission, supra. We think the term should be given its generally accepted meaning in the light of its legislative history. See S.Rep. No. 658, 86th Cong. 1st Sess. (1959); H.R.Rep. No. 936, 86th Cong. 1st Sess. (1959); H.R. Conference Rep. No. 1103, 86th Cong. 1st Sess. (1959); U.S. Code Congressional and Administrative News p. 2548; see also, Beaman, Paying Taxes to Other States, ch. 6, p. 6.3 (1963); Barnes, State Taxation of Interstate Commerce, 16 W. Res.L.Rev. 859, at 871 (1965).
The tax court held that ESCO's activities amounted to more than solicitation and that ESCO was entitled to apportion its income. The facts on which the tax court based its finding are stated in its opinion, 3 OTR Adv.Sh. at 36-37, as follows:
We agree with the trial court that the activities of ESCO in Washington amounted to more than solicitation within the meaning of P.L. 86-272. The record discloses that during 1960 and 1961, and for many years prior thereto, ESCO and Boeing had continuously engaged in a complex mutual endeavor to provide Boeing with a large variety of specially designed and precisely engineered and manufactured parts for the airplanes manufactured by Boeing. This mutual endeavor included fairly regular meetings and consultations between the personnel of both companies, principally in Seattle, but also in Portland. There was an almost constant interchange and pooling of talents, resources and expertise in the engineering, manufacturing, installation and testing of the parts furnished by ESCO. In our view, the relationship between the parties involved far more activity than the mere solicitation of orders.
The evidence further indicates that ESCO furnished parts to Boeing pursuant to contracts negotiated and executed in Seattle, and that no orders within the meaning of P.L. 86-272 were sent from Seattle to Portland for approval or rejection. Mr. Wright, the former general manager of ESCO's aircraft division, testified as follows:
However, it is not necessary to rest our decision on this latter ground; we prefer to rest it on the ground that ESCO's activities in Washington amounted to more than solicitation.
The decree of the tax court is affirmed.