Title: State of Alaska v. Petronia

State: washington

Issuer: Washington Supreme Court

Document:

69 Wn.2d 460 (1966) 418 P.2d 755 THE STATE OF ALASKA, Respondent, v. WALTER PETRONIA et al., Appellants.[*] No. 38086. The Supreme Court of Washington, Department One. October 6, 1966. Vance, Davies, Roberts & Bettis, J. Duane Vance, and John M. Darrah, for appellants. Warren Colver (Attorney General of Alaska, Michael M. Holmes, of counsel) and Aiken, St. Louis & Steere, by Charles E. Siljeg, for respondent. HUNTER, J. This is an appeal from a judgment entered in four consolidated cases by the Superior Court for King County. These actions were instituted by the attorney general of the state of Alaska under our reciprocal tax collection statute, RCW 4.24.140, for the enforcement of the payment by certain merchant seamen of income taxes asserted to be owed to the state of Alaska. Of the four defendant (appellant) seamen, Walter Petronia, *462 Morris K. Nainoa and Charles Frankle are residents of the state of Washington, and John W. Massey is a resident of the state of Oregon. All, however, were covered by collective bargaining agreements between the Pacific District of the Seafarers International Union and the Pacific Maritime Association, and were hired out of the union dispatch hall in Seattle. The question of this court's jurisdiction is not raised by any of the defendants. The facts are set out in a written stipulation between counsel for the parties and are undisputed. The defendants' duties as seamen were exclusively on board ships, relating principally to the operation and maintenance of the vessels which they were aboard. For the taxable year in question, 1960, they earned a substantial percentage of their voyage pay while the vessels upon which they were serving were within the boundaries of the state of Alaska. The pertinent part of Title 43, Alaska Statutes, applicable to the defendants provides: Applying the ratio in § 43.20.130, supra, the defendants earned approximately the following percentage of voyage pay while serving as seamen aboard vessels within the waters of Alaska: For the taxable year of 1960, Petronia, 17 per cent; Nainoa, 16 per cent; Frankle, 26 per cent; and Massey, a higher percentage. The apportionment of wages earned in Alaska by the defendants, and the amount of taxes assessed them in pursuance of the statutes, are not in issue in this case. All parties agree that the sole issue is whether the state of Alaska can constitutionally levy a tax on the net income of seamen engaged in interstate and foreign commerce, where the tax is levied only on that portion of the seamen's net income which is attributed to their activity within the boundaries of the state of Alaska. The trial court held that the Alaska net income tax was constitutional and entered judgment against the defendants in the amounts due under the act, in pursuance of the stipulation. The defendants appeal. *464 [1] Although the parties raise no question as to the jurisdiction of this court on this appeal, we have nevertheless considered the propriety of our considering, in the first instance, the issue of the constitutionality of an enactment of a sister state. We consider this normally to be the prerogative of the state wherein the legislation is enacted; however, in the instant case we have acquired jurisdiction at the express request of the attorney general of Alaska based upon the following reciprocity statutes existing between our states, by his institution of these consolidated actions: *465 The constitutionality of the Alaska Net Income Tax Act, as it applies to these defendants, has been interposed as a defense. We therefore have no alternative other than to test the constitutionality of this enactment, in view of the reciprocity statutes, supra. The defendants first contend that the Alaska Net Income Tax Act, as it applies to the defendant seamen, constitutes a deprivation of property without due process of law in violation of the fourteenth amendment to the United States Constitution. [2] The defendants admit that a state may levy a personal income tax upon a nonresident under certain conditions. But these conditions require the existence of minimum connections between the nonresident and the taxing authority. The defendants cite Shaffer v. Carter, 252 U.S. 37, 64 L. Ed. 445, 40 Sup. Ct. 221 (1920); Northwestern States Portland Cement Co. v. Minnesota and Williams v. Stockham Valves & Fittings, Inc., 358 U.S. 450, 3 L.Ed. (2d) 421, 79 Sup. Ct. 357 (1959); Wisconsin v. J.C. Penney Co., 311 U.S. 435, 85 L. Ed. 267, 61 Sup. Ct. 246, 130 A.L.R. 1229 (1940). We find no difficulty in ascertaining that these cases support the rule of law as stated by the defendants. In Northwestern States Portland Cement Co. v. Minnesota and Williams v. Stockham Valves & Fittings, Inc., supra, the court stated: The court further stated, quoting from Wisconsin v. J.C. Penney Co., supra, that The defendants argue that the rule as applied to nonresident corporations and nonresident individuals transacting business on land within a state is not comparable to the activities of seamen on vessels within a state's waters, which are open to interstate and foreign commerce; that the benefits afforded seamen are de minimus; that virtually all the protection normally afforded by a state to a nonresident employee is afforded to seamen exclusively by the federal government; that virtually the only benefits available from the state of Alaska to seamen such as the defendants are the protection and benefits they are afforded by the state when they are on shore in strictly a tourist or recreational capacity. [3] This argument of the defendants is impressive; however, it overlooks a most significant element considered in applying the test of benefits in determining minimum connections. Probably the most significant benefits in the eyes of these defendant seamen are the wages they contemplated receiving for their services during the course of the vessel's voyage. The business productivity generated by Alaska was accountable for the wages earned by the defendants when they were in Alaskan waters. The activity of their employment in Alaska constituted a minimum of 16 per cent of their voyage pay for the year 1960, within the meaning of the Alaska statute, § 43.20.070, supra. We find no distinction between business generated by the economic activities of Alaska accountable for the employment of nonresidents whether it be on land or on the water within the Alaskan boundaries. We are satisfied that the benefits of employment afforded by this economic activity of the state of Alaska constituted minimum connections within the rule to avoid a denial of due process under the fourteenth amendment to the United States Constitution. The defendants contend that the Alaska Net Income Tax Act, as it applies to seamen, is in violation of the commerce clause of U.S. Const. art. 1, § 8, clause 3. The defendants first argue that the tax violates a rule of *467 uniformity as applied to commerce; that the state of Alaska is forbidden to act in this area affecting commerce, despite the inaction of Congress, since it is an area which requires a uniform national system of regulation, and therefore requires the exclusive legislation of Congress, citing Cooley v. Board of Wardens of Port of Philadelphia, 53 U.S. (12 How.) 299, 13 L. Ed. 996 (1851); Hays v. Pacific Mail S.S. Co., 58 U.S. (17 How.) 596, 15 L. Ed. 254 (1855); Southern Pac. Co. v. Jensen, 244 U.S. 205, 61 L. Ed. 1086, 37 Sup. Ct. 524 (1917); The Law of Admiralty, Gilmore & Black, (1957) pp. 43, 44. The defendants' argument is characterized by the following pertinent quotes from the above authorities in support of this rule: [4] The above cases (Southern Pac. Co. v. Jensen, supra and Cooley v. Board of Wardens of Port of Philadelphia, supra) not only characterize the uniformity argument but they also indicate that it must be applied to the facts of each case. In Cooley v. Board of Wardens of Port of Philadelphia, supra, the court found there was no interference with the rule of uniformity by state licensing of harbor pilots, holding that problems involving pilots were local in nature, and noting that Congress had passed an act of August 7, 1789, § 4 (1 Stat. 54), which specifically provided that regulation of pilots in bays, inlets and harbors shall be regulated by state law until further legislative provision may be made by Congress. In Southern Pac. Co. v. Jensen, supra, the state of New York, by subjecting foreign ships to the obligation of her compensation statutes, was clearly interfering with a uniform system for the protection of seamen which was later recognized by the enactment of the Longshoremen's Compensation Statute, as cited in Gilmore & Black, supra. In the instant case there is no attempt to regulate the activities of seamen in Alaskan waters by interference with the uniformity of the operation of the shipping industry by the imposition of the income tax on the earnings of seamen in Alaska. [5, 6] The difference between interference and noninterference with the rule of uniformity as it applies to maritime law is illustrated by the history of the Alaska Net Income Tax Act itself. A law similar to the one which presently exists was enacted by the Territorial Legislature in Alaska in 1949. It provided for a net income tax on seamen's wages to be withheld by their employers. In Alaska S.S. Co. v. Mullaney, 180 F.2d 805 (1950), this enactment was held by the Ninth Circuit Court of Appeals not to be repugnant to the commerce clause of the United States Constitution. As an outgrowth of this case, the United States Congress in 1959 passed a law, 46 U.S.C.A. § 601, prohibiting the withholding of any sums from a master's, officer's, or seaman's *469 wages for state tax purposes in vessels engaged in foreign, coastwise, intercoastal, interstate, or noncontiguous trade. However, the right of the Territory of Alaska to impose taxes was not disturbed; it was only the withholding of monies from seamen's wages to which Congress directed and asserted its jurisdiction. The defendants argue, however, that the above 1959 enactment demonstrates that the taxation of seamen engaged in coastwise trade or in foreign trade can admit only of a single system of regulation. We disagree. Congress clearly did not base this enactment upon a determination that the imposition of the tax by the Territory of Alaska violated a constitutional rule of uniformity. Congress rather directed its action against the requirement by the Alaskan territory that shipping concerns withhold monies from seamen's wages. That this was Congress' concern is expressly disclosed by reference to its proceedings (86th Cong. 1st Sess., S. Rep. No. 433, p. 3, June 25, 1959) during consideration of the passage of the enactment: [7] The test of whether any particular matter is maritime in nature and is thereby precluded from state regulation or legislation is whether or not the exclusive features of *470 admiralty matters are involved. In Standard Dredging Corp. v. Murphy, 319 U.S. 306, 309, 310, 87 L. Ed. 1416, 63 Sup. Ct. 1067 (1943), the United States Supreme Court said: We hold that the rule requiring a uniform system regulated solely by the federal government in maritime commerce has not been violated by the imposition of taxes on earnings of seamen within the waters of the state of Alaska by the Alaska Net Income Tax Act; that Congress has not disturbed the right of a state to impose income taxes on the wages of seamen earned within its boundaries. [8] The defendants argue that the commerce clause was violated by reason that the tax imposed on seamen's wages is inconsistent with Robbins v. Shelby Cy. Taxing Dist., 120 U.S. 489, 30 L. Ed. 694, 7 Sup. Ct. 592 (1887), also cited in the recent case of Northwestern States Portland Cement Co. v. Minnesota and Williams v. Stockham Valves & Fittings, Inc., supra. In that case there was an interference with the ability of an itinerant drummer, who resided in the state of Ohio, to do business in Tennessee by imposing a tax for the privilege of doing business in that state. This case is not apposite to the instant case. In Robbins v. Shelby Cy. Taxing Dist., supra, there was a direct interference with the right of a person to do business within a state by exacting a tax for the privilege. The Alaska Net Income Tax Act, as it applies to these seamen, makes no attempt to interfere with or control the conduct of any business. It is not a privilege tax. [9] The defendants contend that the imposition of income taxes upon them is contrary to the home port doctrine, *471 which denies states other than the state of the home port the right to impose taxes on vessels engaged in lawful commerce on other than inland waters. Defendants cite Hays v. Pacific Mail S.S. Co., supra; Ott v. Mississippi Valley Barge Line Co., 336 U.S. 169, 93 L. Ed. 585, 69 Sup. Ct. 432 (1949), and others. An examination of these cases discloses they are not apposite. These cases involved the exaction of personal property taxes on the vessels by states other than the state of the home port, constituting an undue burden on commerce. The instant tax is not a direct tax upon interstate commerce or the vessels engaged therein. It is rather a tax upon the income derived therefrom, properly proportioned so as to tax only that net income of seamen which is earned within the jurisdiction of Alaska. Defendants' counsel argue that defendant Massey is subjected to multiple taxation since as a resident of Oregon he is required to pay a tax upon all of his earnings. The constitutionality of the Oregon statute is not an issue in this case. We are concerned solely with the constitutionality of the Alaska enactment, which imposes taxes only on this defendant's income earned in the jurisdiction of Alaska. There is therefore no valid multiple taxation issue raised on this record. The trial court correctly held that the Alaska Net Income Tax Act as applied to the defendant seamen was not in violation of the commerce clause and the fourteenth amendment to the United States Constitution. The judgment is affirmed. ROSELLINI, C.J., HILL and HALE, JJ., and WARD, J. Pro Tem., concur. December 7, 1966. Petition for rehearing denied. [*] Reported in 418 P.2d 755.