Source: http://www.chanrobles.com/usa/us_supremecourt/300/577/case.php
Timestamp: 2017-12-11 02:20:49
Document Index: 542363480

Matched Legal Cases: ['§ 8', '§ 266', '§ 380', '§ 380', '§ 31', '§ 32']

A statute of Washington taxing the use of chattels in that state is assailed in this suit as a violation of the commerce clause (Constitution of the United States, Article 1, § 8) insofar as the tax is applicable to chattels purchased in another state and used in Washington thereafter. chanroblesvirtualawlibrary
Plaintiffs (appellees in this Court) are engaged either as contractors or as subcontractors in the construction of the Grand Coulee Dam on the Columbia river. In the performance of that work, they have brought into the State of Washington machinery, materials, and supplies, such as locomotives, cars, conveyors, pumps, and trestle steel, which were bought at retail in other states. The cost of all the articles, with transportation expenses added, was $921,189.34. Defendants, the Tax Commission of Washington (appellants in this Court) gave notice that plaintiffs had become subject through the use of this property to a tax of $18,423.78, 2 percent of the cost, and made demand for payment. A District Court of three judges, organized in accordance with § 266 of the Judicial Code (28 U.S.C. § 380), adjudged the statute void upon its face, and granted an interlocutory injunction, one judge dissenting. 15 F.Supp. 958. The case is here upon appeal. 28 U.S.C. § 380.
Chapter 180 of the Laws of Washington for the year 1935, consisting of twenty titles, lays a multitude of excise taxes on occupations and activities. Only two of these taxes are important for the purposes of the case at hand -- the "tax on retail sales," imposed by Title III, and the "compensating tax," imposed by Title IV on the privilege of use. Title III provides that, after May 1, 1935, every retail sale in Washington, with a few enumerated exceptions, [Footnote 1] shall be subject to a tax of 2 percent of chanroblesvirtualawlibrary
the selling price. Title IV, with the heading "compensating tax," provides (§§ 31, 35) that there shall be collected from every person in the state "a tax or excise for the privilege of using within this state any article of tangible personal property purchased subsequent to April 30, 1935," at the rate of 2 percent of the purchase price, including in such price the cost of transportation from the place where the article was purchased. If those provisions stood alone, they would mean that retail buyers within the state would have to pay a double tax, 2 percent upon the sale and 2 percent upon the use. Relief from such a burden is provided in another section (§ 32) which qualifies the use tax by allowing four exceptions. Only two of these exceptions (b and c) call for mention at this time. [Footnote 2] Subdivision (b) provides that the use tax shall not be laid unless the property has been bought at retail. Subdivision (c) provides that the tax shall not chanroblesvirtualawlibrary
The plan embodied in these provisions is neither hidden nor uncertain. A use tax is never payable where the user has acquired property by retail purchase in the state of Washington, except in the rare instances in which retail purchases in Washington are not subjected to a sales tax. On the other hand, a use tax is always payable where the user has acquired property by retail purchase in or from another state, unless he had paid a sales or use tax elsewhere before bringing it to Washington. The tax presupposes everywhere a retail purchase by the user before the time of use. If he has manufactured the chattel for himself, or has received it from the manufacturer as a legacy or gift, he is exempt from the use tax, whether title was acquired in Washington or elsewhere. The practical effect of a system thus conditioned is readily perceived. One of its effects must be that retail sellers in Washington will be helped to compete upon terms of equality with retail dealers in other states who are exempt from a sales tax or any corresponding burden. Another effect, or at least another tendency, must be to avoid the likelihood of a drain upon the revenues of the state, buyers being no longer tempted to place their orders in other states in the effort to escape payment of the tax on local sales. Do these consequences, which must have been foreseen, necessitate a holding that the tax upon the use is either a tax upon the operations of interstate commerce or a discrimination against such commerce obstructing or burdening it unlawfully? chanroblesvirtualawlibrary
Things acquired or transported in interstate commerce may be subjected to a property tax, nondiscriminatory in its operation, when they have become part of the common mass of property within the state of destination. Wiloil Corp. Pennsylvania, 294 U. S. 169, 294 U. S. 175; Cudahy Packing Co. v. Minnesota, 246 U. S. 450, 246 U. S. 453; Brown-Forman Co. v. Kentucky, 217 U. S. 563, 217 U. S. 575; American Steel & Wire Co. v. Speed, 192 U. S. 500, 192 U. S. 519; 75 U. S. 137. This is so, indeed, though they are still in the original packages. Sonneborn Bros. v. Cureton, 262 U. S. 506; American Steel & Wire Co. v. Speed, supra; Woodruff v. Parham, supra. For like reasons, they may be subjected, when once they are at rest, to a nondiscriminatory tax upon use or enjoyment. Nashville, C. & St.L. Ry. Co. v. Wallace, 288 U. S. 249, 288 U. S. 267; Edelman v. Boeing Air Transport, Inc., 289 U. S. 249, 289 U. S. 252; Monamotor Oil Co. v. Johnson, 292 U. S. 86, 292 U. S. 93. The privilege of use is only one attribute, among many, of the bundle of privileges that make up property or ownership. Nashville, C. & St.L. Ry. Co. v. Wallace, supra; Bromley v. McCaughn, 280 U. S. 124, 280 U. S. 136-138; Burnet v. Wells, 289 U. S. 670, 289 U. S. 678. A state is at liberty, if it pleases, to tax them all collectively, or to separate the faggots and lay the charge distributively. Ibid. Calling the tax an excise when it is laid solely upon the use (Vancouver Oil Co. v. Henneford,@ 183 Wash. 317, 49 P.2d 14) does not make the power to impose it less, for anything the commerce clause has to say of its validity, than calling it a property tax and laying it on ownership.
Equality is the theme that runs through all the sections of the statute. There shall be a tax upon the use, but subject chanroblesvirtualawlibrary
Gregg Dyeing Co. v. Query, 286 U. S. 472, 286 U. S. 480. If the sales tax were abolished, the buyer in Washington would pay at once upon the use. He would have no longer an offsetting credit. While the sales tax is in force, he pays upon the sale, and pays at the same rate. For the owner who uses after buying from afar, the effect is all one whether his competitor is taxable under one title or another. This common sense conclusion has ample precedent behind it. Alabama laid a tax on chanroblesvirtualawlibrary
the sale of spirituous liquors, the products of sister states. Comparing the tax with others applicable to domestic products, the court upheld the statute. The methods of collection were different, but the taxes were complementary, and were intended to effect equality. 75 U. S. 372-373. South Carolina laid a tax on the storage of gasoline brought from other states and held for use in local business. The statute was interpreted by the state court as covering "all gasoline stored for use and consumption upon which a like tax has not been paid under other statutes." Upon comparison of all the statutes, the impost was upheld. The taxpayers had "failed to show that, whatever distinction there existed in form, there was any substantial discrimination in fact." Gregg Dyeing Co. v. Query, supra.@
Baldwin v. G.A.F. Seelig, Inc., 294 U. S. 511, is invoked by appellees as decisive of the controversy, but the case is far apart from this one. There, a statute of New York had made provision for a minimum price to be paid by dealers in milk to producers in that state. Cf. Nebbia v. New York, 291 U. S. 502; Hegeman Farms Corp. v. Baldwin, 293 U. S. 163. The same statute provided that, when milk from another state had been brought into New York, the dealer should be prohibited from selling it at any price unless, in buying the milk from the out-of-state producer, he had paid the price that would be necessary if he had bought within the state. New York was attempting to project its legislation within the borders of another state by regulating the price to be paid in that state for milk acquired there. She said, in effect, to farmers in Vermont: your milk cannot be sold by dealers to whom you ship it in chanroblesvirtualawlibrary
We are told that a tax upon the use, even though not unlawful by force of its effects alone, is vitiated by the motives that led to its adoption. These motives cause it to be stigmatized as equivalent to a protective tariff. But motives alone will seldom, if ever, invalidate a tax that, apart from its motives, would be recognized as lawful. Magnano Co. v. Hamilton, 292 U. S. 40, 292 U. S. 44; Fox v. Standard Oil Co., 294 U. S. 87, 294 U. S. 100-101. Least of all will they be permitted to accomplish that result when equality, and not preference, is the end to be achieved. Catchwords and labels such as the words "protective tariff" are subject to the dangers that lurk in metaphors an symbols, and must be watched with circumspection lest they put us off our guard. A tariff, whether protective or for revenue, burdens the very act of importation, and, if laid by a state upon its commerce with another, is equally unlawful whether protection or revenue is the motive back of it. But a tax upon use, or, what is equivalent for present purposes, a tax upon property after importation is over, is not a clog upon the process of importation at all, any more than a tax upon the income or profits of a business. The contention would be futile that Washington, in laying an ownership tax, would be doing a wrong to nonresidents in allowing a credit for a sales tax already borne by the owner as a result of the same ownership. To contend this would be to deny that a state may develop its scheme of taxation in such a way as to rid its exactions of unnecessary oppression. In the statute in dispute, such a scheme has chanroblesvirtualawlibrary
Finally, there is argument that the tax now in question, though in form upon the use, was in fact upon the foreign sale, and not upon the use at all, the form being a subterfuge. The supposed basis for that argument is a reading of the statute whereby the use shall not be taxable if the chattel was manufactured by the user or received as a legacy or acquired in any way except through the medium of purchase, and a retail one at that. But the fact that the Legislature has chosen to lay a tax upon the use of chattels that have been bought does not make the tax upon the use a tax upon the sale. One could argue with as much reason that there would be a tax upon the sale if a property tax were limited to chattels so acquired. A legislature has a wide range of choice in classifying and limiting the subjects of taxation. 134 U. S. 237; Ohio Oil Co. v. Conway, 281 U. S. 146, 281 U. S. 159. The choice is as broad where the tax is laid upon one or a few of the attributes of ownership as when laid upon them all. Flint v. Stone Tracy Co.,@ 220 U. S. 107, 220 U. S. 158-159. True, collections might be larger if the use were not dependent upon a prior purchase by the user. On the other hand, economy in administration or a fairer distribution of social benefits and burdens may have been promoted when the lines were drawn as they were. Such questions of fiscal policy will not be answered by a court. The Legislature might make the tax base as broad or as narrow as it pleased.