Opinion ID: 2586114
Heading Depth: 3
Heading Rank: 1

Heading: Validity of the tax measure under Washington law

Text: ¶ 25 First, Ford's argument that Washington law requires the Cities to piecemeal the tax measure among all of the jurisdictions in which all of the various activities related to the sale were conducted is a clear misreading of our decision in Lone Star Cement Corp. v. City of Seattle, 71 Wash.2d 564, 429 P.2d 909 (1967). In Lone Star Cement, we struck down on equal protection and privilege and immunities grounds the City of Seattle's B & O tax assessment on an out-of-state company who had plants in both Seattle and Concrete, Washington. The city attempted to measure its B & O tax by including the gross income from sales made at the Concrete plant, even when those sales were consummated outside of Seattle and the products delivered to places outside of Seattle. We disallowed the tax assessment on the products sold in Concrete, as these sales had no connection to the company's activities in Seattle and, thus, were beyond Seattle's taxing power. We did not, however, rule that Seattle could not tax Lone Star Cement on the entire gross receipts of sales to customers within Seattle, even when the products sold were manufactured elsewhere. In fact, Lone Star Cement paid B & O taxes on those products without protest. We only excluded from the measure of Seattle's B & O tax the revenue from products manufactured, sold, and delivered outside Seattle  revenue essentially unconnected to Seattle. ¶ 26 This was the same type of overreaching that the United States Supreme Court disallowed in Gwin, White & Prince, Inc. v. Henneford, 305 U.S. 434, 59 S.Ct. 325, 83 L.Ed. 272 (1939). There, the taxpayer marketed, shipped, and sold fruit in places throughout the country, including Washington State. Washington asserted that it had the authority to measure its B & O tax on all of the business's gross receipts from interstate activities, whether conducted inside or outside of Washington. The United States Supreme Court invalidated Washington's tax, because it was not apportioned to the activities within the state, but rather was impermissibly based upon the entire volume of interstate commerce in which the taxpayer participated. ¶ 27 Clearly, such is not the scenario here. By their very terms, the Cities' ordinances limit their taxing power to only those gross receipts derived from the sale of goods delivered into the Cities. This places the Cities' tax measure squarely within the boundaries allowed under Lone Star Cement and Gwin, White & Prince. The measure of tax would be invalid if it included all gross income earned by Ford on its interstate sales or even if it included gross income derived from sales made in other areas of this state. However, that is not the case with which we are presented. In this case, the Cities properly limited their tax measure to only those sales that were connected to Ford's business activities in their respective jurisdictions.