Court Opinion

ID: 9789410
Source: CourtListenerOpinion
Date Created: 2023-08-31 01:36:01.354433+00
Date Added: 2024-06-11T07:37:22.344539
License: Public Domain

*546Petrich, J.
(dissenting) — The majority concludes that the imposition of Tacoma's business and occupation tax on Fiberchem violates due process because the activities that Fiberchem actually performed in Tacoma do not bear any fair and reasonable relation to the proceeds of its sales to Tacoma customers. I believe that the majority focuses too narrowly on the extent of the physical presence of Fiber-chem's salespeople in Tacoma for the purpose of directly generating sales when it determines the activities actually performed in Tacoma, and I dissent.
In holding that there was no fair and reasonable relation between activities and proceeds, the majority relies on the trial court's findings that (1) over 99 percent of orders from Tacoma customers are telephoned to Fiberchem at its Tuk-wila office, and (2) the salesman whose territory includes Tacoma only spends 6 percent of his working time contacting Tacoma customers. This focus overemphasizes the importance of the physical presence of Fiberchem's salespeople to generate sales and undervalues findings that demonstrate the other activities that its salespeople perform. The trial court found that one-third of Fiberchem's Tacoma customers are contacted by field salespeople and that those customers constitute the majority of Fiberchem's sales in Tacoma. The fact that these salespeople do not take orders when they are in the field does not mean that they do not engage in activities that are related to the generation of proceeds. They serve as manufacturers' representatives for the products that Fiberchem distributes, and as such provide assistance to customers. They then turn over the actual ordering of the desired products to the Tukwila office. This centralized ordering system does not affect the validity of the tax.
The fact that the value which the gross receipts measure is, in large part, the result of activity outside the territorial limits of the taxing jurisdiction does not mean the gross receipts are not fairly related to the activity within the jurisdiction.
Dravo Corp. v. Tacoma, 80 Wn.2d 590, 599, 496 P.2d 504 *547(1972).
The majority concludes by stating that "the sales activity that directly generated proceeds was almost entirely conducted by telephone communication to Tukwila initiated by Tacoma customers" and that "the major portion of the little time spent by salespeople in Tacoma as they passed through the city was spent with a very small segment of its Tacoma customers". Majority, at 545. This suggests that in order to allow imposition of the business and occupation tax, the court must find that some substantial amount of the sales activities must be conducted by salespeople physically located in Tacoma and that such sales must be conducted with a substantial number of the customers in Tacoma, regardless of the frequency or quantity of their purchases. Such a standard considerably exceeds the sufficient nexus or minimum connection test employed in Tacoma v. Hyster Co., 93 Wn.2d 815, 819, 613 P.2d 784 (1980) and Dravo Corp. v. Tacoma, supra. I would conclude that because Fiberchem's field salespeople contact the Tacoma customers who generate the majority of its sales and assist those customers as manufacturers' representatives, Fiberchem's activities in Tacoma were fairly and reasonably related to its sales proceeds. See Standard Pressed Steel Co. v. Department of Rev., 10 Wn. App. 45, 49-52, 516 P.2d 1043 (1973), review denied, 83 Wn.2d 1008 (1974). This could satisfy the sufficient nexus test, and I would reverse and remand the trial court's dismissal.
Review denied by Supreme Court October 28, 1986.