Court Opinion

ID: 9545545
Source: CourtListenerOpinion
Date Created: 2023-08-07 17:15:17.708385+00
Date Added: 2024-06-11T15:15:04.450777
License: Public Domain

Hill, J.
(dissenting) — I dissent. The majority makes an excellent explanation of the facts which present the problem in this case, and repetition is unnecessary.
The tax on St. Regis for the privilege of manufacturing plywood in this state is easily calculated, if we apply the express and, to me, unambiguous provisions of the applicable'statute.
. The measure of the tax is the value of the products manufactured “regardless of the place of sale or the fact that deliveries may be made to points outside the state.” RCW 82.04.240.
RCW 82.04.450 provides that:
“The value of products . . . manufactured shall be determined by the gross proceeds derived from the sale thereof whether such sale is at wholesale or at retail, to which shall be added all subsidies and bonuses received from the purchaser or from any other person with respect to the extraction, manufacture, or sale of such products or by products by the seller, except:
“(1) . . .
“(2) Where such products . . . are shipped, transported or transferred out of the state, or to another person, without prior sale or are sold under circumstances such that the gross proceeds from the sale are not indicative of the true value of the subject matter of the sale.
“In the above cases the value shall correspond as nearly as possible to the gross proceeds from sales in this state of similar products of like quality and character, and in similar quantities by other taxpayers, plus the amount of subsidies or bonuses ordinarily payable by the purchaser or by any third person with respect to the extraction, manufacture, or sale of such products. The tax commission shall prescribe uniform and equitable rules for the purpose of ascertaining such values.” (Italics mine.)
*573The Tax Commission’s Published Rule 112, promulgated under the authority of this statute, essentially paraphrases the statute, except that it provides that:
“. . . value shall correspond as nearly as possible to the gross proceeds from other sales at comparable locations in this state of similar products of like quality and character, and in similar quantities by the taxpayer or others,
The ppsition of the Tax Commission in this case is that on the out-of-state sales the “value of the products” manufactured is the delivered price less the actual freight paid. The trial court agreed with the commission, as does the majority. (As made clear in the majority opinion, the purchasers. of the out-of-state shipments were billed for an amount which equalled the f.o.b. mill price plus the estimated freight. The purchaser then paid the actual charge for freight and remitted the difference to St. Regis, the manufacturer.)
The method used by the Tax Commission to compute the value of the products does not conform to the plain wording of the statute, and the trial court’s finding that there was no prior sale. The statute states that where products are transported out of the state without prior sale,
“. . . value shall correspond as nearly as possible to the gross proceeds from sales in this state of similar products of like quality and character, and in similar quantities by other taxpayers ...”
or, as modified by Published Rule 112, “by the taxpayer or others.”
Accordingly, I would hold that “value of products” on which the manufacturing tax liability of plaintiff is to be based is its f.o.b. mill price within this state for other but similar products of like quality and character and in similar amounts.
In thus adhering to the express wording of the statute, I but follow the argument which the Tax Commission has used so successfully on so many occasions: that it is not ours to reason why; our only responsibility is to follow the wording of the taxing statute. Bornstein Sea Foods, *574Inc. v. State (1962), 60 Wn. (2d) 169, 373 P. (2d) 483, is typical of the cases to which we refer.
This result would be consistent not only with the statute, but would produce the common-sense result that the value of the manufactured product, which is the measure of the tax for the privilege of manufacturing, is the same “regardless of the place of sale or the fact that deliveries may be made to points outside the state.”
The State Tax Commission, with the laudable objective that no dollar received by any business in the state shall escape one or the other of our excise or privilege taxes, follows what seems to me a tortuous process of reasoning to add the amount of the “underweight revenue” to the f.o.b. price at the mill to arrive at the value of the manufactured product, and thus subject the “underweight revenue” to the tax for the privilege of manufacturing.
I have difficulty in following the circuitous route by which the majority gets away from the f.o.b. mill price, as the measure of the value of the manufactured product, to the “gross proceeds of sale” as the measure of value, particularly when carrying the burden of demonstrating “legislative intent.” I can, however, understand the desire to reach that particular plateau, for then, as the majority says apparently with some considerable relief, “our task becomes simpler.” The statutory definition of “gross proceeds of sale,” quoted by the majority, is indeed inclusive.
To reach the “gross proceeds of sale” as the measure of the tax, the transaction must be removed from the specific exception contained in RCW 82.04.450, which says that the gross proceeds derived from the sale shall be the measure of the tax, except

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“Where such products . . . are shipped, transported or transferred out of the state, . . . without prior sale.
Therefore, it is argued, the manufactured product was sold before it left the state.
It seems to me that this argument is extremely tenuous in view of the unchallenged finding of the trial court that:
*575“Title to delivered out-of-state shipments did not pass to purchaser until delivery was completed.”
There can be no question that prospective out-of-state purchasers had the right of inspection on delivery and could refuse to accept delivery. Reliance is placed by the majority on RCW 82.04.040 as making the definition of what constitutes a sale within the revenue act of the state different from the definition of a sale in other fields of law. It is true that RCW 82.04.040 extends the definition of a sale to include the renting or leasing of property and certain types of security transactions. With these we are not concerned, and under the definition of sale as “any transfer of the ownership of, title to, or possession of property for a valuable consideration,” I fail to see where the ownership, the title, or the possession of the manufactured product had passed prior to the time that is was “shipped, transported or transferred out of the state.”
The Tax Commission’s position here would seem to be a reasoning from an unwarranted assumption to a foregone conclusion. Unless the “prior sale” can be established, we never reach the “gross proceeds of sale” measure of the value of the product manufactured.
But if we assume a “prior sale,” I would point out that to adopt the “gross proceeds derived from the sale thereof” as the measure of the tax in this case, leads to a pitfall. It is apparent that the price f.o.b. the mill is attributable to the manufacturing process in the state of Washington, and that the “underweight revenues” are applicable only to out-of-state shipments and are obviously an increment of value directly attributable to the fact that the product is in interstate commerce.
A privilege tax on activities carried on within the state, measured by gross proceeds derived from interstate commerce, that are not apportioned to activities carried on within the state is precluded because such a tax burdens interstate commerce in the same manner and to the same extent as if the exaction were for the privilege of engaging in interstate commerce. Gwin, White & Prince, Inc. v. *576Henneford (1939), 305 U.S. 434, 83 L. Ed. 272, 59 S. Ct. 325. We have held, in a case where we were upholding a tax as being on a purely local activity, that while the state may tax a local activity, such as the privilege of manufacturing, and may measure that tax by the sale price of the item sold in interstate commerce, it should be careful in so doing that the tax neither discriminates nor reaches that portion of gross compensation directly attributable to interstate commerce or activity therein. Crown Zellerbach Corp. v. State (1958), 53 Wn. (2d) 813, 816, 328 P. (2d) 884. In that case we said:
“A review of the Federal cases concerned with the power of a state to tax a purely local activity, measured by the gross receipts from sales of the product within and outside the taxing state, reveals that such taxes have been upheld, where the local taxable incident is one of sufficient substance so that the sales price substantially reflects thé value of the products at the place of manufacture. . . . ”
I submit that while the f.o.b. price at the mill reflects the value of the products at the place of manufacture, the addition of the underweight revenue to that price, if it reflects any added value, is attributable to the fact that the product is in interstate commerce.
Here we have a situation where to include the “underweight” revenue in the sale price, by which the tax is measured, results in discrimination (i.e., a higher tax is paid for the privilege of manufacturing the identical product if shipped and sold outside of .the state than if it is shipped and sold inside the state); 'and in which the portion of the tax which is directly attributable to the product being in interstate commerce, as distinguished from being, attributable to a local activity, is apparent and calculable to the penny.
There can not be a clearer case of a readily calculable portion of a tax for' the privilege of manufacturing in the state of Washington being attributable to its being shipped in interstate commerce. .....■.
It seems to me that there is no- justification for rejecting an interpretation of the manufacturing-tax statute, that is *577obvious and produces a common-sense result, and adopting in its stead a more tenuous interpretation which, while it nets a few more dollars for the state, raises serious constitutional issues. It should also be borne in mind that if there is any doubt as to the meaning of a taxing statute, it must be construed most strongly against the taxing power in favor of the taxpayer. Buffelen Lbr. & Mfg. Co. v. State (1948), 32 Wn. (2d) 40, 43, 200 P. (2d) 509; Weyerhaeuser Tbr. Co. v. Henneford (1936), 185 Wash. 46, 51, 53 P. (2d) 308.
I dissent.
Ott, C. J., and Weaver, J., concur with Hill, J.
April 23, 1964. Petition for rehearing denied.