Budget Rent-A-Car of Washington-Oregon, Inc. v. Multnomah County

• Decision Date: 12 July 1979
• Docket Number: INC,U-H,WASHINGTON-OREGO,A-C,RENT-A-CAR
• Citation: 597 P.2d 1232,287 Or. 93
• Parties: BUDGETOF, Petitioner, and Oregon Rental Association, Intervenor, and P.T.J. Rental & Leasing, Inc., an Oregon corporation, dba Airways Rent-ar, and Cassan Enterprises, Inc., a Washington corporation, dba Dollar Rent-ar, Intervenors, and Huling Bros. Rental & Leasing Co., dba Thrifty Rent-ar, an Oregon corporation,aul Co. of Oregon, an Oregon corporation, andaul Co. of Southern Oregon, an Oregon corporation, Intervenors, v. MULTNOMAH COUNTY, Oregon, Donald Clark, Dan Mosee, Alice Corbett, Dennis Buchanan, and Mel Gordon, Respondents. TC A7607-09640; CA 8925; SC 25873. . *
• Court: Oregon Supreme Court

Page 1232

597 P.2d 1232

287 Or. 93

BUDGET RENT-A-CAR OF WASHINGTON-OREGON, INC., Petitioner and Oregon Rental Association, Intervenor and P.T.J. Rental & Leasing, Inc., an Oregon corporation, dba Airways Rent-A-Car, and Cassan Enterprises, Inc. a Washington corporation, dba Dollar Rent-A-Car, Intervenors and Huling Bros. Rental & Leasing Co., dba Thrifty Rent-A-Car, an Oregon corporation, U-Haul Co. of Oregon, an Oregon corporation, and U-Haul Co. of Southern Oregon, an Oregon corporation, Intervenors, v. MULTNOMAH COUNTY, Oregon, Donald Clark, Dan Mosee, Alice Corbett, Dennis Buchanan, and Mel Gordon, Respondents.

TC A7607-09640; CA 8925; SC 25873.

Supreme Court of Oregon, In Banc. ^*

Argued and Submitted April 4, 1979.

Decided July 12, 1979.

John Spencer Stewart, Portland, argued the cause for petitioner. With him on the briefs were F. Gordon Allen and Kobin & Meyer, Portland.

John B. Leahy, County Counsel, Portland, for Multnomah County, argued the cause for respondents. With him on the brief were Martin B. Vidgoff, Deputy County Counsel, and John D. Hoffman, III, Deputy County Counsel, Portland.

No appearance by intervenors.

LINDE, Judge.

Plaintiff, a Washington corporation engaged in the car rental business in Multnomah County, sued to have a county tax on motor vehicle rentals declared invalid under state and federal law. The Circuit Court for Multnomah County sustained the validity of the tax. On appeal, the Court of Appeals held that plaintiff had not alleged or proved facts sufficient to show its standing to attack the tax. ¹ 36 Or.App. 347, 584 P.2d 767 (1978). We allowed review and now affirm the decision of the circuit court.

I. Plaintiff's Standing.

The tax was enacted in April, 1976, by Multnomah County Ordinance No. 122, effective July 1, 1976. The relevant provisions are appended to this opinion. Briefly stated, the ordinance imposes on every person who rents a motor vehicle for less than 30 days a tax in the amount of 10 percent of the gross rental fees. It requires the provider of the rental vehicle to collect the tax and to remit the accumulated tax payments to the county at three month intervals. The taxes collected are treated as revenue for the county's general fund except the portion attributable to gasoline furnished with the vehicle, which portion is limited to uses legally permitted for fuel taxes.

A plaintiff suing under ORS chapter 28 must show that he is a person "whose rights, status or other legal relations are affected by" the challenged instrument, in this case Ordinance No. 122. ORS 28.020. Under that chapter, as the Court of Appeals stated, plaintiff must show some injury or other impact on a legally recognized interest beyond an abstract interest in the correct application or the validity of a law. See Gruber v. Lincoln Hospital District, 285 Or. 3, 588 P.2d 1281 (1979), Gortmaker v. Seaton,252 Or. 440, 450 P.2d 547 (1969). Plaintiff in this case relies on the text of Ordinance No. 122, which it incorporated in its complaint, to show on its face how it affects the plaintiff. Beyond this, the amended complaint alleged only the nature of plaintiff's business and the county's intention to enforce the ordinance according to its terms.

We find that the terms of the ordinance sufficiently show that plaintiff's "rights, status or other legal relations are affected" by its enforcement to permit plaintiff to challenge their validity in a declaratory judgment proceeding. The ordinance obliges plaintiff to collect the tax from its customers. Plaintiff must maintain records of the taxes collected, and the amount "required to be collected", whether or not it is collected, is "a debt owed by the commercial establishment to the county." Failure to collect and remit the taxes results in a penalty of 50 percent of the deficiency and potentially leads to criminal penalties. Even if the tax itself is borne by plaintiff's customers, if the tax is not valid plaintiff is spared the burdens of collecting it and the risk of potential controversies over plaintiff's compliance with the ordinance. That is a sufficient effect on plaintiff to satisfy ORS 28.020. Unlike the Court of Appeals, we therefore reach the merits.

II. Adoption of the Ordinance.

Plaintiff contends that the enactment of Ordinance No. 122 did not follow statutory procedures. It cites a provision of the state's local budget law, ORS 294.435(1), that requires public notice and hearing on the proposed budget and tax levy and limits the magnitude of changes that may be made without a further publication and public hearing. The tax levied by Ordinance No. 122 was originally proposed at five percent and was doubled before enactment without a further notice or hearing. ORS 294.435(1) provides:

"After the public hearing provided for in subsection (1) of ORS 294.430 has been held, the governing body shall enact the proper ordinances or resolutions to adopt the budget, to make the appropriations and to determine, make and declare the ad valorem tax levy for each fund. Consideration shall be given to matters discussed at the public hearing. The budget estimates and proposed tax levy of any fund as shown in the budget document may be amended prior to adoption. However, the amount of estimated expenditures for each fund shall not be increased by more than 10 percent thereof, and the amount of the total ad valorem taxes to be certified by the municipal corporation for levy for all funds shall not exceed the amount shown in the budget document as published in accordance with ORS 294.421, prior to the budget meeting, unless the amended budget document is republished as provided by ORS 294.416 or 294.418 and 294.421 for the original budget and another public hearing is held as provided by subsection (1) of ORS 294.430."

The county responds that the motor vehicle rental tax is not an "ad valorem tax levy" within the meaning of this section. We agree.

Plaintiff complains that defendants voted to double the tax to ten percent after all the testimony at the public hearing had opposed even the original five percent tax proposal. But the purpose of legislative hearings is not to bind those responsible for the decision to follow the views expressed at the hearing. If raising public revenue depended upon the appearance of witnesses urging a new tax, not much would be raised.

Plaintiff also contends that Ordinance No. 122 had to be submitted to the county's voters for approval under ORS 203.055, which provides:

"Any ordinance, adopted by a county governing body under ORS 203.035 and imposing, or providing an exemption from, taxation shall receive the approval of the voters of the county before taking effect."

The county responds that the section by its own terms applies only to taxes imposed under ORS 203.035. That section is the source of taxing authority for counties that do not have home rule charters, as Multnomah County does, and expressly supplement other grants of power. ² Again, we agree. Ordinance No. 122 rests on the general lawmaking authority granted defendants by the voters of Multnomah County in section 2.20 of the county charter, not on ORS 203.035. It did not require a public vote under ORS 203.055.

III. Uses of Tax Funds.

Another attack is leveled against Ordinance No. 122 because it directs the proceeds of the motor vehicle rental tax into the county's general fund. Article IX, section 3 of the constitution limits the use of taxes on the "ownership, operation or use of motor vehicles" to expenditures related to streets and highways and to public parks and other comparable places. ³ Plaintiff asserts and defendants deny that a tax on motor vehicle rentals is a tax on the "operation or use" of the rented vehicles.

This question need not be decided in the present proceeding. Article IX, section 3 by its express terms governs the use of the proceeds from the taxes to which it refers, not the collection of the taxes. Plaintiff sought only a declaration invalidating the tax. No demand to limit the expenditure of the proceeds to certain purposes was before the court. The court did not err in declining to invalidate the tax on this ground. ⁴

IV. Impact on Interstate Commerce.

The tax is challenged as an impermissible interference with the "Commerce with foreign Nations, and among the several States" whose care the United States Constitution entrusts to Congress and by implication protects against the states to some extent. U.S.Const. art. I, sec. 8(3). Plaintiff phrases its commerce clause attack in three forms: by characterizing the tax as discriminatory against interstate commerce, as an impermissible burden upon it, and as unapportioned. The factual predicate for this attack is that an estimated 75 percent of automobile rentals in Multnomah County take place at the Portland International Airport, mostly by nonresidents engaged in an interstate journey, and that this incidence of the tax primarily on nonresidents was openly stated as one of the reasons for enacting it.

On this issue our task is to follow in the footsteps of the United States Supreme Court, whether their track is straight or winding. During the early decades of this century, there would have been a substantial likelihood that a state tax imposed on the rental of vehicles used in the course of interstate travel or transportation would have been deemed an impermissible burden on commerce, at least when the measure of the tax reflected this use of the vehicle and entered directly into the rental cost. It might have been necessary to decide whether the tax should properly be characterized as a tax on gross receipts of the lessor, because it is the lessor who must pay the tax to the county in quarterly aggregates, or as a special sales tax formally imposed upon the lessee and only collected and remitted by the lessor. For taxes on interstate transportation or the gross receipts therefrom were repeatedly held to be beyond the authority of the...