Crown Zellerbach Corp. v. State
| Decision Date | 16 December 1954 |
| Docket Number | No. 32750,32750 |
| Citation | 278 P.2d 305,45 Wn.2d 749 |
| Court | Washington Supreme Court |
| Parties | CROWN ZELLERBACH CORPORATION, Appellant, v. The STATE of Washington, Respondent. |
Holman, Mickelwait, Marion, Black & Perkins, J. Paul Coie, Seattle, for appellant.
Grosscup, Ambler, Stephan & Miller, Seattle, Abbott & Lant, Bellingham, McLean & Klingberg, Longview, Harry Ellsworth Foster, Olympia, Eggerman, Rosling & Williams, Seattle, Evans, McLaren, Lane, Powell & Beeks, Seattle Eisenhower, Hunter, Ramsdell & Duncan, Tacoma, Brown & Olson, Yakima, Weter, Roberts & Shefelman, Seattle, amici curiae.
Don Eastvold, Atty. Gen., Jennings P. Felix, Olympia, for respondent.
In this proceeding, Crown Zellerbach, a corporation licensed to do business in the state of Washington, claims it is exempt from certain business and occupation taxes upon its extracting and manufacturing activities. A timely petition was filed with the tax commission of the state of Washington by Crown Zellerbach for a hearing relative to the claim for refund of taxes. After a hearing, the commission entered an order denying relief to the corporation. An appeal to the superior court for Thurston County resulted in a judgment against Crown Zellerbach. This appeal followed.
The facts of the case were stipulated in the trial court. The portions pertinent to the issues in this appeal are:
'The plaintiff [Crown Zellerbach] is principally engaged in the business of manufacturing and selling pulp, paper and paper products and operates pulp and paper mills within and without the State of Washington.
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'Plaintiff sells its products manufactured in Washington at wholesale f. o. b. Mill, for delivery to purchasers both within and without the State of Washington. Its transactions during the period at issue, between August 1, 1950, and December 31, 1951, are divisible as follows:
'(a) Sales and Transfers within the State of Washington: * * *
'(b) Total Interstate Sales and Transfers: * * *
'(1) Interstate Transfers Without Sale * * *
'(2) Interstate Sales at Wholesale. During said period, plaintiff manufactured or extracted goods in Washington and sold such goods at wholesale outside of the State of Washington. For the purposes of this action, it is agreed that these sales were in interstate commerce. Plaintiff in its bi-monthly returns reported all such interstate sales under the Wholesaling classification, but deducted such sales from the measure of its total tax, claiming deduction under RCW 82.04.430(6). The State of Washington asserts a Manufacturing and Extracting tax on the local manufacturing and extracting of these products in the amount of $231,209.04 plus audit interest of $4,467.11, or a total of $235,676.15. * * * 'Thus, plaintiff contests only the manufacturing or extracting tax assessed on goods manufactured or extracted within this state but sold out of state.'
Basically, two questions are presented. The first requires us to construe certain sections of the business and occupation tax statute to determine whether appellant is liable thereunder for the disputed taxes or is exempt under an interpretation of the tax statute urged by the taxpayer. The second question involves an inquiry respecting the constitutional validity of the taxes here in contest, and need be considered only if the state prevails on the first question; i. e., if we find that our state statutes impose liability for the tax.
With reference to the first question, the trial court entered its conclusion of law No. I, which reads as follows:
'The imposition of the tax in question for the taxable activity of manufacture was lawful and in accord with the legislative intent to be derived from the applicable law, disregarding administrative rules and interpretation.'
On this question of statutory construction, it is necessary to set out several sections of the applicable statute in order to understand the contentions made by the appellant.
RCW 82.04.230:
'The measure of the tax is the value of the products, including byproducts, so extracted, regardless of the place of sale or the fact that deliveries may be made to points outside the state.'
RCW 82.04.240:
'The measure of the tax is the value of the products, including byproducts, so manufactured regardless of the place of sale or the fact that deliveries may be made to points outside the state.'
It is appellant's position that, because it is engaged in the activity of wholesaling, it is consequently a person taxable by reason of its wholesaling activity, and is exempt under the proviso of RCW 82.04.440 from taxation respecting its activities of manufacturing and extracting. Before analyzing and discussing the pros and cons of this appeal any further, we shall make an observation that may seem like oversimplification, and perhaps it is. However, in it lies, we think, the crux of this entire matter. The observation is simply this: The legislative purpose, or tax policy, of the above-quoted statutes is to provide for as equitable an imposition of actual tax liability as possible insofar as our state business and occupation tax is concerned. Implicit in this policy is the avoidance of an imposition of double or triple tax liability as to particular products. In other words, the policy is to impose actual liability for payment of tax only once--on either (a) extracting, or (b) manufacturing, or (c) wholesaling. Thus, actual liability for the payment of the business and occupation tax is the key to the problem. The corollary of this policy is that actual liability for business and occupation tax be imposed on at least one activity. Appellant's interpretation emphasizes the fact that a technical tax liability is imposed under RCW 82.04.270; that is, that their wholesaling activity in interstate commerce is taxable. Appellant claims it is of no consequence that this technical liability is excused--that is, that the corporation escapes actual tax liability for business and occupation tax on their wholesaling activities in interstate commerce under another statutory provision. RCW 82.04.440. Appellant acknowledges it is immune from state tax respecting its wholesaling activities in interstate commerce because of Federal constitutional provisions. Under its theory, appellant would not only be immune from the business and occupation tax regarding its activity involving sales at wholesale in interstate commerce, but would be exempt from any business and occupation tax relative to activities of manufacturing and extracting products 'so sold' in interstate commerce. In other words, appellant would pay no business and occupation tax relative to any intrastate activities respecting products sold in interstate commerce. We cannot believe such a result was intended by the legislature in the enactment of the statutory provisions in question.
We will now discuss in more detail the theories advanced by appellant. It is necessary to consider the key words of the proviso in RCW 82.04.440. These words may be italicized for convenience, as follows:
'Provided That persons taxable under RCW * * * 82.04.270 [wholesaling activity] shall not be taxable under RCW 82.04.230 [extracting activity], 82.04.240 [manufacturing activity], * * * with respect to extracting or manufacturing of the products so sold, * * *.' (Emphasis supplied.)
Appellant first argues that it is a person taxable under RCW 82.04.270 because it engages in wholesaling activity. It is acknowledged by appellant that its wholesaling activity here in question took place outside the state of Washington and was in tax-free interstate commerce. However, it is argued that this activity was taxable under the language of RCW 82.04.270, which makes no distinction between sales within the state and sales outside the state. It is claimed that the interstate character of its sales simply entitles it to a deduction under RCW 82.04.430, which provides:
'In computing tax there may be deducted from the measure of tax the following items:
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'(6) Amounts derived from...
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