Fisher's Blend Station, Inc. v. Tax Com'n of Washington

• Decision Date: 27 May 1935
• Docket Number: 25302.
• Citation: 182 Wash. 163,45 P.2d 942
• Court: Washington Supreme Court
• Parties: FISHER'S BLEND STATION, Inc., v. TAX COMMISSION OF WASHINGTON et al.

45 P.2d 942

182 Wash. 163

FISHER'S BLEND STATION, Inc., v. TAX COMMISSION OF WASHINGTON et al.

No. 25302.

Supreme Court of Washington

May 27, 1935

Department 1.

Appeal from Superior Court, Thurston County; D. F. Wright, Judge.

Action by Fisher's Blend Station, Inc., against the Tax Commission of the State of Washington and individual members thereof. From a decree for plaintiff, defendants appeal.

Reversed with instructions.

MILLARD C.J., dissenting.

G. W Hamilton and E. P. Donnelly, both of Olympia for appellants.

Venables, Graham & Howe, of Seattle, for respondent.

BEALS Justice.

Plaintiff, a domestic corporation, operates two radio stations in the city of Seattle, and instituted this action for the purpose of enjoining the defendants, the members of the tax commission of the state of Washington, from enforcing against plaintiff an occupation tax, pursuant to Laws 1933, c. 191, p. 869 (Rem. Rev. Stat. §§ 8326-1 to 8326-30, inclusive). In its complaint, plaintiff alleged that it was engaged solely in the business of radio broadcasting; that this occupation constitutes interstate commerce; and that the tax sought to be levied against plaintiff, amounting under the statute to 1 per cent. of plaintiff's gross income, constitutes an illegal and unconstitutional burden upon interstate commerce, and that plaintiff is not liable to pay the same.

Plaintiff also alleged its operation of the two stations, one as owner, the other as lessee, pursuant to licenses issued by the Federal Radio Commission, subject to use and control by the federal government, in accordance with federal statutes, and under call letters, radio frequencies, and watt power as fixed by the Federal Commission. Plaintiff further alleged that its two radio stations were broadcasting commercially, covering a designated area embracing the state of Washington and several other states of the Union, besides certain parts of the Dominion of Canada and an area of the Pacific Ocean; that such broadcasting from plaintiff's stations has been continuous and effective, and constitutes a valuable and remunerative business; that the facilities of plaintiff's stations are greatly in demand, the stations forming links in a system of national and Pacific Coast broadcasting; and that the value of the operating systems of the two stations is approximately $600,000.

Defendants demurred to plaintiff's complaint, and, upon their demurrer being overruled, the complaint was amended by a stipulation containing certain agreed statements of fact. Defendants renewed their demurrer to the amended complaint, and, upon their second demurrer being overruled, elected not to plead further, whereupon a decree was entered granting the prayer of plaintiff's complaint and permanently enjoining defendants from levying the tax against plaintiff, from which decree defendants have appealed.

Respondent contends that it is engaged solely in interstate commerce, and that a tax upon the gross receipts derived from radio broadcasting amounts to a tax upon interstate commerce and cannot be collected; the same being in contravention of the Commerce clause of the Constitution of the United States (article 1, § 8, cl. 3).

Appellants assign error upon the overruling of their demurrer, and upon the entry of a decree permanently enjoining them from levying a tax upon respondent in an amount equal to 1 per cent. of the gross income received by respondent from its activities as operator of the two radio stations.

By section 5 of the act (section 8326-5), it is provided that, in computing the amount of the tax, there shall be excepted from gross proceeds such portion thereof as may be derived from business which the state of Washington is, by the Constitution or laws of the United States, prohibited from taxing. Appellants concede that gross income derived from interstate business cannot be considered in computing the tax. As respondent has no income save from its two stations, the question is squarely presented: Is such a tax as is here under attack, when levied upon the gross income of radio broadcasting stations, a burden upon interstate commerce, or does broadcasting, for the purposes of the statute above referred to, constitute intrastate business, upon which the state is entitled to receive the tax provided for by statute?

It is, of course, manifest that broadcasting stations and the operation thereof, whether commercial or private, must be under the control of the federal government. The electromagnetic waves released from such stations pass through space to varying distances, at approximately the speed of light, registering here and there as they go upon different receiving appliances properly attuned to transmute the waves into audible sound. The ether which surrounds us and serves as a connecting medium between the broadcasting mechanism and the receiving point recognizes no state or national boundary, and, indeed, we know not whether the activity of the magnetic vibrations is limited merely to the atmosphere which surrounds our planet. It must be admitted that in their activities the waves which are intentionally released by broadcasting stations in the course of their business are, in their field of activities, essentially interstate and international. Radio broadcasting, then, whether commercial or private, from its very nature must be under the control of the federal authorities, and the Congress, undoubtedly, has the constitutional prerogative to control the same. In time of war or calamity, the activities connected with radio must be, on the one hand, at the service of the government for its purposes, and, on the other, used by private individuals only as may be permitted under regulations necessary to preserve the public safety. Federal control of broadcasting is essential, also, in order that stations may operate without undue interference from other stations, and that lanes and zones may be carved out of the either, thereby allowing each station to function to a maximum of advantage and with a minimum of interference. It must be conceded that, once the magnetic waves are released from a broadcasting station, they become an interstate and international activity, or energy, and in the present state of the art are, generally speaking, subject to no human control, save, of course, that they can be interfered with or blanketed by other and stronger waves released at strategic points.

As respondent is attacking the constitutionality of a revenue law, the burden rests quite heavily upon it to establish the facts upon which it bases its claim that the statute is, as to respondent, invalid. Weaver v. Palmer Bros. Co., 270 U.S. 402, 410, 46 S.Ct. 320, 70 L.Ed. 654; Detroit International Bridge Co. v. Corporation Tax Appeal Board, 287 U.S. 295, 53 S.Ct. 137, 77 L.Ed. 314; St. Louis S.W. R. Co. v. Arkansas, 235 U.S. 350, 35 S.Ct. 99, 59 L.Ed. 265; Interstate Busses Corporation v. Holyoke St. R. Co., 273 U.S. 45, 47 S.Ct. 298, 71 L.Ed. 530. Statutes providing for the raising of revenue required by the state in carrying on its functions are vital to its welfare, and a person, natural or artificial, should not be declared exempt from the payment of a tax required of business generally, unless it clearly appears that the Constitution and laws of the United States (or of the state) require such exemption.

Referring to the tax imposed by the Legislature on commercial activities, from which respondent claims that it is exempt, this court, in the case of State ex rel. Stiner v. Yelle, 174 Wash. 402, 25 P.2d 91, 94, said: 'These commercial businesses are peculiarly dependent upon the state for protection in order that they may be carried on successfully, and they, more than all others, are responsible for and receive the benefit of that which the state expends in maintaining peace and order and the safety of private property.'

The tax levied is for revenue, not regulation. Pacific Tel. & Tel. Co. v. Seattle, 172 Wash. 649, 21 P.2d 721.

The statute here in question does not levy a license tax, nor a tax based upon corporate stock, but imposes a tax, by way of an excise, upon business activities or functions; the tax to be computed by figuring a percentage of the gross income received by the taxpayer. Payment ofthe tax is not a prerequisite to the right to engage in business, save in so far as process to enforce payment of a delinquent tax might interfere with the taxpayer's affairs. In passing upon such questions as are here presented, courts pay less attention to form than to substance, and also consider the operation of a law as applied and enforced by the state authorities.

It must now be considered whether or not respondent's business is, from the standpoint of the tax sought herein to be enjoined, interstate, or whether, for the purposes of the statute in question, it should be held to be an intrastate business and subject to payment of the tax. Of course, a business may be, to some extent, interstate in its nature and still not come within the purview of the Commerce Clause of the Federal Constitution. Many newspapers circulate beyond state lines, carrying their advertising indiscriminately to all readers, but would scarcely, for that reason, be classified as engaged in interstate commerce. It has been held that a business consisting of representing merchants in placing with publishers advertisements in magazines which are published and distributed throughout the United States, is not interstate commerce, although the circulation and distribution of the magazines themselves be such commerce. Blumenstock Bros. Advertising Agency v. Curtis Publishing Co., 252 U.S. 436, 40 S.Ct. 385, 64 L.Ed. 649. An advertising billboard might be so placed as to carry its message to persons ...