General Elec. Co. v. State
| Decision Date | 14 April 1953 |
| Docket Number | No. 31962,31962 |
| Citation | 42 Wn.2d 411,256 P.2d 265 |
| Court | Washington Supreme Court |
| Parties | GENERAL ELECTRIC CO. v. STATE. . en Banc |
Smith Troy and Jennings P. Felix, Olympia, C. John Newlands, Tacoma, for appellant.
Reuben C. Carlson, Tacoma, Ellis N. Slack, Acting Asst. Atty. Gen., and Berryman Green, Dept. of Justice, Washington, D. C., for respondent.
This action was instituted by General Electric Company to recover from the state of Washington the sum of $938,437.25, with interest, representing business and occupation taxes paid. The court entered a judgment for the amount claimed. The state of Washington has taken this appeal.
Some years ago the United States constructed a plant at Hanford, Washington, for the manufacturing of fissionable material. In 1943, a contract was made with E. I. du Pont de Nemours and Company, Inc., a foreign corporation authorized to do business in the state of Washington, to carry on the manufacturing activity. The contract was negotiated and executed pursuant to the First War Powers Act of 1941, 50 U.S.C.A.Appendix, § 601 et seq. The question of liability to the state of Washington for the payment of business and occupation taxes was considered. The record indicates the corporation was seeking ways and means whereby in the performance of its contract with the United States it might be able to avoid payment of such taxes. A suggested method was the insertion in the contract of an agency clause, but this was not done. The thought was expressed that the attendant difficulties would more than offset the comparatively small tax saving involved.
The corporation and the United States sought a ruling from the state tax commission upon the question whether in performing its contract the corporation would be engaged in such a business activity that it would be amenable to the business and occupation tax, and also whether in the performance of the contract it would be an instrumentality or agency of the United States. It was recognized that the performance by a private corporation of a contract with the United States did not grant it immunity from a business and occupation tax, and the reason assigned was that the incidence or impact of the tax was not upon the operations of the corporation as an agency or instrumentality of the United States, but upon the corporation in its private capacity. It appears from the record that this recognition was based upon rules pronounced in Silas Mason Co. v. Tax Commission, 302 U.S. 186, 58 S.Ct. 233, 82 L.Ed. 187, and James v. Dravo Contracting Co., 302 U.S. 134, 58 S.Ct. 208, 82 L.Ed. 155. The tax commission made a ruling that the corporation would not be an agency or instrumentality of the United States in the performance of its contract, would not be immune from such tax, and that it would be engaged in a business activity within the meaning and intent of Laws of 1935, chapter 180, p. 706, as amended, RCW 82.04.
Respondent is the successor of the du Pont company. It is a foreign corporation, is authorized to transact business in this state, and is normally subject to its business and occupation tax. As a part of its business, the corporation manufactures fissionable material and uses specially constructed facilities owned by the United States.
The following statutes are a part of our business and occupation tax laws:
In September, 1946, respondent entered into a contract with the United States pursuant to the authority given by the First War Powers Act of 1941. In June. 1947, respondent and the United States made a supplemental contract pursuant to authority given to the latter by the Atomic Energy Act of 1946, Public Law No. 585, 79th Congress, 60 Stat. 755, 765, 766, 42 U.S. C.A. § 1809(b). The courts of this state have been asked in this action to construe the contract between respondent and the United States and determine whether one of the activities in which the respondent is engaged, the manufacturing of fissionable material, is that of the Atomic Energy Commission or its own activity.
Because of the secrecy necessarily surrounding the manufacturing process in which respondent is engaged, it has agreed in its contract to submit to many contractual conditions with reference to supervision by government agents in the purchase of supplies and equipment, in fiscal affairs and in many other respects not necessary to set forth, none of which, however, are inconsistent with or change the status of respondent as one engaged in business as a manufacturer, as defined by statute.
It is the contention of respondent that, by the terms of its contract with the United States, a relationship has been created whereby it must be said that the manufacturing business in which it is engaged is that of the governmental agency, and, therefore, it is immune from the business and occupation tax by virtue of § 9(b) of the Atomic Energy Act of 1946. The part of § 9(b) relied upon reads:
'The Commission, and the property, activities, and income of the Commission, are hereby expressly exempted from taxation in any manner or form by any State, county, municipality, or any subdivision thereof. * * *'
The respondent cites and relies upon the cases of Roane-Anderson Co. v. Carson, 192 Tenn. 150, 239 S.W.2d 27, and Carson v. Roane-Anderson Co., 342 U.S. 232, 72 S. Ct. 257, 96 L.Ed. 257. We do not think the statute or the cited cases meet the question we have before us in this case, or that we should feel bound by the decision of the United States supreme court. In that case and the Tennessee case being reviewed, sales and use taxes were involved. The Tennessee court found as a fact that the goods sold and purchased became the property of the government and were in reality paid for by government money; hence, they were not subject to the Tennessee sales and use tax. The United States supreme court accept the findings of fact made by the Tennessee court and affirmed its judgment. The supreme Court of Arkansas has recently decided in a similar case that if the contractor is the purchaser of the goods, a sales tax is collectible; but if the United States is such purchaser, the taxes are not collectible; also, that who is the purchaser of the goods, is a question to be determined by state law, upon which subject only the courts of the state can speak with final authority. Parker v. KernLimerick, Inc., Ark., 254 S.W.2d 454. The court cited Alabama v. King & Boozer, 314 U.S. 1, 62 S.Ct. 43, 86 L.Ed. 3, holding to the same effect.
The questions before us are purely domestic and must be determined by a construction of the contract and the application of our statutes. The part of the Atomic Energy Act above quoted is not before us for construction or application and does not affect respondent or appellant. The governmental agency is not carrying on any activity in connection with the manufacturing business of respondent, and therefore § 9(b) of the act has nothing to do with the legal questions we have under consideration. The incidence or impact of the tax falls only on respondent as a business corporation and not as an agency or instrumentality of the United States. The act does not in any way attempt to affect the operation of the business and occupation tax upon those who engage in manufacturing in this state, even though they may do so pursuant to a contract with the United States. If it did so, a very serious constitutional question involving the power of the United States to restrict the right of this state to impose such a tax upon those who exercised the privilege of doing business within its borders would be raised.
The manufacturing of fissionable material by respondent is done by it, not as an agent or instrumentality of the United States, but as a part of its authorized corporate functions. The taxpaying status of respondent must be determined by our statutes, and not by any status or relationship attempted to be created by contract. It is the nature of the business done by respondent in this state that must determine its taxpaying status and not what it may denominate itself in its contract. The adroit use of words and phrases in the contract by which it is sought to establish a relationship between itself and the governmental agency whereby its manufacturing business and activity can be said to be that of the agency is of no avail.
Reduced to its simplest form, we have a business corporation engaged in manufacturing a high explosive and delivering its product to a governmental agency. Our statute authorizes...
To continue reading
Request your trial
-
E-G Sheet Metal Works v. Crain, E-G
...Court of Washington held, however, that the General Electric Company was subject to the business and occupation tax of that State. 42 Wash.2d 417, 256 P.2d 265. The United States Supreme Court, on the authority of the Carson case, reversed. The distinction heretofore pointed out between the......
-
E. I. Du Pont de Nemours & Co. v. State, 32362
...to § 9(b). In a six-to-three decision, we reversed the trial court and directed a dismissal of the action. General Electric Co. v. State of Washington, 42 Wash.2d 411, 256 P.2d 265. Our decision was reversed by the supreme court of the United States on February 8, 1954. General Electric Co.......
-
Reynolds Elec. & Engineering Co. v. Lujan
...Attorney General's contention in General Electric Co. v. State of Washington, 347 U.S. 909, 74 S.Ct. 474, 98 L.Ed. 1066, reversing 42 Wash.2d 411, 256 P.2d 265. The decision of the Court below is It is so ordered. LUJAN, C. J., and SADLER, McGHEE and COMPTON, JJ., concur. ...