Gwin, White & Prince, Inc. v. Henneford
| Decision Date | 09 February 1938 |
| Docket Number | 26793. |
| Citation | 75 P.2d 1017,193 Wash. 451 |
| Court | Washington Supreme Court |
| Parties | GWIN, WHITE & PRINCE, Inc., v. HENNEFORD et al. |
Appeal from Superior Court, Thurston County; D. F. Wright, Judge.
Action to restrain enforcement of a tax by Gwin, White & Prince Inc., against Harold H. Henneford and others, constituting the state of Washington tax commission. From a judgment of dismissal, plaintiff appeals.
Affirmed.
Bayley & Croson, of Seattle, for appellant.
G. W Hamilton, Atty. Gen., and R. G. Sharpe, Asst. Atty. Gen., for respondents.
This action was instituted by Gwin, White & Prince, Inc., a domestic corporation of Seattle, to restrain the state tax commission from enforcing against the plaintiff the provisions of title 2, c. 180, p. 709, Laws 1935, for collection of a business or occupation tax from all persons engaged in business activities in the state of Washington. The appeal is from the judgment of dismissal rendered after a demurrer had been sustained to the complaint.
The facts presented by the allegations of the complaint, which are admitted by the demurrer to be true, and the stipulation of the parties, are in substance as follows: The appellant acting solely as agent of various growers and grower organizations in Washington and Oregon, is engaged in the business of marketing apples and pears produced in Washington and Oregon and in making deliveries of fruit so sold. The growers and grower organizations have the exclusive authority to fix the price at which their or its products may be sold by appellant who is required to collect the sales price of fruits sold and to deposit the proceeds of the sales in a separate fund entitled 'Gwin, White & Prince, Inc. Trustee.' From this fund appellant deducts its charges as fixed by the contract of the appellant with the growers and pays the balance to the contracting organization. Appellant transacts its entire business originating in the state of Washington under a written contract with the Wenatchee-Okanogan Co-Operative Federation made up of approximately twelve co-operative associations in this state. Under the terms of that contract, appellant is the exclusive agent of the federation to sell and collect the proceeds from sales of all commercially packed apples and pears which come into the possession or control of the federation as agent for its members. By that contract the appellant is obligated to sell the fruit and to obtain the widest possible distribution of same, to inform the federation and its members as to marketing conditions, to be responsible for collections on all sales made by appellant on all shipments where the bill of lading runs to appellant or its order, to handle all traffic matters pertaining to shipments, and to attend to the collection of claims against carriers or others. The compensation to be paid to appellant for its services under the contract is 8 cents a box for apples and 10 cents a box for pears. Except for an occasional sale of a small amount of fruit made within this state, all of the fruit sold is shipped to points outside the state of Washington; that is, the fruit is shipped to other states and to foreign countries. In the conduct of its business as agent for the fruit growers, the appellant maintains sales representatives in many points outside of the state of Washington, both within the United States and in Europe, whose duty is to negotiate sales, and who execute written contracts of sale in appellant's name and on its behalf at their respective places of business outside of the state of Washington.
As a part of its business, the appellant sends to its representatives outside of this state daily bulletins listing cars of fruit which are for sale. The appellant gives shipping directions to the respective growers and sellers and handles all of the bills of lading on shipments, most of which are consigned to appellant at points outside of this state. Upon arrival of the fruit at its destination, appellant attends to the delivery of shipments and collection of the proceeds therefrom.
Upon the ground that it is acting only as an agent for the fruit growers and that it is engaged solely in interstate commerce, appellant has never taken out a license under the commission merchants law of this state. The state tax commission's demand for payment of a business or occupation tax upon the appellant's gross revenue (commission of 8 cents a box for apples and 10 cents a box for pears) derived from the business done by the appellant under its contract as agent of the fruit growers was rejected. That is, the state tax commission's claim of a tax liability on the total commissions appellant receives from the growers for Washington-grown fruit sold and shipped to points within and without this state was denied. Appellant's action to restrain the state tax commission from enforcement of the occupation tax statute resulted, as stated above, in dismissal of the action following sustaining of demurrer to the complaint.
Appellant contends that the imposition of the occupation tax upon it constitutes a direct impost upon the gross proceeds of appellant's foreign and interstate business; therefore, is in violation of article 1, § 9, clause 5, and article 1, § 10, cl. 2, of the Constitution of the United States, reading as follows:
All persons engaged in business in this state are required by title 2, c. 180, Laws 1935, to pay an occupation tax for the act or privilege of engaging in business activities. The tax is measured by a percentage of the gross income solely of that business. In the case at bar the tax is measured by a percentage of the appellant's gross income, consisting of the commissions of 8 cents a box for apples and 10 cents a box for pears produced in the state of Washington and sold and shipped to points within and without this state. The tax which the state tax commission seeks to exact of the appellant is a tax laid for the purpose of revenue only and is measured, not by the sales price of the fruit, but by the amount received by the appellant for its services as the exclusive agent of the growers fixed on a 'per box' basis.
The United States Supreme Court held in Crew Levick Company v. Pennsylvania, 245 U.S. 292, 38 S.Ct. 126, 62 L.Ed. 295, that a state tax on the business of selling goods in foreign commerce measured by a percentage of the entire business transacted is both a regulation of foreign commerce and an impost, or duty on exports, and is, therefore, void.
Cooney v. Mountain States Telephone & Telegraph Co., 294 U.S. 384, 55 S.Ct. 477, 481, 79 L.Ed. 934.
The appellant may not successfully invoke the rule that if a contract of sale requires transportation across state lines the connection is so close as to render the sale itself immune from taxation. In the case at bar we are not dealing with a sale, but with a contract of agency--a contract for services to be rendered by appellant for the fruit growers.
The occupation tax is imposed upon all persons for the privilege of engaging in business activities in this state. The appellant is a domestic corporation operating, entirely within this state, a business which is exclusively with his principals, certain fruit growers; and for its services to its principals the appellant is paid a commission as recited above. The tax imposed upon the appellant is not upon imports or exports or interstate or foreign commerce. Appellant is not a necessary factor in such commerce. Appellant renders an independent service--engages in a business within this state--which is advantageous to those who form a component part or link in such commerce, but that does not render invalid the imposition of the occupation tax as it is not in conflict or inconsistent with the Federal Constitution.
In Ficklen v. Shelby County Taxing District, 145 U.S. 1, 12 S.Ct. 810, 812, 36 L.Ed. 601, it was held that a license tax measured by gross commissions imposed on factors and brokers buying or selling on commission as applied to a commission merchant who negotiated sales on behalf of principals residing in other states with respect to goods located in other states was valid. The court stated that the tax was clearly levied upon the complainants in respect to the general commission business they conducted and not on the principal of the complainants. The court said:
'No doubt can be entertained of the right of a state legislature to tax trades, professions, and occupations, in the absence of inhibition in the state constitution in that regard, and where a resident citizen engages in general business subject to a particular tax, the fact that the business done chances to consist, for the time being, wholly or partially in negotiating sales between resident and nonresident merchants of goods situated in another state does not necessarily involve the taxation of interstate commerce, forbidden by the constitution. * * *
'This tax is not on the goods, nor on the proceeds of...
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Gwin, White Prince v. Henneford
...others specified in the stipulation. Judgment of the trial court for appellees was affirmed by the Supreme Court of Washington, 193 Wash. 451, 75 P.2d 1017, and the case comes here on appeal under § 237(a) of the Judicial Code as amended, 28 U.S.C. § 344(a), 28 U.S.C.A. § Section 4(e), 5(g)......
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...of appellant, who was the marketing agent of fruit growers, was local, and was therefore subject to the tax. Gwin, White & Prince v. Henneford, 193 Wash. 451, 75 P.2d 1017. But the Supreme Court of the United States reversed the Washington decision (Gwin, White & Prince v. Henneford, 305 U.......
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Albuquerque Broadcasting Co. v. Bureau of Revenue
...who was the marketing agent of fruit growers, was local, and was therefore subject to the tax. Gwin, White & Prince v. Henneford, 193 Wash. 451, 75 P.2d 1017. But the Supreme Court of the United States reversed the Washington decision (Gwin, White & Prince v. Henneford, 305 U.S. 434, 59 S.C......
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...commerce, measured by the entire volume of the commerce, is likewise foreclosed." 305 U.S. at 435-41, 59 S.Ct. 325 (reversing 193 Wash. 451, 75 P.2d 1017 (1938)). Based on these statements in Gwin, White & Prince, we conclude that the license tax authorized by Ordinance No. 805-89 was not "......