Hemphill v. Washington State Tax Commission

• Decision Date: 18 March 1965
• Docket Number: No. 37584,37584
• Citation: 400 P.2d 297,65 Wn.2d 889
• Court: Washington Supreme Court
• Parties: Robert C. HEMPHILL and Maxine G. Hemphill, his wife, d/b/a Capitol Skateland, Respondents, v. The WASHINGTON STATE TAX COMMISSION, Appellant.

Page 889

65 Wn.2d 889

400 P.2d 297

Robert C. HEMPHILL and Maxine G. Hemphill, his wife, d/b/a Capitol Skateland, Respondents, v. The WASHINGTON STATE TAX COMMISSION, Appellant.

No. 37584.

Supreme Court of Washington, En Banc.

March 18, 1965.

Rehearing Denied June 10, 1965.

[400

P.2d 298] John J. O'Connell, Atty. Gen H. Eugene Quinn, James A. Furber, Asst. Attys. Gen., Olympia, for appellant.

Corbett, Siderius & Lonergan, Charles R. Lonergan, Jr., Seattle, for respondents.

FINLEY, Judge.

Robert and Maxine Hemphill, owners and operators of Capitol Skateland, instituted this suit, questioning the validity of 1961 amendments respecting the sales tax, RCW 82.04.250 and RCW 82.04.050. These amendments applied the tax to the gross sales (admission fees) of skating rinks and other recreational businesses, but excluded bowling alleys. The pertinent section of the 1961 amendatory tax statute reads:

'The term 'sale at retail' or 'retail sale' shall include the sale of or charge made for personal, business or professional services, including amounts designated as interest, rents, fees, admission, and other service emoluments however designated, received by persons engaging in the following business activities: (a) Amusement and recreation businesses including but not limited to golf, pool, billiards, skating, ski lifts and tows and others But excluding bowling and excluding admission charges which may be subject to county or city admissions taxes levied under authority granted in RCW 35.21.280 or chapter 36.38 RCW; * * *.' 1961 Ex.Sess.Laws ch. 24, § 1, (Italics ours.).

The Thurston County Superior Court ruled in favor of the Hemphills, holding that the whole of subsection (a) as quoted was null and void because the exemption granted to bowling was a denial of equal protection under the Fourteenth Amendment to the United States Constitution and the equal privilege and immunities provision of Art. I, § 12 of the Washington State Constitution. ¹ The state has appealed the decision to this court.

A review of general statutory and constitutional principles should be helpful in setting the stage for decision herein. There is a strong presumption that a revenue statute is constitutional, and, where there is doubt, it will be resolved in favor of constitutionality. Gruen v. State Tax Comm., 35 Wash.2d 1, 6, 211 P.2d 621 (1949). Also, the general rule is that a legislature has the power to make reasonable and natural classifications for purposes of taxation, and that in the exercise of this power the legislature has very broad discretion in making such classifications. ² Galvin v. State Tax Comm., 56 Wash.2d 738, 355 P.2d 362 (1960); State v. Hi-Lo Foods, Inc., 62 Wash.2d 534, 383 P.2d 910 (1963). Since the legislative enactment is presumptively valid, the burden is upon the challenger to prove that a questioned classification does not rest upon a reasonable basis. Madden v. Kentucky, 309 U.S. 83, 88, 60 S.Ct. 406, 84 L.Ed. 590 (1939).

Even conceding that skating and bowling are both part of the 'amusement and recreation' industry, we do not accept the respondent's argument that there are no differences between skating and bowling. As the Supreme Court has stated:

'* * * it has long been settled that a classification, though discriminatory, is not arbitrary nor violative of the Equal Protection Clause of the Fourteenth Amendment If any state of facts reasonably can be conceived that would sustain it.' Allied Stores of Ohio v. Bowers, 358 U.S. 522, 528, 79 S.Ct. 437, 441, 3 L.Ed.2d 480 (1959) (Italics ours.)

Thus, the test is merely whether 'any state of facts reasonably can be conceived that would sustain' the classification. We note that bowling requires a high initial capitalization; that it is a wholesome family sport, actively participated in by both male and female, young and adult; that its rates are fairly expensive; and that it is often located in or close to local neighborhoods, and that it is a sport requiring skill. These factors combined with the special characteristics of the sport of bowling are sufficient to place it in a separate and distinct category. While the distinction between bowling and skating may be called 'narrow,' this is not fatal to the classification. State v. Hi-Lo Foods, Inc., 62 Wash.2d 534, 541, 383 P.2d 910 (1963). Since there is a narrow distinction between skating and bowling, the exemption of bowling from the tax violates no equal protection principle as to the respondents-plaintiffs located within the skating rink classification.

The highly semantical nature of the respondent's argument can be seen when we consider the alternatives open to the legislature in this matter. The legislature could have imposed the tax alone on skating, or it could have made a long list of the different industries making up the 'amusement and recreational businesses,' omitting reference to the bowling industry. Since each field is different and requires different considerations, such a revenue act would have been upheld. As to the matter of the mechanics of legislative drafting, we can see no significant difference between legislative choice of the above format and the choice of the challenged format, where in either instance one segment of a general industry classification is excluded or excepted from the impact of a tax statute. These applicable principles are of long standing:

'* * * This Court has repeatedly held that inequalities which result from a singling out of one particular class for taxation or exemption, infringe no constitutional limitation. * * *

'Like considerations govern exemptions from the operation of a tax imposed on the members of a class. A legislature is not bound to tax every member of a class or none. It may make distinctions of degree having a rational basis, and when subjected to judicial scrutiny they must be presumed to rest on that basis if there is any conceivable state of facts which would support it.' Carmichael v. Southern Coal & Coke Co., 301 U.S. 495, 509, 57 S.Ct. 868, 872, 81 L.Ed.2d 1245 (1937).

Therefore, once it is determined that there is a reasonable basis for the distinction between the taxed class and the untaxed class, the language mechanics are no longer of controlling importance.

We are supported in our holding that there is a reasonable difference between the classes here by the authority of Texas Co. v. Cohn, supra, where this court upheld a tax on the distribution of fuel oil even though no such tax was imposed upon solid fuels. ³ The court there listed many differences between the types of fuel, any number of which would have supported the classification.

The respondents have strongly argued that their competition with the bowling industry for 'amusement dollars' places them in the same class for taxation. This same argument was advanced in the Texas Company case, supra, and was rejected with the statement that '* * * this court has indicated that it does not regard competition as a circumstance of controlling significance.' (See also, Magnano Co. v. Hamilton, 292 U.S. 40, 54 S.Ct. 599, 78 L.Ed. 1109 (1934), where a Washington state statute which imposed a tax of fifteen cents per pound on butter...