Henneford v. Silas Mason Co

Citation300 U.S. 577,81 L.Ed. 814,57 S.Ct. 524
Decision Date29 March 1937
Docket NumberNo. 418,418
PartiesHENNEFORD et al. v. SILAS MASON CO., Inc. Et al. Re
CourtUnited States Supreme Court

Appeal from the District Court of the United States for the Eastern District of Washington.

Mr. R. G. Sharpe, of Olympia, Wash., for appellants.

Mr. B. H. Kizer, of Spokane, Wash., for appellees.

Mr. Justice CARDOZO delivered the opinion of the Court.

A statute of Washington taxing the use of chattels in that state is assailed in this suit as a violation of the commerce clause (Constitution of the United States, art. 1, § 8) in so far as the tax is applicable to chattels purchased in another state and used in Washington thereafter.

Plaintiffs (appellees in this court) are engaged either as contractors or as subcontractors in the construction of the Grand Coulee Dam on the Columbia river. In the performance of that work they have brought into the state of Washington machinery, materials, and supplies, such as locomotives, cars, conveyors, pumps, and trestle steel, which were bought at retail in other states. The cost of all the articles with transportation expenses added was $921,189.34. Defendants, the Tax Commission of Washington (appellants in this court) gave notice that plaintiffs had become subject through the use of this property to a tax of $18,423.78, 2 per cent. of the cost, and made demand for payment. A District Court of three judges, organized in accordance with section 266 of the Judicial Code (28 U.S.C. § 380 (28 U.S.C.A. § 380)), adjudged the statute void upon its face, and granted an interlocutory injunction, one judge dissenting. 15 F.Supp. 958. The case is here upon appeal. 28 U.S.C. § 380 (28 U.S.C.A. § 380).

Chapter 180, page 706 of the Laws of Washington for the year 1935, consisting of twenty titles, lays a multitude of excise taxes on occupations and activities. Only two of these taxes are important for the purposes of the case at hand, the 'tax on retail sales,' imposed by title 3, and the 'compensating tax,' imposed by title 4 on the privilege of use. Title 3 provides that after May 1, 1935, every retail sale in Washington, with a few enumerated exceptions, 1 shall be subject to a tax of 2 per cent. of the selling price. Title 4, with the heading 'compensating tax,' provides (sections 31, 35) that there shall be collected from every person in the state 'a tax or excise for the privilege of using within this state any article of tangible personal property purchased subsequent to April 30, 1935,' at the rate of 2 per cent. of the purchase price, including in such price the cost of transportation from the place where the article was purchased. If those provisions stood alone, they would mean that retail buyers within the state would have to pay a double tax, 2 per cent. upon the sale and 2 per cent. upon the use. Relief from such a burden is provided in another section (section 32) which qualifies the use tax by allowing four exceptions. Only two of these exceptions (b and c) call for mention at this time.2 Subdivision (b) provides that the use tax shall not be laid unless the property has been bought at retail. Subdivision (c) provides that the tax shall nto apply to the 'use of any article of tangible personal property the sale or use of which has already been subjected to a tax equal to or in excess of that imposed by this title whether under the laws of this state or of some other state of the United States.' If the rate of such other tax is less than 2 per cent., the exemption is not to be complete (section 33), but in such circumstances the rate is to be measured by the difference.

The plan embodied in these provisions is neither hidden nor uncertain. A use tax is never payable where the user has acquired property by retail purchase in the state of Washington, except in the rare instances in which retail purchases in Washington are not subjected to a sales tax. On the other hand, a use tax is always payable where the user has acquired property by retail purchase in or from another state, unless he had paid a sales or use tax elsewhere before bringing it to Washington. The tax presupposes everywhere a retail purchase by the user before the time of use. If he has manufactured the chattel for himself, or has received it from the manufacturer as a legacy or gift, he is exempt from the use tax, whether title was acquired in Washington or elsewhere. The practical effect of a system thus conditioned is readily perceived. One of its effects must be that retail sellers in Washington will be helped to compete upon terms of equality with retail dealers in other states who are exempt from a sales tax or any corresponding burden. Another effect, or at least another tendency, must be to avoid the likelihood of a drain upon the revenues of the state, buyers being no longer tempted to place their orders in other states in the effort to escape payment of the tax on local sales. Do these consequences which must have been foreseen, necessitate a holding that the tax upon the use is either a tax upon the operations of interstate commerce or a discrimination against such commerce obstructing or burdening it unlawfully?

1. The tax is not upon the operations of interstate commerce, but upon the privilege of use after commerce is at an end.

Things acquired or transported in interstate commerce may be subjected to a property tax, nondiscriminatory in its operation, when they have become part of the common mass of property within the state of destination. Wiloil Corp. v. Com. of Pennsylvania, 294 U.S. 169, 175, 55 S.Ct. 358, 360, 79 L.Ed 838; Cudahy Packing Co. v. Minnesota, 246 U.S. 450, 453, 38 S.Ct. 373, 62 L.Ed. 827; Brown-Forman Co. v. Kentucky, 217 U.S. 563, 575, 30 S.Ct. 578, 54 L.Ed 883; American Steel & Wire Co. v. Speed, 192 U.S. 500, 519, 24 S.Ct. 365, 48 L.Ed. 538; Woodruff v. Parham, 8 Wall. 123, 137, 19 L.Ed. 382. This is so, indeed, though they are still in the original packages. Sonneborn Bros. v. Cureton, 262 U.S. 506, 43 S.Ct. 643, 67 L.Ed. 1095; American Steel & Wire Co. v. Speed, supra; Woodruff v. Parham, supra. For like reasons they may be subjected, when once they are at rest, to a nondiscriminatory tax upon use or enjoyment. Nashville, C. & St. L. Ry. Co. v. Wallace, 288 U.S. 249, 267, 53 S.Ct. 345, 349, 77 L.Ed. 730, 87 A.L.R. 1191; Edelman v. Boeing Air Transport, Inc., 289 U.S. 249, 252, 53 S.Ct. 591, 592, 77 L.Ed. 1155; Monamotor Oil Co. v. Johnson, 292 U.S. 86, 93, 54 S.Ct. 575, 578, 78 L.Ed. 1141. The privilege of use is only one attribute, among many, of the bundle of privileges that make up property or ownership. Nashville, C. & St. L. Ry. Co. v. Wallace, supra; Bromley v. McCaughn, 280 U.S. 124, 136—138, 50 S.Ct. 46, 48, 74 L.Ed. 226; Burnet v. Wells, 289 U.S. 670, 678, 53 S.Ct. 761, 764, 77 L.Ed. 1439. A state is at liberty, if it pleases, to tax them all collectively, or to separate the faggots and lay the charge distributively. Id. Calling the tax an excise when it is laid solely upon the use (Vancouver Oil Co. v. Henneford, 183 Wash. 317, 49 P.(2d) 14) does not make the power to impose it less, for anything the commerce clause has to say of its validity, than calling it a property tax and laying it on ownership. 'A nondiscriminatory tax upon local sales * * * has never been regarded as imposing a direct burden upon interstate commerce and has no greater or different effect upon that commerce than a general property tax to which all those enjoying the protection of the state may be subjected.' Eastern Air Transport, Inc., v. South Carolina Tax Commission, 285 U.S. 147, 153, 52 S.Ct. 340, 341, 76 L.Ed. 673. A tax upon the privilege of use or storage when the chattel used or stored has ceased to be in transit is now an impost so common that its validity has been withdrawn from the arena of debate. Nashville, C. & St. L. Ry. Co. v. Wallace, supra; Edelman v. Boeing Air Transport, Inc., supra; Monamotor Oil Co. v. Johnson, supra. Cf. Vancouver Oil Co. v. Henneford, supra.

The case before us does not call for approval or disapproval of the definition of use or enjoyment in the rules of the Commission. Those rules inform us that 'property is put to use by the first act after delivery is completed within the state by which the article purchased is actually used or is made available for use with intent actually to use the same within the state. The term 'made a available for use' means and includes the exercise of any right or power over tangible personal property preparatory to actual use within the state, such as keeping, storing, withdrawing from storage, moving, installing or performing any act by which dominion or control over the property is assumed by the purchaser.' A tax upon a use so closely connected with delivery as to be in substance a part thereof might be subject to the same objections that would be applicable to a tax upon the sale itself. If the rules are too drastic in that respect or others, the defect is unimportant in relation to this case. Here the machinery and other chattels subjected to the tax have had continuous use in Washington long after the time when delivery was over. The plaintiffs are not the champions of any rights except their own.

2. The tax upon the use after the property is at rest is not so measured or conditioned as to hamper the transactions of interstate commerce or discriminate against them.

Equality is the theme that runs through all the sections of the statute. There shall be a tax upon the use, but sub- ject to an offset if another use or sales tax has been paid for the same thing. This is true where the offsetting tax became payable to Washington by reason of purchase or use within the state. It is true in exactly the same measure where the offsetting tax has been paid to another state by reason of use or purchase there. No one who uses property in Washington after buying it at retail is to be exempt from a tax upon the privilege of enjoyment except to the extent that ...

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