High Tide Seafoods v. State, 52590-1

• Court: United States State Supreme Court of Washington
• Writing for the Court: DOLLIVER; BRACHTENBACH, ANDERSEN, PEARSON, DORE, CALLOW, GOODLOE and DURHAM, JJ., and HAMILTON
• Citation: 106 Wn.2d 695,725 P.2d 411
• Parties: HIGH TIDE SEAFOODS, a partnership; James L. Shefler, as his separate estate; and Ernest J. Vail, a single person, Appellants, v. The STATE of Washington; The State of Washington Department of Revenue; and the Director of Revenue, Respondents.
• Docket Number: No. 52590-1,52590-1
• Decision Date: 11 September 1986

Page 695

106 Wn.2d 695

725 P.2d 411

HIGH TIDE SEAFOODS, a partnership; James L. Shefler, as his

separate estate; and Ernest J. Vail, a single

person, Appellants, v. The STATE of Washington; The State of Washington Department

of Revenue; and the Director of Revenue, Respondents.

No. 52590-1.

Supreme Court of Washington,

En Banc.

Sept. 11, 1986.

Ronald Richards, Jane Shefler, Port Angeles, for appellants.

Kenneth Eikenberry, Atty. Gen., Maureen Hart, Asst., Olympia, for respondents.

DOLLIVER, Chief Justice.

Plaintiffs challenge the legality and constitutionality of Washington's tax on enhanced food fish and request a refund for all taxes paid between July 1, 1980, and March 31, 1983, under RCW 82.27. Plaintiffs appeal from a summary judgment awarded in favor of the State of Washington dismissing their claim.

Plaintiff High Tide Seafoods is a Washington partnership. Plaintiffs James L. Shefler and Ernest J. Vail are its sole owners. Plaintiffs are engaged in the business of purchasing fresh salmon from fishermen, processing the fish, and wholesaling them to third parties. The salmon is purchased from both treaty Indians and nontreaty fishermen.

Pursuant to RCW 82.27, plaintiffs collected and paid excise taxes of $153,041.13 for the period from July 1, 1980, through March 31, 1983. In purchasing salmon from nontreaty fishermen, plaintiffs deducted from the purchase price an amount equal to a tax at one-half the rate levied under RCW 82.27.020 as allowed by RCW 82.27.020(2). Pursuant to the federal law, plaintiffs did not deduct that same amount in purchasing salmon from treaty Indian fishermen (an amount of $97,852.79).

Plaintiffs petitioned the Department of Revenue for a refund of one-half of the tax amount paid to treaty Indian fishermen for salmon purchases. Plaintiffs' refund request was denied by the Department in the determination in In re High Tide Seafoods, No. 82-128 (May 26, 1982) and in the final determination in In re High Tide Seafoods, No. 82-128A (Nov. 16, 1982). Plaintiffs appealed the Department's decision to Thurston County Superior Court seeking a refund of all fish tax paid, with interest, and declaratory and injunctive relief. They requested a judgment finding the taxes imposed by RCW 82.27 unlawful and enjoining the State from imposing and collecting the tax authorized by RCW 82.27. Plaintiffs moved for summary judgment; but the trial court continued adjudication of the matter pending our decision in Department of Fisheries v. DeWatto Fish Co., 100 Wash.2d 568, 674 P.2d 659 (1983).

Following the decision in DeWatto, both sides moved for summary judgment. The trial court entered an order granting summary judgment in favor of the State of Washington and denied the plaintiffs' similar motion. Plaintiffs' appeal was transferred to us pursuant to RAP 4.3.

Plaintiffs raise numerous legal and constitutional issues regarding RCW 82.27, the tax on enhanced food fish. These issues are approximately the same issues plaintiffs raised as amici curiae in the DeWatto case and which were not necessary to reach. Although we were interpreting the previous fish tax statute (former RCW 75.32), the holdings in DeWatto still cover and control most of the issues in the instant case. We affirm summary judgment awarded in favor of the State of Washington.

RCW 82.27 replaced the former fish tax statute. It is a single excise tax and encompasses no sales tax and no sales tax credit provision. Persons liable for the tax, however, still may pass on to their sellers one-half of the economic burden of the tax. RCW 82.27.020(2). Plaintiffs concede the tax impact of RCW 82.27 upon them is the same as the tax impact of former RCW 75.32.

Statutes are presumed constitutional and a party challenging a statute has the burden of establishing its invalidity beyond a reasonable doubt, as well as rebutting the presumption that all legally necessary facts exist. Higher Educ. Facilities Auth. v. Gardner, 103 Wash.2d 838, 843, 699 P.2d 1240 (1985). A statute, if possible, should be construed to be constitutional. State v. Moore, 79 Wash.2d 51, 58, 483 P.2d 630 (1971). The issues which follow are plaintiffs' challenges to the statute in effect between 1980 and 1983.

I

Plaintiffs claim RCW 82.27 is a property tax because the tax is levied upon the owner's "ownership" of the fish. RCW 82.27.020(1). They argue that as a property tax it fails to meet the requirements of Const. art. 7, §§ 1 and 2 because it is not a uniform tax. The state claims the tax is properly an excise tax because the tax is imposed upon an owner's exercising control over the fish for "commercial" purposes. We agree with the State.

RCW 82.27.020(1) provides:

In addition to all other taxes, licenses, or fees provided by law there is established an excise tax on the possession of food fish and shellfish for commercial purposes as provided in this chapter. The tax is levied upon and shall be collected from the owner of the food fish or shellfish whose possession constitutes the taxable event. The taxable event is the first possession by an owner after the food fish or shellfish have been landed. Processing and handling of food fish and shellfish by a person who is not the owner is not a taxable event to the processor or handler.

(Italics ours.) See Laws of 1980, ch. 98, § 2, p. 303.

This court distinguished a property tax from an excise tax in Black v. State, 67 Wash.2d 97, 406 P.2d 761 (1965). In Black, we defined a property tax as a tax on things tangible or intangible and an excise tax on the right to use or transfer things. Black, at 99, 406 P.2d 761. The tax in Black involved a tax on the leasing of tangible personal property and was held to be an excise tax, not a property tax.

[T]he obligation to pay an excise is based upon the voluntary action of the person taxed in performing the act, enjoying the privilege or engaging in the occupation which is the subject of the excise, and the element of absolute and unavoidable demand, as in the case of a property tax, is lacking.

Black, at 99 406 P.2d 761. (quoting 1 T. Cooley, Taxation § 46, at 132 (4th ed. 1924) ).

If a tax is imposed on the value of the property, it may be a property tax. If levied upon the privilege of doing business, it is an excise tax. Clifford v. State, 78 Wash.2d 4, 469 P.2d 549 (1970). A tax for the beneficial use of property as distinguished from a tax on property itself has long been established law. United States v. Detroit, 355 U.S. 466, 78 S.Ct. 474, 2 L.Ed.2d 424 (1958).

In this case, the fish tax is not imposed merely by reason of ownership or possession of the fish. RCW 82.27.020(1) refers to the tax imposed as an excise tax with the first possession by an owner as the taxable event. This "owner" becomes liable for the fish tax by exercising control over the fish for commercial purposes. Plaintiffs cite Jensen v. Henneford, 185 Wash. 209, 53 P.2d 607 (1936) for the proposition that because ownership is the taxable event the fish tax is a property tax. Besides being somewhat modified by more contemporary cases ( see, e.g., P. Lorillard Co. v. Seattle, 83 Wash.2d 586, 521 P.2d 208 (1974); Cary v. Bellingham, 41 Wash.2d 468, 250 P.2d 114 (1952) ), this court also stated in Jensen that when a tax is levied for the exercise of a privilege granted or permitted by the state, it may be considered an excise tax. Jensen v. Henneford, supra 185 Wash. at 218, 53 P.2d 607. The event causing this food fish tax to be levied is the transfer of ownership from the fisherman to the fish purchaser. It is not based just on the ownership of the fish.

Plaintiffs set forth no convincing authority which would classify the tax in RCW 82.27 as a property tax. The tax is imposed upon an owner's exercising control over fish for purposes of disposing of them for profit, and as such, it is an excise tax and is not subject to the uniformity requirements of Const. art. 7, §§ 1 and 2.

II

Plaintiffs claim the present tax is an unlawful delegation of the Legislature's taxing authority because it allows the person liable for the fish tax to choose whether to deduct one-half of the tax levied from the price paid to the nontreaty fishermen. We do not agree.

Plaintiffs point out that RCW 82.27.020(2) provides a person in possession of food fish "may deduct from the price paid to the person from which such food fish ... [is] purchased an amount equal to a tax at one-half the rate levied in this section upon these products." (Italics ours.) While this is true, the owner whose first possession of the food fish constitutes the taxable event is liable for the tax. That person alone is responsible for the tax regardless of whether a deduction is taken pursuant to RCW 82.27.020(2). "[T]he tax is levied upon and shall be collected from the owner of the food fish ... whose possession constitutes the taxable event." RCW 82.27.020(1). This is the legislative authority to impose the tax which is nondelegable. See 1 T. Cooley, Taxation § 78, at 193-94 (4th ed. 1924). The language cited by plaintiffs merely allows the parties liable for the tax to pass on to their sellers part of the burden of the tax; it does not trench upon the legislative function.

The Legislature has established a clear tax structure for liability. The tax is not discretionary; the first owner of the fish is liable for the full amount of the tax. No legislative power or authority is granted by RCW 82.27 to a taxpayer.

III

The State claims plaintiffs lack standing to raise issues regarding violations of the Indian treaty rights, freedom of association, equal protection, and Indian commerce clause because plaintiffs' contentions are based solely on assertions of the rights of third parties. The State argues that unless plaintiffs show they are harmed by the statute and are within the zone of interests protected by the guaranties at issue, they cannot challenge the validity of the statute. The plaintiffs claim they have standing to raise...