Mahler v. Tremper, 31898

• Decision Date: 24 April 1952
• Docket Number: No. 31898,31898
• Citation: 243 P.2d 627,40 Wn.2d 405
• Court: Washington Supreme Court
• Parties: MAHLER, v. TREMPER, Treasurer of King County.

Page 405

40 Wn.2d 405

243 P.2d 627

MAHLER, v. TREMPER, Treasurer of King County.

No. 31898.

Supreme Court of Washington, en Banc.

April 24, 1952.

Peyser, Cartano, Botzer & Chapman, Seattle, for appellant.

Charles O. Carroll, Samuel C. Rutherford, Seattle, Smith Troy, Lyle L. Iverson, Olympia, for respondents.

FINLEY, Justice.

James H. Mahler, engaged in the real estate business in Seattle, Washington, instituted this law suit in King county superior court. He questions, on several grounds, the constitutionality of the 1951 tax on real estate sales, or transactions, Laws of 1951, 1st Ex.Sess. chapter 11, p. 108, hereinafter referred to as chapter 11. The action was brought under the declaratory judgment act. Mr. Mahler asked for injunctive relief against the auditor and treasurer of King county to prevent them from enforcing the law and collecting the tax. A demurrer, on the ground that the complaint did not state facts sufficient to constitute a cause of action, was sustained by the trial court. Mr. Mahler has appealed.

Chapter 11 authorizes each county of the state, at its option, to impose a tax on sales of real estate. The imposition of the tax is restricted to sales involving real estate located in the particular county. King county has elected to exercise the statutory option by enacting an ordinance to effectuate or impose the tax on such sales of real estate. Appellant, among other things, contends that the tax is not an excise, but one imposed upon property, and that it violates constitutional provisions or limitations respecting the imposition of taxes on property; furthermore, that chapter 11 violates other state and Federal constitutional provisions. We do not agree. It is our opinion that the trial court properly sustained the demurrer and dismissed the action.

We have reviewed State ex rel. Stiner v. Yelle, 174 Wash. 402, 25 P.2d 91, business and occupation tax; Morrow v. Henneford, 182 Wash. 625, 47 P.2d 1016, sales tax; Vancouver Oil Co. v. Henneford, 183 Wash. 317, 49 P.2d 14, compensating tax; Klickitat County v. Jenner, 15 Wash.2d 373, 130 P.2d 880, sales tax; Gruen v. State Tax Commission, 35 Wash.2d 1, 211 P.2d 651, soldiers bonus--cigarette tax; and numerous other cases.

The tax incidence in the case at bar relates to the sale of real estate. The tax sustained in the Morrow case, supra, related to, or was imposed upon, the sale of personal property. Appellant has advanced many ingenius arguments but we can visualize no distinction between the Morrow case and the one at bar, except the fact that the former was concerned with a transaction tax involving personal property, while the latter is concerned with a transaction tax involving real estate. We recognize the distinction between real and personal property and realize quite well that many arguments involving the difference can be made in an effort to distinguish the tax in the Morrow case from one in the case at bar. Without more, we are convinced that chapter 11 imposes an excise, and that constitutional provisions relative to taxes on property are no more applicable here than they were in Morrow v. Henneford, supra. Our thinking on this aspect of the matter is well explained by the comment of the court in the Vancouver Oil Company case, supra, 183 Wash. at page 320, 49 P.2d at page 16, as follows:

'With reference to the first contention, that is, that the tax is a property tax, little need be said, because this contention is coverted by what is said in the recent case of Morrow v. Henneford , 47 P.2d 1016, where it was held that the tax provided for in chapter 180 was an excise tax, and not a property tax.'

At this point it is appropriate to refer to several basic principles of law which are generally applicable to the instant case. In State ex rel. King County v. State Tax Commission, 174 Wash. 336, 341, 24 P.2d 1094, 1096, we said:

'* * * The power of taxation is an incident of sovereignty, and is possessed by the state without being expressly conferred by the people. It is a legislative power, and, when the people, by the Constitution, create a department of government upon which they confer the power to make laws, the power of taxation follows as a necessary part of the general power. State ex rel. Thompson v. Nichols, 29 Wash. 159, 69 P. 771; State ex rel. Board of Commissioners v. Clausen, 95 Wash. 214, 163 P. 744. The Legislature had a right to enact chapter 106, even though not expressly authorized by the Constitution.

'Since the Legislature had the power of taxation, it follows that it might confer such power upon such agencies as it deemed fit and proper for the valuation and equalization of intercounty properties. * * *' In Morrow v. Henneford, supra, 182 Wash. at page 630, 47 P.2d at page 1018, we referred to a decision of the United States Supreme Court as follows:

'In Bromley v. McCaughn, 280 U.S. 124, 50 S.Ct. 46, 47, 74 L.Ed. 226, the court held that a tax imposed upon transfers of property by gift is not a direct tax, but an excise on the exercise of one of the powers incident to ownership, and need not be apportioned. The court said:

"Whatever may be the precise line which sets off direct taxes from others, we need not now determine. While taxes levied upon or collected from persons because of their general ownership of property may be taken to be direct, Pollock v. Farmers' Loan & Trust Company, 157 U.S. 429, 15 S.Ct. 673, 39 L.Ed. 759; Id., 158 U.S. 601, 15 S.Ct. 912, 39 L.Ed. 1108, this court has consistently held, almost from the foundation of the government, that a tax imposed upon a particular use of property or the exercise of a single power over property incidental to ownership, is an excise which need not be apportioned, and it is enough for present purposes that this tax is of the later class. [Citing cases.]

"It is a tax laid only upon the exercise of a single one of those powers incident to ownership, the power to give the property owned to another. Under this statute all the other rights and powers which collectively constitute property or ownership may be fully enjoyed free of the tax. So far as the constitutional power to tax is concerned, it would be difficult to state any intelligible distinction, founded either in reason or upon practical considerations of weight, between a tax upon the exercise of the power to give property inter vivos and the disposition of it by legacy, upheld in Knowlton v. Moore, supra [178 U.S. 41, 20 S.Ct. 747, 44 L.Ed. 969], the succession tax in Scholey v. Rew, supra [23 Wall 331, 23 L.Ed. 99], the tax upon the manufacture and sale of colored oleomargarine in McCray v. United States, supra [195 U.S. 27, 24 S.Ct. 769, 49 L.Ed. 78], the tax upon sales of grain upon an exchange in Nicol v. Ames, supra [173 U.S. 509, 19 S.Ct. 522, 43 L.Ed. 786], the tax upon sales of shares of stock in Thomas v. United States, supra [192 U.S. 363, 24 S.Ct. 305, 48 L.Ed. 481], the tax upon the use of foreign built yachts in Billings v. United States, supra [232 U.S. 261, 34 S.Ct. 421, 58 L.Ed. 596], the tax union the use of carriages in Hylton v. United States, supra [3 Dall. 171, 1 L.Ed. 556]. * * *

"It is true that in each of these cases the tax was imposed upon the exercise of one of the numerous rights of property, but each is clearly distinguishable from a tax which falls upon the owner merely because he is owner, regardless of the use or disposition made of his property. See Billings v. United States, supra; cf. Pierce v. United States, 232 U.S. 290, 34 S.Ct. 427, 58 L.Ed. 609. * * * "The power to give cannot be said to be a more important incident of property than the power to use, the exercise of which was taxed in Billings v. United States, and, even though differences in degree may be carried to a point where they produce distinctions in kind, the present levy falls so far short of taxing generally the uses of property that it cannot be likened to the taxes on property itself which have been recognized as direct. It falls, rather, into that category of imposts or excises which, since they apply only to a limited exercise of property rights, have been deemed to be indirect and so valid, although not apportioned."

In the Morrow case, after our reference to the Bromley case, we stated:

'We are of the opinion that the sales tax here involved is an excise, not required to be apportioned, and, therefore, not obnoxious to the cited provisions of the State and Federal Constitutions.'

In Newman v. Schlarb, 184 Wash. 147, 154, 50 P.2d 36, 39, we said:

'The establishment and maintenance of public schools throughout the state is primarily and essentially a state purpose, from which local and special benefits are expected to, and do, flow to the counties and the various municipalities of the state. In the performance of such general duties and purposes, the state calls upon and utilizes its constituent political agencies and for such purposes confers such powers and imposes such duties upon them as it deems necessary. These local subdivisions are created by the sovereign power of the state and under its paramount authority, with the view, not only of having them administer their own local and internal affairs, but also of having them carry out the policies of the state at large and assist in the accomplishment of the general purposes of the state. Consequently, the state, through the Legislature, may not only require such subdivisions to levy taxes for public purposes, but may also fix the amount to be levied by them, provided that such purposes, though of a general nature and for the benefit of the whole people, result in special benefits to the particular subdivision. [Citing cases.]'

We are committed to the proposition that a tax upon the sales of property is not a tax upon the subject matter of that sale. A sales tax upon personal property or a sales tax upon real property is a tax upon the act or incidence of transfer. The imposition relates to an exercise of...