Pacific Tel. & Tel. Co. v. City of Seattle

Decision Date21 April 1933
Docket Number24327.
CourtWashington Supreme Court
PartiesPACIFIC TELEPHONE & TELEGRAPH CO. v. CITY OF SEATTLE et al.

Appeal from Superior Court, King County; J. T. Ronald, Judge.

Suit by the Pacific Telephone & Telegraph Company against the City of Seattle and another. From judgment dismissing the action plaintiff appeals.

Affirmed.

STEINERT J., dissenting.

McMicken, Ramsey, Rupp & Schweppe and Winlock Miller, Jr., all of Seattle, for appellant.

A. C Van Soelen, Walter L. Baumgartner, and C. V. Hoard, all of Seattle, for respondents.

BLAKE Justice.

The plaintiff brought this action to enjoin the defendant from collecting a license tax under Ordinance No. 62,662, being entitled: 'An ordinance relating to, and providing for, a license or occupation tax upon certain businesses occupations, pursuits and privileges; defining offenses and providing penalties.'

A demurrer interposed to the amended complaint was sustained. The plaintiff, electing to stand on the pleading, appeals from a judgment dismissing the action and assigns error as follows:

'I. The court erred in sustaining respondents' demurrer to appellant's amended complaint.
'II. The court erred in dismissing appellant's cause of action.
'III. The court erred in failing to hold that the enforcement of the ordinance as to appellant would contravene the Fourteenth Amendment to the Constitution of the United States, and article 1, § 3, and article 7, § 9, of the Constitution of the state of Washington.'

The pertinent provisions of the ordinance are:

'Section 1. Exercise of Revenue License Power: The provisions of this ordinance shall be deemed an exercise of the power of the City of Seattle to license for revenue.'

'Section 2. * * * Gross Income: The value proceeding or accruing from the sale of tangible property or service, and receipts (including all sums earned or charged, whether received or not) by reason of the investment of capital in the business engaged in, including rentals, royalties, fees or other emoluments, however designated (excluding receipts or proceeds from the use or sale of real property or any interest therein, and proceeds from the sale of notes, bonds, mortgages, or other evidences of indebtedness or stocks and the like) and without any deduction on account of the cost of the property sold, the cost of materials used, labor costs, interest or discount paid, or any expense whatsoever, and without any deduction on account of losses.'

'Section 5. Occupations Subject to Tax-Amount: There are hereby levied and shall be collected annual license fees or occupation taxes against the persons on account of the business activities, and in the amounts to be determined by the application of the rates against gross income as follows:

'(a) Upon every person engaged in or carrying on a telegraph and/or telephone business, a fee or tax equal to four per cent. (4%) of the total gross income from such business in the city during his fiscal year next preceding the tax year for which the license is required; provided however, that the minimum fee or tax shall not be less than One Thousand ($1,000.00) Dollars per tax year.'

The appellant sets up some twenty-one separate grounds or reasons why the tax sought to be collected from it under the ordinance is invalid. For the purposes of this discussion, these may be classified into five groups: (1) That the City has no power to levy such a tax; (2) that the state has preempted this field of taxation; (3) that the definition of 'gross income' is so indefinite and uncertain that neither the income subject to the tax nor the amount thereof can be ascertained; (4) that the tax is unreasonable, oppressive, and confiscatory; and (5) that the tax is in contravention of appellant's rights under the Act of Congress of July 24, 1866 (14 Stat. 221 [47 USCA § 1 et seq.]), known as the Post Roads Act.

I. It is first contended that there is no grant of power from the state to the city to levy such a tax. The power, under which the right to levy the tax is asserted, is found in Rem. Comp. Stat. §§ 8966 and 8981.

Section 8966 relates to the powers of cities of the first class, and, among other things, provides:

'Any such city shall have power--* * *

'33. To grant licenses for any lawful purpose, and to fix by ordinance the amount to be paid therefor, and to provide for revoking the same: Provided, that no license shall be granted to continue for longer than one year from the date thereof. * * *'

Section 8981 provides: 'Any city adopting a charter under the provisions of this act shall have all the powers which are now or may hereafter be conferred upon incorporated towns and cities by the laws of this state, and all such powers as are usually exercised by municipal corporations of like character and degree, whether the same shall be specifically enumerated in this act or not.'

This court has held in numerous cases that cities and towns, under the powers granted, have the right to impose license taxes either for the purpose of regulation or revenue. Fleetwood v. Read, 21 Wash. 547, 58 P. 665, 666, 47 L. R. A. 205; City of Walla Walla v. Ferdon, 21 Wash. 308, 57 P. 796; Stull v. De Mattos, 23 Wash. 71, 62 P. 451, 51 L. R. A. 892; In re Garfinkle, 37 Wash. 650, 80 P. 188; Town of Sumner v. Ward, 126 Wash. 75, 217 P. 502; Town of Bucoda v. Swaney, 163 Wash. 43, 299 P. 652.

Speaking of the grant of power contained in subdivision 33, § 8966, supra, in the Fleetwood Case, Judge Dunbar said: 'This provision is in relation to cities of the first class. * * * The language is comprehensive. The authority is to grant licenses for any lawful purpose, and, in the absence of restriction, the purpose of raising revenue is as lawful as the purpose of exercising the police power. This interpretation is borne out, we think, by the authorization of the legislature to cities of other classes. * * * And so the power to license for purposes of revenue is especially granted to all the other classes of cities.'

We think that, by virtue of section 8981, supra, the power to license for purposes of revenue is also 'especially granted' to cities of the first class. In any event, subdivision 33 of section 8966 has been uniformly construed to confer such power. Pacific Tel. & Tel. Co. v. Everett, 97 Wash. 259, 166 P. 650.

II. It is contended that, conceding the power, the city is precluded from exercising it, because the state has preempted this field of taxation. With respect to police powers, it is a rule of universal application that a municipality may not enact regulatory ordinances upon subjects covered by state legislation. State ex rel. Webster v. Superior Court, 67 Wash. 37, 120 P. 861, L. R. A. 1915C, 287, Ann. Cas. 1913D, 78; Seattle Electric Co. v. Seattle, 78 Wash. 203, 138 P. 892. Whether this rule is applicable in cases involving the exercise of the taxing power, it is not necessary for us to determine, because the state had not entered this field of taxation at the time the ordinance in question was enacted.

It must be kept in mind that the power granted to the city to issue licenses is dual: (1) For regulation; (2) for revenue. The power here exercised is for revenue and not for regulation. Here the granting of the license is an incident to the power to raise revenues. The license is the means, not the end. It is the method provided for raising the revenues. The penalty provided is merely a mode of enforcing payment, and the license is only a receipt for the tax. Home Insurance Co. v. City Council of Augusta, 93 U.S. 116, 23 L.Ed. 825. The tax is an excise. It is levied upon the right to do business, not upon the right to exist; nor upon the property. The cases relied upon by appellant on this point so characterize such a tax. State ex rel. Zielonka v. Carrel, 99 Ohio St. 220, 124 N.E. 134; City of Cincinnati v. American Telephone & Telegraph Co., 112 Ohio St. 493, 147 N.E. 806; Firestone v. City of Cambridge, 113 Ohio St. 57, 148 N.E. 470, 471.

In 1 Cooley on Taxation (4th Ed.) § 26, it is said: 'One distinction between a tax upon a business * * * and a license is said to be 'that the former is exacted by reason of the fact that the business is carried on * * * within the jurisdiction of the taxing power, and the latter is required as a condition precedent to the right to carry on such business * * * within the jurisdiction.' So it has been said that a charge cannot be deemed a license rather than a tax unless the payment thereof confers some right or privilege upon the person charged which otherwise would not exist.'

A license is granted under the police power; an excise is imposed under the taxing power. The former is essentially not a tax at all. 1 Cooley, Taxation (4th Ed.) § 26.

'The distinction between a demand of money under the police power and one made under the power to tax is not so much one of form as of substance. The proceedings may be the same in the two cases, although the purpose is essentially different. The one is made for regulation and the other for revenue. If for regulation, it is an exercise of the police power while if for revenue it is an exercise of the taxing power.' 1 Cooley, Taxation (4th Ed.) § 27.

Bearing this distinction in mind, we shall examine briefly the statutes, by virtue of which appellant contends that the state has pre-empted the field of taxation covered by the ordinance.

Laws of 1929, chapter 107 (page 209), requires public utility companies, subject to regulation as to rates and charges by the department of public works, to 'pay to the department of public works a fee of 1/10 of one per cent of such gross operating revenue. * * *' This act is amendatory of section 1 of chapter 107 of the Laws of 1923 (page 290)...

To continue reading

Request your trial
38 cases
  • Cape Girardeau v. Groves Motor Co., 36862.
    • United States
    • United States State Supreme Court of Missouri
    • September 10, 1940
    ...52 Pac. 797; Clark v. Titusville, 184 U.S. 329; Young v. Lexington, 235 Ky. 822, 32 S.W. (2d) 410; Pacific Tel. & Tel. Co. v. Seattle, 172 Wash. 649, 21 Pac. (2d) 721; American Express Co. v. St. Joseph, 66 Mo. 675; St. Louis v. Sternberg, 69 Mo. 289; Village of Beverly Hills v. Schulter, 1......
  • Great Northern Ry Co v. State of Washington, 20
    • United States
    • United States Supreme Court
    • February 1, 1937
    ...amended by § 1, c. 107, p. 290 of the Laws of 1923. It left section 2 of c. 113, p. 354 Laws of 1921, in effect. 3 Pacific T. & T. Co. v. Seattle, 172 Wash. 649, 21 P.(2d) 721, affirmed on other questions 291 U.S. 300, 54 S.Ct. 383, 78 L.Ed. 810. See, also, the opinion below, 184 Wash. 648,......
  • State ex rel. Pacific Tel. & Tel. Co. v. Department of Public Service, 28594.
    • United States
    • United States State Supreme Court of Washington
    • October 22, 1943
    ...of the city of Seattle to levy the tax referred to was upheld by this court in the case of Pacific Tel. & Tel. Co. v. Seattle, 172 P. 649, 21 P.2d 721, the judgment of this court having affirmed by the Supreme Court of the United States, Pacific Tel. & Tel. Co. v. Seattle, 291 U.S. 300, 54 ......
  • State ex rel. Pacific Tel. & Tel. Co. v. Department of Public Service, 28594.
    • United States
    • United States State Supreme Court of Washington
    • October 22, 1943
    ...of the city of Seattle to levy the tax referred to was upheld by this court in the case of Pacific Tel. & Tel. Co. v. Seattle, 172 P. 649, 21 P.2d 721, the judgment of this court having been affirmed by the Supreme Court of the United States, Pacific Tel. & Tel. Co. v. Seattle, 291 U.S. 300......
  • Request a trial to view additional results
1 books & journal articles
  • A Washington State Income Tax-again?
    • United States
    • Seattle University School of Law Seattle University Law Review No. 16-02, December 1992
    • Invalid date
    ...373, 25 P.2d at 82. 115. Id. at 374, 25 P.2d at 82. 116. Id. at 378, 25 P.2d at 83. 117. See, e.g., Pacific Tel. and Tel. Co. v. Seattle, 172 Wash. 649, 21 P.2d 721 118. In re Ellis' Estate, 169 Wash. 581, 584, 14 P.2d 37, 39 (1932) (stating that "an inheritance tax is not a tax upon proper......

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT