Rusan's, Inc. v. State
| Decision Date | 24 December 1970 |
| Docket Number | No. 40412,40412 |
| Citation | 478 P.2d 724,78 Wn.2d 601 |
| Court | Washington Supreme Court |
| Parties | RUSAN'S, INC., a Washington corporation, Respondent, v. The STATE of Washington, Appellant. |
Slade Gorton Atty. Gen., Timothy R. Malone, Asst. Atty. Gen., Olympia, for appellant.
Paine, Lowe, Coffin, Herman & O'Kelly, Horton Herman, John R. Quinlan, Spokane, for respondent.
The previous majority opinion in this case (reported in 77 Wash.Dec.2d 355, 462 P.2d 218 (1969)), does not properly resolve several significant aspects of this appeal. The end result is an erroneous interpretation of the provisions of subsection (2) of RCW 82.04.270.
Although the facts of this appeal are fully stated in the original majority opinion, a brief recapping here is useful to clarify the grounds for the present opinion. Rusan's Inc., is a Washington corporation which, during the times pertinent to this litigation, operated four women's apparel stores in Spokane. Each store catered to the individual clothing tastes of the customers in its particular locale. Rusan's buyers placed periodic orders with out-of-state wholesalers and manufacturers. These suppliers were directed to individually box and mark clothing, designating it for the particular Rusan's store for which it was destined. All merchandise was, however, delivered to Rusan's downtown store. Upon arrival the merchandise was removed from its boxes, steamed for display, and priced. The merchandise was then placed on racks which were individually marked as belonging to the Rusan's store for which it was destined. While in the downtown Rusan's receiving room, the clothing of each store at all times remained identified with the particular Rusan's store for which it had been ordered. Within one day of receipt, the merchandise was delivered, by Rusan's trucks, to the appropriate Rusan's store.
In our judgment, the previous opinion lacks proper emphasis upon (1) the fact that the power of the legislature is tantamount to being plenary in the imposition of excise taxes--I.e., taxation of activities; and (2) that the legislature, in enacting subsection (2) of RCW 82.04.270, exercised its well-nigh plenary power in imposing this excise tax.
In numerous instances the legislature has taxed certain run-of-the-mill, usual, or well-recognized activities, such as retailing, wholesaling, processing or manufacturing. As to those activities clearly falling within the indicated categories--I.e., usually and habitually so defined and regarded--few, if any, disabling legal questions may be raised relative to the validity of excise taxation. The exceptions to this proposition, for the most part, involve considerations relating to equal protection and to the commercial reasonableness of the classification.
Closely collateral to the imposition of excise taxes upon clearly run-of-the-mill activities, the legislature further has the authority to impose excise taxes upon other activities of a Comparable or related nature. Thus, the power of the legislature in the field of excise taxation is such that taxes may be imposed upon activities which, although not normally considered to be within a given category, are, nevertheless, deemed by the legislature, For tax purposes, to be within such a category. See Bornstein Sea Foods, Inc. v. State, 60 Wash.2d 169, 373 P.2d 483 (1962); Stokely-Van Camp, Inc. v. State, 50 Wash.2d 492, 312 P.2d 816 (1957). Such taxes have frequently raised judicial hackles and doubts; Nevertheless, even more frequently they have been held to be within the legislature's power of enactment. For purposes of analysis, it is possible to express the legislature's power in this regard by an illustrative formula: it is unquestionably true that the legislature has the power to impose excise taxes upon activities which clearly fall within a commonly recognized category which could be labeled 'A' or which would be clearly recognized or describable as 'black.' In addition, however, it is within the power of the legislature to provide that certain specified activities, not clearly within category 'A' or not clearly describable as 'black,' nevertheless, For the purpose of tax imposition, are Deemed to be categorized as 'A' or 'black.'
In other words, the problem is not whether the legislature has the power to impose the tax. Rather, the only legal question presented for an appellate court is whether confusion and doubt exists as to the nomenclature employed or the language used by the legislature in drafting and imposing a given excise tax. These considerations dramatically illustrate the nature of the problem in the instant case. The central question presented is whether the merchandising arrangements or activities performed by Rusan's, Inc., may be said to be included within the language employed by the legislature in drafting subsection (2) of RCW 82.04.270.
The error in the previous majority opinion of this Court is its assumption that the described activities of Rusan's, Inc., are solely or completely descriptive of a retail operation, with no semblance or comparability whatsoever to wholesale activities or functions. The crucial question which should be, but is not, asked by the previous opinion is: What are the usual or 'run-of-the-mill' activities of wholesalers? A short, but accurate, answer to this question would seem to be that (a) wholesalers acquire or purchase merchandise from manufacturers or processors; (b) wholesalers--the run-of-the-mill variety--perform no manufacturing and few, if any, processing activities or functions with respect to merchandise acquired or purchased; and (c) wholesalers arrange for merchandise to be offered, transported, and delivered to retailers on the basis of cash, credit or other bookkeeping terms. In other words, wholesalers, in the performance of their activities or functions, merely provide a 'merchandising conduit' for the flow of goods, wares, and merchandise from manufacturers and processors to retail outlets, and, finally to the consuming public.
It is thus instructive to compare the described activities of Rusan's, Inc., in the instant case to the above-stated description of wholesaling: (a) Rusan's acquired merchandise from manufacturers and other suppliers; (b) Rusan's performed no manufacturing and little or no significant processing functions as to the merchandise; and (c) thereafter, Rusan's made the merchandise available to retailers for sale--I.e., by delivering the merchandise to their retail outlets. Additionally, Rusan's made the necessary bookkeeping arrangements for payment or reimbursement for the merchandise acquired, offered, transported, and distributed to the several retail stores. We are convinced that these activities can, and properly should, be regarded as Closely comparable to those of a wholesaler. The statute, by clear inference, does not require that such activities be 'simon-pure' wholesaling activities. In fact, subsection (2) of RCW 82.04.270 specifically negates the significance or the necessity of a 'purchase and sale,' involving passage or changing of title (which obviously did not occur in the instant case involving passage of merchandise from Rusan's downtown store to its several retail stores).
Lastly, in deciding this appeal in favor of Rusan's, Inc., the previous majority opinion relies almost exclusively upon Stipulation of Fact 4 entered into by the parties. That opinion's emphasis, in our judgment, misinterprets this stipulation by taking certain of its portions completely out of context and giving those portions an 'out of context' interpretation. The full Stipulation of Fact 4 reads as follows:
The activity taxed under the Washington Business and Occupation Tax in this situation is the alleged wholesaling function activities of the plaintiff. The measure of the assessed tax is the value of articles shipped from the Rusan's downtown location to the outlying Rusan's store times the wholesaling function business tax rate. The measure of the tax is not in dispute. What is in dispute is whether under the above facts, Rusan's is engaged in wholesaling functions subject to tax under the provisions of RCW 82.04.270(2). If wholesaling functions are not present in this situation, there is no tax and the measure of the tax is therefore immaterial.
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