State ex rel. Stiner v. Yelle

• Decision Date: 08 September 1933
• Docket Number: 24637.
• Citation: 25 P.2d 91,174 Wash. 402
• Parties: STATE ex rel. STINER v. YELLE, State Auditor.
• Court: Washington Supreme Court

25 P.2d 91

174 Wash. 402

STATE ex rel. STINER v. YELLE, State Auditor.

No. 24637.

Supreme Court of Washington

September 8, 1933

Original mandamus proceeding by the State, on the relation of Will T Stiner, against Cliff Yelle, State Auditor.

Writ granted.

Yantis & Brodie, of Olympia, for relator.

G. W Hamilton and John W. Hanna, both of Olympia, for respondent.

Wright Jones & Bronson and Grinstead, Laube, Laughlin & Meakim, all of Seattle, and E. W. Anderson, of Olympia, amici curiae.

TOLMAN Justice.

This is an action instituted in this court for the purpose of testing the constitutionality of chapter 191, p. 869, Laws of 1933, imposing a tax on the privilege of engaging in business in this state. Relator seeks a writ of mandate to compel the respondent, as state auditor, to honor a voucher duly presented for services rendered by him at the behest of the state tax commission in forwarding its preparations to administer the act. The auditor refuses to recognize the voucher upon the ground that the act is unconstitutional. Hence, we have here only the one broad question as to the constitutionality of the act as a whole. No lesser or minor questions as to the reasonableness of the several classifications, as to the difference in rates as between the classes, or any other such question has been presented to us and no such question is to be prejudged by anything here said.

Without entering into a history of conditions giving rise to this legislation, it is sufficient to say that the Legislature was confronted by a situation of the utmost gravity requiring the prompt and effective raising of much additional revenue and making necessary the placing of a heavy tax burden upon every available source from which taxes might legally be drawn, or from which revenue might be derived, without causing more harm and loss than the depressed state of industry could bear. Faced with this situation, chapter 191 was enacted which is entitled: 'An Act relating to taxation; imposing taxes upon the privilege of engaging in business activities and providing for the ascertainment, assessment, collection and distribution thereof; providing for the administration and enforcement of this act; providing penalties; making appropriations; and declaring that this act shall take effect immediately.'

Section 1 of the act (page 869) contains definitions of certain of its terms, one or two of which will be set out and referred to as we proceed.

Section 2 (page 870) provides: 'From and after the first day of August, 1933, and until the thirty-first day of July, 1935, there is hereby levied and there shall be collected from every person an annual tax or excise for the privilege of engaging in business activities. Such tax or excise shall be measured by the application of rates against values, gross proceeds of sales, or gross income, as the case may be, as follows.'

Then follows the legislative classification of business into some twenty general classes, several of which are subdivided and subjected to different rates. The act, by reason of the Governor's veto, had eliminated from it, when it finally became a law, those engaged in agriculture, using the term in its broad sense, and also those engaged in rendering services, professional or otherwise, and it is upon the omission of those classes, and others, if any such there be, from the act, that the argument as to its unconstitutionality is now based.

The Attorney General and the friends of the court, appearing in defense of the action, appear to rely primarily upon the Fourteenth Amendment to the Federal Constitution; section 3 of article 1 of the State Constitution, which is to the same effect and provides, 'No person shall be deprived of life, liberty, or property without due process of law'; article 1, § 12, of the Constitution, which forbids special privileges or immunities; and article 7, § 1, being the Fourteenth Amendment to the state Constitution, which provides: 'The power of taxation shall never be suspended, surrendered or contracted away. All taxes shall be uniform upon the same class of property within the territorial limits of the authority levying the tax and shall be levied and collected for public purposes only. The word 'property' as used herein shall mean and include everything, whether tangible or intangible, subject to ownership. All real estate shall constitute one class: Provided, That the Legislature may tax mines and mineral resources and lands devoted to reforestation by either a yield tax or an ad valorem tax at such rate as it may fix, or by both. Such property as the Legislature may by general laws provide shall be exempt from taxation. Property of the United States and of the state, counties, school districts and other municipal corporations, and credits secured by property actually taxed in this state, not exceeding in value the value of such property, shall be exempt from taxation. The Legislature shall have power, by appropriate legislation, to exempt personal property to the amount of three hundred ($300.00) dollars for each head of a family liable to assessment and taxation under the provisions of the laws of this state of which the individual is the actual bona fide owner.'

In the light of the constitutional provision, just quoted, it seems necessary first to determine whether the tax under consideration is a property tax or an excise tax because of the uniformity clause which applies specifically to each class of property.

Relator, of course, bases his application upon the idea that this is an excise tax pure and simple, while the Attorney General and some of the friends of the court defending, though not so conceding, appear by the arguments presented to anticipate that we must so hold. Yet another firm appearing as amicicuriae does argue this question extensively. Time and space will not permit a review of the authorities on this question. Slight differences in the terms of the acts considered or in constitutional provisions have led to a maze of conflicting and bewildering decisions. It may be that we have in some prior case used language not wholly consistent with our present views. After an exhaustive study of the cases we are well satisfied that this is not a property tax even under the broad and allinclusive terms of our Constitution. To hold otherwise would render it exceedingly difficult if not impossible to sustain any excise tax.

It is true that the Constitution defines property as anything subject to ownership, and, in a sense, one's business and its earnings are owned by him, but the privilege of engaging in business and gainful pursuits under the protection of our laws is something which must and does exist Before the business can be established and something far and away beyond and above the mere ownership of a business. Man in a state of nature gained his sustenance by his strength or cunning, or both, and that which he so gained might, and no doubt often was, taken from him Before he could use and enjoy it by some one stronger and more cunning. Hence the established state enacted laws for the protection of human rights, the rights of property and to prevent the weak or the credulous from becoming the helpless victims of the force or fraud of the strong and the cunning. Peace officers and courts, among many other things, were established to this end and every citizen is now measurably safe in pursuing any gainful occupation with the expectation that he will be by the state fully protected and made secure in his property investment, and also in his gains therefrom. This is the privilege, far above mere property, which it is now sought to tax to the end that it may pay in some part its fair share of the cost to the state of its creation and continuance.

Income may be acquired, but only in exceptional cases, such as annuities and the like, is it susceptible of ownership. When acquired, income immediately becomes property in the hands of the acquirer, and it is, of course, taxable with other property of the same class.

This act does not concern itself with income which has been acquired, but only with the privilege of acquiring, and that the amount of the tax is measured by the amount of the income in no way affects the purpose of the act or the principle involved.

Among other authorities bearing upon the question, which support our view, we refer only to the following few: Southern Railway Co. v. Watts, 260 U.S. 519, 43 S.Ct. 192, 67 L.Ed. 375; Lawrence v. State Tax Commission, 286 U.S. 276, 52 S.Ct. 556, 76 L.Ed. 1102; and our own cases of Pacific Telephone & Telegraph Co. v. Seattle (Wash.) 21 P.2d 721; Puget Sound Power & Light Co. v. Seattle (Wash.) 21 P.2d 727; Town of Bucoda v. Swaney, 163 Wash. 43, 299 P. 652; Town of Sumner v. Ward, 126 Wash. 75, 217 P. 502; and prior cases therein cited. These seem sufficient to decisively determine that we are now dealing with an excise tax and not with a tax on property.

This being an excise tax, the Legislature, under the Fourteenth Amendment to our State Constitution, has very broad power, and we cannot interfere with that power except for arbitrary action, clear abuse, or constructive fraud appearing on the face of the act or from facts of which we may take judicial knowledge.

'A very wide discretion must be conceded to the legislative power of the state in the classification of trades, callings businesses, or occupations which may be subjected to special forms of regulation or taxation through an excise or license tax. If the selection or classification is neither capricious nor arbitrary, and rests upon some reasonable consideration of difference or policy, there is no denial of the equal protection of the law.' Brown-Forman Co. v. Kentucky, 217 U.S. 563, 30 S.Ct. 578, 580, 54...