State of Alaska v. Petronia
| Decision Date | 06 October 1966 |
| Docket Number | No. 38086,38086 |
| Citation | 69 Wn.2d 460,418 P.2d 755 |
| Parties | The STATE OF ALASKA, one of the United States, Respondent, v. Walter PETRONIA and Rose Petronia, his wife et al., Appellants. |
| Court | Washington Supreme Court |
Vance, Davies, Roberts & Bettis, J. Duane Vance, John M. Darrah, Seattle, for appellants.
Warren Colver, Atty. Gen., Michale M. Holmes, Deputy Atty. Gen., of Alaska, Juneau, Aiken, St. Louis & Steere, Charles E. Siljeg, Seattle, for respondent.
This is an appeal from a judgment entered in four consolidated cases by the superior court for King County. These actions were instituted by the attorney general of the state of Alaska under our reciprocal tax collection statute, RCW 4.24.140, for the enforcement of the payment by certain merchant seamen of income taxes asserted to be owed to the state of Alaska.
Of the four defendant (appellant) seamen, Walter Petronia Morris K. Nainoa and Charles Frankle are residents of the state of Washington, and John W. Massey is a resident of the state of Oregon. All, however, were covered by collective bargaining agreements between the Pacific District of the Seafarers International Union and the Pacific Maritime Association, and were hired out of the union dispatch hall in Seattle. The question of this court's jurisdiction is not raised by any of the defendants. The facts are set out in a written stipulation between counsel for the parties and are undisputed.
The defendants' duties as seamen were exclusively on board ships, relating principally to the operation and maintenance of the vessels which they were aboard. For the taxable year in question, 1960, they earned a substantial percentage of their voyage pay while the vessels upon which they were serving were within the boundaries of the state of Alaska.
The pertinent part of Title 43, Alaska Statutes, applicable to the defendants provides:
Sec. 43.20.010. Tax on individuals, fiduciaries, corporations, and banks. (a) There is levied and there shall be collected and paid for each taxable year upon the net income of every resident and nonresident individual, fiduciary, and bank that is required to make a return and pay a tax under the Federal Income Tax law a tax equal to 16 per cent of the total income tax that would be payable for the same taxable year to the United States * * *.
Sec. 43.20.040. Income from sources in the state. (a) Income from sources in the state, for the purposes of this chapter, includes * * * (2) income from a business, trade, or profession, and compensation for services rendered in the state * * *.
Sec. 43.20.070. Employees of interstate carriers. The tax levied by this chapter applies to that portion of the voyage pay of vessel personnel of interstate carriers engaged in the Alaska trade which is earned in the waters of the state. The tax also applies to that portion of the pay earned in the state of the personnel of carriers operating vehicles or airplanes on land or in the air on routes to and from the state. In determining the portion of the voyage pay of vessel personnel earned in the waters of the state, the method of allocation provided for in § 130(g) of this chapter shall be used. (Italics ours.)
Sec. 43.20.130. Allocation of business income. * * *
(g) The value of vessels operating on the high seas and compensation of employees engaged in operating the vessels shall be apportioned to the state in the ratio which the number of days spent in ports inside the state bears to the total number of days spent in ports inside and outside the state. The term 'days spent in ports' does not include periods when ships are tied up because of strikes or withheld from the Alaska service for repairs, or because of seasonal reduction of service. Days in port are computed by dividing the aggregate number of hours in all ports by 24. The value of aircraft and automotive vehicles operating as freight and passenger carriers from, to, and inside the state and compensation of employees so engaged are apportioned to the state in the ratio which the number of days during which the services are rendered inside the state bears to the total number of days during which the services are rendered inside and outside the state.
Applying the ratio in § 43.20.130, supra, the defendants earned approximately the following percentage of voyage pay while serving as seamen aboard vessels within the waters of Alaska: For the taxable year of 1960, Petronia, 17 per cent; Nainoa, 16 per cent; Frankle, 26 per cent; and Massey, a higher percentage.
The apportionment of wages earned in Alaska by the defendants, and the amount of taxes assessed them in pursuance of the statutes, are not in issue in this case. All parties agree that the sole issue is whether the state of Alaska can constitutionally levy a tax on the net income of seamen engaged in interstate and foreign commerce, where the tax is levied only on that portion of the seamen's net income which is attributed to their activity within the boundaries of the State of Alaska. The trial court held that the Alaska net income tax was constitutional and entered judgment against the defendants in the amounts due under the act, in pursuance of the stipulation. The defendants appeal.
Although the parties raise no question as to the jurisdiction of this court on this appeal, we have nevertheless considered the propriety of our considering, in the first instance, the issue of the constitutionality of an enactment of a sister state. We consider this normally to be the prerogative of the state wherein the legislation is enacted; however, in the instant case we have acquired jurisdiction at the express request of the attorney general of Alaska based upon the following reciprocity statutes existing between our states, by his institution of these consolidated actions:
Sec. 43.10.070 (Alaska Statute). Reciprocity in collection of taxes. (a) The courts of the state shall recognize and enforce the liability for taxes lawfully imposed by the laws of every state or territory which extends a like comity in respect to the liability for taxes lawfully imposed by the laws of this state. The officials of a state or territory may bring action in the courts of this state for the collection of their taxes. The certificate of the secretary of state of the other state or territory that the officials have the authority to collect the taxes sought to be collected by the action is conclusive proof of that authority.
(b) The attorney general may bring action in the courts of other states or territories to collect taxes due the state.
RCW 4.24.140. Action by another state to enforce tax liability. The courts of the state shall recognize and enforce the liability for taxes lawfully imposed by the laws of any other state which extends a like comity in respect to the liability for taxes lawfully imposed by the laws of this state and the officials of such state are hereby authorized to bring an action in all the courts of this state for the collection of such taxes: Provided, That the courts of this state shall not recognize claims for such taxes against this state or any of its political subdivisions: Provided, further, That the time limitations upon the bringing of such actions which may be imposed by the laws of such other state shall not be tolled by the absence from such state of the person from whom the taxes are sought. The certificate of the secretary of state of such other state to the effect that such officials have the authority to collect the taxes sought to be recovered by such action shall be conclusive proof that authority.
The constitutionality of the Alaska Net Income Tax Act, as it applies to these defendants, has been interposed as a defense. We therefore have no alternative other than to test the constitutionality of this enactment, in view of the reciprocity statutes, supra.
The defendants first contend that the Alaska Net Income Tax Act, as it applies to the defendant seamen, constitutes a deprivation of property without due process of law in violation of the Fourteenth Amendment to the United States Constitution.
The defendants admit that a state may levy a personal income tax upon a nonresident under certain conditions. But these conditions require the existence of minimum connections between the nonresident and the taxing authority. The defendants cite Shaffer v. Carter, 252 U.S. 37, 40 S.Ct. 221, 64 L.Ed. 445 (1920); Northwestern States Portland Cement Co. v. State of Minnesota and Williams v. Stockham Valves & Fittings, Inc., 358 U.S. 450, 79 S.Ct. 357, 3 L.Ed.2d 421 (1959); Wisconsin v. J. C. Penney Co., 311 U.S. 435, 61 S.Ct. 246, 85 L.Ed. 267 (1940).
We find no difficulty in ascertaining that these cases support the rule of law as stated by the defendants. In Northwestern States Portland Cement Co. v. State of Minnesota and Williams v. Stockham Valves & Fittings, Inc., supra, the court stated:
It strains reality to say, in terms of our decisions, that each of the corporations here Was not sufficiently involved in local events to forge 'some definite link, Some minimum connection' sufficient to satisfy due process requirements. * * * (Italics ours.)
The court further stated, quoting from Wisconsin v. J. C. Penney Co., supra, that
(T)he 'controlling question is whether the state has given anything for which it can ask return.' Since by 'the practical operation of (the) tax the state has exerted its power in relation To opportunities which it has given, to protection which it has afforded, to benefits which it has conferred * * *' it 'is free to pursue its own fiscal policies unembarrassed by the Constitution * * *.' (Italics ours.)
The defendants argue that the rule as applied to nonresident corporations and nonresident individuals transacting business on land within a state is not comparable to the activities of seamen on vessels within a state's waters, which are open to interstate and foreign...
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