# Jurisdictional Statement — Inland Empire Builders, Inc. v. Washington > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385001_0525%3A2 ## Record - **Collection:** Supreme Court brief - **Document type:** Jurisdictional Statement - **Published:** January 1, 1964 - **Citation:** 378 U.S. 580 ## Text aT eee yr pe FILED FEB 17 1964 vo 849 JOHN F. DAVIS, CLERK In the Supreme Court of the United States OcTorRER Term, 1963-4 INLAND Emprae Boripers, Inc., J. C. Borsprica Construction Co., and McLavaauin, INc., Appellants, vs. Tre State or WasHiInaton and WriiaoraM S. Scnar- MACHER, CLARK Sovire and A. E. HanxKrns, as the Tax Commission of the STATE OF WASHINGTON, Appellees. On APPRAI FROM THE SUPREME Covert oF THR STaTE OF W ASHINGTON JURISDICTIONAL STATEMENT Seta W. Morrison ALLEN, DeGarmo & LEEpy Attorneys for Appellants. 1308 Northern Life Tower, Seattle, Washington 98101. Tee AeGus Press, _ SEATTLE, WASHINGTON No. In the Supreme Court of the United States OctTorER Treo, 1963-4 Incanp Extprre Beropers, Ixc., J. ©. Borsperica CONSTRUCTION Co., and McLacGuHutn, INc., Appe llants, - ; v3. THe Strate or WasHInoton and Wriax S. Scae- MACHER, CLARK SQUIRE and A. BF. HANKINS, as the Tax Comission of the STATE OF WASHINGTON, Appellees. Qn APPEAL FROM THE SUPREME ¢ OURT OF THE STATE OF W ASHINGTON JURISDICTIONAL STATEMENT Seta W. Morrison ALLEN, DeGarwo & LEEDY Attorne NS f vr A ppellants. 1308 Northern Life Tower. Seattle. Washington 98101. INDEX Introductory Paragraph ..8 Opinion Below Jurisdiction Statutes Involved Questions Presented Statement 6f the Case Factual Background How the Federal Question Was Presented The Questions Are Substantial Appendix .\ —- Opinion of the Washington State Supreme Court App. .A, pp. 3 to 24 Appé@ndix B—Statutes Involved — App. B, pp. 1 te 13 SOD te oe oe LO to itl TABLE OF CASES Alabama vo King & Boozer (1941) 314 U.S. 1, 86 L.ed. 3, 62 S.Ct. 43 mn 13 Clallam County (Wash) v. United States (1923) 263 U.S. 341, 68 L.ed. 828, 44 S.Ct. 121 9 DuPont v. State of Washington (1954), 44 Wh. (2d) 339, 267 P.(2d 91 14,15 Easy Standard Oil v. Brans, 345 U.S. 495, 97 Led. 1174 Saou as 3 (renerol Motors Corporation v. Washington, Case No. 115. 1963 term, United States Supreme Court 5 Green v. Eglin AFB Housing, Inc., Fla. (1958), 104 Se.(2d) 465 8. 1i (swin, White & Prince ». Henneford, 305 U.S, 434, 83 Led. 272 3 [niand Empire Builders, Ine., et al. v. State of Washington, et al., 162 Wash. Dee. 609, — Wn. (2d) — 384 P.(2d) 337 ~ 2,8 James vo Dravo Construction Company, 302 U.S. 134, 42 Lied. 155 13 Kern-Limerich, Ines v. Scurlock, 347% U.S. 110.-98 L.ed. 346, 74 S.Ct. 405 3,9 * so LO APIA RE SAM ME NT RTS ” TaBie ov Cases . ; Page Knapp Stiles v. Michigan Department of Revenue (1963) 370 Michigan 629, 122 N.W.(2d) of2 8, 12 MeCulloch 2 ica msgs 4 Wheat. 316, 4 Led. 579, 17 U.S. 15 Railway Express Agency, tne. v. Virginia, 347 U8. 9 359, 98 Lied. 757 _.... 3 Silrerblatt, Inc. vo. New Vork, 5 N.Y.(2d) 635, 159 N.E.(2d) 195, cert. den. 361 U.S. 912 i4. United States v. Livingston (E.D.. S.Ct.) 179 F. Supp. 9; aff'd 364 U.S. 281, 4 Laed.(2d) 1719; pet. reh. denied 364 U.S. 855, 5 Lied. (24479, 81 S.Ct. 35 ae 8,8, 14, 15 STATUTES RCW Title 82 RCW 82.04 RaW 82.08 *REW 82.08.050 % 69 Stat. 646, 42 UuS.C. 9 1594 et seq. 28 U.S.C. * 1257 (2) 42 U.S.C. 3 1504 ye We Dw Ww bo se 7 In the Supreme Court of the United States OcroBER TERM, 1963-4 No. [INLAND Expree Britipers, Inc., J. C. Borspriuc Constreetion Co., and McLavaurtr, INc., Appellants, vs. THE Strate or WasHinoton and Wiitiam S. Scnuv- MACHER, (LARK Square and A. E. HANKINS, as the Tax Conmnesston Of the State or WASHINGTON. Appellees. t _ (o~ APPEAL FROM THE SUPREME € OURT OF THE STATE OF WASHINGTON JURISDICTIONAL STATEMENT INTRODUCTORY PARAGRAPH Appellants appeal from the judgment of the Su- preme Court of the State of Washington, whieh be- came final on September 26, 1965, affirming the judg- ment of the Superior Court of the State of Washing- ton for Thurston County whieh held appellant con- tractors responsible and liable for the colleetion of sales tax on the priee of military housing constructed under a contraet between the appellant contractors and the United States purguant te 42 ULS.C. See. 1504. This statement is submitted to show that the Supreme 1 2 Court of the United States has jurisdiction of this appeal and that a substantial question is presented. OPINION BELOW The opinion of the majority tive Judges and the opin- ion of the dissenting four judges of the Supreme Court of Washimgtou is reperted in 162 Wash. Dee. 609, — Wau. ( ld) —, 384 P.( 2d) 357. The Supreme Court opin- ion is attached hereto as Appendix A. JURISDICTION a. The appellant contractors commenced an action in the Superior Court of the State of Washington for Thurston County to enjoin the defendant State, acting through its Tax Conuiission, from collecting from ap- pellants a money amount representing a consumer sales tax which appellants were allegedly obligated to col- lect ou the coutract price of their military housing coustruction coutract, entered into by the Department of. the Army and performed by appellants. The appel- lant coutractors contended that the imposition of a liability for failure to collect the tax coustituted an unconstitutional applitition of the state taxing stat- utes, Revised Code of Washington Title 82. under the Cnited States Constitution. b. The Superior Court decision denying appellant coutractors relief and applying the taxing statute was entered Judy 3. 1961, The epigon of the Supreme Court of Washington affirming the trial court's decision, from which this appeais taken, Was entered August 1, 1963. Appellant's petition for re-hearing was denied on Sep- tember 27, 1963, at which time the Supreme Court of 3 Washingtdn's decision beeame tinal, and Notice of Ap- peal te this Court was served on December 18 aad tiled on December 20, 1963. «. The jurisdiction of the Supreme Court of the Cuited States to hear this appeal rests upen 28 U.S.C, Sec, 1257 (2). 4. The following cases, in which the above-entitled Court has accepted jurisdiction in a direet appeal under similar tax situations, are authority for accepting ju- risdiction under a direct appeal in the present instanee : Esso Standard Oil vo Evans, 345 US. 495, 97 Lied. 1174: Gown, White & Prince vr. Hennefyrd, 305 U.S. 454.85 Leed. 272; Aern-Limerick, Ine. +. Seurlock, 347 US. 110, 98 Lied. 46; Raliway Evpress Agency, Ine. t. Virginia, 347 U.S. 359, 98 Lied. 757. and General Motors Corporation v. Washington, Case No. 115. 1963 term of the United States Supreme Court. STATUTES INVOLVED a. The full text of the pertinent portions of Revised Code of Washington See. 82.04 and 82.08 are set forth in Appendix’ B. It ix the application of the tax impos- ing portions of these statutes to the present transaction which is contended to be unconstitutional. , bh, 69 Stat. 646; 42 U.S.CLA. See. 1594 ¢f seg. This statute, Known as the Capehart Aet. constituted the statutory autherity under which the United States through the Department of the Army entered into the construction contract invelved inthis case, 4 OLESTIONS PRESENTED Is the application of the tax imposing provisions of the Washington Retail Sales Tax statute, which by its terms places the incidence of the tax on the purchaser, to the construction of Military Housing pursnant to a contract entered into between the appellant contrac- tors and the United States. aeting through the De- partmeng of the Army pursuant to authority of the Capehart Act (69 Stat. 646 ¢f seq., 42 U.S.C. See, 1504 rf seq.), Wneonstitutional un cer the doctrine of sev- ereign immunity as imposing a tax on a. the United States, or han instrumentality of the United States entitled to eqnivalent immunity from state taxation ? STATEMENT OF THE CASE Factual Background The Capehart Act (69 Stat. 646 ¢f seq., 42 T.S.C. Sec, 1504 ef seq.) created an authority whereby the various Military Departments of the United States could obtain the construction of military housing for service men by borrowing the funds from private Jend- ing institutions and repaying the loans over a 25-year period with funds obtained from annual appropria- tions. This program permitted the construction of a great deal more weilitary housing through payment by the familiar installment plan than would have heen possible if the construction could only be financed from funds currentiy available in each service's an- nual appropriations. The housing as constructed became the property of and was fully under the control of the Military De- 5 partment involved, the construction was controlled and inspected in the same manner es other military ecoustruction jobs, the construction contract contained ali of the standard. provisions normally contained or required by law to be contained in a Federal procure- nent contract of such a nature, and the funds used to repay the loan came from military appropriations. The savings and loan associations were deemed the principal source of the construction loans required. [In order to comply with the loan security requirements imposed by the laws of \drious states on suéh associa- tious, requiring principally an FHA secured mortgage. and in order te create the fiction of being a guarantor rather than a primary debter as a device to avoid in- cluding the borrowed amounts in the national debt limitations and annual expenditure authorizations, the United States required that dummy corporations oe created (Opinion of the Attorney General of the United States dated October 22, 1959; Tr. 0068, p. A-1). These dummy corporations performed the function of signing a uote to the lending institution ‘secured by a mortgage on a nominal leasehold without right of possession, the repayment of which was unconditiou- ally promised by the United States, and further of beihg a nominal signator te a construction contract also e¥ecuted by the United States and the building con- tractor. The stock of the corporations was at all times during and after construction in the actnalor construe- tive ownership of the United States, and particularly 6 when the construetion loan advances allegedly subject to tax were made to the appellant contractors. The United States had at*a time previous to the erea- tion of the dummy corporations already entered inte a contract with the building contractor by written ac- ceptance of the builders’ bended bid for perform- ance of construction of the military housing invoived. In 1959 the appellant contractors entered into and performed such a contract with the United States De- partment of Army for the construction of approxi- mately 850 units of military #otsing on the Fort Lewis Military Reservation at Tacoma, Washington (Tr. W05, 0006). Appellants did not collect the sales tax on the price of the construction (Tr. 0010 F). The Washington Retail Sales Tax Act imposes the liability and incidence of the Retail Sales Tax on the purchaser or buyer (ROW 82.08.050, App. B. p. 7), but makes the seller responsible for collection of the tax and separately liable if he fails to collect it (ROW Sec. 82.08.050, App. B. p. 7). The Tax Commission of the State of Washington, appellees herein, applied the Washington Sales Tax statute to the appellants’ construetion of the Fort Lewis Military fhousing and assessed a tax of %560,- 495.44 against thege contractors, How the Federal Question Wa- Presented The appellant contractors brought suit against the Tax Commission to resist the application of the Wash- ington Retail Sales Tax statute to them. In a pre-trial order in the Superior Court of Thurston County, Washington. which replaced the pleadings (Tr. 0002- "=~ - ‘ M16) the plaintiff contractors contended in p agraph 3 that the sale was immune from the state €&les tax because it was a sale to the United States, in para- graph 4 that the Retail Sales Tax Act could not be ap- plied to a sale to an instrumentality of the United States, and in paragraph 6 that the application of the tax act to the transaction involved was in violation of the United States Constitution (Tr. 0015). The coustitutionality under the United States Con- stitution of impesing the tax was one of the issues of law specified in the pre-trial order (Tr. 0016), The trial court ruled adversely to plaintiff's con- tentions on the constitutional issue by coneluding as a matter of law that the sale was te the corporations, not to the Umted States (Tr. 0037). and that the corpora- tions were not exempt instrumentalities (Tr. 0036), The trial court further pé jected the plaintiff’s pro- posed conclusions of law to the contrary contained in paragraphs Til, TV and V (Tr. 0055, 0056). On appeal, virtually the entire argument related to (1) whether the United States was the buyer and therefore constitutionally exempt from the tax and (2) whether dummy corporations were instrumentali- ties of the United States and therefore constitution- ally exempt. As stated in the five-Judge majority opinion (App. Ap.4) : “The facts upon which these appeals are predi- eated are not in dispute. The legal issue involved ix Whether the transactions, pursnant to which the nilitary housing was constructed, are shielded from state taxation by the sovereign immunity granted to the United States government by the federal and state conustituions,”’ The issue is further considered by the four-sudge dissént at App. A, p. 17: “Tt is my disagreement with the majority in the disposition of the issue relating to whether the mortgagor-hiulder corporation is an imstrumen- tality of the United States that brings me to a re- sult contrary te that of the majority in this case.” THE QUESTIONS ARE SUBSTANTIAL This case involves an asserted tax lability of 8560, 495.44 ageinst appellant contractors. and when eom- bined with the companion cases on appeal of Jan Mur- ray, et al. ve Washington and Hebb & Narodick +. Washington (Supreme Court of Washington doeket numbers 36226, 56228 and 36229, respectively) a total potential lability of over one million dollars is at issue. The majority opinion of the Washington Supreme Court is, in the important constitutional aspects here involved, net only in confliet with the opmions of the Florida Supreme Court in Green ve. Eglin AFB Hous- ing, Inc., Fla. (1958), 104 So.(2d) 463, and of the Michigan Supreme Court in Anapp-Stiles v. Michigan Department of Revenue (1963) 370 Michigan 629, 122 N.W.(2d) 642, but is in direct conflict with and does not even attempt to distinguish the most recent related decision of the United States Supreme Court on federal instrumeiitality as contained in its affirmance of United States v. Livingston (B.D. S.Ct.) 179 F.Supp. 9; aff'd $64 U.S. 281, 4 L.ed.(2d) 1719; pet. reh. denied 364 U.S. 855, 5 L.ed.(2d) 79, 81 S.Ct: 35. The genuineness of this conflict is established by the existence of a four- Judge dissent to the Washington decision heing ap- pealed, which dissent is based on a view eonsistent With, miter alia, the foregoing cited cases (App. and milk cows nsed on the farm; (16) Sales of tangibf? personal property (other than the type referred to in subdivision (11) hereof) for use by the purchaser in connection with the business of operating as a private or common carrier by air, rail, or water in interstate or foreign commerce: Pro- vided, That any actual use of such property in this state shall, at the time of such actual use, be subject to the tax imposed by chapter 82.12; (11) Sales of airplanes, locomotives, railroad cars, or watercraft for use in conducting interstate or for- eign commerce by transporting therein or therewith property and persons for hire or for use in conducting commercial deep sea fishing operations outside the territorial waters of the state; also sales of tangible personal property which becomes a component part of such airplanes, locomotives, railroad cars, or water- craft, and of motor Vehicles or trailers used by the holder o. a carrier permit issued by the Interstate Commerce Commission authorizing transportation by motor vehicle across the boundaries of this state, in the course of constructing, repairing. cleaning, altering, or improving the same; also sales of or charges made for labor and services rendered in respect to such eon- trecting, repairing, cleaning, altering, or improving; ! Appendir B, Page 5 (12) Sales of motor vehicies and trailers to bewused for the purpose of transporting therein persons or property for hire in interstate or foreign commerce: Provided, That the purchaser must be the holder of a carrier permit issued by the [uterstate Commerce Com- mission and that the vehicles will tirst move upon the highways of this state from the point of delivery in this state to a point outside of this state under the au- thority of a one-transit permit issued by the diree- tor of licenses pursuant to the provisions of RCW 46.16.100; (13) Sales of motor vehicles and trailers to non- residents of this state for use outside of this state, even though delivery be made within this state, but only when (a) the vehicles or trailers will be taken from the point of delivery in this state directly to a point > outside this state under the authority of a one-transit / permit issued by the director of licenses ptirsuant to the provisions of RCW 46.16.100, or (b) said motor vehi- eles and trailers will be registered and licensed imme- diately under the laws of the state of the purchaser's residence, will not be used in this state more than three months, and will not be required to be registered ual licensed nuder the laws of this state. (14) Sales to nonresidents of this state for use eut- side of this state of tangible persona! property whieh becomes a component par “Of any machinery or other article of personal property belonging to sueh ne mresl- deut. iw the course of 4nstalling, repairing. cleaning. altering. or improving the same and also sales of or charges made for labor and services rendered in re- spect to any-installing. repairing, cleaning, altering, or 7 Appendir B, Page 6 improving, of personal property of or for a nonresi- dent, but this subsection (14) shall apply only when the seller agrees to, arid does, deliver the property to the purghaser at a point outside this state, or delivers the prapérty to a common or bona fide private carrier consigned to the purchaser at a point outside this state ; (15) Sales to nonresidents of this state for use out- side of this state of watercraft requiring coast guard |. registration or registration by the state of principal use according to the Federal Boating Act of 1958, even though delivery be made within this state, but only when (a) the watercraft will not be used within this state for more than forty-five days and (b) an appro- priate exemption certificate supported by identification ascertaining residence as provided by the tax commis- sion and signed by the purchaser or his agent estah- lishing the fact that the purchasey is a non-resid nt and that the watercraft is for use outside of this state, one copy to be filed with the tax commission with the regular report and a dupligate to be retained by the dealer. (16) Sales of baby chicks and turkey pouits for use in the production for sale of poultry or- poultry products. —~ (17) Sales to nonresidents of this state for use out- side of this state of machinery and implements for use in conducting a farming activity, when such machinery and implements will be transported immediate out- side the state. As proof of exemption, an affidavit or certification in such form as the tax commission shall require shall be made for each such sale, to be retained asa business record of the seller. fo , - cy yeep se ne Ny wy ‘ Appendix B, Page 7 (18) Sales for use in noncontiguous states, terri- tories and possessions of the United States, but only when. as a necessary incident to the contrags of sale, the selledelivers the subject matter of the "gale to the purchaser or his designated agent at the usual recelv- ing terminal of the carrier selected to transport the goods, under such circumstances that it is “casonably -eytain that the goods will be transported directly to a destination in such noncontiguous states, territories andl Possessions, .. . * * * RCW 82.08.050 Buyer-to pay, seller to collect tax— Penaltie-. The tax hereby immposed shall he/paid by the buver to the seller, and each seller shall collect from the buyer the full amount of the tax payable in respect to each taxable sale in accordance with the schedule of collections adopted by the tax commission pursuant to the provisions of ROW 82.08.0600. The tax required by this chapter, to be collected by the seller, shall be deemed to be held in trust by the seller until paid to the commission, and any seller who appropriates or converts the tax collected to his own use or to any Use other than the payment of the tax to the extent that the money required to be coliected is not available for payment on the due date as prescribed in this chapter shall be guilty of a misdemeanor. In case any seller fails to collect the tax herein in posed ov having collected the tax. fais to pay it to the commission it the manner prescribed by this chapter. whether such failyay i means any transfer of the ownership of, title to. or possession of property for a valuable consideration and includes any activity clas- sified as a ‘‘sale at retail’ or “‘retail sale’ under RCW 82.04.0090. [It includes renting or leasing, conditional sale contracts, leases with option te purchase, and any contract under which possession, of the property Is given to the purchaser but title is retained by the vendor as security for the payment of the purchase price. It also includes the furnishing of food, drink, or meals for compensation wheter consumed upon the premises or not. Casual or isolated sale” means a sale made by a per- son Whe is not engaged in the business of selling the type of property involved. « Appendix B, Page 10 ‘Sate at? Retarn,”’ ‘Reta Sate’ DEFINED RCW 82.04.050 “Sale at retail’’ or ‘‘retail sale”’ means every sale of tangible personal property (in- cluding articles produced, fabricated, or imprinted ) other than a sale to one who (a) purchases for the pur- pose of resale as tangible personal property in the regular course of business, or (8) installs, repairs, cleans, aWers, iraprints, improves, constructs, or deco- rates real or personal property of or for consumers, if such tangible personal property becomes an ingredient or component of such real or personal property, or (c) purchases for the purpose of consuming the property purchased in producing for sale a new article of tan- gible personal property or substance, of which such property becomes an ingredient or component or as a chemical used in processing, when the primary pur- pose of such chemical is to create a chemical reaction directiy through contact with an ingredient of a new article being produced for sale. The term also means every sale of tangible personal property to persons en- gaged in any business which is taxable under RCW 82.04.280, subsection (2), and 82.04.290. | The term ‘‘sale at retail’’ or ‘‘retail sale’? shall in- clude the sale or charge made for tangible personal property consumed and or for labor and services ren- dered in respect to the following: (a) The installing, repairing, cleaning, altering, imprinting, or improving of tangible personal property of or for consumers, ex- cluding, however, services rendered in respect to live animals, birds and insects; (b) the constructing, re- pairing, decorating, or improving of new or existing buildings or other structures under, upon, or above ai’ a* 7 re Ee a EE LN MC AL aretha fh > Appendix B, Page 11 real property of or for consumers, including the in- stalling orattaching of any article of tangible personal property therein or thereto, whether or not such per- sonal property bedemes a part of the realty by virtue of installation, and shall also include the sale of serv- ices or charges made for tue clearing of land and the moving of earth, excepting the mere leveling of land used in commercial farming or agriculture: (c) the sale of or charge made for labor and services rendered in respect to thé cleaning, fumigating, razing or mov- ing of existing buildings or structures, but shall not include the charge made for janitorial services; (d) the sale of or charge made for labor and services ren- dered in respect to automobile towing, armored car service and similar automotive transportation services, but not in respect to those required to report and pay taxes under chapter 82.16; (¢) the sale of and charge made for the furnishing of lodging and all other serv- ices by a hotel, rooming house, tourist court, motel. trailer camp, and the granting of any