Jurisdictional Statement — Inland Empire Builders, Inc. v. Washington

Supreme Court brief1964

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Office Supreme Court, US.

FILED

FEB 17 W@4

No. 85) we “JOHN F DAVIS, CLERA

In the

Supreme Court of che United States

OcTOBER TERM, 1963-64

Tan Murray; Cepric EF. SAnpers; Haskett DEVELOP-

MENT Co., a corporétion; lan Murray, INc., a corpora-

tion; Kiowa DEVELOPMENT Co., a corporation; MERCER

DEVELOPMENT Co., a corporation; RICHLAND DEVELOP-

MENT Co., a corporation; CEDRIC SANDERS INC., a cor-

poration; NEOSHO DEVELOPMENT Co., a corporation;

SANDERS DEVELOPMENT Co., a corporation; SEDGWICK

DEVELOPMENT Co., a corporation; SHAWNEE DEVELOP-

MENT Co., a corporation; and SHERIDAN DEVELOPMENT

Co., a corporation; Copartners doing business as

MurkAyY-SANDERS & ASSOCIATES, and GEORGE A.

FULLER COMPANY, a corporation, Appellants,

Vs.

THE StTaTE OF WASHINGTON and Witiiam S. Scuv-

MACHER, CLARK SQUIRE and A. EF. HANKINS, as the

Tax Commission of the State of Washington,

Appellees.

On APPEAL FROM THE SUPREME COURT OF THE STATE OF

W ASHINGTON

=» . JURISDICTIONAL STATEMENT

=...

BoGir, Boa_e & GATES

Epwarb G. DoBrin

RicHarD 8S, SPRAGUE

} Counsel for Appellants.

14th Floor Norten Building,

Seattle, Washington

——— OS

THE ARGUS PRESS ae SEATTLE, WASHINGTON

In the

Supreme Court of the United States

OcToBER TERM, 1963-64

Jan Murray; Cebric E. Sanprrs; Haske. DEVELOP-

veENy Co., a corporation; LAN Murray, INc., a corpora-

tion; Kiowa DEVELOPMENT Co., a corporation; MERCER

, DEVELOPMENT Coa vorporation ; RICHLAND DEVELOP-

MENT Co., a corporation; CEDRIC SANDERS INC., a cor-

poration; NEOSHO DEVELOPMENT Co., a corporation;

= SANDERS DEVELOPMENT Co., a corporation; SEDGWICK

DEVELOPMENT Co., a corporation; SHAWNEE DEVELOP-

MENT Co., a corporation; and SHERIDAN DEVELOPMENT

we 0., a corporation; Copartners doing business as

MURRAY-SANDERS & JASSOCIATES, and GEORGE A.

FULLER COMPANY, & corporation, Appellants,

/ vs

THe Svare or WasHincton and Winuianm S. Scrv-

MACHER, CLARK SQUIRE and A. &. HANKINS, as the

Tax Commission of the State of Washington,

Appellees.

On APPEAL FROM THE SUPREME COURT OF THE STATE OF

W ASHINGTON

JURISDICTIONAL STATEMENT

Boa.Le, BoGLe & GATES

Epwarp G. DoBRIN

RICHARD S. SPRAGUE

Counsel for Appellants.

14th Floor Norton Building,

Seattle, Washington

—————

THE ARGUS PRESS, wie SEATTLE, WASHINGTON

INDEX

Page

Opinion Below 2

Jurfdietion 2

Questions Presented 3

Siatutes Involved 4

Statement of the Case 1

The Questions Are Substantial 8

Appendix A—Opinion | App. A, pp. 3 to 24

Appendix B—Statutes Involved = App. B, pp. Lto 18

CITATIONS

Cases:

Alabame ov. King & Boozer, 314 US. 1. 86 L.ed. 3,

62 S.01. 43 (1941) 14

Clallam Counta ve US. 268 US. 541. 68 Led. 328,

44 S.Ct. 121 (1923)... 13,17

DuPout de Nemours & Co. v. State, 44 Wn2d 339.

268 Pid 667 (1954) 18

Gran. Jemison, 52 So2d 137 (1949) 11

(reneral Motors Corp. v. Washington, Supreme

Court Docket No. 1071 (1963) 2

(rreen vy. Balin AFR Housing,

104 Sod 465 (1958) 10, 13

(rwinn, White & Prince, lune. Henneford, 305 US.

454.835 Led. 272. 59 S.Ct. 825 (1989) 3

James ve Vuited Ariists Corp., 305 U.S. 410, 83

Led, 256, 59 S.Ct. QTL ¢ i 2-3

Kern Limerich Tne, ve Seurloek, 347 US. 110, 98

Led. O46, T4 S.Ct. 408 (1954). 2. 44,15

Kuapp-Stiles Tne. ve. Michigan Dept. of Revenue,

O70 Mich. G29, 122 NW 2d 642 (1962) 10,12

Livingston v. US. 179 F.Supp. 9, 364 U.S. 281. 4

Leeda 1719. SO S.Ct. 1611 (1960) 2. 13, 14, 17

Mosse Luke Homes, lnew ie. Grant County, 51 Wed

Yso. 017 Pid 1069 (1957) 10

‘pe

wv CITATIONS

Page

Moses Lake Homes, Ine. v. Grant County, 51 Wd

TAA, 6 Lied.2d 66, 81 S.Ct. 870 (1961) 10)

Moses Lake Homes, luc. v. State, 48 Wud 499, 294

P.2d 1113 (1956) 10, 11

Murray v. State, — Wn2d —,

384 P.2d 3387 (1963) weds 13, 16

Ojfut Housing Co. v. County of Sarpy, 351 U.S.

2535, 100 Leed. Mt, 76 S.Ct. 814 (1956) 10

UWS. v. Boyd, Supreme Court Docket No. 1157 (1963) 2

Statutes:

Federal:

Capehart Act, amendment of pone 11, 1955 to the

National Housing Act, ¢. 783, Tithe TV, § 401, 70

Stat. 655, as amended 3

Wherry Act, Act of August 8, 1949, ch. 403, 63 Stat.

570 | nin

28 U.S.C. § 1257(2) 2

State: is

RCW 82.04.040 4, App. B. 9

RCW 82.04.050 4

RCW &2.04.060 4, App. B. 12

RCW 82.04,070 wa App. B. 12

RCW 82.04.190 4, App. B. 12

RCW en, 82.08 . 3

RCW 82.08,010 4, App. B. 1

ROW 82.08.020 4, App. B.2

RCW 82.08.0380 4,7, App. B. 2

RCW 82.08,050 mrs 4, Apt B. 7

RCW 82.08,060 App. B. 8

RCW 82.08.140 App. B. 9

RCW s2.08.150 eee |

RCW 82.32. 180 : 2

CITATIONS v

. Page

Miscellaneous:

House Report No. 2363 on the Housing Act of 1956,

U.S. Code Congressional Servier 19560, page 446 |

et seq. 9

Constitution:

United States Constitution, Art. Vi, cl 2

)

In the

Supreme Court of ch: United States

OcTOBER TERM, 1963-64

Noa.

Tan Murray: Vepric EF. Sanpers; Haske. DEvELop-

MENT Co. a copporation: TAN Murray, INc., a corpora-

tion: Kiowa DEVELOPMENT Co., a corporation; MERCER

DEVELOPMENT Co., a corporation; RicHLAND DEVELOP-

MENT Co., a corperation: CEDRIC SANDERS INC., a cor-

poration: NEOSHO DEVELOPMENT Co., a corporation;

SANDERS DEVELOPMENT Co., a corporation; SEDGWICK

DEVOLOPMENT Co., a corporation; SHAWNEE DEVELOp-

MENT Co., a corporation; and SHERIDAN DEVELOPMENT

Co., a corporation; Copariners deing business as

MtRkAY-SANDERS & Assoc iATES, and GEORGE A.

FULLER COMPANY, a corporation, Appellants,

vs.

THE STatTe oF WASHINGTON and Winiam S. Sciv-

MACHER, (LARK SQUIRE and A. BE. HANKINS, as the

Tax Conunission of the State ef Washington,

Appellecs.\,

On APPEAL FROM THE SUPREME COURT OF THE STATE OF”

WASHINGTON

JURISDICTIONAL STATEMENT

Appellants appeal from the judgment of the Supreme

Court of the State of Washington, entered on August

1, 1963. whieh judgment became finial on September 26,

1963. affirming the Judgment of a state Superior Court

and submit this Statement to show that the Supreme

Court of the United States has jurisdiction of the ap-

peal and that substantial questions are presented.

OPINION BELOW

The opinion of the Supreme Court of the State of

Washington is reported in — Wi.(2d) —, 384 P.(2d)

oo7. A copy of the opinion is attached hereto as Ap-

pendix A,

— JURISDICTION

This case was brought under Revised Code of Wash-

ington, RCW 82.52.1780 and RCW? 8$2.52.150 to recover

retail sales taxes paid under protest and to enjoin the

appellees State of Washington and its tax commission

from collecting retail sales taxes assessed against ap-

pellants in connection with the construction of mili-

tary housing on a military reservation under a contract.

with the United States. The judgment of the Washing-

ton Supreme Court was entered on August 1, 1963, and

the order deuying appellants” petition for rehearing

was entered on September 26, 1963. Notice of appeal

was filed in the Washington Supreme Court on Deeem-

ber 20, 1908. The jurisdiction of the Supreme Court

to reviewhis judgment by appeal is conferred by Title

28, United States Code, Section 1257(2). The follow-

ing decisions sustain the jurisdiction of the Supreme

Court to review the Judgment on appeal in this case:

Kern Limerick, Inc. v. Scurlock, 347 U.S. 110, 98 Lied.

546, 748.01. 403; US. 6. Boyd, Supreme Court Docket

No. 1157; General Motors Corp. vo Washington, Su-

preme Court Docket No. 1071: Liringston ve US., 179

F.Supp. 9 364 U.S. 281. 4 Lied2d 1719, 80 S.Ct.

1611; James v. United Artists Corp., 305 U.S. 410, 83

°°

3 4

Led. 256, 59 S.Ct. 272: Guinn, White d& Prince, Ine.

W. Henneford, 305 US, 434, 83 L.ed. 272, 59.8.Ct. 325.

QUESTIONS PRESENTED

1. Ts the United States the buver, under the Wash-

ington retail sales tax statute (RCW Ch. 82.08), of

military housing constructed by appellant contractors

on a military reservation under a contract with the

Cnited States entered into pursuant to the Capehart

Act (Amendment of August 11,1955 to the National

Housing Act, ¢. 783, Tithe IV, 9 401-ef seq., 79 Stat. 635,

ws amended) rather than the so-called **mortgagor

builder’ corporations created by appellant contractors

as required by said coutract, so that said state statute

is repugnant to the Supremacy Clause (Article VI,

Clause 2) of the Uwited States Constitution. when con-

strued and applied as imposing a sales tax on said mort-

gagor builder corporation as the buyers, measured by

the cost of such construction, and on appellant contrae-

tors for failing to collect said tax from said mortgagor

builder corporations ?

2. If said **mortgagor builder”? corporations are the

buvers of such housing under the Washington retail

sales tax statute (ROW Ch. 82.08) rather than the

United States, are said mortgagor builder corporations

federal lustrumentalities so that seid state statute is

repugnant to the Supremacy Clause (Article VI,

Clause 2) of the Uuited States Constitution, when eon-

=crued and iniplted as imposing a sales tax on said mort-

gagor builder corporations, measured by the cost of

such construction, and on appellant contractors for fail-

Ing te collect said tax froma said mortgagor builder cor-

porations ?

STATUTES INVOLVED

Revised Code of Washington 08 82.08.010, 82.08.020,

82.08.030, 82.08.0590, S2.04.040, 82.04.050, 82.04.060, 82-

4.070, and S82.04.190 are set forth in Appendix B

hereto.

STATEMENT OF THE CASE

Appelaiits are contractors Who coustructed military

housing for the United States on a military reserva-

tion located in the State of Washington under a con-

tract with the United States entered imto pursuant to

the provisions of the Capehart Act. The United States,

acting through the Department of the Air Force, de-

termined that it required military housing at MeChord

Air Force Base and plans and specitications for the

construction of such military housing were prepared by

the United States. Bids for the construction were in-

vited by the United States. Appellants submitted their

bid to the United States on the required forms supplied

them, together with the required bid deposit in the form

of a check for $25,000.00 pavable to the Treasurer of

the United States. Upon being denominated the lowest

acceptable bidder at a figure in excess of eight and one-

halt million dollars, the contract was awarded to ap-

pellants by the United States.

To enable the United States to finance the coustruc-

tion of the military housing, the contract between ap-

pellants and the United States obhigated appellants to

form six so-called mortgagor builder corporations Im

the State of Delaware and to cause them to be qualified

as foreign corporations in the State of Washington.

These corporations have identical charters in a form

dictated by the United States. Each of the corporations

)

had exactly $1,000.00 capital whieh was immediately

exhausted by its payment to the United States as rent

under the so-called leases issued to the mortgagor

builder corporations by the United States of portions

of MeChord Air Force Base upon which appellants

Were to coustruct the military housing. The corpora-

tions were prohibited by their charters from engaging

In any business except the performance of the provi-

sious of the documents that appellants were obligated

by their contract with the United States to cause the

corporations to execute. As required by the contract

with the United States, resignations of the offieers and

directors of the corporations and all of the stock of the

corporations were placed in an a aren escrow prior

to conhumencement of the construction of the military

housing. for ultimate delivery to the United States

upon completion of the project or its sooner termination

at the convenience of the United Ntries.

Apvellants were further obligated to cause these

corporations to obtain a commitment from the Federal

Housing Adimiuistration to insure a mortgage loan %o

be obtained by appellants for the entire contract price

secured only by the leasehold interests of the corpora-

tious, The United States agreed in writing to repay

the entire mortgage loan. Appellants obtained the mort-

gage loan on behalf of these corporations on the strength

of the Federal Housing Administration insurance

columitiment and the payment agreement of the United

States.

The so-called leases were for a term of 55 vears. put

each lease provided that as each housing unit) eon-

structed by appellants became available for oecupaney,

it was to be placed under the control of the United

States. The corporations were forbidden to occupy or

possess the housing units.

As required by the, contract with the United States,

appellants, the mortgagor builder corporations, and

the United States entered into a so-called housing con-

tract, and it Was at this time that all of the stock of the

corporations and resignations of its officers and diree-

tors were placed in-the irrevocable escrow, for delivery

to the United States. The housing contract conformed

to the bid made by appellants and ‘provided that all

construction should be under the supervision of the

United States and that it must be accomplished in con-

formity with the planus and specifications furnished by

the United States. Payment to appellants as the work

progressed were made out of the mortgage lonu funds

obtained by appellants on behalf of the mortgagor

builder corporations upon certificates of representa-

tives of the United States. The housing contract ex-

pressly provided that as progress paymeuts were made

to appellants, title to the materials and work covered

thereby vested in the United States. and appellants

were required to waive the right to claim any lien on

the project.

The United States also agreed to pay all local taxes

levied upon the project. but reserved the right to con-

test their validity as it denied that the property was

subjeet to such taxes, Appellants did not charge or col-

leet retail sales taxés from the United States, the mort-

gazor builder corporations, Or any one else in connec-

tien With the construction of the military housing at

MeChord Air Force Base. .

The State of Washington, acting through the ap-

pellee tax commission, assessed retail sales taxes of

SOLOS9.97 against appellants, measured by the total

eontraet price for the muibttary housing, under the au-

thority of ROW 82.08.0900, on the grounds that appel-

lants should have collected retail sales té@@s, measured

by the total contract price, Trom the mortgagor builder

corporations and pag the same over to the appellee

tu conussion,

Appellants paid a portion of the taxes assessed against

them under protest and brought this action in the state

Superior Court under ROW: 82.52.150 and 82.32.1780

to enjoin the collection of the taxes and for refund of

the taxes paid. By their Complaint (R. 0003) their con-

tentions in the Pre-Trial Order (CR. 0014, 0027) and

the Findings of Fact and Conclusions of Law pro-

posed by them #R. Oa] ). app: lants raised in the Supe-

rior Court the fede Se yatciop sought to be reviewed

here. After a trial, the Superior Court hele in favor of

the appre ‘lees, rejected the: ¥ indiugs of Fact and Con-

clusions of Law proposed by appellants CR. 0068),

and entered the Findings of Fact and Conelusions of

Law submitted by appellees OR. 0080) and a Judgment

(R. 0009) in their favor. |

On appeal to the Washington Supreme Court. ap-

pellants raised the federal questions sought te pe re-

viewed here in the assignments of error in their Open-

ing Brief CR. OUS0Q, atop Es ef seg.) and in the argu-

Inelits presented in that brief and in their Reply Brief

CR. 0084). After two en bane hearings, the Washing:

ton Supreme Court, with four of the nine judges dis-

senting, affirmed the judgment of the Superior ( ‘ourt

(R. 00157, p. 609) and in construing and applying the

state sales tax statute, ruled that the legal incidence of

the sales tax ix imposed by the statute on the **buyer’’

and not on the *tconsumer,”’ that the **buyer’’ of the

military housing constructed by appellants was not the

United States but was rather the mortgagor builder

corporations, and that the mortgagor builder corpora-

tions were not federal instrumentalities “and thereby

immune from state taxation.

THE QUESTIONS ARE SUBSTANTIAL

We believe that the questions presented by this ap-

peal are substantial and that they are of public impor,

tance. This ease draws in question the validity’ of the

Washington retail sales tax statute, as construed and

applied by the Washington Supreme Court, and the

decision of the Washington Supreme Court: was i

favor of its validity. In construing the state statute,

the Washington Supreme Court decided that the

‘buyer’? and not the ‘consumer’ is responsible for

payment of the sales tax. ln applying the statute as

thus construed, the state court held that the United

States was not the “tbuyer’’ of the military housing

constructed by appellants. Federal immunity from the

sales taxes in question Was then completely eliminated

by the determination that the mortgagor builder cor-

porations were the “*buyeys”’ and that they were not

federal instrumentalities.

1. The Capehart Act is an amendment of and su-

persedes the so-callegeWherry Act (Aug. 8, 1949, Ch.

403, 63 Stat. STOP whieh in turn was an amendment of

the National Housing Act. The purpose of the Wherry

= 9

Act was ta eneourage construction of rental housing

to serve military personnel on or in the areas adjacent

to military installations by providing for such housing

through a speciag form of mortgage insurance without *

the necessity for the appropriation of public moneys

(U.S. Code Congressional Serviee 1949, page 1757).

The Wherry Act permitted the sale pr lease of land

on nulitary- installations to builders. for the purpose

of such construction and subsequent renting,

The basic difference between the military program

provided by the Wherry Act and that provided by the

Capehart Act is that under the Wherry Act the gov-

ernment sold or leased land to a private entrepreneur

who constructed, operated and maintained the project

and after construction assumed the financial risks of

being able to maintain and operate the same so as to

make the entire venture protitable, whereas under the

Capehart Act, the project is actually built for the

United States by a contractor who merely construets

the project and assumes only the financial risk of being

able to complete such construction on a profitable basis

and the United States thereafter assumes all risks inei-

dent to the ownership, maintenatiee and operation of

the project.

The Capehart Act also provided for the acquisition

by the Secretary of Defense of Wherry Act housing

projects. The reasons for the acquisition of Wherry

Act housing projects were set forth in House Report

No, 2363 on the Flousing Act of 1956 (U.S. Code Cou-

gressional Service 1956, page 4546 ef seq.) :

* Your committee believes strongly in the prin-

ciple that housing on or adjacent to military bases

should be owned and operated by the military de-

' partment concerned. In the opinion of your com-

mittee the time has come to provide a means of

transferring the ownership and operation of * * *

Wherry housing to the military.

ae =o

as * * * Tn many cases the rentals are too high to

attract military personnel on a voluntary basis.

The latter drawback will be aggravated further

by the recent Supreme Court decision ruling that

Wherry Act projects are subject to local taxes.

‘These basic deticiencies in Wherry housing can

be reetitied by bringing them under the ownership

and operation of the military, * * * Rentals would

be lower because sponsors profit would be elimi-

nated and because there would be no question of

local tax burdens.”

The recent Supreme Court opinion adverted to in

the House Report was the case of Offut Housing Co.

v. County of Sarpy, 351 U.S. 253, 100 L.ed. 1151,

76 &Ct. S14, upholding the levy of personal property

taxes by a county in the State of Nebraska on the in-

—* a lessee ina Wherry Act project.

In the State of Washington, both the sales tax based

on the cdustruction cost and county personal property

taxes on ‘the contractor’s leasehold interest in the

Wherry Act projects were upheld. Moses Lake Homes,

Ine. V. State, 48 Wud 499, 294 Pd 1113; Moses

Lake Homes, luc. v. Grant County,,51 Wn2d 285,

317 P.2d 1069. The latter decision ef the Washington

Supreme Court was later found to be erroneous by

this Court in the case of Moses Lake’ Homes, Inc. v.

Grant County, 309 U.S. 744, 6 Lied.ld 66,'81 S.Ct.

S70, on the grounds that the county had valued the

leasehold interests in a discriminatory manner.

2. Despite the pronounced differences between a

Wherry Act project and a Capehart Act project, the

Washington Supreme Court has upheld the inposi-

tion of the sales tax on both of them, as illustrated by

Moses Lake Howes, lnc. 0. State, supra (sales tax on

Wherry Act project imposed) and in this case (sales

tax on Capehart Act project imposed). In this case,

the sales tax has been imposed on appellaft contrae-

Jors for failing to colieet the tax from the **buyer”’

and pay it over to the state, even though appellants did

not add the sales tax to the contract price or collect it

inany manner and without regard to the fact that there

is ho practicable way for appellants to recover the tax

from the mortgagor builder corporations, the entities

determined by the Washington Supreme Court to be

the “buyer”? and upon whom that court held the legal

incidence of the tax falls.

T-vo other states, Florida and Michigen, have had

occasion to consider the application of a state sales tax

to a Capehart Act project. Florida had also upheld

the lmposition of the sales tax oua Wherry Act proj-

ect. Guy v. Jemison, 02 Sod 137. The Supreme

Courts of the states of Florida aid Michigan have both

held, in very sinular opimtons, that the sales tax does

hotapply to Capehart Aet poojeets. Green ov. Kyglin Aer

Foree Base Housing, lne., WA Sod 463 (Florida) ;

Anapp- Stiles, lies oe. Michigan Department of Reve-

nue, 370 Mieh, 629, 122 N.W.2d 642,

The questions presented tkthes Washington Su-

12.

preme Court were federal questions, involving the va-

lidity of a Washington sales tax statute as construed

and applied, and the determination of those questions

was essential to the decision of that court. Three basi®

issues were presented to the Washington Supreme

Court for determination: first, whether the legal inei-

dence of the state retail sales tax is imposed by the stat-

ute on the **buyer”’ or the consumer’? where the *‘re-

tail sale’? involved is the performance of a construe-

tion contract; second, whether the United Si ites was

the “buyer”? or “consumer” of the military housing

units constructed by appellants, rather than the mort-

gagor builder corporations; and third, if the mort-

gagor builder corporations were the **buyers”’ or **con-

sumers,”’ whether these corporations were federal in-

strumentalities so that the federal immunity from state

taxation applied.

The court ruled that the legal incidence of the sales

tax is-imposed by the statute not on the *tconsumer”

but on the **buyer.”* The court further held that the

United States was not the ** buyer” but that the mort-

gagor builder corporations were ou the strength of one

sentence extracted from the many pages of documents

that were required by the United States. The court

stated :

“The housing contract executed by the parties

provided that ‘The mortgagor builder (corpora-

tion) shall pay the eligible builder Ceontractor )

for the performance of this Housing Contract, and

all other obligations of the eligible builder herein

** ** By the express terms of the contract, the

corporation, and not the United States was obli-

gated to pay the appellant contractors; hence the »

13 ——

corporation was the buyer under the statute, * * *""

Murray v. State, — Wn2d —, 384 P2d 335

at 340,

The Unitad States prescribed the use of all of the doen-

ment that are exhibits in this case before the mortgagor

builder copporations ever existed. The Washington Su-

preme Court has thus interpreted and applied the state

retail sales tax statute in such a Way-as to eliminate in

an arbitrary manner the United States as an exempt

sovereign. \

Having decided that the “buyer” and not the *teon-

sumer” is responsible for payment of the sales tax, and

that the mortgagér builder corporations were the **buy-

ers** of the housing units constructed by appellants and

not the United States, the Washington Supreme Court

completed the process of eliminating the immunity of

the federal government from this case by determining

that the mortgagor builder corporations were net fed-

eral instrumentalities. This latter ruling was made con. :

trary to decisions of Florida and Michigan in Green

re Bglia Air Force Base, supra, and Kunapp-Stiles, Lue.

t. Michigan Department of Revenue, supra, and the

cases of Clallam County v. United States, 263 US. 341.

68 Led. B28, 44 S.Ct. 121, and Livingston + UWS. 179

F.Supp. 9, affirmed on the merits by the Supreme Court,

S64 US. 281, 4 Leed.2d 1719. 80 S.Ct, 1611,

Furthermore, in deciding that the mortgagor builder

corporations were not federal instrumentalities, the

Washington Supreme Court relied on DuPont de

Nemours & Co. v. Statc, 44 Wned 339, 267 Pd

667. a case that was in essence overruled by this Court

by its decision in Livingston ve ULS., supra.

4. The question whether the United States was the

“buver@ of the military housing constructed by ap-

pellants is basically the same issue that vas presented

to this Court in Aern Linterich, Ine. v. Scurloch, supra.

That case followed the more well-known case of Ala-

bama v. King & Boozer, 314 US. 1, 86 Lied. 3, 62 S.Ct.

43. In the King d& Boozer case, this Court held that the

legal incidence of the sales tax there in question did

not fall on the United States. In Aern Limerick this

Court reviewea the Aing d& Boozer case (whieh has

heen relied upon by appellees throughout in this case

and also by the Washington Supreme Court) and par-

ticularly a statement made in the latter case to the ef-_

fect that ** Who, in any particular transaction like the’

* within the meaning of the

statute is a question of state law on which only the Su-

present, is a ‘purchaser

preme Court of Alabama can speak with final author-

ity. fd 314 U.S. at 9, 10.°° Regarding that statement,

this Court said in the Aern Limerick case:

‘Real literally, one might conclude this court

Was saving that the state court might interpret its

tax statute so as to throw tax liability where it

chose, even though it arbitrarily eliminated an ex-

empt sovereign. Such a conclusion as to the mean-

ing of the quoted words would deny the long course

of. judicial construction which establishes as a

principle that the duty rests on this court to decide

for itself facts or constructions wpon which fed-

eral constitutional issues rest. The quotation re-

rs. we think, only to the power of the state court

to determine who Is responsible under its law for

15 P

the payment to the state of the exaction. * * * Id

DAT US. at 121, 122. (mphasis supplied )

The duty rests on the Court in this case to decide for

itself the facts and constructions upon which the fed-

eral coustitutional issues here presented rest.

The Washington Supreme Court has denied the eon-

tention of appellants that the United States was the

buver of the military housing constructed by appel-

lant. just as the Arkansas Supreme Court held that

the United States was not the purchaser in the Aer

Limerick case. Tie Washingté Supreme’ Court upheld

the validity of the state retail sales tax statute, as con-

strued and applied to this Capehart Aet construction,

just as the Arkansas Supreme Court upheld the valid-

ity af the Arkansas sales tax svatute. as construed and

applied to the facts presented by the Nern Limerick

case. The appeal of the Kern Limerich case is author-

ity for the appeal of this case.

9. The questions presented here concern net only the

Congressional method for financing the construction

of much needed military housing under the provisions

of the Capehart Act bat also the power of a state to im-

pose taxes ona federal project performed ona federally

owned nilitary reservation. The objectives of Congress

under the Wherry Act prograti had been defeated in

part by the imposition of state and loeal tax burdens.

Cougress enacted the Capehart Act to eliminate these

problems. But the decision of the Washington Supreme

Court ii this case frustrates the Congressional ob-

jectives.

It is difficult to conceive of a project more federal

in character than a Capehart Act project, The need for

the housing is decided by the United States. The United

States prepares and furnishes the plans and specifica-

tions. Construction bids are invited by the United

States. The United States selects the successful bidder

and contracts with him. The land upon which the hous-

ing is constructed is owned by the United States. Con-

struction is supervised by the United States. Pri¥ate

construction funds are obtained on the strength of the

insurance and payment obligations of the United

States. The United States alone occupies, maintains

and uses the housing. Despite all these elements, the

Washington Supreme Court has ruled that the military

housing was actually constructed by appellants for pri-

vate corporations, that the private corporations bought

the housing, not the United States. and that the mort-

gagor builder corporations were not federal instru-,

mentalities because they served ‘ta separate and dis-

tinct function from that of the United States.” Mar-

rag v. Staie, 384 P.2d 337 at 342. The Washington

Supreme Court implied that somehow the mortgagor

builder corporations were performing a function or

purpose of their own. Such a conclusion is clearly un-

tenable. Since the cost of dulfilling the urgent need for

military housing was so gr “at that it could not be ac-

complished by direct appropriations that would be re-

flected immediately in the budget, Congress determined

upon a method of utilizing private loans in the first

instance, eta to be repaid by the United

States on the installment plan out of appropriated

quarters allowances for military personnel. The means

for effectuating this Congressional poliey “were the

mortgagor builder corporations. That was their only

funetiou—to accomplish the federally conceived and

Federaliv implemented financing program for a proj-

eet that was completely federal in all of its essentia!

aspects.

Flexibility in tinaneing federal projects is both nee-

essary and desirable. Such flexibility will be seriously

imipaired if the decision of the Washington Supreme

Court is allowed to stand. A worthwhile Congressional

policy of utilizing private capital in the construetion

of federal projects will also suffer a setback if the use

of financing agents, such as the mortgagor builder cor-

porations, destroys the federal character of the fune-

tion being performed by them. The decision of the

Washington Supreme Court has this effect. for the

state court held that the mortgagor builder corpora

tions Were not federal instrumientalities.

The Clallam County and Livingston v. United States

CASES, sufira, support the contention of appellants that

the funetion performed by the entity is crucial to the

determination of whether it is a federal instrumental-

ity. Lf its sole function is to fuliill a federal purpose, it

is a federal iustrumentality. regardless of the tederal

ownership or the lack of it. Li the Livingston case, E. 1.

duPont de Neitiiours & Co. was held to be a federal in-

strumentality because it was performing a federal pur-

pose and yet the private character of its ownership

cannot be questioned, The Clallam County case invelved

a@ corporation formed pursuant to an Aet of Congress

and that corporation in all of its basie aspects was

quite similar to the mortgagor builder corporations.

Appellees elected to proceed against appellant con-

tractors, rather than the mortgagor builder corpora-

tions as the ‘‘buyers,’’ which would be the normal ap-

proach, for obvious reasons. The only assets of these

corporations was the so-called lease which gave them

no rights to possess, occupy or control the real prop-

erty leased or the military housing constructed thereon

by appellants. A judgment against the mortgagor

builder corporations would therefore be worthless. @

In addition to the reasoning advanced herein, appei-

‘lants adopt the reasons set forth in the jurisdictional out”

statements in the companion cases that were consoli- ue

dated with this case before the Washington Supreme

Court.

The questions presented by this appeal we believe to —__

be substantial and of public importance.

Respectfully submitted,

Boc ie, BoGLe & GATES

Epwarb G. Dosrin

RIcHARD S. SPRAGUE

Counsel for Appellants.

14th Floor Norten Building,

Seattle, Washington

PROOF OF SERVICE

1, RicHarD S. SprRaGve, an attorney in the office of

Bogle, Bogle & Gates, attorneys of record for lan Mur-

ray ef al, appellants herein, depose and say that on

the 15th day of February, 1964, I served a copy of the

foregoing Jurisdictional Statement on the State of

Washington, et a/., appellees herein, by depositing the

same ina United States mail box, with first class post-

age prepaid, addressed to counsel of record at their

post office address in Olympia, Washington.

“

Richard S. Sprague

Subseribed and sworn to before me this 15th day of

February, 1964.

Notary Public in and for the State of

Washington, residing at Seattle.

APPENDICES

AANO B

Appendis A, Pag

APPENDIX A

OPINION OF THE SUPREME COURT OF T.fk

STATE OF WASHINGTON

fNos, SO226, 36227, H6228. 56229. En Bane. August 1,

1963 |

lan Murray ef al, Appellants, v. THE STATE OF

WASHINGTON cf al, Respondeuts.

ANnAND Eapine Buripers, Ixc.. ef al, Appellants, v.

THe Srare or WashiIncton cf a/., Respondents.

Hens & Naropick CoNstRUCTION Co. INc.. ef al.,

Appellants, v. THE Stark oF WASHINGTON ¢f al.,

Respondents.

HeEBBA NAKODICK CONSTRUCTION Co. INC. Appellant. v

THe Stare or WaASHENGTON of al, Dee spoudents.”

Cousolidated appeals from: judgments of the Supe-

rior Court for Thurston County, Nos. 32176, 32186,

219), 52196, Charles T. Wright, J. entered July 3,

1961. Affirmed.

. . ‘ .

Consolidated actions to recover taxes paid under pro-

test. Plaintiffs appeal from: judgments in faver of the

defendant.

Bogle, Bogle & Gates, Rdward G. Dobrin, and Rich

ards. Sprague, for appellants Murray ¢f a/.

Allen, DeGarmo & Ler dy and Seth Wy. Morrison. tor

appellants Diland Eaapire Builders, Ine. ef a/.

Casey d& Pruzan, Wy Car) Prazan, tor appellants

Hebb & Narodiek Construction Co., Ine. «fal,

The Atlorue y (re iif ral, John Ss Rile Y. Chie f wAssist-

aut, and Timothy BR. Malone, Assistant, tor respond-

My = CRIA RE es YO ee As tant ORS

Appendix A, Page 4

_ Orr, C.J this appeal is a consolidation of four ae-

tians brought by several contractors to recover a retail

sales tax paid uhder protest, and to enjoin the State

Tax Commission from assessing the sales tax in con-

nection with the construction of Capehart Act housing

at military installations in Washington.

From adverse judgments, the contractors appeal.

The facts upon which these appeals are predicated

are not in dispute. The legal issue involved is whether

the transactions, pursuant to which the military hous-

ing was constructed, are shielded from state taxation by

the sovereign immunity granted to the United States

government by the federal and state constitutions.

Each of the appellants was awarded contracts under

the provisions of the Capvehart Act (69 Stat. 651-654 as

amended). Since the contract provisions are identical,

-we will refer only to the material portions of the docu-

ments in cause No. 36226. The procedure for the execu-

tion of a contract under the act, in so far as here ma-

terial, may be stated as follows:

The Secretary of Defense, after determining a need

for military housing, issues an invitation for bid& The

contractor submitting the lowest acceptable bid re-

ceives a ‘‘ Letter of Acceptability '’ from the Secretary.

The letter requires the successful bidder to establish a

private ‘‘mortgagor-builder’’ corporation under the

laws of the state of Delaware, and to qualify it to do

business in the state involved. The contractor furnishes

the corporation with $1,000 for capital stock, purchases

all of it, and elects its officers and directors. The United

States government executes to the corporation a 59-

”

' Appendw A, Page 5

vear lease of the real estate upon which the housing is

to be construeted, The corporation is to obtaiy private

financing by giving a mortgage on its leasehold, and—

obtain a commitment from the Federal Housing Ad-

ministration to insure its mortgage loan. The mortgage

loan in is the amount of the contractor’s bid.

The ** Letter of Acceptability’ prescribes the ‘initial

closing”* procedure, Which entails the execution of the

following documents:

(1) The 55-vear lease between the United States and

the corporation for a Consideration of $1,000, paid by

the corporation to ee States gevernment. The

corporation agrees, ditring the period of construction,

to maintain insurance-and to save the United States

government harmless from many laws, ordinances, and

regulations applicable to the leased premises, with re-

gard to construction, sanitation, licenses or permits to

do business.

(2) The corporation executes a note, secured by a

real and chattel mortgage on its real-estate leasehold,

to the private lender, ¢ |

(3) The corporation, contractor, and the United

States execute a housing contract which provides that

all construction is to be inspected antSipervised by the

United States; that progress payments are to be made

by the corporation from the mortgage loan, upon re-

quest of the contractor and approval of the United

States, and that, upon full payment, title to the housing

units vests in the United States, subject to contractor

liability for latent defects. The contract further pro-

vides that the contractor shall act as agent for the eor-

Appendix A, Page 6

poration, guarantee its performance, and furnish a

performance bond to the corporation and the mort-

gagee. }

(4) An irrevocable escrow agreement is executed

which provides that the resignations of the officers and

directors of the corporation, and the stock certificates

of the corporation, endorsed in blank, are to be placed

in escrow, with instructions to the escrow holder to

deliver these documents to the United States upon com-

pletion and acceptance of the project.

(5) The United States executes a written guarantee

to pay the mortgage installment payments to the pri-

vate mortgagee and/or the Federal Housing Adminis-

tration, the insurer.

The provisions of the Capehart Act were fully com- _

plied with by the contractors involved in these appeals.

Appellants’ assignments of error raise two principal

issues: First, the appellant contractors contend that,

under Washington law, the consumer of the housing

project is the party liable for payment of the sales tax,

and that, as a result of the statutory method for the

construction of Capehart housing, the United States

is the consumer and, therefore, its constitutional immu-

nity from state taxation applies. Secondly, appellants

contend that the mortgagor-builder corporation is an

agency of the United States and, as such, is immune

from state tax.

[1] The function of interpreting state statutes to de-

termine who is liable for payment of a sales tax is re-

served to the state courts involved. Alabama v. King &

Boozer, 314 U.S. 1, 86 L.Ed. 3, 62 S.Ct. 43, 140 A.L.R.

Appendi@A, Page 7?

615 (1941); Kern-Limerick, Inc., v. Scurlock, 347 U.S.

110, 98 L.Ed. 546, 74 S.Ct. 403 (1954).

RCW 82.08.020 provides that ** ... there shall be col-

lected a tax on each retail sale in this state... ’’ A retail

sale is defined@in RCW 82.04.050 as including

‘* ... the sale of or charge made for tangible personal

property consumed ghd/or for labor and services ren-

dered in respect tothe following: ... (b) the construct-

ing... of new or existing buildings or other structures

under, upon, or above veal property of or for consum-

ers,...°” (Italies ours. )

A consumer is defined in RCW 82.04.190(4) as ** Any

person who is an owner, lessee or has the right of posses-

sion to or an easement in real or personal property

... °°’ (Italies ours.) ;

RCW 82.08.050 provides in part:

‘The tax hereby imposed shall be paid by the buyer

to the seller, and each seller shall collect from the buyer

the full amount of the tax payable in respect to each

taxable sale ..< aaattttl

ff . o-

**In eas¢ any seller fails to collect the tax herein im-

posed ... he shall... be personally liable to the state

for the amount of the tax.’’ (Italigs ours. )

Appellants concede that a retail sale, as defined in

RCW 82.04.050, did oecur, but contend that the eon-

sumer defined in RCW 82.04.190, and the buyer denomi-

nated in RCW 82.08.050 are synonymous, and that the

United States government is the consumer and taxable

party because it becomes the owner of the housing

units upon their completion and acceptance.

Appendix A, Page 8 ee

[2] With this contention, we do not agree. One of

the purposes of RCW 82.04.050 is to define the event

that gives rise to a taxable transaction, which is the

rendition of labor and services in the construction of

new buildings upon real property of or for consumers.

RCW 82.04.190 establishes the means by which the con-

sumer is identified. These sections do not designate the

party liable for payment of the tax in any given trans-

action. ROW 82.98.050 provides that the retail sales tax

shall be borne by t. buyer, who is primarily hablegfor

payment of the tax. Aaeser v. Everctt, 47 Wn.(2d) 666,

289 P.(2d) 348 (1955).

We must therefore determine who is the buyer under

the facts of the instant case, In this regard, appellants

contend that the United States is the buyer because it

bears the economic burdewof paying for the military

housing, by virtue of its guarantee of the mortgage

obligation.

In Alabama v. King & Boozer, #7 pra, the state of Ala-

bama, pursuant to a statute which imposed the sales tax

upon the purchaser, levied a sales tax upon the sale of

lumber to a contractor who was constructing installa-

tions for the Army. It was there contended that the

sales tax could not be collected from the contractor for

the reason that the United States was the purchaser,

within the meaning of the Alabama statute. In answer-

ing this contention, the Supreme*@ourt of the United

States held:

‘* ., The taxing statute, as the Alabama courts have

held, makes the ‘purchaser’ liable for the tax to the

seller, who is required ‘to add to the sales price’ the

Appendix A, Page 9

amount of the tax and collect it when the sales price is

collected, whether the sale is for cash or on eredit. Who,

in any particular transaction like the present, is a ‘pur-?

chaser’ within the meaning of the statute, is a question

of state law on which only the Supreme Court of Ala-

bama can speak with tinal authority. But w seems plain,

as the Government concedes and as we assume for pres-

ent purposes, that under the provisions of the statute

the purchaser of tangible goods who is subjected to the

taux measured by the sales price, is the person who or-

ders and pays for them when the sale is for-cash or who

is legally obligated to pay for them if the sale is on

credit....’’ (Ltalics owrs. )

The court concluded :

‘*We cannot say that the contractors were not, or

that the Government was, bound to pay the purchase

price, or that the contractors were not the purchasers

on whom the statute lays the tax. The added cireum-

stance that they were bound by their contract to furnish

the purchased material to the Government and entitled

to be reimbursed by it for the cost, including the tax, no

more results in an infringement of the Government im-

munity than did the tax laid upon the contractor’s gross

receipts from the Government in James v. Dravo Con-

tracting Co., supra [302 U.S. 134].”’

[3,4] Applying this rule, the buyer is the person who

ix legally obligated to pay the seller in any transaction.

Lhe housing contract executed by the parties provided

that **The mortgagor-builder [corporation] shall pay

the eligible-builder [contractor] for the performance

of this Housing Contract, and all other obligations of

Appendix A, Page 10

the eligible builder herein, ...°’ By the express terms

of the contract, the corporation, and not the United

States, was obligated to pay the appellant contractors;

hence, the corporation was the buyer under the statute.

Under the provisions of the Capehart Act and the facts

in the instant case, the United States government was

not obligated to pay the seller. The fact that the ulti-

mate economic burden of the tax may fall upon the

United States does not vitiate a state tax on the trans-

actions. Alabama v. King & Boozer, supra; Kern-Lim-

erick, duc., v. Scurleok, supra; United States v. Detroit,

305 U.S. 466, 2 L. kd. (2d )424, 78 S.Ct. 474 (1958) ; EB. T.

Du Pont de Nemours & Co, v. State, 44 Wn. (20) 339,

267 P.(2d) 667 a

Our conclusion in this regard is also supported by

the following cases: ory,

United States v. Harrison & Grimshaw Constr. Co.,

305 F.(2d) 363 (1962), involved the question of whether

the provisions of the Miller Act applied to the perform-

ance bond given by the eligible builder under a Cape-

hart Act contract. The court held (p. 368) :

. The projects are of a private nature until com-

pletition and assumption of control by the government.

The mortgagor-builder has a contract with a construc-

tion company to,build the project. The constructor looks

to the mortgagor-builder for payment for his work and

owes to the mortgagor-builder the obligation to per-

form....°’ (Ltalies ours. )

In Ju re 8S. S. Stiberblatt, lne., v. Tac Comm. of the

State of New Yorks5 N.Y.(2d) 635, 159 N..(2d) 195,

186 N.Y.S.(2d) 646 (1959), it was said:

Appendix A, Page 11

‘*Likewise, we mywst reject appellant’s contention

that the subject mortgages, as direct obligations to the

United States, are immune from State or loeal taxa-

tion, as provided in section 3701 of the Revised Statutes

of the United States (U.S. Code, tit? 31, § 742) which

exempts ‘Except as otherwise provided by law, all

stocks, bonds, Treasury notes, and other obligations of

the United States’ since they are not ‘of the same type

as those specifically enumerated’ in the statute (Smith

uv. Davis, 325 U.S. 111, 117). Under the arrangement

authorized by the Enabling Act, it is clear that the de-

vice employed was designed to relieve the Government

of its financially burdensome obligation to provide

housing for its military personnel and ut the same time

avoid increasing the national debt. It did not pledge its

credit in the usual sense, but merely guaranteed each

‘periodic payment,, based on a monthly average of $90

per family unit.”’

Congress, in its discretion, by — t

law, chose to leave the hazards of coustrp€tie

chasing of proper materials, aud Cciakiie of

proper labor performance to puAate contractors and

private lenders. It chose to guarantee only the payment

to the private lender, after units acceptable to the gov-

ernment were erected upon the leased premises. We

conclude, therefore, that the mortgagor-builder corpo-

ration was the party legally obligated to pay the con-

tractor, and that it was the buyer denominated in RCW

2.08.050.

Is the morigagor-builder corporation an agency of

the United States?

Appendix A, Page 12

Appellants contend that title to the units, when built

in accordance with the contracts, vested in the United

StatesSthat the United States controlled and dictated

the terms of the construction contracts, and that it

guaranteed the mortgage obligation and ultimately

gained ownership of ail of the corporation’s capital

stock ; hence, the corporation is a government agency.

In support of this contention, appellants rely on

Clallam County v. United States, 263 U.S. 341, 68 L.Ed.

328, 448.Ct. 121 (1923) ; Green v. Eglin AFB Housing,

Inc., 104 So.(2d) 463 (Fla. 1958) ; and Knapp-Stiles,

Lne.,v. Michigan Department of Revenue, CCH 2 Mich.

‘Tax Cases “200-202 (1962).

The Clallam County case held that a corporation, or-

ganized pursuant to a World War | emergency act

which authorized the Director of Aircraft Produetion

to establish one or’ more state corporations to produce

war materials, was an agency of the United States and,

as such, its activities were exempt from state taxation.

The case is not apropos. The Director of Aircraft Pro-

duction was, by law, an agent of the government. In the

iustant guse, the successful bidders were not author-

ized agents of the goverument. Furthermore, the facts

in the cited case did not disclose any evidence of an

intent to distinguish the corporate activities from those

of the United States. ln this regard, the court stated

(p. 340): °°... This is not like the case of a corpora-

tion having its own purposes as well as those of the

United States...”

In the Green case, the court stated (p. 467):

.. The question here is the extent of an exemp-

Appendix A, Page 13

tion granted by state statutc. Had the legislature in-

tended to limit the exemption to that required by the

Federal Constitution there would have been no occasion

whatever to go further than to say *‘There shall also be ¢

exempted all sales made to the United States.’’ But the

legislature intended to grant a greater exemption and

made that intent clear...” ”’

tn Knapp-Stiles, Inc., v. Michigan Department of

Revenue, supra, the court stated:

‘*At the outset, it may be noted that the question is

not whether the State has the power to impose such tax

upon contractors who are performing contracts with

the United States.

‘Michigan has the power to impose such a tax. Has

it done so? Or has it, by the language of the statute, ex-

empted the saleshere involved from the tax?...”’

in the Green and Knapp-Stiles cases, the result was

determined by interpreting a state exemption statute

much broader than our own, for which reason the cases

are distinguishable.

[5] The mortgagor-builder corporate entity created

for the purpose of constructing and financing Capehart

housing serves a separate and distinct function from

that of the United States. That such a corporation is

not an agency of the United States is sustained by the

following decisions:

In In re S.S. Silberblatt, Inc., v. Tar Commission of

the State of New York, supra, the New York Court of

Appeals held that the mortgagor-builder corporation

2° ae

# BSR [hs ha

Appendix A, Page 14

was subject to that state's mortgage recording tax,

stating (p. 641): :

“The appellant's contention that this petitioner and

the five corporate mortgagors are instrumentalities of

the Federal Government or its agencies and. as such,

are exempt from State and local taxation, is without

substance, ... At the time of the execution, delivery and

recording of these mortgages, each of the mortgagors

Was a private corperation, all of the capital stock of

which was privately owned. They were created for a

commercial purpose for private profit, as distinguished

from a governmental purpose. In the absence of statute

to the contrary, it may not be assumed that a govern-

mental function was involved. They possess all of the

requisites and responsibilities of corporate existence

efid, as such, are an entily separate and apart from the

United States (United States v. Strang, 254 U.S. 491)

and ies is so, notwithstanding the fact that all of the

capital stock of each corporation will “ultimately be

owned by the Federal Government (Sloan Shipyards

v. United Stakes: Fleet Corp., 208 U.S. 549, 42 S.Ct.

386, 66 L.Ed. 762)...’ (Italics ours )

In United States v. Ft. George G. Meade Defense

Housing Corp. No. 1, D.C., 186° F.Supp. 639 (1960), it

was held that the leasebold interest acquired by the

mortgagor-builder corporation from the United States

Was subject to the Marviand mechanics’ lien law be-

cause

* ... the so-called Capehart Act contemplates leav-

tg the entire arrangement for the financing and eon-

struction of Capebart housing projects in the hands of

sotteasuennee ae hE ae Ree not SS RE. Rae SR Eee, \ , yathe- at

Appendix A, Page 15

private enterprise until the point at which the govern-

ment has secured the capital stock of the Housing Cor-

poration...”

The reasoning in the following cases, although not

arising from Capehart transactions, supports the view

that the mortgagor-builder corporations are not agen-

cies of the government.

In E. 7. Du Pont de Nemours & Co. v. State, 44 Wn.

(2d) 339, 267 P.( 2d) 667 (1954), it was contended that

the Du Pont Company was an agent or instrumentality

of the United States in its operation of the Hanford

Engineer Works. We held (pp. 349, 350) :

* the fact that the govermnent reserved and exer-

cised the right to restrict or control the action of the

contractor as to its general Aetivities does not establish

the existence of an agency relationship. .. .

. .

“It is also without significance that all of the reai

and personal property Utilized in performing the con-

tract was owned by the government. | Citing cases. | The

sume is true with regard to the fact that the govern-

rent exerted unusual supervisory controls over every

phase of the contractor's activity. | Citing case."

In United Siates v. Brown, D.C. 41 F.Supp. 838

(1941), the contention was rejected that certaim Re-

gional Agricultural Credit Corporatious, created pur-

suant to federal enactment, were immune from state

taxation because the United States owned all of the

capital stock of the corporatious. The court said (p.

840): :

‘Whether or not these Regional Corporations shall

enjoy sovereign immunity from taxation is wholly a

2 ga ea

it GaP FE

Appendix A, Page 16 6

question of Congressional intent. They are purely com-

mercial corporations exercising ino sovereign function.

In the absence of statutory provision, there is no rea-

son why they should be exempted from taxation, espe-

cially in view of Congressional policy concerning this

type of corporation, evidenced by many statutory pro-

Visions expressly subjecting the real property of

similar corporations to taxation. ,

“The mere fact that the United States owns all the

capital stock of these corporations is net alone suffi-

cient to endow them with sovereign immunity, nor do

they acquire such immunity merely because they are the

medium through which the Government carries out

certain proprietary activities. Note, 83 L.Ed. 799 et seq.

‘When a corporation is created for commercial as

distinguished from Governmental purposes, it is ordi-

narily implied in the absence of statutory provisions

to the contrary, that such corporation shall have all the

requisites and responsibilities of Gorporate existence,

even though the United States owns all the stock. Such

a corporation is an entity separate from the United

States. Cnited States v. Strang, 254 U.S. 491, 41 S.Ct.

169, 65 L.Ed. 368."’

We conclude that the mortgagor-builder corporation,

having served an independent and distinct purpose in

the taxable event, is pot a federal agency.

Further, Congress has not expressed a legislative in-

tent to immunize a Capehart corporation from state

taxation. The invitations to bid expressly provided :

** Nothing in this Invitation for Bids shall be deemed

Gye aoe

(SR Roan REDRESS EAT EAS IIOLELIELS Se tore

; Appendix A, Page 17

to relieve the eligible builder of any liability for the

payment of sales or use taxes properly levied.”

For the ) easons stated, the sales tax was ‘‘properly

levied’? uj on these transactions. AppeHants, under the

statute, were obligated to collect the tax from the mort-

gagor-builder corporations. Having failed to collect it,

appellants are liable for the tax. RCW 82.08.050, supra.

The judgments are affirmed.

FINLEY. RoseLLin1, HaMILTon, eae JJ., con-

eur.

Hunter, J. (dissenting)—The majority say that the

saiesitax must fall upon the person legally obligated to

pay for construction of the military housing. With this

I agree.

The majority then state that, by the express terms of

the contract with the mortgagor-builder, the Delaware

corporation, and not the United States was legally ob-

ligated to pay the appellant contractors ; hence, the cor-

poration was the buyer under the statute. The fact that

the ultimate economic burden of the tax may fall upon

the United States does not constitute it as the person

legally obligated to pay the tax. Neither do I disagree

with this rationale.

It is my disagreement with the majority in the dis-

position of the issue relating to whether the mortgager-

builder corporation is an instrumentality of the United

States that bring me to a result contrary to that of the

majority in this case.

Under the established rule for the construction of

contracts. a contract must be picked up by its four

a Fie Sars ee mine :

J Pee Sa BRIE, ae by Aw

Appendix A, Page 18

corners and considered in its entirety. In so doing, it is

inescapable to conclude other than that the prime pur-

pose of the housing contract was the construction of

military housing for the exclusive use of the United

States. It was necessarily the obligation of the govern-

ment to pay for this housing and, although ft did not

wish to be directly obligated, the United States, in

causing the Delaware corporation to be organized, did

so to provide a means to carry out its gbligation to com-

pensate the contractors for the construction of this

housing.

In Clallam County v. United States, 263 U.S. 341, 68

L.Ed. 328, 44 8.Ct, 121 (1923), it was held that a corpo-

ration created for the purpose of operating a sawmill

and railroad for the promotion of the war effort and

wholly owned by the United States was an instrumen-

tality of the U nited States. The court there said:

‘In short the Spruce Production Corporation was

organized by the United States an an instrumentality

for carrying on the Yar, all its property was conveyed

to it by or bought with money coming from the United

States ‘and was used by it solely as means to that end,

and when the war’was over it stopped its work except

so far as it found ityecessary tego on in order to wind

up its affairs. ... ——\

a \

¢é ae ,

“The State claims the right to tax on the ground

that taxation of the ageney may be taxation of the

Pie aie vé . .

means employed by the government and invalid upon

admitted grounds, but that taxation of the property of

the agent is not taxation of the means. We agree that it

Appendix A, Page 19

‘is not always, or generally, taxation of the means,’ as

said b¥ Chief Justice Chase in Thomson v. Pacific Rail-

road, 9 Wall 579, 591. But it may be, and in our opinion

clearly is when as here not only the agent was created

but all the agent’s property was acquired and used, for

the sole purpose of producing a weapon for the war.

This is not like the case of a corporation having its own

purposes as well as those of the United States and in-

terested in profit on its own account. The incorpora-

tion and formal erection of a new personality was only

for the convenience of the United States to carry out its

ends....’’ (Italics mine.)

Contemporaneous with the signing of the housing

contract, the stock of the corporation in the Ynstant

case wiirrevocably placed in escrow, together with

_ the resignation of the officers and directors, to be deliv-

ered to the United States at the conclusion of the con-

struction of the housing. There was no possible con-

tingency for the return of the stock to the stockholders

or the documents of resignation to the officers and direc-

tors. The corporation owned nothing of any value in

the housing being constructed. It servéd solely asa

means to the end of obtaining military housing for the

United States. There was no possibility for it to en-

gage in any purpose other than to serve the end of

obtaining military housing for the United States on

this exclusive project. Because it had no purposes in-

dependent of those of the United States, the corpora-

tion was nothing more than an instrumentality thereof.

The appellants cite Green v. Eglin AFB Housing,

Tne., 104 So.(2d) 463 (Fla. 1958), which is persuasive

~=e

Appendix A, Page 20 eo

of their contention. There, under the authority of the

Capehart Act, the government entered inte a eontract

virtually identical with that of the instant case for the

construction of military housing at the Eglin Air Force

Base in Florida. The Florida court in effeet found that

the Delaware c¢ orporatious were government instru-

mentalities, stating:

***The AFB corporations were created at the diree-

tion of the United States for the sole purpose of bor-

rowing money to be expended i in constructing facilities

needed by the United States, to be repaid by the United -

States and further securing the payment of this money

by a mortgage upon property of the United States.

These corporations will continue in existence until the

mortgage debts are paid, so as to provide a party

against whom the mortgages may be foreclosed in the

remote contingency that -the United States defaults iti,

its obligation to pay the mortgage debt.

‘**Even if we regard the AFB corporation as private

enterprises, their interest in the property is so neglible

—lessees without right of use or possession—as to make

it eygrely unrealistic to hold that it destroys the status

of these buildings as a part of the publie works of the

United States.

-***Itis very doubtful if these corporations should be

regarded as anything other than agencies or instru-

mentalities of the Federal Government. In Clallam

G@ounty, Wash. v. United States, 268 U.S. 341, 44°8.Ct.

121, 68 L.Ed. 328, the Supreme Court held that a cor-

poration created for the purpose of operating a saw-

mill and railroad in the promotion of the war ef-

’

eas?

PENSE TN ey AS ee RT a a

Appendia A, Page 21

fort during the first World War and which was wholly

owned by the United States was an ageney of “the

United States and that its property was, therefore, im-

mune from state taxation. In describing the corpora-

tion there involved the [sie] used language peculiarly

applicable to each AFB corporation: **The ineorpora

tion and formal erection of a new perscnality was only

for the convenience of the United States, to carry out

its ends.”* The creation of the AFB corporations was

only for the convenience of the United States to enable

. it to finance military construction in a manner deter-

mined by the Congress to be most conducive to the

’ 99

national interest... . )

The limited function of the Delaware corporation,

its power and purpose are aptly stated by the Michigan

court in Anapp-Stiles, inc., ve Michigan Department

of Revenue, CCH 2 Mich. Tax Cases £* 200-202. (1962).

There, as here, the contracts were for military housing

under the Capehart Act. The court said relative tattae

corporations =

. Jn the Invitation for Bids, which iv prepared

and issued by the Unitgd States, acting through the

epartment of the AirzForce, there is found in Para-

eh 1, above quoted, the following:

+ Phe statute further contemplates that the Govern-

ment-owned housing site be leased to a mortgagor or

borrower corporation which will act as a channel tor

the proceeds of the mortgage loan from the lender to

the successfill bidder...’ *

**And a review of the documents—the Jease, the con-

tract, and the mortgage is convincing that this is sub-

Appendix A, Page 22

tantially the only function that the Delaware corpora-

tion do perform.

‘

‘They have no real powers except to do the bidding

of the United States. ... a

ek Pe

“The corporations do not determine the terms of the

contract. That is all done before the corporations come

inte existeace. They do not determine whether the con-

tract has been performed. They cannot modify its

terms. They cannot terminate it.

‘True, the corporations bad a lease upon the prem-

ises. While this is nominally for a fifty-five year term,

in fact, the actual possession, maintenance and opera-

ticu of the housing is in the hands of the United States

and its Air Force as soon as the housing is ready for

occupancy.

“The United States alone determines the terms of

the contract. It alone can modify or terminate it. It

alone determines when it has been performed.”’

An analysis of Jn re S. S. Silberblatt, Inc., ». Tax

Comm. of the State of New York, 5 N.Y.(2d) 635, 159

majority, discloses that the opinion is based on the

erroneous premise that the Delaware corporations were

* ... created for a commercial purpose for private

profit, as distinguished trom a governmental purpose.”

As heretofore stated, consideration of the housing con-

tract in its entirety cannot support such a conclusion.

The analysis of the housiug contract and the reasoning

of the dissent in the Si/berblatt case is correct.

So Print es Ry Fo Ran PTR ali aca ica PRE bp a2 ls Ph ae ;

hh ETE RIS De a Shlcheie eae PIT Pt SEES fet APM ORG Ree tees ty

. an

~ Appendix A, Page 23%,

* ... Although under our State law the tax is im-

posed upon the recording of the mortgage (Franklin

Soc. Bennett, 282 N.Y. 79), this case is controlled by

Federal law under which the tax is on the mortgage

itself, which is a Federal instrumentality exempt from

State taxation (Federal Land Bank v. Crosland, 261

U.S. 874; ... ). Unlike the Wherry Act, the Cape-

hart Act, under which this military housing project

was authorized, reuders petitioncr-appellant merely a

builder and-tiota private sponsor of the military hous-

ing. The United States, through its Department of De-

fense, is the sponsor, financier and owner of the entire

project. The mortgagor corporations are mere fictions,

and they and the mortgagee banks had no other fune-

tion in this business than to act as agents for the Fed-

eral Govertiment (Clallam County v. United States, 263

U.S. 341, 345, 44 S.Ct. 121, 68 L.Ed. 328; Railroad Co.

v. Peniston, 18 Wall 5, 42, 85 U.S. 5, 42, 21 L.Ed. 787)

The-majority attempt to distinguish the Clallam

County case on the basis that the corporation there had

no purpose other than to produce war materials for

the United States government, and it quotes from the

Clallam County case as follows:

“.. This is not like the case of a corporation hav-

ing its own purposes as well as those of the United

States....7 7’ @&

The inference from this quotation which is desired by

the majority is that the Delaware corporation had pur-

poses other than those of the United States govern-

ment, This is erroneous aud unsupported by the record.

Appendir A, Page 24

The holding of the cases cited by the majority, E. 7.

Du Pont de Nemours & Co, v. State, 44 Wu.(2d) 339,

267 P.(2d) 667 (1954), and United States v. Brown, 41

F.Supp. 838 (1941), is not inconsistent with the Clallam

County ease since the ecrporations, in those cases, were

not instrumentalities of the United States because they

had separate commercial purposes for private profit.

In the instant case we should hold that, although the

mortgagor-builder is the “*buver’’ to whom the retail

sale of the housing project construction was made, it

Was nothing more than an instrumentality of the United

States government; that it had no commercial purpose

other than for the convenience of the United States,

serving as a means to the end of obtaining this military

housing; and that the sovereign immunity of the federa!

government applies.

The judgment of the trial court should be reversed,

and the cause remanded with instructions to enter

Judgment restraining the Tax Commission from = im-

posing the tax and to permit recovery of the tax which

appellants paid under protest.

4 >

Hitt, Don wortu, and Weaver, JJ... coneur with

HUNTER, J.

ee et ee ey pit ise PALS GEL Ft sek | te ae eh pas brag

ik PIE SOLS CSAIL ee IPS ee Sali POE se

Appendix B, Page 1

APPENDIX BS.

STATUTES INVOLVED

Revised Code of Washington

RCW 82.08.010 Definitions. For the purposes of

this chapter:

(1) **Selling price’ means the consideration, whether

money, eredits, rights, or other property, expressed in

the terms of money paid or delivered by a buyer to a

seller, all without any deduction on aecount of the cost

of tangible. property sold. the cost of materials used,

labor costs, interest, discount, delivery costs, taxes, or

any other expenses whatsoever paid or accrued and

without any deduetion on account of losses; but shall

not include the amount of cash discount actually taken

by a buyer;

(2) “Seller means every person making sales at re-

tail or retail sales to a buyer or consumer, whether as

agent, broker, or principal ;

(3) ** Buyer” and ‘tconsumer™ yuelude, without lim-

iting the scope hereof, @very individual, receiver, as

signee, trustee iii bankruptey, trust. estate. firm, eo-

partnership, jolt venture. club. company, joint stock

company, busitiess trust. corporation, association, so

elety, or any group of individuals acting as a unit,

whether mutual, cooperative, fraternal, nonprotit, or

otherwise, municipal corporation, quasi municipal cor-

poration, and also the state, its departments and inst.

tutions and all political subdivisions thereof. acre-

spective of the nature of the activities engaged in or

Appendix B, Page 2

functions performed, and also the United States or any

instrumentality thereof ;

(4) The meaning attributed in chapter 82.04 to the

terms ‘*tax vear,’’ ‘*taxable vear,’’ ‘‘person,’’ **eom-

pany,”’ **sale,"’ ‘sale at retail,”’ ‘retail sale,”’ *‘sale at

99 ee

wholesale,’’ **wholesale sale,’’ **business,’’ ‘engaging

"? Senn.

in this state’’ and **within this state’’ shall

apply equally to the provisions of this chapter. ...

in business,”’ ‘‘cash diseount,’’ **suecessor,

97 44

sumer,

RCW 82.08.020 Retail sales tax imposed. There is

levied and there shall be collected a tax on each retail

sale in this state equal to three and one-third per cent

of the selling price: Provided, That from April 1, 1959

the tax imposed by this section shall be equal to-four

per cent of the selling price. The tax imposed under

this chapter shall apply to successive retail sales of the

same property and to the retail sale of intoxicating

liquor by the Washington state liquor stores. . . .

RCW 82.08.030 Exemptions. The tax hereby levied

shall not apply to the following sales:

(1) Casual and isolated sales of property or service,

unless made by a person who is engaged in a business

activity taxable under chapters $2.04., 82.16 or 82.28:

Provided, That the exemption provided by this para-

graph shall not be construed as providing any exemp-

tio nfrom the tax imposed by chapter $2.12;

(2) Sales made Ly persous in the course of business

activities With respect to which tax liability is specifti-

cally imposed under chapter 82.16, when the gross pro-

ceeds from such sales must be included in the measure

of the tax imposed under said chapter;

Reve oe, BO a nw,

SS RE Scere eas eran cncset ene:

Appendix B, Page 3

‘

(3) The distribution and newsstand sales of news-

papers ;

(4) Saies which the state is prohibited from taxing

under the Constitution of this state or the Constitution

or laws of the United States;

(5) Sales of motor vehicle fuel used in aireraft by

the manufacturer thereof for research, development,

and -testing purposes and sales of motor vehicle fuel

taxable under chapter 82.36: Provided, That the use

of any such fuel upon which a refund of the motor ve-

hicle fuel tax has been obtained shall be subject to the

tax imposed by chapter 82.12;

(6) Sales (including transfers of title through de-

cree of appropriation ) heretofer or hereafter made of

the entire operating property of a publicly or privately

owned public utility, or of a complete operating inte-

gral section thereof, to the state or a political subdivi-

sion thereof for use in conducting any business defined

in subdivisions (1), (2), (3), (4), (5), (6), (7), (8),

(9), (10) or (11) of RCW 82.16.0110; 6

(7) Auction sales made by or through auctioneers of

tangible personal property (including household goods )

which have been used in conducting a farm activity,

when the seller thereof is a farmer and the sale is hedl

or conducted upon a farm and not otherwise ;

(8) Sales to corporations which have been incorpo-

rated under any act of the congress of the United

States and whose principal purposes are to furnish vol-

unteer aid to members of armed forces of the United

States and also to carry on a system of national and

international relief and (o apply the same in mitigat-

Appendix B, Page 4

ing the sufferings caused by pestilence, famine, fire,

floods, and other national calamities and to devise and

carry ou measures for preventing the same;

(9) Sales of purebred livestock for breeding pur-

poses where the animals are registered in a nationally

recognized breed association; sales of cattle and milk

cows used oy the farm;

(10) Sales of tangible personal property (other than

thetype referred to in subdivision (11) hereof) for

use by the purchaser in connecti#i 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 of a carrier permit issued by the Interstate

Commerce Commission authorizing transportation by

/ motor vehicle across the boundaries of this state, in the

coarse of constructing, repairing, cleaning, altering,

Vor improving the same; also sales of or charges made

for labor and services rendered in respect oo sueh eon-

structing, repairmg, cleaning, altering, or improving:

a , .

Naas SEPARA: fees

‘\

Auccniid B, Page 5

(12) Sales of motor vehicles and trailers to be used

for the purpose of transporting therein persons or

property for hire in interstate or foreign commerce:

Provide. That the purchaser must be the holder of a

carrier permit issued by the Interstate Commerce Com-

mission and that the vehicles will first 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; 3 :

(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 pursuant to the

provisions of RCW 46.16.100, or (») said motor vehi-

cles 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

mouths, and will not be required to be registered and

licensed under the laws of this state.

(14) Sales to nonresidents of this state for use out-

side of this state of tangible personal property which

becomes a component part of any machinery@r other

article of personal property belonging te such nonresi-

dent. in the course of installing, repairing, cleaning,

altering, or improving the same and also sales of or

charges made for labor and services rendered in re-

speelto any installing, repairug, cleaning, altering, or

ae ne a |

Lal card

Appendix 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, and does, deliver the property to

the purchaser at a point outside this state, or delivers

the property 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 eommis-

sion and signed by the purchaser or his agent estab-

lishing the fact that the purchaser is a non-resident

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 duplicate to be retained by the

dealer.

(16) Sales of baby chicks and turkey poults for use

in the production for sale of poultry or poultry

products. 7

(17) Sales to nonresidents of this state for us out-

side of this state of machinery and ir&plements for use

in conducting a farming activity, when such machinery

and implements will be transported @himediately 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

as a business record of the seller.

REPRE ESTATE ASE CERISE BR IIR GY We HR SRR aa ioe

——

~~.

. |

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 contract of sale,

the seller delivers the subject matter pf the sale to the

purchaser or his designated agent at the usual reeeiv-

ing terminal of the carrier selected to transport the

goods, under such circumstances that it is reasonably

certain that the goods will be transported directly to a

destination in such noncontiguous states, territories

and possessions. ...

* *

RCW 82.08.050 Buyer to pay, seller to collect tax—

Penalties. The tax hereby imposed shall be paid by the

buyer to the seller, and each, seller shall colleet 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 RCW = 82.08.060. 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 tq the extent that

the money required to be collected is not available for

peyment on the due date as prescribed in this chapter

shall be guilty of a misdemeanor.

In case eny seller fails to collect the tax herein im-

posed or having collected the tax, fails to pay it go the

commission in the manner prescribed by this chapter,

whether such failure is the result of his own acts or

the result of acts or conditions bevond his coutrol. he

OL 840r So 2 Siahe: Ch aay ces

Appendix B, Page 8

shall, nevertheless, be personally liable to the, state for

the amount of the tay.

The amount of tax, until paid by the buyer to the

seller, or to the commission, shall constitute a debt

from the buyer to the seller and any seller who fails or

refuses to collect the tax as required with intent to vio-

late the provisions of this chapter or to gain some ad-

vantage or benefit, either direct or indirect, and any

buyer who refuses to pay any tax due under this chap-

ter shall be guilty of a misdemeanor.

Where a buyer has failed to pay to the seller the tax

imposed by this chapter and the 1 ef has not paid the

amount of the tax to the conunission, the commission

may, in its discretion, proceed directly against the

buyer for collection of the tax, in which case a penalty

of ten percent may be added to the amount of the tax

for failure of the buyer to pay the same to the sellersre-

gardless of when the tax may be collected by the com-

mission; and al] of the provisions of chapter*82.32, in-

cluding those relative to imtérest and. penalties, shall

apply in addition; and, for the sole purpose of apply-

ing the various provisions of cuapter 82.32, the fif-

teenth day of the month following the bimonthly tax

period in which the pufchase was made shall be con-

sidered as the due date of the tax....

RCW 82.08.060 Collection of tax — Methods and

schedules. The tax commission shall have power to

adopt rules ond regulations prescribing methods and

schedules for the collection of the tax required to be

collected by the seller from the buyer under this chap-

ter. The methods and schedules prescribed ;: sall be

—.

Ena ELT IO LSS TEI CLG DEES EE, OE LP SE

Appendix B, Page 9

adopted so as to eliminate the collection of fractions

of one cent atid so-as to provide that the aggregate col-

lections of all taxes by the seller shall, insofar as prac-

ticable, equal the amount of tax imposed by this chap-

ter. Such schedules may provide that no tax need by

collected from the buyer upon sales below a stated sum

and may be amended from time to time to accomplish

the purposes set forth ‘herein. ...

* * *

RCW 82.08.M0 Administration. The provisions of ’

RCW 82.04.470 and all of the provisions of chapter

82.32 shall have full force and application with respect

to taxes imposed under the provisions of this chap-

ter. ...

—

**SaLe DEFINED

RCW 82.04.040 ‘Sale’? means any transfer of the

ownership of, title to, or possession of property for a

valuable consideration and includes any attivity clas-

sified as a ‘‘sale at retail” or ‘retail sale’ under RUW

82.04.050. It includes rentingtor leasinge conditional

sale contracts, Itases with option to 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 aiso includes the furnishing of food, drink, or

meals for compensation whether consumed upon the

premises or not.

**Casual or isolated sale’* means asale made Ly a _per-

son who is not engaged in the business of selling the type

of property involved.

Aprendir By Pane lo

“Sarkar Rerad. Revain Save” Derinep

RCW 82.08.0500 “Sale at retail or ctretail sale"

Ineahs every sale of tangible personal property Cin

eluding articles produced, fabricated, or imprinted )

other than a sate 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, alters. Imprints, mproves, 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 (Ce)

purchases for the purpose of consuming the property

purehased th producing tor sale a new article of tan-

gible personal property or substanee, of whieh sueh

property becomes an dagredient or component or as a

chemical used ii processing, When the primary purs

pose ef such chemical is te ereate a chemical réaction

directly through contact with an ingredient of a new

article being produced for sale. The terni alsé means

every sale of tangible personal property to persons en-

gaged in any business whieh is taxable under RCW

S2.O4BSO, subsection (2). and S2.04.290.

The term ‘sale at retail’? or “retail sale’? shall in-

elude the salefor charge made tor tangible. personal

property consumed and or for labor and services ren-

dered in respect to the following: cay The installing,

repairing, cleammyg, altering, Huprinting or Improving

of tamgible personal property of or tor consumers, ex-

eluding, however, serviees rendered in respect to live

auimals, birds and insects: (b) the constructing, re-

paulring, decorating, or npreving of new or existing

buildings or other structures uuder, upon, or above

App nelrr B, Page 1!

real property of or for consumers, inehading the in

stalling or attaching of any artiele of tangible personal

property therein or thereto, whether or not suel per-

sonal property becomes a part of the realty by virtue

of dustallation, and shall also imelude the sale of serv-

lees ofceharges made for the clearing of land and the

moving of earth, excepting the mere leveling of land

used in commercid farming or agriculture; (ce) the

sale of or charge made fot labor and services rendered

In respect to the cleaning, funugating, razing or mov-

ing of existing buildings or structures, but shall not

inelude the charge made tor janitorial services; (d)

the sale of or charge made for labor and services ren-

dered in respect to automobile towing, armored car

service afd similar automotive tratsportation services,

but not im respect to those required to report aud pay

taxes under chapter S2.16; (Ce) the sale of and charge

made for the furnishing of lodging and all other serv-

ices by a betel, roomimg house, tourist court, motel,

trailer camp.and the granting of any sinmilardeense to

use real property, as distinguisbed trom the renting or

leasing of real property, and it shall be presumed that

the oecupaucy of real property for a continuous period

of one month or more constitutes a rental or lease of

real property and not a mere Heelise to ise or enjoy the

salle,

The term shall not ineliude the sale of or charge made

for labor and services rendered ini respeet to the build:

lug. repairing, er improving ef any publiely owned

street, place, read. highways bridge. or trestle which

is used for to be used primarily for teet or velnentar

traftie. nor shall it include sales of feed. seed. fertilizer.

Ape ndir BL Page 12

and spray materials te persons for the purposes of

producing for sale ane agricultural produet whatse

ever, Ineluding milk, eggs, wool, fur. meat. honey. or

“other substanees obtained from animals, birds. or

lhisects,

“Sate Ap WHOLESALE,’ ** WHOLESALE SALE” DEFINED

RCW 82.04.0600 - Sale at wholesale’ or wholesale?’

stile means any sale of tangible personal property

Which is nota sale at retail and means any charge made

for labor and services rendered for persous who are

Hot consumers, in respect to real or personal property,

If such charge is expressly detined as a retail saleby

ROW 82.04.0590 when rendered to or for consumers:

Provided, That the the term ‘treal or personal prop-

erty" as used in this section shall wet inelude any natu-

ral products named ii ROW 82.04.1000,

‘ “GROSS PROCEEDS OF SALES** DEFINED

RCW 82.08.0700 Gross proceeds of sales? means

the value proceeding or aceruing from the sale of tan-

gible personal property and or for services rendered.

without any deduction on Account of the cost of prop-

erty sold, the cost of materials used, labor costs. inter-

est, discount paid. delivery costs, taxes. or any other

expense Whatsoever paid or accrued and without any

dedttetion ou account of losses,

“CONSUMER” DEFINED

RCW 82.06.190 Consumer means the following:

(1) Ans person who purehases, aequires, owns.

holds. or uses any article of tangible personal property

other than f6r the purpose (a) ef resale as tangible

Apye nda i, Pag 1;

personal property tthe regular course of business or

(h) of inesrporating such property as an nagredient

er component of real or personal property when in-

stalling, repairing. cleaning, altering, imprinting, im-

proving, constructing, oF decorating such real or per-

sonal property of or for consumers or (¢)} of cConsum-

ing such property in producing for sale a new article of

tangible persgfal property or a new substance, of

Whieh such ms becomes an ingredient or compo-

nent or as a chemical used in processing, when the

primary purpose of such chemical is to create a ehemi-

cal reaction directly through contact with an ingredient

of anew article being produced for sale ¢

(2) Any person engaged in any business activity

taxable under ROW 82.04.2960 ;

(3) Any person engaged in the business of contract-

ing for the building, repairing or improving of any

publicly owned street, place, road, highway, bridgexer

trestle which

sused or to be used primarily for foot or

ie as detined in ROW 82.04.280, in re-

spect, however, only to tangible personal property

used or coustffyed in sueh business ;

(4) Amy person who is an owner, lessee or has the

right Gf possession to or an easement in real or per-

sonal property which is being constructed, repaired,

improved, cleaned, imprinted, or otherwise altered by

a person engaged in business, excluding only the United

States, the state, and its politieal subdivisions in respect

to dabor and serviees rendered to their real property

Which is used or held for public road purposes.

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This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.