Opposition — Department of Revenue v. Ass'n of Washington Stevedoring Companies

Supreme Od, U. &

=—$ pitt Q

IN THE ju 15 N

Supreme Court of the United

FALL RODAK, N., CLERK

—— —

No. 76-1706

ASSOCIATION OF WASHINGTON STEVEDORING

COMPANIES, et al.,

Respondents N

.

THE DEPARTMENT OF REVENUE OF THE STATE

OF WASHINGTON,

Petitioner.

BRIEF IN OPPOSITION TO

PETITION FOR A WRIT OF CERTIORARI TO

THE SUPREME COURT OF THE STATE

OF WASHINGTON

JOHN T. PIPER

BOGLE & GATES

The Bank of California Center

Seattle, Washington 98164

Counsel for Respondents

CRAFTSMAN PRESS — WORD PROCESSING. SEATTLE

a

SUBJECT INDEX

Questions Presented .....2+eeeeees

Respondents’ Statement of the Case

Reasons Why Petition Should Not Be Granted. .

ig

oO

we wo re —

I. The Decision Below Was Correct...

Il. The Cases Relied Upon by the State

Are Not In Point >. * * * . * * . * * 5

III. The Record Below Is Inadequate for

the Ambitious Demands That the

State Makes Upon This Court 7

Conclusion * * * * * * * . * > * * * . * * * * 12

TABLES OF AUTHORITY

Table of Cases

Airport BE v. Delta Airlines,

405 U.S. „„ „ „„ „ „

American President Lines, Ltd. v. Federal

Maritime Bd., 317 F.2d 887

r ̃ͤ : cea 6

Calcot, Ltd. v. Isbrandtson Co.,

318 20 669 (ist Cir. 1963) * * . * * * * * 4

Canton R. R. v. Rogan,

. S. ))) 6.9

Carson Petroleum Co. v. Vial,

Case of the State —. 355 Tax,

ewe ail. ee

Deb 88 1 Co. v. Brattleboro,

we —e@ebheeebess ©

11

Page

complete Auto 7571075 Inc. v. Brady,

„ d. ef © © % @ @ -5,7,8-9,11

Dunbar-Stanley Studios, Inc. v. Alabama,

„ * ). * * * „ . * 0 * „ > „ * 10

Ex parte Easton, 95 U.S. 68 (1877) ...... 4

Gruen v. State Tax Comm'r,

~ 35 Wn.2d T. 211 P.2d 651 (1949) ..... 10

hill v. Tax Comm'n,

65 Wn.2d 889, 400 P.2d 297 (1965). ..... 10

Hughes Bros. Timber Co. v. Minnesota,

U.S * 469 (1926) * * * * 0 > >. >. * * > . 8

Interstate Oil Pipeline Co. v. Stone,

U. „ ). * * E „ „% a „ © „ „ . 6,9

Magnano Co. v. Hamilton,

“Fer US. „se 10

Michelin Tire “orks v. Wages,

423 U. * Reer 5,7

Michigan-Wisconsin Pipeline Co. v. Calvert,

ewe 4) ee eS a ee oe e 3,8

Minnesota v. Blasius,

Munson S.S. Line v. Glas Nav. Co.,

0 7. J, cert. denied,

243 U.S. 643 (1917), appeal dismissed,

IL ccc eseeeeeevee §

Ni rt v. Richmond,

. S. ) â ⁊õQ.. 10

111

Puget Sound Stevedoring Co. v. Tax Comm'n,

ewe ) eee — G &© „ „ „

Robbins v. 985 County Taxing Dist.,

Spector Motor Serv., Inc. v. O'Connor,

„ * 1). „ 0 0 * * 0 8 0 * *

The Eddy, 72 U.S. (5 Wall.) 481 (1867)

Union Marine & Gen. Ins. Co. v. Am. Export

Lines, Inc., 274 F. Supp. 123

0 oN. * 966) * . * * * „ * * 0 0 * >

Statutes

RCW 82.04.230-290 ee ee „„ © © © „„ @ @

51 Stat. 233 (1937) (T.S. No. 931, art. 3,

§§ 2 8 8) * * * * . * . * * * * * * * *

46 U.S.C. § 190 (1970) *_0e © © „„ © © @ @

46 U.S.C. § 1303 (197).

Other Authority

S. Rep. No. 12, 93rd Cong.,

ist Sees. (1973) «we „ „ „ „ „ „ „„ W᷑

Page

2,3

10

4-5

- 12

IN THE

SUPREME COURT OF THE UNITED STATES

No. 76-1706

ASSOCIATION OF WASHINGTON STEVEDORING

COMPANIES, et al.,

Res ts,

Vv.

THE DEPARTMENT OF REVENUE OF THE STATE

OF WASHINGTON,

Petitioner.

BRIEF IN OPPOSITION TO

PETITION FOR A WRIT OF CERTIORARI TO

THE SUPREME COURT OF THE STATE

OF WASHINGTON

QUESTIONS PRESENTED

1. Is the decision below, which is based

on decisions of this Court that are squarely in

point, a correct decision?

2. Does a regulation of petitioner that

exempts from tax “transportation of persons or

property across state boundaries” provide an

adequate factual base for petitioner's request

that this Court “clarify” state power to tax

those very activities?

RESPONDENTS’ STATEMENT OF THE CASE

Promptly after enacting its doing-business

privilege tax in 1935, petitioner (“the State“)

attempted to apply it to stevedoring activities

in interstate and foreign commerce. Stevedoring

activities were expressly made taxable in a regu-

lation. The State's attempt was struck down by

this Court in Puget Sound Stevedoring Co. v. Tax

Commission, 302 U.S. 90 (1937). (Petitioner's

Brief for Certiorari at 26, Appendix E, @ IV).

Ten years after Puget Sound, this Court fol lowed

that case in Joseph v. Carter & Weekes Co., 330

U.S. 422 (1947), another stevedoring case involving

a privilege tax indistinguishable from the

Washington tax. Both the Import-Export Clause

and the Commerce Clause were invoked.

For 37 years, succeeding editions of the

State's regulation acquiesced in Puget Sound.

In 1974, however, an amended regulation reasserted

the tax against stevedoring activities conceded

to be identical to those protected by Puget Sound.

(Petitioner's Brief for Certiorari at 3, n. 5).

Puget Sound defined the protected activities as:

“Unloading vessels by moving the cargo from ship's

hold to ‘first place of rest’ on the dock; and

loading vessels by moving the cargo from place

of rest to ship's hold.“ 302 U.S. at 93. This

Court considered the stevedores as an arm of the

foreign and interstate carrier -- doing work

(historically done by the ship's crew) that is

an integral part of foreign and interstate ocean

transportation.

REASONS WHY PETITION SHOULD NOT BE GRANTED

I. The Decision Below Was Correct

The court below followed a settled rule

twice established by this Court in stevedoring

decisions that are squarely in point. Puget

Sound Stevedoring Co. v. Tax Commission, supra,

and Joseph v. Carter & Weekes Co., supra. See

also Michigan-Wisconsin Pipeline Co. v. Calvert,

347 U.S. 157 (1954), which is indistinguish-

able in principle. The State asks this Court

to consider precisely the narrow issue decided

in those cases yet a third time. This Court,

in Puget Sound, treated the stevedores as an

arm of the foreign and interstate ocean carriers

and in so doing was consistent with maritime

Common law, federal statutesꝰ and internat ſona]

lie is as much the duty of the shipowner

to load and discharge the cargo as it is to carry

it between the loading and discharging ports.

Union Marine & Gen. Ins. Co. v. American

agreements” governing the carriage of goods by

sea. Any other rule would permit every state (and

each political subdivision) controlling a seaport

to effectively impose duties on international

trade (because, although the excise may be im-

posed on the stevedore, his role as arm of the

carrier means the tax will be passed on to the

shipper as an item of overhead).

1966), quoting Munson S.S. Line . Glasgow Nav.

Co., 235 F. 64 (2d Cir. 1916), cert. denied, 243

U.S. 643 (1917), appeal dismissed, 246 U.S. 647

(1918). See also Ex parte Easton, 95 U.S. 68,

75-76 (1877); The Eddy, 72 U.S. (5 Wall.) 481, 495

(1867); Calcot, Ltd. v. Isbrandtson Co-, 318

F.2d 669, 673 (lst Cir. 1963); American President

Lines, Ltd. v. Federal Maritime Bd., 317 F.2d

687, 888 (D.C. Cir. 1962).

1 The Carriage of Goods by Sea Act, 46 U.S.C.

§ 1303 (1970), governing foreign commerce, defining

carrier responsibility (and liability) provides in

pertinent part:

"(2) The carrier shall properly and

faithfully load, handle, stow, carry, keep,

care for, and discharge the gods carried.

Accord, the Harter Act, 46 U.S.C. § 190 (1970),

governing interstate and foreign maritime com-

merce.

3 Convention for the Unification of Certain

Rules Relating to Bills of Lading for the Carriage

of Goods by Sea, June 23, 1925, 51 Stat. 233

(1937), T.S. No. 931, art. 3, 26 8.

5

Il. The Cases Relied Upon by the State Are Not

In Point

The State relies on Michelin Tire Corp. v.

Wages, 423 U.S. 276 (1976), and Complete Auto

Transit, Inc. v. Brady, 97 S. Ct. 1076 (1977).

Michelin involved a property tax, not an

excise. It held that after the completion of

import, tires which the importer continued to

hold were subject to a property tax. (Previously

goods were protected from property taxes as long

as the importer held them in the “original

package.

Michelin says nothing at all about exporting

and, even as to importing, Michelin's impact

occurred after completion of the transit. This

Court, in distinguishing the property tax in-

volved in Michelin from a tax on importing, said:

In effect, the Clause was fashioned to prevent

the imposition of exactions which were no more

than transit fees 423 U.S. at 290.

Because steve dor ing is a part of the transit“

activity (the cost of which is borne by the

shipper), no more effective means of imposing

“transit fees” on international trade could be

found than an excise on stevedoring.

Complete Auto Transit did not involve the

Import-Export Clause. As to the Commerce Clause,

it was decided by this Court consistently with

earlier cases involving similar facts.“ Inter-

state 01] Pipeline Co. v. Stone, 337 U.S. 662

(1949), and Canton Railroad v. Rogan, 340 U.S. 511

(1951). All three cases held taxable the activ-

ities of intrastate carriers -- both termini

being within the taxing jurisdiction -- that

operated independently of interstate carriers

but happened to carry interstate goods. Foreign

and interstate carriers were not involved in

those cases -- whereas this Court and Congress

have recognized that stevedores function as an

arm of foreign and interstate carriers.

e Probably the significance that the state

sees in Complete Auto Transit is not in its facts,

but in some of its language. Because the result

of that case accords with established precedent,

the language woild be dictum were it not that

Spector Motor Serv., Inc. v. O'Connor, 340 U.S.

862 (1951) is declared overruled. The Court

might alternatively have distinguished Spector

as involving, in substance, a net income tax--

ineptly labeled as an excise by the taxing juris-

diction.

7

III. The Record Below Is Inadequate for the An-

bitious Demands That the State Makes Upon

This Court

The State has shifted its ground since prom-

ulgating the regulation amendment that the court

below struck down. The amendment put in issue

only stevedoring activities -- a narrow band of

commerce only yards wide (from point of rest

on the dock to the ship's hold) -- and uniquely

bound up with foreign trade, maritime law, and

international agreements.

On brief, however, the State urges that

this case be used to “complete the process of

clarifying the scope of state taxing power which

{this Court] commenced in Michelin Tire, supra,

and Complete Auto Transit, supra." (Petitioner's

Brief for Certiorari at 6).

But the State has not provided the right

vehicle. The State's regulation expressly exempts

interstate and foreign transport from tax, i.e.,

the actual transportation of persons or property

across state boundaries is exempt.” (Petitioner's

Brief for Certiorari at 22, Appendix 0). In

short, the State has not attempted an exercise

cf the taxing power that it asks this Court to

"clarify." Its amendment did not attempt a tax

on foreign and interstate commerce, but aimed

only at reclassifying stevedoring as separate and

intrastate.

Facts are surely the heart of the judicial

craft. A narrow and unique band of sea commerce

is not adequate for the broad, general task of

“clarifying the scope of state taxing power"

under not merely one, but two major clauses of

the Constitution (the Import-Export Clause and

the Commerce Clause).

Movement is so fundamental to commerce that

it has received special protection. Goods moving

in commerce are protected from the start of the

journey to its end -- as long as there is no

unnecessary interruption or deiay in journey --

no matter how deeply a state may be penetrated

or how many carriers may be involved. Champlain

Realty Co. v. Brattleboro, 260 U.S. 366 (1922);

Hughes Bros. Timber Co. v. Minnesota, 272 U.S.

469 (1926); Carson Petroleum Co. v. Vial, 279

U.S. 95 (1929); Minnesota v. Blasius, 290 U.S.

1 (1933). Almost as broad as the protection

for the goods has been protection from excises

on the activity of moving goods (or persons)

in commerce. That protection has covered movement

of goods between the points where the responsi-

bility of the interstate carrier begins and ends.

Michigan-wWisconsin Pipeline Co. v. Calvert, 347

U.S. 157 (1954). (Contrast Complete Auto Transit,

-

*

24 =

Saree -_ 99

*

Inc. v. Brady, Interstate Oil Pipeline Co. v.

Stone, and Canton Railroad v. Rogan, supra, and

like cases involving intrastate carriers pro-

viding an independent movement and having both

termini within the taxing jurisdiction.) Such

protection is over 100 years old, having begun with

the Case of the State Freight Tax, 82 U.S. (15

Wall.) 232 (1873), and is supported by numerous

cases decided since then.

If all this protection were to be totally

and irrevocably swept away, as the State asks,

the facts of the case should adequately raise

the issues to be decided. A regulation that

exempts the very commerce that the State asserts

is taxable does not provide the factual base for

such monumental judicial pronouncements.

An additional consideration is the nature

of the excise. It is the most potent and danger-

Ous weapon in the tax collector's arsenal. It

can attach to activities of all kinds. The excise

lacks the built-in political restraints that

apply to property and income taxes which, if not

required to be uniform, at least tend to be gen-

eral to individuals or corporations that popu-

late the taxing jurisdiction. The versatility

of the excise makes it, in practice, virtually

10

immune to charges of di scrimination.> A taxing

authority's license in selecting subjects and

rates for various excises renders a rule against

multiple imposition (requiring apportionment)

—

}

> Washington, for example, has more than

a dozen different tax rates for the privilege of

doing business ranging from 3.6% of gross income

(applicable to railroad, water, light and power

distribution, telephone and telegraph) down to

a mere .01% (applicable to wholesalers of grains

and dried peas). RCW 82.04.230-290. This Court,

in Magnano Co. v. Hamilton, 292 U.S. 40 (1933),

permitted Washington to tax butter substitutes

reasoning that the obvious differences between

butter and oleo margarine were enough to support

separate tax classifications. Following this

Court's lead, the Washington court has explained,

“There is no constitutional limitation upon the

selection by the legislature of the subjects for

excise tax so long as there is any reasonable

basis for the classification whatsoever." Gruen

v. State Tax Comm'r, 35 Wn.2d 1, 32, 211 P.2d

651, 669 (1949). More recently a tax on the oper

ation of such recreational activities as golf,

skating, skiing, pool and billiards has been

approved while bowling was exempted. Hem hill

v. Tax Comm'n, 65 Wn.2d 889, 400 P.2d 297 (1965).

Even in interstate commerce the rule against

discrimination has been effective mainly to curb

legislation aimed at out-of-state drummers (see,

e.g-, Robbins v. Shelby County Taxing Dist.,

120 U.S. 489 (1887); Nippert v. Richmond, 327

U.S. 416 (1946)); and has not necessarily been

effective even for that purpose. See Dunbar-

Stanley Studios, Inc. v. Alabama, 393 U.S. 537

(1969), where this Court upheld a tax on transient

photographers.

11

likewise impotent. For these reasons, a hundred

years of judicial wisdom has restrained the excise

so that one can transport his person or property

across this nation by air, highway or rail,

through its ports and along its rivers, without

the burden of paying a toll to each of the myriad

of taxing jurisdictions that sit astride the lanes

of commerce.

If other taxing jurisdictions read the lan-

guage of Complete Auto Transit as petitioner State

does, a proper vehicle for testing the scope of

that decision will not be long in coming.° A

6 :

Soon after this Court approved a head tax

on interstate airline passengers (on the basis

that the proceeds were limited to the development

and maintenance of the airport facility involved),

Airport Authority v. Delta Airlines, 405 U.S.

707 (1972), a Senate committee identified at least

31 jurisdictions that had rushed to enact various

forms of head taxes. S. Rep. No. 12, 93rd Cong.,

lst Sess. (1973). See Appendix A. The committee

comment ed:

“ While this decision has invited state

and local governments to enact head taxes

or fees on air travelers, the court de-

cision does not provide adequate safe-

guards to prevent undue or discriminatory

taxation."

The “toll gate“ syndrome will be more than local

legislatures can resist if they believe they have

an unbridled excise taxing power over the channels

of foreign and interstate commerce. In Complete

Auto Transit this Court repeatedly voiced its

concern for the practical“ or “economic” effects

12

thoughtful “clarifying of the scope of state

taxing power" (assuming it is needed) should

await one or more cases with facts that are in

the mainstream of the issue as contrasted with

the instant case whose unique, narrow facts re-

flect only the periphery.

CONCLUSION

The decision below was correctly decided

based on decisions by this Court that are squarely

in point. The cases relied on by petitioner are

not in point. The narrow and unique factual base

of the instant case is not appropriate to the

State's request that this Court clarify a state

taxing power that the State has not asserted.

Nor is the State's alternative request for

a remand and further consideration by the court

below a tenable request. That court followed

decisions of this Court conceded to be squarely

in point. Because that court's only alternative

of a state tax. But once having unleashed ile

excise on movement in commerce, it may be doubted

whether this Court can devote the resources to

effectively curb unreasonable burdens. Nor are

the guidelines that this Court has thus far laid

down against discrimination sufficient to enlist

the assistance of state courts.

13

would be to overrule the decisions of this Court

(which no lower court could presume to do), there

is no useful work to be done on remand.

The petition should be denied.

Respectfully submitted,

JOHN T. PIPER

Counsel for Respondent

A-1

APPENDIX A

ALRPORT PASSENGER TAX

City Amou nc Effective dete Collect ing

donc svi lle, Ala.

. Mewpurt News, Va.

. Medison, Wis.

. Chattanooga, Tenn.

. New Hewpehire (on carrier)—--— 41/50. Aug. 31, 1969 Carrier.

July 1, 1972 Mert authority.

57

7

Cedar 11d, 19

U

bent lente, Pa. 3. 40— Carrier.

. Richmond, Ya. 1 do Oe.

. Sarasote-Bradentoa, fle.--——-——— i do- Airpoct suthericy

Tri-City, Mich. i do— Carrier.

. Pensacola, Fla. i Aug. „ 1972 do.

Kelamazoo, “ich. 1 Aug. 15, 972 Oe.

. Latronee, is. 1 Sepe. |, 1972 de.

- Paletgr-Ovrtas, 0 2 Ao Airport sutherity

. Allentown, Pa. 3271 Met. I. 1972 de.

. Traverse City, Mich. -— t 10— Carrier.

. Fort Waevne, ind. 1 e 2), 1972 = Reerd of Aviation.

Jeet son, Mies. (on carrier) 4 Yow. |, 1972 Carrier.

. Rochester, 4.1. i — de.

- Ves Moines, lowe 1 9% 6. 1972 Oe.

. Evaneville, tnd. I Sov. 79, 197? de.

. Roanoke, Ya. U Bow. 15, 1972 de.

. Fort Myers, Fla. i Bec. I. 1972 Aiepert suthoricy.

duluth, Minn. 1 lL. 1979 §Ganrier.

4

1

1

—

*

197) «= Caevrier.

i, % Aiepert suthoricy.

* . . * * . * 8 * + . . . * + * « — * . * 1 .

aher lle, #.c. 2 Jen. 12, 1999

Youngstown, Ohio 1.

. Medford, Oreg. — 2 Jaa. 25, 1979

tugene, Oreg. 2 Ped. 15, 197) Akepoet auchericy.

. Norfolk, Va. — l feo. 8. 1973 Carrier.

i feo

2

Tyler, Tex.