Appendix — Bacchus Imports, Ltd. v. Dias

a sass & Court, U.S,

ae “TITLED

82-1565

MAR 15 1983

= PL STEVaS,

CLERK

In the Supreme Court

OF THE

United States

Octoser Team, 1982

Baccuvs Imports, Lrp., and Eacte Distrrsvrors, Inc.,

{ppellants,

vs.

Georce FREeIrAs,

Director of Taxation of the State of Hawaii,

Appellee.

On Appeal from the Supreme Court of the

State of Hawaii

APPENDIX TO

JURISDICTIONAL STATEMENT

Auuan S. Hatey

410 Spring Street

Nevada City, CA 95959

Telephone: (916) 265-5524

Attorney for Appellants

Bacchus Imports, Ltd. and

Eagle Distributors, Inc.

BOWNE OF SAN FRANCISCO, INC. * ISO NINTH ST. © B.F..CA 84103 © (418) 864-2300

APPENDIX A

IN THE SUPREME COURT OF THE STATE OF HAWAII

OCTOBER TERM 1982

In the Matter of the Tax Appeals of

BACCHUS IMPORTS, LTD., PARADISE

BEVERAGES, INC., EAGLE

DISTRIBUTORS, INC., and FOREMOST-

MCKESSON, INC., dba MCKESSON WINE &

Spirits Co., Taxpayers

NO. 7802

APPEAL FROM THE TAX APPEAL COURT

HONORABLE YASUTAKA FUKUSHIMA, JUDGE

(CASE NOS. 1852, 1862, 1866, 1867)

DECEMBER 23, 1982

RICHARDSON, C.J., LUM, NAKAMURA,

PADGETT AND HAYASHI, JJ.

CONSTITUTIONAL LAW - equal protection of

laws; equal rights - taxation - in general.

TAXATION - constitutional requirements and

restrictions - equality and uniformity -

in general - constitutional requirements

and operations thereof in general.

Although the strictures of the Equal

Protection Clause condition the exercise of

a state's power of taxation, the Fourteenth

A-2

Amendment was not intended to compel the

State to adopt an iron rule of equal tax-

ation.

CONSTITUTIONAL LAW - construction, opera-

tion, and enforcement of constitutional

provisions - determination of constitu-

tional provisions - determination of con-

stitutional questions - presumptions and

construction in favor of constitutionality

- in general,

SAME - equal protection of laws; equal

rights - taxation - in general.

j |

A-3

OPINION OF THE COURT BY NAKAMURA, J.

In this appeal from the Tax Appeal

Court, four wholesalers of liquor, Bacchus

Imports, Ltd., Paradise Beverages, Inc.,

Eagle Distributors, Inc., and Foremost-Mc-

Kesson, Inc. (Bacchus, Paradise, Eagle and

McKesson respectively, the taxpayers collec-

tively) challenge, on constitutional grounds,

the levy of excise taxes on the sale or use

of liquor pursuant to HRS § 244-4. i/ They

assert the statute in question runs afoul

of the Equal Protection, 2/ Import-Export, 3/

and Commerce Clauses 4/ of the United States

Constitution. 3/ though we have carefully

scrutinized the statute with the cited con-

stitutional provisions in mind, we discern

no infirmities in HRS §244-4. We therefore

affirm the Tax Appeal Court!’s decision.

I.

The Hawaii Liquor Tax, HRS Chapter 244,

A-4

imposes a levy on the sale or use of alco-

holic beverages amounting to twenty percent

of the wholesale price of the liquor sold

or used, which essentially is an excise

levied on the first sale of liquor within

the State of Hawaii. See note 1 supra.

At its inception, the tax was one imposed

on retailers, and the amount of the levy

was six percent of the retail price. S.L.H.

1939, c. 222, § 5. But its incidence has

since been shifted to wholesalers and the

rate has been raised to twenty percent of

the wholesale price. &/ Limited exemptions

from the tax have been approved periodically

by the legislature; transactions involving

okolehao 7/ ana "{ajny fruit wine manufac-

tured in the State from products grown in

the state" 8/ were thus free of taxation

during the relevant period. This aspect

of the Hawaii Liquor Tax has been challenged

by the taxpayers.

A-5

Bacchus, Paradise, 9/ and Eagle are

Hawaii corporations licensed to engage in

the wholesaling of liquor; McKesson is a

Maryland corporation authorized to do bus-

iness in Hawaii, also licensed as a whole-

sale liquor dealer under applicable liquor

control laws. See HRS Chapter 281. Bac-

chus initially protested the assessment of

excise taxes on its sale or use of alcoho-

lic beverages by a letter directed to the

State Director of Taxation on May 30, 1979.

It subsequently filed a complaint pursuant

to HRS § 40-35, 10/ seeking a refund of

taxes paid during the period between Decem-

ber 1977 and May 1979. Paradise, Eagle,

and McKesson quickly followed Bacchus’ lead

with their letters of protest to the Director

and refund suits. ii/

The taxpayers' complaints averred that

HRS §244-4 contravened the Import-Export and

Commerce Clauses of the federal constitution

A-6

because the statute discriminated in favor

of locally produced liquor by providing ex-

emptions for sales and uses of okolehao and

fruit wine brewed in Hawaii from locally

grown products. The cases were consolidated

for trial and disposition by agreement of

ali the parties and submitted to the Tax

Appeal Court for decision on Stipulations

of Facts. The court ruled the tax is "a

valid State tax," and timely appeals to

this court were filed by the taxpayers.

II.

Focusing on the allegations of uncon-

stitutionality advanced by the taxpayers,

we first consider their claim that the

favored treatment of okolehao and locally

produced fruit wine denies them equal pro-

tection.

A-7

A.

We recognize, of course, that the

strictures of the Equal Protection Clause

condition the exercise of a state's power

of taxation. Bell's Gap Railroad v. Pen-

nsylvania, 134 U.S. 232 (1890). Still,

"the Fourteenth Amendment was not intended

to compel the State to adopt an iron rule

of equal taxation.” Id. at 237. For such

a construction

would not only supersede all those constitu-

tional provisions and laws of some of the

States, whose object is to secure equality of

taxation, and which are usually accompanied

with qualifications deemed material; but it

would render nugatory those discriminations

which the best interests of society require;

which are necessary for the encouragement of

needed and useful industries, and the discour-

agement of intemperance and vice; and which

every State, in one form or another, deems it

expedient to adopt.

Id. Moreover, "[iJt has... peen pointed

out that in taxation, even more than in

other fields, legislatures possess the

greatest freedom in classification.” Madden

A-8

v. Kentucky, 309 U.S. 83, 88 (1940) (foot-

note omitted). And "(t]he burden is on the

one attacking the legislative arrangement

to negative every conceivable basis which

might support it." Id. (Footnote omitted).

the legislative arrangement in question,

the taxpayers claim, breaches the equal pro-

tection guaranty because of its favored

treatment of transactions involving okolehao

and pineapple wine. But the statute does

not establish a classificatory scheme that

disfavors any of the taxpayers--all whole-

salers of liquor distributing alcoholic bev-

erages in Hawaii are subject to taxation

thereunder in similar fashion. Bacchus,

Paradise, and Eagle enjoy no advantage over

McKesson, a Maryland corporation, by reason

of their incorporation under Hawaii law

since their transactions are taxed at the

same rate McKesson's are.

A-9

The taxpayers nonetheless contend Allied

Stores of Ohio v. Bowers, 358 U.S. 522 (1959),

and Wheeling Steel Corp. v. Glander, 337 U.S.

562 (1949), sustain their thesis that the

necessary equality of treatment is absent.

To be sure, the cases support a proposition

that a state tax expressly favoring residents

over nonresidents does not pass constitution-

al muster. Yet we think the cited cases do

not boost the taxpayers' cause here; they

reinforce instead the validity of the Hawaii

Liquor Tax.

In Wheeling Steel, the Court struck down

provisions of Ohio's ad valorem property

tax law that discriminated aginst foreign

corporations by taxing their accounts re-

ceivables arising from business transacted

within the State but not the property of

similar nature owned by restdents and domes-

tic corporations. The inequality to which

A-10

the foreign corporations were subjected was

premised solely on the residence of the

owners of the accounts receivables. i2/

And the Court did not consider the declared

purpose of the statute to proffer a scheme

of reciprocity in the taxation of such pro-

perty to other states a redeeming feature.

Wheeling Steel Corp. v. Glander, 337 U.S.

at 572-74.

In Allied Stores, Ohio's levy of an ad

valorem property tax on the contents of

warehouses was upheld despite an exemption

of merchandise belonging to nonresidents

and being held "'in a storage warehouse for

storage only'." The preferred status ac-

corded merchandise owned by nonresidents,

the Court held, did not deny Ohio residents

equal protection; it found the purpose and

policy of the State Legislature could rea-

sonably have been to encourage nonresidents

to construct or lease warehouses in Ohio

A-11

and thereby benefit the State's economy.

Allied Stores of Ohio v. Bowers, 358 U.S.

at 528-29. Thus it concluded the questioned

proviso was neither invidious nor palpably

arbitrary, and ruled the statute did not

deny equal protection to Ohio residents de-

spite the discriminatory classification.

The cited cases therefore confirm that

the Court does not countenance the unequal

treatment of taxpayers based solely on state

residence, Wheeling Steel Corp. v. Glander,

337 U.S. at 572; but if the classification

rests upon some reasonable consideration of

ditference or policy, there is no denial of

equal protection. Allied Stores of Ohio v.

Bowers, 358 U.S. at 527-28. On its face,

the Hawaii law applies equally to all whnole-

salers; the taxpayers, however, assert the

classification in question carries a dis-

criminatory result. We thus proceed to an

examination of the exemption from excise

A-12

taxation of transactions involving okolehao

and pineapple wine to determine whether the

exemption is rationally related to the a-

chievement of a valid legislative purpose.

Cc.

In deciding whether the challenged clas-

sification meets this test of rational rela-

tionship, we are compelled to answer two

questions: "(1) Does the challenged legisla-

tion have a legitimate purpose? and (2) Was

it reasonable for the lawmakers to believe

that use of the challenged classification

would promote that purpose? See Minnesota

v. Clover Leaf Creamery Co., 449 U.S., at

461-463; Vance v. Bradley, 440 U.S. 93, 97-

98 (1979)." Western & Southern Life Insurance

Co. v. State Board of Equalization, 451 U.S.

648, 668% (1981). Shibuya v. Architects Hawaii,

Ltd, 65 Haw. 26, 35, 647 P.2d 276, 283 (1982).

The legislature's reason for exempting

A-13

"ti root okolehao” from the "alcohol tax"

was to “encourage and promote the establish-

ment of a new industry," S.L.H. 1960, c.

26; Sen. Stand. Comm. Rep. No. 87, in 1960

Senate Journal, at 224, and the exemption

of "fruit wine manufactured in the State

from products frown in the State" was intended

"to help” in stimulating "the local fruit

wine industry.” S.L.H. 1976, c. 39; Sen.

Stand. Comm. Kep. No. 408-76, in 1976 Sen-

ate Journal, at 1056. 13/

NO one could quar-

rel with the proposition that the promotion

of domestic industry is a legitimate state

purpose. See Western & Southern Life Insur-

ance Co. v. State Board of Equalization,

451. U.S. at 671; Pike v. Bruce Church, Inc.,

397 U.S. 137, 143 (1970); Parker v. Brown,

We likewise entertain no doubt that the

Classification satisfies the second part of

the applicable test, for the pertinent in-

A-14

quiry here is only whether the "legislature

rationally could have believed that the. .

. [classification] would promote its ob-

jective." Western & Southern Life Insurance

Co. v. State Board of Equalization, 451 U.S.

at 6/2 (citations omitted) (emphasis in the

original). The lawmakers are under no obli-

gation "to convince the courts of the cor-

rectness of their legislative judgments.

Rather, 'those challenging the legislative

judgment must convince the court that the

legislative facts on which the classifica-

tion is apparently based could not reason-

ably be conceived to be true by the govern-

mental decisionmaker.' Vance v. Bradley,

440 U.S., at 111." Minnesota v. Clover

Leaf Creamery Co., 449 U.S. at 464. The

taxpayers have not met their burden in this

regard. The legislature could rationally

have believed the exemption would promote

its objective, and nothing has been pre-

sented to controvert this.

A-15

D.

The taxpayers' equal protection claim

also encompasses a putative breach of the

State counterpart of the Equal Protection

Clause. Compare U.S. Const. amend. XIV,

§ 1 and Hawaii Const. art. 1, §5. In pas-

sing on an earlier taxpayer challenge of

our tax laws premised on an alleged viola-

tion of the foregoing State constitutional

provision, we structured our analysis on

Supreme Court precedent, particularly Lehn-

hausen v. Lake Shore Auto Parts Co., 410

U.S. 356, 359 (1973). See In re Simpson

Manor, Inc., 57 Haw. 1, 548 P.2d 246 (1976).

And Lehnhausen was quoted to the following

effect:

‘"[I)n taxation, even more than in other fields,

legislatures possess the greatest freedom in

classification." .. . "The burden is on the

one attacking the legislative arrangement to

negative every conceivable basis which might

support it.

Id. at 8-9 548 P.2d at 251 (citation omit-

mls

A-16

ted) (emphasis in the original). The claim

there was rejected because the taxpayer had

"failed to meet its burden"; we perceive no

reason to regard the present challenge more

favorably. Id. The taxpayers have not even

attempted to negative the declared basis for

enacting the exemptions.

IIl.

Having found no denial of equal protec-

tion, we turn to the assertion that the Ha-

waii Liquor Tax contravenes the Import-Export

Clause of the federal constitution. The

taxpayers contend that HRS § 244-4 is dis-

criminatory on its face and thus violative

of the clause because of the exemption of

transactions involving locally produced oko-

lehao and fruit wine. They further assert

the excise tax is actually a prohibited im-

port duty since it is levied on wholesale

value, which in the case of liquor of for-

eign origin perforce includes the amount of

A-17

the duty levied by the federal government

and transportation cost. This, they main-

tain, results in a disproportionate State

levy on liquor of foreign origin. They sl-

so Claim the rate at which the tax is ap-

plied deters the consumtion of such liquor

and indirectly deprives the federal govern-

ment of revenue. The precepts enunciated

in Michelin Tire Corp. v. Wages, 423 U.S.

276 (1976), and ratified by Washington

Revenue Department v. Stevedoring Associa-

ers' view, proscribe the imposition of the

tax. We do not read the Import~-Export

Clause and Michelin to have such effect.

ie

The Import-Export Clause commits "sole

power to lay imposts and duties on imports

in the Federal Government, with no concur-

rent state power.” Michelin Tire Corp. v.

A-18

Wages, 423 U.S. at 285. But "the term ‘im-

post or duty’ is not self-defining and does

not necessarily encompass all taxes.” Wash-

ington Revenue Department v. Stevedoring As-

sociation, 435 U.S. at 759. The foregoing

cases give us examples of what is not encom-

passed therein. In the former, the Court

held Georgia's levy of a general ad valorem

property tax on Michelin's inventory of im-

ported tires and tubes stored in a Georgia

warehouse was not interdicted by the Import-

Export Clause. Michelin Tire Corp. v. Wages,

423 U.S. at 302. And in Washinton Revenue

Department, the application of Washington's

business and occupation tax to stevedoring

was approved, even though it reached services

provided within the State "to imports, ex-

ports, and other goods." Washington Revenue

Department v. Stevedoring Association, 435

U.S. at 761.

In reaching these decisions, the Court

A-19

"examined whether the exaction offended any

of the three policy considerations leading

to the presence of the Clause:

"The Framers of the Constitution thus

sought to alleviate three main concerns... :

the Federal Government must speak with one voice

when regulating commercial relations with foreign

governments, and tariffs, which might affect for-

eign relations, could not be implemented by the

States consistently with that exclusive power;

import revenues were to be the major source of re-

venue of the Federal Government and should not be

diverted to the States; and harmony among the

States might be disturbed unless seaboard States,

with their crucial ports of entry, were prohi-

bited from levying taxes on citizens of other

States by taxing goods merely flowing through

their ports to the other States not situated as

favorably geographically."

Washington Revenue Department v. Stevedoring

Association, 435 U.S. at 752-53 (quoting

Michelin Tire Co. v. Wages, 423 U.S. at 285-

86) (footnotes omitted). Our task then is

to scrutinize HRS § 244-4 in the light of

the concerns that, in the Court's opinion,

explain the presence of the clause.

B.

HRS § 244-4 provides that "[elvery per-

son who sells or uses any liquor... [not

A-20

previously taxed thereunder] shall pay an

excise tax .. . equal to twenty percent of

the wholesale price of the liquor so sold

or used.” As the tax is usually imposed on

the person who engages in the first sale

or use of liquor in the State and is mea-

sured by wholesale value, it is in effect

an excis2 levied on wholesalers. In this

sense, it resembles the Washington business

and occupation tax that was deemed a permit-

ted tax, rather that a prohibited import

duty, by the Court. The taxpayers, however,

Claim an objectionable feature, the exemp-

tion of okolehao and fruit wine, causes it

to transgress the first two policy consid-

erations underlying the Import-Export Clause.

We do not find their argument convincing,

for like the Georgia property tax and the

Washington business and occupation tax,

the Hawaii Liquor Tax offends none of the

policy considerations delineated by the Court

A-21

in Michelin and Washington Revenue Depart-

14/

ment.

Hawaii's tax on wholesaling activity ap-

plies to ail liquor wholesalers engaged in

business in the State. I1t touches all la-

cal sales and uses of liquor produced in

foreign countries, in the mainland States,

and in Hawaii, with the exception of okolehao

and pineapple wine. i5/ There is absolutely

no indication that it has been applied se-

lectively to discourage imports in a manner

inconsistent with foreign policy. Nor is

there a scintilla of evidence that it has

the effect of a proisctive tariff or that

it has any substantial indirect effect on

the demand for imported ligour. And no rea-

son whatsoever to consider the limited ex-

emption a threat to the federal treasury ap-

pears. L6/ Michelin and Washington Revenue

Department thus sustain a conclusion that

the tax in question is not a prohibited im-

port duty. See note 14 supra.

2)

ret |

A-22

IV.

Though we have concluded the Hawaii

Liquor Tax infringes neither the Equal Pro-

tection Clause nor the Import-Export Clause,

whether it "falls short of the substantially

even-handed treatment demanded by the Commerce

Clause” remains for decision. Boston Stock

Exchange v. State Tax Commission, 429 U.S. 318,

332 (1977).

A.

"In reviewing Commerce Clause challenges

to state taxes ... [the Court's objectivel

has .. . been to ‘establish a consistent

and rational method of inquiry’ focusing on

‘the practical effect of a challenged tax.'

Mobil Oil Corp. v. Commissioner of Taxes,

445 U.S. 425, 443 (1980)." Commonwealth Ed-

ison E. v. Montana, 453 U.S. 609, 615 (19481).

The method of inquiry presently favored by

the Court is the four-part test described

in Complete Auto Transit, Inc. v. Brady,

430 U.S. 274 (1977). “Under that test, a

’

A-23

state tax does not offend the Commerce

Clause if it ‘is applied to an activity with

a substantial nexus with the taxing State,

is fairly apportioned does not discriminate

against interstate commerce, and is fairly

related to services provided by the State.'

430 U.S., at 279." Commonwealth Edison Co.

v. Montana, 453 U.S. at 617.

The taxpayers do not dispute that the

Hawaii Liquor Tax satisfies the first and

fourth prongs of the test, for the activity

subject to taxation is the wholesaling of

liquor in Hawaii and the revenues derived

are for the support of general governmental

services. The tax is challenged on grounds

that it does not meet the test's second and

third requisites, i.e., it is discrimina-

tory and not fairly apportioned. But we

are also unable to perceive any basis to

seriously consider the taxpayers' assertion

that the tax is not fairly apportioned

A-24

since they agree it is assessed only on

intrastate sales and uses of liquor. It

has no extraterritorial effect and the

State does not seek thereby to obtain a

share of a taxpayer's net income derived

from an interstate enterprise. Nor is

there a possibility that it will subject

"interstate business to a burden of dupli-

cative taxation that an intrastate taxpayer

would not bear." Mobil Oil Corp. v. Commis-

sioner of Taxes, 445 U.S. at 443. No issue

related to fair apportionment is extant,

and our examination of the tax centers on

whether it discriminates against interstate

commerce.

B.

In our analysis of the equal protec-

tion claim, we discerned no disparate treat-

ment of taxpayers. For Bacchus, Paradise,

and Eagle gain nothing over a foreign cor-

poration because of their incorporation un-

A-25

der Hawaii law. That McKesson is a Mary-

land corporation and engaged in business

elsewhere plays no part in fixing its lia-

bility under HRS §244-4. The corporation

presumably is also"tree to engage in the

wholesaling of okolehao and pineapple wine

if it has reason to believe this will re-

lieve its tax burden. 12/ We detect no

discrimination against Bacchus, Paradise,

Eagle, McKesson, or interstate commerce un-

der the circumstances.

The taxpayers nonetheless argue Mary-

lana v. Louisiana, 451 U.S. 725 (1981), and

its precursors preclude the validation of

HRS §244-4. Maryland was an original action

brought in the Supreme Court by several

states and the federal government, chal-

lenging the Louisiana First-Use Tax on nat-

ural gas on grounds that it contravened

the Supremacy and Commerce Clauses. We are, .

of course, mindful of the following precepts

A-26

of "Commerce Clause jurisprudence” that

were reiterated by the Court there:

One of the fundamental principles of Commerce Clause

Clause jurisprudence is that no State, consis-

tent with the Commerce Clause, may ‘impose a

tax which discriminates against interstate

commerce .. . by providing a direct commer-

cial advantage to local business.’ North-

western States Portland Cement Co. v. Min-

mesota, 358 U.S. 450, 458 (1959). See Boston

Stock Exchange v. State Tax Comm'n, 429 U.S.

318, 329 (1977). This antidiscrimination prin-

ciple ‘follows inexorably from the basic pur-

pose of the Clause’ to prohibit the multipii-

cation of preferential trade areas destructive

of the free commerce anticipated by the Consti-

tution. Boston Stock Exchange, supra. See

Dean Milk Co. v. [City of] Madison, 340 U.S.

349,356 (1951).

Id. at 754, and

A state tax must be assessed in light

of its actual effect considered in conjunction

wiht other provisions of the State's tax

scheme. ‘In each case it is our duty to deter-

mine whether the statute under attack, what-

ever its name may be, will in its practical

operation work discrimination against inter-

state commerce.’ Best & Co. v. Maxwell, 311

U.S. 454,455-456 (1940). See Halliburton Oil

Well Cementing Co. v. Reily, 373 U.S. 64,69

(1963); Gregg Dyeing Co. v. Query, 286 U.S.

472, 478-480 (1932). In this case, the Loui-

siana First-Use Tax unquestionably discrimi-

nates against interstate commerce in favor of

tocal interests as the necessary result of

various tax credits and exclusions.

Id. at 756.

A-27

Yet, Hawaii's excise on intrastate

sales and uses of liquor can hardly be like-

ened to Louisiana's tax on the "first-use"

of any natural gas brought into the state

without being taxed previously by another

state or the federal government. The pri-

mary impact of that levy was on gas produced

in the Outer Continental shelf and piped to

processing plants in Louisiana. Some of

this gas was sold to Louisiana consumers,

but most of it was eventually sold to out-

of-state consumers. Louisiana consumers

for the most part were not burdened with

the levy due to exemptions and credits pro-

vided by State law, but the tax azplied un-

iformly to gas moving out of the state. Id.

at /31-33. The Court found the "First-Use”"

Tax, while imposed on the pipeline companies,

- « « (was) clearly intended to be passed

on to the ultimate consumer.” Id. at 736.

And it struck down a scheme of taxation

A-28

that "resulted in Louisiana customers being

‘protected in whole or in part trom the in-

cidence of the tax which is passed on to

consumers out of the State.'" Id. at 758.

Unlike the situation in Maryland v. Louisi-

ana, supra, the incidence ot the tax here

is on wholesalers of liquor in Hawaii and

the ultimate burden is borne by consumers

in Hawaii.

Nor can HRS § 244-4 be equated with

the New York statute imposing a transfer

tax on securities transactions which was

invalidated by the Court in Boston Stock

Excnange v. State lax Commission, supra.

For there, an amendment to the theretofore

uniform tax caused transactions involving

out-of-state sales to be taxed more heavily

than most transactions involving in-state

sales. 48/ The instant situation also bears

no likeness to that in Halliburton Oil Well

Cementing Co. v. Reily, supra, wnere the

A-29

taxpayer was engaged in servicing oil wells

in Louisiana and several other oil-producing

states and the specialized servicing equip-

ment it had assembled in Oklahoma and used

in its Louisiana operation was subjected to

use taxation by Louisiana, which applied the

tax to the value of labor expended and shop

overhead incurred in assembling the equip-

ment. The State conceded this cost factor

would not have been subject to taxation if

the taxpayer had assembled the equipment in

Louisiana rather than in Oklahoma. Id. at

66-67. 19/ The Court logically concluded a

condition precedent for a valid state tax,

the even-handed treatment of in-state and

out-of-state taxpayers, had not been met.

Id. at 70. But the Louisiana use tax can-

not be categorized with the Hawaii Liquor

Tax. 29/

The tax in question here is definitely

not abarricade against the movement of

trade, see e.g., City of Philadelphia v.

A-30

New Jersey, 437 u.S. 617 (1978); Dean Milk

Co. v. City of Madison, supra, nor is ita

means through which Hawaii seeks more than

a just share of the income earned by tax-

payers engaged in multi-state enterprises.

See e.g., Mobil Oil Corp. v. Commissioner

of Taxes, supra; Northwestern States Port-

land Cement Co. v. Minnesota, supra. And

our survey of the case law of Commerce

Clause litigation in the Supreme Court has

uncovered no instance where a state tax of

similar nature has been voided. The tax-

payers have failed to demonstrate that the

Hawaii Liquor Tax in its practical opera-

tion works discrimination against inter-

state commerce. 23/

Tne decision of the Tax Appeal Court

upholding the assessment of the tax against

Bacchus Imports, Ltd., Paradise Beverages,

Inc., Eagle Distributors, Inc., and Fore-

most-McKesson, Inc. is affirmed.

A-31

Allan S. Haley (Cro-

nin, Fried, Sekiya,

Haley & Kekina, of

counsel) for plain-

tiffs-appellants

Bacchus Imports

and Eagle Distribu-

tors.

/s/ Willian S. Richardson

Bruce C. Bigelow

(Julian H. Clark

with him on the /s/ H. Lum

briefs; Case, Kay

& Lynch, of coun-

sel) for plaintiff-

appellant Foremost-

McKesson

/s/ Edward H. Nakamura

Joined in Opening

Briefs of Bacchus

Imports, Foremost-

McKesson & Eagle /s/ Frank D. Padgett

Distributors:

Michael K. Kawahara

(Vernon F. L. Char /s/ Yoshimi Hayashi

with him on the

joinder; Damon Key,

Char & Bocken, of

counsel) for plain-

tiff-appellant Para-

dise Beverages

T. Bruce Honda (Allan

S. Chock on the

brief), Deputy Attor-

neys General, for de-

fendant-appellee Direc-

tor of Taxation

A=-32

1/ HRS § 244-4, in pertinent part, read as

follows when the taxes in question were as-

sessed:

Every person who sells or uses any liq-

cur not taxable under this chapter in

respect of the transaction by which such

person or his vendor acquired such liquor,

shall pay an excise tax which is hereby

imposed, equal to twenty percent of the

wholesale price of the liquor so sold or

used; provided, that the tax shall be

paid only once upon the same liquor; pro-

vided, further, that the tax shall not

apply to:

(6) Okolehao manufactured in the State

for the perioag May 17, 19/1 to June

3u, 1981; or

(7) any fruit wine manufactured in the

State from products grown in the

State for the period May 17, 1975

to June 30, 1981.

2/ The Fourteenth Amendment to the federal

constitution reads:

All persons born or naturalized in

the United States, and subject to the ju-

risdiction thereof, are citizens of the

United States and of the State wherein

they reside. No State shall make or en-

force any law which shall abridge the

orivileges or immunities of citizens of

the United States; nor shall any State

deprive any person of life, liberty, or

property, without due process of law;

nor deny to any person within its juris-

diction the equal protection of the laws.

Ju

A-33

Article I, § 10, cl. 2 of the federal

constitution reads:

No State shall, without the Consent

of the Congress, lay any Imposts or Duties

on Imports or Exports, except what may be

absolutely necessary for executing it's

[sic] inspection Laws: and the net Pro-

duce of all Duties and Impost. laid by

any State on Imports, or Exports, shall

be for the Use of the Treasury of the

United States; and all such Laws shall be

subject to the Revision and Control of

the Congress.

Article I, § 8, cl. 3 of the federal con-

stitution reads:

The Congress shall have Power...

To regulate Commerce with foreign Nations,

and among the several States, and with

the Indian Tribes.

Article I, § 5 of the Hawaii Constitution

reads:

No person shall be deprived of life,

liberty or property without due process

of law, nor be denied the equal prrotec-

tion of the laws, nor be denied the enjoy-

ment of the person's civil rights or be

discriminated against in the exercise

thereof because of race, religion, sex

or ancestry.

S.L.H. 1947, c. 111, §3 14 raised the tax

rate from six percent to eight percent; S.L.H.

1949, c. 343, § 3 shifted the tax incidence

to wholesale transactions and increased the

rate to twelve percent of the wholesale price;

$.L.H. 1957, c. 1, § 7(b) (special session;

1957 Tax Act) raised the rate to sixteen per-

Im

|

A-34

cent; S.L.H. 1965, c. 155, § 8 increased the

rate to twenty percent.

Okolehao is an alcoholic beverage made

from the root of the ti plant, an indigenous

shrub. The exemption of ckolehao was initially

approved in 1960 and remained in effect until

1965. S.L.H. 1960, c. 26 § 1. The exemption

was reenacted in 1971 to cover a five-year per-

fod. §.L.H. 1971, c. 62,§1. Im 1976, the

exemption period was extended to June 30,

196k. S.eR. 1976, 0. Ws § i

Tne only “fruit wine (that was) manufac-

tured in the State from products grown in the

State” during the relevant time span was pine-

apple wine. This exemption was approved in

1976 to cover a five-year period. S.L.H. 1976,

ie = Oe

Paradise acknowledges it is a “beneficiary”

of the exemptions from taxation proveded by HRS

§ 244-4 for okolehao and fruit wine produced

in Hawaii. It nevertheless maintains the sta-

tute is unconstitutional probably because the

volume of sales of the exempted products is

relatively insubstantia..

BRS § 40-35 authorizes a taxpayer to vay

taxes under protest and to commence an action

in the Tax Appeal Court for the recovery of

the disputed sums. See In re Otis Elevator Co.

58 Haw. 163, 167 & an. 10, 566 p.2d 1091, 1094

& a. 10 (1977).

The dates of the letters of protest and

the periods for which refunds were sought are

set forth below:

J,

Bae

A-35

Period Protested

Taxpayer Date of Letter per Letter

Bacchus In- May 30, December, 1977

ports, Ltd. 1979 through May, 1979

Paradise Bev- July 30, June, 1977 through

erages, Inc. 1979 July, 1979

Eagle Distri- August 3l, August, 1974

butors, Inc. 1979 through July, 1979

Foremost-—Mc- September August, 1974

Kesson, Inc. 6, 1979 through August, 1979

12/ The General Code of Ohio § 5328-1, chal-

lenged in Wheeling Steel, provided in pertin-

ent part:

Property of the kinds and classes mention-

ed in section 5328-2 of the General Code,

used in and arising out of business trans-

acted in this state by, for or on behalf

of a non-resident person... shall be

subject to taxation; and all such prop-

erty of persons residing in this state

used in and arising out of business trans-

acted outside of this state by, for or on

behalf of such persons .. . shall not be

subject to taxation. ...

(Emphasis added).

The Hawaii Liquor Tax, on the other hand,

exempts all sales and uses of okolehao and

pineapple wine from taxation. It does not

matter whether the transactions are engaged in

by foreign corporations of Hawaii corporations.

Furthermore, a foreign corporation manufac-

turing okolehao and pineapple wine in Hawaii

would not be treated differently from a Hawaii

corporation under the general excise tax law,

HRS Chapter 237.

A-36

The Supreme Court has stated that in equal

protection analysis, it may be assumed "that

the objectives articulated by the legislature

are actual purposes of the statute, unless an

examination of the circumstances forces...

{a onclusion] that they ‘could not have been

a gce’ of the legislation.'" Minnesota v.

Clover Leaf Creamery Col, 449 U.S. 456, 463

n.7 (1981) (quoting Weinberger v. Wiesenfeld,

420 U.S. 636, 648 n.16 (1975).

The Court summarized the reasons why there

was no breach of the clause in the foregoing

situations in the latter case. With respect

to the tax at issue in Michelin, it concluded

in relevant part:

The ad valorem property tax there at

issue offended none of . . . [the} poli-

cies. It did not usurp the Federal Gov-

ernment's authority to regulate foreign

relations since it did not ‘fall on in-

ports as such because of their place of

origin.’ .. . As a general tax applicable

to all property in the State, it could not

have been applied selectively to encou-

rage or discourage iMportation in a man-

ner inconsistent with federal policy.

Further, the tax deprived the Federal

Government of no revenues to which it was

entitled. The exaction merely paid for

services, such as fire and police protec-

tion, supplied by the local government.

Although the tax would increase the cost

of the imports to consumers, its effect

on the demand for Michelin tubes and tires

was insubstantial. The tax, therefore,

would not significantly diminish the num-

ber of imports on which the Federal Gov-

ernment would levy import duties and would

not deprive it of income indirectly.

A-37

Washington Revenue Department v. Stevedoring

Association, 435 U.S. at 753 (citation omitted).

And its relevant conclusions with respect

to the Washington tax were:

A similar approach demonstrates that

the application of the Washington business

and occupation tax to stevedoring threat-

ens no Import-Export Clause policy. First,

the tax does not restrain the ability of

the Federal Government to conduct foreign

policy. As a general business tax that

applies to virtually all businesses in the

State, it has not created any special pro-

tective tariff. The assessments in this

case are only upon business conducted en-

tirely within Washington. No foreign bus-

iness or vessel is taxed. Respondents,

therefore, have demonstrated no impedi-

ment posed by the tax upon the regulation

of foreign trade by the United States.

Second, the effect of the Washington

tax on federal import revenues is identi-

cal to the effect in Michelin. The tax

merely compensates the State for services

and protection extended by Washington to

the stevedoring business. Any indirect

effect on the demand for imported goods

because of the tax on the value of load-

ing and unloading them from their ships

is even less substantial than the effect

of the direct ad valorem property tax on

the imported goods themselves.

Id. at 754

15/ Okolehao and pineapple wine are not the

only alcoholic beverages produced in Hawaii.

Also produced here are fruit liqueurs and sake,

a Japanese-type rice wine.

We need not consider the third policy

consideration described in Michelin and

Washington Revenue Department since the tax-

payers concede it does not apply to this case.

We noted earlier that Paradise, a Hawaii

corporation engaged in the wholesaling of oko-

lehao, also claims the tax violates the Commerce

Clause. See noti 9 supra. We find it diffi-

cult to give muci. credence to a claim that the

tax creates an undue burden on interstate com-

merce when the argument is advanced by one who

logically would be a "beneficiary" of the al-

leged discrimination.

The questioned legislative action and its

effect were summarized as follows in the Court's

opinion:

[T]he legislature in 1968 enacted § 270-a

to amend the transfer tax by providing for

two deviations from the uniform applica-

tion of § 270 when ome of the taxable e-

vents, a sale, takes place in New York.

First, transactions by nonresidents of

New York are afforded a 50% reduction

(‘nonresident reduction’) in the rate of

tax when the transaction involves an in-

state sale. Taxable transactions by re-

sidents (regardless of where the sale is

made) and by nonresidents selling outside

the State do not benefit from the rate

decrease. Second, § 270-a limits the to-

tal tax liability of any taxpayer (resident

or nonresident) to $350 (maximum tax) for

a single transaction when it involves a

New York sale. If a sale is made out-of-

State, the § 270 tax rate applies to an

in-state transfer (or other taxable event)

without limitation.

19/

A-39

Boston Stock Exchange v. State Tax Commission,

429 U.S. at 324-25 (footnotes omitted).

The stipulation of facts upon which the

case was submitted for decision stated in part:

‘If Halliburton had purchased its

materials, operated its shops, and incur-

red its Labor and Shop Overhead expenses

at a location within the State of Louisi-

ana, there would have been a sales tax

due to the State of Louisiana upon the

cost of materials purchased in Louisiana

and a Use Tax on Materials purchased out-

side of Louisiana; but there would have

been no Louisiana sales tax or use tax

due upon the Labor and Shop Overhead.’

Halliburton Oil Well Cementing Co. v. Reily,

373 U.S. at 67.

We also have good reason to believe nei-

ther okolehac not pineapple wine is produced

elsewhere. Thus, our situation is totally

different from Halliburton where the equip-

ment was assembled out of state, but could

have been assembled in Louisiana too.

_ Furthermore, the producers of okolehao

and pineapple wine are not exempted from pay-

ment of the general excise tax imposed by HRS

Chapter 237.

Though the taxpayers submitted no evidence

on the amount of okolehao and pineapple wine

sold in Hawaii, we believe we car safely assume

these products pose no competitive threat to

other liquors produced elsewhere and consumed

in Hawaii.

A-40

We also find it unnecessary to address

the taxpayers’ claim that the rate of taxation

in itself constitutes a violation of the Com-

merce Clause. "The simple fact is that the

appropriate level or rate of taxation is es-

sentially a matter for legislative, and not

judicial, resolution." Commonwealth Edison

Co. v. Montana, 453 U.S. at 627 (footnote

omited).

=,

be a

APPENDIX B

ALLAN S. CHOCK 1582

Deputy Attorney General

State of Hawaii

Room 305, Hale Auhau

425 Queen Street

Honolulu, Hawaii 96813

Tel. No. 548-4762

Attorney for Director of

Taxation, Detendant

IN THE TAX APPEAL COURT OF

THE STATE OF HAWAII

BACCEUS IM-

PORTS, LTD.,

CASE NO. 1852

Piaintiff,

Vs.

GEORGE FREITAS,

Director of Tax-

ation,

Defendant.

ERAGES, INC.,

Plaintiff

Vs.

GEORGE FREITAS,

Director of Tax-

ation,

)

)

)

)

)

)

)

)

)

)

)

)

)

PARADISE BEV- ) CASE NO. 1862

)

)

)

)

)

)

)

)

)

Defendant. )

)

- led

EAGLE DISTRI-

BUTORS, INC.,

Plaintiff,

vs.

GEORGE FREITAS,

Director of Tax-

ation,

Defendant.

FOREMOST=-McKBS-

SON, INC., dba

MCKESSON WINE &

SPIRITS CO.,

Plaintifé,

vs.

GEORGE FREITAS,

Director of Tax-

ation,

Defendant.

CASE NO. 1866

CASE NO. 1867

DECISION AND

ORDER

DECISION AND ORDER

these proceedings involve the asses-

ment of the liquor tax imposed pursuant to

the provisions of HRS Chapter 244, the Ha-

waii Liquor Tax Law.

The tacts in this case are set forth

in the Stipulations of Facts on file with

A-43

the records of these appeals and are incor-

porated herein and by reference made a part

of this Decision. The cases have been con-

solidated by stipulation for disposition.

Briefly stated, the facts are as fol-

lows:

BACCHUS IMPORTS, LTD., PARADISE BEV-

ERAGES, INC., and EAGLE DISTRIBUTORS, INC.,

Taxpayers and herein Plaintiffs, are cor-

porations organized and existing under the

laws of the State of Hawaii. FOREMOST-Mc-

KESSON, INC., the other Plaintiff, is a

Maryland corporation authorized to do busi-

ness under the laws of the State of Hawaii.

Taxpayers are all licensed dealers as de-

fined by section 244-1, Hawaii Revised Sta-

tutes. At all times herein, Taxpayers wexe

engaged in the wholesaling of intoxicating

liquors in the State of Hawaii. The nature

of their business includes the importation

and distribution of liquor at the wholesale

A-44

level to various retail licensees through-

out the State.

At the various times listed below,

each Taxpayer sent a letter of protest to-

gether with its monthly return of the lic-

uor tax. The letter of protest applied to

that and all previous payments of the lig-

uor tax up to a period of five years.

Within 30 days of the initial letter of

protest, each Taxpayer filed a Complaint

for Refund of Liquor Taxes Paid, pursuant

to section 40-35, HRS.

TAXPAYER

Bacchus Im- May 30, December 1977

ports, Ltd. 1979 thru May 1979

Paradise Bev- July 30, June 1977

erages, Inc. 1979 thru July 1979

Eagle Distri- August 3l, August 1974

butors, Inc. 1979 thru July 1979

Foremost-Mc- September August 1974

Kesson, Inc. 6, 1979 thru August

1979

: ~

ss

A-45

The liquor is imported into Hawaii

through three different routes. (1) Liquor

originating in foreign countries and im-

ported directly to Hawaii as the first

port of entry. (2) Liquor originating in

foreign countries which is imported by an-

other State as the first port of entry and

is thereafter purchased by Taxpayers and

imported to Hawaii. (3) Liquor which o-

riginates in a State other than Hawaii and

is imported to Hawaii.

All of the Taxpayers file their lig-

uor tax returns with the State and report

their gross sales each month, less sales

exempted by Chapter 244. Taxpayers also

remit the tax due per each return along

with the return filed.

The wholesale price charged by Tax-

payers is based upon the landed costs of

the liquor. These costs include:

1. The original cost of the liquor

A-46

2. Ocean or air freight to Hawaii

3. Wharfage fees in Hawaii

4. Drayage charges for transporta-

tion to Taxpayers' warehouses

5. Brokerage fees

6. Customs, duties, and internal rev-

enue taxes

7. Warehouse handling charges

Because of the added landed costs, the

wholesale price is higher for liquors im-

ported into Hawaii as compared with liquor

which is manufactured locally. Locally

manufactured liquor include Okolehao, fruit

wine made from pineapple, fruit liqueurs

and sake.

The Hawaii liquor tax is based upon the

wholesale price of the liquor sold to licen-

sees for use and consumption in the State of

Hawaii. Exemptions from the tax are granted

for certain sales and transactions, includ-

ing sales of Okolehao and fruit wine manu-

- o ai]

7 eZ

a - *

ope” ay

A~47

factured in Hawaii, until June 30, 1981.

But the exemption does not apply to sales

of fruit liqueurs and sake manufactured

locally.

In their complaints for refunds, Tax-

payers allege that the Hawaii Liquor tax

is unconstitutional in that it violates

the Import-Export Clause and the Commerce

Clause of the United States Constitution.

The Court does not agree with the Tax-

pauers' contentions. The Court finds the

liquor tax as administered under the pro-

visions of HRS Chapter 244 to be constitu-

tionally valid and is not violative of ei-

ther the Import-Export Clause nor the Com-

merce Clause of the United States Constitu-

tion.

Under the United States Supreme Court's

decision in Michelin Tire Co. v. Wages, 423

U.S. 276, 96 S.Ct. 535, 46 L.Ed.2d 495

(1975), a nondiscriminatory state tax is

not an impost or duty prohibited by the Im-

A-48

port-Export Clause and is a proper state

exaction. The Court has also decided in

Department of Revenue of Washington v.

Association of Washington Stevedoring Com-

panies, 435 U.S. 734, 98 S.Ct. 1388, 55

L.Ed.2d 682 (1978)and in Complete Auto

Transit, Inc. v. Brady, 430 U.S. 274, 97

S.Ct. 1076, 51 L.Ed.2d 326 (1977) that a

nondiscriminatory tax is not violative of

the Commerce Clause of the United States

Constitution, where applied to activity

with a substantial nexus to the State,

The principal question addressed to

the Court, therefore, is whether or not

the provisions of HRS Chapter 244 are dis-

criminatory. If the tax does not discrim-

inate against foreign imports or against

interstate or foreign commerce, the tax

would be valid under both the Import-Export "

Clause and the Commerce Clause of the Unit-

-

ee

Cg &S

ed States Constitution.

A-49

HRS section 244-4 imposes the Hawaii

liquor tax upon every person who sells or

uses any liquor in the State. It essenti-

ally provides that the tax is imposed upon

the first sale or use of the liquor within

the State of Hawaii. The tax so imposed

is equal to 20 percent of the wholesale

price of the liquor used or sold.

HRS section 244-4(6) and (7) exempt

Okolehao and fruit wine manufactured in Ha-

waii from imposition of the tax. The ex-

emption, however, extends only until June

30, 1981.

Taxpayers pose two arguments in sup-

port of their contention that the Hawaii

liquor tax is discriminatory. In the first,

Taxpayers argue that the tax discriminates

against all imported liquor because the dol-

lar amount of taxes imposed upon imported

liquor is greater than the dollar amount

imposed upon locally manufactured liquor.

A-50

The Court rejects this argument. The

mere fact that the dollar amount of taxes

paid upon one item may be higher than an-

other does not per se make the tax a dis-

criminatory one. The difference in the

exaction may be attributed, as in the case

at bar, to the fact that imported liquors

have a higher tax base because of their

added landing costs.

The nondiscriminatory nature of the

tax herein imposed is evidenced by the fact

that the tax is imposed at a flat rate of

20 percent of the wholesale price of all

liquor so used or sold, whether local or

imported. It is a commonplace occurrence

that any item "imported" from any place

outside Hawaii will generally have a higher

cost than one produced locally. The fact

that this causes such items brought into

Hawaii to result in a greater amount of tax

does not make the tax discriminatory. In

A-51

Re Tax Appeal, Puna Sugar Co., 56 Haw. 621

(1976); Michelin Tire Co. v. Wages, supra.

Taxpayers' second argument is that

the tax discriminates by exempting locally

produced Okolehao and fruit wine until June

30, 1981. This they say has the effect of

taxing only liquor brought into Hawaii

while relieving locally produced liquor

from the tax. The Court finds this argu-

ment without merit.

Exemptions are the proper exercise of

the police powers of the state and are va-

lid, unless applied with no rational basis.

In Re Pacific Marine & Supply Co., 55 Haw.

572 (1974); Allied Stores v. Bowers, 358

U.S. 522, 79 S.Ct. 437, 3 L.Ed.2d 480 (1959).

: In allowing the exemptions to the Oko-

lehao and fruit wine industries, our Legis-

lature has found that the exemptions would

help to put these budding industries on a

firmer financial footing and that the exemp-

tions would benefit the State by providing

A-52

a new industry. Act 39, Session Laws of

Hawaii, 1976; Senate Stan. Com. Rep. 408-

76. The Court finds the legislative pur-

pose provides a rational basis for the ex-

emptions and there was no arbitrary action

taken by the Legislature in granting the

exemptions. This is all the Court can do.

In Re Pacific Marine & Supply Co., supra,

at 582.

It is also interesting to note that

the Taxpayers argue that the exemptions

have the effect of the liquor tax being

applied only to liquor brought in to Hawa-

ii while relieving all locally produced

liquor from the tax. But the argument over-

looks the fact that locally produced sake

and fruit liqueurs are not exempted by Chap-

ter 244, HRS. Two classes of liquors pro-

duced in Hawaii, then, are still subject

to the tax.

A-53

IT IS ACCORDINGLY HEREBY ORDERED, AD-

JUDGED AND DECREED that the Hawaii liquor

tax as imposed by Chapter 244, Hawaii Re-

vised Statutes, is a valid State tax and

the amounts of taxes herein paid are valid

government realizations. Judgment is en-

tered in favor of George Freitas, Director

of the Department of Taxation, State of Ha-

waii, and against the herein Taxpa) ers.

Dated: Honolulu, Hawaii, January 29,

1980.

ay Yasutaka Fukushima

dge of the above-entitiled Court

ree

A-54

DECISION AND ORDER, TAX APPEALS OF BACCHUS

IMPORTS, LTD. (CASE NO. 1852), PARADISE

BEVERAGES, INC. (CASE NO. 1862), EAGLE

DISTRIBUTORS, INC. (CASE NO. 1866), AND

FOREMOST-MCKESSON, INC., dba MCKESSON WINE

& SPIRITS CO. (CASE NO. 1867).

APPROVED AS TO FORM:

ALLAN S. HALEY, ESQ.

Cronin, Fried, Sekiya,

Haley & Kekina

1900 Davies Pacific Center

Honolulu, Hawaii 96813

Attorney for Plaintiffs

BACCHUS IMPORTS, LTD. and

EAGLE DISTRIBUTORS, INC.

fac Michael K. Kawahara

PF. - CHAR, ESQ.

MICHAEL K. KAWAHARA, ESQ.

10th Floor, City Bank Bldg.

810 Richards Street

Honolulu, Hawaii 96813

Attorneys for Plaintiff

PARADISE BEVERAGES, INC.

A-55

MICHAEL R. MARSH, ESQ.

1100 First Hawaiian Bank Bldg.

Honolulu, Hawaii 96813

Attorneys for Plaintiff

FOREMOST=MCKESSON, INC, dba

MCKESSON WINE & SPIRITS CO.

APPENDIX C

NO. 7802

IN THE SUPREME COURT OF THE STATE OF HAWAII

OCTOBER TERM 1982

In the Matter of

the Tax Appeals

of

BACCHUS IMPORTS, LTD.,

PARADISE BEVERAGES,

INC., EAGLE DISTRI-

BUTORS, INC. and

FOREMOST=-McCKESSON,

INC., dba McKESSON

WINE & SPIRITS, CO.,

CASE NO. 1852

CASE NO. 1862

CASE NO. 1866

CASE NO. 1867

APPEALS FROM

FINDING OF

FACT AND CON-

CLUSIONS OF

LAW AND JUDG-

MENT

Plaintiffs-Appellants.

TAX APPEAL

COURT

HONORABLE

YASUTAKA

FUKUSHIMA,

Judge

ee ee ee ee eee ee eee ee ee ee ee ee

PILED

JUDGMENT ON APPEAL 1983 Jan. 5

/s/ Clement J.H. Chun

T. BRUCE HONDA 690

Deputy Attorney General COURT

State of Hawaii

Room 305, Hale Auhau Attorney for Di-

425 Queen Street rector of Taxa-

Honolulu, Hawaii 96813 tion, Appellee

A-57

NO. 7802

IN THE SUPREME COURT OF THE STATE OF HAWAII

OCTOBER TERM 1982

In the Matter of

the Tax Appeals

of

BACCHUS IMPORTS, LTD.,

PARADISE BEVERAGES,

INC., EAGLE DISTRI-

BUTORS, INC. and

FOREMOST-McKESSON,

INC., dba McKESSON

WINE & SPIRITS, CO.,

CASE NO. 1852

CASE NO. 1862

CASE NO. 1866

CASE NO. 1867

APPEALS FROM

FINDING OF

FACT AND CON-

CLUSIONS OF

LAW AND JUDG-

MENT

Plaintiffs-Appellants.

TAX APPEAL

COURT

HONORABLE

YASUTAKA

FUKUSHIMA,

Judge

ee ee ee eee eer”

JUDGMENT ON APPEAL

Pursuant to the Opinion of the Sup-

reme Court of the State of Hawaii filed

December 23, 1982, the judgment of the Tax

Appeal court is affirmed.

DATED: Honolulu, Hawaii, Jan. 5, 1983.

ee if

e P Ls al

APPROVED:

Justice

a

A-58

BY THE COURT:

s/C nt J.H. Chu

er

ura

APPENDIX D

NO.

7802

IN THE SUPREME COURT OF THE STATE OF HAWAIT

OCTOBER TERM 1982

BACCHUS IMPORTS,

LTD.,

Plaintiff-

Appellant,

and

PARADISE BEVERAGES,

INC.

Plaintiff-

Appellant,

and

EAGLE

INC.

DISTRIBUTORS,

Plaintiff-

Appellant,

and

FOREMOST=-McKESSON,

INC., dba MCKESSON

WINE & SPIRITS, CO.,

Plaintiff-

Appellant,

vs.

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

CASE NO. 1852

APPEAL BY BACCHUS

IMPORTS, LTD. FROM

DECISION AND ORDER

FILED ON JANUARY

29, 1980

CASE NO. 1862

APPEAL BY PARADISE

BEVERAGES, INC.

FROM DECISION AND

ORDER FILED ON JAN-

UARY 29, 1980

CASE NO. 1866

APPEAL BY EAGLE

DISTRIBUTORS, INC

FROM DECISION AND

ORDER FILED ON JAN-

UARY 29, 1980

CASE NO. 1867

APPEAL BY FOREMOST-

MCKESSON, INC. FROM

DECISION AND ORDER

FILED ON JANUARY 29,

1980

TAX APPEAL COURT

A-60

GEORGE FREITAS,

Director of Tax-

ation,

HONORABLE

YASUTAKA FUKUSHIMA

Defendant-

)

)

)

)

)

Appellee

NOTICE OF APPEAL TO THE SUPREME

COURT OF THE UNITED STATES

AND

CERTIFICATE OF SERVICE

ALLAN S. HALEY 982-0

410 Spring Street

Nevada City, CA 95959

of Counsel:

CRONIN, FRIED, SE- Attorney for Appel-

KIYA, HALEY & KE- lants: Bacchus Im-

KINA ports, Ltd. and Eagle

Distributors, Inc.

FILED

1983 MARCH 3

ie Clement J. H. Chun

A-61

NO. 7802

IN THE SUPREME COURT OF THE STATE OF HAWAII

OCTOBER TERM 1982

BACCHUS IMPORTS,

LTD.,

Plaintiff-

Appellant,

and

PARADISE BEVERAGES,

Inc.

Plaintiff-

Appellant,

and

EAGLE DISTRIBUTORS,

INC.

Plaintiff-

Appellant,

and

FPOREMOST-McKESSON,

INC., dba McKESSON

WINE & SPIRITS, CO.,

Plaintiff-

Appellant,

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

vs. )

)

CASE NO. 1852

APPEAL BY BACCHUS

IMPORTS, LTD. FROM

DECISION AND ORDER

FILED ON JANUARY

29, 1980

CASE NO. 1862

APPEAL BY PARADISE

BEVERAGES, INC.

FROM DECISION AND

ORDER FILED ON JAN-~

UARY 29, 1980

CASE NO. 1866

APPEAL BY EAGLE

DISTRIBUTORS, INC

FROM DECISION AND

ORDER FILED ON JAN-

UARY 29, 1980

CASE NO. 1867

APPEAL BY FOREMOST-

MCKESSON, INC. FROM

DECISION AND ORDER

FILED ON JANUARY 29,

1980

TAX APPEAL COURT

A~62

HONORABLE

YASUTAKA FUKUSHIMA

GEORGE FREITAS,

Director of Tax-

ation,

Defendant-

)

)

)

)

)

Appellee

NOTICE OF APPEAL TO THE SUPREME

COURT OF THE UNITED STATES

Bacchus Imports, Ltd., and Eagle Dis-

tributors, Inc., the Taxpayers-Appellants

named above, hereby give notice of their

appeal and appeals, pursuant to 28 U.S.C.

Section 1257(2), to the Supreme Court of

the United States from the judgment of the

Supreme Court of Hawaii entered in this

action on January 5, 1983, and each and

every part thereof.

DATED: Nevada City, California, Feb-

ruary 28, 1983

Attorney for appellants

Bacchus Imports, Ltd.

and Eagle Distributors, :

Inc. |

.

i ——— « = - =e

A-63

NO,

7802

IN THE SUPREME COURT OF THE STATE OF HAWAII

OCTOBER TERM 1982

BACCHUS IMPORTS,

LTD.,

Plaintiff-

Appellant,

and

PARADISE BEVERAGES,

Inc,

Plaintiff-

Appellant,

and

EAGLE DISTRIBUTORS,

INC.

Plaintiff-

Appellant,

and

FOREMOST-McKESSON,

INC., dba McKESSON

WINE & SPIRITS, CO.,

Plaintiff-

Appellant,

vs.

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

’

)

)

)

)

)

)

CASE NO. 1852

APPEAL BY BACCHUS

IMPORTS, LTD. FROM

DECISION AND ORDER

FILED ON JANUARY

29, 1980

CASE NO. 1862

APPEAL BY PARADISE

BEVERAGES, INC.

FROM DECISION AND

ORDER FILED ON JAN-

UARY 29, 1980

CASE NO. 1866

APPEAL BY EAGLE

DISTRIBUTORS, INC

FROM DECISION AND

ORDER FILED ON JAN-

UARY 29, 1980

CASE NO. 1867

APPEAL BY FOREMOST-

MCKESSON, INC. FROM

DECISION AND ORDER

FILED ON JANUARY 29,

1980

TAX APPEAL COURT

al

A-64

HONORABLE

YASUTAKA FUKUSHIMA

GEORGE FREITAS,

Director of Tax-

ation,

Defendant-

)

)

)

)

)

Appellee .

CERTIFICATE OF SERVICE

I hereby certify that a copy of the

foregoing Notice of Appeal was duly served

on all parties required to be served by

placing copies of the same in the United

States mail, first-class postage prepaid,

properly addressed, on February 28, 1983,

to the following:

T. BRUCE HONDA 690

Deputy Attorney General

State of Hawaii

Room 305, Hale Auhau

425 Queen Street

Honolulu, Hawaii 96813

Of Counsel

Case, Kay & Lynch JULIAN H. CLARK 717-0

BRUCE C. BIGELOW 1290-0

1100 First Hawaiian

Bank Bldg.

Honolulu, Hawaii 96813

Attorneys for Plain-

tiff llant McKES-

SON WINE & SPIRITS, CO.

A-65

VERNON F. L. CHAR, ESQ.

MICHAEL K. KAWAHARA, ESQ.

10th Flr., City Bank

Bldg.

810 Richards Street

Honolulu, Hawaii 96813

‘si Allan S. Haley

Attorney for Appellants:

BACCHUS IMPORTS, LTD.

and EAGLE DISTRIBUTORS,

IN.

j

al

4 “. * des -