# Brief Opposing Motion to Dismiss or Affirm — White ex rel. Kitsap Automatic Dispenser Co. v. Washington > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385610_0983%3A3 ## Record - **Collection:** Supreme Court brief - **Document type:** Brief Opposing Motion to Dismiss or Affirm - **Published:** January 1, 1957 - **Citation:** 355 U.S. 10 ## Text he “ . . RN ee ahs An ‘the Supreme < ourt of. c “Fh iv Wraith; B. 2 THtoxses: atid ANtvin PLanse df Krissy Nt pom ation Disii insti: Cons BOM. Mie cae ME. 7 bhiaeins,. Peri So Pbieass: and ddan ~Piehin, dt AU roy rie MERCHANDISERS: SP AC ARB Ot 4 . ms a THE pedbatecey Inc. a W ashingten corp oration “ORD AL SWaALi and JAaMeEs PP. Waonpes, fied bra P \CIFY are MVC ERENK Rv&se, d-ebia I VERGREEN BES ERG (ort. J. CLAUS, Jr, d boat UN. ip VENDING SrEv- rer: Cakren WL DeLLANTY “and Greonee K. Liekpns wtis do bea Beverage VENpING SERVICE COMPANY 4 AU rowar Co. Txe.. a Washington corporation: JoeHn Neus. Nicky and “Vir Nee anteky, deb oa CANTEEN: @0MPpANny’ # Wastineros: RicHarp .. Necianicky, dob a: AL TOMALTIC CANTEEN Co, oF SEOKAXNE, Appellants, ; ae ee : Tat Svark of WASHINGTON, Appellee. . é \Y 4 APPEAL PR M — b Cour OF THE-STA rr OF és ae * VWRAstincTon a . . . BRILE OPPOSING MOTION TO DISMISS OR >; . ° y - *e .- e% Ps - ° : ® S. HAkeLD SHEFED MAN Ropenr GG. Mocu . Attorneys for A pijat llirnts, Tee @8Gu8 Pn tSee. GSEATTLCO aoe : ae fe SP A | - a* a i ie eer Inthe ee Supreme Court of the United States | | ‘No. 1079. Don W. ‘Wak: B. ©. Same ‘hel ALVIN “Hansox, d/b/a KITs TOMP AUTOMATIC DISPENSER Co.; F>-M. Hie- GINS, WM. Hivorns, PETER S. Hiuarxs. and: Dark FISHER, d/b/a AUTOMATIC MERCHANDISERS; SPACARB OF | ‘THE NoRTHW EST, INC., a Washington corporation ; ORIE A. SMALL and. JAMES P. Wornen, JRr., d/b/a Paciric . . AUTOMATIC; FRANK Rgsso, d/b/a EVERGREEN BEVERAGE | -Co.; C. J. ‘CLAUSEN, R., d/b/2 INLAN® VENDING, SERV- ' ICE; CARTER W.. DULLANTY and GEORGE K.: LINDBERG, d/b/a BEVERAGE VENDING SERVICE COMPANY; AU POMAT Co., Inc., a Washington. corporation; J oHN .NECHA- NICKY and Vit NECHANICKY, d/b/a. CANTEEN CoMPANY ‘OF AMASHINGTON ; RicHarp P. NECHANICKY, d/b/a AUTOMATIC CANTEEN Co. oF SPOKANE, Appellants, 3 Bp gs han Ta ‘STATE OF WASHINGTON, Appellee. ‘ [ : APPEAL velar THE Sevunie Courr OF ‘THE ge STATE: OF” . »» WASHINCTON a oe. : ' BRIEF OPPOSING MOTION TO DISMISS OR “S. LHarotp SHEFELMAN _Rosert G., Mocu ou... . Attorneys for Appellants. - 1612 Northera Life Tower, . : _ Seattle 1, Washington. — ‘THe Angus Paces, Seatric Se] ane ene Page E € ‘ounter-Statement of the "OE Waser ia Ss TT; Aripmment ..., .seetliiscccniiscoee say lene: Winner $ A. Existence of Classification................... oa : B. Reasonableness of Classific IR iasecrsccapsacicn 15 IIL. Summary sssostentonetennnseesen eee RT Spetideceteetiaccses 18 | TABLE OF CASES es ( emia v. Southern Coal & Coke Co, (1937) 301 U.S. 495,57 S.Ct. 868, 81 So Sans 15, 16" Fernandez v. Wiener (1945) 326 U.S. 340, 66 S.Ct. | ge” Ey > RRP TIGRE Kop AO SGene aan ee CO 16 Hartford Steam Boiler Inspection and Insurance ~ “Company v. Harrison (1937) 301 U.S. 459, 57 , BCR, SSB BT Laced, TBD... ae ceeceessectercsseseyeoeey 12 Louisville Gas & Electric Co. v. lees (1928) 2 277 __*U.8. 32, 48 8.Ct. 423, 72 L.ed. 770....:.............. 17, 17, 18 _ Madden v, Kentucky (1940) 309 U.S. $3, 60 S.Ct. 406, 84 L.ed. SON.....: phGuueenduanhseeeenuehenehne Cabwuethuereseulbenhs 15, 16 Mouledour v. Maestri (1941) 197 La. 525, 2 Se. (2d) j 3 Aen le eS OER Tee a een Oaee Wit na ee 8 . Nelson v. Sears, Roepuck & Co. (7941). 312U 8. 359, - 61 S.Ct. 586, 85 Lred. RENAE oc nro ee 3 Quaker City Cab Co. v. Pennsylvania (1938) 277 | U.S. 389, 48:S.Ct. 553, 72 L.ed. 927... 12 Stebbins v. Riley (1925) 268 U. Ss. 137, 45 S.Ct. 424, BE Reap Reet SSH LN ARS Caie ee kN ea 18, 19 Stewart Dry Goods Co, v. Lewis (1935) 20% U S. 550, 55 S.Ct. 52, 79 Lied. sag nets Rice 2) Wagner v. Covington (1919) 251 U.S. 95, 40 S.Ct FB, OE Dal TI coi nsd poh assess sevescnncstnncimassccneyevenesnansons 3 Winslow-S vacarb, Ine. v. Evatt; Tax Commissioner (1945) 144 Ohio 471, 59 N.E. (2a) See 6,7 Wisconsin v. J. C. Penney Co. (1914) 311 U.S. 435, | 61S. Ut. eg SRE aie een ee 3 STATUTES t Page sao Revised ( Cotte of W ashington (RCW) 85.08.020,.....4, 13 Revised Code of W ashington (RCW) 82 .08.050......4,13 | Revised Code of W ashington (ROW ) 82.08.080 _...... 4 Re ‘vised ¢ ‘ode of Washington (R¢ W ) 82.08.1120... 4 RULES Rule 16 of Revised Rules of. the Supreme Court of - a ne 5 Ruling of the Washington Tax.Commission Relative / to the Bracket Systeme. nc 2..cccseeneecessseecpecposeee 4 is es J In the — ee Supreme Court of the United States | Dos W. WHITE; B. C. THOMSON and AL-\ ' . VIN HANSON, d /b/n Kitsap AUTOMATIC | DISPENSER Co. ; fF. M.. Hicarns, Wn. J. Hicains, PETER S. Hicarxs and DALE FIsHER,: d/b/a AuTOMATIC MERCHAN- DISERS; SPACARB OF THE NORTHWEST, Ixc., a Washington corporation; Ortr ff A. SMALL and JAMEs P. ‘WorvEN, JR., d/b/a Pactric AUTOMATIC; FRANK Russo, d/b/a EVERGREEN BEVERAGE Co. ; C.J. CLAUSEN, R. »d/ /a INLAND VEND- “ING SERVICE ¢ CARTER’ .Duianty and ) No. 1079 Grorce K. LINDBERG, d/b/a BEVERAGE VENDING SERVICE COMPANY; AUTOMAT -Co., Lxc., a ,\Washington corporation; JOHN NECHANICKY and: Vit NECHA- NICKY, d/b/a C_.NTEEN Co, oF W ASHING- TON ; Ricuarp P. ‘-NECHANICKY, d/b/a - AvTomATic C ANTEEN Co. of SPOKANE, | Appellants, vs. THE: STATE or WASHINGTOR, Appellee. APPEAL FROM THE SUPREME Court OF THE STATE OF WASHINGTON ? BRIEF OPPOSING MOTION TO DISMISS OR - AFFIRM I. COUNTER-STATEMENT OF, THE CASE Before answering the argument of appellee in sup- -_ port of its Motion to Dismiss or Affirm, it is logical to [1] " ” = dispose of any implication which may be in its brief that appellants have made erroneous’ statenrents con- cerning who pays the Washington Retail Sales Tax and on whom this tax is imposed, In the Jurisdictional Statement appellants stated that the Retail Sales Tax Law of the State of W ashington imposes a ‘tax col- lected from ippellants on their sales, all of which were for thirteen cents (15¢) or less, without such a tax being colleéted from sellers of merchandise for four- teen cents (14¢) or more, and that the effect of this © law as interpreted by the Supreme Court. of the State of Washington is to impose upon sellers of merehan- dise at retail: for‘amounts between one cent (1¢) and thirteen cents: (13¢) a three per cent (3°; ) tax on the gross’ amount of such sales, while no such or similar tax is imposed on other sellers. In its Motion to Dis- _miss or Affirm, appellee says this is not so and that contrary to appellants’ assertions, all sellers are re- quired to pay tax to the state in an amount determined by multiplying their total gross silos by the rate (- I%-) of the tax. 3 _ The constitutionality of tax measures is not decided upon niceties of language or by considering only the entity which ultimately makes the remittance to the taxing authority, here the sellers. " hee 2. The deseriptive pigeonhole into which a state court puts a tax is of no-moment ‘in determining - the constitutional significance ‘of the exaction. fs whatever language a statute may #4, framed, i purpose must he determined by its natural ie reasonable effect > [lenderson vy New York (Hen- derson vs W iékham) 92 U.S. 25925 38, 23 Lued. 543, . 547. Such has been the repeated import-of- the: . oA ‘eases which only recently were well summarized by the guiding formulation for adjudicating astax nieasure, that ‘in, passing on its constitutionality - we are concerned only with its practieal operation, not its definition or the precise form of dese ‘riptive words which may be applied to it.’ Lawrence v. State Tar Commission, 286 U.S. 276, 280, 76 Lved. 1102, 1105, 52 S.Ct. 556, 87. A. LR. 374.°’ Wisconsin _ ud. C. Penney Co. (1941) 311 US. 435, 443, 61 S.Ct. 246, 85 Lied. 267, 370. *... It hardly is necessary to repeat that when this court is called upon to test a state tax by the | | provisions of the Constitution of the United States, our decision must depend not upon the form of the taxing scheme, or any characterization. of it adopted by the state, but rather@pon the practical operation and effect of the tax as applied and en- -forced.”’ Wagner v. Covington (1919) 251 U.S. 95, 102, 40 S.Ct. 93, 64 Led. 157, 167. (Emphasis added )}. “In passing on the constitutionality of a tax law ‘we are concerned only with its practical op- eration,;not its definition or the precise’ form of descriptive ‘words which may be applied to it.’ Lawrence v. State Tar Commission, 286 U.S. 276, 280, 76. L.ed: 1102, 1105, 52 S.Ct. 556, 87 ALR. 374...’ Nelson v. Sears, Roebuck & Co. q04ty~ 312 Us S359, 363, 61 S.Ct: 586, 85 L.ed. 888, 891. There can be no dispute concerning the practical op- eration.and effect of the Washington Retail Sales Tax as applied and enforced under the statute, the regula- | tions issued’ pursuant thereto and the Washington Su- preme Court interpretation thereof. It is acknewl- edged that the Washington courthas held that all sell- ers must remit three per cent (3% ) of their total gross — =x sales to the state as tax. The appellee makes this state- ‘ment as if it automatically decides the constitutional issue now before this court. [lowever, this remittance requirenient tells only half the story, the remainder is the important part, the practical operation of the . Washington Retail Sales Tax Law, The statute prov rides: that ‘There is ene and there shall be collected a tax on each retail sale... 7 RCW 82:08.020. The duty of paying the tax is upon the buyer, ‘and the seller is required to collect the tax from the buyer. RCW 82.08.0530. The seller is prohibited from in-any way: absorbing the tax," ROW 82.08.120, al- though he must nevertheless remit three per cent (3% ) of his gross sales, Washington Supreme Court Deei- sion (R. 75). The schedule by whic ‘h collections are made by the seller from the buy er is established “hy a ruling of the W ashington Tax Commission’ (Juris. St. 33) and is such that the seller is prohibited from col- lecting on sales for amounts between one cent (1¢) and thirteen cents (13¢), inclusive. The Washington Supreme Court has now held that sellers mist remit to: the state as and for the-retail sales tax three per cent (3%) of all sales made without regard to this statutory prohivition and this holding. is cone ‘lusive here, Thus *The fact that appellants are vending machine operators has nothing to di with the question now before the court; it is completely, immaterial. The discrimination of which appellants complain is based on the sell- ing price of merchandise. It applies whether or not the sale.is through a vesiding machine: no seller can collect the tax from his buyer on a sale - for less than fourteen certs (14¢). RCW 82.08.080 gives a vending machine operator authority to absorb a tax which he would otherwise collect from a buyer when there has been appropriate administrative application and action. However. no such application. or action has _ taken place as to appellants nor does this statutory authorization have any effect on one cent (1¢)—-thirteen cents (13¢) sales; collection from, buyers in these low-priced transactions is prohibited in any event. it is clear that the natural and reasonable effect and the practical operation of the’ Washington Retail Sales Tax Law is that sellers of merchandise for amounts between one: cent (1l¢) and thirteen cents (13¢), in . elusive, ‘must pay the tax themselves, whereas sellers of merchandise for amounts-of fourteen cents (1l4¢) and more do not, unless of course. fhey fail to fulfill the statutory requirement that they collect it from their buyers. | eS Viewing the situation by the well-established rule that the constitutionality of a tax is to be determined by consideting the practical operation of the-tax meas- ure, we resubmit that the effect of the statute involved as‘interpreted by the Supreme Court of the State of — Washington is to impose upon séllers of ‘merchandise - at retail for amounts between one cent (1¢) and thir-" teen cents (13¢) a, three per cent (3%) tax onthe gross amount of such sales, while ‘no such ° or similar tax is imposed « on other sellers. , « a I. | ARGUMENT ' Appellée’s Motion to Dismiss or Affirm is made pur- suant to paragraph 1 of. Rule 16 of the Revised Rules © of the Supreme Court of the United States, The mo- tion to dismiss comes under subparagraph (b) of that. rule and conceths oe substuntial federal question.”’ The motion to affirm comes under subparagraph (@)- and refers to unsubstantial questions. It 4 is obvious that a ‘federal question is involved, and .appellee does ‘not claim otherwise. Consequently the only issue under both of appellee’s motions is--whether or not a sub- se Ss +; 6. _ stantial’? question is presented by appellants. There- fore, both motidug may be argued as one. If a.substan- tial question is presented, both motions, should be de- \ ets nied ; if it is not, botli: motions should he granted. Appellee’s argument is that its motion is well taken -. for the general reason that a number of state, courts — have ypheld the vonstitutionality of a sales tax, and for the specific reasons that (a) there is. no elassifica- tion to which appellants can-object because the effects of which appellants complain are “entirely the result of appellants’ chosen methods of doing business’’ (Ap- peilee’s motion, pagé 10) and (h)-if there is a classifi- cation, it is one founded on reasonable considerations. of tax policies. ° | However, the mere fact that the same. constitutional issue which appellaiits are raising in this case has here- ’ tofore been raised in a number of states in itself indi-— catés that a substantial question exists. A quajority of the cases arose in states where thé sales tax_is imposed directly an the seller, but the other cases are entitled to more weight since they involve a tax uporethe buyer, which is the situation in the. State of Washington. Ap- pellee apparently contends that all of the cases uphold the constitutionality of the sales tax statutes involved, claiming that the statements directly contra to appel- lee’s position in Winslow-Spacarb, luc. v. EvattyTar — . Commissioner (1945) 144 Ohio 471, 59 N.E.(2d) 824, are dicta. The pertinent. paragraph in this cdse is: ‘It is always-the duty of a court to construe a statute, if possible, in-a manner to give it a con- _ stitutional operation. In accordance with such rule Section 5546-l2a, General Code, should be inter- - ot? © ' »- swaied as excluding a vendor wholly engaged in the making of separate sales of a commodity at a . price less than’ nine cents per unit, such sales not being taxable under the express terms of Section 5546-2, General Code. If Section 5546-12a were to be applied to such.a vendor who collects no tax from.the consumer, the vendor would be paVing ‘three per cent on his’ gross retail sales entirely out of his own pocket, while other vendors inthe same vicinity, selling similar and other commodities, sonte of their sales being taxable arid others not, would have the privilege and advantage of deduct- ing ‘the amount of tax paid to the state by means of canceling prepaid tax receipts’ for which ex-. penditure they have been reimbursed by the con- sumer, thus placing them in a more favored ‘posi- ‘tion and. fy some instarices, at least, causing them to pay little or nothing. The result would be an unfair discrimination among vendors, in violation | of the equal protection clauses of Section 2, Arti-~ ” cle I of the Constitution of@Ohio and: the 14th : Amendment to. the’ Constitution of the United States."” Winslow-Spacarb, Inc. v. Evatt, Tas Commissioner (1945) 144 Ohio 471, 59 N.E.(2d)- B24, 826. oe 0 We submit that it does not constitute dicta but is an authoritative opinion of the highest court of the State, of Ohio. The Ohio Supreme Court was setting forth one of its reasons for holding that séllers of smalk priced merchandise did not Jiave to pay the Ohio sales ax: if it should interpret the statute otherwise, the _ statute would be unconstitutional because it would then. “impose a tax upon sellers of merchandise for small. - amounts while no such or similar tax would be imposed on other sellers. This is an opinion of the Righest tri- oO 8 . bunal. of a state directly supporting appellants’ .con- tention in this case. > One other state,. w vhere the natiden of the tax is. pri- marily on the buy er, has a decision indicating that its _ highe# tribunal .would in all probability come ‘to the same conclusion as the Qhio Supreme Court. In Moule- dour v. Maestri (1941) 197 La. 525, 2 So:(2d) 11a. seller located in the City of New Orleans claimed that an ordinance very similar to the Washington Retail: Sales Tax Law violdted the uniformity provisions of | the Louisiana State Constitution béeause, among other . things, he was required to return a stated percentage af his gross sales as tax. The-court held that there was no constitutional violation and in doing so specifically ‘stated that, the seller ‘is required to report only the. actual taxes collected, regardless of the percentage of those taxes. to his gross receipts. . . . In order to make this doubly clear, the amendatory ordinance. adopted by the Commission Council’ indubitably required the- dealer. to report only the tax’actually collected by him from the purchaser, user or consumer. Proof in the record shows that this. was being carried out in the _practical application of the a of the ordinance under/attack. 2 So.(2d) p., 22. Thus, although there is no statement in the case to the effect that if a seller had been required to remit a percentage of his gross ‘receipts there would be an unconstitutional violation, the clear implication i is that the’ Louisiana court would eax, See ce eee \ eae - It is not. surprising that the Jegal battle, extending ; from 1936 to 1956, over the imposition of state sales” taxes upon seHers of: low-priced merchandise without ‘imposing the tax.on sellers of higher-priced merchan- ; dise has in the majority of instances been decided ‘in . favor of the taxing authority sinde only state courts + - have had these taxing méasures under .consideration. — -. However, there is a ‘respectable minority. Also, it must be remembered that our federal constitution provides that the ultimate authority over such controversies be- tween individual taxpayers and taxing states is the United States Supreme Court: which has always been ‘solicitous of the plight of the individual in such mat- ters, and no federal court has ever passed upon the _point.It is to be expected that:the same issue will arise | continuously in the future until it is decided by the highest féderal tribunal. We believe that the time has come for the federal constitutional quéstions involved to be decided by the United States Supreme Court. It . is submitted that not only does the fact that the issue _ has arisen in a number of state courts show that a sub- ' stantial question exists, but that this court should, in any event, decide this vexing problem now. A. Existence of Classification Appellee ‘apparently contends that no. pers ation at all exists, that the Washington Retail Sales Tax has no different effect upon sellers of 1¢-13¢ priced: arti- cles and sellers of higher- -priced merchandise, that the © tax measure does not plage sellers of Tow-priced mer- chandise in a different classification from other sellers, because ‘the ‘collection schedule applies to each and~ every retailer and that the discriminatory effects to which appellants object are merely the result of appel- lants voluntarily doing business in a certain, manner. s i . ; = | It is submitted that this attitude ignores the realities of the situation and: the stipulated facts. “Appellants, _as.sellers of merchandise for amounts between one cent - (1¢) and thirteen cents (13¢), inclusive, have paid the _ retail sales tax out. of their ‘own pockets, with any chance for reimbursement by their buyers prohibited by the statute and the rule establishing the bracket sys- tem. However, sellers of merchandise for amoupts of fourteen cents. .(14¢) and over are reimbursed by their buyers for the tax whicli they pay and, in fact, are re- quired by the statute to secure reimbursemerit. ‘Obvi- ° ously, this difference in the incidence of the tax is a. _ classification; sellers of low-priced merchandise have ‘the tax burden placed upon them, whereas sellers of © other priced merchandise do not. : _ Even though the eollietienn schedule by its terms ap-" plies to every Washington seller, the requirements that each seller pay three per cent (3%) of-his gross sales to the state and.that.each seller collect the tax from his — -buyer unless the, sale is for an amgaiitt between one cent, (1¢) and thirteen cents (13¢) in’which event the seller is prohibited from colletting the tax from his buyer, have the practical effect of shifting the inci- dence of the Washington Retail Sales Tax from buyers to sellers -where sales of the low-priced merchandise are: involved. To say that no difference exists in the effect of the law. upon sellers of merchandise above and below the thirteen cent-fourteen vent (1: 3¢-14¢ ) line igniores the prac tical operation and effect of “the tax measure which 1 is really the essential consideration. Appellee contends this discriminatory practical clas- ‘sification is immaterial by saying that it does not result, from the statute but from appellants so conducting their business as to be hurt by it, and if appellants do . not want this result they should cond yet: some other - business. Supposedly such a statement could: be’ said | about any unconstitutional tax: it is ‘not the taxing | ‘statute which does the harm, but the taxpayer. 80 COn- ducting his business as.to come w ithin its unconstitu-- tional clutches. Such an attitude would render the Con- stitution a nullity. Certainly, all taxpayers are entitled to the. protection afforded by the Fourteenth Amend- ment to the business which they are conducting. Con- - stitutional provisions are to be applied. to situations as they exist. The constitutionality of specific taxation is. _ , determined by the practical effect it.has upon existing conditions, not by -what effect it might mare if the tax- payer changed his business. | The point is perhaps best teeaana: out by examini ing seme of the equal protection cases decided by this court: 9, Stewart Dry Goods Co. v. Leitis (1935) 294 U.S. 550, 55 S.Ct. 525, 79 L.ed. 1054, involved a case where the State of Kentucky was enjoined from imposing a gross ‘sales tax wherein the rate of re- turn increased within established brackets. I could have been. argued that the Kentucky collee- tion schedule applied unifgrmly to every seller in thé State of Kentucky and‘that the partic ular ef- fects upon specific sellers was simply the result of their chosen method of doing business, just as ape - pellee does at page 10 of its motion. This court held, however, that the Kentucky Act taxed sales in an unequal and arbitrary way, classifying them for % 12/ the imposition of different rates without reference to any real or substantial distinction, and held the tax unconstitutional. ae City Cab Cor. Pennsylvania (1928) 277 U.S. 389. 48. S.Ct. 553, 72 L.ed. 927; involved a P ennsy Ivania tax upon the gross receipts of trans- portation companies, the tax being levied upon cor- porations but not upon individuals or partner- ships. Again the argument could have been made’ that the discriminatory effect upon the taxpayer resulted simply from the choice of doing business as a corporation. Such an argument would not -have made any more sense in the Pennsylvania Case than it does in thi§ one. Hartford Steam Boiler Inspection and Insur- ance Company v. Harrison (1937) 301 U.S, 459, 57 -§.Ct. 838, 81 L.ed. 1223, involved a statute which - provided that a salaried employee could not be. a licensed agent of any type of insurance company except a mutual insuranes company. If the argu- ment made by appellee in the case at bar were ap-- plied to the Hartford case@the appellee would say that there was no discrimination since the statute applied to all insurance conrpaniies and Hartford could change its method of doing business and ap-: point an agent who was not a salaried employee if “it wanted to avoid.the effect of the law. Of course, no such argument was made, or at least it was not mentioned in the decision holding the statute unr- constitugional as a violation of the equal protection clause. re ed | Louisville Gas & Electric Co. v. Coleman (1928) 277 U.S. 32, 48 S.Ct. 423, 72 L.ed. 770, involved the constitutionality of a tax on mortgages which shall. he lodged for record **where the indebtedness does not rr within five vears..."' It is to be neted aa, * that this tax applied to every mortgagor in the | State of Kentucky just as the. Washington collec- | tion schedule applies to every seller. Also its par- ticular effect depended entirely upon whether a mortgagor took a mortgage maturing in more or less than five years, just as the particular effect of the Washiugton tax measure. depends entirely upon whether a retailer sells for thirteen cents*”.- (13¢) or fourteen cents (14¢). Any particular mortgagor could avoid the tax by taking only mortgages maturing within five years, just as any particular Washington seller can avoid the tax here involved by selling higher priced items. This court did not tell the taxpayer that there was no constitutional violation because if it ‘wished it ‘ could limit its mortgages to five-year maturity periods, but held that a classification existed and - was arbitrary and, therefore, -_ the statute was unconstitutional. ‘The pr actical effect. of-the Washington Retail Sales Tax upon sellers of merchandise for one eent (1¢) to thirteen cents (13¢,), inclusive, is so drastically differ- ent from that upon other sellers that it seems to us that — there is no question but that the statute creates a dis- tinctive classification of sellers. The tax is imposed on each retail sale. RCW 82.08. 020, Each time a sale is made for fourteen cents (14¢) and over the seller thereof is required to collect the tax. RCW 82.08.059 and Ruling of the Washington Tax Commission Rela- tive to the Bracket System. Each time a sale is made for less than fourteen cents (14¢), the seller is prohib- . ited from collecting the tax. Ruling of the W ashington — Tax Commission Relative to the Bratket System. -Both | types of’sellers are required to pay an amount equiva- ~ 14 lent to three per cent (3%) of their gross sales to the state as tax. Opinion of the Washington Supreme Court (R. 75). This certainly creates a different effect upoy sellers, depending upon whether their sales are one side or the other of the 13¢-14¢ line: The tax incidence is upon the seller when he sells merchandise at less than . _ fourteen cents (14¢), whereas the tax incidence is on— the buyer when the seller sells merchandise at fourteen cents (14¢) or more. Surely as a practical matter this | taxing method creates a classification, 3 J B. Reasonableness of Classification ; In the last part of appellee’s argument supporting . the Motion to Dismiss or Affirm, the contention is made that the classification, if one exists, is reasonable so as to be a difference permitted by the equal protection clause of the Fourteenth Amendment. Appellee points out that the Constitution does not impose a rigid rule of equality of taxation upon a state, and this is readily _ acknowledged. However, appellee then takes the posi- tion that the collection schedule is reasonable because of administrative convenience and expense in the col- ° lection and measurement of the Washington Retail Sales Tax, and’ that this administrative convenience and expense is itself a sufficient justification for. the different tax t#atment imposed upon those who sell low-priced merchandise and those who sell high-priced articles. Appellants’ position is that the reasonable- ness of collecting a retail sales tax from buyers ’in ac cordance with a bracket system such as that existing in Washington, does not justify shifting’ the burden of, os oS | 15 the tax from buyers to a‘elass of sellers selling 1¢-13¢ — articles when there is no such shift to other sellers. It is reasonable for a collection schedule to have a minimum below which no tax .is collected. However, this does not justify shifting the tax burden.-It does . not do so in a number of states. In Florida, Maryland, ° Louisiana and West Virginia no one, buyer or seller, pays any sales tax on sales for small amounts ranging from 1¢:5¢ to 1¢-50¢, and in Mai Connecticut and North Carolina partial relief 6 previde sell articles at prices below the minimuin of the appli- eable collection schedule. The sae states work well and the same could easily be done in Washington. | Even though exactayuality is not attained by collect- ing the retail sales taa from buyers under a bracket sys- tem because of the breakage at the extremes of each bracket in the schedule, this'inequality does not cause a tax measure to be unconstitutional. It is the type of ad- ministrative convenience and expense justifying a dif- ference in tax treatment referred to in Carmichael v. : Southern ( Joal & Coke Co. (1937): 301 U.S. 495, 57 S.Ct. 868, 81 L.ed. 1245, and Madden v. Kentucky (1940) 309 U.S. 85, 60 S.Ct. 406, 84 L.ed. 590. In the Carmichael « _ease the constitutionality of an unemployment com- pensation tax statute. was challenged because, among other chings, it exempted employers of less than eight employees from the tax while imposing the tax on other employers. The law was held to be constitttional, but note that no shift in the tax burden was involvee. If the statute had imposed the tax on employers of eight or to those who x laws of -these @ 16 ; pale é inore employees and had shifted the tax to the employ- ees when the employer had less than eight employees, we believe that this court would have had no hesitancy in declaring that such a-shift in the incidence of the tax violated the equal protection clause as far as the taxed employees, were concerned since ‘employees of other employers would not be taxed. It is a similar shift of the tax burden which appellants claim causes - the’ tax involved in the case at bar to be unconstitu- tional. | | ‘he statements in the Car michael gaa Madden cases are perhaps more fully expressed -in the following words from Fernandez uv. Wiener (4945) 326 us , 340, 66 S.Ct. 178, 90. L. ed, 116, “Considerations of practical administrative con- venience and cost in the administration of tax laws afford adequate grounds for imposing a tax on a well recognized and defined class, without attempt- ing te extend it.so as’to embrace the penumbra of speciai and more or less casual interests which in each case may or may. not resemble the tax c ‘lass. * 326 U.S. 860, 90 L.ed. 133. Actually the cases referring to administrative eon- venience and cost of collection are only integrating the rule that strict equality of taxation is not necessary and the rule that a classification of taxpayers must be based on a real and substantial difference having a rea- sonable relation to the subject, of ‘the legislation. The constitutional objection to the tax measure now before . the court is not that the classification of sellers into those selling merchandise above and those seHing below the 13¢-14¢ line may involve instances of inequality in the administration of the tax, but that the Classifiea- ‘ 17 tion itself bears no > reasonable relationship to the pur- pose of the legislation, to-wit, that of raising revenue. . The situation is not unlike that in Louisville Gas: ‘& Electric Co. v. Coleman (1928) 277 U.S. 32, 48 S.Ct. 423, 72 L.ed. 770, where, in holding a ‘a ‘on recorded : mortgages not maturing within five years. s-to be uncon-* stittuional, the court said: “The applic ation. of the equal, protection clause | does not depend upon what name is given to the- tax. Whether the tax. now in question be called a privilege tax or a property tax, it falls in. effect upon one indebtedness and not upon another where the sum of each is the’same; where both are in- curred by, corporations or. both by natural persons; where the percentage of interest to be paid is the “same; where the mortgage security is identical in ~ all respects; where, in short, the only difference well may be that one is payable in sixty months, and the other in. fifty-nine months..No doubt the state may take into consideration as an element in fixing the amount of the tax the time within w hich. the indebtedness is to be paid; for, since the tax is a flat sum covering the entire life of the lien, the privilege of recording the short-time lien and that’ of recording the long-time lien have different tax- able values. But classification good for one pur- pose may be bad for another; and it does not fol- ~ low that because the state may classify for’ the. purpose of proportioning the tax, it may adopt the same classification to the end that. some shali bear ua burden of taxation from which others under cir- cumstances identical in all respects save in respect | of the matter of value, are entirely exempt. " 2T7i U.S. 38, 72 L.ed. 774. Appellants rec ognize that the unconstitutionality of 18 the Washington Retail Sales Tax is not without doubt. Neither appellants nor appellee would be before this Court if the:question was clear ¢ither way: One of the difficulties i is inherent in the issue itself sine e ’ “the equal protection clause ... is not susceptible of exact delimitation. Ne definite rule... wnih — - automatically will solve the question in spgcifie in- stances, can be formulated.” Louisville Gake Elec- trie Co. v. Coleman (1928) 277. U S. 32, 37, 48 S.Ct. 423, 72 L.ed. 770, 773. : However, it does seem quite clear that a substantial question. is presented when appellants submit that, -al- though the bracket system set‘up by the Washington Tax Commissitin may be a reasonablé method for. col- ‘leeting the retail sales tax from buyers, there does not exist a real and substantial difference having a reason- - able relation to the raising of revenue between sellers of merchandise for one cerit (1¢) to thirteen cents” (13¢), inclisive, and sellers of merchandise for fourteen cents (14¢) and more which justifies requiring all sellers. to pay three per cent (3°) of their gross sales to the state thus shitting the burden of the Washington Retail 7 Sales Tax from buyers to those who seil merchandise at prices below an arbitrary line draw nat fourteen cents (14¢). 1. 3 SUMMARY The invalidity of appellee's moto is highlighted by applying the ideas expressed in Stebbins v. Riley (1925) 268-U.S. 137, 45 S.Ct: 424, 69 Led. 884, to the situation. In the Stebbins case an inheritance tax act é of the State of California was attacked as unconstitu- tional. During the course of the opinion, it. was said : iy “The taxing statute°may ... make a classifica- tion for purposes of fixing the amount or iticidence of the tax, provided only that all persons. subjected ‘to such legislation within the .classification are - treated with equality, and provided further that. the classification itself be rested upon some ground of difference having a fair and ‘substantial rela- . tion to the object of the legislation.’ 268 U.S. 142, 69 L.ed.B88. : If there is no classification involved here as appe ‘Hee * contends and the Washington Retail Sales Tax applies uniformly to every seller in the State of W ashington, | all such sellers are-certainly not treated with equality. “Clearly” a “highty - inequitable Situation exists under - which sellers of tangible personal property at. retail _-for amounts between one cent (1¢) and thirteén cents (13¢), inelusive, bear the incidence of the retail sales tax whereas other sellers of tangible personal property at retail do not. On the other hand, if sellers of one cent- thirteen cents (1¢-13¢) merchandise .are separately classified, then whether the classification bears a rea- sonable relation to the production of revenue is cer- tainly a substantial question. It follows that appellee's Motion to Dismiss or Af- firm is without merit and should be denied. Respectfuly submitted, ~ $S. HaroLtp SHEFELMAN Ropert G. Moca - Attorneys for Appellants. 1612 Northern Life Tower, Seattle 1, Washington. --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385610_0983%3A3. Public record. Not legal advice.