Navigation Top
AGO Logo Graphic
AGO Header Image
File a Complaint
Contact the AGO
AGO 1961 No. 8 - February 02, 1961
AGO Opinion Header Image
John J. O'Connell | 1957-1968 | Attorney General of Washington

LEGISLATURE ‑- CONSTITUTIONALITY OF LAW AUTHORIZING CITIES TO IMPOSE SALES TAX ON UTILITY SERVICES.  USE OF FUNDS TO SUBSIDIZE CITY TRANSIT SYSTEMS

(1) Legislation would be constitutional which would authorize cities owning transit systems to impose a sales tax on sales of city-furnished utility services (water and electricity); the tax to be collected with the utility charge by the utility and placed in the proper fund to be used to subsidize the city transit.

(2) Where the city divided its utility charge into two parts, one a basic minimum charge and one a surcharge based upon the quantity of service used over the stated minimum, a sales tax would be constitutional which was imposed only on the basic minimum utility charge.

                                                              - - - - - - - - - - - - -

                                                                 February 2, 1961


Honorable Daniel J. Evans
Washington State Representative
Legislative Building
Olympia, Washington

                                                                                                                  Cite as:  AGO 61-62 No. 8

Dear Sir:

            You have requested an opinion of this office upon two questions which we paraphrase as follows:

            1.         Would legislation be constitutional which would authorize cities owning transit systems to impose a sales tax on sales of city-furnished utility services (water and electricity), the tax to be collected with the utility charge by the utility concerned, placed in the proper fund and used to subsidize the city transit system?

            2.         In the event the city divided its utility charge into two parts, one a basic minimum charge and one a surcharge based upon the quantity of service used by a customer over the stated minimum, could such a sales tax be constitutionally imposed only on the basic minimum utility charge?

            We answer both questions in the affirmative.

             [[Orig. Op. Page 2]]

                                                                     ANALYSIS

            Cities have no inherent taxing power, but such power can be conferred by the legislature to enable the municipality to impose taxes for corporate purposes.  Washington Constitution, Art. VII, sec. 9; Art. XI, sec. 12; Great Northern Railway Co. v. Glover, 194 Wash. 146, 77 P. (2d) 598 (1938);Pacific etc. Ass'n. v. Pierce County, 27 Wn. (2d) 347, 178 P. (2d) 351 (1947).  Clearly the operation of a city transit system would be for a corporate purpose.  RCW 80.40.060;Denman v. City of Tacoma, 170 Wash. 406, 16 P. (2d) 596 (1932).

            A sales tax is an excise tax and the supreme court has upheld the power of a municipality to impose a business and occupation excise tax under authority granted by the legislature.  Pacific Tel. & Tel. Co. v. City of Seattle, 172 Wash. 649, 21 P. (2d) 721 (1933);Puget Sound Power & Light Co. v. City of Seattle, 172 Wash. 668, 21 P. (2d) 727 (1933).  The latter case is also authority for the proposition that to classify municipal utilities differently from private utilities is reasonable.

            We should call attention to RCW 82.32.370 wherein the state has preempted the field of imposing taxes upon retail sales of tangible personal property.  This statute can, of course, be amended or repealed if the legislature sees fit.

            We find no constitutional provision which would prohibit the legislature from authorizing a city to impose a sales tax upon the sale of city-furnished water or electricity with direction that the revenue therefrom be devoted to the support of the city-owned transit system.  Such a tax would not be in violation of Article XI, sec. 12, of the State Constitution, which reads:

            "The legislature shall have no power to impose taxes upon counties, cities, towns, or other municipal corporations, or upon the inhabitants or property thereof, for county, city, town, or other municipal purposes, but may, by general laws, vest in the corporate authorities thereof, the power to assess and collect taxes for such purposes."

            The legislature would not be imposing the tax but authorizing the city to do so if it chooses.  Nor would the law, even if it provided for disposition of the funds, be unconstitutional.  In such a case the tax burden would be self-imposed by the city, and if the city desired the tax it would have to accept it with the restrictions on the use of the revenue.  Northern Pac. R. Co. v.  [[Orig. Op. Page 3]] Pierce County, 51 Wash. 12, 97 Pac. 1099, 23 L.R.A. (N.S.) 286 (1908); Hallahan v. Port Angeles, 161 Wash. 353, 297 Pac. 149 (1931).

            In answer to your second question, we can see no constitutional problem where the tax is imposed on sales measured by the minimum charge only.  All sales of water or electricity would be taxes upon the same basis.  All sellers or buyers similarly situated would be similarly treated.  White v. State, 49 Wn. (2d) 716, 306 P. (2d) 230 (1957), app. dis., 355 U.S. 10, 78 S.Ct. 23, 2 L.Ed.2d 21 (1957).

            We trust this information will be of assistance to you.

Very truly yours,

JOHN J. O'CONNELL
Attorney General

HENRY W. WAGER
Assistant Attorney General

Content Bottom Graphic
AGO Logo