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Bob Ferguson

AGO 1951 No. 469 -
Attorney General Smith Troy


A city may impose a tax for general revenue purposes upon employers based on payrolls for persons employed within the city.

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                                                                  March 12, 1951

Honorable Donald H. Webster
Director of Bureau of Governmental Research
University of Washington
Seattle, Washington                                                                                                 Cite as:  AGO 49-51 No. 469

Dear Sir:

            You have requested our opinion on the following question:

            May a city impose a tax for revenue purposes based on a flat percentage of the payrolls of persons employed within the city?

            Our conclusion is as follows:

            A city may impose a tax for general revenue purposes upon employers based on payrolls for persons employed within the city.


            Inasmuch as you have not furnished us with any existing or proposed taxing ordinance, we are greatly handicapped in passing upon the validity of such a tax.  We must restrict our discussion to the general principles involved in taxation by municipalities, and particularly as to whether a tax for general revenue purposes may be measured by that portion of a business firm's payroll attributable to employees working within the city.  We need not be concerned with the power of cities and towns to impose license taxes for revenue, the existence of such a power having long since been established by statute and upheld by the courts.  Pacific Telephone and Telegraph Co.  [[Orig. Op. Page 2]] v. Seattle,  172 Wash. 649, 21 P. (2d) 721, and cases cited therein at page 653.  The aforementioned case further provides that the state had not preempted the field of imposing excises as licenses to do business.

            A possible objection to such a taxing ordinance is that payrolls as a measure of such an excise could be held to be unreasonable and unrelated to the privileges enjoyed.  On the matter of reasonableness, our court in the Pacific Telephone & Telegraph case, supra, said:

            "But whether a tax is reasonable is primarily a legislative problem, and the courts will not hold a tax invalid on the ground that it is oppressive or confiscatory, unless there is a clear abuse of the power conferred."

            We think that all objections to a tax measured by payrolls, even where the revenue is used for general purposes, have been laid to rest by the Supreme Court of the United States inCarmichael v. Southern Coal Co., 301 U.S. 495, andSteward Machine Co. v. Davis, 301 U.S. 548.  See also: Ex Parte Sisto Li Protti, 68 Cal. 655, 10 Pac. 113;City of San Mateo v. Mullin, 59 Cal. App. (2d) 652, 139 P. (2d) 351;Ferran v. City of Palo Alto, 50 Cal. App. (2d) 374.  122 P. (2d) 965.

            It is our opinion that a city may, under its power to license for revenue purposes, impose a tax upon those employers within its borders measured by its payroll for persons employed within the city.

Very truly yours,

Attorney General

Assistant Attorney General