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Bob Ferguson

AGO 1960 No. 97 -
Attorney General John J. O'Connell


(1) The right of a municipality to impose a business and occupation tax on a seller who has no business location in the taxing city but delivers goods sold to purchasers in the taxing city depends upon whether the seller is in fact engaging in business within the corporate limits of the city.

(2) No incorporated city of any class may require that commercial motor vehicles operating within the corporate limits of the city purchase a municipal motor vehicle license.

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                                                                 January 19, 1960

Honorable A. B. Comfort
State Representative, 26th District
4125 North 39th
Tacoma, Washington                                                                                             Cite as:  AGO 59-60 No. 97

Dear Sir:

            By letter previously acknowledged you requested an opinion of this office on two questions which we paraphrase as follows:

            1.  May an incorporated city of the first, second, third or fourth class impose upon a seller a business and occupation tax for the privilege of engaging in business as a wholesaler or retailer, when the seller has no business location in the taxing city but delivers the goods sold to purchasers in the taxing city and when the seller in question has his principal place of business in a second city where he has reported and paid a business and occupation tax on the gross volume of business about to be included in a second tax base by the city in which delivery is made?

            2.  May an incorporated city of the first, second, third or fourth class require that commercial motor vehicles, operating within the corporate limits of such a city, purchase a municipal motor vehicle license?

             [[Orig. Op. Page 2]]

            We answer question No. 1 as explained in the analysis, and question No. 2 in the negative.


            Article XI, § 12, of the Washington State Constitution provides:

            "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."  (Emphasis supplied)

            Pursuant to the authority conferred upon it by this constitutional provision, the Washington state legislature has granted to cities of the first, second, third and fourth class the power to impose a business and occupation tax.  See RCW 35.22.570, 35.23.440 (9), 35.24.290 (7), and 35.27.270 (9).  It is well settled that the above statutes do in fact confer upon cities the right to levy a municipal business and occupation tax,Pacific Telephone and Telegraph Co. v. Seattle, 172 Wash. 649, 21 P. (2d) 721 (1933).

            Your letter suggests that you are especially concerned with the problem created by allowing more than one municipality to levy a tax on the same business transaction.  Specifically, you have cited the example of a wholesaler who maintains his principal place of business in Tacoma, and is required to pay a state business and occupation tax, a Tacoma business and occupation tax and a business and occupation tax in every city where he makes deliveries.

            As heretofore indicated, there can be no dispute concerning the basic premise that the state of Washington has granted to municipalities the right to impose a business and occupation tax.  In any given instance the right of a municipality to exercise this grant of authority will depend on whether the commercial enterprise that the city seeks to tax is in factengaging in business within the corporate limits of the city.

            What constitutes "doing business" or "engaging in business" involves a difficult area of law.  See for examplePee Dee Chair Co. v. City of Camden, 165 S.C. 86, 162 S.E. 771 (1932);Crosswell & Co. v. Town of Bishopville, 172 S.C. 26, 172 S.E. 698 (1934);International Shoe Co. v. Washington, 326 U.S. 310, 66 S.Ct. 154, 161 A.L.R. 1057, 90 L.Ed. 95 (1945); Thys v. State, 31 Wn. (2d) 739, 199 P. (2d) 68 (1948);Norton Co. v. Dept. of Revenue, 340 U.S. 534, 71 S.Ct. 377, 95 L.Ed. 517 (1950);B. F. Goodrich Co. v. State, 38 Wn. (2d) 663, 231 P. (2d) 325 (1951), cert. den. 72 S.Ct. 167, 342 U.S. 876, 96 L.Ed. 659;Stone v. Stapling Machines Co., 220 Miss. 470, 71 So. (2d) 205 (1954);  [[Orig. Op. Page 3]] Field Enterprises, Inc. v. State of Wash., 352 U.S. 806, 77 S.Ct. 55, 1 L.Ed. (2d) 39 (1956).  The legal questions involved naturally turn upon the facts of each individual case making it so difficult to generalize that it is impractical for us to rule specifically on the question you have raised.

            InCrosswell & Co. v. Town of Bishopville, 172 S.C. 26, 172 S.E. 698 (1934), the court sustained the right of the Town of Bishopville to levy a business and occupation tax upon a wholesaler whose principal place of business was located outside of Bishopville and whose only business activity in Bishopville consisted of making two deliveries a week to that town.  In reaching this decision, the court referred to the earlier case of Pee Dee Chair Co. v. City of Camden, 165 S.C. 86, 162 S.E. 771 (1932) wherein it was said:

            "It is not always an easy matter to give a satisfactory definition of 'business' or 'occupation,' as used in a statute or ordinance like the one before us, but the terms ordinarily carry with them some idea of custom or continuity as opposed to an isolated or sporadic act."

            In that particular case it was held that one isolated delivery into a town did not constitute "doing business" in that town.  However, the implication of the court's holding was that regular deliveries would satisfy the "doing business" criterion.

            The procedure by which two cities claim the right to tax a business entity doing business in both places does not amount to unconstitutional "double taxation."  1 Cooley, Taxation, § 46 at 132 (4th ed.).  Supply Laundry v. Jenner, 178 Wash. 72, 34 P. (2d) 363 (1934).  It is not objectionable double taxation for two different political entities that have jurisdiction over a given business to impose a tax upon the privilege of engaging in business within the taxing jurisdictions.  See 83 C.J.S. 139-141, Taxation, § 43.

            Finally, with respect to your first question, you have indicated an interest in possible legislative action to limit or eliminate "overlap" of municipal business and occupation taxes.

            It will be noted also that Olympia and Tacoma business taxes provide a basis for apportionment of taxes for taxpayers maintaining places of business within and without the city.  These provisions, substantially identical in form, are typified by sec. 6 of the Olympia ordinance which provides as follows:

            "Persons maintaining a place of business in the City and not elsewhere are taxable on gross income from  [[Orig. Op. Page 4]] business regardless of where services are rendered; if office is maintained in City and also elsewhere, an apportionment is made to City of services rendered in City; where apportionment cannot be made by separate accounting, then it shall be made by apportionment of basis of cost of doing business within the City to cost of doing business within and without the City."

            On the basis of the foregoing provisions of both the Olympia and Tacoma tax ordinances, a method has been provided by the city councils of both cities to avoid duplication of the tax; that is to say, that a wholesale transaction consummated by the taxpayer whose principal place of business is in Tacoma should be taxed by only one and not by both cities.

            Possible additional control of the situation through legislative action by the state legislature might include:

            (1) The legislature may abolish certain powers of municipal corporations to levy taxes; or

            (2) The legislature may define the minimum activity necessary for a firm's activities to constitute "doing business."  Thus, as in California and Illinois, the situs of sales for sales or use tax purposes is defined as the place of seller's business.

            (2) We turn now to the question of whether a municipality has authority to require purchase of a city vehicle license as a condition precedent to operation of commercial vehicles from points outside a city to points inside a municipality of the first, second, third or fourth class.

            This question is to be answered in the negative.

            As we have indicated in the discussion hereinabove, the legislature has the authority to grant to municipal corporations various powers.  Thus RCW 35.22.280, 35.23.440, 35.24.270 and 35.27.370 (granting powers to first, second, third and fourth class municipalities respectively) were enacted accordingly.

            RCW 35.22.280 in pertinent part provides authority to first (and certain second) class cities:

             [[Orig. Op. Page 5]]

            "(33) To grant licenses for any lawful purpose, and to fix by ordinance the amount to be paid therefor, and to provide for revoking the same:  Provided, That no license shall be granted to continue for longer than one year from the date thereof;"

            A license fee is the sum exacted for the privilege of carrying on a particular operation or business, and it may be imposed either for purposes of regulation under the police power or for revenue purposes under the taxing power, or for both regulation and revenue.  37 C.J. 168, Licenses, § 3, 4, 5; 33 Am.Jur. 325, Licenses, § 2.  It is well established that since municipalities have the power to regulate the use of their streets pursuant to their police power (Article XI, § 11), they may enact reasonable rules and regulations controlling the operation of motor vehicles within their limits, so long as they are not in conflict with, or repugnant to, state legislative enactments governing the use of such vehicles.  5 Am.Jur. 568, Automobiles, § 94;Schoenfeld v. City of Seattle, 265 Fed. 726 (1920).  Thus, a city,in the absence of express or implied restrictions imposed by the legislature, may require a license as a condition of vehicular movement within its limits.  People v. Schneider, 139 Mich. 673, 103 N.W. 172 (1905).

           However, RCW 46.08.010 of the motor vehicle code provides:

            "The provisions of this title relating to certificates of ownership, certificates of license registration, vehicle licenses, vehicle license plates and vehicle operator's licenses shall be exclusive and no political subdivision of the state shall require or issue any licenses or certificates for the same or a similar purpose, nor shall any city or town in this state impose a tax, license, or other fee upon vehicles operatingexclusively between points outside of such city or town limits and points therein."  [1937 c 188 sec 75] (Emphasis supplied)

            By this statute the state has preempted the field of licensing any motor vehicle covered by the act which operates "exclusively between points outside of such city or town limits and points therein," since the state has already licensed such vehicles for "the same or a similar purpose."  For cases holding that statutes similar to RCW 46.08.010 prohibit licensing of motor vehicles by municipalities, seeKelly v. James, 37 S.D. 272, 157 N.W. 990 (1916);Daily v. City of Ownesboro, 257 Ky. 281, 77 S.W. (2d) 939 (1934);City of Pineville v. Meeks, 254 Ky. 167, 71 S.W. (2d) 33 (1934);People v. Willert, 37 Cal.App. Supp. (2d) 729,  [[Orig. Op. Page 6]] 93 P. (2d) 872 (1939);Payne v. Massey, 145 Tex. 237, 196 S.W. (2d) 493 (1946);City of Memphis v. Yellow Cab, Inc., 201 Tenn. 71, 296 S.W. (2d) 864 (1956); 9 McQuillan 385, Municipal Corporations (3rd ed.) § 26.160.

            We trust the foregoing will be of some assistance to you.

Very truly yours,

Attorney General

Deputy Assistant
Attorney General