77 Wn.2d 923, WASHINGTON TELEPHONE COMPANY, Respondent, v. THE STATE OF WASHINGTON , Appellant

[No. 40162. En Banc.      Supreme Court      April 30, 1970 .]

WASHINGTON TELEPHONE COMPANY, Respondent, v. THE STATE OF WASHINGTON , Appellant.«*»
          

[1] Taxation - Commerce - Tax on Interstate Commerce - Scope of Commerce Clause. Even though a business activity involves interstate commerce, it is not entitled to a "tax sanctuary" from which it can operate with a tax advantage over intrastate business.

[2] Telecommunication - Commerce - Interstate Commerce - Telephone Calls Originating Within State. The activities of a telephone company in handling messages with out-of-state destinations through connection with carriers in other states constitutes interstate commerce, even though the company does not own communications facilities crossing state lines.

[3] Taxation - Commerce - Tax on Interstate Commerce - Power of State. The primary considerations for determining a state's power to tax interstate commerce are whether the tax places an extra burden on interstate commerce, or erects barriers, placing out-ofstate businesses at a disadvantage when competing locally; and whether the interstate commerce involved is subject to the risk of repeated exactions of the same nature from other states.

[4] Telecommunications - Taxation - Public Utilities Tax - Earnings From Relay of Communications. Earnings derived from the transmittal of communications passing in interstate commerce on equipment located within the state are subject to the public utilities tax levied pursuant to RCW 82.16.020.

Appeal from a judgment of the Superior Court for Thurston County , No. 37194, Charles T. Wright, J., entered December 18, 1967 . Reversed.

Action to recover taxes paid. Defendant appeals from a judgment in favor of the plaintiff.

The Attorney General, Henry W. Wager and Timothy R. Malone, Assistants, for appellant.

F. W. Durnan (of LeCocq, Simonarson & Durnan), for respondent.

WEAVER, J. -

This is an action to recover from the State of Washington $14,864.21, plus interest, the amount of public utility tax levied and paid pursuant to

«*» Reported in 468 P.2d 687.

[3] See 51 Am. Jur., Taxation (1st ed. §§ 212-214).

 924    WASHINGTON TEL. CO. v. STATE     [77 Wn.2d 923

RCW 82.16.020.«1» The trial court entered judgment for plaintiff; the state appeals.

The sole question presented is whether the State of Washington may tax constitutionally plaintiff's gross receipts earned by transmitting interstate communications for the United States Air Force. The amount of the tax involved is the result of a state audit covering a 41/4-year period.

Plaintiff, a Washington corporation operating primarily in Whatcom County , is a public utility engaged in furnishing telephone service to the public.

Plaintiff has several contracts to furnish to the United States Air Force at its station at Blaine , Washington certain communication facilities composed primarily of circuitry and switching gear. Plaintiff's facilities are incorporated into the air force communication system as special equipment not furnished to commercial subscribers. This equipment is integrated with the air force equipment for use in the Semi-automatic Ground Environment system (SAGE) and the Ground Air Transmission system (GATR).

The Blaine air force station transmits information to and receives messages from aircraft deployed in the air defense program. Communications take three forms: radar, voice contact, and computer data. Transmissions rarely originate or terminate at the Blaine station; the messages are usually relayed to and from other air force bases throughout the country.

Plaintiff's equipment is quite sophisticated and primarily automatic; it converts the frequency of the air force messages to telephone frequency and sends the messages to their destination upon telephone circuits of other companies. Plaintiff's employees maintain, control, and repair the

«1» RCW 82.16.020. "There is levied and there shall be collected from every person a tax for the act or privilege of engaging within this state in any one or more of the businesses herein mentioned. The tax shall be equal to the gross income of the business, multiplied by the rate set out after the business, as follows:

"(1) Railroad, express, railroad car, water distribution, light and power, telephone and telegraph businesses: Three and six-tenths percent; . . ." (Italics ours.)