B-142864, AUG. 2, 1960

B-142864: Aug 2, 1960

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WHICH WAS FORWARDED HERE BY YOUR OFFICE READS IN PART AS FOLLOWS: "IN ANSWER TO YOUR SPECIFIC QUESTION LET US SAY THAT THE LEGAL INCIDENCE OF THIS CITY TAX IS ON THE TELEPHONE COMPANY AND NOT ON THE SUBSCRIBER - IN YOUR CASE. "TO REMOVE THE ELEMENT OF DISCRIMINATION BETWEEN OR AMONG LOCALITIES CAUSED BY THE FACT THAT SUCH OCCUPATION TAXES ARE IMPOSED ON THE COMPANY AT DIFFERENCE RATES BY CITIES IN THIS STATE (AND NO SUCH TAXES ARE IMPOSED IN UNINCORPORATED AREAS). THE STATE UTILITY REGULATORY BODY (WASHINGTON PUBLIC SERVICE COMMISSION) AUTHORIZED THE COMPANY TO PASS ON TO THE SUBSCRIBERS LOCATED IN A MUNICIPALITY THE EFFECT OF THE OCCUPATION TAX IMPOSED BY THE MUNICIPALITY. * * * THE PASSING-ON OF THE EFFECT OF THESE TAXES IS ACCOMPLISHED BY APPROPRIATE PROVISIONS IN THE COMPANY'S FILED TARIFFS FIXING THE RATES FOR TELEPHONE SERVICE.

B-142864, AUG. 2, 1960

TO DIRECTOR, ADMINISTRATIVE OFFICE OF THE UNITED STATES COURTS:

ON MAY 9, 1960, YOUR SERVICE OFFICER REQUESTED OUR DECISION AS TO THE PROPRIETY OF PAYING FOR TELEPHONE SERVICE FURNISHED THE CLERK OF THE U.S. DISTRICT COURT, TACOMA, WASHINGTON, AT RATES WHICH INCLUDE AN 8 PERCENT CITY TAX.

A LETTER FROM MCNICKEN, RUPP AND SCHWEPPE, ATTORNEYS FOR PACIFIC TELEPHONE-NORTHWEST, DATED JULY 25, 1960, WHICH WAS FORWARDED HERE BY YOUR OFFICE READS IN PART AS FOLLOWS:

"IN ANSWER TO YOUR SPECIFIC QUESTION LET US SAY THAT THE LEGAL INCIDENCE OF THIS CITY TAX IS ON THE TELEPHONE COMPANY AND NOT ON THE SUBSCRIBER - IN YOUR CASE, THE UNITED STATES. TACOMA ORDINANCE NO. 12,200, AS AMENDED, IMPOSES (SEC. 5 (A) ):

"UPON EVERY PERSON ENGAGED IN CARRYING ON A TELEPHONE BUSINESS, A FEE OR TAX EQUAL TO EIGHT PERCENT (8 PERCENT) OF THE TOTAL GROSS INCOME FROM SUCH BUSINESS IN THE CITY * * * .'

"TO REMOVE THE ELEMENT OF DISCRIMINATION BETWEEN OR AMONG LOCALITIES CAUSED BY THE FACT THAT SUCH OCCUPATION TAXES ARE IMPOSED ON THE COMPANY AT DIFFERENCE RATES BY CITIES IN THIS STATE (AND NO SUCH TAXES ARE IMPOSED IN UNINCORPORATED AREAS), THE STATE UTILITY REGULATORY BODY (WASHINGTON PUBLIC SERVICE COMMISSION) AUTHORIZED THE COMPANY TO PASS ON TO THE SUBSCRIBERS LOCATED IN A MUNICIPALITY THE EFFECT OF THE OCCUPATION TAX IMPOSED BY THE MUNICIPALITY. * * * THE PASSING-ON OF THE EFFECT OF THESE TAXES IS ACCOMPLISHED BY APPROPRIATE PROVISIONS IN THE COMPANY'S FILED TARIFFS FIXING THE RATES FOR TELEPHONE SERVICE, AND THE MONEY SO COLLECTED IS A PART OF THE COMPANY'S REVENUES FROM THE FURNISHING OF TELEPHONE SERVICE.'

IT IS READILY APPARENT FROM THE LANGUAGE OF THE ABOVE-QUOTED ORDINANCE THAT THE LEGAL INCIDENCE OF THE TAX IS ON THE VENDOR AND NOT ON THE VENDEE. IN SUCH CASE, THE CONSTITUTIONAL PRINCIPLE UNDER WHICH THE FEDERAL GOVERNMENT IS IMMUNE TO STATE TAXATION IS NOT FOR APPLICATION. COMP. GEN. 453; 32 ID. 423; 24 ID. 150. FURTHERMORE, THE STATE OF WASHINGTON UTILITY REGULATORY BODY HAS THE POWER TO AUTHORIZE THE TELEPHONE COMPANY TO PASS ON TO SUBSCRIBERS LOCATED IN A MUNICIPALITY THE EFFECT OF AN OCCUPATION TAX IMPOSED BY THE MUNICIPALITY. STATE V. DEPARTMENT OF PUBLIC SERVICE, 142 P.2D498; STATE V. DEPARTMENT OF PUBLIC UTILITIES, 207 P.2D 712.

MOREOVER, IN 32 COMP. GEN. 577, ON THE BASIS OF THE WELL-ESTABLISHED RULE THAT RATES FIXED BY A CONTRACT BETWEEN A PUBLIC UTILITY AND A PATRON ARE NEVERTHELESS SUBJECT TO LEGISLATIVE REGULATION AND ARE SUPERSEDED BY A SCHEDULE OF RATES PRESCRIBED BY THE LEGISLATURE OR A COMMISSION TO WHICH IT HAS DELEGATED ITS REGULATORY AUTHORITY, WE HELD THAT A CITY FRANCHISE TAX WHICH SUCH A COMMISSION HAD DETERMINED TO BE A PROPER OPERATING EXPENSE COULD BE INCLUDED IN UTILITY CHARGES PAID BY THE GOVERNMENT. SEE ALSO B-74147, APRIL 14, 1948.

ACCORDINGLY, WE CONCLUDE THAT THE CLERK OF THE U.S. DISTRICT COURT, TACOMA, WASHINGTON, MAY PROPERLY BE BILLED FOR TELEPHONE SERVICE AT RATES WHICH INCLUDE THE CITY TAX IN QUESTION.