Franks & Son, Inc. v. State

Sanders, J.

(dissenting) — The majority opinion rests on the fulcrum that a “regulatory fee” cannot violate the Commerce Clause absent further proof that it discriminatorily burdens interstate commerce in practical effect. I disagree. This fee discriminatorily burdens interstate commerce on its face.

Fee For Privilege To Use Roads Violates Commerce Clause

Fine, lawyer-like distinctions between taxes, flat taxes, user fees, and regulatory fees find no place in the text of the Commerce Clause which simply provides, “[C]ongress shall have power ... To regulate commerce . . . among the several States . . . .” U.S. Const. art. 1, § 8. The Supreme Court has summarized the purpose of the Commerce Clause to create “ ‘an area of trade free from interference by the States.’ ” American Trucking Assocs. v. Scheiner, 483 U.S. 266, 280, 107 S. Ct. 2829, 2838, 97 L. Ed. 2d 226 (1987) (citing Boston Stock Exch. v. State Tax Comm’n, 429 U.S. 318, 328, 97 S. Ct. 599, 606, 50 L. Ed. 2d 514 (1977)). Thus, even where Congress has declined to legislate, the Supreme Court has construed the language of the Commerce Clause to prohibit the erection of state barriers to interstate commerce by negative inference, known as the dormant Commerce Clause. Oklahoma Tax Comm’n v. Jefferson Lines, Inc., 514 U.S. 175, 179, 115 S. Ct. 1331, 131 L. Ed. 2d 261 (1995).

Whether we characterize this charge as a “tax” or a “regulatory fee” doesn’t matter in and of itself—only whether its measure places a heavier burden on interstate than intrastate activities, Scheiner, 483 U.S. at 281-82, thus granting a competitive advantage to local truckers at the expense of their interstate competitors. Therefore, the focus of inquiry must be whether the challenged imposition puts interstate commerce to a competitive disadvantage against local commerce.

It may be true this so-called regulatory fee is in a sense compensatory to the State for resources consumed by all fee payers; however, this particular fee is at most compensatory only in a global sense for the total cost of those programs funded by the fee, without distinction between the two subclasses of fee payers: local and interstate truckers. But it is upon that distinction which the Commerce Clause turns. Whether the characterization as a regulatory fee is meaningful for the purposes of determining if a local jurisdiction is levying a tax absent that statutory authority required by our State Constitution is, however, a different question than that posed by the Commerce Clause. Compare Covell v. City of Seattle, 127 Wn.2d 874, 905 P.2d 324 (1995), which held that a municipal fee for street improvements is a tax.

Under the Commerce Clause we must hypothesize the imposition of this fee to every state, to test it in one. This we call the “internal consistency” test. We need not consider the actual “adverse economic impact in dollars and cents upon a participant in interstate commerce for crossing a state boundary” to know such discrimination against interstate commerce exists. Scheiner, 483 U.S. at 283-84 n.15. See also Majority at 752 (“ ‘This test asks nothing about the degree of economic reality reflected by the tax, but simply looks to the structure of the tax at issue . . . .’ ”) (quoting Oklahoma Tax Comm’n v. Jefferson Lines, Inc., 514 U.S. 175, 185, 115 S. Ct. 1331, 131 L. Ed. 2d 261 (1995)).

Here, for example, we consider a $10.00 charge levied upon any truck for the privilege to operate within this State (RCW 81.80.300) plus a gross tonnage fee of up to $48.00 (RCW 81.80.320). The charge is fixed and flat regardless how many miles are driven, how many safety inspections are conducted, and, most importantly, regardless whether the truck is engaged in wholly intrastate or interstate commerce.¹ But the latter distinction must be made for reasons stated by Justice Frankfurter, whose dissenting language in Capitol Greyhound Lines v. Brice, 339 U.S. 542, 557, 70 S. Ct. 806, 94 L. Ed. 1053, 17 A.L.R.2d 407 (1950) (Frankfurter, J., dissenting) was relied upon by the majority in Scheiner:

So long as a State bases its tax on a relevant measure of actual road use, obviously both interstate and intrastate carriers pay according to the facilities in fact provided by the State. But a tax levied for the privilege of using roads, and not their actual use, may, in the normal course of operations and not as a fanciful hypothesis, involve an undue burden on interstate carriers. While the privilege extended by a State is unlimited in form, and thus theoretically the same for all vehicles, whether interstate or intrastate, the intrastate vehicle can and will exercise the privilege whenever it is in operation, while the interstate vehicle must necessarily forego the privilege some of the time simply because of its interstate character, i.e., because it operates in other States as well. In the general average of instances, the privilege is not as valuable to the interstate as to the intrastate carrier.

Capitol Greyhound Lines, 339 U.S. at 557 (Frankfurter, J., dissenting) {as quoted in Scheiner, 483 U.S. at 291). In Scheiner the Supreme Court struck down Pennsylvania’s flat-axle tax levied on each truck for the annual privilege of using Pennsylvania’s roads. Here we have a flat $10.00 fee plus a flat tonnage fee for the annual privilege to use Washington’s roads. In relevant principle they are indistinguishable, notwithstanding Pennsylvania called it a tax whereas our majority calls it a fee.

Applying this principle to our facts, the subject fee is not apportioned between “the several states” so as to insure that the interstate trucks will not pay more than the truck which is operated wholly within the boundaries of Washington if the scheme were generalized to other states. That is the constitutional problem. I disagree with the majority that a regulatory fee on the privilege to use the roads of a state need not be apportioned to survive constitutional scrutiny, at least when that fee is not based on the consumption of state resources by the actual payer of the fee.²

Consider, for example, the interstate trucker on a Boston to Seattle run. The total distance is 2,508 miles requiring travel through at least 11 different states. If each state charged a flat $10.00 fee for an annual road permit, plus a gross tonnage charge, the interstate trucker would pay $110.00 per year plus eleven times his applicable gross tonnage charge to ply his trade; whereas the truck which ran an equivalent gross number of miles wholly intrastate between Seattle and Spokane would pay but $10.00 total, plus but one gross tonnage charge. Necessarily the intrastate trucker would be at a competitive advantage to his interstate counterpart because his “regulatory fee” would be less than a tenth of that required of his competitor, although the interstate trucker’s use of Washington roads is considerably less. Such result discriminatorily burdens interstate commerce whether we call it a regulatory fee, a tax, or some other name.

That it also violates the Commerce Clause is not fairly debatable as “[i]f each State imposed flat taxes for the privilege of making commercial entrances into its territory, there is no conceivable doubt that commerce among the States would be deterred.” Scheiner, 483 U.S. at 284. This conclusion necessarily holds true no matter how each of the states spends the resulting revenue. Whether the money is placed in a trust fund for highway purposes or is spent on public education, the bottom line is interstate commerce is put to a competitive disadvantage. That is precisely what the Commerce Clause was enacted to prevent.

Although the aforementioned really disposes of the majority’s argument, we might go further to distinguish how a regulatory or user fee (or tax, for that matter) might pass Commerce Clause muster. Scheiner calls this “The User-Fee Defense” and discusses it in some detail. See Scheiner, 483 U.S. at 289-92. A “user fee” is the purest form of regulatory fee in that it is a fee levied to compensate the government for resources expended on a particular user’s behalf. A toll bridge fee might be an example, as would an airport service fee for the passenger’s use of airport facilities. See Evansville-Vanderburgh Airport Auth. Dist. v. Delta Airlines, Inc., 405 U.S. 707, 92 S. Ct. 1349, 31 L. Ed. 2d 620 (1972). Although these fees “burden” interstate commerce, they do not violate the Commerce Clause because, as Franks and Son, Inc., put it, “if every state assessed a transaction-based $1.00 ‘user fee’ for each passenger boarding a commercial aircraft operating from an airport within the state, no single boarding would be subject to more than one state’s fee.” Appellants’ Reply Br. at 15.

In the case at bar, however, the fee is for the privilege of using the roads, not the degree of actual use to which they are put. The fee is not based upon the consumption of State resources by the interstate trucker. If permitted, this fee can be multiplied as the truck crosses each state boundary without regard to the actual use of the road system “or with some other proxy for value obtained from the State.” Scheiner, 483 U.S. at 291. The conclusion must therefore necessarily follow that

when the measure of a tax bears no relationship to the taxpayers’ presence or activities in a State, a court may properly conclude under the fourth prong of the Complete Auto Transit [Inc. v. Brady, 430 U.S. 274, 279, 97 S. Ct. 1076, 51 L. Ed. 2d 326 (1977)] test that the State is imposing an undue burden on interstate commerce.

Scheiner, 483 U.S. at 291 (quoting Commonwealth Edison Co. v. Montana, 453 U.S. 609, 629, 101 S. Ct. 2946, 69 L. Ed. 2d 884 (1981)).

In the same sense that a broken clock is right twice a day, the flat $10.00 fee, plus the gross tonnage charge, may be compensatory to the State in a given case, or in the aggregate of all such fees paid by all truckers, intrastate and interstate; however, compensatory in that sense or not, it still discriminates against interstate commerce because the interstate trucker, by definition, pays the same amount for the privilege to use the state’s roads only part of the time, which the intrastate trucker pays to use the roads all of the time. This fee cannot be distinguished from the one held unconstitutional in Scheiner.

Refund Is the Proper Remedy

Although the majority found it unnecessary to reach the question of remedy, because it found no constitutional violation, I conclude once the violation is established a full refund is appropriate.

Were we to call the remedy for this current application of an established principle to new facts “retroactive,” then so be it as the United States Supreme Court has upheld such retroactive effect as the general rule, unless each of the following conditions to justify an exception is satisfied:

First, the decision to be applied nonretroactively must establish a new principle of law, either by overruling clear past precedent on which litigants may have relied, or by deciding an issue of first impression whose resolution was not clearly foreshadowed. Second, it has been stressed that “we must . . . weigh the merits and demerits in each case by looking to the prior history of the rule in question, its purpose and effect, and whether retrospective operation will further or retard its operation.” Finally, we have weighed the inequity imposed by retroactive application, for “[wjhere a decision of this Court could produce substantial inequitable results if applied retroactively, there is ample basis in our cases for avoiding the ‘injustice or hardship’ by a holding of nonretroactivity.”

Chevron Oil Co. v. Huson, 404 U.S. 97, 106-07, 92 S. Ct. 349, 30 L. Ed. 2d 296 (1971) (quoting Linkletter v. Walker, 381 U.S. 618, 629, 85 S. Ct. 1731, 14 L. Ed. 2d 601 (1965) and Cipriano v. City of Houma, 395 U.S. 701, 706, 89 S. Ct. 1897, 23 L. Ed. 2d 647 (1969)) (citations omitted).

Clearly the ruling, as I would posit it, finds its specific source by, at least, 1987 in the Scheiner case, and a refund of every payment subsequent to that date is appropriate without necessity of further discussion.

Alexander, J., concurs with Sanders, J.

1 The negative effect of the fee may be mitigated, but not eliminated, by single trip passes. The vice survives in principle as the charge is still for the privilege of using the roads, not the consumption of state resources in any quantitative sense.

2 The majority cites V-1 Oil Co. v. Utah State Dep’t of Pub. Safety, 131 F.3d 1415 (10th Cir. 1997) and Interstate Towing Ass’n v. City of Cincinnati, 6 F.3d 1154 (6th Cir. 1993) for the proposition that a regulatory fee need not be apportioned; however, each distinguishes Scheiner as a case which concerns the privilege of making commercial entrances into a state. In V-1 Oil the court observed, “The fees involved here are not assessed ‘for the privilege of making commercial entrances into’ the State.” V-1 Oil Co., 131 F.3d at 1426 (citing Scheiner, 483 U.S. at 284); whereas Interstate Towing similarly distinguished its facts from Scheiner as the fee at issue in Interstate Towing was “not charged for the privilege of using the City’s streets . . . .” Interstate Towing Ass’n, 6 F.3d at 1163. But the statute at issue here does exactly what V-l Oil and Interstate Towing claim as the basis to distinguish Scheiner as this fee was assessed as a condition precedent to commercial entrances into Washington.