A statute of Washington taxing the use of chattels in that state is assailed in this suit as a violation of the commerce clause (Constitution of the United States, art. 1, § 8) in so far as the tax is applicable to chattels purchased in another state and used in Washington thereafter.
Plaintiffs (appellees in this court) are engaged either as contractors or as subcontractors in the construction of the Grand Coulee Dam on the Columbia river. In the performance of that work they have brought into the state of Washington machinery, materials, and supplies, such as locomotives, cars, conveyors, pumps, and trestle steel, which were bought at retail in other states. The cost of all the articles with transportation expenses added was $921,189.34. Defendants, the Tax Commission of Washington (appellants in this court) gave notice that plaintiffs had become subject through the use of this property to a tax of $18,423.78, 2 per cent. of the cost, and made demand for payment. A District Court of three judges, organized in accordance with section 266 of the Judicial Code (28 U.S.C. § 380 (28 U.S.C.A. § 380)), adjudged the statute void upon its face, and granted an interlocutory injunction, one judge dissenting. 15 F.Supp. 958. The case is here upon appeal. 28 U.S.C. § 380 (28 U.S.C.A. § 380).
Chapter 180, page 706 of the Laws of Washington for the year 1935, consisting of twenty titles, lays a multitude of excise taxes on occupations and activities. Only two of these taxes are important for the purposes of the case at hand, the 'tax on retail sales,' imposed by title 3, and the 'compensating tax,' imposed by title 4 on the privilege of use. Title 3 provides that after May 1, 1935, every retail sale in Washington, with a few enumerated exceptions, shall be subject to a tax of 2 per cent. of the selling price. Title 4, with the heading 'compensating tax,' provides (sections 31, 35) that there shall be collected from every person in the state 'a tax or excise for the privilege of using within this state any article of tangible personal property purchased subsequent to April 30, 1935,' at the rate of 2 per cent. of the purchase price, including in such price the cost of transportation from the place where the article was purchased. If those provisions stood alone, they would mean that retail buyers within the state would have to pay a double tax, 2 per cent. upon the sale and 2 per cent. upon the use. Relief from such a burden is provided in another section (section 32) which qualifies the use tax by allowing four exceptions. Only two of these exceptions (b and c) call for mention at this time. Subdivision (b) provides that the use tax shall not be laid unless the property has been bought at retail. Subdivision (c) provides that the tax shall nto apply to the 'use of any article of tangible personal property the sale or use of which has already been subjected to a tax equal to or in excess of that imposed by this title whether under the laws of this state or of some other state of the United States.' If the rate of such other tax is less than 2 per cent., the exemption is not to be complete (section 33), but in such circumstances the rate is to be measured by the difference.