SANDERS, J. (dissenting)

While the majority asserts "[t]he time has come for this litigation to end" (Majority at 29), the time this matter should end is the time our state respects the constitutional rights of its taxpayers and the time this court provides an adequate remedy for those whose rights have been violated. Unfortunately, that time has yet to come.

At their core the facts are relatively simple: we have an unapportioned business and occupation tax on gross receipts which, at least prior to the effective date of its amendment on August 11, 1987, violated the interstate commerce clause. Quite understandably the government wants to keep the moneys collected from this unconstitutional tax; in fact it wants to collect even more! Less understandably this court will not put a stop to it.

The question may be divided into two parts: the appropriate remedy due interstate taxpayers for preamendment taxes alleged due but unpaid and/or actually paid; and whether the 1987 amendment effectively cured the commerce clause deficiency so as to eliminate the necessity to provide a remedy for post-1987 tax periods.

I submit proper resolution of this case depends entirely on the nature and effect of the 1987 amendatory act (hereinafter "1987 act"), for existing state statutes clearly provide (1) the State may not lawfully require payment of an unconstitutional tax; (2) collection of an unconstitutional tax may be enjoined; and (3) unconstitutional taxes actually paid must be refunded.

I fundamentally differ with my colleagues in a number of respects:

First, the multiple activities tax credit provision in the 1987 act does not establish any obligation to pay any portion of the unconstitutional tax against which the credit may apply. Second, the 1987 act is prospectively effective from August 11, 1987, not retroactive to the beginning of time. Notwithstanding the expressed legislative intention set forth in section 3 of the 1987 act to restrict taxpayer remedies for prior tax periods to credits only, section 3 does not retroactively amend the substance of the preexisting B O tax. Therefore the constitutional deficiency is not retroactively cured even if we assume a retroactive amendment could ever resurrect an unconstitutional statute.

Third, this legislative effort to deny taxpayers their clearly defined preexisting statutory remedies against payment or refund of an unconstitutional tax deprives those taxpayers their property absent that process due by not only denying them a "clear and certain remedy" for the deprivation but also employing an unconstitutional "bait and switch" tactic.

Fourth, the 1987 act's tax credit scheme unconstitutionally discriminates against interstate commerce because tax credits for interstate business are nearly impossible to prove in practice; and the imposition of such a burden of proof, which depends on the tax laws of other states, is unconstitutional in theory.

Fifth, the Washington B O tax, a tax on gross receipts, violates the commerce clause on its face because it is not apportioned to in-state value-producing activity, but taxes out-of-state activity as well. Assuming even one of the aforementioned disagreements with the majority is well founded in fact and law, these taxpayers are entitled to the full measure of the relief they request, not a farthing less.

Section 3 of the amendatory act provides:

If it is determined by a court of competent jurisdiction, in a judgment not subject to review, that relief is appropriate for any tax reporting periods before the effective date of this act, in respect to RCW 82.04.440 as it existed before the effective date of this act, it is the intent of the legislature that the credits provided in RCW 82.04.440 as amended by section 2 of this act shall be applied to such reporting periods and that relief for such periods be limited to the granting of such credits.

Laws of 1987, 2d Ex. Sess., ch. 3, sec. 3 (emphasis added).

Section 3's reference to "the credits provided in RCW 82.04.440 as amended by section 2 of this act" is a scheme of multiple activities tax credits (MATC) whereby interstate taxpayers may credit qualifying taxes paid in other jurisdictions against their Washington B O tax obligation, provided: "The amount of the credit shall not exceed the tax liability arising under this chapter with respect to the sale . . . manufacturing . . . [or] extraction . . . of those products." RCW 82.04.440(2), (3), (4). This statute implements a garden variety tax credit scheme where it is first necessary to establish and compute the tax liability before that liability can be reduced by setting off available credits.

Plainly section 3 of the 1987 act is not inconsistent on its face with the assertion by interstate taxpayers that there are no taxes lawfully due for the pre-August 11, 1987 tax periods, regardless whether these taxpayers are entitled to apply any statutory tax credits. Axiomatically if no taxes are due for any tax period in question proceedings to establish or contest the availability of a credit against a $0 tax obligation are a waste of time for all concerned.

I posit there is indeed no such tax obligation because (1) the 1987 preamendment tax was found unconstitutional in Tyler Pipe Indus., Inc. v. Washington State Dep't of Revenue, 483 U.S. 232, 107 S.Ct. 2810, 97 L.Ed.2d 199 (1987); (2) Tyler Pipe, as concedes the majority, applies retroactively (Majority at 593); (3) the 1987 act does not retroactively amend the substance of preexisting tax law; and (4) any unconstitutional statute, including a taxing statute, is invalid.

The first two points are self-evident and/or conceded by the majority. The third point will be discussed in the next section. I would have assumed the fourth point is also self-evident but for the fact the majority has engaged in such a complex analysis to reach a result favorable to the state tax collector. Therefore let us repair to those fundamentals of statutory invalidity to test the majority's conclusion that one may be compelled to pay an unconstitutional tax.

It was no less than Chief Justice John Marshall who observed, "[A]n act of the legislature, repugnant to the constitution, is void." Marbury v. Madison, 5 U.S. 137, 176, 1 Cranch 137, 2 L.Ed. 60 (1803). Were it necessary to find further justification for the Chief Justice, Alexander Hamilton provided exactly that in Federalist No. 78 wherein he opined, prior to the ratification of our national character:

No legislative act therefore contrary to the constitution can be valid. To deny this would be to affirm that the deputy is greater than his principal; that the servant is above his master; that the representatives of the people are superior to the people themselves; that men acting by virtue of powers may do not only what their powers do not authorise, but what they forbid.

The Federalist No. 78 (Alexander Hamilton) (May 28, 1788), reprinted in The Federalist Papers by Alexander Hamilton, James Madison, and John Jay 395-96 (Garry Wills ed., 1982).

Later judicial generations have also pledged their fidelity to this principle. In Norton v. Shelby County, 118 U.S. 425, 6 S.Ct. 1121, 30 L.Ed. 178 (1886), for example, the United States Supreme Court repeated

An unconstitutional act is not a law; it confers no rights; it imposes no duties; it affords no protection; it creates no office; it is, in legal contemplation, as inoperative as though it had never been passed.

Id. at 442. And our court is in accord. See, e.g., Drum v. University Place Water Dist., 144 Wn. 585, 258 P. 505 (1927), aff'd, 147 Wn. 699, 266 P. 1056 (1928); Boeing Co. v. State, 74 Wn.2d 82, 88, 442 P.2d 970 (1968) ("It is the rule [under Washington law] that an invalid statute is a nullity. It is as inoperative as if it had never been passed."); City of Seattle v. Grundy, 86 Wn.2d 49, 50, 541 P.2d 994 (1975) ("A statute or ordinance which is void as being in conflict with a prohibition contained in the constitution is of no force and effect."). See also 16A Am. Jur. 2d Constitutional Law sec. 203 (1998) ("[A]n unconstitutional law, in legal contemplation, is as inoperative as if it had never been passed and never existed.") (footnotes omitted).

Notwithstanding this weighty authority in support of what lesser minds might conclude to be a simple truth, the majority responds that "controlling law on this issue is found in a more recent United States Supreme Court precedent." Majority at 17 (citing McKesson Corp. v. Division of Alcoholic Beverages Tobacco, 496 U.S. 18, 110 S.Ct. 2238, 110 L.Ed.2d 17 (1990), as well as Associated Indus. v. Lohman, 511 U.S. 641, 114 S.Ct. 1815, 128 L.Ed.2d 639 (1994), and Reynoldsville Casket Co. v. Hyde, 514 U.S. 749, 755, 115 S.Ct. 1745, 1750, 131 L.Ed.2d 820 (1995)). However on closer inspection of this "more recent" authority it is apparent the United States Supreme Court has not turned its back on the Fathers but merely recognizes, under constitutionally limited circumstances, (1) a legislature may retroactively amend an otherwise unconstitutional statute so as to restore its validity during the effective period of the retroactive amendment; or (2) a decision declaring a new rule of law need not be retroactively applied.

This then leads us to the next inquiry, i.e., does the 1987 act in fact retroactively amend preexisting law? For if it does not, we need not consider any possible constitutional objection to a retroactive scenario not presented. I venture this inquiry is summarily answered in the negative by the statute's text.

II. Section 3 of 1987 amendment is a prospective attempt to limit preexisting remedies and does not retroactively cure the constitutional text

The majority, as well as previous decisions from this court, unfortunately use the term "retroactive" in relation to the 1987 act rather loosely by failing to distinguish between retroactive amendments to the substance of the tax vis-a-vis backward looking limitations on available remedies for prior tax periods. On its face the 1987 act states its effective date shall be August 11, 1987. Were the statute retroactive it would necessarily identify some prior effective date. However here the legislature not only failed to do that, but affirmatively did exactly the opposite. Had the statute not identified its effective date as August 11, 1987 a judicial question might have been presented as to its effective date by default; however, even in that event the statute would have been judicially deemed prospective in accordance with overwhelming authority.

This conclusion does not change by virtue of section 3 of the 1987 act, which in essence purports to limit judicial remedies to tax credits for prior tax periods; for this section is not on its face an expression of retroactivity but rather a prospective attempt to limit future remedies for prior events. Such does not make the statute "retroactive." See Landgraf v. USI Film Prods., 511 U.S. 244, 273, 114 S.Ct. 1483, 128 L.Ed.2d 229 (1994) ("When the intervening statute authorizes or affects the propriety of prospective relief, application of the new provision is not retroactive."). Therefore we must, at the outset, distinguish all claims of the majority which are premised upon retroactive tax statutes, as this one isn't. Indeed it seems nearly the entire majority opinion builds upon this false premise.

III. Section 3 of the amendatory act is an unconstitutional "bait and switch" tactic which offends due process

Interstate taxpayers subject to B O taxation before the effective date of the 1987 act, August 11, 1987, also challenge the constitutionality of section 3's legislative attempt to restrict the availability of their preexisting statutory right to either defend against collection of unconstitutional taxes or obtain a full cash refund of such taxes if already paid. Section 3 of the 1987 act is uncodified. It speaks to legislative "intent" yet does not purport to amend much less repeal preexisting statutes of general application which then, and now, provide clear and certain relief from unconstitutional taxation. See notes two, three, and four, supra.

These taxpayers object to any effort to limit their remedy to tax credits, asserting such limitation not only deprives the taxpayer of that "clear and certain remedy" which the constitution requires for coerced payment of unconstitutional taxes, McKesson, 496 U.S. at 32, but also engages in unconstitutional "bait and switch" tactics depriving the taxpayer of a clearly established preexisting state remedy.

The essential constitutional flaw that lies at the heart of any attempt to retrospectively limit a taxpayer's remedy (to tax credits, for example) has been succinctly set out by the Supreme Court:

In a long line of cases, this Court has established that due process requires a "clear and certain" remedy for taxes collected in violation of federal law. A State has the flexibility to provide that remedy before the disputed taxes are paid (predeprivation), after they are paid (postdeprivation), or both. But what it may not do . . . is hold out what plainly appears to be a "clear and certain" postdeprivation remedy and then declare, only after the disputed taxes have been paid, that no such remedy exists.

Reich v. Collins, 513 U.S. 106, 108, 115 S.Ct. 547, 130 L.Ed.2d 454 (1994) (citations omitted). Although we held limitation of the postdeprivation remedy to tax credits satisfies due process in Digital Equipment (Digital Equip. Corp. v. Department of Revenue, 129 Wn.2d 177, cert. Denied, ___ U.S. ___, 117 S.Ct. 2452, 138 L.Ed.2d 210 (1997)) and Digital Equipment postdated Reich, Digital Equipment did not consider the "bait and switch" objection outlined in Reich, nor even cite Reich to signal awareness of the contrary precedent.

Notwithstanding this contrary Supreme Court mandate the majority now blesses not only that which the Supreme Court has expressly condemned but what our court has condemned as well. In National Can Corp. v. Department of Revenue, 109 Wn.2d 878, 749 P.2d 1286 (1989) (National Can II) we held: "If the taxes were collected in violation of the constitution, then the state refund statutes would mandate refunds," refusing the refund only on the mistaken assumption Tyler Pipe was not to be applied retroactively. National Can II, 109 Wn.2d at 880-81. Yet now the majority acknowledges Tyler Pipe applies retroactively (as we also held in Digital Equip., 129 Wn.2d at 188) yet ignores, without overruling, our previous holding that retroactive application of Tyler Pipe "mandate[s] refunds." National Can II, 109 Wn.2d at 881. Consistency, therefore, is found only in the result which favors the tax collector, not the reasons which justify it.

This case falls within the constitutional "bait and switch" prohibition because at all times material hereto every Washington taxpayer has enjoyed, and even now does enjoy, the statutory right to (1) simply lawfully refuse to pay an unconstitutional tax in the first place, RCW 82.04.4286; (2) seek an injunction against paying an unconstitutional tax, RCW 51.52.113; or (3) pay now and claim a refund later, RCW 82.32.060. Section 3's limitation of remedy is after the fact; it overlays these preexisting remedial statutes and clearly offends the "bait and switch" doctrine set forth in Reich and its progeny.

In Reich the Supreme Court considered a Georgia statute which, like RCW 82.32.060, provided a right to refund of taxes illegally paid, whether voluntary or not. Reich, 513 U.S. at 108-09 (citing Ga. Code Ann. sec. 48-2-35(a) (Supp. 1994)). But Georgia courts attempted to defeat the preexisting remedy by claiming it did not apply to taxes collected pursuant to an unconstitutional statute. The Georgia Supreme Court therefore denied the statutory refund remedy, claiming due process was satisfied by an unutilized predeprivation process.

The Supreme Court acknowledged states have flexibility with respect to whether they will maintain an exclusively predeprivation remedial scheme, or an exclusively postdeprivation remedial scheme, or a hybrid regime, yet cautioned:

But what a State may not do, and what Georgia did here, is to reconfigure its scheme, unfairly, in mid-course to "bait and switch," as some have described it. Specifically, in the mid-1980's, Georgia held out what plainly appeared to be a "clear and certain" postdeprivation remedy, in the form of its tax refund statute, and then declared, only after Reich and others had paid the disputed taxes, that no such remedy exists.

Reich, 513 U.S. at 111. Washington holds out exactly such a clear and certain remedy for the payment of an unconstitutional tax a refund, RCW 82.32.060 but the majority now seeks to deny the right of these taxpayers to exercise that statutory remedy.

Newsweek, Inc. v. Department of Revenue, 522 U.S. 442, 118 S.Ct. 904, 905, 139 L.Ed. 888 (1998) (per curiam) adds force to Reich. There considered was suit brought by Newsweek magazine against the Florida Department of Revenue seeking refund of sales taxes collected from Newsweek magazine between 1988 and 1990, contrary to the First Amendment of the United States Constitution. Newsweek claimed Florida's denial of the refund, notwithstanding a preexisting Florida refund statute analogous to Washington's, violated its due process right to relief as defined by McKesson v. Division of Alcoholic Beverages Tobacco, 496 U.S. 18, 110 S.Ct. 2238, 110 L.Ed.2d 17 (1990). The Florida trial court dismissed Newsweek's claim attempting to distinguish McKesson's requirement for "meaningful backward-looking relief" based upon Florida law. Newsweek, Inc., 118 S.Ct. at 904 (citing McKesson, 496 U.S. at 31). However, the Supreme Court summarily reversed based upon McKesson and Reich, holding that where state law holds out either a pre- or post-payment remedy during the tax period in question, due process requires the state to continue to offer the remedy and prevents the state from withdrawing that remedy after the fact which was available during the prior taxable period:

While Florida may be free to require taxpayers to litigate first and pay later, due process prevents it from applying this requirement to taxpayers, like Newsweek, who reasonably relied on the apparent availability of a postpayment refund when paying the tax.

Newsweek is entitled to a clear and certain remedy and thus it can use the refund procedures to adjudicate the merits of its claim.

Newsweek, Inc., 118 S.Ct. at 905.

But our majority rejects the "bait and switch" argument, asserting the Supreme Court has "specifically approved the credit remedy set forth in the 1987 remedial legislation." Majority at 24 (emphasis in the original) (citing Tyler Pipe, 483 U.S. at 249). The majority's claim is fanciful since the Supreme Court in June of 1987 certainly had no occasion to "specifically approve" legislation passed nearly two months later! To the contrary, referenced dicta in Tyler Pipe deals not with a retroactive credit in lieu of preexisting statutory remedies but with prospective credits which might prospectively cure the commerce clause deficiency. Accord General Motors Corp. v. City County of San Francisco, 69 Cal.App.4th 448, 81 Cal.Rptr.2d 544, 549 (1999). This dicta is irrelevant on its face to the statutory right of a taxpayer to a refund of an unconstitutional tax actually paid, much less the obvious validity of a defense against paying an unconstitutional tax in the first place.

The majority reasons despite the fact taxpayers had every reason to believe that they would be entitled to a refund or defense, as that is what our statutes promised them the taxpayers have not been the victims of duplicity because they still have the right to "challenge" Washington's B O tax scheme in court. Majority at 23. But what good is a challenge absent a remedy? Chief Justice John Marshall proclaimed in Marbury, "The very essence of civil liberty certainly consists in the right of every individual to claim the protection of the laws whenever he receives an injury" and "One of the first duties of government is to afford that protection." Marbury v. Madison, 5 U.S. 137, 163, 1 Cranch 137, 2 L.Ed. 60 (1803). Following up this observation the Chief Justice relied upon Lord Blackstone for the proposition "every right, when withheld, must have a remedy, and every injury its proper redress"; and then drew the circle to its close in language so plain even today's majority cannot hide from its mandate:

The government of the United States has been emphatically termed a government of laws, and not of men. It will certainly cease to deserve the high appellation, if the laws furnish no remedy for the violation of a vested right.

Marbury, 5 U.S. at 163.

The majority's sophistry was most recently, and pointedly, rejected by the Supreme Court in Reich:

[T]the Georgia Supreme Court's reliance on Georgia's predeprivation procedures was entirely beside the point (and thus error), because even assuming the constitutional adequacy of these procedures an issue on which we express no view no reasonable taxpayer would have thought that they represented, in light of the apparent applicability of the refund statute, the exclusive remedy for unlawful taxes.

Reich, 513 U.S. at 111. Accord Newsweek, Inc., 118 S.Ct. at 905. Surely, there is simply no reason taxpayers prior to enactment of the 1987 act would have thought that credit procedures which did not even then exist barred plain statutory remedies against collection of unconstitutional taxes!

IV. The 1987 tax credit scheme itself unconstitutionally discriminates against interstate commerce

Ever mindful that "the power to tax is the power to destroy," we must be even more solicitous of the ratifiers' intent that interstate commerce be spared those burdens imposed by discriminatory state and local taxation. "The Supreme Court has traditionally recognized that a large part of the rationale for granting Congress control over interstate commerce 'was to [e]nsure . . . against discriminating State legislation.'" Laurence H. Tribe, American Constitutional Law 453 (2d ed. 1988) (citing Welton v. Missouri, 91 U.S. (1 Otto) 275, 280, 23 L.Ed. 347 (1875)).

"A State may not 'impose a tax which discriminates against interstate commerce . . . by providing a direct commercial advantage to local business.'" Oklahoma Tax Comm'n v. Jefferson Lines, Inc., 514 U.S. 175, 197, 115 S.Ct. 1331, 1344, 131 L.Ed.2d 261 (1995) (quoting Northwestern States Portland Cement Co. v. Minnesota, 358 U.S. 450, 458, 79 S.Ct. 357, 3 L.Ed.2d 421, 67 A.L.R.2d 1292 (1959)).

But this credit scheme discriminates against interstate commerce in both form and substance. First, section 3, as the majority construes it, requires interstate taxpayers seeking a remedy for prior unconstitutional taxation to prove, through a difficult, burdensome, if not impossible, procedure the quantum of foreign taxes actually paid as well as the technical intricacies of foreign taxation to qualify for a credit; whereas in-state businesses are automatically credited the entire amount in the first instance. Second, it is a discriminatory scheme in itself which places the burden on the taxpayer to prove and quantify the specific taxes actually paid to other taxing jurisdictions to obtain the unlikely credit.

A. Tax credits are discriminatorily more burdensome for interstate taxpayers to obtain than in-state taxpayers

As illustrated by the record in this very proceeding, the discriminatory nature of the tax credit scheme is borne out by the practical nonavailability of such credits to interstate business. In order for the interstate taxpayer to avail himself of the credit, it is necessary to produce voluminous factual documentation from every other taxing jurisdiction in America for periods increasingly remote in time, without end. As a practical matter, such record-keeping is extremely difficult, even if the necessity for the records is known in advance, and nearly impossible if the requirement is imposed, as it is here, after the fact. See General Motors Corp., 81 Cal.Rptr.2d at 548.

This record demonstrates, for example, that such specific documentation may not have been maintained in the first instance in other taxing jurisdictions, or may have been lost or destroyed over the intervening years even if it had. However the failure to originally make, or thereafter maintain, these records is fatal to any claim of the interstate taxpayer for a tax credit whereas an in-state taxpayer has an automatic credit. Thus, as a practical matter, the in-state taxpayer enjoys an automatic 100 percent credit whereas the interstate taxpayer is lucky to recoup 1 percent, if that.

The discriminatory burden placed upon interstate taxpayers to obtain the benefits of a tax credit in excess of that burden placed upon in-state taxpayers is so readily apparent that the lesson is clear to anyone engaged in interstate business that the business is much better off to move in-state so as to claim a B O credit to both manufacture and sell in-state rather than risk a doubtful and difficult-to-prove credit for performing one of those functions out-of-state. This record demonstrates the cumbersome, if not impossible, procedure to recoup taxes paid in other jurisdictions to offset duplicitous taxes paid by the interstate business under the discriminatory Washington B O tax falls much more heavily on the shoulders of interstate businesses than on their in-state counterparts.

But even if the taxpayer could carry his burden to prove double taxation in fact, simply placing such a burden on his shoulders itself unconstitutionally discriminates against his commerce.

There is also the prospect, if not likelihood, that actual taxes paid on business activity in other jurisdictions will not be specifically analogous to the technical intricacies of the Washington B O tax, thus disqualifying the interstate taxpayer from claiming foreign taxes actually paid as a credit against a Washington tax bill. This is not because interstate businesses do not pay business taxes in other jurisdictions, but because those tax schemes differ in technical aspects from our own. This discriminatory feature cannot be constitutionally cured even in theory by putting the taxpayer to his proof of actual taxes paid in other jurisdictions; however, even if it could, the burden of this proof, in and of itself, discriminatorily falls on the commerce of the interstate taxpayer. See General Motors Corp., 81 Cal.Rptr.2d at 547-48.

While the in-state taxpayer has an automatic credit, the interstate taxpayer must not only prove that he actually paid business taxes in another jurisdiction but must also prove the exact analogy of the foreign tax law to our own in order to qualify. This was exactly the burden the state tax collector sought to be placed on the interstate taxpayer to prove his claim in Tyler Pipe that the statute was unconstitutional. But that argument was squarely rejected by the Supreme Court in no uncertain terms:

The immunities implicit in the Commerce Clause and the potential taxing power of a State can hardly be made to depend, in the world of practical affairs, on the shifting incidence of the varying tax laws of the various States at a particular moment.

Tyler Pipe, 483 U.S. at 242 n. 11 (quoting Freeman v. Hewit, 329 U.S. 249, 256, 67 S.Ct. 274, 91 L.Ed. 265 (1946)); see also City of Winchester v. American Woodmark Corp., 252 Va. 98, 471 S.E.2d 495 (1996). However the tax credit scheme at issue here incorporates on its face exactly that discriminatory mechanism which the Supreme Court condemned in the very opinion which struck down the unconstitutional tax which this credit scheme was supposedly enacted to cure: it leaves interstate taxpayers to "the shifting incidence of the varying tax laws of the various states at a particular moment." In pegboard fashion, the vice is suppressed here, only to reappear there: the Supreme Court disclaims any burden on the taxpayer to show how he has been harmed in fact to prove the tax unconstitutional, yet now the state reimposes the same burden by conditioning relief on precisely that.

V. The commerce clause requires apportionment of gross receipt taxes on interstate business

The final concern is the constitutionality of the gross receipts tax, amended or not, vis-a-vis the claim that it constitutionally must be apportioned, but is not.

Consistent with the jurisdictional requirements of the due process and commerce clauses, a state may levy a nondiscriminatory tax on an aspect of a multi-state transaction otherwise wholly immune from taxation because interstate in character (such as gross receipts from an out-of-state sale made by a local corporation), if the method by which the tax is measured apportions the tax burden in conformity with a formula that rationally relates the amount of the tax to the fraction of interstate activity taking place within the taxing state. Because they seek to derive uniquely local bases for state taxation from otherwise interstate aspects of taxed transactions, apportionment formulas in theory prevent interstate commerce from being cumulatively burdened by repeated taxation of the same incident.

Although we have previously approved the tax at issue here against claims of malapportionment in National Can Corp. v. Department of Revenue, 105 Wn.2d 327, 340-42, 732 P.2d 134 (1986), judgment vacated by Tyler Pipe, 483 U.S. 232 (National Can I), and American Nat'l Can Corp. v. Department of Revenue, 114 Wn.2d 236, 239, 787 P.2d 545 (1990), such approval was in the context of a challenge that conceded the tax met the Supreme Court's apportionment requirement. Id. at 241. Moreover that holding is ultimately not in accordance with the requirements of the commerce clause viewed from a perspective more enlightened by recent Supreme Court precedent and the more vigorous advocacy of these parties than was the case in presentations leading to previous decisions. We have recognized as fundamental our state commerce clause jurisprudence must yield to Supreme Court precedent rather than repeating our own errors. See Digital Equip. Corp., 129 Wn.2d 177. See also Tricon, Inc. v. King County, 60 Wn.2d 392, 394, 374 P.2d 174 (1962) ("The issue here involves the interpretation and application of the federal constitution and we are bound to follow the decisions of the Supreme Court of the United States, which have passed on this issue."); B.F. Goodrich Co. v. State, 38 Wn.2d 663, 676, 231 P.2d 325 (1951) ("It scarcely needs be said that, with respect to matters involving the Federal constitution, we, as an inferior tribunal, must follow the pronouncements of [the United States Supreme Court] no matter what our private views may be.").

Every state tax must pass a four-part test to comply with the dormant commerce clause. American Nat'l Can, 114 Wn.2d at 241 (citing Complete Auto Transit, Inc. v. Brady, 430 U.S. 274, 97 S.Ct. 1076, 51 L.Ed.2d 326 (1977)). To comply, state taxation of interstate business must: (1) tax only interstate activities with a sufficient connection to the taxing state; (2) be fairly apportioned to the taxpayer's activities in the taxing state; (3) not discriminate against interstate commerce; and (4) be fairly related to the services provided by the state. Id. The taxpayers in American Nat'l Can only raised a third prong discrimination challenge, id., but in point of law the Washington scheme of tax credits still does not solve the fair apportionment prong.

Central Greyhound Lines v. Mealey, 334 U.S. 653, 68 S.Ct. 1260, 92 L.Ed. 1633 (1948) controls. It holds fair apportionment of gross receipt taxes is required to pass muster under the dormant commerce clause. The gross receipt tax there considered was nearly identical to that imposed here. New York taxed gross receipts of an interstate bus line traveling between points within the state, but over routes which utilized highways outside the state in Pennsylvania and New Jersey. The gross receipts of these bus tickets were taxed without apportionment (or limitation) to in-state activities.

The United States Supreme Court held these unapportioned gross receipts taxes violated the commerce clause because they were not apportioned to taxing only in-state segments of travel.

The unapportioned New York tax is indistinguishable from Washington's except for Washington's tax credit feature. However it is apparent from Central Greyhound Lines that allowance of a tax credit is no defense to a fair apportionment challenge as the Supreme Court there held the tax must be apportioned even if no out-of-state taxes are paid or credited against the domestic tax:

[E]ven if neither Pennsylvania nor New Jersey sought to tax their proportionate share of the revenue from this transportation, such abstention would not justify the taxing by New York of the entire revenue.

Central Greyhound Lines, 334 U.S. at 663 (citing Freeman v. Hewit, 329 U.S. 249, 256, 67 S.Ct. 274, 288, 91 L.Ed. 265 (1946)). By its very nature "an unapportioned gross receipts tax makes interstate transportation bear more than 'a fair share of the cost of the local government whose protection it enjoys.'" Central Greyhound Lines, 334 U.S. at 663 (quoting Freeman, 329 U.S. at 253). The vice is that "it lays 'a direct burden upon every transaction in [interstate] commerce by withholding, for the use of the State, a part of every dollar received in such transactions.'" Central Greyhound Lines, 334 U.S. at 663 (alterations in original) (quoting Crew Levick Co. v. Pennsylvania, 245 U.S. 292, 38 S.Ct. 126, 62 L.Ed. 295 (1917)).

Although Tyler Pipe seems to discount an apportionment challenge to Washington's gross receipts tax, more recent Supreme Court authority has reinvigorated the vitality of Central Greyhound's gross receipt tax apportionment requirement, highlighting the critical distinction between gross receipts and sales tax, not their analogy.

As the Supreme Court explained, the apportionment prong of the Complete Auto Transit test is required to ensure a state taxes only its fair share of an interstate transaction. Oklahoma Tax Comm'n v. Jefferson Lines, Inc., 514 U.S. 175, 184, 115 S.Ct. 1331, 131 L.Ed.2d 261 (1995) (quoting Goldberg v. Sweet, 488 U.S. 252, 260-61, 109 S.Ct. 582, 102 L.Ed.2d 607 (1989)). The question is how to slice up the tax pie among the states in which the taxpayer's activities have contributed to taxable value. Oklahoma Tax Comm'n, 514 U.S. at 186. The answer is to apportion the income among the states in which the activity has occurred, and allow taxation only of that portion attributable to activity within that state. Id.

Sales taxes do not fit within this formula and thus need not be apportioned because, the Supreme Court reasoned, a sale of goods is best viewed "as a discrete event facilitated by the laws and amenities of the place of sale, and the transaction itself does not readily reveal the extent to which completed or anticipated interstate activity affects the value on which a buyer is taxed." Oklahoma Tax Comm'n, 514 U.S. at 186. What saves a sales tax from apportionment challenge is that it does not provide an opportunityfor multiple taxation of the same activity, as the tax necessarily falls only once upon the buyer of the goods or services who is taxed on his purchase at a single location. Id. at 189-90. However a tax upon gross receipts does require apportionment because multiple taxation is possible, as the origin of the taxable value may be extraterritorial. Id. (citing Central Greyhound Lines, 334 U.S. 653).

Jefferson Lines thus represented a critical clarification of previous Supreme Court precedent on this issue. See Walter Hellerstein et al., Commerce Clause Restraints on State Taxation after Jefferson Lines, 51 Tax L.Rev. 47, 97-98 (1995); see also M Assocs., Inc. v. City of Irondale, No. 1962143, 1998 WL 432097, at *4 (Ala. July 31, 1998) and see City of Winchester v. American Woodmark Corp., 252 Va. 98, 471 S.E.2d 495 (1996). And it is this clarification which renders questionable the majority's reliance upon earlier Supreme Court cases, not to speak of cases from our own court, that dismissed apportionment challenges to Washington's B O tax (Majority at 20) by falsely analogizing nexus requirements to apportionment.

The problem is Washington's current B O tax scheme allows for double taxation by taxing manufacturing, extracting, or wholesaling activities within the state without apportioning, or limiting, the tax to that part of the receipts attributable to value produced in this state only. Credits provided by the 1987 amendments do not eliminate the apportionment problem because the tax still is based on value produced in other taxing jurisdictions. It therefore uniquely burdens interstate commerce.

That an apportionment deficiency may not be corrected by allowing interstate businesses to credit similar taxes paid in other jurisdictions also seems quite apparent from the Jefferson Lines decision. The fair apportionment requirement implicates concerns of external consistency which look

not to the logical consequences of cloning [the tax in other jurisdictions], but to the economic justification for the State's claim upon the value taxed, to discover whether a State's tax reaches beyond that portion of value that is fairly attributable to economic activity within the taxing State.

Jefferson Lines, 514 U.S. at 185 (citations omitted). While a properly structured nondiscriminatory tax credit scheme might arguably satisfy concerns of internal consistency by diminishing, at least in theory, the prospect of double taxation, Jefferson Lines clarifies the external consistency requirement for gross receipt taxes can be satisfied only by proper apportionment, as was the rule in Central Greyhound, where the court held "taxation of an interstate bus line's gross receipts was constitutionally limited to that portion reflecting miles traveled within the taxing jurisdiction." Jefferson, 514 U.S. at 186.

Moreover, as the Supreme court in Tyler Pipe specifically held:

The facial unconstitutionality of Washington's gross receipts tax cannot be alleviated by examining the effect of legislation enacted by its sister States,

Tyler, 483 U.S. at 242, as,

"[T]he immunities implicit in the Commerce Clause and the potential taxing power of a State can hardly be made to depend, in the world of practical affairs, on the shifting incidence of the varying tax laws of the various States at a particular moment."

Tyler, 483 U.S. at 242 n. 11 (quoting Armco, Inc., 467 U.S. at 645 n. 8). But that is exactly the burden put on interstate commerce by this tax credit scheme which wholly depends for its utilization upon proof not only of quantification of the actual tax paid in other jurisdictions but proof of the technical subtleties of those divergent tax schemes as well.

VI. Conclusion

Thus, the majority pays lip service to the commerce clause but does little to protect the freedom of interstate commerce and nothing to protect interstate taxpayers from the avaricious appetite of state taxing authorities which, even to this day, extort payment of unconstitutional taxes while overtly denying taxpayers their statutory defense to payment, as well as their statutory right to refund. The majority's resolution does much for the coffers of this state but much to the constitutional rights of its citizens.

Until these priorities are reversed, I dissent.

MADSEN, J., concurs with SANDERS, J.