ALASKA v. ARCTIC MAID

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Argument of Gary Thurlow

Chief Justice Earl Warren: Number 106, Alaska, Petitioner, versus Arctic Maid et al.

Mr. Gary Thurlow: Mr. Chief Justice, may it please the Court.

Beginning in 1949 --

Chief Justice Earl Warren: Mr. Thurlow.

Mr. Gary Thurlow: Beginning in 1949, a number of Puget Sound canneries began to equip ships with refrigeration equipment.

At the beginning of the summer each year, these ships would head to Bristol Bay at the beginning of the red salmon fishing season in Bristol Bay.

Bristol Bay is a large bay in Western Alaska, a very shallow bay.

These ships would load on about seven to 17 catcher boats.

These catcher boats are fishing boats.

They're 30 to 32 feet long.

They're about 10 feet wide.

These boats would be carried to Bristol Bay.

When the ships reach Bristol Bay, they would anchor approximately three miles from mean low tide.

They would align themselves in order to give the catcher boats rooms -- room.

They didn't want to have the anchor lines or the freezer ship followup the gill nets which the catcher boats use in catching salmon.

Homer Kyros, who is the -- who was the captain of the Arctic Maid, stated that he designated his anchorage beforehand and that when the Arctic Maid reached Bristol Bay, it anchored at this anchorage which has already been selected and then the fishing effort would begin.

After the freezer ships had anchored, they would launch their catcher boats and the catcher boats would fish between the freezer ships and along the shores of Bristol Bay.

They fish right along the beaches, right along the shore.

The fisher -- the catcher boats were manned by two fishermen each.

When the catcher boat load a salmon or when the fishermen were ready to come back to the freezer ship, they would return to the freezer ship, the freezer ship would lower the net onto the catcher boat, the fish will be thrown on the net.

The net would be hoisted through the ship and dumped into a brine tank.

There, the fish will be frozen and after the fish were frozen, the fish will be transferred to another part of the ship where it would be stored until the end of the Bristol Bay red salmon fishing season or until the freezer ships were through with their Alaska operations.

The freezer ships spend from 25 to 65 days in Alaska waters.

The freezer ships purchase some fish from independent fishermen.

The record doesn't indicate how many they do purchase.

There's no evidence at all on that point.

Justice Charles E. Whittaker: By that, you mean they purchase somewhere, they are anchored at sea?

Mr. Gary Thurlow: Yes, sir, they do.

They -- they probably purchase -- purchase most of them in Bristol Bay while they're anchored from three to four or five miles outside of mean low tide.

The freezer ships also carry on some operations off of Kodiak Island and in Southeast Alaska.

When the freezer ships operate in these areas, they anchor within the three-mile limit.

The freezer ships sometimes fish during the Bristol Bay king salmon fishing season.

But for the most part, freezer ships are engaged in catching red salmon during the Bristol Bay red salmon fishing season and they fish for the most part in Bristol Bay.

Unknown Speaker: (Inaudible) salmon and --

Mr. Gary Thurlow: Yes, sir, they are.

King salmon or Chinook salmon, Silver salmon or Coho salmon and dog salmon or Chum salmon.

Chief Justice Earl Warren: How do you measure your -- how do you measure your three miles there?

Is it along the shore line or is from headland-to-headland from the bay?

Mr. Gary Thurlow: Well, I'm assuming for the -- for purpose of this argument that's just along the mean low tide.

I didn't think this Court would get into question whether the Bristol Bay or any part of it is an inland bay.

So I assume that there would be no inland bays in it, involved here.

It is the States' theory that a good part of Bristol Bay is an inland bay and has historically been treated as such.

The Ninth Court of Appeals found the end of Bristol Bay to be an inland bay.

Chief Justice Earl Warren: On what?

Mr. Gary Thurlow: How's that?

Chief Justice Earl Warren: Is found what --

Mr. Gary Thurlow: The upper portion of Bristol Bay to be an inland bay and they refer --

Chief Justice Earl Warren: Not where the ships were?

Mr. Gary Thurlow: Well, after reviewing the record, it appears that the great bulk of the operations of these ships occurs within that area which the Ninth Court of Appeals on its first hearing of the case, the hearing before the three-man court, that the great bulk of the operations of these freezer ships do occur within what that -- what that three-man panel called "Inland waters, the State of Alaska."

Justice William J. Brennan: (Inaudible)

Mr. Gary Thurlow: Yes, it would be.

The freezing --

Justice William J. Brennan: (Inaudible)

Mr. Gary Thurlow: Well --

Justice William J. Brennan: (Inaudible) freezer ships operating (Inaudible)

Mr. Gary Thurlow: Yes sir, that's right.

I -- it is our position that the three-man panel of the Ninth Court of Appeals was correct when they heard the case.

Their decision was later withdrawn, but the three-man panel said that it may be that some of these freezer ships freeze their fish outside of the taxing jurisdiction of Alaska.

However, they catch their fish within Alaska's waters.

Their catcher boats do.

Justice William J. Brennan: (Inaudible)

Mr. Gary Thurlow: By use of the catcher boats.

Justice William J. Brennan: (Inaudible)

Mr. Gary Thurlow: Yes, sir.

Justice William J. Brennan: (Inaudible)

Mr. Gary Thurlow: No, it's best to approach it on --

Justice William J. Brennan: (Inaudible) they were anchored outside?

Mr. Gary Thurlow: Yes, sir.

Chief Justice Earl Warren: I see.

Mr. Gary Thurlow: It's much better to approach it in from that angle I think.

In 1949, the Alaska Legislature drastically modified the tax structure as an effective -- fish processors.

The first such act of the 1949 Legislature was Chapter 82, Sessions Laws of Alaska, 1949.

Under this Act, canneries were taxed at the rate of 6% on the salmon which they obtained for canning.

Canneries were taxed at 1% on the salmon they obtained and diverted to purposes other than canning.

Later that same session -- and also crab canneries, herring canneries and clam canneries were taxed during this act at a rate varying from 1% to 2 %.

Later that same session in 1949, the Legislature passed Chapter 97.

Under this Act, cold storages were taxed.

Cold storages were taxed at 1% of the value of the fisheries products which they obtained for freezing, solving or processing through any other method.

In 1951, the tax on canneries was raised to 6%.

Shortly thereafter, the Chapter 97, the tax on cold storage -- storages was amended, so as to tax freezer ships and floating cold storages at the rate of 4% of the value of the fisheries products which they obtained for freezing.

The -- most of the freezer ship companies refuse to pay their tax on a theory that the tax was unlawful.

In 1950, territory of Alaska brought suit against them, and 1956, the District Court for the territory of Alaska ruled in the suit.

It ruled that the taxable event in this case was the taking of the fish, the catching of the fish.

Justice William O. Douglas: Well, as of -- as of now, of course that is a -- what we call a state -- state law in question, the incidence of the bay.

Mr. Gary Thurlow: Yes, I believe so.

It's a local activity.

Justice William O. Douglas: Has the -- has the state courts of Alaska -- since Alaska became a State passed on this?

Mr. Gary Thurlow: No, they haven't.

No, sir.

Justice Felix Frankfurter: Well, is it exclusively a state question?

Mr. Gary Thurlow: Well --

Justice Felix Frankfurter: And the State by saying it's a local affair and they give it a non-commerce significance by saying it's a local activity.

I thought all the cases turn on that very controversy.

Mr. Gary Thurlow: Well --

Justice Felix Frankfurter: Whether you can or cannot isolate it separately.

Justice William O. Douglas: Well you'd at least -- you'd at least start with the state adjudication as to what the tax was on and we don't have that here at all, do we?

Mr. Gary Thurlow: No sir, you don't.

Justice William O. Douglas: We don't know what the -- how the state courts would construe this?

Mr. Gary Thurlow: No, you have no idea.

Justice Felix Frankfurter: You mean we don't know that this was a tax on the -- on the catching of fish?

Mr. Gary Thurlow: You certainly don't have the opinion of any state court on this question.

Justice Felix Frankfurter: Well, this -- is that a controversy?

Justice William O. Douglas: Yes.

Mr. Gary Thurlow: Yes, it is.

Justice William O. Douglas: Because the -- your Court of -- our Court of Appeals in this case changed its mind in -- on the incidence, didn't they?

Mr. Gary Thurlow: That's right.

This -- this case has been heard four times now.

This is the fourth time.

On -- on the three times, it's already been heard.

The Court found the taxable event to be in a different place each time.

Justice William J. Brennan: (Inaudible) whether it would be taxable.

Mr. Gary Thurlow: Well --

Justice William O. Douglas: The latest one is processing, isn't it?

Mr. Gary Thurlow: No -- yes, it is, processing by freezing.

Justice William O. Douglas: Isolating.

processing by freezing.

Mr. Gary Thurlow: The --

Justice William J. Brennan: (Inaudible)

Mr. Gary Thurlow: That's right.

Justice William J. Brennan: (Inaudible)

Mr. Gary Thurlow: It is.

Justice William J. Brennan: In the freezer ships and the freezer ships are anchored outside (Inaudible) --

Mr. Gary Thurlow: Yes sir, that's right.

Justice William J. Brennan: (Inaudible)

Mr. Gary Thurlow: The -- the District Court said the taxable event was the catching of the fish and the Ninth Court of Appeals when it first heard this case --

Justice William J. Brennan: And the court of panel.

Mr. Gary Thurlow: Yes, the court of panel said that the tax was on the freezer ship line of business carried on within Alaska's taxing jurisdiction and that's what the State is arguing here today.

Justice Charles E. Whittaker: That state is arguing today, what kind?

Mr. Gary Thurlow: That freezer ships subject themselves to Alaska taxation by doing business within Alaska and that the Alaska freezer ship tax was designed to reach all freezer ship activities which are carried on within Alaska's taxing jurisdiction.

Justice Charles E. Whittaker: And they are doing business within Alaska, does it mean that this small catching boats that come to shore operated by themselves as well as by contractors?

Mr. Gary Thurlow: No, only those operated by themselves.

I cannot see how the State of Alaska could reach fish which are caught by independent fisherman and which are sold to freezer ships outside of Alaska's taxing -- taxing jurisdiction.

Justice William J. Brennan: Well, you -- you tax (Inaudible)

Mr. Gary Thurlow: We have a statute passed by the 1959 Legislature which purports to do that.

Justice Felix Frankfurter: What is the position of the State before this Court as to the -- besides incidence of the tax? What, in the view of the State is the tax for?

Mr. Gary Thurlow: That the tax is to cover the business activities of freezer ships in Alaska, wherever they occur.

And I think that if you --

Justice Felix Frankfurter: Yes, I understand.

That's the legal theory.

But what --

Mr. Gary Thurlow: Yes.

Justice Felix Frankfurter: -- what so-called what is the taxable event in your view?

Is it the freezing or the catching or is it the fact that they are doing something within the territorial waters of Alaska?

Mr. Gary Thurlow: That fact that they are doing something.

Justice Felix Frankfurter: Anything?

Mr. Gary Thurlow: Anything.

Justice William J. Brennan: Well, what is (Inaudible)

Mr. Gary Thurlow: Well, they are certainly catching fish by means of their catcher boats and after reviewing this record again, it appears to me that most of their freezing of fish also take place within what the Ninth Court of Appeals once called an inland bay of Alaska, what -- what they said on their first hearing.

Okay.

Justice William J. Brennan: Suppose that the (Inaudible) freezer ship itself.

Mr. Gary Thurlow: Yes, it is.

Justice William J. Brennan: I thought they were anchored outside the (Inaudible)

Mr. Gary Thurlow: Well, in some cases, they certainly would be done outside of the waters of Alaska.

I -- I thought that probably this Court wished to assume that no part of Bristol Bay was an inland bay of Alaska.

And if this is so, virtually all or all of the freezing of fish done by these freezer ships is done outside the three-mile limit other than the fish caught right near Kodiak and caught in Southeast Alaska.

Justice Felix Frankfurter: Let me ask you.

Is it relevant to the determination of the case before the Court whether Bristol Bay is or is not within the territory of water?

Mr. Gary Thurlow: It is not relevant.

Justice Felix Frankfurter: So that we can operate on the assumption, not because we cannot create on the assumption that maybe falls geographically, but because it's irrelevant to the issue of the case.

Mr. Gary Thurlow: It's irrelevant to the issue of the case.

Justice Felix Frankfurter: Now, is that an agree -- is that an agreement?

Is that an agreement in both sides?

Mr. Gary Thurlow: I don't know, but that's the only way I can analyze the case.

Justice Felix Frankfurter: I mean, that's your view.

Mr. Gary Thurlow: Yes.

Justice Felix Frankfurter: This isn't -- this isn't done, except the thing in the case, we may go on that basis.

We'll have to hear what the appellees say.

Mr. Gary Thurlow: Yes, sir.

Justice Felix Frankfurter: Alright.

Chief Justice Earl Warren: In other words, would you say that if the freezer ships was inside these territorial waters of Alaska that the legal issue would be exactly the same?

Mr. Gary Thurlow: I believe it would be.

Chief Justice Earl Warren: It would be.

Mr. Gary Thurlow: Yes sir.

Justice Felix Frankfurter: From your point of view.

Mr. Gary Thurlow: From our point of view.

Justice Felix Frankfurter: From your point of view.

Mr. Gary Thurlow: Yes, sir.

Justice Felix Frankfurter: Because then it would be all a local activity.

Mr. Gary Thurlow: Yes.

Justice Felix Frankfurter: So that there'd be no problem of touches interstate commerce except insofar as an activity with interstate may be a necessary part of the process of interstate commerce.

Mr. Gary Thurlow: I believe that that would be our position.

Justice William J. Brennan: (Inaudible)

Justice Felix Frankfurter: He doesn't.

Mr. Gary Thurlow: He doesn't.

Justice William J. Brennan: He does not?

Mr. Gary Thurlow: No.

I'm sure my adversary will concede that the part of the operations of these freezer ships occurred entirely within territorial waters.

Justice William J. Brennan: (Inaudible) because everything you've done (Inaudible) territorial water.

I wonder if he would challenge the (Inaudible)

Justice Felix Frankfurter: He wouldn't.

Mr. Gary Thurlow: Certainly, he certainly would.

Justice William J. Brennan: (Inaudible)

Mr. Gary Thurlow: Oh, surely.

Justice Felix Frankfurter: Because they're intended for commerce and --

Mr. Gary Thurlow: That's right.

Justice Felix Frankfurter: -- and that's intended to local consumption.

This is just the beginning of a chain that stretches outside of Alaska.

Mr. Gary Thurlow: That is exactly his position.

Justice Felix Frankfurter: Now, which will be good enough, it would help me greatly if you would state without arguing to begin with it in all event.

If you would state the basis, the facts which you conceive to be that -- what are the findings or fact in this equity?

Have you got any findings or fact?

Mr. Gary Thurlow: None that I know of.

Justice Felix Frankfurter: Alright.

Now, would you be good enough to state the fact, the assumptions on the basis of which it was then tend for certain legal propositions?

Mr. Gary Thurlow: I would say that the predominant feature of a freezer ship operation is the catching of fish and that the loading and freezing of this fish onboard to freezer ship is an incidental thing and it's -- it's a necessary thing which inevitably results from the catching of the fish and therefore, it is local in nature.

Justice Felix Frankfurter: Because the catching is all local, ergo, it's a local activity just sell it from the whatever commerce consequences there may be, being a local activity so (Inaudible) the state may impose its tax.

That's your argument.

Mr. Gary Thurlow: Yes sir.

Justice Felix Frankfurter: That's your position.

Justice William O. Douglas: Like digging coal.

Mr. Gary Thurlow: Yes sir, like digging coal.

Justice William O. Douglas: Has any court below agreed with your construction as to the incidence of this tax as a matter of Alaska law?

Mr. Gary Thurlow: Well, it appears that when we fist argued the tax, we urge that the --that the tax will -- was actually the taking of the fish but --

Justice William O. Douglas: Well, that's what the District Court ruled.

Mr. Gary Thurlow: That's what the District Court ruled.

Now, that the Ninth -- now that this three-man panel, the Ninth Court of Appeals has ruled on this question, I personally think that they're unquestionably right and that is that the tax is on any activities they carry on within Alaska's taxing jurisdiction.

I think -- and that is a position the State is urging here today.

Justice William O. Douglas: That's a -- that's a first position of the Court of Appeals.

Mr. Gary Thurlow: Yes.

Justice William O. Douglas: Not their latest position.

Mr. Gary Thurlow: No, their -- their fist position.

Justice William O. Douglas: Yes.

Justice Felix Frankfurter: This is quite irrelevant to this case that the fact that nine judges of the Court of Appeals all agreed to the conclusion which you attack not only as to -- as to law but as to the starting point, the very starting point.

This may be a good reason that(Inaudible) to say this like an Alaskan should sit on the Court of Appeals.

Mr. Gary Thurlow: I won't comment on that.

[Laughter]

The Ninth Court of Appeals granted a rehearing at the respondent's request and they simply found that the tax was on the freezing of the fish and that this is an integral part of interstate commerce.

Their theory apparently was that the loading of the fish is similar to stevedoring that the rule of Joseph versus Carter & Weekes would apply to the loading of the fish and that since the fish are there in the (Inaudible) of interstate commerce when they are loaded that the activities which occurs subsequent to that and freezing does occur subsequent to the loading would also be interstate commerce.

Now, the respondent in his brief where he discusses his discrimination argument says the facts are not in dispute and the applicable legal principles are not subject to dispute.

I think what he means is the Court probably won't be troubled with tangled under brash of cases here.

I think the problem is in giving the proper weight to the facts and then properly characterizing the nature of freezer ship operation.

The Ninth Court of Appeals saw a freezer ship operation apparently as a freighter that calls from port to port that -- that goes from Seattle and goes to Alaska and loads up with the cargo and then returns to Seattle.

But by categorizing freezer ship operation in that manner, they ignored the most significant aspect of a freezer ship operation which is the fact that its very reason for existence is to catch fish by means of its catcher boats and because it does catch fish, it necessarily follows it has to preserve the fish as they are caught.

Justice Charles E. Whittaker: Is there some basis in your taxing act to contend that the tax is on that act of catching the fish?

Mr. Gary Thurlow: No, I don't know.

Well, yes.

You mean -- yes, I think so.

The --

Justice Charles E. Whittaker: Well, it would seem to me there'll be no doubt that Alaska might have power to impose a tax upon the privilege of taking fish in Alaska.

Mr. Gary Thurlow: Sure.

Justice Charles E. Whittaker: Is this such a tax?

Mr. Gary Thurlow: Yes, sir, it is, because the subject of the tax is clearly set forth in the statute and the subject of the tax is set -- set forth separately from the major and the subject of the tax is on the following industries operating in connection with Alaska's fishing resources.

I'll -- I'll read it to you because it's on page four of our brief.

The subject of the tax is this, "Any person, firm or corporation prosecuting or attempting to prosecute any of the following lines of business in connection with Alaska's commercial fisheries resources with -- in connection with Alaska's commercial fisheries shall first apply for and obtain on the conditions here -- here and after set forth a license so to do on the basis of the following license tax -- taxes which are hereby levied."

And then it says, "Freezer ships and other floating cold storages what is being taxed --

Justice Charles E. Whittaker: Now you're -- you're jotting down to subparagraph (b), are you?

Mr. Gary Thurlow: Yes.

Yes, sir, subparagraph (b).

Justice Charles E. Whittaker: Alright.

Mr. Gary Thurlow: So we can see that the tax --

Justice Charles E. Whittaker: Well now, that says freezer ships and other floating cold storages, "an annual license tax equal to 4% of the value of the raw fish brought or otherwise obtained for processing through freezing" period.

Mr. Gary Thurlow: Yes, sir.

Justice Charles E. Whittaker: Well, does that suggest to you that the tax is upon obtaining fish for processing through freezing?

Mr. Gary Thurlow: No, it doesn't.

Because to me, everything that falls in that column is a measure of the tax.

It says "equal to."

It doesn't say the tax is on the freezing.

It says the -- the tax will be equal to.

Justice Charles E. Whittaker: 4% of the value of the fish bought or otherwise obtained for processing through freezing.

Mr. Gary Thurlow: Yes, sir.

Justice Charles E. Whittaker: You think that is sufficient to include or to be a tax on the privilege of taking fish in Alaska, do you?

Is that -- is that the section you rely on?

Mr. Gary Thurlow: I -- I certainly don't rely on the measure of the tax to find the scope of the tax.

Justice Charles E. Whittaker: No.

Mr. Gary Thurlow: And that the part that you just read I think it's clearly the measure of the tax.

Justice Charles E. Whittaker: Which is the rate, is that it?

Mr. Gary Thurlow: It fixes the rate.

Justice Charles E. Whittaker: But not on the subject.

Justice William J. Brennan: (Inaudible)

Mr. Gary Thurlow: Yes, sir.

Justice William J. Brennan: (Inaudible)

Mr. Gary Thurlow: Yes, sir.

Justice William J. Brennan: It -- it holds out the provision on that (Inaudible)

Mr. Gary Thurlow: Yes, sir.

Every business license tax I think has a taxable event in a measure and generally, they're different things and they're different things here I believe.

Justice Charles E. Whittaker: The statute now then, if that -- if this applies to identify only the line of business then what statute would we look to, to find the subject matter upon which the tax is imposed or the incidence of the tax?

Mr. Gary Thurlow: You'd look at the language which precedes the column in subsection (b).

Justice Charles E. Whittaker: Freezer ships and other floating cold storages?

Mr. Gary Thurlow: Yes, that's the line of business which is being taxed.

Justice Charles E. Whittaker: A tax for what?

Not the existence.

Mr. Gary Thurlow: No, for engaging in the freezer ship line of business.

Justice William O. Douglas: You pick up the incidence from the first sentence of Section 1.

Mr. Gary Thurlow: Yes, sir, I do.

Justice William O. Douglas: Prosecuting or attempting to prosecute any of the following lines of business.

Mr. Gary Thurlow: Yes, sir.

Justice Charles E. Whittaker: In Alaska.

Now then, is there any language here that imposes a tax on the privilege of taking fish?

I must be dense, I don't understand it.

Mr. Gary Thurlow: Well, a freezer ship is a -- is a type of business which does many things.

And one of the things that freezer ship business exists for is to catch fish.

It doesn't just engage in one activity, it engages in a number of activities and the catching of fish is one of the activities, which is an integral part of a freezer ship line of business.

Justice William O. Douglas: It catches, freezes and transports?

Mr. Gary Thurlow: Yes, sir.

It moves the fish back and forth on the ship for better storage.

Justice John M. Harlan: Do you have any tax that would reach a ship that was not a freezer ship that was doing the same thing, lying offshore here and simply acting as the mother ship or (Voice Overlap) of the day?

Mr. Gary Thurlow: Cannery ships are taxed under the cannery tax and floating cold storages are taxed.

These ships do no use catcher boats.

Chief Justice Earl Warren: How about the canneries on the shore that they're the -- the -- or do you have any freezing plants on the shore?

Mr. Gary Thurlow: Yes, sir, we have.

Chief Justice Earl Warren: Are they taxed?

Mr. Gary Thurlow: They're taxed at a lesser rate.

Chief Justice Earl Warren: Is there any question of discrimination in the amount of taxes between the various types?

Mr. Gary Thurlow: Yes, sir, there is.

Chief Justice Earl Warren: There is a question of discrimination.

Mr. Gary Thurlow: I think that if stevedoring is a predominant characteristic of these freezer ships, it's a very peculiar type of stevedoring, because before the stevedoring can be done, the stevedoring company has to go out and catch the fish.

And if it's shipping, it's a very peculiar type of shipping because before the shipping can be done, the shipper has to catch the fish and hold the fish for the remainder of the fishing season.

The -- actually, the freezing and the loading is keen directly to the catching of the fish.

I think that these freezer ships could successfully operate without ever leaving the Alaska waters or the vicinity of Alaska.

They catch and freeze salmon for the duration of the fishing season and then sell the frozen salmon to land based canneries or to ships of other -- of say a Japanese freighter, which is equipped to preserve, freeze, salt or can fish.

So, this could be an entirely intrastate operation.

I think that the leading case is all Oliver Iron Company versus Lord.

Here again, you have a Business License Act, an Occupation Act, a local privilege tax.

And here, the measure of the tax was 6% of the value of iron ore produced.

The iron ore apparently was loaded on small railway cars by the same act by which it was produced.

In other words, the steam shovel or dragline, this isn't said outright in the case but I think it's -- this is only surely the case.

The steam shovel or dragline scoops up the iron ore, dumps it in the railway cars and then the railway cars are assembled in -- into trains and the trains are loaded onto barges and the barges are then sent to other States where the iron ore is unloaded.

Now, here you have a relatively smooth even flow of a commodity from the time it severed from the earth to the time it reaches a market in another State.

In a freezer ship case, you again have a -- a flow of a commodity from the time its caught in -- in Alaska waters until the time that it reaches Seattle, but it's not an even flow.

It's interrupted by the fishing season.

The freezer ships stay in Alaska for the remainder of the fishing season and not until then do they start moving towards Seattle.

So -- so I think that the freezer ship case is on a better set of facts in the Oliver Iron case, Oliver Iron Company case.

Justice Felix Frankfurter: But wouldn't you agree that -- I'm not saying there's a legal difference, either all catching cases, nice discriminations must be made.

But wouldn't you say extracting ore from mine is a more separate or separable, physically different as a transaction or is more of a break.

The ores to be gone out, it has to be -- process things gone through it, and thus considerable doing before it gets down to train on concept that -- that there's a sale for the ore.

There might be glutton market, etcetera, etcetera.

It's very different situation.

Mr. Gary Thurlow: It's -- it's more --

Justice Felix Frankfurter: Physically event -- as a matter of events of the difference.

I'm not saying that therefore it isn't relevant.

You have the right to -- to go on it.

All I'm saying is that there are those differences, would you agree?

Mr. Gary Thurlow: Mining of iron ores are a more elaborate activity than --

Justice Felix Frankfurter: Maybe it's more separable and it's more of a break.

Justice William O. Douglas: Well, I suppose that the respondent would answer you at this point that -- that by your own argument, this is not a tax on taking a fish.

Mr. Gary Thurlow: I presume he will argue that.

Justice William O. Douglas: Therefore, the -- Oliver Iron point.

Mr. Gary Thurlow: I think Oliver Iron Company would still and be on point because in Oliver Iron Company, if the ore was loaded on these cars and what was the purpose of putting them on the cars, the ores is -- and to get them to another State?

Justice Felix Frankfurter: But they tax the mining.

Mr. Gary Thurlow: And isn't that part --

Justice Felix Frankfurter: That's the extraction.

Mr. Gary Thurlow: Well, I think that this was an occupation tax and the occupation was mining and the loading of these railway cars is mining.

I think it's part of the mining operation.

Justice Felix Frankfurter: Once they get out of the cart, they are -- they started to go, don't they?

I mean they're on the way that it (Inaudible)

Mr. Gary Thurlow: Yes, sir.

Chief Justice Earl Warren: Do you tax your local fishermen who -- who fish for salmon in the same way as these small boats do and then -- and then come in to take it into Alaska?

Mr. Gary Thurlow: Fishermen.

Chief Justice Earl Warren: Do you tax them on -- in -- in the same way that you -- that you tax ships?

Mr. Gary Thurlow: Fishing boats are not taxed to such that they were at this time the fishermen were taxed.

Chief Justice Earl Warren: Well, no -- do you -- do you tax the fish that they catch?

Mr. Gary Thurlow: Oh surely, you tax them at a heavier rate than the fish caught by the freezer ships.

Chief Justice Earl Warren: They are.

Mr. Gary Thurlow: Yes, sir.

Justice Felix Frankfurter: Can you -- just as a matter of interest, at least approximately indicate what part of the revenue of the State is derived from -- immediately derived from various aspects of the fishing industry, like the catching, the loading, the processing, etcetera.

Mr. Gary Thurlow: Of all the fishing industry or just the freezer ships?

Justice Felix Frankfurter: No, no, the whole -- what part of the revenue of Alaska is drawn approximately?

Mr. Gary Thurlow: I would --

Justice Felix Frankfurter: What part of the revenue which Alaska assesses or levies is imposed on aspect of the fishing industry as such that might be called the -- within the fishing industry like catching, processing, loading, et cetera.

Mr. Gary Thurlow: I would say less than 20% because --

Justice Felix Frankfurter: Less than 20.

Mr. Gary Thurlow: Less than 20, because Alaska relies largely on the Net Income Tax Act -- on its Net Income Tax Act and on its Business Licence Act.

Justice Felix Frankfurter: All, all of this.

Mr. Gary Thurlow: Yes.

And when I say the Business License Tax Act, that means excluding the taxes on fish process.

So I'd say --

Justice Felix Frankfurter: What I meant is including -- including corporation taxes by fishing concerns.

How much is derived from the fishing industry, just (Inaudible)

Mr. Gary Thurlow: Well, I'd say close to 20%.

Justice Felix Frankfurter: Not more than that.

Mr. Gary Thurlow: Not more than that.

Justice William J. Brennan: (Inaudible)

Mr. Gary Thurlow: Well, Alaska's economy is sort of peculiar because it depends so heavily on federal spending for military purposes.

It's -- it's very heavily dependent on -- on that type -- on construction, military construction.

Chief Justice Earl Warren: Mr. Thurlow, may I ask you this question?

If the -- if the respondents are successful in avoiding this tax, will they be subject to any tax either for their appraising or for their catching of fish in Alaska?

Mr. Gary Thurlow: No taxes, whatsoever.

Chief Justice Earl Warren: No taxes, whatsoever.

This would -- if they prevail, it will be absolutely free from any -- any taxes either on the gathering of the fish or the freezing of them.

Mr. Gary Thurlow: I better modify that.I think that at the time these taxes in effect, they had to buy fishing licenses either for their fishermen or possibly, for their boats.

The license fee would be nominal.

I think it's a regulatory act.

Chief Justice Earl Warren: Yes, yes.

Justice Felix Frankfurter: They were -- they're not subject to -- to a tax -- to an apportioned tax or activities on their gross receipt or gross income for activities that geographically play their part within territorial waters?

Mr. Gary Thurlow: No, sir.

There is no provision in any Alaska statute to tax them on that basis.

Justice Felix Frankfurter: No, but this -- this decision, the Court of Appeals' decision doesn't rule that question out, does it?

Mr. Gary Thurlow: Didn't touch it, so I guess it didn't rule it out.

Justice Felix Frankfurter: But that's in -- that's before the Court.

Mr. Gary Thurlow: No.

It wasn't before the Court, it was an --

Justice Felix Frankfurter: Your answer to the Chief Justice means -- that mean that on the existing -- existing legislature, existing tax measures wouldn't have anything.

Mr. Gary Thurlow: Wouldn't have --

Justice Felix Frankfurter: You didn't mean to imply the Constitution that nothing could be it.

Mr. Gary Thurlow: No, no.

Justice Felix Frankfurter: Alright.

Chief Justice Earl Warren: Just that it isn't.

Justice Felix Frankfurter: It isn't, yes.

Mr. Gary Thurlow: It isn't.

Justice Hugo L. Black: What has happened in connection with the collection of the tax since this case began?

Mr. Gary Thurlow: The State --

Justice Hugo L. Black: Hasn't been going?

Mr. Gary Thurlow: The State hasn't been collecting the tax since 1955 and it didn't collect much tax, much on a way of taxes before that date.

There is -- there is no injunction against the State.

Justice Felix Frankfurter: You mean the State is just holding its hand?

Mr. Gary Thurlow: That State has been holding its hands since 1955.

Justice Hugo L. Black: How did that happen?

Mr. Gary Thurlow: I don't know.

That was before my time.

[Laughter]

Justice Potter Stewart: Before it was a state too.

Chief Justice Earl Warren: It wasn't a state, yeah.

Mr. Gary Thurlow: Before Alaska was a state.

Justice Hugo L. Black: But it was a territory.

Mr. Gary Thurlow: It was a territory.

I don't -- I don't know why -- why that the -- that the territory didn't pursue these taxes act of those years.

I know that the territory certainly will pursue these taxes.

If the Court rules in the State's favor and I know that we have kept some track of the freezer ship operations for the last five years.

We are in a position to build them and we have built them for the last two years.

Well, I've always thought that the most important problem here --

Justice Potter Stewart: The statute is still on the books of the State of Alaska?

Mr. Gary Thurlow: Yes, sir.

Justice Potter Stewart: This statute which was originally a territorial statute.

Mr. Gary Thurlow: Yes, sir.

Justice Potter Stewart: The same with identical statute is.

Mr. Gary Thurlow: Exactly -- exactly the same.

Justice William J. Brennan: And did I understand you say it was the last two years at least you'd sent bills to those -- the operators?

Mr. Gary Thurlow: Yes, sir.

Justice William J. Brennan: And have them pay?

Mr. Gary Thurlow: No, sir.

I've always thought that the most difficult problem in this case was the question of -- of discrimination.

Alaska, like most States, taxes its businesses with -- under a Business License Act.

It's a -- it's a local privilege tax.

And the -- most businesses in -- in Alaska are taxed according to their gross receipts.

They are taxed $25 for their -- for the first 20,000, 1/4, 1% for their -- 1/2% to 1% for the gross receipts up to 100,000 and 1/4% to 1% for gross receipts above that amount.

Banks are also taxed under a Business License Act but the measure of that tax is net income.

Fish processors are taxed at 4% of the value of -- at -- or taxed according to the value of fishery products which they obtain, which they handle.

This works out very well for the State of Alaska because it results in virtually every fish which is caught contributing to Alaska tax revenues and contributing to the cost of -- of meeting the cost -- conserving Alaska's fishery resources and maintaining Alaska's fishery resources.

All fish have to be processed, cured, sold and handled in some way within 48 hours after they're caught.

Salmon are perishable.

And federal law requires that the salmon be handled in some manner.

So, by reaching the processor, Alaska has pretty successfully reached all the fish caught in Alaska.

That's not entirely true because there is some testimony in the record that during a five today fall seining season, some vessels in Ketchikan will ice down their fish by ice at a cold storage and run their fish to Seattle.

Justice Felix Frankfurter: What is the discrimination problem?

Mr. Gary Thurlow: Well, the discrimination problem is this.

The respondents claimed that cold storages are taxed at a lower rate than freezer ships.

Freezer ships are taxed at 4% of the value of salmon which they obtain.

Cold storages are taxed at 1%.

On the face of it, this appears to be discrimination, but it isn't because cold storages and freezer ships are not in competition with each other.

Cold storages freeze king salmon and silver salmon, their trolled cut salmon, their degutted salmon, their higher quality salmon and their frozen for the fresh fish market.

They never go into competition with canned salmon or as far as I know, rarely do.

The fish which canneries are after and which freezer ships companies are after are red salmon, pink salmon, and dog salmon.

These are especially suitable for canning.

They're -- they're caught by seining vessels, they're caught by gill-netters and they're not treated this carefully as the fish which are destined for cold -- for the fresh fish market.

Canneries are taxed at 6% and freezer ships are taxed at 4%, so there is discrimination but the discrimination is in -- is in favor of interstate commerce and it's against Alaska canneries.

And this is true I think even if you include the Seattle business license tax and the Washington business and occupation tax which the Seattle canneries pay because of the fish which have been caught in Alaska by their freezer ships.

Justice Felix Frankfurter: I like your candor and things -- you think this is a difficult part of the problem.

Mr. Gary Thurlow: It is.

Justice Felix Frankfurter: Would you mind telling me why you think so because four is less than six, is that it?

Mr. Gary Thurlow: No.

The difficult part has yet to be discussed and that is this.

Cold storage operators do freeze some fish for canneries.

This is an isolated, unusual incidental thing.

There isn't much evidence in the record on it.

There's only about seven or eight pages in this entire record on this.

Three witnesses testified on this problem.

Pinkerton, manager of the Ketchikan Cold Storage, Wallis George, manager of the Juneau Cold Storage and Tom Park, tax collector for -- a tax collector for the Department of Taxation.

Pinkerton had to admit that the freezing of salmon for later canning was a “isolated incidental thing.”

Wallis George, the Juneau Cold Storage manager said that in a 27 years, he has been in the cold storage business, he has only canned -- he has only frozen salmon for salmon canneries two or three times, two or three times in 27 years.

And Tom Park testified that the freezing of salmon for later canning is an expensive process and it is not readily done.

On redirect examination, James Pinkerton said that the freezing of salmon for later canning was a regular occurrence and it happened each year.

This was part of the -- this was designed to rehabilitate his testimony.

Now, what Pinkerton was taking about was the canning of small silver salmon which are caught by trollers.

Apparently, Pinkerton feels compelled to buy all the fish the trollers bring to him and the trolling season opens shortly before the sailing season.

And apparently, he does buy some silver salmon and -- and freeze them and sell them later to the cannery.

Justice Hugo L. Black: May I ask you if -- I think I understand what you are saying in the orange industry, they sell frozen orange juice and they sell canned orange juice, and here you say they have some salmon that they sell frozen and is freshly on high price, some other is the can, is that -- are those two situations analogies?

Mr. Gary Thurlow: Yes, those two situations are analogies.

Justice Felix Frankfurter: Let's see if I understand the course of your expositions.

If we had no testimony at all, merely have the legislative in that 4% for freezers and 6% for canneries, is that right?

Mr. Gary Thurlow: Yes sir.

Justice Felix Frankfurter: If we just have that enactment, one couldn't possible be I just say that the fact that four less than six that six is more than four shows discrimination against the canned because we can't think judicial notice or what the fact of the fishing industry in the relation of that problem.

Are you suggesting that by testimony, it was sought to be established that in fact, that surface discrimination -- that surface justifiably discrimination made by the Legislature is overturned as a -- as a -- is (Inaudible) which earns and a showing was made.

As a matter of fact, there is no differentiation.

In fact, if you can go to a levied -- so, 6% and against those who have to pay only 4%, is that right?

Mr. Gary Thurlow: What -- I think that's what the fact show.

Justice Felix Frankfurter: Well, the -- if the fact show that, isn't really a bad way, aren't you?

Mr. Gary Thurlow: No, I misunderstood you.

Justice Felix Frankfurter: That's what I thought when you said that's the fact show.

I say that the facts, if the testimony goes to the proposition that in fact while without any elucidation, the Legislature may well have reasons be imposing 6% on canneries against 4% on freezers.

The testimony shows that there's no basis in the actualities of life with that discrimination -- with that distinction, but you say that isn't what the testimony show?

Mr. Gary Thurlow: No, there was no testimony to show the reason for the distinction between the 4% tax and 6% tax at all.

Justice Felix Frankfurter: No, but the -- the testimony which is about -- which there's controversy is whether there -- it is shown that there is no difference between the two kinds of enterprises.

Mr. Gary Thurlow: There was some testimony with that effect, but the -- the thing that the respondents was interested in urging was the differ -- difference between the 4% tax on freezer ships which freeze fish.

Justice Felix Frankfurter: Yes.

Mr. Gary Thurlow: And the 1% tax on cold storages which freeze fish.

They -- they wanted to show that the tax on freezer ships was four times as great as a tax on both storages.

Justice Felix Frankfurter: You are talking until now about four and six, not four and one.

Mr. Gary Thurlow: Yes, and these are the relevant taxes because freezer ships are in competition with canneries.

They are after the same type of fish and the fish which they obtain will later be canned.

And the cold storage operations are -- are totally irrelevant to this problem even though a cold storages have on occasion frozen some fish for the canneries.

Justice Felix Frankfurter: I think there are no attached -- there are no attached here on the basis -- on the claim of discrimination as between four and six?

Mr. Gary Thurlow: No.

Justice Felix Frankfurter: Because there's no claim here.

Mr. Gary Thurlow: No.

Justice Felix Frankfurter: No, alright.

(Voice Overlap)

Justice William J. Brennan: That's between four and one.

Mr. Gary Thurlow: It's between four and one.

Justice Felix Frankfurter: Well, I -- I misunderstood why all this is relevant as to whether this is episodic or not between the four and the six, if that's not challenged.

Mr. Gary Thurlow: It's not challenged.

Justice Felix Frankfurter: Alright, then why bother?

Mr. Gary Thurlow: Pinkerton said that this was a regular occurrent each year but he's referring to these cohos, the silver salmon which he did feel obliged to buy controllers that came to his cold storage plant.

George was in the same business in Juneau, never had occasion ever to mention these silver salmon.

And -- so I think that this is truly an isolated, incidental thing as Pinkerton's -- Pinkerton said and it is so -- such an isolated, incidental thing.

I don't think that this is a factor which you'd expect the Alaska Legislature to take into consideration when it framed a series of taxes designed to fairly tax all fish processors in Alaska.

Now, there is the problem of the salmon caught in Alaska later be in taxed in Washington.

Chief Justice Earl Warren: We'll recess now Mr --

Print this transcript Transcript: 

Argument of Gary Thurlow

Chief Justice Earl Warren: -- you may continue.

Mr. Gary Thurlow: May it please the Court.

I had only one last point to make.

One of the respondents' contentions is that the taking and the processing of this fish or at least the processing of this fish should not be taxed in Alaska because this fish will later be taxed in Seattle or in the State of Washington.

Now, I don't think that's a good argument because you have a local activity in Alaska and that local activity is not going to be repeated in any other State, so there's no harm in taxing this one local activity occurring in Alaska.

It makes no difference whether a different activity which occurs in Seattle is taxed or whether it isn't taxed.

It's simply irrelevant.

In conclusion --

Justice Charles E. Whittaker: Mr. Thurlow.

Mr. Gary Thurlow: Yes.

Justice Charles E. Whittaker: (Inaudible) -- Did you urge your District Judge -- Judge Hodge to construe your statute as you now urge upon us?

Mr. Gary Thurlow: No, sir.

It -- no, sir.

No, sir.

Our briefs -- I don't think that I've seen any briefs in the record and I don't know exactly what we did argue to Judge Hodge.

But apparently, Judge Hodge was led to the -- to the view that the tax should be on the taking and I suppose, one of the reasons he ruled that way is that under the view which I am asserting here today, some of the freezer ship operations are likely to be immune from any Alaska taxes whatsoever.

If a freezer ship lays outside of Alaska's taxing -- taxing jurisdiction and if it buys all of its fish from independent fishermen, then, I do not believe that freezer ships would be liable to any taxes, whatsoever.

Under Judge Hodge's ruling, freezer ships would have to take the tax responsibility for all fish which had -- had come from Alaska waters.

Justice Charles E. Whittaker: But if the interpretation of your statute which you now urge upon us was not presented to nor urged upon him, should it not be -- is it not commonly true that the best Court to interpret a state statute is the Court of the State and its reasonable construction or interpretation is binding on all?

Mr. Gary Thurlow: Well, it's difficult to answer because Alaska was a territory at that time and the -- the appellate court for the Federal District Courts was the Ninth Court of Appeals.

So, if you can consider that the Ninth Court of Appeals as being the territorial Supreme Court of the State of Alaska, you at least have two opinions from that Court to go on.

You have the opinion of the three-man panel which I think is correct and the opinion of the entire Court, their final opinion which I think is wrong.

Chief Justice Earl Warren: Very well.

Justice Felix Frankfurter: Mr. Thurlow, before you --

Chief Justice Earl Warren: Yes, sir.

Justice Felix Frankfurter: -- proceed, along the lines or in connection with the question we've just put to you, in agreeing with my brother Douglas that certainly, it is relevant for the construction placed by a state court as to what it is on which the State purported to impose a tax not conclusive but it's something to be considered at all, taking those to -- taking that into account.

I want to ask you this question.

You -- you maintained or the part which is involving your position that the manner in which the statute is construed in relation to what it is that is being taxed, what it is that if you're validating taxed?

It may make a difference how you construe the statute as to what it is on which a tax is sought to be imposed using that it may make a difference in construing the statute?

Mr. Gary Thurlow: Certainly.

Long standing administrative inter -- interpretation of a statute is -- of relevance in -- in construing the statute.

Justice Felix Frankfurter: I'm talking about whether if the statute opened to two different constructions as to what it is on which -- for which the taxes sought to be collected.

Mr. Gary Thurlow: Not in my opinion.

Justice William J. Brennan: Well, apparently it was (Inaudible) between.

Mr. Gary Thurlow: In other people's opinion it is, but not in mine.

Justice Felix Frankfurter: But I don't mean to say that what you're urging here in the Court is it -- is it outside of the realm of the conceivable that if this question came up before the Supreme Court of -- of Alaska, they could only have to -- they would have to construed only your way that there'd be -- as a compulsion of intellectual honesty that would've required them?

That can't be because this --

Mr. Gary Thurlow: No.

Justice Felix Frankfurter: -- very Court is divided as between three or nine, isn't it?

Mr. Gary Thurlow: That's right.

Justice Felix Frankfurter: Well, if that -- it does may make -- it may make a difference as to how the statute is construed regarding what it is that's levied it.

What is it that you sought to be levied about, is that right?

Mr. Gary Thurlow: That's right.

This Court is --

Justice Felix Frankfurter: And one construction may lead the Court to say this is within it, another construction may say it's without it, is that right?

Mr. Gary Thurlow: That's right.

This Court has always taken that position.

Justice Felix Frankfurter: Well, do you agree to that?

Mr. Gary Thurlow: I agree.

Justice Felix Frankfurter: There is that ambiguity in the statute, resolved one way by the District -- by the Court of Appeals in the three-judge panel.

Another way in the nine judge panel and of course, no construction at all from the Supreme Court of Alaska, is that right?

Mr. Gary Thurlow: That's right.

Justice Felix Frankfurter: Do that state accurately?

And where that --

Unknown Speaker: Well, but the certain statute by the District Court.

Mr. Gary Thurlow: There have been three constructions.

Justice Felix Frankfurter: Well, because I hope that the -- your brother will address itself to that.

Suppose you gave answer to that question which I made it clear.

Mr. Gary Thurlow: Well, in --

Justice Felix Frankfurter: Alright, you can't answer for him.

I want him to answer for himself.

Mr. Gary Thurlow: In conclusion, I would say I think it would be extremely harsh and unfair to all -- all other fish processors in Alaska to tax him at irrelevantly heavy rate.

You can't raise your tax at 6%.

This is a heavy tax and it should be heavy tax.

Justice Hugo L. Black: Do you urge or do you ask or do you take any position as to whether the -- just should be sent back to the State in some way or the construction by the State Supreme Court?

Mr. Gary Thurlow: I would much prefer to see this Court rule on the issues because I think it is in the position to rule on them.

Justice Charles E. Whittaker: (Inaudible)

Mr. Gary Thurlow: He's in the position to rule on the constitutional issues involved here.

Justice Charles E. Whittaker: Now, what happens to interpretation?

Mr. Gary Thurlow: Well, I agree there's some ambiguity but I think this Court is competent to -- to pass on what the measure of the tax is and what the subject of the tax is.

I -- I think that this is very fundamental and I think that it would be good if this Supreme Court should rule on this because courts are in confusion as -- as to what the difference is between a measure of the tax and what is the subject of a tax.

I always sought this was elementary but apparently, it isn't.

So, I would like to see this Court rule on that question.

Of course you --

Justice William O. Douglas: Do you think they have to start over again in the state court?

Mr. Gary Thurlow: Well, this case started in 1955.

It's -- and it's going to be in the courts for another two or three years if the court rules in favor of the State.

I -- I hate to see a case drag on so -- so long.

Justice Tom C. Clark: Sorry, I didn't hear you.

How would you get to this case into the Supreme Court of Alaska (Inaudible)?

Mr. Gary Thurlow: I -- I suppose you would remand it to the Supreme Court of the State of Alaska and then I suppose your respondents would move to have it removed to the District Court.

Justice Tom C. Clark: (Inaudible) remand it to the Supreme Court of Alaska (Inaudible)

Justice William O. Douglas: It's started rule in a territorial Court.

Mr. Gary Thurlow: That's right.

Justice Tom C. Clark: You can have the Ninth Circuit.

Mr. Gary Thurlow: That's right.

Justice Tom C. Clark: Don't you have -- are you claiming within Alaska Indian case that we have here?

Mr. Gary Thurlow: Yes, sir.

I am.

Justice Tom C. Clark: Is that statute permits -- is that statute permits to (Inaudible) or send it back to territorial court that you have in District Court?

Will that statute (Inaudible) you then just take it from there to the Supreme Court (Inaudible)?

Mr. Gary Thurlow: Oh, I get lost somehow.

Justice William J. Brennan: (Inaudible)

Mr. Gary Thurlow: Yes, sir.

Justice William J. Brennan: And in that basis (Inaudible) you said territorial?

It's provision, I think (Inaudible) permitted a review in a period of time of judgment of the lower court?

Mr. Gary Thurlow: Yes.

Justice William J. Brennan: (Inaudible)

Mr. Gary Thurlow: I don't know if at that time is open.

Justice Tom C. Clark: Well, yes, certain period (Inaudible)

Mr. Gary Thurlow: Yes.

Justice Tom C. Clark: When the case as he addressed -- when the case (Inaudible)

Mr. Gary Thurlow: It wasn't.

Justice Tom C. Clark: So, he planned it back, as I remember it, under that statute (Inaudible) that territorial passes upon in the United States (Inaudible) and then send it along (Inaudible).

Mr. Gary Thurlow: That's right.

Justice Tom C. Clark: (Inaudible)

Mr. Gary Thurlow: It would -- it would be --

Justice Tom C. Clark: (Inaudible)

Mr. Gary Thurlow: It would be -- it would be very difficult to do this because no one knows where this case originated as a state case or as a federal case because, in those days, the territorial courts had jurisdiction over cases, a state nature and a federal nature indiscriminately.

And no one would know whether this would be sent back to the United States, the District Court for the District of Alaska or to the Supreme Court of the State of Alaska.

There's no way of telling this.

Justice William J. Brennan: (Inaudible) because it didn't permit an appeal to Supreme Court, within some period, the problem of judgment to the old territorial court with couple district.

Mr. Gary Thurlow: We could let you know, surely.

Justice Hugo L. Black: Would a new suit be barred by the statute of limitation?

Mr. Gary Thurlow: I don't believe so.

I don't think there is any statute of limitations as to tax actions of this kind.

Justice Felix Frankfurter: None at all?

Mr. Gary Thurlow: Not in Alaska.

Justice Felix Frankfurter: But some years here -- some years would be clearly all alive so that -- but -- but no statute being?

Mr. Gary Thurlow: I don't believe so.

Freezer ships that posted the bond for this five -- five years, I would certainly hate to start a new suit and loss the benefit of that bond.[Laughter]

Mr. Gary Thurlow: Thank you.

Chief Justice Earl Warren: Mr. Detels.

Argument of Martin P. Detels, Jr.

Mr. Martin P. Detels, Jr.: Mr. Chief Justice, members of the Court.

I want to discuss three preliminary matters and then come very quickly at the question of the incidence of the tax.

The first and I think it's related to the function of this Court in dealing with the incidence is the statement that the respondents here have not paid or provided for payment of taxes accruing in the years -- tax years since this case was tried.

Chapter 71 of the Session Laws of Alaska of 1955 requires that a tax liability bond be filed by persons applying for other licenses to engage in any business in Alaska that the amount of the bond be twice the amount of the estimated tax liability.

And there is a further provision that the requirement for a bond maybe waived if the Attorney General finds that the applicant has property in Alaska subject to Alaska's jurisdiction in an amount sufficient to cover any estimated tax liability.

Not all of the respondents have operated in each of the years since 1954, but each of the respondents has complied with this Section which I now speak, by either posting a tax liability bond or obtaining a waiver under conditions approved by the Attorney General of Alaska.

So, the Alaska is protected and likewise, the respondents are extended to the extent of 10 years of tax liability as I stand before this Court today.

Justice Charles E. Whittaker: May I ask?

Would the terms of that bond continue to (Inaudible) the advancement of the State if the State should be remanded or determination of the union of the statute?

Mr. Martin P. Detels, Jr.: I do not have the bonds before me, Your Honor, but we made an effort to draft them in a form which would make their validity dependent upon the outcome of this litigation.

And if there is any remand, I would assume that the litigation would not have terminated.

Now, with respect to the statement that the respondents are Puget Sound canneries, that is not a fact.

What the record does state is that the respondents can their fish in the State of Washington and that is all the record states.

But the fact is that their fish are their custom canned by which is meant that someone who owns and operates a cannery, cans fish for a custom canning charge, the property and ownership of the fish remaining in these respondents.

Now, from the standpoint of the administration of Washington's tax laws, the respondents for whom these fish are canned and who retained the ownership are the canners.

And the taxes which they pay to the State of Washington are paid in respect of that canning.

I don't believe that this is an unusual construction of the tax laws.

But where there is a reference to the canning of the fish by respondents, that is the circumstance in which they are canned by respondents.

Finally, with reference to the question of the significance of the three-mile limit and the territorial waters, in its last opinion, the Ninth Circuit Court of Appeals found that it did not need to decide that issue in order to pass upon the validity of this tax under the Commerce Clause.

I think that is a correct proposition.

The Court assumed that the freezing and storage of fish by respondents was being carried on in territorial waters, tested the validity of the tax on that assumption and found that invalid under the Commerce Clause.

Now, if that position is not sustained by this Court, then, the Court will come to a due process question, and that would require a determination of the extent of the territorial waters.

But as the case is here now, there has been no such determination except that the District Court inferentially ruled that the normal three-mile limit was applicable in Bristol Bay.

And in its first opinion, which has now been withdrawn, a three-judge panel of the Court of Appeals held that a headland-to-headland rule should be applied and it suggested the drawing of a line which I calculated to be approximately 50 miles in lake, from one side of Bristol Bay to the other.

Now --

Justice Tom C. Clark: Is that directed on (Inaudible)

Mr. Martin P. Detels, Jr.: The evidence in the record on this issue, I would say consist of a chart from which these distances can be determined and that is all.

There is no evidence in the record as to the amount of -- or I -- I should -- I should say this.

There is evidence in the record of the number of fish loaded aboard respondents' vessels while they were outside the three-mile limit if that is the rule to be applied.

There is no mechanical method of calculating the respondent's tax liability upon the predicate that a portion of Bristol Bay is an inland bay not subject to the three-mile rule.

Justice Hugo L. Black: It's all that was done according to the record as it's shown that all that was done in the way of freezing is within that line from headland-to-headland?

Mr. Martin P. Detels, Jr.: No, it is not, Your Honor.

And the first decision of the Court of Appeals remanded the case for a determination of what activity took place outside that line.

Now, as to the incidence of the tax, it is the position of the respondents that its final determination in this case is a responsibility of this Court.

The Court is dealing with a territorial tax, not a state tax.

This case comes here from the only Court which could've had jurisdiction for the tax years here involved of the -- of any litigation involving the constitutionality of that tax, the District Court for Alaska and intermediately, the Ninth Circuit Court of Appeals.

In any event, the ultimate responsibility for determining the practical operation and effect of the state tax claimed to infringe the Commerce Clause is upon this Court as in itself has said many times in Railway Express Agency versus Virginia, the 1954 decision.

Neither the state courts nor the legislatures by giving the tax a particular name or by use of some formal words can take away our duty that consider its nature and effect in which inquiry, we are concerned only with its practical operation.

Justice Felix Frankfurter: But we have also said as you know that what the state court has done, is illuminating the cast, is to be considerably as relevance in construing what after all as often as not in the series of more or less complicated or it's not complicated the use of facts.

That's also true, isn't' it?

Mr. Martin P. Detels, Jr.: It certainly is, Your Honor.

And as I recall in the --

Justice Felix Frankfurter: Particularly the other way around.

We have said that if a state court as the tax is on -- on a -- uninterrupted sale from one State to another, the fact that a state court rather inclined to sustain a tax for appropriate reasons, if a state court find that a tax is indeed a burden on interstate commerce, that carries a lot of weight here.

Mr. Martin P. Detels, Jr.: Well, in the Spector case, as I recall, this Court remanded the case on its first appearance to await an interpretation of Connecticut's law by a Connecticut court not in that case but in some case.

Now, here, what is being suggested, I think is inappropriate because a court of the State of Alaska would be the one to determine the construction of a statute of the territorial legislature of the territory of Alaska.

And that some 10 years after its enactment and some 10 years after taxes which for all practical purposes at this moment had been paid by the respondents in the form of supersedeas bonds.

But I hope to persuade the Court that under either of the two possible constructions and I think there are only two, that this kept tax cannot stand and that a remand would be a formal and useless as well as in this circumstance, an unfair thing.

Now, what is the subject or incidence of this tax?

It's the prosecution of a line of business, in this case, the operation of a freezer ship.

This is to be compared with the tax imposed on land-based coal storage plants and with the tax imposed on land based canneries and floating canneries.

None of these statutes is made to depend upon the taking or catching of fish.

The territory has admitted in its briefs in this Court -- excuse me, I should say Alaska has admitted that this is a tax on processing activity.

So a tax on processing activity must tax process not fishing.

The record is also clear that land-based coal storages who from 1949 to 1951 were taxed like the respondents in the same subsection of the same Act.

No differentiation, no specific reference to freezer ships.

Land-based coal storages operate no catcher boats.

They take no fish, whatsoever.

They purchase all their fish from independent fishermen.

It's obvious that Alaska's tax scheme of which this Section is apart is to tax not the catching or the taking of fish but to tax the processing of the fish after they are taken.

The record at 305 and 306 and at 335 and 336 sets forth the fact that the land-based coal storage plants do not engage in fishing activities of any kind.

If this tax is laid on the catching of fish, then, the petitioner here has been collecting taxes without warrant from land-based coal storage companies for the 12 years.

Now, this record also shows that freezer ships can and do purchase fish from independent fishermen.

For all that this record shows they could obtain all their fish in that manner.

Now, could a representative of the respondents come before this or any other court and say that they were not engaging in business as a freezer ship merely because they chose to conduct their business by not operating catcher boats.

I don't think it could.

Now, in addition, Alaska does impose a tax on the catching of fish.

And it knows how to specify when it -- intends that to be the taxable event.Chapter 66 of the Session Laws of 1949 is set out as appendix B --

Chief Justice Earl Warren: 66?

Mr. Martin P. Detels, Jr.: 66 of 1949 as set out as appendix B to our brief.

And Mr. Thurlow referred to it as a regulatory license fee and I think he's correct in that statement.

But, it does provide for the requirement of a license and the payment of a fee for any person who fishes commercially for, it takes or attempts to take salmon.

Chief Justice Earl Warren: What is the fee?

Mr. Martin P. Detels, Jr.: As it originally enacted, it was $50 for a nonresident fisherman and $5 for a resident fisherman.

This Court invalidated that discrimination in Mullaney versus Anderson in 1952.

And as it is now in effect, it is -- if I am correct, $15 for a nonresident fisherman and $10 for resident fisherman.

Chief Justice Earl Warren: Your -- do your boats pay that $15 now?

Mr. Martin P. Detels, Jr.: The record is silent, Your Honor, but in fact, they have no immunity from it.

There is no indication here that they've ever claimed any immunity.

I would have to go outside the record to tell the Court that they do.

Chief Justice Earl Warren: Well, I don't -- I don't think it (Inaudible)

Mr. Martin P. Detels, Jr.: They do.

Chief Justice Earl Warren: They do pay.

Mr. Martin P. Detels, Jr.: We have never contended before any court that Alaska may not impose a tax, a nondiscriminatory tax on the catching of fish within its waters.

We just -- we -- our position is that by this legislation, it has not done so.

Now --

Justice Hugo L. Black: Has not done what?

Mr. Martin P. Detels, Jr.: Has not sought to tax the extraction or severance or taking of fish, the activity which can be taxed under Oliver Iron Mining Company versus Lord.

Chief Justice Earl Warren: Would the -- would the State be entitled to -- without having it consider discriminatory to have -- have two different kinds of taxes, one for -- for those fishermen who -- who catch the salmon within their territorial waters and who take them into the -- into the shore where there'd be no -- no chance of them getting away from taxation on the one hand, and then, another type of taxation, another method of collecting it rather for those who -- who take a ride out, out of the State without any processing in -- in the State?

Mr. Martin P. Detels, Jr.: I don't --

Chief Justice Earl Warren: Is there anything discriminatory on the fact that the -- that the kind of tax is -- is different?

Mr. Martin P. Detels, Jr.: Well, Your Honor, I think that the territory itself has answered that question in its brief.

It says on page 24 of its opening brief, presumably a tax could not be constitutionally devised which is levied only upon fish caught by freezer ships.

Chief Justice Earl Warren: Well, I -- I wouldn't -- I would -- that wasn't my question.

In other words, they expect to get so much revenue from -- from the business of -- of catching fish.

Would it make any difference if there were two different statutes that were different in -- in form as to those who could be easily policed because they -- all their fish go to the canneries inside Alaska?

And another type of statute for those who -- who never get -- take their fish to shore but take them right out to a -- to a ship that's outside of the territorial waters?

Mr. Martin P. Detels, Jr.: And tax them at a different rate?

Chief Justice Earl Warren: Well, let's start with -- with approximately the same rate.

Mr. Martin P. Detels, Jr.: Well, I think that this Court has said that a discrimination or a differential which is reasonably approximated to a difference in the actual cost of enforcing the tax laws is permitted if you get into discrimination or differential beyond that, it's our position to Commerce Clause would not permit it.

This record does contain information as to the difference in the cost of enforcement against the respondents as compared to land-based operators.

And it is that in 1949, the first year in which any tax was imposed upon freezer ships, the additional cost of enforcement was $50.

In 1950, the second year, the additional cost of enforcement was $100 and the figures do go upwards from 1951 on as a direct result of the quadrupling of the tax rate upon the respondents by Chapter 116 in 1951.

Have I answered your question Mr. Chief Justice?

Chief Justice Earl Warren: Well --

Mr. Martin P. Detels, Jr.: I'm not (Voce Overlap) --

Chief Justice Earl Warren: Well, you -- used of my understanding to your answer is that they can only have a discrimination to the extent of the additional cost of -- of policing.

Mr. Martin P. Detels, Jr.: That's our (Voice Overlap) --

Chief Justice Earl Warren: If it goes beyond that, it is -- it is burden on commerce.

Mr. Martin P. Detels, Jr.: That's correct.

Chief Justice Earl Warren: That's the answer to it.

Mr. Martin P. Detels, Jr.: Now, I think it's --

Justice Tom C. Clark: What is the State (Inaudible)

Mr. Martin P. Detels, Jr.: Well, I -- I would think that the Legislature could classify in that respect and impose a different tax rates, but I would also suppose that the higher tax would have to be imposed on the higher price or more valuable fish whereas what we have here is the opposite of that.

The 1% rate on land-based canneries as compared with the 4% rate on the freezer ships --

Justice Tom C. Clark: (Inaudible) kind of price, 1% of canneries (Inaudible) 4% of the canneries.

Mr. Martin P. Detels, Jr.: This record is full of testimony, Your Honor, to the effect that the land-based cold storage fish are more valuable.

They are eaten in a fresh condition prepared for the table.

Now, I think it's inherent in the entire argument of Alaska that a freezer ship is somehow, something less or other than a vessel engaged in navigation or commerce.

I do not think that that position can be sustained.

For one thing, a freezer ship proceeds from Puget Sound of Bristol Bay at the beginning of the season.

While there, it serves as a base for the operations of these smaller catcher boats or for the recede of fish completely independent boats.

While there, it loads, freezes and stores salmon and it returns to Puget Sound at the end of the season.

But now --

Justice Hugo L. Black: That wouldn't -- that wouldn't make an interstate commerce during the time that was -- they are next to the last of it, I don't quite understand that.

Mr. Martin P. Detels, Jr.: Well, I think it is, Mr. Justice Black, and I will try to persuade you in that fact.

Well, we concede that respondents are not common carriers.

But no -- no commerce case decided by this Court turns on that issue.

The respondents' vessels are in the language perhaps of another century trading for their own account.

As a matter of fact, common carriage is a comparatively modern byproduct of the industrial evolution and I suggest that vessels trading for their own account were more familiar to the frameworks of the Constitution than common carriers.

Michigan-Wisconsin Pipeline Company to cite a recent example of an interstate enterprise held immune from taxation in this Court was not a common carrier.

It owned the property which had received and transmitted through its pipelines.

I could go on to many other similar examples.

Secondly, there is the argument that because these vessels anchor for a period of time that they somehow are removed from commerce and navigation.

I note here that there was a different objection made by Alaska at the time of trial where the claim was that they moved too often and were hard to find.

I submit to the Court that only in the pipeline cases is there simultaneous loading and transmission in interstate commerce.

A common carrier vessel must necessarily store cargo which had as previously loaded while it is loading other cargo.

In every case, there is storage as an aspect of carriage of cargo.And if it is refrigerated cargo, there is coal storage.

Justice Tom C. Clark: (Inaudible)

Mr. Martin P. Detels, Jr.: They take them to Puget Sound in some instance in Seattle and they are there canned for them.

Justice Tom C. Clark: The same companies.

Mr. Martin P. Detels, Jr.: The canneries are owned by other companies but they are canned for the account of the respondents and the respondents retained ownership.

Now, can it fairly be said that these vessels while operating in Bristol Bay or elsewhere are removed or withdrawn from commerce and navigation.

I think not.

And I suggest that if I were to come here in defending a personal injury case brought against the operator of one of these vessels, for an injury sustained during the period that it was operating in Bristol Bay and to urge the Court that the respondents did not warrant the seaworthiness of that vessel to the members of its crew during the period that it was anchored for the purpose of receiving fish, I would get short shrift from this Court and I would deserve short shrift.

Navigation does not seize to be navigation because at some temporary purpose which requires the vessel to anchor or more, the principle of the recent case of West versus United States cannot fairly be applied here.

Now, this Court has said that the object of the Commerce Clause of the Federal Constitution is that every farmer and every craftsmen shall be encouraged to produce by the certainty that he will have free access to every market in the nation.

I submit that that principle is that issue in this case.

Concretely, this Court has held that Louisiana could not embargo the shipment of raw Louisiana shrimp for processing in Mississippi plants.

That South Carolina could not hamper by regulation.

The shipment of raw South Carolina shrimp for processing in Georgia plants.

Justice Charles E. Whittaker: Is this really on the aspect to -- to obstruct transportation assumed that this ship were on the shores for the purpose of taking -- freezing the fish?

Then, afterward, they were loaded into a ship for transportation to Seattle.

Would that first operation not be local or manufacture of processing well within the power of Alaska to assess?

Mr. Martin P. Detels, Jr.: Your Honor, as suggesting that there are two different vessels involved?

Justice Charles E. Whittaker: Well, I'm asking if there is a distinction between the operations, which is tantamount to two operations - One, freezing, and the other that subsequent transportation and commerce, the first being local in character and subject to regulation by the power of the State.

Mr. Martin P. Detels, Jr.: Well, it's certainly local in the sense that it occurs within the territorial jurisdiction under the assumption of the Ninth Circuit Court of Appeals if there were two separate vessels involved.

It appears to me that we would have only the discrimination issue to place before this Court.

But the other issue is that when these vessels are loaded aboard, there is -- when these salmon are loaded aboard the respondents' vessels, they are committed irrevocably to interstate transportation.

The processing which is performed to the extent that it is a process is carried on aboard that vessel.

And under other decisions of this Court to which I will refer, that cannot be separated out.

This Court held in the Michigan-Wisconsin Pipeline case that Texas could not tax the receipt of natural gas in Texas for transmission to and distribution in other States.

It held in Joseph versus Carter and Weeks and other cases that New York could not tax the compensation received by stevedoring companies from the loading or discharging of cargo in interstate or foreign commerce.

The purpose and effect, as we hope to demonstrate of the Alaska tax here involved is to promote the processing of Alaska of raw materials, in this case salmon, by taxing their preservation for later canning in another State.

And the activities upon which the tax is laid occur after they are loaded aboard the vessel in which they are in every instance transported in interstate commerce.

To validate this tax would be to make the borders of Alaska an obstruction to the flow of commerce.

Now, the Court of Appeals decided this case by answering what it found to be the critical question whether the activity of freezing and cold storing of fish while lying at anchor in territorial waters, preparatory to transporting such fish to the State of Washington is an inseparable part of interstate commerce, and it answered that in the affirmative that it was an essential part of interstate commerce.

Now, first and most obviously, all activities in interstate commerce take place within the boundaries of some State except as they may occur on the high seas.

Whether they are an integral part of interstate commerce depends on whether there can be a realistic separation.

In the Carter and Weeks case, this Court said, "Transportation in commerce begins at the least with loading.Loading is preliminary and essential to transportation."

It's conceded here that the only activity of the respondents which takes place prior to loading is the catching of fish and I think that it's conceded that this statute is not imposed on that Act.

Justice Tom C. Clark: You have to (Inaudible)

Mr. Martin P. Detels, Jr.: You have to preserve them in some manner.

Justice Tom C. Clark: (Inaudible)

Mr. Martin P. Detels, Jr.: No.

The federal law requires that salmon be preserved by freezing, icing, salting or some other method within 48 hours of being killed and the laws of nature require the same thing in any event.

Justice Tom C. Clark: What did they (Inaudible)

Mr. Martin P. Detels, Jr.: Yes.

Justice Tom C. Clark: (Inaudible)

Mr. Martin P. Detels, Jr.: That's correct, Your Honor.

Justice Tom C. Clark: (Inaudible)

Mr. Martin P. Detels, Jr.: No.

These fishes are all frozen in the realm without any sort of beheading or cleaning of any kind.

Justice Tom C. Clark: How long (Inaudible)

Mr. Martin P. Detels, Jr.: Pardon Your Honor?

Justice Tom C. Clark: How long supposes they have been (Inaudible)

Mr. Martin P. Detels, Jr.: The number of days during which these vessels have operated in waters north and the south boundary of Alaska which was the only thing we find we could agree upon seven years ago appears in this record at -- it's Exhibit 4 on page 45 and I think that Mr. Thurlow has correctly stated that it varies from about 25 to as many as 55 or 60.

Now, in this case, the freezing and the storage take place after the loading has occurred.

The transportation is impossible as well as unlawful without the preservation by freezing or otherwise.

And here again, I reiterate, there is no challenge to the power of Alaska to levy a tax on the taking of fish within its waters.

To the extent that it has levied such a tax in Chapter 66, that tax is being paid by the respondents.

It's Alaska -- pardon me Your Honor.

Justice Charles E. Whittaker: (Inaudible) upon in line with business mainly freezer ships, doing business in Alaska, a 4% of the value of fish and if you're doing business in Alaska through your catcher boats, wouldn't that be a tax upon the privilege and then direct them perhaps but a tax upon the privilege of taking fish if the statute be given that interpretation?

Mr. Martin P. Detels, Jr.: Well, I think that that is the reasoning of the Court of Appeals in its first decision in effect.

I -- I would attack that problem from this standpoint.

This Court has said that where you have local activity related to interstate commerce, you may tax the local activity but you may not buy the reach or measure of the tax.

Tax the interstate aspects and the amount of the tax may not be increased because of the interstate business done, Cooney versus Mountain States Telegraph Company was such a case.

I think that this Court has also helped me with that problem in the Michigan-Wisconsin Pipeline case because it has said that a taxpayer has received benefits from the exercise of state police power and protection is not material to a -- a Commerce Clause question.

That is material to a -- an attack under the Due Process Clause.

In the Pipeline case, the tax -- the taxing authority emphasized the conservation and proration measures which benefited the taxpayer.

This Court said that though the enforcement of these laws has been in the public interest and in the interest of the industry of which the taxpayer was a part, is only relevant to show that the essential requirements of due process have been met and it does not bear on the validity of the tax under the Commerce Clause.

Now, in the Michigan-Wisconsin case, the holding of the Court was not that Michigan-Wisconsin was not engaged in local activities which might form the basis for a tax, but that the State had delayed the incidence of the tax beyond the point where local activity had seized and interstate activity had began.

In that case, Michigan-Wisconsin compressed, cool, scrub and dehydrated gas which had received from the outlet of a local gasoline plant and it transported it over its lines than into other States.

The case also involved a second taxpayer, Panhandle Eastern Pipeline Company whose activities were determined by this Court and by the parties to be identical from a constitutional standpoint to Michigan-Wisconsin.

Panhandle in fact made local sales within taxes of gas that it received in the manner which I've just described.

Now, here, as also in Michigan-Wisconsin, there is the possibility of a multiple burden.

There is not only the possibility in one sense, a multiple burden has occurred.

If Alaska may tax the storing and freezing of this salmon, then, certainly Washington may tax their cold storage because they are cold stored in Washington while they are awaiting discharge to be canned.

And it was that possibility of a multiple burden which this Court also considered in the Michigan-Wisconsin case as an additional reason for invalidating the tax and in many other cases as well.

The power to tax a transaction forming an unbroken process of interstate commerce is in the Congress and not in the States or in a territory.

Now, as to the discrimination point --

Justice Felix Frankfurter: Before you move on to that.

Mr. Martin P. Detels, Jr.: Yes, Your Honor.

Justice Felix Frankfurter: Suppose that there was a sale of -- suppose the -- Alaska just taxed the transaction of sale to the freezer ships, a lot of independent fellows pulling up a lot of salmon and selling it, would the sale tax imposed upon and concededly whatever they buy is committed to interstate commerce?

Is it before the sales tax or whatever you call it, use -- I mean sales tax?

Mr. Martin P. Detels, Jr.: The tax is on the sale from an independent fisherman to the respondents.

Justice Felix Frankfurter: Yes, but (Voice Overlap) --

Mr. Martin P. Detels, Jr.: And if it takes place in Alaska --

Justice Felix Frankfurter: Yes, although --

Mr. Martin P. Detels, Jr.: I would see no basis for resisting it.

Justice Felix Frankfurter: Although you include my proposition that concededly all they buy, is it ones committed to interstate commerce?

Mr. Martin P. Detels, Jr.: Well, in essence, that was the situation in (Inaudible) versus Greenwood if I'm not mistaken involving a cotton broker who paid an occupation tax where all of the cotton that he purchased was ultimately shipped out of the State.

Justice Felix Frankfurter: But let's -- the ship are out of the State if he sends him to the territory by a store and that he could have been subjected to an occupation plant, could he?

Mr. Martin P. Detels, Jr.: No, Your Honor.

Justice Felix Frankfurter: So I can illustrate how nice the distinctions are, aren't they?

Mr. Martin P. Detels, Jr.: They are very nice and as Your Honor said in a case which I can't recall right now, sometimes the language describes the result rather than process of reasoning.

Justice Felix Frankfurter: But you think you -- you would be pretty clear that a sales tax that would be within the power of the State.

Mr. Martin P. Detels, Jr.: Under their conditions Your Honor described, yes.

Justice Felix Frankfurter: Yes.

Mr. Martin P. Detels, Jr.: And I -- I don't think that that's any part of our position here --

Justice Felix Frankfurter: No, no.

I didn't mean to suggest.

I just want to (Voice Overlap) --

Justice Hugo L. Black: You would know a distinction there I guess as I gather the questions.

You say the sales tax was permissible but use tax, couldn't it, by the processor?

Mr. Martin P. Detels, Jr.: Well, if there is a transfer of title.

Justice Hugo L. Black: Yes.

Transfer of sales tax --

Justice Felix Frankfurter: Was that transferred?

Justice Hugo L. Black: -- of one thing, the use tax for the other.

Mr. Martin P. Detels, Jr.: Well, I --

Justice Hugo L. Black: (Voice Overlap) would be to learn.

Mr. Martin P. Detels, Jr.: I understood Mr. Justice Frankfurter to describe a sale which took place entirely within Alaska.

Justice Hugo L. Black: That's right.

That's right.

Mr. Martin P. Detels, Jr.: I could see no basis for attacking the application of the sales.

Justice Hugo L. Black: So What about a used tax on the boat?

Mr. Martin P. Detels, Jr.: The used tax --

Justice Hugo L. Black: -- processor -- for process?

Justice Felix Frankfurter: Within the water?

Justice Hugo L. Black: Within the waters.

Mr. Martin P. Detels, Jr.: A tax on the use --

Justice Hugo L. Black: That's right.

Mr. Martin P. Detels, Jr.: -- of this vessel within the waters.

Justice Hugo L. Black: That's right.

Mr. Martin P. Detels, Jr.: The use of boats (Overlap) --

Justice Hugo L. Black: Well, in that sense I think that's what we have here.

Mr. Martin P. Detels, Jr.: I -- I think -- I don't think so.

Justice Hugo L. Black: By the way I understand it.

Mr. Martin P. Detels, Jr.: This Court -- this Court has permitted taxes which have been described as a property tax or an intangible tax under circumstances not greatly different from this case without the discrimination point which I would like to get to at this time.

Justice Felix Frankfurter: But -- just to go to this -- this little cite that if it were, I -- I am assuming that the sales tax which I hypothesized wouldn't be imposed not on the seller but on the buyer.

Would that make a difference to you?

Mr. Martin P. Detels, Jr.: I don't believe so, Your Honor.

Justice Felix Frankfurter: Alright.

Mr. Martin P. Detels, Jr.: In practical operation, this tax discriminates against the interstate transportation of salmon caught in Alaskan waters for canning outside of Alaska and in favor of the canning of such salmon in Alaska.

It makes these classifications among the persons engaged in the freezing of salmon.First, freezer ships taxed at the rate of 4% of the value of the salmon.

Second, land-based coal storage plants taxed at the rate of 1% provided the salmon are not later canned in Alaska and thirdly, canneries which are not taxed at all with respect to the freezing of salmon which they later can in Alaska.

We submit that if in a single statute, a tax of 1% were imposed for processing fish by freezing with a further provision that if a fish were canned in another State, the tax on freezing would be 4%, the invalidity would be clear.

Justice Felix Frankfurter: But suppose the statutes -- suppose the statute such as you've just stated, would make it all of -- would make the discrimination between freezing and canning wholly within the State, no interstate commerce problem.

But on the phase of the statute such a statute would be violated of the denial of equal protection?

Mr. Martin P. Detels, Jr.: I don't believe so, Your Honor.

The State could discriminate.

It could encourage canning at the expense of freezing or vice versa.

Justice Felix Frankfurter: Well, how do we know from the -- figure to the statute -- how do I know that nobody could be more ignorant about this processing than I am?

Well, how do I know merely from reading to the statute that the distinction, the differentiation and the taxing rate didn't have some relation to either the quality of the fish or the market of the fish or other taxes which in the light of industry and fisheries -- of the fishing industry are relevant taxes?

Mr. Martin P. Detels, Jr.: Well, in this case, you know that because the territory of Alaska had no power to legislate with respect to fisheries.

Justice Felix Frankfurter: Well --

Mr. Martin P. Detels, Jr.: It had no proprietary interest, it had no police power.

It was prohibited --

Justice Felix Frankfurter: Well, but referring on this page of your argument, we are -- we are outside of the covered soft domain and merely on the question of -- of discrimination.

How do I know that assuming that is a matter of the Commerce Clause, there is no barrier in the way of -- of the taxation?

How do we know that the difference within the tax rates have not some relation to the difference in the benefits of a cause, of a potential profit or the relation of -- of the process and canning as against freezing to important difference in -- in life.

Mr. Martin P. Detels, Jr.: Well, as applied to Alaska, we can know that because the White Act prohibited Alaska from denying any person, any United States citizen the right to take or preserve fish on a basis of substantial equality.

And both the District Court for Alaska, the Court of Appeals for the Ninth Circuit and this Court have said in essence that negatives any police power or whatever.

And when the police power is negative, the power to encourage one form of fisheries activity as opposed to another disappears with it I would submit.

Justice Felix Frankfurter: Now forget about the White Act.

We didn't have to pass on that in the -- in the Indian case, didn't we have?

Mr. Martin P. Detels, Jr.: No.

But this has come up in connection with --

Justice Felix Frankfurter: I -- I understand that.

I quite (Inaudible)

Mr. Martin P. Detels, Jr.: Now, we submitted to the territory and interrogatory in which we asked them what differences they relied upon to support the classification that they made in their tax laws as against these respondents.

And their answer appears and it is not as the petitioner's brief would have one believe the offhand opinion of a subordinate tax official.

It is a sworn answer to an interrogatory by a party.

And I think the whole tax of the basis for this classification is of interest but most especially the part appearing at the bottom of page 259 and the top of 260.

It says, "If all of the fish frozen aboard freezer ships or canned or processed in Alaska instead of the States, it would require a sizable industry to care for them aside from the fact that the territory would collect about twice the tax that the freezer ships are now paying."

Now, this Court has at least twice considered legislation which had the same objective and the same effect as this Act.

First, in the case of Foster-Fountain Packing Company versus Haydel, the facts of which I described a few minutes ago.

In that case, Louisiana enacted a statute which prohibited the export of shrimp from which the heads and holes have not been removed from the State.

But it permitted the export without restriction once the heads and holes have been removed.

This Court found that the purpose and intent of the Act was to preserve the business of processing Louisiana shrimp for Louisiana processors at the disadvantage of shrimp processing plants in Biloxi and it said that if the facts bear out, the allegations of the complaint and the affidavits, the case was before the Court on a demurrer, then, this case -- this Act cannot stand.

A few years later in Toomer versus Witsell, it had before it Section 3414 of the then South Carolina Code by which South Carolina required that vessels taking shrimp within the waters of the State dock, unload, packed and stamped their catch before removing it from the State.

This Court found that the necessary effect of that requirement would be to inhibit the free export of South Carolina shrimp to Georgia for processing in Georgia plants and that it invalidated that particular section of the South Carolina Code.

Now, at the same time, it validated a poundage tax of one-eighth of a cent per pound imposed on the taking of all shrimp in its waters by whomever taken and regardless of where it processed.

And of course, there can be no objection to such attacks but that is not the tax before the Court at this time.

Now, the differentiation which the trial judge made, the distinction he made in not following these cases was that they were regulatory measures not tax measures.

And of course, this Court has on many, many occasions said that the tax power may not be used to accomplish of forbidden purpose.

In Freeman versus Hewitt, it pointed out that a burden on interstate commerce is none the lighter and no less objectionable because it is imposed by a State under the taxing power rather than under manifestation of police power in the conventional sense.

Alaska here is seeking to accomplish what this Court denied to South Carolina and to Louisiana by using the tax rather than the regulatory power.

And its action should receive the same treatment upon this Court.

Now, with reference to whether or not the freezing of fish for later canning in Alaska is a substantial activity, there are three witnesses who speak of that.

Two of those witnesses were produced by the petitioner here and the fair essence of their testimony is that this occurs with regularity in Alaska under two circumstances.

It occurs first when fish suitable for canning but not for sale as fresh, frozen fish are received at the beginning of the season prior to the time the canneries go into operation, and it happens secondly when there is a large run of fish.

And the canning facilities of the canneries are inadequate to handle the fish as they are received.

Now, there is some testimony that this is an isolated thing.

There is no testimony from which the Court confine that it's 1% or 2% or 5% or any percent of the business of land-based cold storage plants.

But, in one sense, the activity of these respondents is isolated.

Exhibit 17 in the record at page 57, we'll show by mathematical process that the share of the Alaska pack of salmon represented by the catch of all freezer ships, not just respondents amounts to exactly 1.3%.

Justice Hugo L. Black: You say page 57?

Mr. Martin P. Detels, Jr.: 57 Your Honor.

Now, the discrimination in charging respondents 4% for freezing fish which are canned in Washington as opposed to no tax with respect --

Justice William J. Brennan: (Inaudible)

Mr. Martin P. Detels, Jr.: Well, Your Honor, I totalled the number of cases of salmon appearing in Exhibit 17.

Justice William J. Brennan: (Inaudible)

Mr. Martin P. Detels, Jr.: On page 57 of the record.

Justice William J. Brennan: (Inaudible)

Mr. Martin P. Detels, Jr.: 17 is a part of the same physical page.

Justice William J. Brennan: (Inaudible)

Mr. Martin P. Detels, Jr.: By totalling the number of cases for each of the three varieties of canning operations, you can determine that's freezer ships account for 1.3% of the Alaska canned salmon pack.

Justice William J. Brennan: (Inaudible)

Mr. Martin P. Detels, Jr.: Cases of 48 one-pound tens of salmon.

Justice William J. Brennan: (Inaudible)

Mr. Martin P. Detels, Jr.: Those are the number of units.

Number of --

Justice William J. Brennan: (Inaudible)

Mr. Martin P. Detels, Jr.: Yes, sir.

Now, in the light of Alaska's failure to tax the freezing of salmon for later canning in Alaska, what significance can this Court give to the fact that it imposes a tax at the rate of 6% on the canning of those fish?

We submit that it can give no significance to that for three reasons.

One, there can be no comparison between how a State treats its local commerce and how it treats interstate commerce.

This Court has said once again in Freeman versus Hewitt that those are incomparable.

Secondly, the record shows in Exhibit 8 that Washington taxes the canning of those ships and the canning of those salmon and respondents pay that tax.

That appears at page 47 of the record.

That Washington for the time being has imposed a tax which added to the 4% imposed upon respondents by Alaska that the total of those two taxes doesn't equal 6% is of no constitutional significance because there is no constitutional inhibition on Alaska -- on Washington increasing its tax rate to any percentage that it sees fit to do so.

Justice Hugo L. Black: Has there been any challenge to the Washington tax?

Mr. Martin P. Detels, Jr.: No, there has not Your Honor.

Justice Hugo L. Black: What precisely does it tax?

Mr. Martin P. Detels, Jr.: It taxes manufacturing.

Justice Hugo L. Black: Where?

Mr. Martin P. Detels, Jr.: In Washington.

Justice Hugo L. Black: It takes place where?

Mr. Martin P. Detels, Jr.: In Washington.

Justice Hugo L. Black: In Washington?

Mr. Martin P. Detels, Jr.: Yes.

These fishes are all canned in Washington.

Justice Hugo L. Black: Does it impose any -- attempt to impose any tax on the freezing?

Mr. Martin P. Detels, Jr.: No, it doesn't Your Honor.

Justice Felix Frankfurter: Does the economic factor of the freezing enter into what is tax in Washington?

Mr. Martin P. Detels, Jr.: Well, aside from the fact that there could be no fish to can --

Justice Felix Frankfurter: I understand that.

What I mean is --

Mr. Martin P. Detels, Jr.: No, I don't think so.

I think the answer is no.

Justice Charles E. Whittaker: Did your (Inaudible) buy fish from shore-based reserves in Alaska?

Mr. Martin P. Detels, Jr.: As far as this record shows Your Honor, I think there is no evidence to that effect.

Justice Charles E. Whittaker: If you did, then, those fish would have undergone a tax in Alaska under the statute, wouldn't it?

Mr. Martin P. Detels, Jr.: Of 1%

Justice Charles E. Whittaker: -- before the commerce began.

Mr. Martin P. Detels, Jr.: Of 1%.

Justice Charles E. Whittaker: Yes.

Before the commerce to -- to Seattle began.

Mr. Martin P. Detels, Jr.: That is true.

There is evidence in the record and I can't point to the record page at this moment.

In the testimony of Wallis George to the effect that frozen salmon has been shipped from his cannery to Seattle for canning in Seattle.

But the testimony is not -- that goes no further than I've just stated.

Finally, with respect to the discrimination point is the matter which I referred to earlier that the tax on the intrastate portion of an interstate enterprise must be imposed solely on account of the local activity and may not be increased because of interstate activity or out of state activity.

And by referring to this 6% tax which it imposes on its own canneries, Alaska is asking this Court to give significance to the fact that the respondents also can their fish and justify the tax on that basis when that activity takes place in Washington and is taxed by the State of Washington.

We ask the Court --

Justice Hugo L. Black: (Voice Overlap) your question number two dependent upon the ruling in any way on your question number one?

Mr. Martin P. Detels, Jr.: I think not Your Honor.

Justice Hugo L. Black: Is there an alternative?

Mr. Martin P. Detels, Jr.: There are alternatives.

We ask the Court to affirm the judgment below on the ground first that the freezing and storing of these fish taking place after they're loaded aboard the respondents' vessels is an integral part of interstate commerce that there can be no realistic separation and we rely primarily on the Michigan-Wisconsin Pipeline case which the Ninth Circuit Court of Appeals thought applicable.

Secondly, we asked the Court to affirm the judgment on the ground that in practical operation, this tax discriminates against the shipment of raw salmon from Alaska for processing in another State.

Thank you.