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Oregon Judicial Department Appellate Court Opinions

IN THE OREGON TAX COURT REGULAR DIVISION SCHWEITZER'S CASUAL WEAR, INC., Plaintiff, v. DEPARTMENT OF REVENUE, Defendant. (TC 4555) Plaintiff appealed the imposition of a payroll tax arguing that it is unfair, it amounts to taxation without representation, double taxation, and is in violation of constitutional requirements of uniformity. Explaining that issues of unfairness are remedied by the legislature, that the constitution does not require direct election of a tax, that double taxation does not result from the functions of dual sovereign powers, and that principles of uniformity are not violated where the rate of tax applied is uniform, the court found that the payroll tax at issue does not violate the Oregon or United States constitutions. Taxation 1. Other than an unfairness arising out of a constitutional violation, the appropriate remedy for an asserted unfairness in taxation lies with the legislature rather than with the courts. Taxation 2. The Oregon and United States constitutions do not contain limitations requiring direct participation in the electoral process before a person or entity may be required to pay a tax. Sovereign powers 3. As dual-delegated sovereign powers, the state and federal governments may act in the same arena without limiting the other, absent specific constitutional limitations. Uniformity 4. There is no constitutional violation where the tax rate applied is uniform, even though the absolute amount of tax varies. Submitted on Defendant's Motion for Summary Judgment. Tim Schweitzer, shareholder of Plaintiff, filed a response for Plaintiff (taxpayer) pro se. Wendy Sanderson, Assistant Attorney General, Department of Justice, Salem, filed the motion for Defendant (the department). Decision for Defendant rendered July 2, 2002. HENRY C. BREITHAUPT, Judge. This matter is before the court on Defendant Department of Revenue's (the department) Motion for Summary
file:///C|/Users/Peter/Desktop/Opinions/TC4555.htm[4/19/2013 11:51:17 AM]

Oregon Judicial Department Appellate Court Opinions

Judgment. The parties stipulate to the facts. Plaintiff (taxpayer) is a business located in the city of Cottage Grove. A special election was held September 21, 1999, that resulted in the annexation of Cottage Grove into the Lane County Transit District (LTD). See Ballot Measure 20-23, City of Cottage Grove, Special Election (1999). As a result of that annexation, taxpayer must pay a tax in the amount of six-tenths of 1 percent of the wages paid to its employees, i.e., a payroll tax. Taxpayer argues that the tax is unfair, comparing it to a previously existing inventory tax. Because voting on Measure 20-23 was limited to the residents of Cottage Grove and taxpayer's shareholders do not live in Cottage Grove, taxpayer's preference against the tax was not reflected on that ballot. (1) On that basis, taxpayer contends that it is being subjected to "taxation without representation." In addition, taxpayer argues that the tax results in double taxation because mass-transit systems are federally subsidized and taxpayer's shareholders pay federal income taxes. Finally, taxpayer claims that because the tax is paid only by businesses, not residents, the tax is not uniform as required by Article I, section 32, of the Oregon Constitution. ISSUE Was the LTD payroll tax properly assessed against taxpayer? ANALYSIS The court has jurisdiction of this dispute regarding the LTD payroll tax under ORS 305.620. (2) Following are analyses of each of taxpayer's contentions. The Tax is Unfair Arguments based on the fairness of any taxing provision are relevant only in legislative debates regarding adoption, amendment, or repeal of the tax in question. Neither the Oregon statutes defining the authority of the LTD nor the Oregon or United States constitutions contain provisions authorizing this court to nullify a tax based on asserted unfairness unless the unfairness is also a violation of a constitutional provision. 1. Taxpayer points to the unfairness identified with a previous taxation of inventories in Oregon, and asserts by analogy, that the LTD tax is just as unfair. See generally former ORS 310.608 (1969), renumbered as ORS 307.410 (1983). As discussed in the oral argument on this matter, the analogy used by taxpayer indicates the answer to the argument. That is, to the extent that taxation of inventories was considered unfair, the persons believing that to be true presented their case to the Oregon legislature, which then adopted an exemption for inventories. See ORS 307.400 (1997), amended by Or Laws 2001, ch 753,

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