Alaska v. Arctic Maid – Oral Argument – March 23, 1961 (Part 1)

Media for Alaska v. Arctic Maid

Audio Transcription for Oral Argument – March 23, 1961 (Part 2) in Alaska v. Arctic Maid

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Earl Warren:

Number 106, Alaska, Petitioner, versus Arctic Maid et al.

Gary Thurlow:

Mr. Chief Justice, may it please the Court.

Beginning in 1949 —

Earl Warren:

Mr. Thurlow.

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.

Charles E. Whittaker:

By that, you mean they purchase somewhere, they are anchored at sea?

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.

Gary Thurlow:

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.

(Inaudible) salmon and —

Gary Thurlow:

Yes, sir, they are.

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

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?

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.

Earl Warren:

On what?

Gary Thurlow:

How’s that?

Earl Warren:

Is found what —

Gary Thurlow:

The upper portion of Bristol Bay to be an inland bay and they refer —

Earl Warren:

Not where the ships were?

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.”

William J. Brennan, Jr.:

(Inaudible)

Gary Thurlow:

Yes, it would be.

The freezing —

William J. Brennan, Jr.:

(Inaudible)

Gary Thurlow:

Well —

William J. Brennan, Jr.:

(Inaudible) freezer ships operating (Inaudible)

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.

William J. Brennan, Jr.:

(Inaudible)

Gary Thurlow:

By use of the catcher boats.

William J. Brennan, Jr.:

(Inaudible)

Gary Thurlow:

Yes, sir.

William J. Brennan, Jr.:

(Inaudible)

Gary Thurlow:

No, it’s best to approach it on —

William J. Brennan, Jr.:

(Inaudible) they were anchored outside?

Gary Thurlow:

Yes, sir.

Earl Warren:

I see.

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.

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.

Gary Thurlow:

Yes, I believe so.

It’s a local activity.

William O. Douglas:

Has the — has the state courts of Alaska — since Alaska became a State passed on this?

Gary Thurlow:

No, they haven’t.

No, sir.

Felix Frankfurter:

Well, is it exclusively a state question?

Gary Thurlow:

Well —

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.

Gary Thurlow:

Well —

Felix Frankfurter:

Whether you can or cannot isolate it separately.

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?

Gary Thurlow:

No sir, you don’t.

William O. Douglas:

We don’t know what the — how the state courts would construe this?

Gary Thurlow:

No, you have no idea.

Felix Frankfurter:

You mean we don’t know that this was a tax on the — on the catching of fish?

Gary Thurlow:

You certainly don’t have the opinion of any state court on this question.

Felix Frankfurter:

Well, this — is that a controversy?

William O. Douglas:

Yes.

Gary Thurlow:

Yes, it is.

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?

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.

William J. Brennan, Jr.:

(Inaudible) whether it would be taxable.

Gary Thurlow:

Well —

William O. Douglas:

The latest one is processing, isn’t it?

Gary Thurlow:

No — yes, it is, processing by freezing.

William O. Douglas:

Isolating.

processing by freezing.

Gary Thurlow:

The —

William J. Brennan, Jr.:

(Inaudible)

Gary Thurlow:

That’s right.

William J. Brennan, Jr.:

(Inaudible)

Gary Thurlow:

It is.

William J. Brennan, Jr.:

In the freezer ships and the freezer ships are anchored outside (Inaudible) —

Gary Thurlow:

Yes sir, that’s right.

William J. Brennan, Jr.:

(Inaudible)

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 —

William J. Brennan, Jr.:

And the court of panel.

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.

Charles E. Whittaker:

That state is arguing today, what kind?

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.

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?

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.

William J. Brennan, Jr.:

Well, you — you tax (Inaudible)

Gary Thurlow:

We have a statute passed by the 1959 Legislature which purports to do that.

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?

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 —

Felix Frankfurter:

Yes, I understand.

That’s the legal theory.

But what —

Gary Thurlow:

Yes.

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?

Gary Thurlow:

That fact that they are doing something.

Felix Frankfurter:

Anything?

Gary Thurlow:

Anything.

William J. Brennan, Jr.:

Well, what is (Inaudible)

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.

William J. Brennan, Jr.:

Suppose that the (Inaudible) freezer ship itself.

Gary Thurlow:

Yes, it is.

William J. Brennan, Jr.:

I thought they were anchored outside the (Inaudible)

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.

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?

Gary Thurlow:

It is not relevant.

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.

Gary Thurlow:

It’s irrelevant to the issue of the case.

Felix Frankfurter:

Now, is that an agree — is that an agreement?

Is that an agreement in both sides?

Gary Thurlow:

I don’t know, but that’s the only way I can analyze the case.

Felix Frankfurter:

I mean, that’s your view.

Gary Thurlow:

Yes.

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.

Gary Thurlow:

Yes, sir.

Felix Frankfurter:

Alright.

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?

Gary Thurlow:

I believe it would be.

Earl Warren:

It would be.

Gary Thurlow:

Yes sir.

Felix Frankfurter:

From your point of view.

Gary Thurlow:

From our point of view.

Felix Frankfurter:

From your point of view.

Gary Thurlow:

Yes, sir.

Felix Frankfurter:

Because then it would be all a local activity.

Gary Thurlow:

Yes.

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.

Gary Thurlow:

I believe that that would be our position.

William J. Brennan, Jr.:

(Inaudible)

Felix Frankfurter:

He doesn’t.

Gary Thurlow:

He doesn’t.

William J. Brennan, Jr.:

He does not?

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.

William J. Brennan, Jr.:

(Inaudible) because everything you’ve done (Inaudible) territorial water.

I wonder if he would challenge the (Inaudible)

Felix Frankfurter:

He wouldn’t.

Gary Thurlow:

Certainly, he certainly would.

William J. Brennan, Jr.:

(Inaudible)

Gary Thurlow:

Oh, surely.

Felix Frankfurter:

Because they’re intended for commerce and —

Gary Thurlow:

That’s right.

Felix Frankfurter:

— and that’s intended to local consumption.

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

Gary Thurlow:

That is exactly his position.

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?

Gary Thurlow:

None that I know of.

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?

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.

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.

Gary Thurlow:

Yes sir.

Felix Frankfurter:

That’s your position.

William O. Douglas:

Like digging coal.

Gary Thurlow:

Yes sir, like digging coal.

William O. Douglas:

Has any court below agreed with your construction as to the incidence of this tax as a matter of Alaska law?

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 —

William O. Douglas:

Well, that’s what the District Court ruled.

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.

William O. Douglas:

That’s a — that’s a first position of the Court of Appeals.

Gary Thurlow:

Yes.

William O. Douglas:

Not their latest position.

Gary Thurlow:

No, their — their fist position.

William O. Douglas:

Yes.

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.

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.

Charles E. Whittaker:

Is there some basis in your taxing act to contend that the tax is on that act of catching the fish?

Gary Thurlow:

No, I don’t know.

Well, yes.

You mean — yes, I think so.

The —

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.

Gary Thurlow:

Sure.

Charles E. Whittaker:

Is this such a tax?

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 —

Charles E. Whittaker:

Now you’re — you’re jotting down to subparagraph (b), are you?

Gary Thurlow:

Yes.

Yes, sir, subparagraph (b).

Charles E. Whittaker:

Alright.

Gary Thurlow:

So we can see that the tax —

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.

Gary Thurlow:

Yes, sir.

Charles E. Whittaker:

Well, does that suggest to you that the tax is upon obtaining fish for processing through freezing?

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.

Charles E. Whittaker:

4% of the value of the fish bought or otherwise obtained for processing through freezing.

Gary Thurlow:

Yes, sir.

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?

Gary Thurlow:

I — I certainly don’t rely on the measure of the tax to find the scope of the tax.

Charles E. Whittaker:

No.

Gary Thurlow:

And that the part that you just read I think it’s clearly the measure of the tax.

Charles E. Whittaker:

Which is the rate, is that it?

Gary Thurlow:

It fixes the rate.

Charles E. Whittaker:

But not on the subject.

William J. Brennan, Jr.:

(Inaudible)

Gary Thurlow:

Yes, sir.

William J. Brennan, Jr.:

(Inaudible)

Gary Thurlow:

Yes, sir.

William J. Brennan, Jr.:

It — it holds out the provision on that (Inaudible)

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.

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?

Gary Thurlow:

You’d look at the language which precedes the column in subsection (b).

Charles E. Whittaker:

Freezer ships and other floating cold storages?

Gary Thurlow:

Yes, that’s the line of business which is being taxed.

Charles E. Whittaker:

A tax for what?

Not the existence.

Gary Thurlow:

No, for engaging in the freezer ship line of business.

William O. Douglas:

You pick up the incidence from the first sentence of Section 1.

Gary Thurlow:

Yes, sir, I do.

William O. Douglas:

Prosecuting or attempting to prosecute any of the following lines of business.

Gary Thurlow:

Yes, sir.

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.

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.

William O. Douglas:

It catches, freezes and transports?

Gary Thurlow:

Yes, sir.

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

John M. Harlan II:

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?

Gary Thurlow:

Cannery ships are taxed under the cannery tax and floating cold storages are taxed.

These ships do no use catcher boats.

Earl Warren:

How about the canneries on the shore that they’re the — the — or do you have any freezing plants on the shore?

Gary Thurlow:

Yes, sir, we have.

Earl Warren:

Are they taxed?

Gary Thurlow:

They’re taxed at a lesser rate.

Earl Warren:

Is there any question of discrimination in the amount of taxes between the various types?

Gary Thurlow:

Yes, sir, there is.

Earl Warren:

There is a question of discrimination.

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.

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.

Gary Thurlow:

It’s — it’s more —

Felix Frankfurter:

Physically event — as a matter of events of the difference.

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

Felix Frankfurter:

You have the right to — to go on it.

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

Gary Thurlow:

Mining of iron ores are a more elaborate activity than —

Felix Frankfurter:

Maybe it’s more separable and it’s more of a break.

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.

Gary Thurlow:

I presume he will argue that.

William O. Douglas:

Therefore, the — Oliver Iron point.

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?

Felix Frankfurter:

But they tax the mining.

Gary Thurlow:

And isn’t that part —

Felix Frankfurter:

That’s the extraction.

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.

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)

Gary Thurlow:

Yes, sir.

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?

Gary Thurlow:

Fishermen.

Earl Warren:

Do you tax them on — in — in the same way that you — that you tax ships?

Gary Thurlow:

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

Earl Warren:

Well, no — do you — do you tax the fish that they catch?

Gary Thurlow:

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

Earl Warren:

They are.

Gary Thurlow:

Yes, sir.

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.

Gary Thurlow:

Of all the fishing industry or just the freezer ships?

Felix Frankfurter:

No, no, the whole — what part of the revenue of Alaska is drawn approximately?

Gary Thurlow:

I would —

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.

Gary Thurlow:

I would say less than 20% because —

Felix Frankfurter:

Less than 20.

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.

Felix Frankfurter:

All, all of this.

Gary Thurlow:

Yes.

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

So I’d say —

Felix Frankfurter:

What I meant is including — including corporation taxes by fishing concerns.

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

Gary Thurlow:

Well, I’d say close to 20%.

Felix Frankfurter:

Not more than that.

Gary Thurlow:

Not more than that.

William J. Brennan, Jr.:

(Inaudible)

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.

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?

Gary Thurlow:

No taxes, whatsoever.

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.

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.

Earl Warren:

Yes, yes.

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?

Gary Thurlow:

No, sir.

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

Felix Frankfurter:

No, but this — this decision, the Court of Appeals’ decision doesn’t rule that question out, does it?

Gary Thurlow:

Didn’t touch it, so I guess it didn’t rule it out.

Felix Frankfurter:

But that’s in — that’s before the Court.

Gary Thurlow:

No.

Gary Thurlow:

It wasn’t before the Court, it was an —

Felix Frankfurter:

Your answer to the Chief Justice means — that mean that on the existing — existing legislature, existing tax measures wouldn’t have anything.

Gary Thurlow:

Wouldn’t have —

Felix Frankfurter:

You didn’t mean to imply the Constitution that nothing could be it.

Gary Thurlow:

No, no.

Felix Frankfurter:

Alright.

Earl Warren:

Just that it isn’t.

Felix Frankfurter:

It isn’t, yes.

Gary Thurlow:

It isn’t.

Hugo L. Black:

What has happened in connection with the collection of the tax since this case began?

Gary Thurlow:

The State —

Hugo L. Black:

Hasn’t been going?

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.

Felix Frankfurter:

You mean the State is just holding its hand?

Gary Thurlow:

That State has been holding its hands since 1955.

Hugo L. Black:

How did that happen?

Gary Thurlow:

I don’t know.

That was before my time.

[Laughter]

Potter Stewart:

Before it was a state too.

Earl Warren:

It wasn’t a state, yeah.

Gary Thurlow:

Before Alaska was a state.

Hugo L. Black:

But it was a territory.

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 —

Potter Stewart:

The statute is still on the books of the State of Alaska?

Gary Thurlow:

Yes, sir.

Potter Stewart:

This statute which was originally a territorial statute.

Gary Thurlow:

Yes, sir.

Potter Stewart:

The same with identical statute is.

Gary Thurlow:

Exactly — exactly the same.

William J. Brennan, Jr.:

And did I understand you say it was the last two years at least you’d sent bills to those — the operators?

Gary Thurlow:

Yes, sir.

William J. Brennan, Jr.:

And have them pay?

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.

Felix Frankfurter:

What is the discrimination problem?

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.

Gary Thurlow:

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.

Felix Frankfurter:

I like your candor and things — you think this is a difficult part of the problem.

Gary Thurlow:

It is.

Felix Frankfurter:

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

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.

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?

Gary Thurlow:

Yes, those two situations are analogies.

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?

Gary Thurlow:

Yes sir.

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?

Gary Thurlow:

What — I think that’s what the fact show.

Felix Frankfurter:

Well, the — if the fact show that, isn’t really a bad way, aren’t you?

Gary Thurlow:

No, I misunderstood you.

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?

Gary Thurlow:

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

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.

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.

Felix Frankfurter:

Yes.

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.

Felix Frankfurter:

You are talking until now about four and six, not four and one.

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.

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?

Gary Thurlow:

No.

Felix Frankfurter:

Because there’s no claim here.

Gary Thurlow:

No.

Felix Frankfurter:

No, alright.

(Voice Overlap)

William J. Brennan, Jr.:

That’s between four and one.

Gary Thurlow:

It’s between four and one.

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.

Gary Thurlow:

It’s not challenged.

Felix Frankfurter:

Alright, then why bother?

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.

Earl Warren:

We’ll recess now Mr —