General Motors Corporation v. District of Columbia

PETITIONER: General Motors Corporation
RESPONDENT: District of Columbia
LOCATION: United States Post Office and Courthouse

DOCKET NO.: 352
DECIDED BY: Warren Court (1962-1965)
LOWER COURT: United States Court of Appeals for the District of Columbia Circuit

CITATION: 380 US 553 (1965)
ARGUED: Mar 10, 1965
DECIDED: Apr 27, 1965

Facts of the case

Question

Media for General Motors Corporation v. District of Columbia

Audio Transcription for Oral Argument - March 10, 1965 in General Motors Corporation v. District of Columbia

Earl Warren:

Number 352, General Motors Corporation, Petitioner, versus District of Columbia.

Mr. Barnes, you may proceed with your argument.

Donald K. Barnes:

Mr. Chief Justice and may it please the Court.

My associates are Thomas J. Hughes of Michigan and William T. Plumb of the District of Columbia.

The problem involved in this case is the geographical attribution or apportionment of net income for tax purposes.

The District of Columbia Income and Franchise Tax Act imposes on corporations carrying on business within and without the districts a franchise tax measures by net income daily attributable to that portion of the business which is carried on within the District and then the Act directs the District Commissioners to prescribe by regulation formulas for properly determining such portion.

And the questions which that Act and the regulations under it raise with respect to the assessments made against the petitioner for 1957 and 1958 are whether that statute authorizes the Commissioners to use for this apportionment purpose, a single factor of sales formula that is attributing to the District that portion of petitioner's entire business net income from all sources which the gross receipts received from sales to customers within the District thereto total gross receipts from sales throughout the world.

And do you argue this (Inaudible)

Donald K. Barnes:

Mr. Justice Harlan, I can't escape it.

We have constitutional questions but I have to go through the -- the statutory question first.

We find -- we believe that the statute was violated by the regulations and that the -- even if that were not so, then the regulations produced an unconstitutional result.

Arthur J. Goldberg:

You don't quarrel and do you agree with the statute itself?

Donald K. Barnes:

Not at all.

The statute is imminently reasonable except for --

Arthur J. Goldberg:

Fairly attributable.

Donald K. Barnes:

Fairly attributable but it probably should have itself determined what was fairly attributable instead of leaving it to regulations.

That's the only quarrel of the statute and that's not a constitutional point.

You're not arguing that on the point of allegation?

Donald K. Barnes:

No sir.

If so, that is if the statute does permit that then the next question is whether such formula is here applied as unconstitutional and that's the two reasons, one is for attributing to the District net income out of all reasonable proportion to income derived from District activities.

As a matter of fact, the figure shows there's 11 times as much quite beyond the limits of due process and furthermore taxing values and reaching activities of someone which are not within the territorial jurisdiction of the District.

And second, discriminating against interstate commerce by double taxation, by the result in double taxation and by imposing it by bargains which business entirely confines the District did not have to bear.

The facts in the record are voluminously set forth in great detail but the essential ones to the issues which we raise here are these but the petitioner's business is primarily the manufacture of motor vehicles, 95% of the income which was attributed to the District by which these assessments were based is derived from the manufacturer in the sale of vehicles and parts which are manufactured wholly outside of the District and in general sold outside the District to customers located in the district, so I shall not pay attention to the evidence weighing the other 5% for the purpose of this argument.

The pertinent products are Cadillac automobiles, GMC trucks and GMC coaches all of which are manufactured entirely in Michigan, Chevrolet automobiles and trucks which are assembled in Maryland and Buick automobiles and Pontiac automobiles which are assembled in Delaware.

These were all sold through offices outside the District insofar as we're here concerned to customers within the District generally independent retail dealers.

They set all the manufacturing and most of the selling activity occurred outside the District but they were related in District activities.

And they were permins -- principally sales promotion work by traveling representatives having both their offices and their residences outside the District.

In 1957, one of the two years here, the payroll for the time spent by these people in the District was $65,000 for which the District attributes income for $5,166,000, its net income and the tax of $258,000.

The figures are the same order for the next year.

There are offices in the District which are not directly related to the sales of these automobiles and their presence in the District had no bearing on the assessments.