Gwin, White & Prince, Inc. v. Henneford

1939-01-03

Headline: Washington’s gross‑receipts tax on marketing Washington‑grown fruit is struck down, blocking the State from taxing sales tied to out‑of‑state buyers and protecting interstate marketers from duplicate state levies.

Holding: The Court ruled that Washington cannot impose a business tax measured by gross receipts from marketing fruit shipped to other states because that tax reaches commerce beyond the State and improperly burdens interstate and foreign commerce.

Real World Impact:

Blocks state taxes measured by entire gross receipts from interstate sales without apportionment.
Protects companies marketing goods across state lines from multiple state levies on same commerce.
Leaves open other tax forms, like net‑income taxes, for states to use.

Topics: state business taxes, interstate commerce, taxes on out-of-state sales, fruit and agriculture marketing, multiple state taxation

Summary

Background

A Washington marketing company that acts as agent for apple and pear growers sued the State Tax Commission to stop a 1935 Washington "business activities" law that imposed a 0.5% tax on gross income from business done in the State. The company markets fruit grown in Washington (about 75% of its business) and Oregon (about 25%), ships fruit to buyers in other states and foreign countries, and uses sales representatives outside Washington who negotiate and complete sales, deliver shipments, and collect payment. The State agreed it would not tax the Oregon business and the dispute focused on sales originating in Washington.

Reasoning

The Court asked whether a tax measured by gross receipts from marketing fruit shipped out of the State unconstitutionally burdens interstate and foreign commerce. The Justices held that the services for which the company was paid were part of interstate commerce and that a tax measured by the whole volume of that commerce (the number of boxes shipped) reaches activity both inside and outside Washington. Because the tax was not apportioned to the local part of the work, it would allow multiple states to tax the same interstate commerce and thus improperly burden interstate trade. The Court reversed the state‑court judgment and blocked the tax as applied.

Real world impact

The decision prevents Washington from collecting a gross‑receipts business tax measured by the entire volume of interstate fruit sales without apportionment. It protects companies that market goods across state lines from the risk of duplicate state levies on the same commerce. The ruling does not forbid all state taxes; it leaves other tax types (for example, net‑income taxes or apportioned taxes) available to the States.

Dissents or concurrances

A brief concurrence agreed the tax was unlawful. One Justice dissented, arguing the law was a neutral revenue measure, that invalidation harms local businesses, and that Congress — not the courts — should address the problem of multiple taxation.