Respondents use freezer ships for the taking and preservation of
salmon along Alaska's shores. The salmon are caught in the waters
off the coast of Alaska by boats which respondents own or have
under contract and by independent fishermen who sell salmon to
respondents. The salmon are frozen when received aboard the freezer
ships, and eventually they are taken to the State of Washington,
where they are canned. On the business of operating such freezer
ships, Alaska levies a tax of 4% of the value of the salmon.
Held:
1. As applied to salmon taken in Alaska's territorial waters,
the tax is not invalid as a burden on interstate commerce in
violation of Art. I, § 8 of the Constitution. Pp.
366 U. S.
199-204.
2. Though this tax does not apply to salmon caught and frozen
for canning in Alaska, it is not invalid as discriminatory, since
Alaskan canneries pay a 6% tax on the value of salmon obtained for
canning. Pp.
366 U. S.
204-205.
277 F.2d 120, reversed.
MR. JUSTICE DOUGLAS delivered the opinion of the Court.
While Alaska was a Territory, the Territorial Legislature
amended L.1951, c. 116, its taxing statutes, to read, in relevant
part, as follows:
"Section 1. BUSINESSES IN ALASKA FISHERIES REQUIRING LICENSES:
AMOUNTS
Page 366 U. S. 200
THEREOF. Any person, firm or corporation prosecuting or
attempting to prosecute any of the following lines of business in
connection with Alaska's commercial fisheries shall first apply for
and obtain, on the conditions hereinafter set forth, a license so
to do on the basis of the following license taxes which are hereby
levied:"
"
* * * *"
"(b) Freezer ships and other floating cold storages: An annual
license tax equal to 4% of the value of the raw halibut, halibut
livers and viscera, salmon and bottom fish, shellfish or other
fishing resource bought or otherwise obtained for processing
through freezing. The value of the raw material under this license
shall be the actual price paid for same including indirect
considerations such as fuel or supplies furnished by the processor
or offsets to the cash value for gear furnished etc. Such value
shall apply to the raw material herein mentioned which is procured
in company owned or subsidized boats operated by employees of the
processor or under lease or other arrangement."
Respondents [
Footnote 1] use
freezer ships for the taking and preservation of salmon along
Alaska's shores. These freezer ships use "catcher boats" which
respondents own or have under contract and which catch salmon off
Alaska. The freezer ships sometimes purchase salmon from
independent fishermen.
Bristol Bay is a famous fishing ground for salmon. When
operating in the Bristol Bay area, the freezer ships
Page 366 U. S. 201
anchor more than three miles from the coast, because of the
shallow waters in Bristol Bay. They serve as a base for their
catcher boats that fish within the territorial waters. In other
areas, both the freezer ships and the catcher boats stay within the
territorial waters.
When the catcher boats -- which are shallow-draft and known as
gillnetters -- have a load or desire to discontinue fishing, or
when the open season ends, they return to the "mother" ship and
unload. The salmon are usually dumped into quick-freezing brine
tanks. At other times, they are placed in freezing compartments and
frozen by blasts of air. The freezer ships eventually return to
Puget Sound in the State of Washington, where the salmon are
canned.
Alaska, when a Territory, brought these suits in the District
Court of Alaska for taxes claimed to be due and owing under the
foregoing Act. The District Court entered judgments for the
plaintiff. 140 F. Supp. 190,
16
Alaska 126. It held that the taking of the fish was the taxable
event, not the freezing of the fish.
On appeal, the Court of Appeals held that respondents were
taxable for fish caught by their catcher boats within territorial
waters, even though the freezer ships remained outside the
three-mile limit. In its view, the catcher boats "operated by the
freezer ship itself are but an extension of that ship's
operations." It held, however, that respondents were not
responsible for taxes on fish taken "by independent catcher boats
but purchased by the freezer ships" outside territorial waters.
There was a rehearing en banc, and, on the rehearing, the Court of
Appeals held that the tax incident was not taking fish, but "the
freezing and cold storage of fish aboard freezer ships." It held
that the tax could not be levied even if the freezer ships received
the salmon in territorial waters. It reasoned that the freezing and
storage of the fish was an inseparable part of interstate commerce,
and could not be taxed
Page 366 U. S. 202
locally any more than the loading and unloading of interstate
carriers.
Cf. Joseph v. Carter & Weekes Stevedoring
Co., 330 U. S. 422;
Richfield Oil Corp. v. State Board of Equalization,
329 U. S. 69.
Accordingly it reversed the District Court. 277 F.2d 120. The case
is here on a petition for certiorari which we granted because of
the importance of the ruling to the new State of Alaska. 364 U.S.
811.
We put to one side the specialized cases such as
Richfield
Oil Corp. v. State Board of Equalization, supra, which arise
under the Export-Import Clause of the Constitution (Art. I, § 10,
cl. 2), because none of the salmon involved in these cases was
destined to a foreign country. We also consider irrelevant cases
such as
Joseph v. Carter & Weekes Stevedoring Co.,
supra, where a state tax was laid on the gross receipts of a
stevedore who was loading and unloading vessels engaged in
interstate commerce. A tax on an integral part of an interstate
movement might be imposed by other States "with the net effect of
prejudicing or unduly burdening commerce," as the Court said in
Michigan-Wisconsin Pipe Line Co. v. Calvert, 347 U.
S. 157,
347 U. S.
166.
We have no such problem here. This tax is one imposed on those
"prosecuting or attempting to prosecute . . . lines of business in
connection with Alaska's commercial fisheries." The business in
question is the one specified in subsection (b): "Freezer ships and
other floating cold storages." To be sure, the tax is computed on
the "value" of the fish "bought or otherwise obtained for
processing through freezing." That, however, is the measure of the
tax, not the taxable event. The taxable event is "prosecuting" the
"business" of "Freezer ships and other floating cold storages."
Part of the business is, of course, transporting frozen fish
interstate. Yet it is plain that a freezer ship is more -- much
more -- than an interstate carrier. Part of its business is
freezing fish. Yet these ships do more than freeze fish and
transport them interstate. Taking the fish directly through
their
Page 366 U. S. 203
own catcher boats or obtaining them from other fishermen is also
a part of respondents' business. Without the taking or obtaining of
the fish, the freezer ship would have no function to perform.
It is clear that Alaska has power to regulate and control
activity within her territorial waters, at least in the absence of
conflicting federal legislation.
Skiriotes v. Florida,
313 U. S. 69,
313 U. S. 75.
That case involved a state law forbidding the use of certain
equipment in taking sponges in waters two marine leagues from mean
low tide off Florida's coast. We upheld Florida's power to regulate
sponge fishing in that manner and in that area, as Congress had not
adopted any inconsistent regulation.
See also Toomer v.
Witsell, 334 U. S. 385,
334 U. S. 393.
Alaska's jurisdiction to tax respondents' operations within her
territorial waters -- whether those activities are taking fish or
purchasing fish taken by others -- is equally clear.
See
Wisconsin v. J. C. Penney Co., 311 U.
S. 435,
311 U. S. 444;
Ott v. Mississippi Valley Barge Line Co., 336 U.
S. 169,
336 U. S.
174.
If the fish were taken or purchased outside Alaska's territorial
waters, all of respondents' business in the Bristol Bay area would
be beyond Alaska's reach. But since some of the fish in all of the
cases before us were taken in Alaska's waters or otherwise acquired
there, respondents are engaged in business in Alaska when they
operate their "freezer ships." For we know from this record that,
in this particular business, taking and freezing are practically
inseparable. Fish are highly perishable, and cannot be kept fresh
very long, even in Alaska's latitude. The process of gathering
fish, either through the catcher boats that are part of
respondents' fleet or through independent operators, is a "local
activity" (
Michigan-Wisconsin Pipe Line Co. v. Calvert,
supra, 347 U. S. 166)
in a vivid sense of the term. We see no reason why our cases
involving the taking of shrimp (
Toomer v. Witsell, supra)
and the extraction of ore (
Oliver Iron Mining Co. v.
Lord, 262
Page 366 U. S. 204
U.S. 172) are not dispositive of this controversy. The
Oliver Iron case is indeed a first cousin of the present
case. Here, as there, the tax is an occupation tax. Here, as there,
the market for the product obtained locally is interstate, the
taking being a step in a process leading to an interstate market.
In both, the local product is promptly loaded for interstate
shipment. But in each, there is a preliminary local business being
conducted -- an occupation made up of a series of local activities
which the State can constitutionally reach. Catching the fish or
obtaining them in other ways from the local market is but an
extension of the freezer ship's operations within Alaska's
waters.
It is claimed that there was no tax on salmon caught and frozen
in Alaska and destined for canning in Alaska, and that, therefore,
this law is discriminatory against freezer ships. Alaskan
canneries, however, paid a six-percent tax on the value of salmon
obtained for canning; [
Footnote
2] and local fish processors, which sell to the fresh-frozen
consumer market, paid a one-percent tax. [
Footnote 3] The freezer ships do not compete with those
who freeze fish for the retail market. The freezer ships take their
catches south for canning. Their competitors are the Alaskan
canners, and we know from the record that fish canned locally
usually are not frozen. [
Footnote
4] When we look at the tax laid on local canners and those laid
on "freezer ships," there is no discrimination in favor of the
former and against the latter. For no matter how the tax on
"freezer ships" is computed, it did not exceed the six-percent tax
on the local canners. Hence, cases such as
Pennsylvania v. West
Virginia, 262 U. S. 553,
262 U. S.
595-596, which hold invalid state laws that
Page 366 U. S. 205
prefer local sales over interstate sales, are inapposite. If
there is a difference between the taxes imposed on these freezer
ships and the taxes imposed on their competitors, they are not so
"palpably disproportionate" (
International Harvester Co. v.
Evatt, 329 U. S. 416,
329 U. S. 422)
as to run afoul of the Commerce Clause. No "iron rule of equality"
between taxes laid by a State on different types of business is
necessary.
Caskey Baking Co. v. Virginia, 313 U.
S. 117,
313 U. S.
119-121;
Morf v. Bingaman, 298 U.
S. 407,
298 U. S. 414;
Capitol Greyhound Lines v. Brice, 339 U.
S. 542,
339 U. S.
546-547.
The judgment is reversed. Since we do not know how many fish, if
any, were obtained outside Alaska's territorial waters, [
Footnote 5] we remand the cause to the
Court of Appeals for proceedings in conformity with this
opinion.
Reversed.
[
Footnote 1]
One of the respondents is a Washington corporation. Four
remaining respondents are partnerships all of whose members are
citizens of the United States and residents of either California or
Washington. The Pacific Reefer Co. is the owner of the ship Reefer
II, as to which a tax lien is asserted to exist by virtue of the
activities of a previous owner. It too is a foreign
corporation.
[
Footnote 2]
L.1949, c. 82, § 1(a), as amended, L.1951, c. 113, § 1.
[
Footnote 3]
L.1949, c. 97, § 1(a), as amended, L.1951, c. 116, § 1.
[
Footnote 4]
Fish are sometimes frozen for local canneries when the run is
more than the canneries can take care of; but that freezing is
merely an adjunct of the local canning industry.
[
Footnote 5]
Alaska contends that its territorial waters in the Bristol Bay
area reach beyond the usual three-mile limit. That is a claim on
the merits of which we express no opinion.
MR. JUSTICE HARLAN, dissenting.
It is with reluctance that I have reached the conclusion that
this Alaska tax offends the Commerce Clause of the Federal
Constitution. (Art. I, § 8, cl. 3.)
The Court of Appeals concluded that the taxable event under this
statute is the process of freezing fish aboard ship, 277 F.2d 120.
This conclusion was based on the words of the statute (quoted at
pp.
366 U. S. 199-200
of the Court's opinion), the fact that obtaining fish for local
sale or consumption is untaxed, and the fact that the present tax
"applies whether or not the fish are caught by gillnetters owned by
or under contract to appellants."
Id., 277 F.2d 125-126.
Accepting, as I do, this construction of the statute, I agree with
the Court of Appeals that a privilege tax directed solely at
shipboard freezing, preparatory to interstate shipment, exceeds the
limitations the Commerce
Page 366 U. S. 206
Clause imposes upon the States, for, in its requirement of a
license, such a tax asserts a power to deny what is a necessary
local incident of the right to make interstate purchases.
See
York Manufacturing Co. v. Colley, 247 U. S.
21.
*
As I understand the Court's opinion, it seeks to meet this
objection by denying that the Alaskan tax is imposed on the
privilege of freezing fish aboard ships. It says that the tax is
rather upon the local taking or purchase of fish by or for freezer
boats. But even on this view of the incidence of the tax, I could
not agree that the present tax on obtaining fish by or for
interstate freezer boats would be constitutional in the given
circumstances, for I do not think that Alaska can place a higher
tax on the obtaining and freezing of fish for interstate markets
than it places on the obtaining and freezing of fish for local
markets.
See Pennsylvania v. West Virginia, 262 U.
S. 553,
262 U. S.
596-597. As shown in the Court's opinion, under the
Alaska scheme of taxation, freezer boats, which operate solely in
interstate commerce, must pay a tax for taking and freezing Alaskan
fish for later canning in Washington which is four times that
imposed on a local freezer whose product is sold to consumers in
Alaska. A shore-based freezer who sells his frozen product to
Alaskan canners pays no tax at all.
For these reasons, I would affirm the judgment of the Court of
Appeals.
* I also regard the tax as invalid because it in effect charges
a toll for the interstate transportation of Alaska's natural
resources.
See Brown, The Open Economy: Justice
Frankfurter and the Position of the Judiciary, 67 Yale L.J. 219,
232-233.