This is an appeal under section 237 of the Judicial Code (28 USCA § 344) from a judgment of the Supreme Court of Washington, 172 Wash. 668, 21 P.(2d) 727, 728, sustaining a municipal license or excise tax, assailed by appellant as infringing the Fourteenth Amendment and the contract clause of the Federal Constitution (Article 1, § 10, cl. 1).
An ordinance of the city of Seattle of May 23, 1932, imposes an annual license tax upon the privilege of carrying on the business of selling or furnishing electric light and power to consumers. The tax is 3 per cent. of the gross income from the business 'in the city' during the fiscal year next preceding the tax year for which the license is required. The suit, brought to recover an installment of the tax already paid and to enjoin the collection of future installments, was heard and decided upon demurrer to appellant's complaint.
Both appellant, a Massachusetts corporation, acting under a municipal franchise, and appellee, the city of Seattle, acting by state authority, are engaged and actively compete in the business of furnishing electric light and power to consumers for hire. By state law the city is given plenary power to fix rates for the electric current which it distributes, and its rates are not subject to regulation and control by the Public Service Commission, as are those of appellant. Section 10390, Remington's Rev. Stat. of Washington. Revenues of the city from its electric light business are required by the city charter, article VIII, § 9, to be deposited in a special 'city light fund,' separate from the general funds of the city, and transfer from one fund to the other, except by direction of the city council, is forbidden by the city charter. Article IX, § 17. Section 6 of the ordinance, in terms, imposes the same tax on the city 'so far as permitted by law,' as that levied on appellant. But it appears that the city, acting under a state statute, section 9491, Remington's Rev. Stat. of Washington, enacted before the taxing ordinance, has issued bonds, the payment of which, both principal and interest, is secured by the revenue of its electric light business. Appellant contends that, by the statute, municipal ordinance, and the terms of the bonds themselves, this pledge is superior to all other charges upon the gross revenue, and that the city cannot lawfully pay the tax. It appears that in fact the city has not paid the tax or made any provision for paying it. The state court, in passing on this question, said: 'The city has not allocated, and probably cannot allocate, any of the revenues of its power and light business to the payment of such a tax. Bonds have been issued in excess of $30,000,000 against the revenues from that business; and those bonds are a prior lien on the entire income from it-taking precedence even over operating charges. Conceding that the city's light and power revenues could be subjected to the tax, no machinery is set up in the ordinance to accomplish such an end. Furthermore, in making up its budget for 1932, no provision was made for the levy of general taxes to cover the excise provided for in the ordinance. So the problem must be met as though section 6 had been omitted from the ordinance. * * *'
Whether by this statement the Court intended to decide that the city could not lawfully pay the tax, or assumed that to be the case for the purpose of the decision, it is unnecessary to determine, for appellant further insists that, even though the tax were paid by the city to itself, it would impose no actual burden.
Asserting that no effective tax is imposed with respect to the business carried on by the city, appellant argues that the taxation of its competing business is a denial of equal protection and deprives it of its property without due process. The tax is also assailed because the measure of it is vague and uncertain, and because, by imposing a license tax upon the privilege of doing the business, the ordinance impairs appellant's franchise contract which gave it the right to conduct the business.