The Supreme Court ruled yesterday that a state can protect retailers subject to sales taxes from being disadvantaged by certain out-of-state, mail-order sellers that are not.
The 7 to 0 decision permits a state to impose a levy in lieu of a sales tax on mail-order businesses with certain minimal relationships to the state. The decision may trigger efforts by numerous states to levy these use taxes on all non-resident sellers that solicit within their boundaries by mail or by radio, television, newspaper or magazine advertisements.
The ruling came in a case involving the National Geographic Society which conducts mail-order sales of atlases, books, globes and maps from its headquarters here. In addition, the non-profit organization maintains small offices in Berverly Hills and San Francisco that solicit ads for the society's monthly magazine, but have no connection whatever with the mail-order business.
During a six-month period at issue in the case, California members of the society and subscribers to the magazine - ordered $83,596 worth of items from the society. The State of California then levied $3,843 in use taxes on the sales.
The society went to court to contest the right of the state to collect and remit use taxes on mail-order sales. The connection, or nexus, between the state and National Georgraphic - through its two offices - is too insignificant to justify a constitutional imposition of the use tax. the society argued.
Two lower courts agreed. But the California Supreme Court reversed, saying that "the slightest presence" of the seller in California permitted the state to impose a duty to collect and pay use taxes.
In the opinion for the U.S. Supreme Clurt affirming the California tribunal. Justice William J. Brennan Jr. said that the affirmance "is not to be understood as implying agreement with that court's 'slightest presence' standard of constitutional nexus."
Rather, Brennan wrote, the affirmance rests on the conclusion that the two National Geographic offices "adequately establish a relationship or 'nexus' between the society and the state . . ." he noted that the society had a "continuous presence" in California through its offices.
Chief Justice Warren E. Burger and Justice William H. Rehnquist took no part in considering or deciding the case.
The court took other actions: Beef Tycoon Loses
Just a few years ago, American Beef Packers Inc. of Omaha was the second largest packing house in the country. It ranked 218th on the Fortune Magazine list of the 500 largest corporations. In the year ended July, 1974, its sales were $896.9 million, its net earnings $4.86 million. It had 3,000 employees. But only six months later, the enterprise filed for bankruptcy.
In the aftermath, Frank R. West, founder, chairman and president of the firm was convicted of 24 counts of mail and wire fraud in connection with a scheme to defraud cattle feeders and creditors of more than $20 million.
U.S. District Judge Robert V. Denney sentenced West, now 57, to two years on probation and fined him $24,000. Yesterday, Supreme Court refused his plea for review of the sentence. Meanwhile, the company was reorganized and is under new management. Auto Tycoon Loses
During the 1060s, what the Washington State Supreme Court termed "the world's largest car dealership" was operated by Ralph Williams, whose monotone voice and pitchman style in television commercials made him a conversation piece, and a conglomerate of enterprises he controlled.
Actually, "the world's largest" consisted of multiple agencies, particularly Chrysler-Plymouth dealerships in North Seattle, San Francisco, and Houston, Tex., and a Ford dealership in Encino, Calif.
In May 1968, William opened the North Seattle dealership. Washington State shut it down 19 months later for failure to pay certain excise taxes collected from customers.
Later, the state won a court conviction of Williams and two of his enterprises for engaging in a litany of practices the court said were identical to those used in California, including:
Prices claimed to be lower than rivals' but actually higher, charging more for repairs under a "special warranty" than competitors charged without a warranty: telling a customer - after a sale - that "dealer preparation." which often wasn't done at all, would cost $200 to $500; selling defective used cars; bait and switch, and pressuring customers to buy by keeping their property, such as trade-ins.
The trial judge found Williams and the two enterprises liable for $857,500, assessed them for costs and attorneys' fees of $389,528, and ordered $142,000 put in trust to restore customers' property. They didn't pay up. Rather, chief state Supreme Court Judge Charles F. Stafford said last July, they engaged in "the most flagrant disregard and contemptuous disobedience of a trial court's orders that I have witnessed."
Yesterday, the U.S. Supreme Court dismissed Williams' appeal from a unanimous affirmace of his conviction by the state high court. Williams is now out of the auto business and lives in Dallas.