Town of Cady v. Alexander Const. Co.

• Decision Date: 10 January 1961
• Citation: 107 N.W.2d 267,12 Wis.2d 236
• Parties: TOWN OF CADY, a Wisconsin municipal corporation, Plaintiff-Appellant, v. ALEXANDER CONSTRUCTION COMPANY, Inc., a foreign corporation, Defendant-Respondent.
• Court: Wisconsin Supreme Court

Page 267

107 N.W.2d 267

12 Wis.2d 236

TOWN OF CADY, a Wisconsin municipal corporation, Plaintiff-Appellant, v. ALEXANDER CONSTRUCTION COMPANY, Inc., a foreign corporation,

Defendant-Respondent.

Supreme Court of Wisconsin.

Jan. 10, 1961.

Rehearing Denied March 7, 1961.

See 108 N.W.2d 145.

John G. Nestingen, Spring Valley, Kenneth Hayes, Hudson, for appellant.

Robert R. Gavic, Spring Valley, for respondent.

HALLOWS, Justice.

The problem presented divides itself into three parts: 1. Has Wisconsin the jurisdiction to tax such personal property? 2. Do the existing laws tax such property? 3. Is the town of Cady the proper assessment district?

It has been generally recognized that the state of the domicile of the owner may tax personal property where such property has not acquired a situs elsewhere for tax purposes. Van Dyke v. Tax Comm., 1940, 235 Wis. 128, 292 N.W. 313; affirmed per curiam in Van Dyke v. Wisconsin Tax Comm., 1940, 311, U.S. 605, 61 S.Ct. 36, 85 L.Ed. 383. Personal property acquires a taxable situs at the domicile of its owner by the application of the maxim mobilia sequuntur personam, which applies with less logic to tangibles than to intangible personal property. 1 Beale, The Conflict of Laws, p. 546, sec. 118C.8; 2 Cooley, Taxation (4th Ed.), pp. 955-981, secs. 440-451. This maxim, however, is not to be literally applied and does not preclude a state, in which tangible personal property has acquired a situs as distinguished from mere physical presence, from taxing such property. Coe v. Town of Errol, 1886, 116 U.S. 517, 6 S.Ct. 475, 29 L.Ed. 715; 51 Am.Jur., Taxation, p. 467, sec. 452. The basis of the rule is that the personal property enjoys the protection of the state where it is located and should be made to contribute to the expenses incident to its protection in the state in common with other personal property.

The difficulty with applying the rule is the determination of when movable personal property acquires a situs for tax purposes. See Jurisdiction to Tax Tangible Personal Property, 44 Iowa Law Review 412. It has been said that such property acquires a situs when it becomes 'commingled with the general property of the state,' Old Dominion S. S. Co. v. Commonwealth of Virginia, 1905, 198 U.S. 299, 25 S.Ct. 686, 49 L.Ed. 1059; or 'mingled' with the general property of the state, Delaware, L. & W. R. Co. v. Commonwealth of Pennsylvania, 1904, 198 U.S. 341, 25 S.Ct. 669, 49 L.Ed. 1077; or 'permanently located * * * there,' Union Refrigerator Transit Co. v. Commonwealth of Kentucky, 1905, 199 U.S. 194, 26 S.Ct. 36, 50 L.Ed. 150; or 'incorporated in' the local property, Southern Pacific Co. v. Commonwelath of Kentucky 1911, 222 U.S. 63, 32 S.Ct. 13, 56 L.Ed. 96. Such language contemplates some degree of permanency as distinguished from temporary or transitory. The concept of taxable situs means more or less permanent location, but does not include the characteristics of permanency ascribed to real estate or the fact the owner has no present intention of removing it. It may include the idea of more or less permanent location for the time being. 51 Am.Jur., Taxation, p. 468, sec. 454. See also Annotation 110 A.L.R. 707, 'Situs as between different states or countries of tangible chattels for purposes of property taxation.'

Situs means more than simply the place where the property is physically present. It excludes mobile personal property which happens to be in transit through the taxing state at the moment when the occasion for taxing arises. Situs may include property which for some definite purpose of its owner has come to rest within the boundaries of a state, but not if the interruption is beyond the control of the owner and only for a brief period of time. 1 Beale, The Conflict of Laws, p. 551, sec. 118C.11, and p. 561, sec. 118C.18; Goodrich, Conflict of Laws, (3d Ed.) 1949, p. 76, sec. 46.

Perhaps the concept of situs for tax purposes stated in terms of commingled with the property of the state, or mingled or incorporated in local property, means no more than the state wherein the personal property is physically present must have sufficient contact or relationship with the property in order to form in fairness a basis for taxing it. By analogy to the reasoning in the interstate airline cases, the word 'situs' must be given a realistic meaning. Originally airplanes in interstate commerce were taxed at the domicile of the owner. Northwest Airlines v. State of Minnesota, 1944, 322 U.S. 292, 64 S.Ct. 950, 88 L.Ed. 1283. Later the United States supreme court in approving an apportionment rule in Braniff Airways v. Nebraska State Board, 1954, 347 U.S. 590, 74 S.Ct. 757, 98 L.Ed. 967, held that 18 stops a day by the appellant's airplanes was sufficient contact with Nebraska to sustain a tax on an apportionate-rule basis, even though the same airplanes did not land every day and even though none of the airplanes was continually within the state. The modern idea of situs seems to be whether the taxing state has sufficient contact with the personal property sought to be taxed to justify in fairness the particular personal property tax.

While taxation of tangible personal property is essentially a state function, the supreme court of the United States has considered the problem of the proper place of taxation when the point has been raised that the taxation system of a state contravened the due process, equal protection or commerce clause of the federal constitution. U.S.Const. art. 1, § 8, cl. 3; Amend. 14. Some examples: Braniff Airways case, supra; Northwest Airlines case, supra; Safe Deposit & Trust Co. of Baltimore, Md. v. Commonwealth of Virginia, 1929, 280 U.S. 83, 50 S.Ct. 59, 74 L.Ed. 180; Frick v. Commonwealth of Pennsylvania, 1924, 268 U.S. 473, 45 S.Ct. 603, 69 L.Ed. 1058; Union Refrigerator Transit Co. v. Commonwealth of Kentucky, supra; Delaware L. & W. R. Co. v. Commonwealth of Pennsylvania, supra; Pullman's Palace-Car Co. v. Commonwealth of Pennsylvania, 1891, 141 U.S. 18, 11 S.Ct. 876, 35 L.Ed. 613.

In considering the power to tax construction machinery, at least two courts have held that because of the very nature of road construction machinery and the business of its owner, such machinery could not acquire a situs other than the domicile of the owner. Capital Const. Co. v. City of Des Moines, 1931, 211 Iowa 1228, 235 N.W. 476; Commonwealth v. American Dredging Co., 1888, 122 Pa. 386, 15 A. 443, 1 L.R.A. 237. However, other courts have found no such difficulty and have held construction machinery employed in construction work in a state other than that of the owner's residence may acquire a local situs in the state in which it is used. In Hamilton & Gleason Co. v. Emery County, 1930, 75 Utah 406, 285 P. 1006, the court sustained a personal property tax on construction equipment belonging to a Colorado corporation which was brought into Utah to do construction work on a railroad. The court rejected the argument that the property was in the state for temporary use and the owner intended to remove it as soon as the contract was completed. The property was brought into Utah sometime in 1925 and was removed by April 30, 1926. In The Arundel Corporation v. Sproul, 1939, 136 Fla. 167, 186 So. 679, a personal property tax was upheld on dredges and dredging equipment used by a nonresident in constructing dikes around Lake Okeechobee in Florida under a contract with the federal government. Its owner intended to return the property to Baltimore after completing the contract. The property was in Florida from June, 1934 to December, 1935. In Griggsby Construction Co. v. Freeman, 1902, 108 La. 435, 32 So. 399, 58 L.R.A. 349, blacksmith tools and commissary store goods kept as part of a construction outfit and owned by a nonresident were held taxable. The court reasoned that the property, because of its presence in the state for six months to construct a railroad bed, had acquired a situs because it was no longer in transit and had enjoyed the benefit and protection of the laws of Louisiana. In Eoff v. Kennefick-Hammond Co., 1906, 80 Ark. 138, 96 S.W. 986, 7 L.R.A.,N.S., 704, equipment of a nonresident owner used for constructing a road bed in Arkansas for a railroad was held subject to a personal property tax on the ground it was not in transit and was in the state chiefly, if not solely, for its owner's use and profit. The court reasoned the property for the time being was incorporated in the bulk of the property of the state and was distinguishable from other property in the state in no respect except the intention of the owner to remove it at some future time. See also Gromer v. Standard Dredging Co., 1911, 224 U.S. 362, 32 S.Ct. 499, 56 L.Ed. 801, wherein a dredge, tugboat, scows, and launch were held to have a situs in Puerto Rico...