State v. United States Express Co.

Decision Date19 May 1911
Docket Number16,977 - (2)
Citation131 N.W. 489,114 Minn. 346
PartiesSTATE v. UNITED STATES EXPRESS COMPANY
CourtMinnesota Supreme Court

Action in the district court for Ramsey county to recover $9,719.66 the amount of taxes claimed to be due by reason of certain omitted taxable gross earnings of defendant for the years 1899 to 1909, both inclusive, not included in defendant's returns for taxation. The case was heard upon the pleadings and stipulated facts by Hallam, J., who made findings of fact and ordered judgment in favor of plaintiff for the amount demanded. From the judgment entered pursuant to the order defendant appealed. Modified.

SYLLABUS

Interstate commerce -- gross earnings.

Carriage of shipments by an express company from a point in this state to another point in this state does not constitute interstate commerce, even where the shipments are forwarded over a line of railroad that for a part of its route lies outside the state. A proportionate part of the earnings from such shipments, based on the number of miles of the route within the state, constitutes a part of the company's gross earnings, upon which the state is entitled to assess taxes, under R.L. 1905, § 1019.

Tax upon property within state.

The state has a right to impose a tax upon property within its borders regardless of the fact that such property may be employed by its owners in interstate commerce.

Tax upon property within state -- gross earnings tax.

The gross earnings tax provided by R.L. 1905, §§ 1013-1019, is not a tax upon the earnings of express companies, or upon the companies, or their right to engage in business, but is a tax upon their property within the state.

Interference with interstate commerce.

A tax upon the property within the state of an express company engaged in interstate commerce, based upon its gross earnings within the state on interstate shipments, is not a regulation of or interference with interstate commerce.

Sale of money orders -- gross earnings.

Receipts of an express company from the sale of money orders within this state are earnings of such company within the state, whether such money orders are redeemed within or without this state, and should be included in the gross earnings of such company in estimating the tax upon its property within the state.

Statute constitutional.

R.L. 1905, §§ 1013-1019, as thus construed, do not violate either the constitution of the United States or the constitution of this state.

Recovery of taxes -- limitation of action.

The right of the state to recover taxes on the property of defendant for the year 1899 did not accrue prior to May 1, 1900, and was not barred March 1, 1906, when the Revised Laws of 1905 went into effect.

Recovery of taxes.

Section 980, R.L. 1905, abrogated the statute of limitations as to the right of the state to enforce the assessment and collection of taxes upon all property within the state subject to taxation, including the property of express companies.

Recovery of tax on omitted returns.

When earnings within the state for any year are omitted from the annual returns of the company, and not included in the amount of gross earnings upon which the taxes for such year were based, the state may recover taxes based on such omitted earnings in an action brought for that purpose.

Frank B. Kellogg, C. A. Severance, and Robert E. Olds, for appellant.

George T. Simpson, Attorney General, and George W. Peterson, Assistant Attorney General, for the State.

OPINION

BUNN, J.

Defendant is an express company organized under the laws of New York, and doing business in this state and throughout the United States. This action was brought by the state to recover the sum of $9,719.66, being taxes alleged to be due on account of gross earnings never reported by defendant. Defendant admitted that it had failed to include in its returns to the proper state officials the items of gross earnings on which the complaint alleged taxes were payable, and claimed that such items were not taxable.

A constitutional amendment passed in 1896 (Const. art. 9, § 17) authorized a gross earnings tax upon express companies. The legislature in 1897 passed an act (Laws 1897, c. 309, p. 575, § 6) providing for three per cent. tax upon the gross earnings of such companies. The rate was increased to five per cent. in 1899, and to six per cent. in 1901. The statutes as they are now, and were at the time the action was commenced, provide in substance that every express company shall annually, between January 1 and February 1, make and file with the state auditor a statement which shall contain, among other facts, "the entire receipts * * * for business done within this state, including its proportion of gross receipts for business done by such company within this state in connection with other companies." The auditor, between March 1 and April 1, determines the gross receipts of every such company, and on or before March 15 "shall assess upon each company a tax of six per cent. upon its gross receipts for business done between points within this state for the preceding calendar year as determined by the auditor, which shall be in lieu of all taxes upon its property." R.L. 1905, §§ 1013, 1015, and 1019.

The facts were stipulated. The items of gross earnings which the company failed to include in its returns to the state auditor, and which the state claims are taxable, are as follows:

First. Earnings on through shipments consigned from a point in Minnesota to another point in Minnesota, but forwarded over lines of railroad partly without the state of Minnesota. Ninety-one per cent. of this mileage is in Minnesota. The amount of the back taxes claimed on these earnings is $2,991.29, based upon the total earnings of such shipments, without any deduction based upon the portion thereof earned without the state.

Second. "Interstate transfer business;" that is, earnings on interstate shipments received by defendant at a point in Minnesota, carried over its lines to a second point in Minnesota, the transportation by defendant being performed wholly within the state, but the transportation of such shipments while out of the state, and also within the state, but beyond defendant's lines, being performed by other connecting companies. The amount of back taxes claimed on such earnings is $504.47.

Third. Earnings from the issuance of money orders sold and issued by defendant at points in Minnesota. These money orders designate no place of payment, but are payable at any office of the company. Eighty per cent. of them are returned through banks and clearing houses to the main office of defendant in New York. No part of the revenue from this service is paid to railroad or other transportation companies. No shipments of money are connected with the issuance and redemption of money orders. The amount of back taxes on the earnings derived from this class of business is $5,788.15.

Fourth. Miscellaneous items, not reported for taxation, representing omitted earnings on intrastate express business handled between points in Minnesota by defendant during 1899. The amount of back taxes on these earnings is $434.75.

The trial court decided for the state, holding that the earnings embraced in each of the four classes were taxable, and that plaintiff was entitled to judgment for $9,719.66, the full amount claimed. Judgment was entered, and defendant appealed.

We will consider the different classes of earnings separately in the order above stated.

1. Defendant claims that a tax upon these earnings is a tax upon interstate commerce. We think that the case of Lehigh Valley R. Co. v. Pennsylvania, 145 U.S. 192, 12 S.Ct. 806, 36 L.Ed. 672, is decisive against defendant's contention, at least as to the proportion of the earnings derived from the carriage within this state. The facts in that case are substantially identical with the facts in this. As here, the point of shipment and the point of destination were both within the state; but the route passed through a portion of another state. It was held that this was not interstate commerce, and that the state of the points of shipment and destination could tax earnings on such shipments. It perhaps does not appear as clearly as it might whether the recovery in that case was allowed for the entire earnings, or for a proportion thereof based upon the mileage within the state; but we interpret the decision as allowing a recovery of taxes upon that proportion of the earnings derived from the carriage wholly within the state. This seems to us the safer rule, and avoids any question of taxing interstate commerce, and we adopt and apply it to this case. Nine per cent. of the taxes recovered on this class of earnings should be deducted from the amount of the recovery.

Defendant also contends that the language of the statute shows it was not the intention of the legislature to tax such earnings. This contention is based upon the wording of the provisions that the gross receipts "for business done within this state" shall be returned by the company, and that the tax shall be assessed upon its "gross receipts for business done between points within this state." The intent of the legislature was clearly to avoid taxing interstate business; but we are unable to see how confining the tax to receipts from business done "between points within this state" indicates an intention to exclude from taxation, or, more correctly speaking, to exclude from the measure of taxation, earnings "between points within this state" in cases where the shipments pass out of the state en route. To so construe the language would be to add a new term to the act.

2. So-called "interstate transfer" business. Carriage of shipments from points in this state to points without this...

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