Banner Laundering Co. v. Gundry, Nos. 5-7

CourtSupreme Court of Michigan
Writing for the CourtNORTH
Citation298 N.W. 73,297 Mich. 419
PartiesBANNER LAUNDERING CO. v. GUNDRY et al. FORD BLDG. CO. v. SAME. SILLS v. SAME.
Decision Date21 May 1941
Docket NumberOct. Term, 1940.,Nos. 5-7

297 Mich. 419
298 N.W. 73

BANNER LAUNDERING CO.
v.
GUNDRY et al.
FORD BLDG.
CO.
v.
SAME.
SILLS
v.
SAME.

Nos. 5-7, Oct. Term, 1940.

Supreme Court of Michigan.

May 21, 1941.


Actions by the Banner Laundering Company against George Gundry and others, as members of the Michigan State Board of Tax Administration, and others, by the Ford Building Company against George Gundry and others, as the State Board of Tax Administration, and by Henry B. Sills against George Gundry and others, as the State Board of Tax Administration, involving constitutionality of the Use Tax Act. From judgments sustaining constitutionality of the Act, plaintiffs appeal.

Affirmed.

[298 N.W. 74]

Appeal from Circuit Court, Wayne County, in Chancery; Joseph A. Moynihan, Judge.

Argued before the Entire Bench, except BUTZEL, J.

Butzel, Levin & Winston, of Detroit, for plaintiffs and appellants, Banner Laundering Co. and Ford Bldg. Co.


Lewis & Watkins, of Detroit, for plaintiff and appellant, Ford Building Co.

Henry H. Sills, of Detroit, in pro. per.

Thomas Read, Atty. Gen., and Edmund E. Shepherd, T. Carl Holbrook, and Gaylord N. Bebout, Asst. Attys. Gen., for appellees.

NORTH, Justice.

In each of these three cases, simultaneously submitted to the trial court, the constitutionality of the Use Tax Act (Act No. 94, Pub. Acts 1937) is challenged. In each case the plaintiff seeks injunctive relief and a declaratory decree holding the act unconstitutional. The particular grounds upon which the plaintiffs assert unconstitutionality of the act will be hereinafter noted; and the pertinent portions of the statute are printed in the margin hereof.1

[298 N.W. 75]

In the circuit court a decree was entered in each case sustaining the constitutionality of the act. Plaintiffs have appealed.

At the outset there should be noted, at least in general terms, the character of the business of the respective plaintiffs and the circumstances under which each is sought to be subjected to the use tax.

The Banner Laundering Company is a Michigan corporation engaged in the laundry and linen supply business in this state. It purchases cotton and other textile goods and garments, laundry and office supplies, equipment and machinery, for use in its business; and a substantial part of such purchases are made outside of the State of Michigan and in the course of interstate commerce. Its customers consist of restaurants, hotels, barber shops and others of like nature. It furnishes to these customers clean linens, towels, uniforms, etc.; and that at regular intervals calls for the soiled articles and replaces them with clean articles of like character. The articles so furnished remain at all times the property of plaintiff company.

The Ford Building Company, a Michigan corporation, owns and operates in the city

[298 N.W. 76]

of Detroit two office buildings, the Ford Building and the Dime Bank Building. Incident to such ownership and operation the plaintiff in this case purchases for its own use and its tenants' use fixtures, equipment and supplies. In part at least such purchases are made outside the State of Michigan and reach this plaintiff in the course of interstate commerce.

Plaintiff Henry H. Sills resides in Detroit. In February 1938 he purchased at retail in Canada footwear at a price of $10.70. He brought his purchase to Detroit and paid the custom duties thereon. Also in February 1938 and since that time he has subscribed to and paid for various magazines and periodicals which have been delivered to him for his own use from without the state in regular course of mail.

Each of these three plaintiffs denies that in consequence of the respective transactions of the character above noted there is a legal liability for the payment of the use tax. The first of plaintiffs' contentions is stated in their brief as follows: ‘(1) The statute seeks to impose a tax upon the owners of property. The tax is not a specific tax but is one imposed upon the property and its ownership. The statute contravenes the provisions of Article X of the Michigan Constitution.’

The pertinent portions of Article X read:

‘Sec. 3. The legislature shall provide by law a uniform rule of taxation, except on property paying specific taxes, and taxes shall be levied on such property as shall be prescribed by law: Provided, That the legislature shall provide by law a uniform rule of taxation for such property as shall be assessed by the state board of assessors, and the rate of taxation on such property shall be the rate which the state board of assessors shall ascertain and determine is the average rate levied upon other property upon which ad valorem taxes are assessed for state, county, township, school and municipal purposes.

‘Sec. 4. The legislature may by law impose specific taxes, which shall be uniform upon the classes upon which they operate.


* * *

‘Sec. 6. Every law which imposes, continues or revives a tax shall distinctly state the tax, and the objects to which it is to be applied.


* * *

‘Sec. 21. The total amount of taxes assessed against property for all purposes in any one year shall not exceed one and one-half per cent of the assessed valuation of said property, * * *.’

We are not in accord with appellants' contention that the statutory use tax is a tax on property, and not a specific tax. If appellants are wrong in the particular just noted, their assertion of invalidity because of lack of uniformity (Const. X, § 3) or because the tax exceeds the rate of one and one-half per cent. (Const. X, § 21) fails.

Fundamentally the issue goes to the character of the tax, rather than to its lack of uniformity or to its excessiveness. Appellants assert the use tax is not a specific tax, but instead: ‘This tax is merely a property tax of that nature (on property purchased without and brought within the state), and nothing more’; and further: ‘The name by which the tax is described in the statute is immaterial. * * * However, this court is not bound by the name given the tax by the legislature; it must inquire into the incidents of the tax, and from these incidents determine its nature.’

The argument of appellants in support of their contention is that notwithstanding the nomenclature of the legislature, still the so-called use tax is a tax upon ownership, therefore a property tax. The conclusion appellants reach is that since the act imposes upon them the duty to pay the tax upon certain personal property used, stored or consumed by them, and a like tax is not imposed on similar property owned by them or others, therefore the tax is not uniform and the act is unconstitutional. The fallacy, at least in part, of appellants' reasoning is that they overlook the provisions of the act which confine the tax to a certain type or class of tangible personal property, and further that the act does not fix the amount of the tax on an ad valorem basis. Stated in concise terms and disregarding certain expressed exemption in the statute, the class or type of property which if used, stored or consumed in this State subjects one to the payment of the tax in question is property on which a sales tax has not been imposed under the terms of Act No. 167, Pub.Acts 1933, as amended. It is not a tax imposed upon the use or ownership of all tangible personal property. Instead one may own, use, store or consume any amount of tangible personal property without being subjected to the use tax, unless such tangible personal property falls within the specific type or class designated in the act.

[298 N.W. 77]

The Constitution of this State (Art. X, §§ 3, 4) plainly empowers the legislature to provide not only for so-called property or ad valorem taxes, but it may also ‘impose specific taxes, which shall be uniform’ upon the class or classes of property subjected thereto. If a valid reason exists for the segregation of the designated class of property to be subjected to a specific tax, the wisdom of so doing is for legislative determination, not for judicial decision. If there is a reasonable basis for selecting the class or classes, the only remaining constitutional limitation bearing upon the validity of specific taxes is that they ‘shall be uniform upon the classes upon which they operate’. There is an obvious and just reason, approximating a necessity, for legislation of the type under consideration. Clearly its purpose is to equalize taxation as between the tangible personal property reached by the sales tax act and tangible personal property to which the use tax is made applicable. Under like circumstances courts of other states, which have enacted a use tax statute as complementary to their sales tax systems, have held that the use tax is an excise or privilege tax, not a property tax. Douglas Aircraft Co., Inc. v. Johnson, 13 Cal.2d 545, 90 P.2d 572;Vancouver Oil Co. v. Henneford, 183 Wash. 317, 49 P.2d 14;Oklahoma Tax Commission v. Sisters of the Sorrowful Mother, 186 Okl. 339, 97 P.2d 888;National Linen Service Corp. v. State Tax Commission, 237 Ala. 360, 186 So. 478.

While it is true, as appellants urge, that the mere fact the legislature has designated the use tax as ‘a specific excise tax’ is not conclusively binding upon the courts in determining whether in fact and in law the tax is a specific tax or an ordinary property tax, still such designation is entitled to ‘much weight’. Flint v. Stone Tracy Co., 220 U.S. 107, 145, 31 S.Ct. 342, 55 L.Ed. 389, Ann.Cas.1912B, 1312. ‘Such statutory statement is to be accepted as true unless incompatible with the meaning and effect of the act as a whole.’ Opinion of the Justices, 250 Mass. 591, 597, 148 N.E. 889, 892.

For the reasons hereinbefore indicated we conclude that the use tax is an excise tax (as contradistinguished from an ordinary property or ad valorem tax) imposed on the privilege of using (in the statutory sense, see section 2 [b]) tangible personal property which one has caused to become located in this State and which is not within the exemptions provided in the use tax act;...

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21 practice notes
  • State ex rel. Transport Mfg. Co. v. Bates, No. 41456.
    • United States
    • United States State Supreme Court of Missouri
    • November 14, 1949
    ...211, 186 S.E. 326; State Tax Comm. v. General Trade Co., 233 Iowa 877, 10 N.W. (2d) 659; Banner Laundering Co. v. State Bd. of Tax Adms., 297 Mich. 419, 298 N.W. CONKLING, J. This original action in mandamus presents to us the question of the constitutionality of the statute imposing a 2% u......
  • Lockwood v. Nims, No. 508
    • United States
    • Michigan Supreme Court
    • October 22, 1959
    ...tax thereby imposed, or that the construction placed thereon by this Court in Banner Laundering Co. v. State Board of Tax Administration, 297 Mich. 419, 298 N.W. 73, in which the validity of the enactment was sustained, was not correct. On behalf of plaintiffs it is contended that the state......
  • Shapero v. State Dep't of Revenue, No. 13.
    • United States
    • Supreme Court of Michigan
    • September 8, 1948
    ...to a business and on the privilege of carrying on the business. See also Banner Laundering Co. v. State Board of Tax Administration, 297 Mich. 419, 298 N.W. 73;Miller v. Michigan State Apple Commission, 296 Mich. 248, 296 N.W. 245, and Kull v. Michigan State Apple Commission, 296 Mich. 262,......
  • Sugarman v. State Bd. of Equalization
    • United States
    • California Court of Appeals
    • July 21, 1958
    ...and that they have been so used since their arrival from Holland. We find a compelling analogy in Banner Laundering Co. v. Gundry, 1940, 297 Mich. 419, 298 N.W. 73 and Tres Ritos Ranch Co. v. Abbott, 1940, 44 N.M. 556, 105 P.2d 1070. In the Gundry case, the taxpayer, a resident of Detroit, ......
  • Request a trial to view additional results
21 cases
  • State ex rel. Transport Mfg. Co. v. Bates, No. 41456.
    • United States
    • United States State Supreme Court of Missouri
    • November 14, 1949
    ...211, 186 S.E. 326; State Tax Comm. v. General Trade Co., 233 Iowa 877, 10 N.W. (2d) 659; Banner Laundering Co. v. State Bd. of Tax Adms., 297 Mich. 419, 298 N.W. CONKLING, J. This original action in mandamus presents to us the question of the constitutionality of the statute imposing a 2% u......
  • Lockwood v. Nims, No. 508
    • United States
    • Michigan Supreme Court
    • October 22, 1959
    ...tax thereby imposed, or that the construction placed thereon by this Court in Banner Laundering Co. v. State Board of Tax Administration, 297 Mich. 419, 298 N.W. 73, in which the validity of the enactment was sustained, was not correct. On behalf of plaintiffs it is contended that the state......
  • Shapero v. State Dep't of Revenue, No. 13.
    • United States
    • Supreme Court of Michigan
    • September 8, 1948
    ...to a business and on the privilege of carrying on the business. See also Banner Laundering Co. v. State Board of Tax Administration, 297 Mich. 419, 298 N.W. 73;Miller v. Michigan State Apple Commission, 296 Mich. 248, 296 N.W. 245, and Kull v. Michigan State Apple Commission, 296 Mich. 262,......
  • Sugarman v. State Bd. of Equalization
    • United States
    • California Court of Appeals
    • July 21, 1958
    ...and that they have been so used since their arrival from Holland. We find a compelling analogy in Banner Laundering Co. v. Gundry, 1940, 297 Mich. 419, 298 N.W. 73 and Tres Ritos Ranch Co. v. Abbott, 1940, 44 N.M. 556, 105 P.2d 1070. In the Gundry case, the taxpayer, a resident of Detroit, ......
  • Request a trial to view additional results

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