Banner Laundering Co. v. Gundry
Decision Date | 21 May 1941 |
Docket Number | Oct. Term, 1940.,Nos. 5-7,s. 5-7 |
Parties | BANNER LAUNDERING CO. v. GUNDRY et al. FORD BLDG. CO. v. SAME. SILLS v. SAME. |
Court | Michigan Supreme Court |
OPINION TEXT STARTS HERE
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.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.
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.1In 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 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:
The pertinent portions of Article X read:
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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 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.
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; and further, we conclude that the tax...
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