Bay City v. State Bd. of Tax Admin.

• Decision Date: 14 February 1940
• Docket Number: No. 150.,150.
• Citation: 290 N.W. 395,292 Mich. 241
• Parties: BAY CITY et al. v. STATE BOARD OF TAX ADMINISTRATION et al.
• Court: Michigan Supreme Court

292 Mich. 241

290 N.W. 395

BAY CITY et al.

v.STATE BOARD OF TAX ADMINISTRATION et al.

No. 150.

Supreme Court of Michigan.

Feb. 14, 1940.

Suit by the City of Bay City and seventeen other cities and villages, against the State Board of Tax Administration of the State of Michigan and others, for a declaratory decree to determine whether the state functioning through the State Board of Tax Administration has right under statute to require each of plaintiffs to obtain a license and pay a license fee as a condition of operating its municipal utility and to impose a tax on the retail sales of such municipal utility.From the declaratory decree, the plaintiffs appeal.

Affirmed.Appeal from Circuit Court, Ingham County, in Chancery; Leland W. carr, judge.

Argued before the Entire Bench.

Joseph W. Planck, of Lansing, Roland M. Shivel, of Grand Rapids, and George R. Sidwell, of Ann Arbor, for plaintiffs-appellants.

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

NORTH, Justice.

The city of Bay City and seventeen other cities and villages have joined as plaintiffs in the bill of complaint filed herein.They seek a declaratory decree as to the rights and duties of the parties to this suit in the particulars hereinafter stated.With the exception of two, each of plaintiffs owns and operates within its boundaries an electric light plant.The other two municipalities own and operate within their respectiveboundaries artificial gas plants.In addition to its electric light plant the city of Lansing also manufactures and distributes within the city limits steam for heating purposes.The output of these municipal plants is used im part by the respective cities or villages but in the main it is sold to persons residing in such municipalities.The bill alleges and the answer admits ‘that all of the said municipal utilities * * * are operated to render a service to the public and are not operated for the purpose of gain or profit’.The issue presented is whether the State functioning through the State Board of Tax Administration has the right under ActNo. 167, Pub.Acts 1933, as amended by Act No. 77, Pub.Acts 1935, ActNo. 180, Pub.Acts 1939andActNo. 313, Pub.Acts 1939, to require each of these plaintiffs to obtain a license and pay a license fee as a condition of operating its municipal utility and to impose a tax on the retail sales of such municipal utility.Plaintiffs allege that the cited statutes, particularly the amendatory act No. 313, Pub.Acts 1939, violate their constitutional rights for the following reasons:

‘(1) Municipal utilities are not adequately included in or designated by the title of the act, and the title of the act is not broad enough to cover their operations and functions, which are not business activities.

‘(2)The legislature cannot tax the privilege to operate municipal utilities granted to municipal corporations by the stateconstitution.

(3)The legislature cannot require municipalities to take out a license to operate their municipal utilities.'

Plaintiffs have appealed from a decree entered in the circuit court by which the statutory enactments here involved were held to be valid.

The constitutional provision under which cities and villages are authorized to acquire, own and operate public utilities in part reads: ‘Subject to the provisions of this constitution, any city or village may acquire, own and operate, either within or without its corporate limits, public utilities for supplying water, light, heat, power and transportation to the municipality and the inhabitants thereof * * *.’Const. art. 8, § 23.

Prior to the 1939amendments to ActNo. 167, Pub.Acts 1933, we held that the general sales tax provided in the Act, as then amended by ActNo. 77, Pub.Acts 1935, was not applicable to sales of gas and electricity by municipal utilities.Wyandotte v. State Board, 278 Mich. 47, 270 N.W. 211.In the main, decision was based on the definition of the term ‘person’ contained in Section 1, subdivision (a) of the 1933 Act.Under the then existing statutory definition of this term as then used in the Actwe held that it did not include municipal corporations, and that therefore retail sales of gas or electricity produced by municipally owned and operated plants were not subject to the sales tax.However, in this particular the 1933 Act was amended and broadened by ActNo. 313, Pub.Acts 1939, hereinafter quoted in part.Except as it refers to amendments, there has been no change in the title to this Act as originally passed in 1933; and appellants contend that the title is not broad enough to cover the amended Act.The title and pertinent portions of the amendatory Act read:

‘An Act to amend sections 1,4,4a,6,8,9,11,13,14,17,18and19 of ActNo. 167 of the Public Acts of 1933, entitled ‘An act to provide for the raising of additional public revenue by prescribing certain specific taxes, fees, and charges to be paid to the state for the privilege of engaging in certain business activities; to provide, incident to the enforcement thereof, for the issuance of licenses to engage in such occupations; to provide for the ascertainment, assessment and collection thereof; to appropriate the proceeds thereof; to establish a state board of tax administration; to make an appropriation for carrying out the provisions of this act; and to prescribe penalties for violations of the provisions of this act,’ as amended by ActNo. 77 of the Public Acts of 1935.

* * *

‘Sec. 1.Definitions.That when used in this act:

‘(a) The term ‘person’ includes any individual, firm, co-partnership, joint adventure, association, municipal or private corporation whether organized for profit or not, company, estate, trust, or any other group or combination acting as a unit, and the plural as well as the singular number, unless the intention to give a more limited meaning is disclosed by the context.

‘(b) The term ‘sale at retail’ means any transaction by which is transferred for consideration the ownership of tangible personal property, when such transfer is made in the ordinary course of the transferor's business and is made to the transferee for consumption or use other than for consumption or use in industrial processing or agricultural producing, or for any other purpose than for resale in the form of tangible personal property:

* * *

‘(e) The term ‘sale at retail’ includes sales of electricity, natural and/or artificial gas and steam when made to the consumer or user for consumption or use rather than for resale: Provided, however, That the term ‘sale at retail’ shall not include the sale of water through water mains.'

By its amendment of Section 1, subdivision (a), clearly the legislature intended to and did broaden the body of the Act so that it now expressly includes in the term ‘person’ municipal corporations, as well as private corporations.But it does not follow that the title, which remained unchanged, does not cover the Act as amended, as is contended by appellants.Gallie v. Detroit Auto Accessory Co., 224 Mich. 703, 195 N.W. 667.

In numerous decisions of this court it has held in substance that the title to an act is good if it fairly indicates the general subject matter covered by the act; and that the constitutional provision (Article 5, § 21) does not require a title sufficient in detail to constitute a table of contents or an index to the various provisions of the act.Mackin v. Detroit-Timkin Axle Co., 187 Mich. 8, 153 N.W. 49;Seifert v. Buhl Optical Co., 276 Mich. 692, 268 N.W. 784;Attorney General ex rel. Eaves v. State Bridge Commission, 277 Mich. 373, 269 N.W. 388,270 N.W. 308;In re Lewis' Estate, 287 Mich. 179, 283 N.W. 21.

The amended act here involved according to its title imposes a specific tax ‘for the privilege of engaging in certain business activities'.Appellants assert that the ‘operations and functions' of their respective municipal utilities ‘are not business activities' within the title of the Act.Appellants stress the argument that such activities are carried on as a service to the public and not for the purpose of making a profit; and in their brief they have cited many cases in the light of which appellants urge that these activities do not constitute ‘business activities' since they are not carried on for profit.It is clear that the mere fact an activity is being carried on by a municipality does not of necessity render such activity a purely governmental function, Taber v. City of Benton Harbor, 280 Mich. 522, 274 N.W. 324; and a profit may be a benefit or advantage other than money return in excess of cost of operation.For example, as noted in appellants' brief, the city of Lansing by reason of operating its electric light plant obtains its street lighting gratis.This only means that the profit on the electric current sold to private customers is taken to pay for the electric current used by the city for street lighting purposes, instead of collecting the cost of this public service from the city taxpayers.Even the making of a livelihood is but a form of benefit or advantage which might well be considered a ‘profit’.We are not prepared to agree that in the sense it is used in this statute, a ‘business activity’ is not being conducted except it is for profit.If for consideration utilities furnish such commodities as are here involved to the residents of the municipality who desire to buy but do not furnish to those who do not wish to purchase, such utilities are carrying on a ‘business activity’ within the meaning of our statute regardless of whether the utility is municipally owned or privately owned, and also regardless of whether or not the activity contemplates a profit.State Tax Commission v. City of Logan, 88 Utah 406, 54 P.2d 1197;City of Phoenix v. State ex rel. Conway, 53 Ariz. 28, 85 P.2d 56;City of Tacoma v. Tax Commission, 177 Wash. 604, 33 P.2d 899;City of...