Knight Newspapers, Inc. v. City of Detroit, Docket No. 4821

• Decision Date: 24 March 1969
• Docket Number: No. 1,Docket No. 4821,1
• Citation: 168 N.W.2d 318,16 Mich.App. 438
• Parties: KNIGHT NEWSPAPERS, INC., an Ohio corporation, Plaintiff-Appellee, v. CITY OF DETROIT, a municipal corporation, and County of Wayne, a public corporation, Defendants-Appellants
• Court: Court of Appeal of Michigan — District of US

Page 318

168 N.W.2d 318

16 Mich.App. 438

KNIGHT NEWSPAPERS, INC., an Ohio corporation, Plaintiff-Appellee, v. CITY OF DETROIT, a municipal corporation, and County of Wayne, a public corporation, Defendants-Appellants.

Docket No. 4821.

Court of Appeals of Michigan, Division No. 1.

March 24, 1969.

Released for Publication June 11, 1969.

Robert Reese, Corp. Counsel, Detroit, for city.

William L. Cahalan, Pros. Atty., Wayne County, Detroit, for county.

Brownson Murray, Detroit, for plaintiff-appellee.

Before FITZGERALD, P.J., and BRONSON and R. B. BURNS, JJ.

R. B. BURNS, Judge.

Plaintiff's newspapers are printed on paper stock called newsprint, 99 percent of which is imported from Canada. On December 31, 1964, tax day for the assessment of 1965 personal property taxes, plaintiff had on hand in the original package 2,304 tons of imported newsprint. Defendants assessed the entire stock of newsprint. The Michigan State tax commission affirmed this assessment. Plaintiff claimed that 1,178 tons of the newsprint were exempt from taxation ¹ and paid the tax on this amount under protest. Plaintiff instituted the present suit to recover the amount paid under protest. ² Defendants in 1960 had arbitrarily set a standard of 15 days' supply of newsprint as the amount committed to current operating needs of all newspapers in its area. The trial court found that newsprint taken directly from freight cars to the plant was used as much as possible by the plaintiff in its daily operation. During the first 15 days of January, 1965, the plaintiff used 2,186 tons of newsprint; 1,712 tons were transported directly from freight cars to the plant and 474 tons were used from storage. The trial court held that only 474 tons were committed to current operational needs and were taxable.

Defendants raise 2 procedural issues in their claim of appeal, but all parties agreed at the time of oral argument that a decision on the merits is needed in the instant case. Therefore, we will not discuss the procedural issues but will confine this opinion to the merits.

At first glance one might question how a general personal property tax levied indiscriminately on all personal property can be classified as a tax on imports. It was settled in Low v. Austin (1871), 80 U.S. (13 Wall) 29, 20 L.Ed. 517, that a general property tax on imports is prohibited by the Constitution.

U.S. Const., art. 1, § 10, cl. 2 states:

'No State shall, without the Consent of the Congress, lay any Imposts or Duties on Imports or Exports, except what may be absolutely necessary for executing its Inspection Laws.'

In Brown v. Maryland (1827), 25 U.S. (12 Wheat) 419, 6 L.Ed. 678, Chief Justice Marshall held that the State of Maryland could not require importers of foreign goods to secure a license in order to sell the goods. He recognized that at some point of time the prohibition must cease and enunciated the principle that States could not tax imported goods as long as they remained in the original package prior to sale.

Hooven & Allison Company v. Evatt, Tax Com'r. (1945), 324 U.S. 652, 65 S.Ct. 870, 89 L.Ed. 1252, involved imports for use in manufacturing. The 'use' doctrine was born. The Court held that the immunity om imported goods continued until the goods were removed from their original package or put to the use for which they were imported.

Youngstown Sheet & Tube Company v. Bowers, Tax Com'r. (1959), 358 U.S. 534, 79 S.Ct. 383, 3 L.Ed.2d 490, presented the issue of whether the presence of imported goods at the factory site was so essential to current operating requirements that it could be said the goods had entered the process of manufacturing and, therefore, had been put to the use for which they were imported. Youngstown was a consolidation of 2 cases: Youngstown Sheet & Tube Company v. Bowers (1957), 166 Ohio St. 122, 140 N.E.2d 313, and United States Plywood Corp. v. City of Algoma (1958), 2 Wis.2d 567, 87 N.W.2d 481. Youngstown imported ore from several foreign countries and stored the ore in segregated piles in its ore yard. The daily manufacturing needs were taken from these piles. The Court held that under the facts of the case the ore had entered the manufacturing...