Mankato Citizens Tel. Co. v. Commissioner of Taxation

• Decision Date: 30 September 1966
• Docket Number: No. 40053,40053
• Citation: 145 N.W.2d 313,275 Minn. 107
• Parties: MANKATO CITIZENS TELEPHONE COMPANY, Relator, v. COMMISSIONER OF TAXATION, Respondent.
• Court: Minnesota Supreme Court

Page 313

145 N.W.2d 313

275 Minn. 107

MANKATO CITIZENS TELEPHONE COMPANY, Relator, v. COMMISSIONER OF TAXATION, Respondent.

No. 40053.

Supreme Court of Minnesota.

Sept. 30, 1966.

Syllabus by the Court

1. The supreme court cannot assume a legislative intent in plain contradiction to words used by the legislature. The primary object in the interpretation of any statute is to ascertain, if possible, and to give effect to the intention of the legislature that enacted the law. However, where language is unambiguous, the clearly expressed intent must be given effect, and there is no room for construction.

2. Ambiguous statutes may be viewed in light of conditions and circumstances surrounding their enactment to ascertain legislative intent.

3. Administrative interpretation of statutes, although not binding upon the courts, should receive consideration unless found to be erroneous and in conflict with the express purpose of the act and the intention of the legislature.

4. A revision of an existing statute is presumed not to change its meaning, even if there be alterations in the phraseology, unless such intention to change the law clearly appears from the language of the revised statute.

5. The 1945 legislature in adopting and enacting the revision and codification of the general laws of the state made pursuant to L.1943, c. 545, expressly provided that the laws contained and compiled in such codification are to be construed as continuations of the acts from which they were compiled and derived and not as new enactments.

6. Prior statutes may be resorted to only for the purpose of solving and not for the purpose of creating an ambiguity. Where, however, new language appearing in the revised statute is subject to more than one interpretation, it becomes both necessary and proper to resort to a consideration of the legislative history of such section.

7. The Tax Court correctly determined that gross earnings from services rendered by relator telephone company to subscribers living in a city of the fourth class were taxable under Minn.St. 295.34, subd. 1(c), rather than § 295.34, subd. 1(b). Resport to the prior statute embodying § 295.34, subd. 1(b), both necessary and proper because of the ambiguity of the language of such statute in the revision adopted in 1945, establishes that the tax rate provided therein is applicable to a telephone company only if its central facilities and office are located in a city of the fourth class.

Blethen, Ogle, Gage & Krause, Mankato, for relator.

Robert W. Mattson, Atty. Gen., Ralph W. Peterson, Sp. Asst. Atty. Gen., St. Paul, for respondent.

OPINION

NELSON, Justice.

Certiorari to review a decision of the Tax Court affirming an order of the commissioner of taxation.

The relator, Mankato Citizens Telephone Company, is independent and locally owned, with its principal office and central exchange facilities located in Mankato, a city of the second class with a population of about 24,000. The company serves several rural and contiguous areas.

Relator is required to pay a tax upon its gross earnings pursuant to the provisions of Minn.St. 295.34. Section 295.34, subd. 1(b), imposes on a telephone company a tax of '4 percent of its gross earnings from exchange business of all cities of the fourth class and boroughs and villages having a population of 10,000 or less'; and subd. 1(c) imposes on such a company a tax of '7 percent of its gross earnings derived from all other business * * *.'

The commissioner of taxation audited relator's gross earnings tax reports for the calendar years 1959 to 1962 and certified a deficiency in the principal amount of $7,504.50, asserting that relator had erroneously reported its gross earnings from service rendered to subscribers in North Mankato at 4 percent pursuant to § 295.34, sudn. 1(b), rather than at 7 percent under subd. 1(c). North Mankato is a city of the fourth class with a population of about 6,000, located adjacent to Mankato.

The legal issue involved on this appeal is as follows: Where a telephone company's central exchange facilities and central office are located at a city of the second class, should a 4- or 7-percent rate of tax be imposed under the foregoing provisions on the gross earnings of that company received from subscribers located in a contiguous city of the fourth class? The Tax Court determined that the 7-percent rate applied in the instant case.

Relator contends that prior to 1960 it could not determine its earnings from North Mankato as distinguished from the city of Mankato without going into a costly manual accounting. It had, therefore, prior to 1960, reported its gross earnings from the two contiguous cities as a lump sum and paid a 7-percent gross earnings tax on the whole of that sum. (It should be noted, however, that relator could determine its 1960 earnings from rural service out of the Mankato exchange as the telephone numbers in those areas had some identifying characteristics and, consequently, the gross earnings from that service were taxed at 4 percent as provided by § 295.34, subd. 1(a).) In 1960, as a byproduct of installed automated equipment, relator was able to determine the amount of revenue derived through serving North Mankato. Consequently, in 1960, 1961, and 1962, relator was better able to report its earnings from North Mankato separately and paid a 4-percent gross earnings tax thereon.

On November 18, 1963, the commissioner ordered that a tax of 7 percent be assessed on the company's earnings from North Mankato and determined that taxes plus added penalties were due in the amount of $9,505.22. Relator appealed to the Tax Court, contending that it properly computed its tax under § 295.34, subd. 1(b). It argues that the preposition 'of' in the phrase 'exchange business of all cities of the fourth class' means derived from or arising from, and thus that its gross earnings derived from North Mankato are subject to tax at the 4-percent rate. The commissioner of taxation contends, however, that 'of' is susceptible of other meanings and that the legislature did not intend to give it the one for which relator contends. Section 295.34, subd. 1(b), as first enacted in Ex.Sess.L. 1937, c. 10, § 1, provided for a tax of 4 percent on gross earnings from 'exchange business at' cities of the fourth class. The word 'of' first appeared in the compilation and revision of the statutes adopted by the legislature in 1945. It is clear that the original wording, 'exchange business at,' requires that the exchange be located within the fourth-class city (North Mankato) to qualify for the 4-percent rate. This appeal, therefore, involves a question of statutory interpretation. The Tax Court in a memorandum accompanying its decision takes the position that the commissioner's order does not necessarily imply a finding that the revenues received from North Mankato were from exchange business in the city of Mankato, but merely means that relator has not established that the business involved falls within a classification governed by $295.34, subd. 1(b), and that, at best, what relator has established is that the exchange business was conducted across city lines between Mankato and North Mankato. It is clear that all the subscribers involved in the order of the commissioner were located in North Mankato and that, furthermore, the telephone switching equipment and the business offices were located in the city of Mankato.

The commissioner has conceded that the word 'of,' in the law as presently printed, is ambiguous and susceptible of more than one interpretation. The Tax Court acceded to this view and added that the original wording of the statute must control as evidence of the legislative intnet. The Tax Court suggests in its memorandum that 'exchange business of' can mean either business actually taking place at some particular place, or it can mean business 'arising from' or 'dervied from' some particular place. Relator argues that the latter interpretation is the correct one. The commissioner, however, contends that, because the word 'at' was used when the statute was first enacted, the legislature intended that the place where the exchange facilities building and business offices were located should control and, consequently, the higher rate must be applied. Relator also asserts that because the subscriber and certain physical equipment constitute a part of the telephone system as applied to North Mankato, the lower rate of 4 percent is applicable, even though the central facilities, the exchange building, the switching equipment, and the business offices are located in Mankato. Despite these arguments it is conceded by both parties that the intention of the legislature controls.

The commissioner offered and the Tax Court admitted a memorandum into evidence for the purpose of establishing certain administrative practices, adopted pursuant to a joint decision of the Tax Commission, the attorney general, and the state comptroller. That memorandum, dated October 18, 1937, became the basis of an administrative practice concerning the proper applicability of § 295.34, subd. 1. The memorandum considered the following question:

'Subscribers in a small city or town may, in some instances, elect to receive service from a large nearby city rather than from the small exchange in the city of his residence. Is this 'exchange business' at the small or the large city?'

The unanimous determination was that such exchange business was at the large city.

1--2--3. In judicial construction of statutes courts are guided by well-established rules. They cannot assume a legislative intent in plain contradiction to words used by the legislature. Loew v. Hagerle Brothers, 222 Minn. 258, 24 N.W.2d 278. The primary object in the interpretation of any statute is to ascertain, if possible, and to give effect to the intention of the legislature that enacted the law. Badger Dome Oil Co. v. Hallam (8 Cir.) 99 F.2d 293. Section...