Miller Brewing Co. v. State
| Decision Date | 15 June 1979 |
| Docket Number | No. 48509.,48509. |
| Citation | 284 NW 2d 353 |
| Parties | MILLER BREWING COMPANY, Appellant, v. STATE of Minnesota, Minnesota Department of Revenue, and Commissioner of Revenue, Respondents. |
| Court | Minnesota Supreme Court |
Gray, Plant, Mooty, Mooty & Bennett and James R. Lande, Kenneth M. Anderson and Craig L. Vollmar, Minneapolis, for appellant.
Warren Spannaus, Atty. Gen., and Thomas K. Overton, Sp. Asst. Atty. Gen., Dept. of Revenue, St. Paul, for respondents.
Briggs & Morgan, R. E. Kyle and R. Scott Davies, St. Paul, amicus curiae for Minnesota Brewers Assn.
Foley & Lardner and John S. Skilton, Milwaukee, Wis., amicus curiae for Minnesota Brewers Assn.
Heard, considered, and decided by the court en banc.
The issue for resolution in this case is whether the classifications established by Minn.St. 340.47, subd. 2, distinguishing between fermented malt beverages produced by brewers with brewing production facilities in Minnesota and fermented malt beverages produced by brewers having no brewing production facilities in Minnesota contravenes the equal protection guarantees contained in Minn.Const. art. 1, § 2, and art. 10, § 1.
Plaintiff, Miller Brewing Company, filed claims for refund with the Minnesota Department of Revenue for the taxable periods July 1, 1973, through June 30, 1974, and July 1, 1974, through June 30, 1975. The refunds requested, $99,992 and $97,659, respectively, constituted the additional excise tax paid by plaintiff in excess of the amount it would have paid had it been taxed equally with brewers having production facilities in Minnesota. The commissioner denied the claims. Plaintiff then commenced this litigation asserting that the tax statute unconstitutionally discriminates against its fermented malt beverages which originate outside Minnesota. The district court granted the state's motion for summary judgment, based upon stipulated facts, and this appeal followed.
Minnesota imposes a tax upon the sale of fermented malt beverages in Minnesota. A partial and limited credit is provided for the products of brewers producing and selling beverages in Minnesota. At all times relevant to this appeal, the applicable statute, § 340.47, subd. 2, provided as follows:
1 (Italics supplied.)
Plaintiff is a Wisconsin corporation with no brewing facilities in Minnesota. Because the fermented malt beverages sold by plaintiff within the state of Minnesota are not produced in Minnesota, it was required to pay $197,651 more in excise taxes upon its products during the two subject years than it would have paid had it been taxed equally with brewers having production facilities in Minnesota. Brewers selling identical products produced in Minnesota were entitled during the two subject years to a maximum of $120,000 in credits per year against their excise tax liability.
The credit provisions of § 340.47, subd. 2, establish two classifications. The first classification includes fermented malt beverages produced by brewers with breweries located within Minnesota. A 50-percent credit is allowed against the excise tax imposed upon these beverages. The credit is available only on a limited number of barrels per year. The second classification includes fermented malt beverages produced by brewers who have no breweries located in Minnesota. No credit is allowed against the excise tax imposed upon these beverages. The touchstone of the classifications is the location of the production facilities. Because it is clear by reason of the Twenty-first Amendment that there is no federal constitutional question involved in the present case,2 the sole issue for this court is whether the classifications established by the statute contravene the equal protection guarantees contained in Minn. Const. art. 1, § 2, and art. 10, § 1.3
Resolution of the constitutional issue raised in this case is governed by well-established principles. Every presumption is invoked in favor of the constitutionality of a statute. Reed v. Bjornson, 191 Minn. 254, 253 N.W. 102 (1934). The power of this court to declare a statute unconstitutional is to be exercised only when absolutely necessary and with extreme caution. Schwartz v. Talmo, 295 Minn. 356, 363, 205 N.W.2d 318, 323, appeal dismissed, 414 U.S. 803, 94 S.Ct. 130, 38 L.Ed.2d 39 (1973). A statute will not be declared unconstitutional unless the party challenging it demonstrates beyond a reasonable doubt that the statute violates some constitutional provision. Head v. Special School Dist. No. 1, 288 Minn. 496, 182 N.W.2d 887 (1970), certiorari denied sub nom. Minneapolis Federation of Teachers, Local No. 59 v. Spannaus, 404 U.S. 886, 92 S.Ct. 196, 30 L.Ed.2d 168 (1971).
The test to determine the constitutionality of statutory classifications includes three primary elements: (1) The distinctions which separate those included within the classification from those excluded must not be manifestly arbitrary or fanciful but must be genuine and substantial, thereby providing a natural and reasonable basis to justify legislation adapted to peculiar conditions and needs; (2) the classification must be genuine or relevant to the purpose of the law; that is, there must be an evident connection between the distinctive needs peculiar to the class and the prescribed remedy; (3) the purpose of the statute must be one that the state can legitimately attempt to achieve. Schwartz v. Talmo, supra; Montgomery Ward & Co., Inc. v. Commr. of Taxation, 216 Minn. 307, 12 N.W.2d 625 (1943).
These three elements are satisfied in § 340.47, subd. 2. First, there are substantial differences between in-state and out-of-state breweries that provide a natural and reasonable basis for separate classifications. Brewers with production facilities in Minnesota contribute substantially to Minnesota's economy. Breweries located in Minnesota constitute capital investment in the Minnesota economy. Minnesota breweries provide employment opportunities within Minnesota for Minnesota citizens. Minnesota breweries purchase Minnesota industrial and agricultural products. Similarly, there are tax differences between the in-state and out-of-state breweries. Minnesota property tax is paid only on breweries located in Minnesota, and Minnesota sales and use tax is paid only on the plant and equipment of breweries located in Minnesota. Minnesota brewers pay an annual Minnesota license tax of $1,000, while non-Minnesota brewers pay only a $100 fee. Additionally, Minnesota brewers pay substantially more of the social costs resulting from the sale of beer in Minnesota, such as costs for law enforcement and welfare, than non-Minnesota brewers even though all brewers benefit equally from being able to sell beer in this state. The economic and tax differences between in-state and out-of-state breweries provide a natural and reasonable basis for separate classifications.
Second, the classifications are reasonably related to the purpose of the statute. Section 340.47, subd. 2, provides tax relief to brewers having brewing facilities in Minnesota. Its obvious purpose is to promote the economic health of the few remaining Minnesota breweries and to thereby retain for Minnesota the economic advantages arising from their continued operation. The statute also encourages out-of-state brewers to locate production facilities in Minnesota. The statute is reasonably related to these purposes because its logical effect is to reward brewers for locating their plants within this state, thereby investing capital within Minnesota for creating jobs and for generating taxable income for in-state purposes. It also encourages out-of-state brewers to locate plants within Minnesota to achieve the same reward and thereby make the same contribution to Minnesota's economy.
Third, the purpose of the statute is one which this state can legitimately attempt to achieve. As we noted in Montgomery Ward & Co., Inc. v. Commr. of Taxation, supra, a state may classify for the purpose of encouraging and assisting industry within its borders.4
Plaintiff's primary argument is that the equal protection guarantees of Minn. Const. art. 1, § 2, and art. 10, § 1, do not permit any type of discrimination based upon origin of a product. In effect, plaintiff contends this court has repeatedly held classification by product origin to be inherently arbitrary. We are not persuaded by this argument because the cases relied upon by plaintiff do not satisfactorily establish its position.
Plaintiff cites, for example, our opinion in Federal Distillers, Inc. v. State, 304 Minn. 28, 229 N.W.2d 144, appeals dismissed sub nom. Griggs, Cooper & Co., Inc. v. Novak and Heaven Hill Distilleries, Inc. v. Novak, 423 U.S. 908, 96 S.Ct. 209, 210, 46 L.Ed.2d 137 (1975), as an indication that we will not allow the Minnesota legislature to treat products from other states less favorably than products originating in Minnesota. That case involved the constitutionality of Minn.St. 304.144, a statute requiring all licensed importers of liquor to offer their products for sale on an...
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