Montgomery Ward & Co. v. Fry

Citation277 Mich. 260,269 N.W. 166
Decision Date05 October 1936
Docket NumberNo. 84.,84.
PartiesMONTGOMERY WARD & CO., Inc., v. FRY, State Treasurer, et al.
CourtMichigan Supreme Court

OPINION TEXT STARTS HERE

Suit by Montgomery Ward & Company, Incorporated, against Theodore I. Fry, Treasurer of the State of Michigan, and others. From the judgment, the defendants appeal and the plaintiff cross-appeals.

Case remanded to the circuit court to enter judgment in accordance with opinion. Appeal from Circuit Court, Ingham County; Leland W. Carr, Judge.

Argued before the Entire Bench, except BUTZEL, POTTER, and TOY, JJ.

Brown, Gregg, Thompson & Glassen, of Lansing, Wildermuth, Force & Barr, of Gary, Ind., and Robert L. Wright, of Chicago, Ill., for plaintiff.

David H. Crowley, Atty. Gen., and Edmund E. Shepherd and Arthur T. Iverson, Asst. Attys. Gen., for defendants.

Clark, Klein, Ferris & Cook, of Detroit, for Rockafellow Grain Co., Farmers Elevator Co., Christian Briesch Corporation, and Michigan Fertilizer Co., amici curiae.

WIEST, Justice.

This suit was brought by plaintiff to recover sale taxes, levied by the State Board of Tax Administration, under claim of right by virtue of Act No. 167, Pub. Acts 1933, as amended by Act No. 77, Pub.Acts 1935, known as the General Sales Tax Law, and paid by plaintiff under protest.

The declaration contains six counts. Under count 1 plaintiff seeks recovery of exacted taxes upon catalogue orders of customers, forwarded by its retail stores to its mail order house in Chicago for acceptance, filling, and shipment from there to or for such customers. Such catalogue mail orders, so sent from this state and accepted, filled in, and the merchandise shipped from the state of Illinois, and here involved, amounted to the sum of $253,440.29, and the tax levied thereon amounted to $7,603.21. Defendant appeals from the judgment for recovery of this tax.

Plaintiff maintains many retail stores in this state where it sells wares and merchandise. Upon such sales the tax attaches, has been paid, and is not here involved. Plaintiff's home office and main supply house is in Chicago. Its catalogue, descriptive of offered merchandise, and soliciting purchases thereof through mail orders sent to that city and there to be accepted and filled and shipment made, has a wide circulation, and copies thereof are in retail stores in this state. Such mail order sales and shipments were in the course of interstate commerce and beyond the taxing power of the state.

The Attorney General states: ‘Since the effective date of the Michigan General Sales Tax Law (Act No. 167, Pub.Acts 1933, as amended) the State Board of Tax Administration has been confronted with several rather perplexing problems which in its judgment can be set at rest only by a court of last resort. And it has been the rather commendable policy of members of that board consistently to resolve any reasonable doubt in respect to any particular question presented, in favor of the taxing power of this state.’

There is no appeal in that statement. ‘The scope of tax laws may not be extended by implication or forced construction. Such laws may be made plain, and the language thereof, if dubious, is not resolved against the taxpayer.’ In re Dodge Brothers, 241 Mich. 665, 217 N.W. 777, 779.

The tax act, in section 4, Pub.Acts 1933, No. 167, specifically directed that attention be given to and observance had relative to the proceeds of business ‘which are exempt from taxation by reason of the provisions of the constitution of the United States or the constitution of Michigan.’

The sales tax is not a property tax, but a ‘privilege tax imposed upon the privilege of making retail sales, measured by the gross proceeds of such sales, less deductions allowed by statute.’ C. F. Smith Co. v. Fitzgerald, 270 Mich. 659, 259 N.W. 352, 362.

The question of interstate commerce, here presented, has been too long settled to admit of any doubt. Wares and merchandise, shipped into a state for local sale and sold therein, is in the course of intrastate commerce. But wares and merchandise, located in another state and sold, to be shipped from such state to this state and not to be here resold, constitutes interstate commerce and, while such merchandise may be subjected to a property tax when at rest in this state, no privilege tax may be imposed. See Robbins v. Taxing District of Shelby County, 120 U.S. 489, 7 S.Ct. 592, 30 L.Ed. 694.

It has long been settled, as stated in Minnesota v. Blasius, 290 U.S. 1, 54 S.Ct. 34, 36, 78 L.Ed. 131, that: ‘Thus, the states cannot tax interstate commerce, either by laying the tax upon the business which constitutes such commerce or the privilege of engaging in it, or upon the receipts, as such, derived from it.’

That case points out the distinction between a property tax and a privilege or sales tax.

The Michigan General Sales Tax is valid if limited to intrastate commerce, and this is conceded by plaintiff, but if extended to include receipts from interstate commerce without power of excision thereof, then it would have to be held void. The framers of the act have expressly negatived any such inclusion, and the board exceeded its powers in acting otherwise.

In Cooney v. Mountain States Telephone & Telegraph Co., 294 U.S. 384, 55 S.Ct. 477, 481, 79 L.Ed. 934, it was again stated: ‘There is no question that the state may require payment of an occupation tax from one engaged in both intrastate and interstate commerce. But a state cannot tax interstate commerce; it cannot lay a tax upon the business which constitutes such commerce or the privilege of engaging in it. And the fact that a portion of a business is intrastate and therefore taxable does not justify a tax either upon the interstate business or upon the whole business without discrimination.’

A tax upon receipts is a burden upon sales.

In East Ohio Gas Co. v. Tax Commission of Ohio, 283 U.S. 465, 51 S.Ct. 499, 500, 75 L.Ed. 1171, it was said:

‘The question is whether the state statute, construed to include the amounts reported as receipts from interstate business, operates directly to regulate or burden interstate commerce.

‘Admittedly the exaction is not a tax on property nor in lieu of a property tax. The statute calls it, and in fact it is, a tax for the privilege of carrying on intrastate business. Receipts from interstate business are expressly excluded from the calculation. It is elementary that a state can neither lay a tax on the act of engaging in interstate commerce nor on gross receipts therefrom.’ Citing Pullman Co. v. Richardson, 261 U.S. 330, 43 S.Ct. 366, 67 L.Ed. 682;New Jersey Bell Telephone Co. v. State Board of Taxes and Assessments, 280 U.S. 338, 50 S.Ct. 111, 74 L.Ed. 463.

The sales tax is a burden on interstate commerce directly when levied upon or measured by the operation of interstate commerce or gross receipts derived therefrom.

In Cook v. Pennsylvania, 97 U.S. 566, 24 L.Ed. 1015, it was held that a tax on the amount of an auctioneer's sales was a tax on the goods sold.

It has been held that a tax on the sale of an article, imported for sale, is a tax on the article itself. Brown v. Maryland, 12 Wheat. 419, 6 L.Ed. 678. See, also, Stewart Dry Goods Co. v. Lewis, 294 U.S. 550, 55 S.Ct. 525, 79 L.Ed. 1054.

Upon the subject here presented, see Heyman v. Hays, 236 U.S. 178, 35 S.Ct. 403, 59 L.Ed. 527;Furst v. Brewster, 282 U.S. 493, 51 S.Ct. 295, 75 L.Ed. 478;International Textbook Co. v. Pigg, 217 U.S. 91, 30 S.Ct. 481, 54 L.Ed. 678,27 L.R.A.(N.S.) 493,18 Ann.Cas. 1103;People v. Bunker, 128 Mich. 160, 87 N.W. 90;Fifth Avenue Library Society v. Hastie, 155 Mich. 56, 118 N.W. 727;Despres, Bridges & Noel v. Zierleyn, 163 Mich. 399, 128 N.W. 769.

The judgment under count 1 is affirmed.

Count 2.

Count 2 seeks to recover the sales tax, exacted and paid under protest, upon catalogue orders of merchandise where the customer paid the price at the retail store in Michigan and the order was sent by the retail store to the manufacturer in another state (not plaintiff) for acceptance, filling, and shipment of the merchandise to the customer in this state. The manufacturer's account was charged to the retail store in this state, and the plaintiff's Chicago mail order house had no connection with sales of this class beyond its catalogue solicitation.

Such sales amounted to $76,970.27, and the sales tax exacted thereon to $2,309.11.

Plaintiff appeals from the judgment denying refund of this tax.

The circuit judge found no privity of contract between the customer and the manufacturer or wholesaler but, rather, ‘a purchase by plaintiff of...

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