Nebraska Tel. Co. v. City of Lincoln

Citation82 Neb. 59,117 N.W. 284
Decision Date26 June 1908
Docket NumberNo. 15,856.,15,856.
PartiesNEBRASKA TELEPHONE CO. v. CITY OF LINCOLN.
CourtSupreme Court of Nebraska
OPINION TEXT STARTS HERE
Syllabus by the Court.

The franchise or right to occupy the streets of a city by a telephone company is not identical with the business or occupation of the company.

An occupation tax measured by a percentage of the gross earnings of a telephone company, whose franchise is also taxed in connection with its tangible property according to its value as a going concern, does not tax the same property twice.

The provision for an annual payment of $500 to the city of Lincoln in the respective franchise ordinances of two telephone companies “in consideration of the rights and privileges granted” is a sum exacted by the city for the privilege of using the streets under its proprietorship of the streets, and, while termed a “privilege tax,” is in the nature of a rental charge or compensation for the use of the streets.

The exaction of a percentage of the gross earnings of its business in the ordinance granting a franchise to the Western Union Independent Telephone Company is an exercise of the taxing power of the city, and is a tax upon the business or occupation of conducting a telephone business within the city.

Such provision is also legislative in its character and subject to repeal.

A provision in an ordinance imposing an occupation tax that “the sum and amount of the occupation tax or taxes on the gross receipts required to be paid under existing ordinances” may be deducted from the amount of the tax is not void because not uniform as to persons or property, since by its operation all persons engaged in the same occupation are taxed upon the same basis and in the same manner.

Under its charter, the city of Lincoln may lawfully enact an ordinance imposing upon telephone companies a business or occupation tax measured by the gross receipts within the city, and the fact that tolls and rentals collected within the city are in part for messages over lines lying in part beyond the city limits does not invalidate the tax. Western Tel. Co. v. Fremont, 39 Neb. 692, 58 N. W. 415, 26 L. R. A. 698.

Appeal from District Court, Lancaster County; Holmes, Judge.

Action by the Nebraska Telephone Company against the city of Lincoln to restrain the enforcement of an ordinance imposing an occupation tax on telephone companies. Judgment for defendant, and plaintiff appeals. Affirmed.H. F. Rose and W. W. Morsman, for appellant.

John M. Stewart and T. F. A. Williams, for appellee.

LETTON, J.

The Nebraska Telephone Company is a corporation operating a telephone system in the city of Lincoln with local and long-distance connections. In 1885 it obtained a franchise to transact business within the city. No provision was made in the ordinance for the payment of any consideration for the privilege. In 1894 an ordinance was passed giving it the right, for a term of 50 years, to construct and maintain subsurface conduits for carrying its wires and cables under ground. This ordinance provided for the payment of $500 annually to the city “as a privilege tax” in consideration of the rights and privileges thereby granted. In 1903 the city granted to the Western Union Independent Telephone Company a like franchise to operate a telephone system. This ordinance provided that the grantee should pay the city $500 annually “in accordance with the terms and conditions of the existing ordinances fixing the occupation tax upon telephone companies.” The grantee was also required to pay a further sum annually equal to 1 per cent. of its gross earnings during the first term of five years after the commencement of its business, and 2 per cent. for the next five years, and 3 per cent. annually thereafter during the term of the grant, which was for 50 years. The grantee transferred its rights under this ordinance to the Lincoln Telephone Company, which constructed and has operated a telephone system in Lincoln for several years. In 1907 Ordinance No. 448 was passed, providing that all telephone companies doing business in the city should pay an occupation tax “equal to two per cent. of the gross receipts of such companies from exchange rentals and tolls taken within the city not including any interstate service or services for the United States government”; and, after providing for penalties for delinquencies and for the filing of proper statements, the ordinance further provided that, in the payment of said occupation tax, any such company shall have the right to deduct therefrom “the sum and amount of the occupation tax or taxes on the gross receipts required to be paid by such company or companies to the city of Lincoln under existing ordinances.” The Nebraska Telephone Company began this action, praying that the latter ordinance be declared void, and praying for an injunction to restrain the city of Lincoln from attempting to enforce the same or collect the tax imposed thereby. As grounds for the action, it alleged in the petition that the two telephone companies named are the only companies doing business in said city and that there is no probability there will ever be more; that the ordinance was framed and passed with reference to these companies; that there was not at that time any ordinance imposing any occupation tax or taxes on the gross receipts of telephone companies or any other ordinance imposing obligations upon such companies, except those named, and that the purpose and object of the provision permitting the companies to deduct from the amount of the tax “the sum and amount of the occupation tax or taxes on the gross receipts required to be paid by such companies to the city of Lincoln under existing ordinances” was to permit each company to deduct the sum which they had severally agreed to pay by the respective franchise ordinances, and was a device under the pretense of taxation to impose an unequal burden on the plaintiff by permitting the Lincoln Telephone Company to subtract payments made in performance of its contractual obligations from the amount of the occupation tax ostensibly imposed upon it by the ordinance. The plaintiff alleges, further, that the tax imposed by the ordinance is not uniform in its operation and imposes unequal taxation, and is in violation of the charter of the city, the Constitution of Nebraska and of the United States. The city answered, admitting the passage of the ordinance, but denying the other facts alleged, and praying for an accounting of the amount of taxes due under the ordinance from the plaintiff, and a decree for their payment. The district court found the ordinance to be legal and valid, refused an injunction, and ordered the plaintiff to file a statement and pay the tax as required by the ordinance. From this judgment, the Nebraska Telephone Company has appealed.

The plaintiff first contends that the ordinance creating the occupation tax is void because it imposes double taxation upon it by taxing the same thing for the same purpose twice, but under different names. The argument is that because under the law in this state, with reference to taxation of public service corporations, their tangible property and their franchises, including all tangible rights and interests, are to be taken together, and the value of the whole be taken as a going concern, the right or privilege of doing business or carrying on the occupation is therefore taxed, and cannot be again taxed by virtue of an impost laid upon the right to carry on the occupation within the city; citing Western Union Telegraph Company v. Omaha, 73 Neb. 527, 103 N. W. 84;Nebraska Telephone Co. v. Hall County, 75 Neb. 405, 106 N. W. 471;State v. Savage, 65 Neb. 714, 91 N. W. 716. The plaintiff in its brief says: We fully concede that the fact that the property employed in a business is taxed as property and ad valorem is no objection to a separate tax upon the business in which the property is employed, provided the business or occupation has not in fact been, or is not required by the law to be, taxed in taxing the property and franchises ‘by valuation.’ So that the whole argument of the plaintiff on this point is based upon the proposition that the franchise and the business or occupation of the telephone company are identical.

But there is a distinction between the right or privilege to transact or carry on business within the corporate limits of a city and the actual operation of the business itself. It is the franchise, the grant of the right to do business, which must be taxed according to value, the same as other property. It is property and is susceptible of valuation. It is well known that the right to occupy the streets of a city by a corporation, either for gas, water, lighting, street railway, telegraph, or telephone purposes, often constitutes an exceedingly valuable property even before the construction of the operating plant or the doing of any business whatsoever. Such unavailed of franchises, as a matter of common knowledge, have in some instances been valued and sold at many thousands of dollars before one cent has been realized from the enterprise. On the other hand, the corporation owning a franchise and carrying on a business might be conducting its operations at an actual loss, its earnings being insufficient to pay running expenses with no better prospects in the future, and therefore its franchise of little or no value. While its gross earnings might amount to a large sum of money, yet a tax upon the business, measured by the gross earnings, would be upheld as a business tax. A business tax measured by gross earnings is a tax upon the business which is actually performed and is not a tax upon property in any sense, while a tax levied by valuation on the right to do business is a tax upon property, irrespective of whether or not any business or occupation has been actually carried on. It seems clear that a property tax based upon the value of the franchise and a business or...

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    • Missouri Supreme Court
    • 3 Julio 1944
    ... ... 582, ... 58 S.W.2d 975; Welch v. Henry, 223 Wis. 319, 271 ... N.W. 68; Neb. Tel. Co. v. City of Lincoln, 82 Neb ... 59, 117 N.W. 284; Lincoln Traction Co. v. City of ... Ry. Co. v. Alameda County, 225 P. 304, 66 Cal.App. 7; ... Nebraska Tel. Co. v. City of Lincoln, 82 Neb. 67, ... 117 N.W. 87; City and County of Denver v. Stenger, ... ...
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    • 10 Febrero 1915
    ... ... expressly recognized in the following cases: Nebraska ... Telephone Co. v. City of Lincoln, 82 Neb. 59, 117 N.W ... 284; Salt ... ...
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