State ex rel. Froedtert Grain & Malting Co. v. Tax Comm'n of Wis.

• Decision Date: 04 May 1936
• Citation: 267 N.W. 52,221 Wis. 225
• Court: Wisconsin Supreme Court
• Parties: STATE EX REL. FROEDTERT GRAIN & MALTING CO., INC., v. TAX COMMISSION OF WISCONSIN.

221 Wis. 225

267 N.W. 52

STATE EX REL. FROEDTERT GRAIN & MALTING CO., INC.,

v.TAX COMMISSION OF WISCONSIN.

Supreme Court of Wisconsin.

May 4, 1936.

On motion for rehearing.--[By Editorial Staff.]

Motion denied.

For former opinion, see 265 N.W. 672.Lamfrom Tighe, Engelhard & Peck, of Milwaukee (Leon B. Lamfrom and Egon W. Peck, both of Milwaukee, of counsel), for plaintiff.

James E. Finnegan, Atty. Gen., Herbert H. Naujoks, Asst. Atty. Gen., and Cyrus C. Thieme, Sp. Counsel, of South Milwaukee, for defendant.

Olin & Butler, Harry L. Butler, and Ward Rector, all of Madison, Lawrence A. Olwell, Bernard V. Brady, Shaw, Muskat & Paulsen, Miller, Mack & Fairchild, and Upham, Black, Russell & Richardson, all of Milwaukee (Perry J. Stearns, of Milwaukee, of counsel), Nicholson, Snyder, Chadwell & Fagerburg, of Chicago, Ill., Stephens, Sletteland, Sutherland & Cannon,of Madison (Erwin P. Snyder and Dewey F. Fagerburg, both of Chicago, Ill., and Glenn W. Stephens, of Madison, of counsel), amici curiæ.

FOWLER, Justice.

There is a motion for rehearing, and the brief in support of the motion reargues nearly all of the questions presented in the original briefs, perhaps with more force and cogency than they were originally presented, but the ultimate conclusion urged in all the briefs is in effect that the tax imposed is a property tax and a personal tax against the stockholder, and as such is unconstitutional as to nonresident stockholders.

[1] From some things in the briefs on the motion for rehearing we fear that we failed to make our position entirely clear in the original opinion. Our position is that the tax is an excise tax on the transfer of earnings resulting from property located or business transacted within this state, and stands on the same basis of constitutionality that a state inheritance tax stands; that the tax of the state of New York on stock transfers, upheld in New York ex rel. Hatch v. Reardon, 204 U.S. 152, 27 S.Ct. 188, 51 L.Ed. 415, 9 Ann.Cas. 736, stood; that the state tax in New York on the transfer of property by deed upheld in Keeney v. Comptroller, 222 U.S. 525, 32 S.Ct. 105, 56 L.Ed. 299, 38 L.R.A.(N.S.) 1139, stood; and that the tax on salaries of nonresidents earned within the state, upheld in Travis v. Yale & Towne Mfg. Co., 252 U.S. 60, 40 S.Ct. 228, 64 L.Ed. 460, stood. Earnings from property or transactions within the state are as much subject to a transfer tax as property within the state passing by inheritance or deed or other form of transfer, or salaries earned within the state. We cannot perceive that the fact that the recipient is a nonresident any more invalidates the instant tax than the others stated, nor do we perceive that it makes any material difference whether the transfer tax is paid before or after dividends are declared from earnings.

[2][3][4][5] It is urged in the brief for rehearing that the decisions of the United States Supreme Court in the cases involving inheritance taxes on stocks, Rhode Island Hospital Trust Co. v. Doughton, 270 U.S. 69, 46 S.Ct. 256, 70 L.Ed. 475, 43 A.L.R. 1374, and First National Bank v. Maine, 284 U.S. 312, 52 S.Ct. 174, 76 L.Ed. 313, 77 A.L.R. 1401, on bonds, Farmers' Loan & Trust Co. v. Minnesota, 280 U.S. 204, 50 S.Ct. 98, 74 L.Ed. 371, 65 A.L.R. 1000, on debts for advancements and for unpaid declared dividends, Beidler v. South Carolina Tax Commission, 282 U.S. 1, 51 S.Ct. 54, 75 L.Ed. 131, inherited by a nonresident of the taxing state wherein the debtor was a corporation or resident of the taxing state, holding the tax unconstitutional, render the instant tax unconstitutional. But it does not follow from these decisions that a transfer tax may not be imposed on the devolution of dividends resulting from property located or transactions conducted within the state. The basis of those decisions was that the things inherited were intangibles whose situs was at the residence of the owner, and subject to an inheritance tax only by the state of which the deceased owner was a resident. These cases do not reach the instant situation. It is true a dividend declared and not paid is a debt. But dividends declared from earnings made within a state have characteristics not possessed by other debts. They are debts so different in kind that the difference forms a proper basis of classification and renders them the basis of a transfer tax that other debts are not subject to. The basis of the instant tax is the fact that the dividends result from earnings from property situated or business transacted within this state. Such earnings are a proper subject of taxation, and therefore a proper basis for an excise tax on the transfer of the dividends resulting therefrom. The case of First National Bank v. Maine, supra, so strongly relied on by plaintiff, legalizes the instant tax as to Wisconsin corporations. It holds that, although an inheritance tax may not be laid by a state on the devolution of stock of a domestic corporation owned by a nonresident decedent, the state may, on the issue of new certificates to take the place of the old, lay a tax on the transfer of the stock to nonresidents inheriting it. The declaring of a dividend is as much of a transaction within the state as is the making out of a stock certificate. If the state may impose a tax on the one transaction, it may on the other. Of course, it does not follow that the state may impose the instant tax in case of a foreign corporation because it may impose it in case of a domestic corporation. The declaring of a dividend by the foreign corporation and the transmittal of it would be done withoutthe taxing state, and neither would be a transaction within it, nor would the funds out of which the dividend was paid be located within the taxing state at the time of the payment. But the fact that the earnings made by a foreign corporation within a state are not located therein does not prevent the state wherein they are earned from taxing the earnings, nor from enforcing the collection of the tax. No more should the circumstances above stated prevent the state from imposing the instant tax or enforcing its collection. The case of First National Bank v. Maine, supra, also states that the United States Supreme Court has reserved the question whether stock, bonds, etc., owned by a nonresident may by reason of their use within a state acquire such a situs within the state as to make them subject to an inheritance tax. By implication the question whether they may not be so used as...