State v. Railway Express Agency

• Decision Date: 03 July 1941
• Docket Number: No. 32720.,32720.
• Citation: 210 Minn. 556,299 N.W. 657
• Parties: STATE v. RAILWAY EXPRESS AGENCY, Inc.
• Court: Minnesota Supreme Court

299 N.W. 657

210 Minn. 556

STATE v. RAILWAY EXPRESS AGENCY, Inc.

No. 32720.

Supreme Court of Minnesota.

July 3, 1941.

Appeal from District Court, Ramsey County; Hugo O. Hanft, Judge.

Action by the State of Minnesota against the Railway Express Agency, Incorporated, to recover a certain sum allegedly due as gross earnings taxes during the year 1938 on certain of defendant's receipts from railroads for services rendered. From an order sustaining the plaintiff's demurrer to the amended answer, the defendant appeals.

Affirmed.

Kellogg, Morgan, Chase, Carter & Headley, of St. Paul, and H. S. Marx and J. C. Greenway, both of New York City, for appellant.

J. A. A. Burnquist, Atty. Gen., and John A. Weeks, Asst. Atty. Gen., for respondent.

PETERSON, Justice.

This action was brought to recover $4,653 alleged to be due as gross earnings taxes during the year 1938 on certain of defendant's receipts from railroads for services rendered. The case comes here on appeal from an order sustaining plaintiff's demurrer to the amended answer.

The facts are stated in the complaint and the amended answer.

Defendant is an express company within the meaning of the express company gross earnings tax law, Mason Minn.St.1927, §§ 2261-2269, as amended by Mason Minn.St. 1940 Supp. § 2268 which imposes a tax on express companies measured by nine per cent of their gross earnings.

The receipts in question were in payment of the contract price of certain hauling of freight in less than carload lot by motor vehicle over public highways. During the year 1938 the railroads paid defendant $46,999.48 for such services.

The services were of two types. One, which consisted of conveying freight from the shipper to the railroad and from the railroad to the consignee, was called pickup and delivery service. The other, which consisted of transferring freight from one railroad to another for through movement and certain hauling from St. Paul to Minneapolis for a railroad, was known as transfer service.

Defendant performed these services with its employes, equipment and tractive power. Incident thereto it took possession of the property which it transported. Except where the volume of freight was light, the loading and unloading of merchandise received from and delivered to railroads was done by their employes. To perform these services defendant purchased 10 trucks, seven tractors and 27 trailers. It paid the motor vehicle tax on this equipment imposed by Mason Minn.St.1940 Supp. §§ 2672-2674.

The freight which defendant hauled was received by the railroads from shippers for transportation under railroad bills of lading. The railroads collected the entire transportation charges from the shipper. Defendant had no dealings with shippers or consignees concerning the freight hauled by it. It did not issue any express receipt or waybill for any freight which it moved. Its dealings were exclusively with the railroads.

The railroads included the freight receipts from the shippers in their gross earnings. They were taxed five per cent of their gross earnings under Mason Minn.St. 1927, §§ 2246-2260, in lieu of all taxes.

The express company gross earnings tax law, Mason Minn.St.1927, § 2261, provides that "Every person, company, joint-stock association, or corporation, wherever organized or incorporated, engaged in the business of conveying to, from, or through this state, or any part thereof, money, packages, gold, silver plate, or other articles, by express, shall be deemed to be an express company."

The gross earnings of express companies are subject to a tax of nine per cent under Mason Minn.St.1940 Supp. § 2268, which reads: "Every such express company shall be assessed a tax equal to nine per cent of its gross earnings as defined in subdivision 6 of Section 1013, Revised Laws of 1905 (§ 2262), after deducting payments to railroads for the transportation of freight as defined in subdivision 7 of said section, and the same shall become due and payable to the State of Minnesota on March 1st thereafter; and the payment of such sum at said time shall be in full and in lieu of all ad valorem taxes upon its property."

Earnings are defined by Mason Minn.St. 1927, § 2262(6), as: "The entire receipts, including all sums earned or charged, whether actually received or not, for business done within this state, including its proportion of gross receipts for business done by such company within this state in connection with other companies."

Defendant's contentions here, which are the same as those made below, are: (1) that the receipts from the railroads for the services mentioned are earnings derived from conducting a "drayage," not the express, business and hence are not subject to the express company gross earnings tax law; (2) that the compensation paid to defendant was part of the receipts of the railroads for the transportation of which defendant's services were part and that the railroads' receipts having been taxed as part of the gross earnings of the railroads under the railroad gross earnings tax law "cannot be made the basis of a second tax under the Express Companies Gross Earnings Tax Law;" (3) that the taxation of such receipts is double taxation; (4) that such double taxation is violative of the uniformity clause of the state constitution and the equal protection clauses of the state and federal constitutions; and (5) that, since the statute does not authorize the imposition of a gross earnings tax on such receipts, the tax in question involves a taking of defendant's property without due process of law in violation of the due process clauses of the state and federal constitutions.

1. The services in question were not mere drayage. One who transports goods for a common carrier under its contracts of carriage as an essential part of the freight movement renders a common carrier service, although he has no dealings directly with consignors or consignees and issues no bills of lading, receipts or waybills covering his part of the transportation. State v. Rock Island Motor Transit Co., 209 Minn. ___, 295 N.W. 519. There is authority for the view that the services in question were "express business." American Ry. Express Co. v. Wright, 128 Miss. 593, 91 So. 342, 23 A.L.R. 127; Alsop v. Southern Express Co., 104 N.C. 278, 10 S.E. 297, 6 L.R.A. 271. We do not need to decide whether or not such services technically constituted "express" business.

While the claim is made that the services constitute a business different and separate from the express business, no claim is made that rendering such services by defendant was unlawful or ultra vires. Whatever the nature of the services, the compensation therefor constitutes receipts and earnings of defendant—of an express company.

The construction of the express company gross earnings tax law was settled in State v. United States Express Co., 114 Minn. 346, 131 N.W. 489, 493, 37 L.R.A.,N.S., 1127, affirmed 223 U.S. 335, 32 S.Ct. 211, 56 L.Ed. 459, in which the question was whether or not the receipts of an express company from the sale and redemption of money orders issued by it within this state were part of its gross earnings upon which the gross earnings tax was payable. We held that the sale and redemption of money orders was "banking business." There the contention was made that an express company is taxable only on its receipts from the express forwarding business and that receipts from other lines of business conducted by an express company are not part of its gross earnings as an express company. Disposing of that contention and holding the receipts taxable we said:

"It is argued by defendant that, to the extent that defendant is engaged in business other than the express forwarding business, it cannot be regarded as an express company within the meaning of the statute. The statute defines an express company as a corporation that is engaged in the business of conveying articles by express; but it by no means follows that a corporation that is also engaged in other business is not still an express company, and liable to pay taxes on the property used in such other business. It was and is a well-known fact that express companies sell and redeem money orders. Defendant's charter authorized it to do a banking and exchange business. No reason is apparent why the Legislature should exempt from taxation the property employed in such business. The statute does not confine the tax to earnings from transportation. It says that the company shall return a statement of its `entire receipts for business done within this state'; * * *." (Italics supplied.)

The contention here is like that in the cited case. The fact is that the receipts in question are those of an express company from services which it is authorized to render. It uses its property and facilities in the rendition of such services. In the cited case the receipts taxed were not derived from transportation. Here they were.

The defendant's contention that the definition of an express company by implication limits the receipts to be taxed to those received from express operations cannot be sustained. The definition designates the companies and not the operations to be taxed. The tax is upon the entire receipts of such companies. In State v. United El. Light & W. Co., 90 Conn. 452, 97 A. 857, 858, in holding that electric and water companies' receipts from the sale of apples and hay grown upon their land, for the right to take ice from their ponds, and from the sale of coke, tar, and other residual products under a statute similar to ours, were properly included in their gross earnings, the court said: "The clear intention of the Legislature, from the language used, was that companies of the class designated shall pay a tax measured by a percentage of the gross earnings from all their operations. This would have been no clearer had the words `from all sources' been inserted between the words `gross earnings' and `from operations in...