State v. Railway Express Agency

Decision Date03 July 1941
Docket Number32,720
Citation299 N.W. 657,210 Minn. 556
PartiesState v. Railway Express Agency, Inc
CourtMinnesota Supreme Court

Action in the district court for Ramsey county by the state to recover $4,653 alleged to be due from defendant as gross earnings taxes for the year 1938 on certain of defendant's receipts from railroads for services rendered. Plaintiff demurred to the answer, the demurrer was sustained, Hugo O. Hanft, Judge, and defendant appealed from the order. Affirmed.

Kellogg Morgan, Chase, Carter & Headley, H. S. Marx, and J. C Greenway, for appellant.

J. A A. Burnquist, Attorney General, and John A. Weeks, Assistant Attorney General, for the State.

The opinion of the court was delivered by: Peterson

Taxation -- gross earnings tax of express companies -- receipts taxable -- services rendered railroads.

1. The receipts of an express company derived from "transfer" and "pick-up and delivery" services rendered to railroads under contract are part of its gross earnings for purposes of taxation under 1 Mason Minn St. 1927, §§ 2261-2269, as amended by 3 Mason Minn. St. 1940 Supp. § 2268.

Taxation -- gross earnings tax of express companies -- receipts taxable -- services rendered railroads.

2. Such receipts must be included in an express company's gross earnings although received by it from a railroad which paid a gross earnings tax measured by a percentage of all its earnings.

Constitution -- double taxation -- taxation of express company earnings from services rendered railroads.

3. There is no double taxation of the earnings received by an express company from a railroad where each pays a gross earnings tax on its own property in lieu of all other taxes.

Constitution -- equal protection of laws -- taxation of express company earnings from services rendered railroads.

4. Since the inclusion in an express company's gross earnings for purposes of taxation of its receipts from a railroad for services rendered does not result in double taxation, there is no basis for holding that such inclusion results in double taxation which violates the uniformity clause of the state constitution and which denies the taxpayer the equal protection of the laws in violation of the equal protection clauses of the state and federal constitutions.

Constitution -- due process of law -- taxation of express company earnings from services rendered railroads.

5. The claim that the tax in question violates due process because the statute does not authorize the tax falls by our holding that the tax is authorized by the statute.

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, 1 Mason Minn. St. 1927, §§ 2261-2269, as amended by 3 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 pick-up 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, 7 tractors, and 27 trailers. It paid the motor vehicle tax on this equipment imposed by 3 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 1 Mason Minn. St. 1927, §§ 2246-2260, in lieu of all taxes.

The express company gross earnings tax law, 1 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 3 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 1 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 M.T. Co.209 Minn. 105, 295 N.W. 519. There is authority for the view that the services in question were "express business." American Ry. Exp. Co. v. Wright, 128 Miss. 593, 91 So. 342, 23 A.L.R. 127; Alsop v. Southern Exp. 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. U.S. Exp. 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...

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