State v. United States Express Co.
| Decision Date | 19 May 1911 |
| Docket Number | Nos. 16,977-(2).,s. 16,977-(2). |
| Parties | STATE v. UNITED STATES EXPRESS COMPANY.<SMALL><SUP>1</SUP></SMALL> |
| Court | Minnesota Supreme Court |
Action in the district court for Ramsey county to recover $9,719,66, the amount of taxes claimed to be due by reason of certain omitted taxable gross earnings of defendant for the years 1899 to 1909, both inclusive, not included in defendant's returns for taxation. The case was heard upon the pleadings and stipulated facts by Hallam, J., who made findings of fact and ordered judgment in favor of plaintiff for the amount demanded. From the judgment entered pursuant to the order, defendant appealed. Modified.
Frank B. Kellogg, C. A. Severance, and Robert E. Olds, for appellant.
George T. Simpson, Attorney General, and George W. Peterson, Assistant Attorney General, for the State.
Defendant is an express company organized under the laws of New York, and doing business in this state and throughout the United States. This action was brought by the state to recover the sum of $9,719.66, being taxes alleged to be due on account of gross earnings never reported by defendant. Defendant admitted that it had failed to include in its returns to the proper state officials the items of gross earnings on which the complaint alleged taxes were payable, and claimed that such items were not taxable.
A constitutional amendment passed in 1896 (Const. art. 9, § 17) authorized a gross earnings tax upon express companies. The legislature in 1897 passed an act (Laws 1897, c. 309, p. 575, § 6) providing for three per cent. tax upon the gross earnings of such companies. The rate was increased to five per cent. in 1899, and to six per cent. in 1901. The statutes as they are now, and were at the time the action was commenced, provide in substance that every express company shall annually, between January 1 and February 1, make and file with the state auditor a statement which shall contain, among other facts, "the entire receipts * * * 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." The auditor, between March 1 and April 1, determines the gross receipts of every such company, and on or before March 15 "shall assess upon each company a tax of six per cent. upon its gross receipts for business done between points within this state for the preceding calendar year as determined by the auditor, which shall be in lieu of all taxes upon its property." R. L. 1905, §§ 1013, 1015, and 1019.
The facts were stipulated. The items of gross earnings which the company failed to include in its returns to the state auditor, and which the state claims are taxable, are as follows:
First. Earnings on through shipments consigned from a point in Minnesota to another point in Minnesota, but forwarded over lines of railroad partly without the state of Minnesota. Ninety-one per cent. of this mileage is in Minnesota. The amount of the back taxes claimed on these earnings is $2,991.29, based upon the total earnings of such shipments, without any deduction based upon the portion thereof earned without the state.
Second. "Interstate transfer business;" that is, earnings on interstate shipments received by defendant at a point in Minnesota, carried over its lines to a second point in Minnesota, the transportation by defendant being performed wholly within the state, but the transportation of such shipments while out of the state, and also within the state, but beyond defendant's lines, being performed by other connecting companies. The amount of back taxes claimed on such earnings is $504.47.
Third. Earnings from the issuance of money orders sold and issued by defendant at points in Minnesota. These money orders designate no place of payment, but are payable at any office of the company. Eighty per cent. of them are returned through banks and clearing houses to the main office of defendant in New York. No part of the revenue from this service is paid to railroad or other transportation companies. No shipments of money are connected with the issuance and redemption of money orders. The amount of back taxes on the earnings derived from this class of business is $5,788.15.
Fourth. Miscellaneous items, not reported for taxation, representing omitted earnings on intrastate express business handled between points in Minnesota by defendant during 1899. The amount of back taxes on these earnings is $434.75.
The trial court decided for the state, holding that the earnings embraced in each of the four classes were taxable, and that plaintiff was entitled to judgment for $9,719.66, the full amount claimed. Judgment was entered, and defendant appealed.
We will consider the different classes of earnings separately in the order above stated.
1. Defendant claims that a tax upon these earnings is a tax upon interstate commerce. We think that the case of Lehigh Valley R. Co. v. Pennsylvania, 145 U. S. 192, 12 Sup. Ct. 806, 36 L. ed. 672, is decisive against defendant's contention, at least as to the proportion of the earnings derived from the carriage within this state. The facts in that case are substantially identical with the facts in this. As here, the point of shipment and the point of destination were both within the state; but the route passed through a portion of another state. It was held that this was not interstate commerce, and that the state of the points of shipment and destination could tax earnings on such shipments. It perhaps does not appear as clearly as it might whether the recovery in that case was allowed for the entire earnings, or for a proportion thereof based upon the mileage within the state; but we interpret the decision as allowing a recovery of taxes upon that proportion of the earnings derived from the carriage wholly within the state. This seems to us the safer rule, and avoids any question of taxing interstate commerce, and we adopt and apply it to this case. Nine per cent. of the taxes recovered on this class of earnings should be deducted from the amount of the recovery.
Defendant also contends that the language of the statute shows it was not the intention of the legislature to tax such earnings. This contention is based upon the wording of the provisions that the gross receipts "for business done within this state" shall be returned by the company, and that the tax shall be assessed upon its "gross receipts for business done between points within this state." The intent of the legislature was clearly to avoid taxing interstate business; but we are unable to see how confining the tax to receipts from business done "between points within this state" indicates an intention to exclude from taxation, or, more correctly speaking, to exclude from the measure of taxation, earnings "between points within this state" in cases where the shipments pass out of the state en route. To so construe the language would be to add a new term to the act.
2. So-called "interstate transfer" business. Carriage of shipments from points in this state to points without this state is undoubtedly interstate commerce, though the carriage without the state is wholly by connecting companies. There is no doubt that it was the intention of the legislature, as expressed in the act, to include this class of earnings within the state in the gross receipts upon which the tax is based. They are earnings from business done "between points within this state." The provision that there shall be included by the company in its return "its proportion of gross receipts for business done by such company within this state in connection with other companies" is not, we think, entirely colorless, but bears out the conclusion that the act shows an intent that the state shall be entitled to include such earnings in figuring the taxes to be paid by the company.
The question is whether the legislature had power to include earnings from such shipments. If the gross earnings tax law is to be construed as a tax upon gross earnings, admittedly a tax upon the earnings from interstate shipments is an interference with interstate commerce; but if such law does not authorize a tax upon gross earnings, if it is a tax upon the property of the corporation within the state, its gross earnings within the state being merely a measure or method of arriving at the value of its property for taxation, it is equally clear that there is no interference with interstate commerce, and the legislature has not acted beyond its power.
There is nothing in the constitution or laws of the United States which forbids the state to tax property which is within its borders merely because it is employed in interstate or foreign commerce. State v. Northwestern Tel. Exch. Co., 107 Minn. 390, 120 N. W. 534; Pullman's Palace Car Co. v. Pennsylvania, 141 U. S. 18, 11 Sup. Ct. 876, 35 L. ed. 613.
It has long been settled by the decisions of this court that the gross earnings tax laws were not intended to change the character of the tax, but for the purpose of certainty were intended to change the method of computation. The amount required to be paid remains a tax upon the property, and not against the corporation. The gross earnings tax is a system by which the amount of tax upon the property is determined. City of St. Paul v. St. Paul & S. C. R. Co., 23 Minn. 469; County of Ramsey v. Chicago, M. & St. P. Ry. Co., 33 Minn. 537, 24 N. W. 313; County of Todd v. St. Paul, M. & M. Ry. Co., 38 Minn. 163, 36 N. W. 109; County of Traverse v. St. Paul, M. & M. Ry. Co., 73 Minn. 417, 76 N. W. 217; Minneapolis & St. L. R. Co. v. Koerner, 85 Minn. 149, 88 N. W. 430; State v. Canda Cattle Car Co., 85 Minn. 457, 89 N. W. 66; State v. Northwestern Tel. Exch. Co., 107 Minn. 390, 120 N. W. 534.
It is true that this court has never construed this particular law; but we are not able to see why the decisions on the railroad tax laws and on the telephone tax law should not rule this case. It is...
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