U.S. Glue Co. v. Town of Oak Creek

Decision Date16 June 1915
Citation161 Wis. 211,153 N.W. 241
PartiesUNITED STATES GLUE CO. v. TOWN OF OAK CREEK.
CourtWisconsin Supreme Court

OPINION TEXT STARTS HERE

Appeal from Circuit Court, Milwaukee County; J. C. Ludwig, Judge.

Action by the United States Glue Company against the Town of Oak Creek to recover a portion of the amount paid as income tax. Judgment for plaintiff, and defendant appeals. Reversed and remanded, with directions to dismiss the complaint.

Barnes, J., dissenting.

The plaintiff brought this action to recover the sum of $2,835.38, with interest from January 29, 1913. Plaintiff, under protest, paid this sum to defendant as income tax and claims it was in excess of the amount lawfully due from it as income tax on its income for the year 1911 and assessed in the year 1912. The plaintiff is a corporation organized under the laws of this state, and is located and has its principal place of business at Carrollville, in the town of Oak Creek, Milwaukee county. The plaintiff conducted the business of manufacturing glue, gelatine, grease, and other products, and sold these products in this and other states of the United States and in foreign countries. Its manufacturing was done at its plant in the town of Oak Creek, the defendant in this action. It maintained general offices at its plant in Carrollville, and conducted all of its business there, except such as was conducted at its established branch business places in the cities of Boston, Mass., New York City, N. Y., Chicago, Ill., Cincinnati, Ohio, Richmond, Va., and Grand Rapids, Mich. At these places the plaintiff carried stocks of its goods. Each place was in charge of a manager, who employed traveling men to solicit orders for goods. A part of the goods covered by orders obtained by salesmen were shipped to the purchasers from the stocks at these branches, and the rest of such orders were sent by the managers to the plaintiff's headquarters at Carrollville, and the goods called for by them were shipped from the factory at Carrollville. The stock of goods at these branches was in part manufactured at the factory in Carrollville and sent to the branch houses before sale thereof, and the rest of the goods at these branches the plaintiff purchased from manufacturers and dealers outside of this state and were shipped from the places of purchase either directly or by way of plaintiff's factory to these branches.

The parties agreed upon the material facts of the case and stipulated that in 1911: (1) The value of plaintiff's property within the state was $753,181.61. The value of its property within and without the state was $1,060,900. (2) Plaintiff's income from rentals, stocks, bonds, securities, or evidences of indebtedness was $10,390.81. (3) Plaintiff's income from its business (exclusive of the above item of $10,390.81) for 1911 was $1,279,850.71, which is designated hereafter as its “business income.” (4) The state tax commission computed plaintiff's net “business income” for 1911 at $143,200. After making the deductions provided for by the law, the tax commission computed plaintiff's taxable income for 1911 to be $66,576, upon which it assessed an income tax at the rate of 6 per cent., amounting to $3,994.56. (5) In 1913 the tax commission made a reassessment of plaintiff's 1911 income, to correct alleged errors in their assessment thereof in 1912, and upon their computation for reassessment found that $13,344 of plaintiff's net taxable income for 1911 had been omitted from the tax of 1912, and made an assessment thereon at the rate of 6 per cent., amounting to $700,64, which the plaintiff paid under protest and included in its demand of recovery in this action. (6) It is also stipulated that the plaintiff's net “business income” for 1911 arising from the conduct of its business was derived as follows: (a) The sum of $15,999.47 was realized from the manufacture, sale, and delivery of goods from its factory to customers residing in the state of Wisconsin. (b) The sum of $65,103.26 was realized from the manufacture, sale, and delivery of goods from its factory to customers residing outside of the state of Wisconsin. (c) The sum of $31,336.86 was realized from the manufacture of goods at the factory, sent to branch houses outside of Wisconsin, and the sale and delivery of such goods from the branch houses to customers residing outside of the state of Wisconsin. (d) The sum of $11,444.75 was realized from the purchase of goods in the market outside of the state of Wisconsin, and shipped from the place of purchase either directly or by way of plaintiff's plant at Carrollville to its branch houses, and the sale and delivery of such goods to customers residing outside of the state of Wisconsin.

The trial court adopted the facts as stipulated by the parties as its findings of fact in the case, and as conclusions of law held that plaintiff's taxable income for the year 1911 under the provisions of sections 1087m1 to 1087m30 (Stats. 1911) inclusive, was $10,390.81 income derived from rentals, stocks, bonds, securities, and evidences of indebtedness, and $15,999.47 of the income derived from conducting the business specified and described in the foregoing classes (a), (b), (c), and (d) as “business income,” and that the income tax lawfully due thereon was the sum of $1,055.61, which tax was paid by plaintiff on the 29th day of January, 1913; that plaintiff was unlawfully required to pay the sum of $2,835.38 in excess of the lawful amount due as income tax; and the court awarded plaintiff judgment for the recovery of $2,835.38, with interest thereon from January 29, 1913. From such judgment this appeal is taken.

Walter C. Owen, Atty. Gen., and H. J. Killilea of Milwaukee, (Walter Drew, Deputy Atty. Gen., of counsel), for appellant.

Lines, Spooner, Ellis & Quarles, of Milwaukee, for respondent.

SIEBECKER, J. (after stating the facts as above).

The income tax law of 1911 provides:

“There shall be assessed, levied, collected and paid a tax upon incomes received during the year ending December 31, 1911. * * *” Section 1087m1, Stats. 1911.

“The tax shall be assessed, levied and collected upon all income, not hereinafter exempted, received by every person residing within the state, and by every nonresident of the state upon such income as is derived from sources within the state: * * * Provided, that any person engaged in business within and without the state shall, with respect to income other than that derived from rentals, stocks, bonds, securities or evidences of indebtedness, be taxed only upon that proportion of such income as is derived from business transacted and property located within the state, which shall be determined in the manner specified in subdivision (e) of section 1770b, as far as applicable.” Section 1087m2, subd. 3, Stats. 1911.

The taxability of the income derived from rentals, bonds, etc., is not in controversy. All parties agree that the tax commission properly taxed this item of $10,390.81.

The defendant, the town of Oak Creek, contends that the court erred in holding that the part of the plaintiff's net “business income,” denominated class (a) in the foregoing statement, which is derived from the manufacture, sale, and delivery of its products at its plant in Carrollville to customers in the state of Wisconsin only, is subject to be taxed as income under the foregoing provisions of the income tax law. On the part of the plaintiff it is claimed that the judgment of the trial court is correct, upon the ground that the net “business income” derived by plaintiff from the manufacture, sale, and delivery of its goods to customers in this state constitutes the net income derived from business transacted and located within this state in the sense of this law, and that the “business income” derived from goods sold to customers outside of the state, whether manufactured at and shipped from its factory at Carrollville or purchased outside of this state and then delivered from its branch houses, was derived from transactions in interstate commerce and therefore not taxable, because it is a burden on such commerce and is repugnant to section 8, art. 1, of the Constitution of the United States, whereby is conferred on Congress the power “to regulate commerce with foreign nations, and among the several states, and with the Indian tribes.”

[1] The question naturally arises first: What portion of plaintiff's net “business income” is income “derived from business transacted and property located within the state,” and subject to the tax upon incomes? We are of the opinion that this provision of the statute includes all of plaintiff's net “business income” derived from the manufacture, sale, and delivery of such of its products as were manufactured at, sold, and delivered from the factory to customers in Wisconsin and other states, and the net “business income” of its products which were manufactured at its factory at Carrollville, and shipped from there to its branch houses out of the state, and delivered from there to customers residing outside of the state, on sales made either at Carrollville or at the branch houses. The trial court held that the net “business income” of the sales of the latter class--embraced in classes (b) and (c) of the foregoing statement--was not subject to an income tax, because such portion of plaintiff's income is not “derived from business transacted and property located within the state.” This court, in State ex rel. Arpin v. Eberhardt, 158 Wis. 20, 147 N. W. 1016, had under consideration the provisions of these statutes involving this question, and interpreted them to the effect that the income of a person residing in the state, other...

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