5 N.W.2d 637 | Minn. | 1942
On August 15, 1939, relators, 23 nonresident corporations, filed with the commissioner of taxation a Protest and Notice of Desire for Hearing, requesting a return of the money collected from them for the period from January 1 to July 1, 1939, under Mason St. 1927, §§ 2270 to 2276-1, as amended. The hearing was granted, but the relief asked was denied. Relators appealed to the board of tax appeals. The board took testimony, heard arguments, made and filed detailed and extensive findings affirming the commissioner. The findings and memorandum (opinion) cover 40 pages of the printed record.
The first contention is that the statutes referred to are unconstitutional, in that they impose a gross earnings tax without having been approved and ratified as required by Minn. Const. art.
"Any law providing for the repeal or amendment of any law or laws heretofore or hereafter enacted, which provides that any railroad company now existing in this state or operating its road therein, or which may be hereafter organized, shall in lieu of all other taxes and assessments upon their real estate, roads, rolling stock, and other personal property, at and during the time and periods therein specified, pay into the treasury of this state a certain percentage therein mentioned of the gross earnings of such railroad companies now existing or hereafter organized, shall before the same shall take effect or be in force, be submitted to a vote of the people of the state, and be adopted and ratified by a majority of the electors of the state voting at the election at which the same shall be submitted to them."
It is perfectly clear that this constitutional provision does not apply to any one of relators or to the freight cars furnished or leased by any one of them to railroads.
It is true that the gross earnings tax, under Mason St. 1927, § 2246, on the property of railroads used in transportation as common carriers of passengers and freight, is a lieu tax, the same as the gross earnings tax under § 2272 upon the property of relators. Common carrier railroads do not pay a gross earnings tax upon all of their real estate or personal property. Only that used in or for transportation purposes is subject to that tax; other property owned by such railroads for investment or other purposes is subject to and pays the advalorem tax. State v. G. N. Ry. Co.
The next contention is that the gross earnings tax under said §§ 2270 to 2276-1 violates Minn. Const. art.
Before considering the contention mentioned, some of the factual situation disclosed by the findings should be stated. Long ago corporations encroached upon or came to the aid of common carrier railroads by furnishing sleeping cars, as, for instance, the Pullman Company. Then came the great packing industries and fruit shippers, furnishing their own refrigerator cars, and the large oil industries, furnishing their own tank cars. The railroads, either for lack of funds or due to the depression following the expansion after the World War, were unable or unwilling to procure the cars needed to move the freight offered by shippers. Relators organized for the purpose of providing the railroads and shippers with the needed cars. Since the bulk of the freight moved on railway lines is interstate commerce, the rates of compensation for the use of cars so furnished and operated came under the control of the interstate commerce commission; and our railroad and warehouse commission cannot establish a tariff for intrastate use different from that approved by the interstate commission. So far as concerns relators, the established rates which they receive vary from one and one-half cent a mile for a loaded car haul to two and one-half cents, depending upon the classification of the car. Where the freight is oil in tank cars, the cars return empty, and no charge is made by the railroads for the return.
Relators' expert undertook to develop the differences and variations in cost and values of the different types of cars furnished by them. He was not only an attorney, but also an officer and principal stockholder of one of relators and the taxation adviser of all. He introduced exhibit 6, prepared under his direction, showing the cost of the various types of cars, new and old, the earnings or paid mile haul of the cars of each relator, the price at which they could be purchased or built, and so forth. Of the same type, the rent or earnings of an old car fit for the use furnished *66
was, of course, the same as that of a new car of the same capacity or load. It appeared that glass-lined tank cars for transportation of milk to centers like New York City or Chicago cost new up to $3,500, oil tank cars new cost from $1,600 to $1,900 of one class, and $1,150 of another, whereas serviceable old oil tank cars could be bought and fixed up for $700 or less. It would cost about $3,900 to build a poultry car, and a refrigerator car would cost about $3,200. And the argument goes that, the tax being a lieu tax, it is impossible to have uniformity under a percentage basis upon the gross earnings. Hence, §§ 2270 to 2276-1 contravene Minn. Const. art.
So far as § 1 of art. 9 applies to §§ 2270 to 2276-1, we consider it settled that the statute does not contravene this section of our constitution. It was so held in State v. Cudahy Packing Co.
As to the gross earnings tax collected from relators under our statutes, §§ 2270 to 2276-1, being in contravention of U.S. Const. Amend.
The last proposition urged is that the classification of relators' cars for taxation under any other method than that applied to other privately owned cars of the same type is violative of the constitutional guarantees of uniformity and equality. We do not understand that the classification by the interstate commerce commission as to tariff or rental rates is attacked, but the difference between railroad-owned cars and relators' cars. They say that trains are moving over railroad lines in this state with freight in cars owned by railroads and in cars of relators furnished or let to the railroads, the same sort of freight in both. On the railroad-owned cars, the railroads pay five per cent of the tariff on the freight, while relators, in addition to what the railroads pay, must pay seven per cent on the mileage haul received from the *69
railroads. That this is not double taxation or even a discrimination is shown by a study of our cases. State v. U.S. Exp. Co.
No system of taxation has been devised that will justly and equally distribute the burden either upon the persons or the property. But so far as the gross earnings tax method has been applied as a lieu tax where an ad valorem tax is impossible because of the use of the property, it appears to work out with reasonable uniformity and equality. As to relators, it cannot be said that the rate paid by them is appreciably more than that paid on the average upon personal property.
The decision of the board of tax appeals is affirmed. *70