The issues presented on this appeal are:
(1) Were the operations of the taxpayer in Wisconsin during the years 1948 to 1953, inclusive, such as to subject it to taxation under ch. 71, Stats., on its net income apportioned to Wisconsin ?
(2) Does the imposition of such a net income tax violate the commerce clause of the United States constitution inasmuch as all of taxpayer’s activities in Wisconsin were confined exclusively to interstate commerce ?
(3) Is there a sufficient “nexus” between the state of Wisconsin and taxpayer’s business activities in the state as to permit the imposition оf this income tax under the due-process clause of the Fourteenth amendment?
The pertinent provisions of ch. 71, Stats., read as follows:
Sec. “71.01 (1) For the purpose of raising revenue for the state and the counties, cities, villages, and towns, there shall be assessed, levied, collected, and paid a tax on all net incomes as hereinafter provided, by every person residing within the state or by his personal representative in case of death; and by every nonresident of the state, upon such income as is derived from propеrty located or business transacted within the state, except as hereinafter exempted. . . .
Sec. “71.07 (2) Persons engaged in business within and without the state shall be taxed only on such income as is derived from business transacted and property located within the state. The amount of such income attributable to Wisconsin may be determined by an allocation and separate accounting thereof, when the business of such person within the state is not an integral part of a unitary business, provided, however, that the department of taxation may pеrmit an allocation and separate accounting in any case in which it is satisfied that the use of such method will properly reflect the income taxable by this state. In all cases in which allocation and separate accounting is not permissible, the determination shall be made in the following manner: There shall first be deducted from the total net income of the taxpayer such part thereof (less related expenses, if any) as follows the situs of the property or the residence of the recipient; provided, that in the case of income which follows the residence of the recipient, the amount of interest and dividends deductible under this provision shall be limited to the total interest and dividends received which are in excess of the total interest (or related expenses, if any) paid and allowable as a deduction under sec. 71.04 during the income year. The remaining net income shall be apportioned to Wisconsin on the basis of the ratio obtained by taking the arithmetical average of the following three ratios:
“(a) The ratio of the tangible prоperty, real, personal, and mixed, owned and used by the taxpayer in Wisconsin in connection with his trade or business during the income year to the total of such property of the taxpayer owned and*383 used by him in connection with his trade or business everywhere. . . .
“(b) In the case of persons engaged in manufacturing or in any form of collecting, assembling or processing goods and materials, the ratio of the total cost of manufacturing, collecting, assembling or processing within this state to the total cost of manufacturing, or assembling or procеssing everywhere. . . .
“(3) Where, in the case of any person engaged in business within and without the state of Wisconsin and required to apportion his income as herein provided, it shall be shown to the satisfaction of the department of taxation, that the use of any one of the three ratios above provided for gives an unreasonable or inequitable final average ratio because of the fact that such person does not employ, to any appreciable extent in his trade or business in producing the income taxed, the factors made use of in obtaining such ratio, this ratio may, with the approval of the department of taxation, be omitted in obtaining the final average ratio which is to be applied to the remaining net income.
“(5) If the income of any such person properly assignable to the state of Wisconsin cannot be ascertained with reasonable certainty by either of the foregoing methods, then the same shall be apportioned and allocated under such rules and regulations as the department of taxation may prescribe.”
The first contention advanced by taxpayer, as to why the afore-quoted statutes have no application to it, is that it has no property located in Wisconsin or “business transacted within the state.” The department does not take issue with the argument that taxpayer has no property in Wisconsin in the sense of having a taxable situs here. However, the department strenuously disagrees with the assertion that taxpayer transacts no business in Wisconsin.
Taxpayer’s business is the transportation of merchandise by motor truck as a common carrier. Therefore, it can be argued logicalfy that wherever taxpayer transports goods for hire it is transacting business within the meaning of
Taxpayer takes the position that activities within the state, which are confined solely to transporting goods in interstate commerce, cannot constitute the transaction of business within the meaning of sec. 71.01 (1), Stats. However, no Wisconsin decisions so construing this statutе are cited in support of such position, and we are aware of none which have adopted so restrictive an interpretation.
Apparently, taxpayer has in mind decisions of other jurisdictions construing the statutory phrase “doing business” as applied to foreign corporations. As we pointed out in Huck v. Chicago, St. P., M. & O. R. Co. (1958), 4 Wis. (2d) 132, 138,
We can perceive of no reason why we should аttribute any intent to our legislature to restrict the meaning of the statutory words “business transacted within the state” to any
Taxpayer advances the further argument that certain provisions of sec. 71.07, Stats., evince a legislative intention to exempt the interstate activities of motor carriers from the Wisconsin income tax. This argument is grounded upon the fact that the three factors, enumerated in pars, (a), (b), and (c) of sub. (2) of such statute and which are to be averaged in arriving at an apportionment formula to be applied to income of a taxpayer engaged in business within and without the state, are on their face wholly inapplicable to motor carriers. We deem that the force of this argument is entirely vitiated by the provisions of sub. (5) of sec. 71.07, which authorizes the department to prescribe its own rules and regulations for devising an аpportionment formula in the event the other designated methods are unworkable. Pursuant to this authority the department had devised a formula for apportionment of taxpayer’s income which embodied two factors, revenue and miles traveled;
This argument also fails because tax exemptions do not arise by implication but must be clear and express. Albion v. Trask (1950),
The Commerce Clause of the United States Constitution.
We pass now to the question of whether the imposition of the tax in question violates the commerce clause of the United States constitution. We are satisfied that it does not.
The companion cases of Northwestern States Portland Cement Co. v. Minnesota, and Williams v. Stockham Valves & Fittings, Inc. (1959),
“AYe conclude that net income from the interstate operations of a foreign corporation may be subjected to state taxation provided the levy is not discriminatory and is properly apportioned to local activities within the taxing state forming sufficient nexus to support the same.”
The Portland Cement Co. Case has been widely interpreted as holding that taxes imposed on net income, which are fairly apportioned and nondiscriminatory, are valid as not imposing a burden on interstate commerce even though all the income is derived exclusively from interstate commerсe.
“The taxing statutes are not sought to be applied to portions of the net income of Northwestern and Stockham because of the source of that income — interstate commerce —but rather despite that source. The thrust of these statutes is not hostile discrimination against interstate commerce, but rather a seeking of some compensation for facilities and benefits afforded by the taxing states to income-producing activities therein, whether those activities be altogether local or in furtherance of interstate commerce. The past decisions of this court establish that such compensation may be had by the states consistent with the commerce clause.
*388 “I think it no more a ‘regulation of,’ ‘burden on,’ or ‘interference with’ interstate commerce to permit a state within whose borders a foreign corporation engages solely in activities in aid of that commerce to tax the net income derived therefrom on a properly apportioned basis than to permit the same state to impose a nondiscriminatory net income tax of general application on a corporation engaging in both interstate and intrastate commerce therein and to take into account income from both categories.”
United States Glue Co. v. Town of Oak Creek (1918),
In a per curiam opinion closely following and relying for authority upon the Portland Cement Co. Case, ET & WNC Transportation Co. v. Currie (1959),
(1) Maintaining rented freight terminals in various places in the taxing state for use in taxpayer’s interstate operations;
(2) Owning and operating pickup and delivery trucks for use at these terminals;
(3) Owning the furniture, fixtures, and equipment in the terminals; and
(4) Picking up interstate freight from its customers in the taxing state.
Our reading of the majority, concurring, and dissenting opinions in the Portland Cement Co. Case convinces us that, while the local activities of the two taxpayer corporations may have had some significance in upholding the taxes imposed on due-process grounds, they played no part in the court’s holding that such taxes did not violate the commerce clause. In fact, the Portland Cement Co. Case has been widely interpreted as rejecting “local activities” as a commerce-clause requirement.
The facts in the West Publishing Co. Case, as set forth in the California court’s opinion, were as follows: Taxpayer was a Minnesota corporation having its principal office in the city of St. Paul, and was engaged in the business of selling lawbooks and other publications. It had not qualified to do intrastate business in California. During 1937-1939 it shipped books and other publications into California pursuant to orders taken by its four regularly employed solicitors located in California. These solicitors were authorized to receive payments on orders taken, to collect delinquent accounts, and to make adjustments. They were given space in offices of California attorneys in return for the use of taxpayer’s books kept in these offices. Such offices were advertised in California newspapers and periodicals as being offices of the taxpayer. However, the California court, in its opinion, assumed that taxpayer’s income in California was derived entirely “from activities in furtherance of a purely interstate business . . .” 27 Cal. (2d) 705, 712,
Mr. Justice Clark, speaking for the majority in the Portland Cement Co. Case, commented upon the local activities of the West Publishing Company in California by stating (p. 461) :
“The opinion [in West Publishing Co. v. McColgan] was not grounded on the triviality that office space was given West’s solicitors by attorneys in exchange for the*391 chanceful use of what books they may have had on hand for their sales activities. Rather, it recognized that the income taxed arose from a purely interstate operation.”
Similarly, the concurring opinion of Mr. Justice Harlan rejected the view advanced by the three dissenting justices, that the local activities of West Publishing Company in California controlled the result in the West Publishing Co. Case, by declaring (p. 468) :
. . it is surely stretching things too far to say that California was seeking to measure and tax office renting and complaint adjusting rather than part of the income from concededly interstate sales transactions.”
Taxpayer in the instant case places reliance on certain decisions of the United States supreme court antedating the Portland Cement Co. Case, as did the dissenting justices in that case. That the supreme court has not always been consistent in its decisions concerning the impact of the commerce clause upon the taxing power of the states is apparent from the fact that the majority opinion in such case concedes there is a “need for clearing up the tangled underbrush of past cases.”
“It would be a Plerculean, if not impossible task, to review and harmonize the myriad decisions of the supreme court of the United States on the subject of interstate commerce and exactly what incidents thereof may be constitutionally taxed by the states. The dissenting opinions in many of those cases make clear that the task of recon*392 ciling all the decisions is more difficult than was the task of Theseus as he threaded his way through the famous Cretan Labyrinth in search of the Minotaur.”
Whatever may have been the confusion which existed prior to the Portland Cement Co. Case, we deem that case controls the decision of the instant appeal, and that the nondiscriminatory income tax assessed against the taxpayer does not violate the commerce clause of the United States constitution. Furthermore, we are convinced of the soundness of such holding.
In passing, it perhaps should be noted that no issue of multiple taxation is before us on this appeal. Because of the impossibility of successfully attacking the fairness of the apportionment formula here appliеd by the department, a more-likely forum for raising this issue would be Minnesota, the domiciliary state. The majority opinion in the Portland Cement Co. Case had this comment to make on that problem (p. 462):
“Logically it is impossible, when the tax is fairly apportioned, to have the same income taxed twice. In practical operation, however, apportionment formulas being what they are, the possibility of the contrary is not foreclosed, especially by levies in domiciliary states.”
As a footnote to this sentence the court cited Standard Oil Co. v. Peck (1952),
Sufficient Nexus Under the Due-Process Clause.
The reference, in the court’s opinion in the Portland Cement Co. Case, to the necessity that there be local activi
Taxpayer contends that a foreign corporation must have local activities in the taxing state, in addition to activities confined solely to transporting goods in interstate commerce, in order for the state to have jurisdiction to levy an income tax on such corporation. In raising this argument, taxpayer has overlooked the significance of the reason the United States supreme court, in cases involving state taxation of foreign corporations engaged in interstate commerce, has stressed such local activities as maintaining salesmen or solicitors, or operating an office, within the state. Most of these cases deal with situations in which the interstate commerce is carried on by an independent common carrier, such as, for example, a manufacturer shipping goods into a state
However, in the instant case there is no necessity of finding any local activities by taxpayer in Wisconsin other than operating its trucks through the state over the state’s highways. We are aware of the requirement that a tax, levied on interstate commerce solely for support of highways, to be valid must bear a reasonable relationship to the costs sought to be dеfrayed by its levy. Capitol Greyhound Lines v. Brice (19S0),
We are satisfied that there is nothing in the due-process clause of the Fourteenth amendment which would prevent activities in interstate commerce taking place within the
“. . . it is axiomatic that the founders did not intend to immunize such commerce from carrying its fair share of the costs of the state government in return for the benefits it derives from within the state.”
Mr. Justice Clark expressed the same thought more tersely when he observed, “Even interstate business must pay its own way.” Postal Telegraph-Cable Co. v. Richmond (1919),
In Memphis Natural Gas Co. v. Stone (1948),
“So here I do not think that the local activities for the protection of which the Mississippi tax purports in terms to be laid become separate from the interstate business which petitioner conducts in Mississippi, either by reason of the apportionment or otherwise. But they are incidents of carrying on that business taking place in Mississippi and only there, for which Mississippi affords protection received from no other state or the United States. Nor can any other state give that protection. For that portion of the business and the protection given it, I think the state is entitled to levy such a tax as has been placed here.” Id., page 98.
Likewise, in the instant case no other state than Wisconsin affords protection to the taxpayer’s trucks and operators while they are plying the highways of this state. We are satisfied that taxpayer’s interstate activities in Wisconsin, to which this state extends the protection of its laws, supply a sufficient nexus to sustain the taxes levied on the income derived from such activities to constitute due process of law.
By the Court. — Judgment affirmed.
Notes
For a discussion of the problem of the constitutionality of a tax applied to minimal or sporadic activities confined to interstate commerce in the state which seeks to impose the tax, see 12 Alabama Law Review (1959), 66, 68.
The fairness of the two formulas was not in issue. The Minnesota apportionment formula employed the average of these three ratios, sales assignable to Minnesota to total sales, tangible prop
For expressions of such an interpretation, see 47 California Law Review (1959), 388, 389; 46 Virginia Law Review (1960), 1051; Annotation, Income Tax on Foreign Corporation (1959), 3 L. Ed. (2d) 1787, 1790.
47 California Law Review (1959), 388, 391; 43 Minnesota Law Review (1959), 1010, 1014; 29 University of Cincinnati Law Review (1960), 82, 87; 20 University of Pittsburgh Law Review (1959), 868, 869.
It is impossible to reconcile the result reached by the Pennsylvania court in this case with the later-decided Portland Cement Co. Case. Therefore, we consider that Roy Stone Transfer Corp. v. Messner no longer hаs any persuasive authority on the point of constitutional law therein decided.
The court used the term “nexus” to refer to the due-process requirement that there must be “some definite link, some minimum connection, between a state and the person, property, or transaction it seeks to tax.” This definition the court took from its decision in Miller Bros. Co. v. Maryland (1954),
See 20 University of Pittsburgh Law Review (1959), 868, 869.
See 46 Virginia Law Review (1960), 1051, 1059, and the concurring opinion of Mr. Justice Rutledge in International Harvester Co. v. Department of Treasury (1944),
For a brief synopsis of what has been held to constitute a sufficient “nexus,” see Anno. Tax- — Income of Foreign Corporation, 67 A. L. R. (2d) 1322, 1331.
7 Mississippi Code, Anno. (1942), p. 150, sec. 9314.