84 Minn. 459 | Minn. | 1901
In proceedings to enforce the collection of taxes for the year 1899 against three separate parcels of real property owned by the defendant telephone company, situated in the city of Minneapolis, answers were interposed, the cases treated and tried as one, and judgments ordered for the state for the full amount of taxes assessed against each parcel.
As to two, there was no dispute over the facts. Prior to the
The corporation paid its gross earnings tax for the year 1899, as provided for and required by Laws 1897, c. 314, and'the defense interposed by the answers and at the trial was that the collection of specific taxes could not be enforced against any of this property, because of the law last mentioned and a compliance therewith. This chapter provides for substituted taxation for certain properties of a kindred character, including the property of telephone companies. It provides for payment into the state treasury of three per cent, of the gross earnings of each telephone company; and, further, that such payment shall be in lieu of all other taxes and assessments whatever upon each company, its appurtenances and appendages, and upon all its property held or used for, in, or about the construction, repairing, renewal, maintaining, and operating its system or lines, and also upon the capital stock of any such company.
It is possible that under this statute property not within or contemplated by the 1896 amendment to article '9 of the constitution (Laws 1897, p. viii.) may be exempted from specific taxation; but, if this be the fact, the law is to that extent invalid, and must be cut down by construction. So that the real question becomes one of interpretation of the fundamental law itself, and not wholly of the provisions found in chapter 314.
It is to be noticed at- the outset that the constitutional provision;
“That nothing in this act contained shall operate to authorize the assessment or taxation of any farm land or ordinary business blocks or property owned by any such corporation, person, firm or company, except in the manner provided by the ordinary methods of taxation.”
It is clear that this proviso was added to the preceding provisions in order that some limitation or restriction might be made as to property to which the legislature might apply the gross-earnings method of taxation. The purpose was to exclude some kinds of property belonging to the real or artificial persons specified from the operation of any statute which might be enacted in furtherance of the project. All property excluded by the proviso, remained subject to taxation in the prevailing manner; that is, it was to be assessed and taxed as prescribed by the general revenue laws of the state. Railroad property was expressly excepted from the operation of the act, undoubtedly because it was already subject to the gross-earnings system of taxation, and further legislation in respect thereto was unnecessary.
There seems to be no room for misunderstanding as to farm land, for by express language this class of property was excluded. The difficulty arises when we attempt to ascertain what are “ordinary business blocks or property” within the meaning of the amendment. How is it to be determined what are ordinary business blocks or ordinary property? If business buildings, the property of owners or companies mentioned in chapter 314, are of like construction as business buildings, the property of other ■owners or companies, and of the same outward appearance, are
Effect must be given to the word “ordinary,” which was used to differentiate one class of business blocks or other property from another class o.r classes, for it cannot be presumed that this word was inserted unintelligently, or without a purpose; and in endeavoring to arrive at its office and design reference may be had to its association with other words and expressions found in close juxtaposition, and with which it is connected. Great care was taken to exclude from the operation of any law which might be enacted in furtherance of this taxing plan all farm lands, ordinary business blocks, and ordinary property belonging to the persons, companies, or corporations named in the law. It was seen that the property of these real or artificial persons was, or easily might be, of two classes, — one comprising such property as was absolutely necessary to use and occupy in the production of the revenue or earnings upon which was to be laid a percentage tax; and the other of property which in no manner was necessary to the creation of revenue or the accumulation of gross earnings. One class of the property might well be denominated as strictly legitimate to the business of its owners, while the other would be wholly foreign to that business, and a mere incident.
A telephone company, an insurance or an express company, might own real property which would be absolutely necessary for corporate business, and in continual use every day in its business; but no one can see to what corporate purposes such a company could devote farm land, unimproved town property, or a dwelling house. A telephone or an express company might properly own horses and wagons as very essential adjuncts to the business of either, but it is difficult to discover to what legitimate use a sleeping car company could put such property, for it would be foreign to the objects for which such a company was organized.
This was considered, unquestionably, when the constitutional amendment was drafted, enacted, and adopted, and with this in mind the object was to provide that none of these parties should have substituted taxation for ordinary property, real or personal. It was the intent to exclude from the operation of a gross-earnings system of taxation all property which was simply held as a collateral or distinct enterprise, and did not in a direct manner promote the purposes for which the main business was organized and carried on. As to property devoted to legitimate business, exclusively occupied, held, or used in that business by the parties named, the peculiar exemption from ordinary methods of taxation applied.
The distinction between property which actually contributes to produce earnings which are or may be adopted as the basis of a contemplated percentage tax and that which is not necessary and which cannot properly contribute to produce earnings is plain and easily understood. It has been made clear in a large number of cases in this state in which railway companies have claimed that certain of their real property was not subject to ordinary taxation. If the property is devoted to the specific purpose of conducting and carrying on the very business for the taxation of which the substituted .method is authorized, and is of the very class for which the substituted system is enacted, then it is relieved from customary methods; otherwise it is not.
Looking beyond the proviso and the phrase “ordinary business blocks or property,” we observe that this constitutional provision requires that the tax upon property which comes within its terms must be “as uniform as reasonably may be with the taxes imposed'
If the telephone company should acquire property wholly distinct in its character from that which it must necessarily secure for the proper conduct of its business, — wholly useless in its business, — the rules already laid down in railway cases would be exactly in point. Such property, whether real or personal, would bear no relation whatever to that which had been secured for the transaction of business, and which must be devoted thereto. If such property is used in and necessary to the business, it is taxable by the substituted method, and not otherwise. If it is not so used, it is taxable in the usual way. When it ceases to be used for the purposes of the owner or corporation, it becomes subject to taxation the same as ordinary property.
It has been well said that:
“The general inclination of the courts has been to hold, that a charter which provides for a certain tax, and ‘that no other tax or impost shall be levied or assessed’ upon'the corporation, will exempt from taxation all the property held by it, necessary to effect the purpose of the incorporation, but not other property held by it which, though convenient and tending to increase the profits, is not necessary to the corporation and its business.” Cooley, Taxn. 151.
Two of the tracts in question here were as absolutely necessary for the proper conduct of the purposes and business of the teléphone company in 1899 as were the poles in the streets,, or the wires strung thereon, or the subsurface conduits, with their contents. The buildings were occupied exclusively for telephone pur
It is argued that the rules which have been adopted for ascertaining what is, in fact, within the gross-earnings laws affecting railways cannot be applied in the case at bar, because this view would render the proviso of no force and superfluous. With such a construction, it is argued, nothing whatever was added to that part of the amendment which preceded it. It is true that without such proviso and with this construction it would have been understood and implied that no property which was not in actual use by the specified owners or companies for their own proper purposes could escape taxation in the ordinary way, but that does not tend to demonstrate that rules for the assessment of railway property are not applicable. In the proviso was an attempt to provide in express terms, so that there might be no misunderstanding, that ordinary business property or other ordinary property should not be exempt from the usual methods of taxation. The line between property within the amendment and that without, but of the same ownership, was to be plainly announced, not left to inference, or for judicial construction, as had been the case in prior years, and with prior enactments'.
Our conclusion is that by the receipt of a percentage on the gross earnings of the telephone company for the year 1899 the state received its tax once upon two of the tracts of the land in question, and that a specific tax against such property would be double taxation, and illegal.
This brings us to a consideration of what is known as the “East Side Property.” The court found as facts that there was an unnecessary delay in adapting this tract to the purposes of the company, and that it was not used in its business in the year 1899, As a conclusion of law it was held liable and subject to specific taxation that year.
As before stated, this tract was unimproved in the year 1899,
In view of all of the facts, we are of. the opinion that the questions of unnecessary delay in the construction of this building and the use to which the property was devoted in 1899 were to be determined from all of the evidence, and we conclude that the testimony justified a finding against the company on these points.
Finally, except as to the east-side premises, the answer to the question first certified is that the property in controversy is exempt from ordinary taxation, “because of the payment of its. gross-earnings tax by the defendant corporation.”
We answer the second question in the negative, and that the-east-side property was not exempt.
Case remanded, with instructions to proceed in the court below in accordance with the views herein expressed.