107 Minn. 390 | Minn. | 1909
This case comes to this court upon appeals by both the plaintiff and the defendant; but the questions involved are so intimately connected that we will dispose of the appeals in one opinion.
The action was brought by the state against the Northwestern Telephone Exchange Company to recover the sum of $4,959.48, alleged to be due for taxes which were properly payable under the provisions of the gross earnings law of this state. It was alleged that the defendant was a telephone company, engaged in carrying on a general telephone business, with its principal office and place of business in the city of Minneapolis; that the company, in lieu of all other taxes and assessments upon its property held for use in and about its business, was obliged to pay into the state treasury on January first of each year three per cent, on its gross earnings; that for the purpose of ascertaining said gross earnings the company had been and is obliged, on or before December fifteenth of each year, to furnish a verified abstract of such gross earnings to the state treasury; that a statement was furnished for the year 1904, but that it was incorrect, in that the company failed to report and furnish a certain part and portion of its gross earnings, which were subject to taxation for that year; that the items thus omitted were as follows:
Earnings Tax at 3%
Item 1. Interstate toll earnings............ $36,252 53 $1,087 57
Item 2. Messenger earnings............... 36,795 76 1,103 87
Item 3.************
Item 4. Receipts from sale of material..... 33,736 22 1,012 09
Item 5. Rebates or charges to earnings before reporting the same for taxation purpose to Minnesota...... 36,374 08 1,091 22
Item 6. Income other than from operation of the telephone company, such as dividends and interest on securities owned by it................... 12,157 91 364 73
Item 7. Free telephone................... 10,000 00 300 00
Total .............................$165,316 50 $4,959 48
The company refused to pay these amounts, for the reason, as it alleged, that the items were not such as were properly included within
As to item 1. referred to above, the court found that during the year 1904, in addition to the earnings reported from business done wholly within this state, other earnings from the system were received, and that the sum of $36,252.53, specified under such item 1, represents a proportion of such earnings, based upon the proportion of
As to item 2, receipts for messenger earnings, [it was found] that $25,301.01 thereof represent amounts collected by the company from its patrons and subscribers, for other telephone companies, with whom the defendant had traffic arrangements, as connecting carriers, for terminal fees and messenger services for said companies, and for the share of said companies, for sending the messages over their respective lines, and that said amounts, and all thereof, were paid over by the defendant company to the said other companies as and for their share for sending such messages; that $6,494.75 of this item represents money charged and received for messengers not regularly in the defendant’s service, but employed specially to call nonsubscribers to the telephone stations; and that $5,000, the balance of this item, has been collected from the defendant’s patrons and subscribers as messenger charges actually paid to the persons in whose buildings the defendant’s telephone booths were located, and also as compensation for such location.
Item 3 in the complaint was withdrawn.
As to item 5, [it was found] that the defendant received during 1904 from railway companies transportation of the value of $1,625, which is included in said item; that the balance of $34,749.08 does not represent any income to the defendant, but are rebates and discounts to customers, arising through facts such as the following: At the beginning of the month a customer is charged' rental in advance at the regular rate, and in cases where the service is terminated before the expiration of the month, for which said rental is charged, a proportionate rebate or credit is entered on the books, so as to balance the charge made. Certain customers, having a number of telephones, are charged on the books with the regular price and then credited with such discount as has been agreed upon between the defendant and said customers. Rebates are also made on interrupted service, or failure to render service already charged for.
As to item 6, [it was found] that during 1904 the defendant received as interest and dividends on securities owned by it $12,157.91, but that said securities were never a part of the defendant’s telephone system, or any part of the appurtenances or appendages thereof; nor were said securities ever held or used for, in, or about the construction, repairing, renewal, maintaining, or operating of said system; but such securities were held by the defendant by way of investment only.
As to item 7, [it was found] that the defendant furnished during 1904 telephone service to certain municipal corporations, public officials,
From these facts the court found that the state is entitled to the three per cent, tax as follows: On $36,252.53, being the whole of item 1, interstate toll earnings; on $11,494.75 of the amount included in item 2, messenger earnings; and on $1,625 of the amount included in item 5, transportation from railroad companies. That the amount payable thereon for the year 1904 amounts to $1,481.16. The claim of the state to the tax on the balance of the messenger earnings,, on the whole óf the receipts from the sale of material, on the balance of rebates, on the receipts from dividends on securities held by the company, and on the amount which, at regular rates, would have been received for the use of telephones which were in fact furnished free-to the users, was disallowed by the trial court.
1. The principal question raised upon this record is whether the Northwestern Telephone Exchange Company is required under the provisions of chapter 314, Eaws 1897, to pay the gross earnings tax therein provided for on the earnings from its property situated in this state and used in interstate commerce. This statute is entitled “An act to provide for the imposition and collection of a proportionate earnings tax upon the gross earnings of all property within the state of Minnesota of all telephone companies or owners whose lines are in or extend into or through said state, in lieu of other taxes.”
Section 1 of this statute provides that “any person or persons, co-partnership, association or corporation now or hereafter organized under the laws of this state, or any copartnership or association or corporation now or hereafter organized under the laws of any other state,, territory or country, owning, operating and conducting telephones and telephone lines which are in or extend into, in or through this state,, and carrying on a general telephone business and giving a general service in this state, shall pay into the state treasury on or before the 1st day of January in each year the sum of three (3) per cent, of his or their or its gross earnings, which said payment shall be in lieu of all other taxes and assessments whatever upon each said telephone
Section 3, so far as material, reads as follows: “For the purpose of ascertaining the gross earnings aforesaid, an accurate account of all such earnings shall be kept by such owner, owners, copartnership, association or corporation, and an abstract thereof shall be furnished by such owner or owners, copartnership, association or corporation to the treasurer of this state on or before the 15th day of December in each year.”
The telephone company claims that the language of this statute, when read in connection with that used in the title, shows that the legislature intended to restrict the tax to earnings on business which originates and ends within this state. The authorities cited do not, in our judgment, sustain this contention. Practically all the cases which give support to this view proceed on the theory that any other construction would render the particular statute unconstitutional as an attempt to impose a tax upon interstate commerce. In accordance with the established rule of construction, it was therefore held that the statute should, if possible, be so construed as to render it constitutional. The Dakota statute construed in Northern Pacific v. Barnes, 2 N. D. 310, 51 N. W. 386, and McHenry v. Alford, 168 U. S. 651, 18 Sup. Ct. 242, 42 L. Ed. 614, provided for the payment in lieu of all other taxes of “a percentage of all the gross earnings of the corporation owning or operating such railroad, arising from the operation of such railroad as shall be situated within this territory.”
In the McHenry case it was suggested that a construction which would make this statute include earnings arising from the transportation of-persons and property between different states would render it unconstitutional, but the question was not decided. The same idea seems to have controlled the decision of the Barnes case; that is, in order to sustain the statute, it was assumed that it was necessary to so -construe it to make it applicable to intrastate commerce only.
So, in Pacific Express Co. v. Seibert, 142 U. S. 339, 12 Sup. Ct. 250, 35 L. Ed. 1035, the construction adopted was said to be necessary
In Western Union Tel. Co. v. Alabama State Board, 132 U. S. 472, 10 Sup. Ct. 161, 33 L. Ed. 409, a statute which imposed a tax upon the gross amount of the receipts of the company derived from the business “done by it in the state” was construed to apply only to the company’s receipts from business- done within the state.
By the statute under consideration in State v. United States, 93 Md. 314, 48 Atl. 918, a tax was imposed upon the gross receipts of certain corporations doing business within the state, and it was said that the legislature could not have intended to levy a tax upon the business of the company done by it without the state. “This construction of the statute,” said Mr. Justice Briscoe, “is strengthened by a reference to that part of the statute which provides that the provisions of the act shall apply to all corporations of a like kind to those enumerated by the act, which are doing business in this state, and which are incorporated by or under the laws of any other state. It is, then, quite clear that the tax required by the statute to be paid by foreign corporations is limited to business done by them within the state, and it cannot be presumed that the legislature intended to unjustly discriminate against domestic corporations, doing business in this state, by taxing the business done by them outside of the state.”
When we consider the principles which seem to have controlled the decision of these cases, it is apparent that' they do not require us to adopt the construction contended for by the telephone company. The gross earnings tax provided for by the Minnesota statutes is not a tax upon the right to carry on interstate commerce, and 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. Pullman’s Palace Car Co.
When chapter 314, Laws 1897, was enacted, the gross earnings system of taxation as applied to railroads had been in force for many years. It had been fully developed through general and special legislation and constitutional amendments, and had proven so satisfactory that it was thought advisable to extend it to other kinds of corporations. In 1895 the constitution was so amended as to authorize the legislature to impose a gross earnings tax upon telephone and other corporations therein named. When it enacted chapter 314, Laws 1897, the legislature intended to extend the system which had already been applied to railroads, without substantial change or modification, to other corporations. State v. Twin City Tel. Co., supra; State v. Northwestern Tel. Exch. Co., 84 Minn. 459, 87 N. W. 1131. In that system the words . “gross earnings” had a definite meaning, which must have been understood by the legislature. In chapter 235, p. 368, Laws 1889 (section 2753, G. S. 1894), the words “gross earnings,” as applied
When this statute was enacted in 1897 the railway companies were required to pay, and in fact were paying, the state a gross earnings tax upon a proportionate part of their earnings from interstate, as well as from all their intrastate, business. When the system was extended, it is reasonable to assume that the legislature intended that the words “gross earnings,” when applied to telephone companies, should have the same meaning which had been given them in existing statutes applicable to railroad companies. The telephone companies, like the railroad companies, were engaged in interstate, as well .as intrastate, commerce, and they were taxable upon their property in the state which was earning an income while used in interstate commerce. We cannot assume that the legislature intended to relieve the property from future taxation to the extent of its income from interstate business, which was an important element of its earning power, and which must previously have been taken into consideration in determining the taxable value of the property itself. Under the gross earnings system the railroads were, in order to commute their general property tax, required to pay a tax upon a proportion of the earnings ■of the property in the state used in interstate commerce, as well as on what resulted from its use in intrastate business/ .The principle was equally applicable to telephone companies, and there is no apparent reason why, in fixing a tax which was in theory the exact equivalent of the general property tax, a part of the earnings which constituted an ■essential element in determining the value of the property should have been excluded. A fair and reasonable construction of the statute leads to the conclusion that the legislature intended that a proportionate part of the earnings of the telephone companies, arising from interstate
For the purpose of ascertaining the legislative intention, we may look to the title as well as to the body of the statute. State v. O’Connor, 81 Minn. 79, 83 N. W. 498; Loper v. State, 82 Minn. 71, 84 N. W. 650; Robinson v. U. S., 42 Ct. Cl. 52; Moore v. Chartiers, 216 Pa. St. 457, 65 Atl. 936; Forman v. Sewerage Board, 119 La. 49, 43 South 908; Allen v. Commissioners, 57 N. J. L. 303, 31 Atl. 219; Wilson v. Spaulding (C. C.) 19 Fed. 304. The telephone company lays great stress upon the phrase “all property within the state of Minnesota,” which appears in the title; but, if it was the intention that this tax should be computed as three per cent, upon the income from intrastate business only, it is difficult to see why the title of the act also recites that the purpose is to provide for the imposition and collection of “a proportionate earnings tax” upon all such property. The use of the words “proportionate earnings tax” indicates that the legislature intended to apply to telephone companies the system under which other corporations were then paying taxes upon their property used within the state, based upon their earnings from intrastate business and a proportionate part ■ of their earnings from interstate business. No question of proportion or apportionment could enter into the imposition and collection of a tax upon the gross earnings of property used in intrastate commerce only; but, before the tax'could be estimated upon that part of the income of the company which resulted from the use of its property within the state in interstate commerce, it was necessary to determine the proportion which that business bore to the entire interstate commerce of the company. It was not essential that the statute should provide in detail the method by which the apportionment should be made. Any method which would be just and equitable and consistent with established legal principles might be used. For the purpose of the imposition and collection of the same kind of tax on railroads, a method of apportionment was already in use in the state, and we think it may fairly be assumed that the legislature had this in mind when it enacted the statute, which was designed to apply the same general system of taxation to telephone companies.
2. The argument based upon the practical construction which has been given the statute by the executive officers of the state can have
3. The trial court properly held that the $25,301.01 included in item 2, which had been collected by the defendant from its patrons and subscribers for other telephone companies with whom it had traffic arrangements, was not a part of its gross earnings, but that the $6,494.75 received for messengers not regularly in the defendant’s service, but employed specially to call nonsubscribers to the telephone stations, and the $5,000 collected from the defendant’s patrons and subscribers as messenger charges actually paid to the persons in whose buildings the company’s booths were located, and as compensation for such location, were a part of its gross earnings. These items constitute a part of the income of the company, and the fact that the money was disbursed to persons who rendered services to or supplied accommodations for the company does not change their character. The question of profit is immaterial.
The state’s claim to the tax upon the amount of certain rebates is manifestly without merit, and the same may be said with reference to the claim that the tax should be paid upon the amount which the regular rates would have produced, had the service, which was in fact rendered without charge, been charged and collected for at the regular rates.
The securities which produced dividends and interest, while the. property of the telephone company, were not used in connection with its business, and the court, therefore, properly held that the income therefrom was not a part of the gross earnings of the company within the meaning of the statute. The other items do not require consideration.
Affirmed on both appeals.