299 N.W. 657 | Minn. | 1941
The facts are stated in the complaint and the amended answer.
Defendant is an express company within the meaning of the express company gross earnings tax law, 1 Mason Minn. St. 1927, §§ 2261-2269, as amended by 3 Mason Minn. St. 1940 Supp. § 2268, *558 which imposes a tax on express companies measured by nine per cent of their grow earnings.
The receipts in question were in payment of the contract price of certain hauling of freight in less-than-carload lot by motor vehicle over public highways. During the year 1938 the railroads paid defendant $46,999.48 for such services.
The services were of two types. One, which consisted of conveying freight from the shipper to the railroad and from the railroad to the consignee, was called pick-up and delivery service. The other, which consisted of transferring freight from one railroad to another for through movement and certain hauling from St. Paul to Minneapolis for a railroad, was known as transfer service.
Defendant performed these services with its employes, equipment, and tractive power. Incident thereto it took possession of the property which it transported. Except where the volume of freight was light, the loading and unloading of merchandise received from and delivered to railroads was done by their employes. To perform these services, defendant purchased 10 trucks, 7 tractors, and 27 trailers. It paid the motor vehicle tax on this equipment imposed by 3 Mason Minn. St. 1940 Supp. §§ 2672-2674.
The freight which defendant hauled was received by the railroads from shippers for transportation under railroad bills of lading. The railroads collected the entire transportation charges from the shipper. Defendant had no dealings with shippers or consignees concerning the freight hauled by it. It did not issue any express receipt or waybill for any freight which it moved. Its dealings were exclusively with the railroads.
The railroads included the freight receipts from the shippers in their gross earnings. They were taxed five per cent of their gross earnings under 1 Mason Minn. St. 1927, §§ 2246-2260, in lieu of all taxes.
The express company gross earnings tax law, 1 Mason Minn. St. 1927, § 2261, provides that: *559
"Every person, company, joint-stock association, or corporation, wherever organized or incorporated, engaged in the business of conveying to, from, or through this state, or any part thereof, money, packages, gold, silver plate, or other articles, by express, shall be deemed to be an express company."
The gross earnings of express companies are subject to a tax of nine per cent under 3 Mason Minn. St. 1940 Supp. § 2268, which reads:
"Every such express company shall be assessed a tax equal to nine per cent of its gross earnings as defined in subdivision 6 of Section 1013, Revised Laws of 1905 [§ 2262], after deducting payments to railroads for the transportation of freight as defined in subdivision 7 of said section, and the same shall become due and payable to the State of Minnesota on March 1st thereafter; and the payment of such sum at said time shall be in full and in lieu of all ad valorem taxes upon its property."
Earnings are defined by 1 Mason Minn. St. 1927, § 2262(6), as:
"The entire receipts, including all sums earned or charged, whether actually received or not, for business done within this state, including its proportion of gross receipts for business done by such company within this state in connection with other companies."
Defendant's contentions here, which are the same as those made below, are: (1) That the receipts from the railroads for the services mentioned are earnings derived from conducting a "drayage," not the express, business and hence are not subject to the express company gross earnings tax law; (2) that the compensation paid to defendant was part of the receipts of the railroads for the transportation of which defendant's services were part and that the railroads' receipts having been taxed as part of the gross earnings of the railroads under the railroad gross earnings tax law "cannot be made the basis of a second tax under the Express Companies Gross Earnings Tax Law;" (3) that the taxation of *560 such receipts is double taxation; (4) that such double taxation is violative of the uniformity clause of the state constitution and the equal protection clauses of the state and federal constitutions; and (5) that, since the statute does not authorize the imposition of a gross earnings tax on such receipts, the tax in question involves a taking of defendant's property without due process of law in violation of the due process clauses of the state and federal constitutions.
1. The services in question were not mere drayage. One who transports goods for a common carrier under its contracts of carriage as an essential part of the freight movement renders a common carrier service, although he has no dealings directly with consignors or consignees and issues no bills of lading, receipts, or waybills covering his part of the transportation. State v. Rock Island M. T. Co.
While the claim is made that the services constitute a business different and separate from the express business, no claim is made that rendering such services by defendant was unlawful or ultra vires. Whatever the nature of the services, the compensation therefor constitutes receipts and earnings of defendant — of an express company.
The construction of the express company gross earnings tax law was settled in State v. U.S. Exp. Co.
"It is argued by defendant that, to the extent that defendant is engaged in business other than the express forwarding business, it cannot be regarded as an express company within the meaning of the statute. The statute defines an expresscompany as a corporation that is engaged in the business ofconveying articles by express; but it by no means follows thata corporation that is also engaged in other business is notstill an express company, and liable to pay taxes on theproperty used in such other business. It was and is a well-known fact that express companies sell and redeem money orders. Defendant's charter authorized it to do a banking and exchange business. No reason is apparent why the legislature should exempt from taxation the property employed in such business. The statute does not confine the tax to earnings fromtransportation. It says that the company shall return astatement of its 'entire receipts * * * for business donewithin this state;' " (Italics supplied.)
The contention here is like that in the cited case. The fact is that the receipts in question are those of an express company from services which it is authorized to render. It uses its property and facilities in the rendition of such services. In the cited case the receipts taxed were not derived from transportation. Here they were.
The defendant's contention that the definition of an express company by implication limits the receipts to be taxed to those received from express operations cannot be sustained. The definition designates the companies and not the operations to be taxed. The tax is upon the entire receipts of such companies. In State v. United E. L. W. Co.
"The clear intention of the legislature, from the language used, was that companies of the class designated should pay a tax measured by a percentage of the gross earnings from all their operations. This would have been no clearer had the words 'from all sources' been inserted between the words 'gross earnings' and 'from operations in this State,' as is done in part one, which refers to railroad and street-railway corporations."
In State v. N.W. Tel. Exch. Co.
In City of Lancaster v. Briggs Melvin,
Defendant urges that our railroad gross earnings tax cases are decisive that the tax is limited to receipts from "express" business only and does not include those from other sources. The railroad gross earnings tax statute imposes a tax upon railroads measured by a percentage of the "gross earningsderived from the operation *563 of such line of railway within this state." 1 Mason Minn. St. 1927, § 2246. The tax on express companies is measured by a percentage of "the entire receipts * * * for business donewithin this state." 1 Mason Minn. St. 1927, § 2262(6). In the case of a railroad company the taxable receipts are limited to those derived from the operation of its railroad, and in the case of an express company the entire receipts for business done in the state are taxable. The difference is that in the one case receipts from a particular part of the business — that is, railroad operation, are taxed; in the other the entire receipts from all business transacted in the state are taxed. Hence cases holding that railroads are taxable on earnings derived from railroad operations such as State v. St. P. M.
M. Ry. Co.
Furthermore, our early decisions in the railroad gross earnings tax cases have been limited by our decisions in State v. M. I. Ry. Co.
"We believe the proper meaning of the act under consideration to be that, when a railroad company is engaged in work reasonably within its charter powers, the receipts from such sources constitute gross earnings in the operation of the railroad."
Applying the rule, we held to be taxable as gross earnings income not derived from the operation of trains such as receipts from lumber companies for switching cars, from other railroad companies for the use of work trains employed in construction work, and rentals received from other railroads in excess of the amount due to them for the use of cars. The rule thus limited and explained has been applied in such recent cases as State v. Illinois Cent. R. Co.
The express company gross earnings tax law shows that the legislature fully considered what deductions were permissible in determining gross earnings. Broad and comprehensive language admitting of no exclusions was used to include the entire income of such companies from business done in this state. Absent a clause authorizing the deduction of payments to railroads for transportation of freight, no such deduction was permissible. Commonwealth v. U.S. Exp. Co.
The receipts from the services rendered by defendant to the railroads were part of its gross earnings and hence subject to the tax in question.
2. Inclusion in each instance of the receipts for the entire freight movement in the gross earnings of the railroads for purposes of computing their gross earnings taxes does not prevent the inclusion of defendant's receipts from the railroads for services rendered as part of such movement in its gross earnings for purposes of computing its tax. Defendant's argument to the contrary is in effect that the railroad gross earnings tax is a tax on receipts and that the tax on a receipt covers all taxes for the transportation service for which the receipt was paid against the railroad and others participating in such service. Therefore it is argued that including receipts for the entire freight movement in the railroad's gross earnings for taxation covered the tax on the entire freight movement as to the railroads and defendant.
The fundamental error in this argument is the baseless assumption that the tax in question is on receipts or income. It is settled beyond argument that the gross earnings taxes on railroads and express companies are not taxes upon the earnings of the companies, or upon the companies, or their franchises, but are taxes upon the property of the companies within the state which are measured by their gross earnings. State v. U.S. Exp. Co.
A tax on a railroad's property measured by a percentage of its gross earnings is not the same as a tax on the earnings themselves. The former is a property tax. A tax on a railroad's earnings as such is an income tax, which is unconstitutional since the property tax measured by a percentage of the gross earnings is, under the constitution, in lieu of all taxes against a railroad. State v. D. M. *566 N. Ry. Co.
It necessarily follows that payment by a railroad of its gross earnings tax operates only as payment of its property tax. In County of Martin v. Drake,
"The percentage of gross earnings paid by the company is merely the equivalent of the tax it would have to pay had a taxin specie been assessed. In other words, it is a commutedpayment of its own tax, and not that of somebody else." (Italics supplied.)
Consequently we held that the payment of the gross earnings tax operated as payment of the tax on the property owned by the railroad on May 1 — that is, the land conveyed on June 17, but not on the land of its grantee conveyed on April 15. The only importance of the railroad's earnings is that they afford the basis upon which *567
the percentage is computed which measures its property tax. For all practical purposes, the case is no different than the payment of property taxes assessed against tangible property in specie. No one would contend that a disbursement by an ordinary property owner would have any bearing whatever on the property or income taxes of the recipient of the disbursement. Such an argument would be manifestly absurd. The necessary consequence is that an operating earning received by a gross earnings taxpayer from another gross earnings taxpayer is the same as an earning received from any other source. As to the paying company, such a payment is an operating expense. State v. M.
St. L. R. Co.
Defendant's argument encounters other difficulties for which no answer has been attempted. The rate of the tax isfive per cent on railroads and nine per cent on express companies. The statutes clearly require each company's tax to be measured at the stated rate. Just how a tax at the rate of five per cent can operate as payment of a tax at nine per cent has not been, and it cannot be, shown.
3. Double taxation is objectionable in a legal sense only when the same property or person is taxed twice for the same purpose for the same taxing period by the same taxing authority without taxing all property and persons in the same class a second time. Klemm v. Davenport,
The claim that the receipts were twice taxed — once against the railroads and again against the defendant — is without any basis, since the receipts were not taxed at all either against the railroads or defendant. We are dealing with property taxes measured by a percentage of gross receipts. The railroads and the defendant paid their property taxes by such lieu taxes. There can be no double taxation, where each taxpayer pays only his own tax. County of Martin v. Drake,
A gross earnings taxpayer's income from another gross earnings taxpayer is not doubly taxed where each of them derives income in respect to the same commodity or service, since neither the same earning nor the same taxpayer is thereby taxed twice. 1 Cooley, Taxation (4 ed.) § 243, note 41. For example, the taxation of car rentals — that is, the excess due from one railroad to another on the exchange of use of cars — is included in the gross earnings of the railroad receiving the rentals although the paying road included the earnings from its use of the cars in its gross earnings. State v. Illinois Cent. R. Co.
The rule is illustrated where the tax relates to receipts from the sales of commodities. In In re Merchants Refrigerating Co. v. Taylor,
There is no double taxation of the receipts from the sale of electricity by a gross earnings tax on electric companies under which the receipts of the manufacturing company from the sale of electricity to a distributing company and the distributor's receipts from the sale of the same electricity to its customers are included in the gross earnings of the respective companies for taxation purposes, since neither the same taxpayer nor the same earning is twice taxed. People ex rel. Genesee L. P. Co. v. Saxe,
In Commonwealth v. N.Y. P. O. R. Co.
Conversely, a gross earnings taxpayer is not entitled to deduct from its gross earnings payments made to another gross earnings taxpayer in respect to the subject matter out of which the earnings of each arise. C. M. L. Traction Co. v. State,
The cases in which we have held that certain receipts should not be included in the gross earnings of railroads for purposes of computing the gross earnings tax are not in point. In State v. St. P. M. M. Ry. Co.
In State v. St. P. Union Depot Co.
"If the railway companies had owned and used this depot as tenants in common, the percentage on their gross earnings payable to the state would have been the same as now, and yet that percentage would have paid the taxes on the depot the same as on any other property held and used by them for railway purposes. We cannot see what difference it can make whether they hold the depot property as tenants in common, or put it in the name of a trustee to hold and manage for their common use, or, as in this case, organize a corporation for the same purpose, as a more economical and convenient method of holding the property, managing the business and apportioning the expenses among themselves. The state plants itself on the technical ground that defendant is a separate and independent legal entity, and that we have no right to consider the functions which it performs, or the relations which it bears to the railway companies who own its stock and use its depot. We think this is too narrow and technical *571 a view of the case. When evasions have been resorted to by railway companies or others to escape taxation, we have unhesitatingly looked through the external form or dress to the substance of the transaction, and the same rule should be applied against the state."
Defendant's stock is not owned by nor is it an agency of the railroads which employ it. Its property is not their property. The relationship between the railroads and defendant in this respect is no different than that between them and any other motor carrier whom they might hire to perform a service for them.
Receipts from services performed by one railroad for another at cost with no intention of gaining revenue or making profit, such as payment for repairs of cars at actual cost under reciprocal arrangements between railroad companies involved in State v. M. I. Ry. Co.
In State v. C. R.I. P. Ry. Co.
By a process of statutory construction we held that payment by the railroad and the sleeping car company of the gross earnings taxes constituted full payment of their respective property taxes measured by a percentage of such gross earnings and that any further tax after such payment of taxes in full constituted pro tanto double taxation of the property. This result was reached by construing the two statutes to be practically the same and supplementary and that each company's earnings for measuring its property tax by the gross earnings method consisted of the amounts charged to and collected from passengers by each company. Thus, it was stated, the entire receipts of both companies for the transportation service were apportioned to each company according to what it charged and earned. We said [
"When the railroad company paid the gross earnings tax upon all its gross earnings, except these earnings [the excess Pullman earnings] of the Pullman cars, and the Pullman Company paid the gross earnings tax upon all its earnings, including that part of the earnings thereafter paid to the railroad company, the state then had received full payment of taxes for the period covered, upon *573 all the property, both of the railroad company and the Pullman. Company, subject to taxation in this state."
We held that the excess Pullman earnings should not be included in the railroad's gross earnings not because such earnings had been once taxed in the hands of the Pullman company and could not be again taxed in the hands of the railroad, but because the property taxes of each company had been paid in "full" in the manner described and there was therefore no further tax to be paid by the railroad.
The question of statutory construction here arises from entirely different facts with respect to which our decisions prior and subsequent to the Rock Island case [
In the Rock Island case the applicable statutes in effect apportioned the separate revenues from the separate business to the sleeping car and railroad company in accordance with their business practice. Such revenues were held to represent the earnings of the properties of the respective companies for gross earnings tax purposes. There is no basis for such a construction here for lack of separate services and separate charges collected therefor by defendant and the railroads. The income involved here is part of defendant's gross earnings under the rule established in State *574
v. M. I. Ry. Co.
Once we concede, as we held in the Rock Island case, that the gross earnings taxes based upon the separate earnings of each company according to the business practice of the companies sanctioned by the statutes were in full of all taxes of both companies, any further tax on revenues was pro tanto double taxation and unauthorized. There is no basis here — no matter what view we adopt — for saying that the express company's gross earnings tax could be paid in full unless it included its earnings from the railroads. The cases differ so radically in point both of law and fact that the cited case cannot be deemed to be in point.
The employment of the express company by the railroad was a fortuitous and not a determinative circumstance. Had the railroads employed other than the express company to do the involved trucking, there would have been no resulting change in the tax liability of either employers or employes. So here, the express company is entitled to no reduction in the tax upon its property simply because it is hired to do work for the railroad companies. The amounts received by the express company from the railroads are just as much taxable gross earnings as they would have been had the service been performed for others who were not taxed under the gross earnings system.
In the last analysis, defendant's argument assumes that a railroad's earnings are taxed in specie and that payment of the railroad's tax renders money expended by it immune from further taxation. The fallacy of these assumptions has been sufficiently *575
explored. The dollar spent by a gross earnings taxpayer is not stamped as tax-free thereafter. Tax laws exact from property wherever it may be found a contribution for the support of government without respect to the owner or his occupation, Finley v. City of Philadelphia,
There was no double taxation.
4. The contention that including the receipts in question in defendant's gross earnings for purposes of taxation results in violation of the uniformity clause of the state constitution and the denial of equal protection of the law in violation of the due process clauses of the state and federal constitutions is bottomed upon claimed double taxation. Since there is no double taxation here, there is no basis for the contention. See C. Thomas Stores Sales System, Inc. v. Spaeth,
5. Taking of defendant's property without due process of law is claimed to result from the fact that the statute does not require the inclusion of the receipts in question in defendant's gross earnings; that taxation based upon such inclusion is without legal authorization; and that if the tax thus asserted is enforced defendant's property is taken to pay the tax without authority of law. The claim is disposed of by our holding that the statute requires the inclusion and authorizes such taxation. The question of due process was considered at length in State v. U.S. Exp. Co.
The receipts in question were part of defendant's gross earnings for purpose of the gross earnings tax.
Affirmed. *576