146 Minn. 444 | Minn. | 1920
This action is brought to recover the unpaid gross earnings tax for the years 1914, 1915, 1916 and 1917, assessed against the defendant, under chapter 454, p. 664, Laws of 1913, G. S. 1913, § 2241, et seq. The tax imposed by this act is a tax “equal to 8 per cent of its gross earnings,” after deducting payments to railroads for the transportation of goods. Fifty-five per cent of defendant’s revenue was in fact paid for this purpose. This tax is “in full and in lieu of all taxes and assessments upon its property.”
The state demands 8 per cent of the gross earnings from express business done within this state, including a proper proportion of earnings from interstate business No question is raised as to the propriety of the proportion.
It is not clear to us just what constitutional provision defendant contends inhibits this form of taxation as applied to transportation companies. We know of none. The validity of this form of taxation, as applied to property employed in transportation, seems to us no longer an open question. When railroads first came to Minnesota Territory, this form of taxation was agreed upon by the state and the railroad companies as the most practicable -and equitable system of taxation of railroad property. After Minnesota became a state this form of taxation was imposed upon railroad companies which had not by contract agreed to accept it, until 1871 with doubtful constitutional authority, State v. Luther, 56 Minn. 156, 57 N. W. 464, but so satisfactory was the system that its constitutionality was never challenged by the railroad companies interested. The amendment of 1871, art. 4, § 32a, provided for this form of taxation of railroad property and the Constitution has ever since so provided. The validity of this provision has been sustained. State v. Great Northern Ry. Co. 106 Minn. 303, 119 N. W. 202. Property of railroad companies, freight line companies, sleeping car companies, telephone companies ánd, trust companies are now taxed in this manner. The United States Supreme Court has applied legislation providing for this system of taxes in many cases. Many years ago this mode of taxation of interstate railroads was sustained • and held not a tax upon interstate
The amendment of 1906 contained a provision that “nothing herein contained shall be construed to affect, modify or repeal any existing law providing for the taxation of the gross earnings of railroads.” Defendant contends that, by the application of the rule “expressio unius est ex-clusio alterius,” this provision is indicative of a purpose to abolish this form of taxation as applied to other property than that of railroad companies. We see no force in this contention. The express reservation of existing laws for taxation of railroads was not necessary to preserve the right to tax railroads on the gross earnings plan, but was doubtless inserted to preserve the features of the provision for taxation of railroads which requires submission to the people of any proposed change in the laws enacted for that purpose.
And with what class of property taxed on an ad valorem basis must we compare it? With iron ore taxed at 50 per cent of its value, household goods at 25 per cent or agricultural products at 33^-á per cent? The Federal Constitution does not require that all property be taxed at like rate. In Coulter v. Louisville & N. R. Co. 196 U. S. 599, 25 Sup. Ct. 342, 49 L. ed. 615, it was held that the state of Kentucky might tax the franchise of a Kentucky corporation at a different rate from tangible property so far as the Constitution of the United States is concerned.
Our statute imposes a 3 per cent gross earnings tax on telephone corporations, 5 per cent on railroad corporations, 5 per cent on trust companies, 6 per cent on freight line companies, 5 per cent on sleeping car companies. These differences are within the scope of the power of the legislature to classify property for purposes of taxation. The classifications are legitimate ones. For example, there are reasons why the rate in case of express companies should be higher than in case of railroad companies. The cost of transportation is deducted in the case of express companies before the percentage is computed, but it is not, in the case of railroads.
It is true the market value of the company’s stock and bonded debt furnishes good evidence of the real value of the aggregate of its assets. This lias been recognized in many cases. Adams Express Co. v. Ohio, 166 U. S. 185, 222, 17 Sup. Ct. 604, 41 L. ed. 965; State Railroad Tax Cases, 92 U. S. 575, 605, 23 L. ed. 663. But such evidence is not conclusive. It is a matter of common knowledge that market quotations of stock sometimes vary widely without material changes as to the productive capacity of the property. In this case it is impossible to use this standard with anything like conclusive effect, for the reason that, only about one-fifth of defendant’s property is used in its express business, The balance consists of property held by the “investment department” of the company. Since the whole property of the company goes towards making up the value of the stock, it is apparent that the stock value gives no decisive information as to the market value of the assets, tangible or intangible, used in the express business.
.Another method of determining aggregate property value; including intangible value, is that of capitalizing the net earnings of the corporation. In Louisvlle & N. R. Co. v. Greene, 244 U. S. 522, 37 Sup. Ct. 683, 61 L. ed. 1291, Ann. Cas. 1917E, 97, the court speaks of this as one of the “recognized methods” of ascertaining the aggregate capital value of the' company’s stock, which means the total value of all its assets, tangible and intangible. See also Board of Assessment v. Alabama Central R. Co. 59 Ala. 551; State v. Virginia & T. R. Co. 23 Nev. 283, 46 Pac. 723, 35 L.R.A. 759, 24 Nev. 53, 49 Pac. 945, 50 Pac. 607.
The statute imposing a tax of 8 per cent upon the gross earnings of express companies is valid.
Judgment affirmed.