161 Wis. 211 | Wis. | 1915
Tbe Income Tax Law of 1911 provides:
“There shall be assessed, levied, collected and paid a tax. upon incomes received during the year ending December 31, 1911. . . .” Sec. 1087m — 1, Stats. 1911.
“The tax shall be assessed, levied and collected upon all-income, not hereinafter exempted, received by every person residing within the state, and by every nonresident nf the state upon such income as is derived from sources within the state . . . ; provided, that any person engaged in business, within and without the state shall, with respect to income other than that derived from rentals, stocks, bonds, securities, or evidences of indebtedness, be taxed only upon that proportion of such income as is derived from business transacted and property located within the state, which shall be determined in the manner specified in subdivision (e) [of subsection Y] of section 1770b, as far as applicable.” Sub. 3, sec. 1087m — 2, Stats. 1911.
The taxability of the income derived from rentals, bonds, etc., is not in controversy. All parties agree that the tax commission properly taxed this item of $10,390.81.
The defendant, the town of Oak Greek, contends that the-court erred in holding that the part of the plaintiff’s net “business income,” denominated class (a) in the foregoing-statement, which is derived from the manufacture, sale, and delivery of its products at its plant in Carrollville to customers in the state of Wisconsin, only, is subject to be taxed as income under the foregoing provisions of the Income Tax. Law. On the part of the plaintiff it is claimed that the judgment of the trial court is correct, upon the ground that the net “business income” derived by plaintiff from the manufacture, sale, and delivery of its goods to customers in this-state constitutes the net income derived from business transacted and located within this state in the sense of this law, and that the “business income” derived from goods sold h> customers outside of the state, whether manufactured at and shipped from its factory at Carrollville or purchased outside-of this state 'and then delivered from its branch houses, was.
The question naturally arises, first, what portion of plaintiff’s net “business income” is income “derived from business transacted and property located within the state,” and subject to the tax upon incomes? We are of the opinion that this provision of the statute includes all of plaintiff’s net “business income” derived from the manufacture, sale, and delivery of such of its products as were manufactured at, sold, and delivered from the factory to customers in Wisconsin and other states, and the net “business income” of its products which were manufactured at its factory at Carroll-ville and shipped from there to its branch houses out of the state and delivered from there to customers residing outside of the state, on sales made either at Carrollville or at the branch houses. The trial court held that the net “business income” of the sales of the latter class (embraced in classes (b) and (c) of the foregoing statement) was not subject to an income tax, because such portion of plaintiff’s income is not “derived from business transacted and property located within the state.” This court in State ex rel. Arpin v. Eberhardt, 158 Wis. 20, 147 N. W. 1016, had under consideration the provisions of these statutes involving this question and interpreted them to the effect that the income of a person residing in the state, other than' that derived from rentals, stocks, bonds, securities, and evidences of indebtedness, is taxable if derived from sources within the state, and income derived from sources without the state is not taxable under the statutes. The plaintiff’s business enterprise, in the light of the income statutes, must be considered in a twofold character as respects income producing. 'In its cor
“It is the net result of many combined influences: the use of the capital invested; the personal labor and services of the members of the firm; the skill and ability with which they lay in, or from time to time renew, their stock; the carefulness and good judgment with which they sell and give credit; and the foresight and address with which they hold themselves prepared for the fluctuations and contingencies affecting the general commerce and business of the country.”
The statute is to receive a practical interpretation. This court recently said on the subject:
“Philosophical and logical distinctions must yield to the clearly expressed intent of the written law and to the possibility of a practical administration thereof.” State ex rel. Manitowoc Gas Co. v. Wis. Tax Comm., ante, p. 111, 152 N. W. 848. “If an income be taxed the recipient thereof must have a domicile within the state, or the property or business out of which the income issues must be situated within the state so that the income may be said to have a situs therein. . . . The Income Tax Law does not seek to reach property or an interest in property as such, but to reach incomes having a situs in the state, or growing out of a privilege exercised or occupation conducted within the state.” Ibid.
Tbe income derived from goods wbicb were produced and
The plaintiff contends that the judgment of the trial court, must stand, because all income of the plaintiff derived from business conducted in this state, except that portion derived from goods sold to customers in this state, is derived from transactions in interstate commerce, and the imposition of a. tax on such income is repugnant to plaintiff’s rights under see. 8 of art. I of the constitution of the United States, providing that: “The Congress shall have power: To regulate commerce with foreign nations, and among the several states, and with the Indian tribes.” The defendant urges that there is no such conflict between the powers thus granted to Congress and the powers exerted by the legislature under the state Income Tax Law. The power of a state to tax its people and their property in all the recognized ways of levying and collecting taxes is an acknowledged attribute of its sovereignty, which it may exert to the fullest extent for the purpose of providing revenue to defray the expenses of conducting the government. In exerting this- governmental function it is not permitted to levy and collect taxes on any in-strumentalities or property employed by the federal govern
“ ... No state bas tbe right to lay a tax on interstate commerce in any form, whether by way of duties laid on the transportation of the subjects of that commerce, or on the receipts derived from that transportation, or on the occupation or business of carrying it on, and the reason is that such taxation is a burden on that commerce, and amounts to a regulation of it, which belongs solely to Congress.” Leloup v. Port of Mobile, 127 U. S. 640, 648, 8 Sup. Ct. 1380.
The foregoing is the conclusion as stated by Bradley, J., who delivered the opinion for the court, and he cites thereto a large number of cases. This established doctrine is followed in many subsequent cases. The question had received extensive examination and elaboration in Philadelphia & S. S. Co. v. Pennsylvania, 122 U. S. 326, 7 Sup. Ct. 1118, involving a tax imposed by the state of Pennsylvania on gross receipts of a steamship company conducting an interstate traffic, which was held a burden on interstate commerce and hence repugnant to the exclusive power of Congress to regulate such commerce. Beadley, J., delivered the opinion of the court in this case also, in which he discussed at length the reasons and grounds of the conclusion reached, namely, that the tax on the gross receipts of such business, as such, is a tax on such business, because “ . . . they were received io£ transportation. No doubt a shipowner, like any other citizen, may be personally taxed for the amount of his property or estate, without regard to the source from which it was derived, whether from commerce, or banking, or any other employment. But that is an entirely different thing from laying a special tax upon his receipts in a particular employment.” In a part of the opinion this learned jurist answers for the court the claim made that the tax in question was in the nature of an income tax, and declares that:
“It is not a general tax upon the incomes of all the inhabitants of the state; but a special tax on transportation com-*221 parties. ... As a tax on transportation ... it cannot be supported where that transportation is an ingredient of interstate or foreign commerce, even though the law imposing the tax be expressed in such general terms as to include receipts from transportation which are properly taxable.”
The result of the court’s consideration of the question led. it to declare that:
“The corporate franchises, the property, the business, the income of corporations created by a state may undoubtedly be taxed by the state; but in imposing such taxes care should be taken not to interfere with or hamper, directly or by indirection, interstate or foreign commerce, or any other matter exclusively within the jurisdiction of the federal government.”
The laying and collecting of an income tax by a state imposes a burden on its citizens wholly unlike a tax upon their business or commerce. The tax in question does not refer to nor is it in the nature of a tax burden laid on the business, the gross receipts, or the property employed in interstate •commerce. In fact the tax deals only with that part of the fruits of such commerce which remains as the net proceeds .after all the immediate burdens of the commerce have been discharged and such net profits are merged in the assets of the corporation. The income tax is in effect not unlike the tax which was imposed on corporations under the act of Congress in the Tariff Act of 1909 and known as the “Corpora;tion Tax.” This law imposed a tax on incomes of corporations from all sources. In the case of Flint v. Stone Tracy Co. 220 U. S. 107, 31 Sup. Ct. 342, it was urged upon the court that this tax was invalid because the income taxed was in part derived from business of corporations engaged in interstate commerce. The court held that the burden imposed was “ . . . a tax upon the doing of business with the advantages which inhere in the peculiarities of corporate or joint-stock organizations of the character described.” The act involved incomes derived from business transactions involving
“It is therefore well settled by tbe decisions of this court that when tbe sovereign authority has exercised tbe right to tax a legitimate subject of taxation, as an exercise of a franchise or privilege, it is no objection that tbe measure of taxation is found in tbe income produced in part from property wbicb of itself considered is nontaxable. Applying that doctrine to this case, the measure of taxation being tbe income-of tbe corporation from all sources, as that is but tbe measure-of a privilege tax within tbe lawful authority of Congress to-impose, it is no valid objection that this measure includes, in part at least, property wbicb as sucb could not be directly taxed.” Page 165.
We are of tbe opinion that tbe tax imposed by tbe Income-Tax Law of this state does not impose a burden on tbe business or property of plaintiff in any sense repugnant to its-rights under tbe provision of tbe federal constitution conferring on Congress tbe right to regulate commerce between tbe states, and that tbe trial court erred in bolding that the-income tax imposed by tbe tax commission was excessive and in awarding recovery for tbe amount of sucb alleged excess-with interest.
By the Gourt. — Tbe judgment appealed from is reversed, and tbe cause remanded to tbe circuit court with direction to-award judgment dismissing plaintiff’s complaint.