STATE ex rel. ST. PAUL CITY RAILWAY COMPANY v. MINNESOTA TAX COMMISSION

Minnesota Supreme Court1915-02-05No. Nos. 19,135—(298)

128 Minn. 384

Summary · law.co

Holding. The court quashed the writ of certiorari and upheld the Tax Commission's classification of the railway company's property in Class 4. The court held that the property does not qualify as "tools, implements and machinery" under Class 3, and that the statutory classification scheme is neither arbitrary nor unconstitutional.

St. Paul City Railway Company sought review of the Minnesota Tax Commission's classification of its railroad infrastructure—including tracks, overhead wires, trolley poles, and underground conduits—for property tax purposes. The company argued these assets qualified as "tools, implements and machinery" under Class 3, which would result in a lower assessment rate of 33⅓ percent of true value, rather than the 40 percent rate applied to Class 4 property where the Tax Commission had placed them.

The court rejected the company's interpretation, finding that railroad infrastructure does not reasonably fall within the statutory language describing tools, implements, and machinery. The court emphasized this was not a close question. The company also challenged the classification scheme itself as arbitrary and unconstitutional, but the court upheld the legislature's authority to classify property for taxation purposes, provided the classification rests on reasonable distinctions. The court found sufficient differences between the company's property and Class 3 assets to justify their separate classification.

Summary generated by law.co from the public-domain opinion. The opinion text itself is public domain.

Key issues

Whether railroad tracks, wires, poles, and conduits constitute "tools, implements and machinery" for tax classification purposes
Whether a statutory property tax classification system violates constitutional requirements of uniformity and reasonableness

Procedural posture

The relator sought a writ of certiorari from the state supreme court to review the Tax Commission's assessment and classification decision.

Authorities cited

No cited authorities resolved to law.co cases yet.

Opinion · public domain

majority opinion

Dibble,. C.

Writ of certiorari issued from this court to review the proceedings of the Minnesota Tax Commission in the matter of the assessment of certain personal property of the relator, St. Paul City Railway Co. The commission made its return to the writ upon which a hearing was had in this court.

1. By Laws 1913, p. 710, c. 483, property for the purpose of taxation is classified. Class 1 includes iron ore and is assessed at 50 per cent of its true value. Class 2 includes household goods and personal belongings and is assessed at 25 per cent of its true value. Class 3 includes live stock, agricultural products, stocks of merchandise with the furniture and fixtures used therewith, manufacturers’ materials and manufactured articles, and “all tools, implements and machinery whether fixtures or otherwise,” unplatted real estate, etc., and is assessed at 33-y- per cent of its true value. Class 4 includes all property not included in classes 1, 2 and 3 and is assessed at 40 per cent of its true value.

The question is whether the relator’s railroad tracks, its overhead feed wires and trolley wires, its trolley poles, and its underground conduits and cables are within class 3 or class 4. The commission put them in class 4, assessable at 40 per cent of the true value. The relator claims that they are within the description of “tools, implements and machinery whether fixtures or otherwise,” and should be in class 3 and assessed at 33-J per cent of true value.

Within the meaning of the act of 1913 none of this property comes within the designation of “tools, implements and machinery whether fixtures or otherwise,” as used in class 3. A very liberal construction would not put street railroad tracks, feed and trolley wires, trolley poles, conduits and cables within the classification sought. It is not a doubtful question.

2. The relator claims that if the property mentioned is included in class 4 the classification is so arbitrary and unreasonable that the statute is unconstitutional.

At the November, 1906, election the Constitution was amended by striking out the provisions therein relative to a uniform valuation throughout the state on a cash basis, and inserting a provision to this effect: “Taxes shall be uniform upon the same class of subjects.” Const, art. 9, § 1. The effect of this amendment is not to remove all limitation upon the classification of subjects of taxation. The classification must be a reasonable one and such as essential differences suggest. Mutual Benefit Life Ins. Co. v. County of Martin, 104 Minn. 179, 116 N. W. 572. Thus, recognizing that the classification must be reasonable and based on differences suggesting its propriety, it was held that the classification of money and credits for the purpose of taxation, putting upon them a specific annual tax, was within legislative discretion and not unconstitutional. State v. Minnesota Tax Commission, 117 Minn. 159, 134 N. W. 643.

The subject of classification for the purpose of taxation is treated at some length in Citizens Telephone Co. v. Fuller, 229 U. S. 322, 33 Sup. Ct. 833, 57 L. ed. 1206. In referring to the cases, cited as illustrative, the court says:

“They illustrate the power of the legislature of the state over the subjects of taxation and the range of discrimination which may be exercised in classifying those subjects when not obviously exercised in a spirit of prejudice and favoritism. * * * Granting the power of classification, we must grant Government the right to select .the differences upon which the classification shall be based, and they need not be great or conspicuous. * * * The state is not bound by any rigid equality. This is the rule; its limitation is that it must not be exercised in ‘clear and hostile discriminations between particular persons and classes.’ ”

We have no difficulty in reaching the conclusion that the differences between the property involved in the assessment and that included in class 3 are such as to justify the legislature in separating them into the two classes and providing for their assessment upon the percentage basis adopted.

The tax commission was right.

Writ quashed.