#### City of Superior and another, Appellants, vs. Allouez Bay Dock Company, Respondent. Same, Respondents, vs. Same, Appellant.

*April 25*

June *28, 1917.*

*Taxation: Income tax not a burden on interstate commerce: Railroad property: Ore doelc used as terminal: Exemption from income taxation: Corporations: Ultra vires: Action to recover unpaid taxes: Costs.'*

*1.*Although the amount oí an income tax may be measured by the-receipts of a business, it is not in any true sense a tax upon the business itself; and a state tax levied upon the income arising from an interstate business is not void as being a burden upon or interference with interstate commerce.

2. An ore dock used exclusively as a railroad terminal should be taxed as railroad property, even though owned and operated by a warehousing or dock corporation; and the income derived therefrom is, under sec. 1087m — 5, Stats., exempt from income taxation.

3. The warehousing or dock company which, operates such a terminal does not thereby violate its charter or commit any act *ultra vires;*but the business authorized by its charter is, under such circumstances, a branch of the railroad business, and for the-purposes of taxation its property should be classified as railroad property.

4. In view of sec. 1107a, Stats., providing that an action to recover unpaid taxes shall be “an action of debt,” it seems plain that it was the legislative intention that any remedy in such an action should be a recovery as upon contract, and the costs therein-are governed by sec. 2921, which‘provides that in actions at law upon contract the costs, exclusive of disbursements, shall not exceed $26.

Appeals from a judgment and an order of the circuit court for Douglas county: James Wickham, Judge.

*Affirmed.*

This is an action brought by the city of *Superior*and county of *Douglas*to recover the sum of $100,310.04, being the income tax assessed against the defendant in the year 1912 based on the income received by it in 1911. The defense was in brief that for the purposes of taxation the de~ *77fendant was in legal effect a railway company under tbe terms of tbe Wisconsin statutes and bence not subject to income taxation.

Tbe defendant is a Wisconsin corporation formed in 1903 under tbe provisions of cb. 86 of the Wisconsin Statutes for tbe purpose of constructing, purchasing, leasing, and operating docks, warehouses, piers, etc. It owned and operated large ore docks at *Superior*which formed tbe lake terminal of tbe Great Northern Railway Company, and. on which all the iron ore brought in by said railroad from tbe Minnesota iron mines was received, the cars being switched upon tracks running out upon the elevated dock and there dumped immediately into lake vessels for transportation to Eastern ports, or deposited in pockets to be run into lake vessels a few days later. All the ore handled on the dock was consigned to Eastern lake ports, and no ore was handled save that which was brought in by the Great Northern Company. The property ¡of the defendant consisted of a strip of land nine tenths of a •mile long, connected at the south end with the right of way 'of the Great Northern Railway Company and extending ¡northward into Allouez Bay and to the dock line thereof in the city of Superior, the improvements thereon consisting of four docks with pockets and appliances for handling ore, two main lines of railway tracks connected with the tracks of the Great Northern Railway, switch tracks running the whole length of the docks, elevated on trestlework seventy-three feet above the water line, on which tracks ore cars were moved by two switch engines owned by defendant, a railway signal tower, an office where several clerks were employed, and all the necessary equipment for operating the tracks and handling the ore cars and the ore. Prior to 1903 this property was owned by the Duluth, Superior & Western Terminal Company, there being then but two docks. In 1903 the defendant leased the property from the terminal company for ninety-nine year's (there being then but two docks and a third *78under construction), and at the same time made a contract with the Great Northern Railway Company providing that the latter company should run its ore cars and trains upon the docks and the defendant company should unload the ore and deliver it in boats, the railway company paying twenty-five cents per ton therefor. The business was conducted under this contract until November, 1908, when the defendant purchased the whole property, real and personal, from the tei’minal company. In August, 1909, a new agreement was made by the parties by which the defendant leased to the Great Northern Company its entire track system and locomotives, the latter company agreeing to keep the same in repair, switch and spot the cars, and remove the same when unloaded, the defendant company agreeing to unload the ore from the cars and load the same into vessels as directed, the railroad company paying twenty-two cents per ton for the ore actually handled and the defendant company repaying to the railway company any taxes which it might be obliged to pay on the leased property. This arrangement was in operation during the year 1911, and during that year there was handled over the docks more than 9,000,000 tons of ore, the net income therefrom being $1,671,834.01, on which sum the income tax in question was levied. The docks were always used as a part of the railroad system of the Great Northern Railway Company and as a terminal thereof. The defendant’s stock was held by certain officers of the railway company for the benefit principally or wholly of stockholders of the railway company, and thus the defendants property and business was always indirectly controlled by the railway company though owned by an entirely separate corporation.

The Wisconsin tax commission in 1905 assessed the defendant’s property as railroad property under ch. 315 of the Laws of 1903 as amended (the *ad valorem*taxation law); and in the subsequent years up to 1911 the property was assessed in the same manner, except that in said later years it was *79assessed to the Great Northern Company as a part of its system. After the passage of ch. 540, Laws 1911, for two years the tax commission in making its assessment against the Great Northern Company omitted the ore docks from the assessment and the same were locally assessed by the city of *Superior*under the terms of that act. After that act was declared void by this court in Minneapolis, *St. P. & S. S. M. B. Co. v. Douglas Co.*159 Wis. 408, 150 N. W. 422, and pursuant to ch. 407, Laws 1915, the state tax commission reassessed to the Great Northern Bailway Company the defendant’s property which had been omitted as aforesaid. Both the defendant and the Great Northern Company have paid the taxes assessed against them by the Wisconsin tax commission (except the income tax here in dispute), including the aforesaid reassessment, and the city has received its share of the taxes resulting from the reassessment. The defendant has repaid the Great Northern Company its proper proportion of the taxes paid by it during the years when defendant’s property was assessed as a part of the Great Northern system based upon the valuation of defendant’s property. The defendant has brought actions which are still pending and undetermined to set aside the taxes locally assessed against it for the years 1912 and 1913 and has been obliged to pay the same as a condition of maintaining the actions.

The defendant on these facts contended that the tax in question was void because (1) it constituted a burden upon or interference with interstate commerce, and (2) the defendant’s property was exempt from such taxation by the provisions of sec. 1087m — 5, Stats. The circuit judge held against the defendant on the first question and in its favor on the second, and entered judgment setting aside the taxes, from which judgment plaintiffs appeal.

Eor the appellant *City of Superior*there was a brief by *II. V. Card*and *T. L. MJIntosh*of Superior, and oral argument by *Mr. Card.*

*80Eor tbe appellant *Douglas County*tbe canse was submitted on tbe brief of *Archibald McKay*of Superior.

Eor tbe respondent there was a brief by *J. A. Murphy,*attorney, and *E. C.*Lindley, of counsel, both of Superior, and a reply brief and oral argument by *Mr. Murphy.*

Tbe following opinion was filed May 15, 1911:

WiNSLow, C. J.

As indicatéd in tbe foregoing statement there are two fundamental questions in tbe case, viz.: (1) Was tbe tax in question a burden upon interstate commerce? and (2) Was tbe defendant’s property exempted from income taxation under tbe statutes of tbe state because it was railroad property ?

1. It must be admitted that tbe defendant’s income arose entirely from interstate commerce business. Tbe ore wbicb it bandied was all consigned from tbe Minnesota mines to lower lake ports and simply passed tbrougb tbe defendant’s docks in its transit, tbe defendant receiving a fixed charge for its part in facilitating tbe continuous interstate voyage, namely, tbe transferring of tbe ore from the land carrier to tbe water carrier. Is tbe levying of an income tax measured by tbe income so derived a burden upon interstate commerce ?

Tbe question is not free from difficulty, but we think it must be answered in tbe negative. Income taxation is not taxation of property, but is more nearly akin to taxes levied upon privileges or occupations. Its amount may be measured by tbe receipts of a business, but it is not in any true sense a tax upon tbe business itself. Tbe subject is covered, as it seems to us, by tbe decisions of this court in the cases of *United States G. Co. v. Oak Creek,*161 Wis. 211, 153 N. W. 241, and *Northwestern Mut. L. Ins. Co. v.*State, 163 Wis. 484, 155 N. W. 609, 158 N. W. 328, and the cases therein cited.

2. Sec. 1087TM — 5, Stats., provides for tbe exemption of certain incomes from income taxation; among wbicb are *81named in sub. 3 of tbe section “Incomes derived from property and privileges by persons now required by law to pay taxes or license fees directly into tbe treasury of tbe state in lieu of taxes.5’

Eailroad companies are required by law to pay taxes directly into tbe state treasury, and tbe defendant claims and tbe trial court beld that it was to be considered a railroad company for tbe purposes of taxation and bence not subject to income taxation. We can see no escape from tbe argument. Tbe law governing tbe taxation of public utilities pro* vides (sub. (2), sec. 51.02, Stats.) that “Any person . . . or corporation owning and operating a railroad, ... or owning or operating any station, depot, track, terminal, or bridge, in tbis state, for railroad purposes . . . shall be deemed a railroad company.”

Tbe ore dock under consideration here was unquestionably a terminal witbin the meaning of that section. *Minneapolis, St. P. & S. S. M. R. Co. v. Douglas Co.*159 Wis. 408, 150 N. W. 422. It was used exclusively as a railroad terminal and bence should have been assessed and taxed as a railroad. It is said that it cannot be so taxed because tbe defendant corporation was not a railroad corporation, but a corporation organized for dock and warehousing purposes, and bence that it would be violating tbe law if it attempted to do a railroad business. Tbe argument is fallacious. When a railroad operates a terminal itself, or when a terminal is owned by a third person or corporation and operated solely as a terminal for tbe railroad, it’ is as truly a part of tbe railroad as its trains, and its business as truly a part of tbe railroad business as tbe operation of tbe trains. ISTo reason is perceived why, for tbe purposes of taxation, such property should not be classified as railroad property and subjected to tbe same methods of taxation. A warehousing or dock company which operates such a terminal does not thereby violate its charter or commit any act *ultra viresj*it does tbe business which its *82charter authorizes it to do, but the state, perceiving that this business is, under such circumstances, simply a branch of the railroad business, directs that it be taxed in the same class with railroad companies. This was the conclusion of the trial court, and must be approved.

The court limited the costs to the sum of $25 and disbursements under that clause of the statutes which provides that in actions at law on contract the costs, exclusive of disbursements, shall not exceed $25. The defendant appeals from this ruling on the ground that an action to recover unpaid taxes is not an action upon contract, or, in other words, that an unpaid tax is not a debt or a contract. This abstract proposition may be conceded, but we do not regard it as controlling. Our statute which authorizes the bringing of the action provides that it shall be “an action of debt.” Sec. 1107a, Stats. An action of debt at common law arose only to enforce contract rights. The legislative intention that any recovery in such an action should be a recovery as upon contract seems plain, and there seems no reason why effect should not be given to that intention.

*By the Oourt.*— The judgment and order appealed from are affirmed, the defendant to recover one bill of costs.

XeRwin and Viwje, JJ., dissent.

A motion for a rehearing was denied, with $25 costs, on June 28, 1917.