The Minneapolis journal. [volume] (Minneapolis, Minn.) 1888-1939, 1906-08-25
PHONE COMPANIES
MISCONSTRUE LAW
PART OF GROSS EARNINGS TAX
Is EVADED.
Public Examiner Kerst Discovers Prac-
tice in Making Reports Of Long-Dis-
lance Earnings Which Deprlves State
Of Considerable Revenue-Attorney
=: General Rules Against Companies.

,I6lopnOue companies nave heretofore
been escaping considerable taxation by
Of other companies Offices, as expense
instead Of earnings. The matter was
unearthed by Peter NJ. Kerst, public ex-
aminer, and the attorney generals opin-
ion asked in case which is to estab-
lish a precedent. Attorney General E.
T. Yonug's opinion on the case cited is
self-explanatory Of Mr.. Kerst's Ques-
ton. 1t is as follows:
How Case Stands.
HDear Sir: In your communication
Of June 8, 1905, you make this state.
ment: ~ IL 49,. H..
Q Instead of the Northwestern Tele-
phone company having it's own opera
tors and equipment at Winnebago City,.
MINI, it's employs the Blue Earth Val
ley Telephone Exchange company to act
as its agent and pays it a terminal or
connecting fee Of 10 cents message
on all business coming from points on
the Northwestern Telephone company's
lines. The charge for q one-minute day,
message from Minneapolis to Winnie
bago City is 40 cents. The Northwest
ern Telephone company only, pays tax
on 80 cents, claiming that the 10 cents
the Blue Earth Valley, is to be reported
by It as a part Of tho gross receipts,
but this is not done. Tho books Of ac-
count Of. the orfhwnstern Telephone
company show the 40 cents as . part of
the general income and the 10 cents
terminal charge Is handled as an c1-
pense and might be classified the same
as the salary Of one. Of the employees
..And then you ask this \. question.
opipion d tsht tie t. kRasT Is s
hsne sGmpssy 5n9u6 r sssa IF t
collects, or should it pay 9 tax on 80
cents and their agent Include the 10
cents, which it receives az terminal
charge or connecting fee, in the gross
earnings report9' =. - 49,.
"In answer, I would say from your
statement it is very clear that the en-
tire sum Of 40 cents is a part Of the
gross earnings Of the Northwestern Tel
ephone Exchange company and, as such,
should be reported by that company
for taxation. - >,E-s.s &. ~:
:t'tThe money having been earned and
received by that company, if it then
sees At to pay 10 cents Of the same
to the Blue Earth Valley Telephone
company, that 10 cents becomes a part
of the gross earnings of the latter COM
pany, and; as such, should be reported
for taxation by that company,
-. ~@@1 Another Point.
| "f'Again you make this further state
= @rhe charge for a one-minute mes
apolis is only 80 cents. The Blue Earth
Valley Telephone company makes the
| collection and RENTS the same to the
| Northwestern company and the latter
reports this sum for taxation purposes.
Subsequently It pays the agent (the
Blue Earth Valley company 9 com
mission Of 20 per cent for handling
this business. On the books Of the
Northwestern company this commission
It is not deducted from the gross
earnings returns to Minnesota, nor is 1t
returned for taxation purposes. by the
Blue Earth Valley company
! ttAnd you ask: Can the state Gin
accordance with chapter 3l4. General
Laws, 1879 impose tax on so cents,
received by the Northwestern Tele.
phone. company. and also compel the
Blue Earth Valley Telephone company
to include in tax return the commission
Of 90 cents, or 8 cents9'
"Here, as in the previous case, the
money earned is clearly 9 part Of the
! gross earnings Of the Northwestern
! Telephone Exchange company, and
should be reported as such BY it TO,
taxation.
That portion, 6 cents, which is paid
to the Blue Earth Valley Telephone com
pany, isspaid for services rendered by
that company, is part OF Its gross
earnings, and as such should be, re
ported BY it FOR taxation.
In each case, under the statement
i of facts, the money earned is, in the