Case Name: J. B. SIMPSON, INC., v. STATE BOARD OF TAX ADMINISTRATION
Court: Michigan Supreme Court
Jurisdiction: Michigan
Decision Date: 1941-05-21
Citations: 297 Mich. 403
Docket Number: Docket No. 4, Calendar No. 41,123
Parties: J. B. SIMPSON, INC., v. STATE BOARD OF TAX ADMINISTRATION.
Judges: Sharpe, C. J., and Chandler, and McAllister, JJ., concurred with Wiest, J.
Reporter: Michigan Reports
Volume: 297
Pages: 403–419

Head Matter:
J. B. SIMPSON, INC., v. STATE BOARD OF TAX ADMINISTRATION.
1. Statutes — Definitions.
A definition of words and phrases in an act carries no force unless employed in the enactment.
2. Taxation — Use Tax — Interstate Commerce.
Statute imposing a tax upon sellers of “tangible personal property for storage, use or other consumption in this State, engaged in the business of selling at retail in this State,” would not be applicable to merchant tailoring establishment located in Illinois which takes orders for clothes in this State from residents hereof and then fills the orders and passes title to the clothing to the purchaser upon delivery in Illinois to an interstate carrier, since it is engaged in interstate commerce and is not required to register under the sales tax act (Act No. 167, Pub. Acts 1933, as amended; Act No. 94, Pub. Aets 1937).
3. Same — Collection of Use Tax from Consumers.
The remedy of the State as to goods purchased in interstate commerce under the use tax act, if any, is against the consumers (Act No. 94, Pub. Acts 1937).
4. Same — Interstate Commerce — Jurisdiction—States.
Neither the legislature nor administrative officials may reach into another State and mandate persons there to serve as tax collectors in behalf of" this State upon merchandise there manufactured, sold, and delivered in interstate commerce destined for storage, use or other consumption in this State.
5. Constitutional Law — Statutes—Parties.
Matter of constitutionality of statute imposing a tax is left without decision where party attacking the statute is not subject to tax imposed thereby.
6. Costs — Public Question — Application of Use Tax Act.
No costs are allowed in suit involving application of use tax act, a public question being involved (Act No. 94, Pub. Aets 1937).
7. Constitutional Law — Burdens on Interstate Commerce— States.
A State may not impose a burden on interstate commerce not in any manner connected with intrastate commerce.
8. Taxation — Sales Tax — Use Tax.
A foreign corporation doing business within this State subject to the sales tax is liable for the use tax upon goods shipped into the State to residents as, in such case, the use tax is complementary as associated with the sales tax and not considered a burden upon what would otherwise be interstate commerce (Act No. 167, Pub. Acts 1933, as amended; Act No. 94, Pub. Acts 1937).
9. Judgment — Res Judicata — Interstate Commerce — Taxation.
Business of merchant tailoring establishment wherein orders are taken in this State from residents herein for clothing manufactured and delivered in Illinois to an interstate carrier having been previously determined to be interstate commerce and not subject to sales tax, such matter is res judicata in suit involving determination of application of use tax (Act No. 167, Pub. Acts 1933, as amended; Act No. 94, Pub. Acts 1937).
Bushnell, Boyles, and North, JJ., dissenting.
Appeal from Wayne; Moynilian (Joseph A.), J.
Submitted October 23, 1940.
(Docket No. 4, Calendar No. 41,123.)
Decided May 21, 1941.
Certiorari denied by Supreme Court of the United States October 27, 1941.
Bill by J. B. Simpson, Inc., an Illinois corporation, against State Board of Tax Administration and others for a declaratory judgment regarding the rights of plaintiff under the use tax act and for injunctive relief. Decree declaring plaintiff not required to collect and pay the tax, and granting injunction. Defendants appeal.
Modified and affirmed.
Butzel, Levin & Winston, for plaintiff.
Thomas Read, Attorney General, Edmund E. Shepherd, Gaylord N. Bebout, and T. Carl Holbrook, Assistants Attorney General, for defendants.

Opinion:
Wiest, J.
The bill herein was filed under the provisions of Act No. 36, Pub. Acts 1929 (3 Comp. Laws 1929, §13903 et seq. [Stat. Ann. §27.501 et seq.]), to obtain a decree declaratory of the rights of plaintiff under Act No. 94, Pub. Acts 1937 (Comp. Laws Supp. 1940, § 3663-41 et seq., Stat. Ann. 1940 Cum. Supp. §7.555 [1] et seq.), commonly known as the "use tax act." It is agreed that the facts are fully stated in J. B. Simpson, Inc., v. O'Hara, 277 Mich. 55, where we held plaintiff's sales in Chicago did not come within Act No. 167, Pub. Acts 1933 (Comp. Laws Supp. 1935, § 3663-1 et seq., Stat. Ann. § 7.521 et seq.), known as the "sales tax act."
Briefly stated, plaintiff operates a merchant tailoring establishment in Chicago, Illinois, takes orders in this State, from residents, for clothes, fills such orders in Chicago and, upon delivery there to an interstate carrier, title thereto is vested, by agreement, in the purchaser. The circuit court held the sales and delivery so made did not require plaintiff to collect and pay the tax under the use tax act. Defendants appeal.
The use tax act in section 2, subd. (d), states:
"'Seller' means the person from whom a purchase is made and includes every person engaged in this State or elsewhere in the business of selling tangible personal property for storage, use, or other consumption in this State."
Section 5 of the act provides:
"Every seller of tangible personal property for storage, use or other consumption in this State, engaged in the business of selling at retail in this State, shall, within thirty days after the effective date of this act, register with the board and give the name and address of each agent operating in this State, the location of any and all distribution or sales houses or offices, or other places of business in this State and snch other information as the board may require with respect to matters pertinent to the enforcement of this act: Provided, That it shall not be necessary for a seller, holding a license obtained pursuant to the provisions of act number one hundred sixty-seven of the public acts of nineteen hundred thirty-three, as amended, to register with the board as provided in this act. Every such seller shall collect the tax imposed by this act from the consumer and the board may, by rule or regulation, authorize any other seller to collect such tax from the consumer, and such rule or regulation shall require that each such seller shall register with the board in such form as may be therein provided."
A definition of words and phrases in an act carries no force unless employed in the enactment and cannot be considered in the present instance for the quoted enactment, by its specific terms, only applies to sellers of "tangible personal property for storage, use or other consumption in this State, engaged in the business of selling at retail in this State," and this is manifested by the required registration of such persons under the act, unless registered under the sales tax act.
Plaintiff did not so register.
In the former case, J. B. Simpson, Inc., v. O'Hara, supra, we held, in effect, that plaintiff was not required to register under the sales tax act for sales made by it were not made in Michigan but in Illinois and, being interstate commerce, cannot be taxed by the State of Michigan.
Plaintiff's sales in Chicago are not subject to the use tax any more than to the sales tax, and it was not required to register. The remedy of the State under the use tax act, if any, is against the consumers.
Section 7 of the act provides:
"Each consumer storing, using or otherwise consuming in this State tangible personal property-purchased for such purpose or purposes shall be liable for the tax imposed by this act, and such liability shall not be extinguished until the tax has been paid to the board. The payment to the board of the tax, interest and any penalty assessed by the board shall relieve the seller, who sold the property with regard to the storing, use or other consumption on which the tax was paid from the payment of the amount of the tax which he may be required under this act to collect from the purchaser."
Sanction of the claim made by the State would make plaintiff a collector of a tax, in behalf of the State, upon merchandise, manufactured, sold and, in the course of interstate commerce, delivered in Chicago for carriage to owners thereof in the State of Michigan, and such cannot be done, for the lawmaking arm of the legislature, and much less that •of mere administrative officials, cannot reach into another State and mandate persons there to so serve. The use tax act does not accomplish any such thing.
Considering our holding in the sales tax case in connection with this opinion the decree in the circuit court, restraining' defendants from exacting the asserted use tax from plaintiff, is affirmed.
We find no occasion to touch upon the constitutionality of the act and, as there was none necessary in the circuit court, the part of the decree below holding the act constitutional is eliminated and the question left without decision to await a proper setting'.
The tax paid by plaintiff and impounded by order of the circuit court will be released to plaintiff as owner thereof.
A public question being involved, no costs are awarded.
After the above was written and submitted to the justices for consideration, the supreme court of the United States, on February 17th, handed down opinions in Nelson v. Sears, Roebuck & Co., 312 U. S. 359 (61 Sup. Ct. 586, 85 L. Ed. 888, 132 A. L. R. 475), and Nelson v. Montgomery Ward & Co., 312 U. S. 373 (61 Sup. Ct. 593, 85 L. Ed. 897), reversing the holding of the supreme court of Iowa that the use tax of that State was in violation of the Federal Constitution as applied to mail order business conducted between customers in Iowa and the mail order houses of defendants located outside of Iowa. In those cases defendants were authorized to do business in the State of Iowa and maintained retail stores therein with sales subject to the State sales tax, and it was held, as the use tax was complementary to the sales tax, to which defendants had subjected themselves, that all sales made by defendants in Iowa, whether out of stock on hand in Iowa or out of stock elsewhere and coming to rest in the State of Iowa, brought the sales under order and shipment within the use tax. Such is not the case at bar.
Here the plaintiff made no sales in this State subject to the sales tax. J. B. Simpson, Inc., v. O'Hara, supra. See, also, Montgomery Ward & Co. v. Fry, 277 Mich. 260. Merchandise was purchased by residents of Michigan from plaintiff in Illinois, with title passed in that state to the purchaser under express contract consummated in the State of Illinois. Plaintiff did not maintain retail stores nor sell merchandise at retail in this State, and such fact brings the case within the following exception noted in Nelson v. Sears, Roebuck & Co., supra:
"Respondent, however, insists that' the duty of tax collection placed on it constitutes a regulation of and substantial burden upon interstate commerce and results in an impairment of tbe free flow of sueb commerce. It points to tbe fact that in its mail order business it is in competition with out-of-State mail order bouses wbicb need not and do not collect tbe tax on tbeir Iowa sales. But those other concerns are not doing business in tbe State as foreign corporations. Hence, unlike respondent, they are not receiving benefits from Iowa for wbicb it has tbe power to exact a price."
Along this line see Montgomery Ward & Co. v. Fry, supra.
In tbe case at bar tbe State seeks to impose a burden on interstate commerce not in any manner connected with intrastate commerce, and this may not be done. Plaintiff needed no authorization to do business in tbe course of interstate commerce in this State, and leave to do business in this State, unless an intrastate business is carried on and tbe intrastate and interstate businesses become associated, does not subject interstate commerce to any State-imposed burden.
Under tbe mentioned Federal decisions, a foreign corporation doing business within this State, subject to the' sales tax, is liable for tbe use tax upon goods shipped into tbe State to residents as, in such case, tbe use tax is complementary as associated with tbe sales tax and not considered a burden upon what would otherwise be interstate commerce. Tbe business here involved, upon which the State seeks to sustain the use tax, is the very business which we held, in J. B. Simpson, Inc., v. O'Hara, supra, was not subject to tbe sales tax, and upon that point that decision is res judicata. So disassociated, tbe business is strictly interstate commerce upon wbicb tbe State may not impose tbe burden of tbe use tax or compel plaintiff to collect the same.
Sharpe, C. J., and Chandler, and McAllister, JJ., concurred with Wiest, J.