Court Opinion

ID: 9659000
Source: CourtListenerOpinion
Date Created: 2023-08-23 21:25:47.221314+00
Date Added: 2024-06-11T18:14:02.806979
License: Public Domain

*117Otis, Justice
(dissenting).
The original version of Minn. St. 295.34 imposed a tax on “gross earnings from exchange business at all cities of the fourth class.”1 (Italics supplied.) Sometime before 1941, however, the word “at” was changed to “of.” Though much of the discussion in the briefs is devoted to whether “at” or “of” correctly represents the will of the legislature, in my opinion the meaning is disclosed, not in the preposition, but in the words which precede it.
Looking to the three categories of earnings listed in the statute, it appears that the legislature graduated the tax according to the size of the communities served and not according to the size of the company.2 Service to rural subscribers and “exchange business at” small municipalities are taxed at a rate of 4 percent. All other business, including service to subscribers in larger communities, is taxed at 7 percent. The rate therefore appears to be dependent on population. The statute also reveals the kind of business which determines the rate when the exchange is in one community and the subscribers are in another.
In enacting § 295.34, the legislature did not impose the 4-percent tax on “earnings from exchanges located in all cities of the fourth class,” but rather, it applied the 4-percent rate to earnings from exchange business, that is, business at exchanges at all cities of the fourth class. The word “at” may have a geographical connotation, but as I construe the statute the reference is intended to apply to the location of the business, not to the location of the exchange. It seems likely the purpose was to encourage service to small communities without reference to location of the exchanges. This would tend to reduce losses in service to sparsely settled areas where company costs are inevitably higher. In any case, no reason has been advanced why the location of exchanges was a matter of concern to the legislature. The purpose suggested is in harmony with the express language of the statute. Both indicate that the location of the subscribers was intended to be decisive.
The Tax Court emphasized the fact that the legislature used the term *118“service to rural subscribers” in clause (a) of § 295.34, subd. 1, and “exchange business at [of] all cities of the fourth class” in clause (b). In this connection relator argues as follows:
“* * * ‘Service’ characterizes one sort of earnings. ‘Exchange business of’ characterizes another. ‘Service’ conveys an intent only to tax those gross earnings from rural subscribers arising directly from telephone service. In the case of fourth class cities which provide a more sophisticated form of service all exchange business is taxed. * * * In short the Legislature intended to tax a different quantum of gross earnings in the case of rural subscribers from that which they intended to tax in the case of fourth class cities and villages. In more populous areas all gross earnings, of any kind, are taxed under clause (c) of the statute.”
Relator also cites a 1937 memorandum of the tax commissioner to the effect that directory advertising and listings are included in exchange business but not in service to rural subscribers.
At issue in this case are revenues which are conceded to be derived from the exchange business of a city of the fourth class. Hence, as I read § 295.34, subd. 1(b), the 4-percent rate should apply without reference to the physical location of the exchange — which to me appears to be an irrelevant consideration — rendering the application of the 7-percent rate erroneous.

 Ex. Sess. L. 1937, c. 10.

 The rate of taxation was not geared to the amount of earnings, for example.