Court Opinion

ID: 3493098
Source: CourtListenerOpinion
Date Created: 2016-07-05 22:01:17.083925+00
Date Added: 2024-06-11T13:54:49.065260
License: Public Domain

I do not concur in the opinion of Mr. Justice BOYLES.
Defendants in their brief raise this question: Does the Michigan "use tax act," when applied to the telephone company, involve the same subject of taxation that was contributing to the primary school interest fund, pursuant to Act No. 179, Pub. Acts 1899, when the State Constitution of 1908 became effective?
Under Act No. 179, Pub. Acts 1899, the plaintiff telephone company was then (1908) paying an annual specific tax described in section 5 of that act as,
"A specific tax upon the property and business of such express company, telephone company and telegraph company operating within this State * * * computed * * * upon the gross receipts of such telephone company derived from business within this State for the year included in the report provided for in section two of this act, three per cent. of such gross receipts."
This act (Act No. 179, Pub. Acts 1899) did not expressly provide for payment of such taxes into the primary school interest fund but, since article 14, § 1, of the Constitution of 1850 was self-executing,* this was not necessary.
The so-called use tax is in fact a privilege tax. The words of the statute, Act No. 94, § 3, Pub. Acts 1937 (Comp. Laws Supp. 1940, § 3663-43, Stat. Ann. 1944 Cum. Supp. § 7.555 [3]), are:
"There is hereby levied upon and there shall be collected from every person in this State a specific tax for the privilege of using, storing or consuming tangible personal property in this State." (Italics supplied.) *Page 605 
At the time of the adoption and at the effective date of the Constitution of 1908, the plaintiff telephone company was a public service corporation in full possession and enjoyment of the privilege of using, storing and consuming tangible personal property in this State. Because of the nature of the telephone business, and in view of the acts of the legislature on that subject, it is fair to consider that the framers of the Constitution of 1908, the electorate who voted its adoption, and members of the legislature of the State, all knew fairly well about the telephone company's business and activities.
The plaintiff telephone company was organized in 1904 and since that date it has been continuously in business and under regulation by various commissions designated in turn by State law. It has been obliged to invest large sums of money to make compliance with those regulations. It had a right to collect tolls for service dependent upon the privilege of use, storage and consumption of tangible personal property in the State. It bore a peculiar relationship to the transaction of public affairs and of business in the State. It was required to render its service without discrimination. It is not necessary to recite in detail the various statutes and regulations pertaining to telephone companies in the State in order to discover the peculiar character of the right of plaintiff telephone company to carry on its business. From the considerations herein recited, we conclude that the privilege of plaintiff telephone company to use, store and consume tangible personal property in this State, is an inseparable portion of its franchise, even though such privilege in the case of some other person may be only a privilege and not a franchise nor a portion of a franchise. This privilege as a franchise was part of the property of plaintiff telephone company in 1908. *Page 606 
The plaintiff telephone company could transact no business whatsoever without the existence of the privilege, as well as the exercise of the privilege of using, storing and consuming tangible personal property in this State. That privilege was an absolutely indispensable part of the property and business of the company and amounted to a franchise on the part of this public service corporation in order that it might carry on the activities it was specially authorized to perform. That privilege (a franchise in fact), being part of the property of the telephone company, was subjected to the tax under the act of 1899, above quoted, "a specific tax upon the property and business" of the company. All taxes "from such subject of taxation," i.e., "the property and business" of plaintiff telephone company, must be levied for the educational funds mentioned in Const. 1908, art. 10, § 1.
The use tax is levied for the general fund. As regards plaintiff telephone company, the levy in question in this case is therefore void under said Const. 1908, art. 10, § 1. Plaintiffs do not question the right of the legislature to levy such tax for the purpose of the educational funds mentioned.
We do not pass upon the dispute as to the validity of the proceedings and of the statute respecting penalty, since the penalty must fail with the tax.
The judgment appealed from should be reversed and the case remanded to the trial court with direction to enter judgment for plaintiffs for the full amount of the tax and penalty. Costs to plaintiffs.
The late Justice WIEST took no part in the decision of this case.
* Walcott v. People, 17 Mich. 68. *Page 607