# Motion to Affirm — W. R. Arthur & Co. v. Wisconsin Department of Taxation > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385001_0350%3A3 ## Record - **Collection:** Supreme Court brief - **Document type:** Motion to Affirm - **Published:** January 1, 1963 - **Citation:** 374 U.S. 94 ## Text +} Bthce Supreme Court, U.S ae ome meee ye a Lie SRY. TaN sed COURT. U. >. MAY 7 1963 | ; IN THE , : - JOHN F. DAVIS, CLERK October Term, ope \ No..1008 -W. R. ARTHUR & CO, INC, ee . a : ’ Appellant, (a vs. WISCONSIN DEPARTMENT OF TAXATION, F Appellee.” APPEAL FROM -THE SUPREME COURT OF THE STATE OF WISCONSIN MOTION OF APPELLEE TO DISMISS APPEAL ~~ (AND BRIEF" : GEORGE THOMPSON, _ Attorney General of Wisconsin - - HAROLD H. PERSONS, Assistant Attorney General E. WESTON WOOD. on Assistant Attorney General } . .°. Attorneys for Appellee. Post Office Address: =s_—.:«. eet 114-East ; os oe State Capitol — ‘ Pail _ Madison 2, ‘Wisconsin | ( Ceedsectetseatectiastterstereeeeeretereties « Pd i _ TABLE OF CONTENTS PAGE MOTION TO Ser ninaunneceamenes eneT strate 1 ‘STATEMENT OF THE II; cksichiinceccaenesticheLasecicaniaet Basen 1-2 - S SRATUTES INVOLVED, 2c einen neon FACTS LR Ee Cn OCS RE aco 4-12 NO SUBSTANTIAL — Is INVOLVED color Qe -18 - L Each Factor In An Apportionment ‘Formula is. __. Reasonable If the Formula is Reasonable .......... 12-14 2. Apportionment Formula Used Was'Fair.and Rea- ~ gonable ......... Rule Se OO arene nn Sea 3. Apportionment of Unitary. Income. by q, Reason- able Formula is Constitutional pacianeuianenianiate 17-18 4 . “ ; AUTHORITIES CiTED : a 7 Butler Bros. v. McColgan (1942), 315 U. S. 501, 62 Sup: ; Ct. 701, 86 L. Ed. 991 ..:.... - Sherntibeiibcshinytiligltoeses aie Central Greyhound’ Lines v. Meiten’ (1948), 334 U. S. | 653, 68 Sup. Ct. 1260, 92 L. Ea. ID nessa syrensgeneseneccnees 17 _ Eisner v. -MacComber (1919), 252 U. s, 189, 40 teen: Ct. 189, 64 L, WA, G08 \enzes /18 _ET & WNC Transp, C6. v. Currie (1959), 359 U. S. 28,’ 79 Sup. Ct, 602, "3-L. Ed.’ (2d) 625, affg, 248 N. C. 560, 104 S. E. (24) UN gh ene 17 ae : ; . PAGE Hans Rees. Sons (1931), 283 U. S. 123, 51 Sup. eS. 385, 75 L. Ed. 679 Teer E SNe npechiondanetaas Sates sant cabanas ae N. W. States Portland — Co. v. Minnesota (1959), 358 U. S. 450. 79 Sup. Ct. 357, 3 L.. Ed. (2d) 421. 17, ‘18 -* Senet Saliceiicen LTD v. Howbert (1913) 231 U _ S. 399, 34 Sup. Ct. 136, 58 L. Ed. 285 .. omen a . Williams v, Stockham Ydows & Fittings, Inc. (1959), 358 U. S. 450, 79 Sup. Ct. 357, 3 L. Ed. (2d) 421... 18 IN THE ~ SUPREME COURT of the UNIFED STATES ‘October Term, 1962 — ; No.1008 , W. R. ARTHUR & CO., INC. * * . Appellant, vs. "WISCONSIN DEPARTMENT OF TAXATION, Appellee. APPEAL FROM THE SUPREME Court’ _ OF THE STATE OF WISCONSIN - MOTION TO DISMISS Pursuant to Rule 16. of the Revised Rules the appellee, Wisconsin, Department of Taxation, moves.this court to * ‘dismiss with costs the appeal faken herein to this court by W. R. McArthur ‘& vere Inc., upon ithe following ground: 1. No substantia] Fedéral question is presented. Co : , STATEMENT OF THE CASE © This is a state income tax apportionment case. The appellant, W. R. Arthur & Co., Inc., is a corporation,.incor- - _ porated in IIlinois, but having its office and place of business at Janesville, Wisconsin. It is engaged in a unitary, multi- state business of transporting new Chevrolet automobiles and trucks from the manufacturer’s assembly ‘plant at Janesville, Wisconsin. to the dealers in the midwest. It seeks a review of the judgment of the Supreme ‘Court of Wisconsin which affirmed an assessment of Wisconsin in- come taxes against the appellant on the part of the net income of the appellarit in the years 1953 through 1956 attributable to business transacted within the State of Wis- consin. The amount of its total net income in each of the- - years so attributed to business transacted. within Wisconsin. and subjected to Wisconsin income taxation was calculated, "pursuant to sec. 71.07 (2). Wisconsin Statutes, by the appli- ‘ eation-of an apportionment formula composed . of three factors:‘ (1) revenue miles, (2): payroll, [non-driver pay- roll assigned a situs where headquartered. and driver pay- © "roll assigned a situs on basis of revenue miles], and, (3) originating revenue [assigned a situs at place of receipt]. - STATUTES INVOLVED Sec: 73.02, Wisconsin Statutes, alin the" ai Wisconsin Department of Taxation, as a department of © . State government of the State of Wisconsin. The duties of said department as set out in sec. 73.03, Wisconsin Statutes, include the general supervision of the administration and enforcement of the state income tax imposed by ch. 71, of the Wisconsin Statutes. It is the governmental agency or subdivision by which the State of Wisconsin administers its income tax laws. The Wisconsin Department of. Taxa- tion is fully authorized by the Wisconsin Statutes to make s >) 3 : the additional assessment involved. Aso question is raised in respect thereto the statutory — for it to so act. : is not set out. The prov isions of the Wisconsin ree Tax Law. are in ch. 71 of the Wisconsin Statutés. So far-as relevant here . they are set forth at pages 4, 5 and 6 of the Appellant's Jurisdictional Statement. It_j vided in sec. 71.07(2), that the amount of incor of of pyrsans | includes corporas - tions by express definition sec. 71.02(1)], engaged in busi- " ness within and without the State of Wisconsi: shall be taxed only on ‘such income as is derived from business transacted within the state; that if the’ business transgcted _ in the state is not part of a unitary business the amount of income attributable to Wisconsiri may be determined by /separate accounting; but where the business is unitary then the amount of Wisconsin taxable income is to be de ~ termined by a three factor formula composed of (a) tangi ble property, (b) cost’ of manufacturing, and (c) sales. It is then provided in sec. 71.07 (3); that if the use of any | of the three factors produces an unreasonable or -unequit- able result stieh factor or factors may be omitted from the formu!z Then sec. 71.07 (5), provides that if, by | any ‘of the foregoing, the income properly assignable can not | be ascertained, then the income: shall be apportioned -and allocated upon such basis as the Wisconsin Department of. Taxation may, in accordance with its rules and regula-. tions, prescribe. Because the use of the. three-factor for- _youla was inappropriate to the taxpayer’s business and as dropping out factors therein did not provide a reasonable method for apportionment, the Wisconsin Department of Taxation applied an. apportionment formula consisting of: revenue miles, payroll and an revenue as deemed / 4 to be an apportionment formulua which fairly and reason- ably apportioried. to Wisconsin that portion of the net busi- ness income of the appellant as, Was attributable to business conducted within Wisconsin. “This was in accordance with . place of business at Janesville, Wisconsin, adjacent-to the - the promulgated formal published rule of the Wisconsin Department of Taxation, designated Tax 2.45, as set forth © at page 6 of Appellant's Jurisdictional Statement. FACTS While the appellant, W. R. Arthur & Co.” Inc, is a cor- poration incorporated in Ilinois, it has its general office and ‘Chevrolet automobile assembly, plant of General Motors Corporation. The sole business of the appellant is the trans- porting of new Chev rolet automobiles and trucks from said assembly plant,*to dealers in Wisconsin, Illinois, Indi- — ana, lowa, upper Michigan, Minnesota, Missouri, Montana, * Nebraska and North and South Dakota. Other than a gar- ‘age relay station which is owned at Black River Falls, Wis- consin, a-minor relay station rented at Manchester, Iowa * and an experiméntal. operation cgnducted out of mote? locations in Minnesota, the W. R. Arthur & Co., Inc., had no . Office or facility other than its office and receiving and dis- the manufacturer’s assembly plant to the dealer. in such, patching terminal facility at Janesville,” Wisconsin. - Taxpayer's. business’ was entirely the hauling of one commodity, new Chevrolet automobiles arid trucks from new vehicles. It had only. one customer, the Chevrolet -division’ of General Motors Corporation at its assembly - plant at Janesville, Wisconsin: The new at. smobiles and ro / , =F 8 - trucks, were moved by appellant by two methods. 96% were moved by the “haulaway,” also known as the “truck- away,” method and 4°. were hauled or transported by be- ’ ing driven under their. own ‘power by employees of. the ‘taxpayer, which is known as the ° ‘driveaway” method. The “haulaway” method consisted of ‘the transportation of the new vehicles upon specifically designed semi-trailers carry- ing either four new Chevrolet automobiles or three new — Chevrolet trucks, drawn or pulled by ets units,—heavy ~ duty trucks known as truck- tractors. All of the transportation actually ini at ei Chevrolet plant at Janesville, Wiscgnsin. Beyond question, 88°. of the hauling of new vehicles was started at the Janesville plant. Such other hauling as was done was nom- ~ inal in amount and insigniticant. It involved ‘the movement . of new. vehicles between auto shows at the start of a model year, some readjusting of inventory between dealers at the "end of a model year, the return of new cars from Chevrolet * dealers to the factory ‘at Janesville, and the movement of _ some new trucks from Streeter, Illinois, after the installa- . tion of special dump boxes there, which trucks had been ‘initially transported ‘by the taxpayer from the Janesville plant to Streeter, Illinois for such installation. All of the hauling, regardless of where the haul at the time originated, - was for the Chev roléet division of General Motors Corpora- tion and was performed under tariffs negotiated by the - taxpayer's officers headquartered at Janesville, Wisconsin. — The taxpayer's revenue’ was entirely from the Chevre- let-plant at Janesville for which all of such transportation service was performed. Taxpayer was a contract carrier . - and the Chevrolet division of the General. Motors Corpora-. - ’ . tion was its only customer’ and the only | 6éne for which . taxpayer was authorized to perform transportation serv- ices. All billing by the taxpayer was to said Chevrolet divi- | sion of the/General Motors Corporation.. Taxpayer took possession bf the new Chevrolet augfomobiles and trucks at the factory gate at Janesville, stored them at its facilities at Janesville, loaded them onto trailers, | transported them » Ly said truck and seini-trailers or.drove them to. the speci- fied Chevrolet dealers to whem they were ‘consigned by the Chevrolet factory, and thereon unloaded and delivered them. For this service, it was compensated under agree- _ ments with the Chevrolet division pursuant to which the W. R. Arthur & Co., Inc., received a certain amount for actual-miles transported plus surcharges for other services, plus allowances for extra drivér expense on lorig hauls (driver lodging) and extra driver expense of unloading “LTL shipments—shipments where the load: goes to more than one dealer. The basis for the compensation from Jan- uary 1, 1953 to 1995 was nine cents.per mile for each veni- - cle transported, plus a ‘surcharge of three dollars per car, plus a further surcharge of seventy-five cents per car for . each 150 miles after the first 150 miles. If alf of the vehicles on the load were not consigned to a'single destination, the - - taxpayer received an additional $1.50 for each vehicle on that load. _ Subsequent to June 20, 1955, and during the remainder of the period invdited, the rates were scaled upward slightly, but on this. same’ scheme or pattern. The general offices were located at Janesville, Wiscon- . - sin in a 40x60. feet two story building known as the Cherry Street office owned by it, upon leased land. The officers. of the corporation with an executive payroll of. $100,000 a year headquartered there. The off cers were responsible | : -for the conduct of the business, including the negotiations with General Motors Corporation relative’ to the retention of business and the detérmination of terms; the purchase - _ of trucks and trailers from General Motors Corporation; the negotiation of union contracts; and the negotiation with state and federal regulatory agencies. In addition, this office housed the claims department, the safety, and per- sonnel division, the accounting personnel, and’ a number of other office work , Altogether there were fr om twenty . to twenty-four office, workers employed in various capaci- ties, including the settlement of-claims and driver training. The general corporate records were maintained there. The principal dispatchers were headquartered at J anesville. In the latter part of 1956 taxpayer constructed a new 40x70 feet offtce building on what i$ known as the Kellogg Street . lot which it ‘used for dispatching. In addition to its offices, appellant inatiee the years involved, operaied two large garages at Janesville, a large parking lot at Janesville and had a eee garage at Black ; River Falls, Wisconsin. . The two Janesville garages were located on State * Street’ and Academy Street respectivély. The State Street garage was a 200 foot by 60-70 foot building on land owned by the taxpayer. It had drive-through bays with electrically — -operated overhead doors that could accommodate loaded tractors and trailer units. It was used for greasing, painting, | welding, tire‘repair, brake repair and other like and heavy maintenance of taxpayer’ Ss equipment, ough as removal and repair and: replacement of motors, tear epds and transmis- gions, and making structural alterations on: trailers to accommodate new model Chevrolet automobiles and trucks. . | F \ "There, was a stock room -for replacement parts ‘for equip- “ 8° ‘ment. ‘The Academy Street, garage was a two story 100 by 70 feet cement block building arid was owned by the tax- payer at a cost of $70,000. Except for brake work and _ painting it performed the same functions as the State Street garage and similarly had a parts room for storage of tires, motors and ‘Tepair parts. Forty to forty-five men worked in these two garages , and included shop supervisors, foremen, greasers, tire i > _ welders, brake men, mechanics and janitors. _ “Taxpayer took pa@ession of: ‘the new Cheveollt ‘auto- - mobiles and trucks at the factory gates at Jane; ville and _assumed the risk of loss or damage from that point. About twenty persons were employed by taxpayer to drive rew - cars from the factory gates to its parking area. Prior to 1956 taxpayer parked the new vehicles on land owned by . the Chevrolet division adjacent to the taxpayer’s office. In 1956 taxpayer began the development of the Kellogg Street __ parking area-riear the factory on eighty acres developed ' in 1956 for parking purposes and built upon it the 40 feet by 70 feet building used for dispatching purposes. It had — _ also started construction on a large: garage to. replace the Acade.ny Street garage: . é ' The revenue miles, factor is, entirely line-haul-in na- ture. Ordinarily ton-miles would ‘be used but here revenue miles were used as the taxpayer used tevenue n ns ei in fil- | ing its returns and no records for computation of ton- miles. ~ were available. Revenue miles reflects*the . contribution of both’ the labor and: capital involved in the actual ,hauling - and assigns them to where the hauling is done. ae The originating revenue factor is terminal, and is com- - ; parable to and takes the place of, the sales factor that would “be used in the statutory formula which would be applicable the taxpayer were a manufacturer. Originating revenue reflects the contribution. of labor and capital involved in the functioning of the general office and operating terminal (including the garages, etc.). at Janesville, Wisconsin and the fact.that all of the services were supervised and directed’ at such home office and originating’ terminal. _ The payroll factor ‘is neytral, or rather both line-haul’ 4 and terminal in character, an Revés t to balance or coordin- ate the other two factors. In computing. the payroll factor the non-drivers were allocated on the basis of the location of their headquarters and the drivers were allocated on the basis of revenue miles. Thus, the payroll reflects labor and capital contributions to the line-haul movement and also -thé labor and capital contributions to the terminal activity, including. the minor relay operations outside of Wisconsin, at the place where those contributions are made. It also. _ réflects the contribution of labor and capital involved in ‘the - functioning of the general office and the originating ter- : minal including the garages, etc., at J anesville, Wisconsin and the fact that all of the hauling-service ‘was sold, con- tracted for and generally implemented, directed and inal -vised_by sich home office. 7 _ ey >. 17 Ss, e Thus, the apportionment formula used in the case was eminently fair and reasonable as, calculated to attribute to Wisconsin only that portion of the total net income of the " taxpayer as was derived from that part offhe business which was transacted and carried on in Wisconsin. Being fairly . apportioned by such a formula, the assessment was proper and the taxes invelved are valid. = fs ' ae 3. Apportionment of unitary income by a reason- able formula is constitutional. . : It is well established that the net income of a corpora- ~ . tion generated by interstate as well as intrastate activities, may be fairly apportioned for tax purposes by a formula 3 utilizing in-state aspects of interstate affairs. Butler Bros. v. McColgan (1942), 315 U. S. 501, 62 Sup. Ct. 701, 86 L. Ed. 991; ET&WNC Transp. Co. v. Currie (1959), 359 U. S. 28, 79 Sup. Ct. 602, 3 L) Ed_(2d) 626; affirming 248 N. C. 560, 104 S. E. (2d) 403;'N.\W. States Portland Cement Co. v. Minnesota (1959), 358 U. S. 450, 79 Sup. Ct. 357, 3 L. Ed. (2d) 421. Appellant reliie upon Copal Greyhound: Lines v. Mealey (1948), 334 U. S. 653, 68 Sup. Ct. 1260, 92 L. Ed. 1633. That case is in no way pertinent for two reasons. In the first place, it was a gross receipts tax and, this court has clearly distinguished between a gross-receipts tax. and a net. income tax. Secondly, the tax there was an unapportioned tax which by its very nature makes interstate activjty bear ‘ more than its fair share. N.-W. States. Portland Cement : -v, Minnesota (1959), 358 U. S. 450, 79 Sup. Ct..357,-3 L. Ed. (2d) 421. However,-in the instant case, the tax is laid on. an amount that is very carefully apportioned ‘so as to limit ‘ —_ *. — the tax.to the amount of net income that is reasonably - attributable to business done in Wisconsin. Hans Rees Sons v. N. C. (1931), 283 W. S: 123, 51 inn. Ct. 385, 75 a. Ed, 879, is not similar to the instant case. -It involved a single factor apportionment formula—a property factor. The tax was unreasonable on its face if, as this court has held; net income derives from both capital and labor. Stratton’s Independent LTD v: Howbert (1913), 231\U. S. 399, 34 Sup. Ct. 136, 58 L. Ed. 285; ;Eisner v. MacComber (1919), 252: U. S. 189, 40 Sup. Ct. 189, 64 L. Ed. 521. There - - the State of North Carolina overtaxed. because it had most of the property and under its formula nearly all of the in- come, although there was substantial labor that was em- ployed elsewhere. — The case of N. W. States Portland Conant Co. v. eae * sota (1959) ,.358 U- S. 450, 79 Sup. Ct. 357, 3 L. Ed. (2d) 421, . “furnishes no. support, to the xppellant. It and the compan- ion case, Williams v. Stockham Vales & Fittings, Inc. did not involve how much either Minnesota or Georgia could < - tax, but only whether they ‘could tax at all. Here, concededly, the State of Wisconsin has power to. tax some part of the appellant’s net i from its entire business a fsy is exclusively over how much ef that income is “to ‘be apportioned : to Wisconsin. The apportionment formula used here is reasonable and fair. \ e -As the assessments here involved itnpose the Wiscon- sin income tax upon only that portion of the net business income of appellant which is reasonably attributable to the © 19 - tindinees done in Wisconsin, Pa constitutional question is presented as to the validity théreef under the 14th @mend- _ ment. Therefore the judgment of: the Supreme Court .of Wisconsin was correct and the motion to dismiss the appeal should be granted. Respectfully submitted, GEORGE THOMPSON, rane, | Attorney General of Wisconsin ‘ HAROLD: H. PERSONS, Assistant Attorney General °. E. ‘WESTON WOOD” } Assistant Attorney General Attorneys for Appellee. P. O. Address: (114 East, State Capitol, em ~ Madison 2, Wisconsin “| ooh en --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385001_0350%3A3. Public record. Not legal advice.