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jurisdictionappealcorporationdue processlevy
jurisdictiontax lawcorporationdue processappellantlevy

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International Harvester Co. v. Wisconsin Dept. of Taxation, 243 Wis. 198, 10 N.W.2d 169

Facts

International Harvester Company, a New Jersey corporation, had been doing business in Wisconsin since 1920. From December 2, 1935, to October 15, 1937, the company paid dividends totaling over $39 million without paying the corresponding privilege dividend tax. The Wisconsin Tax Commission assessed a privilege dividend tax against the company based on the presumption that the dividends were paid from previous years' earnings. The company contested the assessment, arguing that the tax was unconstitutional and improperly computed.

Appellant is a New Jersey corporation, having its principal office in Hoboken, New Jersey. Its general executive offices are in Chicago. So far as the record discloses, it has done business in Wisconsin since 1920.

Issue

The main legal issues were whether the privilege dividend tax contravened due process provisions and whether the method of computation used by the Wisconsin Department of Taxation was authorized by law.

It is contended that the privilege dividend tax contravenes the due process provision of the Wisconsin constitution and of the federal constitution; that the computation adopted by the Wisconsin Department of Taxation is not authorized by the Wisconsin dividend privilege tax law, but on the contrary, that the dividend tax law prescribes a wholly different formula.

Rule

The court applied the principle that a state may levy taxes on privileges exercised within its jurisdiction, provided that the tax bears a fiscal relation to the protection and benefits conferred by the state.

A state is free to pursue its own fiscal policies, unembarrassed by the Constitution, if by the practical operation of a tax the state has exerted its power in relation to opportunities which it has given, to protection which it has afforded, to benefits which it has conferred by the fact of being an orderly, civilized society.

Analysis

The court analyzed the application of the privilege dividend tax in light of previous rulings, determining that the tax was constitutional as it was imposed on dividends declared from earnings derived from business conducted in Wisconsin. The court emphasized that the label of the tax as a privilege tax did not affect its constitutional validity, as the underlying jurisdictional facts supported Wisconsin's authority to impose the tax.

What the Supreme Court has done is (1) to state the factual basis upon which this law must be treated as constitutional insofar as the jurisdiction of Wisconsin to levy it is concerned and (2) to hold that given the factual basis, the law is constitutional in this aspect, regardless of the designation given it by this court.

Conclusion

The court affirmed the judgment of the Circuit Court, upholding the assessment of the privilege dividend tax against International Harvester Company.

Order and judgment are affirmed.

Who won?

The Wisconsin Board of Tax Appeals prevailed in the case, as the court upheld the assessment of the privilege dividend tax, finding it constitutional and properly computed.

The court being equally divided, this results under the rules of this court in an affirmance of the judgment upon this point.

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