PUBLISHED OPINION
Case No.: 94-2185
Complete Title
of Case:
LOVE, VOSS & MURRAY,
a partnership consisting of
GEORGE W. LOVE,
THOMAS K. VOSS and
DANIEL P. MURRAY,
Petitioners‑Appellants,
v.
WISCONSIN DEPARTMENT
OF REVENUE,
Respondent‑Respondent.
Submitted on Briefs: April 18, 1995
Oral Argument:
COURT COURT OF APPEALS OF WISCONSIN
Opinion Released: June 7, 1995
Opinion Filed: June
7, 1995
Source of APPEAL Appeal from an order
Full Name JUDGE COURT: Circuit
Lower Court. COUNTY: Waukesha
(If
"Special", JUDGE: PATRICK L. SNYDER
so indicate)
JUDGES: Anderson, P.J., Nettesheim and Snyder, JJ.
Concurred:
Dissented:
Appellant
ATTORNEYSOn behalf of the petitioners-appellants, the cause was
submitted on the briefs of George W. Love, of Love, Voss & Murray
of Waukesha.
Respondent
ATTORNEYSOn behalf of the respondent-respondent, the cause was
submitted on the brief of James E. Doyle, attorney general, and Gerald
S. Wilcox, assistant attorney general.
COURT OF APPEALS DECISION DATED AND RELEASED JUNE 7, 1995 |
NOTICE |
A party may file
with the Supreme Court a petition to review an adverse decision by the Court
of Appeals. See § 808.10
and Rule 809.62, Stats. |
This opinion is
subject to further editing. If
published, the official version will appear in the bound volume of the
Official Reports. |
No.
94‑2185
STATE OF WISCONSIN IN
COURT OF APPEALS
LOVE, VOSS & MURRAY,
a partnership consisting of
GEORGE W. LOVE,
THOMAS K. VOSS and
DANIEL P. MURRAY,
Petitioners‑Appellants,
v.
WISCONSIN DEPARTMENT
OF REVENUE,
Respondent‑Respondent.
APPEAL
from an order of the circuit court for Waukesha County: PATRICK L. SNYDER,
Judge. Affirmed.
Before
Anderson, P.J., Nettesheim and Snyder, JJ.
ANDERSON,
P.J. The partnership of Love, Voss & Murray
(partnership) appeals from the circuit court's order in favor of the Wisconsin
Department of Revenue (DOR) wherein the court affirmed the Wisconsin Tax
Appeals Commission's decision and held that the Wisconsin Recycling Surcharge
Tax for 1991 was constitutional.
Because we conclude that the tax is not violative of the Equal Protection
Clause of the United States Constitution and is a reasonable exemption under
§ 1 of Article VIII of the Wisconsin Constitution, we affirm.
The
facts are not in dispute. The
partnership is a law practice located in Waukesha, Wisconsin. For 1991, it filed a Form 3S Wisconsin
Partnership Temporary Surcharge return.
The partnership refused to pay the tax, claiming that it was
unconstitutional. The DOR denied the
partnership's claim by notice of adjustment.
The partnership then appealed to the DOR appellate bureau, which denied
the partnership's petition for redetermination of the temporary surcharge
tax. The partnership appealed this
decision to the Wisconsin Tax Appeals Commission (commission). The commission granted summary judgment in
favor of DOR.
The
partnership filed a petition for judicial review to the circuit court from the
commission's decision and order. The
circuit court affirmed the commission's decision, stating that “the Wisconsin
temporary recycling surcharge tax, provided by subch. VII of ch. 77, Stats., is
constitutional as it rationally furthers a legitimate state interest.” The partnership appeals.
We
must determine whether the temporary recycling surcharge tax violates the Equal
Protection Clause of the United States Constitution. The constitutionality of a statute is a question of law which we
review de novo. See Bachowski
v. Salamone, 139 Wis.2d 397, 404, 407 N.W.2d 533, 536 (1987).
The
partnership challenges, among other things, the constitutionality of § 77.94, Stats., 1991, which calculates the
surcharge.[1] Section 77.93, Stats., 1991, enumerates the entities to be taxed:
77.93 (title) Applicability. (intro.) There For the privilege
of doing business in this state, there is imposed a recycling fee temporary
recycling surcharge on the following entities:
(1) All
corporations required to file a return under subch. IV or V of ch. 71 for the
taxable year except corporations that are exempt from taxation under s.
71.26(1) and that have no gross receipts from unrelated businesses the unrelated
business income of which is reportable under s. 71.24(1m), and
except corporations the only gross receipts of which are from farming, as
defined in section 464(e)1 of the internal revenue code. The fee surcharge is imposed
on the tax-option corporations corporation, not on their
its shareholders, except that if a tax-option corporation's surcharge
is delinquent, its shareholders are jointly and severally liable for it.
(2) All natural
persons, estates and trusts that are required to file a return under subch. I
or II of ch. 71 for the taxable year and that either are an employe as
defined in section 3121(d)(3) of the internal revenue code or file a form
indicating a profit or loss from a trade or business, as defined in section
1402(c) of the internal revenue code, not including farming, for federal income
tax purposes for the taxable year. The
surcharge is imposed on each such natural person regardless of ch. 766 and
regardless of whether or not the person files jointly under ch. 71. The fee surcharge is not
imposed on gross receipts net business income of individuals for which the fee surcharge is
imposed on a tax-option corporation of which an individual is a shareholder or
a partnership of which an individual is a partner.
(3) All
partnerships, except partnerships that have gross receipts net
business income only from farming, that are required to file a return under
s. 71.20(1) for the taxable year. The fee
surcharge is imposed on the partnership, not on its partners, except
that if a partnership's surcharge is delinquent the partners are jointly and
severally liable for it.
....
77.93(5) All
natural persons, estates, trusts and partnerships that are engaged in
farming. The surcharge is imposed on
the partnership, not on its partners, except that if a partnership's surcharge
is delinquent the partners are jointly and severally liable for it.
1991 Wis. Act 39, §§ 2089i, 2089k. The partnership argues that “those who get
taxed ‘for the privilege of doing business in this state’ get taxed in a
substantially disparate fashion, solely on the basis of whether they are or are
not a noncorporate entity engaged in farming.”
We
begin our analysis with the familiar proposition that “constitutional
challenges to a statute must overcome a strong presumption of
constitutionality.” State v.
Thiel, 188 Wis.2d 695, 706, 524 N.W.2d 641, 645 (1994). A party attacking a statute on
constitutional grounds has the burden of proving that the statute is
unconstitutional beyond a reasonable doubt.
Wisconsin Bingo Supply & Equip. Co. v. Wisconsin Bingo Control
Bd., 88 Wis.2d 293, 301, 276 N.W.2d 716, 719 (1979).
The
partnership cites State ex rel. LaFollette v. Torphy, 85 Wis.2d
94, 99, 270 N.W.2d 187, 188 (1978) (quoted source omitted), for the standard
used for reviewing legislative classifications in an equal protection argument:
(1) All
classifications must be based upon substantial distinctions which make one
class really different from another.
(2) The
classifications adopted must be germane to the purpose of the law.
(3) The classifications
must not be based upon existing circumstances only. They must not be so constituted as to preclude additions to the
numbers included within a class.
(4) To whatever
class a law may apply, it must apply equally to each member thereof.
(5) The
characteristics of each class should be so far different from those of other
classes as to reasonably suggest at least the propriety, having regard to the
public good, of substantially different legislation.
In the area of taxation, the legislature has wide
discretion in making classifications. Id.
at 100, 270 N.W.2d at 188. These types
of classifications need only be reasonably related to the purposes of the
legislation. Id.[2]
The
commission stated in its decision:
[B]oth farm income and numbers of farms in Wisconsin
(most of which are individual or family operations) were in decline prior to
the legislature's action, providing one rationale for easing the burden of the
surcharge on farm entities in economic trouble in “America's Dairyland.”
... [B]ecause
these smaller family and individual farm operations are more subject to the
vagaries of the commodity marketplace and government price supports, they are
not able to pass the surcharge on to consumers by raising prices.
The circuit court agreed with the commission, stating
that “the Wisconsin temporary recycling surcharge tax, provided by subch. VII
of ch. 77, Stats., is constitutional as it rationally furthers a legitimate
state interest.”
We
conclude that there is a rational relationship between the classification and a
legitimate government purpose; therefore, the statutory sections at issue do
not violate the Equal Protection Clause.
We agree with the commission that farmers, unlike other businesses,
cannot necessarily absorb the recycling surcharge tax through increasing the
prices of their product because of the “vagaries of the commodity
marketplace.” Additionally, this
classification serves a legitimate state interest by giving a partial exemption
to a valuable part of Wisconsin's economy which has seen a decrease in
numbers. See Wis. Legislative Reference Bureau, 1981-1982 Blue Book 615
and Wis. Legislative Reference Bureau,
1991-1992 Blue Book 567 (showing a decline in the number of Wisconsin
farms).
The
partnership also argues that the disparate treatment of noncorporate farmers
under the “recycling income tax surcharge” is not a reasonable exemption under
§ 1 of Article VIII of the Wisconsin Constitution. Article VIII provides in relevant part:
Taxes may also be imposed on incomes, privileges and
occupations, which taxes may be graduated and progressive, and reasonable
exemptions may be provided.
Because Wisconsin farmers serve a vital function in this
state as well as throughout the country, because they cannot necessarily recoup
the tax through raising the prices on their products and because farm numbers
have decreased, we conclude that the partial exemption of farmers from the
recycling surcharge tax is reasonable.
By the
Court.—Order affirmed.
[1] Section 77.94, Stats., 1991, provides:
77.94
(title) Surcharge determination. (1) Except as provided in sub. (2), for
taxable years ending after April 1, 1991, and ending before April 1, 1992, the
surcharge imposed under s. 77.93 is calculated as follows:
(a) On a
corporation under s. 77.93(1) and (4), an amount equal to the amount calculated
by multiplying gross tax liability for the taxable year of the corporation by
5.5%, or in the case of a tax-option corporation an amount equal to the amount
calculated by multiplying net income under s. 71.34 ¼ by 0.4345%, up to a maximum of $9,800, or $25, whichever
is greater.
(b) On an entity
under s. 77.93(2) or (3), except an entity that has less than $1,000 of gross
receipts, an amount equal to the amount calculated by multiplying net business
income as allocated or apportioned to this state by means of the methods under
s. 71.04, for the taxable year of the entity by 0.4345%, up to a maximum of
$9,800, or $25, whichever is greater.
(c) On an entity
under s. 77.93(5), except an entity that has a net farm profit of less than
$1,000, a surcharge of $25, regardless of whether the entity is subject to a
surcharge determined under par. (b).
1991 Wis. Act 39 § 2089m. Section 77.97, Stats.,
provides for the use of the revenue as follows: “The department of revenue shall deposit the surcharge, interest
and penalties collected under this subchapter in the recycling fund under s.
25.49.”
[2] In Szarzynski
v. YMCA, Camp Minikani, 184 Wis.2d 875, 886, 517 N.W.2d 135, 139
(1994), the supreme court stated:
“Unless the challenged statute affects a ‘fundamental right’ or creates
a classification based on a ‘suspect class,’ the standard this court uses in
reviewing the constitutionality of the statutory classification is the
‘rational basis’ test. ¼ [I]n order to withstand an equal protection challenge,
the statutory classification must be rationally related to a legitimate
government purpose.” (Quoted source
omitted.)