85-736 WHITE - CITY CLERK
PINK - FINANCE G I TY O F SA I NT PA U L Council //-
� CANARV - DEPARTMENT File NO• ��' " �`
OLUE - MAVOR
�
. Co cil Resolution
Presented By
Referred To Committee: Date
Out of Committee By Date
WHEREAS, according to a Minnesota Department of Revenue
i nterpretat i on of M i nnesota Statutes 297A.0 1 subd. 3 (f) ,
Northern States Power Company charges sales tax on the City of
Sa i nt Pau 1 franch i se fee requ i red of NSP for the use of streets
and public property in providing gas and electric service within
the City; and
WHEREAS, this interpretation cost City ratepayers at
least $960,000 in 1984; and
WHEREAS, this interpretation results in imposition of a
"tax on a tax" and should be discontinued; now therefore be it
RESOLVED, that the City Council goes on record in
opposition to charging sales tax on franchise fees; and be it
FURTHER RESOLVED, that the City will lobby the state
Legislature to end this "tax on a tax" .
Yeas C�SonnenME Na s Requested by Department of:
1F�Q1�ll7C y
Drew � [n Favor
Masanz '�
Nicosia
Scheibel �� __ Against BY
Tedesco
Wilson
MAY 3 01985 Form Approved by City Attorney
Adopted by Council: Date
Certified Y• -- d b ouncil et BY
By,
Appr by iNavor: Date
` MAY 3 + 1985 Approved by Mayoc for Submission to Council
BY BY
�st►sr��+� ����� 81985
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SaLES T?�YES GENERAL SALES TAX _ � § 29%A.O1 :
. ,
l also provided for the man- (a) Any transfer of title or possession, or both, of tangible personal property, whether 'a
Court of Appeals judges. absolutely or conditionally, and the leasing of or the granting of a license to use or �
i by the addition of"to the consume tangible personal property other than manufactured homes used for residential �
the end thereof. purposes for a continuous period of 30 days or more, for a consideration in money or by �
exchange or barter. "Sales" also include the transfer of computer software, meaning '
information and directions which dictate the function to be perfurmed by data processing
equipment and which are sold without adaptation to the specific requirements of the
provided in this chapter, purchaser_ This type of computer software, whether contained on tape, discs, cards, or
fter a return is filed.The other devices, shall be considered tangible personal property; '
his section whenever the �
�nd recorded the amount . (b)The production, fabrication, printing or processing of tangible personal property for
excess of that originally a eonsideration for consumers who furnish either directly or indirectly the materials used
d a notice of tax assess- in the production, fabrication, printing or processing;
t shall be sent by mail to (c)The furnishing,preparing or serving for a consideration of food, meals or drinks, not
�f the mailing shall be including hospitals, sanatoriums, nursing homes or senior citizens homes, meats or drinks ;
•ds shall be preserved by purchased for and served exclusively to individuals who are 60 years of age or over and `
- their spouses or to the handicapped and their spouses by governmental agencies,
ion, a return filed before nonprofit organizations, agencies, or churches or pursuant to any program funded in
dered as filed on the last whole or part through�2 USCA sect:ons 3001 through 3045, wherever delivered,prepared
or served, meals and lunches served at public and private schools, universities or colleges,
i a company, joint stock or the occasional meal thereof by a charitable or church.organiaation. Notwithstanding
file a return under this section 297A.25, subdivision 1, clause (a), taYable food or meals include, but are not
the tax may be assessed, limited to, the following:
(i) heated food or drinks; , '
�n of the time prescribed (u) sandwiches prepared by the retailer;
ner of re��enue and the
di��idual filing the return (iii) single sales of prepackaged ice cream or ice milk novelties prepared by the retailer;
the tax, the tax may be (iv)hand-prepared or dispensed ice cream or ice milk products including cones, sundaes, �
ed upvn. The period so and snow cones; �
✓riting made before the ' �
(v) soft drinks and other beverages prepared or served by the retailer;
�
�ayer omits a❑ amount (vi) gum;
� amount of taK stated in (�i) ice; � �
�r the collection of such
� was filed. (viii) all food sold in vending machines; "•
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(ix) party�trays prepared by the retailers; and �
(x) all meals and single servings of packaged snack food, single cans or bottles of pop, �
sold in restaurants and bars; . - +
3TRIBUTION (d)The granting of the privi7ege of admission to places of amusement or athletic events
and the privilege of use of amusemerit devices or athletic facilities;
(e) The furnishing for a consideration of lodging and related services by a hotel, �
materials; exemption. rooming house, tourist court, motel or trailer camp and of the granting of any similar ;
payment of taxes prior to .license to use real property other than_the renting or leasing thereof for a continuous �
�tion and licensing. period of 30 da„s or more; - -
ed payment of June liabili- � �
� (fl The furnishing for a consideration of electricity, gas, water, or steam for use or
of tax pending appeal. consumption within this sta.te, or local exchange telephone service and intrastate toll +
related to applications for service; the tax imposed on amounts paid for telephone services is the liability of and �
icenses. shali be paid by the p�son paying for the services. Sales by municipal corporations in a �
�proprietary capacity are included in the provisions of this clause. The furnishing of water
and sewer services for residential use shall not be considered a sale; �
'2J (g)The furnishing for a consideration of cable television services, including charges for �
limited to, each of the basic monthly service, charges for monthly premium service, and charges for any other
similar television services; ; . . ti
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' `AUGUST-SEPTEMBER 1974 35
FRA?�CIiISE FEES: DEFINITION OF "TAX." "iinn St1t. of the icrm "tax" as used in l�iinn. St.at. g 477A.01 subd. 18,
�477A.01 svbd. 18 (1971) prohibits taking disGricts [rom in- and that its imposition for the balance of 1974 and ensuing
('°'"1; cmasing a present tax or imposing a ne«� tax on sales or ��ears �eould not be violative of that statute.
� _�, income. Franchise Fees from [ranchisee in question are Since the �•ord "tax" is not� defined in D'Iinn. Stat, ch.
not "taxes" and colleclion of a yearly franchise fee a•hich 477A, it must be presumed to have been used in accordance
a•as not coliected iu prior years is not prohibited by the with its common meaning or, if it has been judicially con-
statute. strued, in accordance with such construction. Ingebritsou
Arthur C. Roemer Se�:�ember 18 1974 v.Tjernlund Dianufacturing Co., 289 Minn. 232, 183 N.W. 2d
Commissioner of Revenue 204-a-4 552 (1971). In the case of Bemis Bros. Bag C�. v. ��'allace,
Centennial Office Building 197 N1inn. 216, 221, 266 N.W. 690, 693 (1936), the Minncsota
St. Paul, Minnesota 55145 Supreme Court described a "tax" as follows:
It is a burden or charge imposed by legislative power
In your letter to Attorney General Warren Spannaus upon persons or property to raise money for public pur-
you state substantially the following poses. [Citation omitted.] The essential characteristics
FACT8 of a tax are that it is not a voluntary payment. or dona-
The City Council of the City of Brainerd, pursuant tion, but an enforced contribution, exacted pursuant to
to its regulatory power under City Charter Section 39, legislative authority, in the exercise of t•he taxing power.
S 44 and 14iinn. Stat. �� 222.37, 300.03, 300.04 and 410.09, en- A'Iore recently, in State v. Bies, 258 Minn. 139, 150, 103
acted Ordinance No. 491 on September 5, 1956. Said ordin- N.W.2d 228, 237 (1960), the court said that:
ance grants "to the biinnesota Valley Natura] Gas Com- , . . A tax law is therefore a legislative enactment
pany, a Minncsata corporation, its lessees, successors, and which defines the measure of every man's dut�y in sup-
assigns, a non-exclusive franchise to operate a gas system port of the public burdens, and a tax thus imposed is not
within t•he City of Brainerd and to supply gas to the in- faunded on contract and does not establish the relation
habitants thereof; and to regulate such business opera- of debtor and creditor between the taxpayer and t6e
tions." Section 8 of said ordinance provides: state.
"There is hereby expressly reser��ed to the City Coun- „ .
Thus, a "tax �s a burden imposed and enforced by the
cil of the City of Brainerd throughout the term hereof, taxing body in the exercise of its taxing power; it does not
t•he right by Resolution to provide for the payment to have the element of volunt•ariness, and it is not founded on
the City by the Grantee of compensation for the fran- contract.
chise hereby granted in an amount not to eaceed five
per cent (5°,�0) of the Grantee's gross earnings, as here- On the other hand, a franchise is in the nature of a
contract. In Cit of South St. Paul v. Northern States
inafter defined, during any period ccmmencing not less y
(�'' than sixty (60) days aft�er written notice to the Grantee Po�;�er Co., 189 Mirrn. 26, 248 N.W. 288 (1933), the court•was
� � of such council action. Such payment shall be made called upon to construe a gas franchi�e similar to the one
annually to the Treasurer of the City of Brainerd on or now under consideration, under the terms of which South
before the first day of February for the preceding calen- St. Paul was claiming a license fee from Northern States
dar year or part thereof. Whenever such payment shall Power Co. The court held in 189 Minn. at 29, 248 N.W. at
be required from the Grantee by the Cit.y, the Grantee 290 that•:
shall be entitled to add to the rates charged by it for . • . The ordinance granting the franchise which defen-
gas sold for distribution and use within the municipal dant now holds is a contract, and the license fee claim�d
limits of the City of an amount equal to the percentage by the city mus�. be claimed under the terms of that con-
of gross earnings which the Grantee is required to pay tract. City of St. Cloud v. Water L. & P. Co., 88 Minn.
to the City. 'Gross earnings' shall be held to mean all 329, 92 N.W. 1112. The rights of the parties under a con-
sums received by the Grantee from the sale of natural tract may be more readily affected by the interpretation
gas distributed and used within t•he City limits of the they place thereon in its performance than the rights of
City oE Brainerd, except such sums as may be received a taxpayer may be by the conduct of the authorities
by the Grantee frcro such sale pursuant to an increase in charged with t•he enforcement of taxation statutes.
rate made by the Grantee as in ihis section pro��ided." This principle was upheld more recently in Singea•ald
Since the enactment of Ordinance No. 991 t•he Brainerd v. ltiinneapolis Gas Co., 274 Minn. 556, 142 N.W.2d 739
City Council has not exerted its right as stated in section (�9G6), where the court treated a Burnsville village ordin-
8 of said ordinance. ance granting a gas franchise as a contract.
You then ask substantially the follo�ving The franchise granted by Ordinance No. 491 is there-
fore essentially a contract and the fee imposed by section
QuESTION R is not an "enforced cont•ribution" from the franchisee
May ihe City Council of the City of Erainerd require but is part of the consideration which it voluntarily agreed
a franchise fee pursuant to Ordinance No. 491, section 8 to pay in return for the grant of the franchise. We note that
for the balance of 1974 and ensuing years without violating under section 13 of the ordinance t•he franchise was not
the provisions of Minn. Stat. g 477A.01 subd. 18 (1971)? effecti�•e until the company had voluntarily accepted it in
OPINIOfV w•riting and under section 8 the City of Brainerd has the
Aiinn. Stat. �477A.01 subd. 18 (1971) states: right to exact "compensation for t•he franchise" at a cer-
No county, cit•y, village, borough, town or other taxing tain rate. In addition, the term "tax" is not used anywhere
authority shall increase a present tax or impose a new in the ordinance. Finaliy, as stated in the Facts, the fee
�� tax on sales or income. was not• established pursuant to any taxing authority of
\Ve are of the upinion that the franchise fee described the city. See generally Op. Atty. Gen. 519-c, Nov. 23, 1965
in Ordinance No. 491, section 8 is not within ihe meaning (public utility franchise fee may be based on franchisee's
. � y�-- y3�
� 36 � � AUGUST-SEPTE114BER 1974
local gross earnings and may be established pursuant to 3'r5A.01, onI3• one such plan ma�- be suhmittcd at anc one
the municipal police power). election.
Based upon the foregoing, it is our opinion that the (Emphasis added.) '`
franchise fee in question is not a "t•ax" within the meaning It is our opinion that the word "plan," as used in the �'y
of Minn. Stat. �477A.01 subd. 18, and thus its collection is last sentence of this subdivision, refers only to the five
not violative of that statute. We therefore answer your forms of government listed in section 375A.01, • and that
question in the affirmative. the voters of a county may vote on the adoption of one of
WAftREN SPANNAUS, Attorney General these p]ans and also on changing the number of county
Arthur J. Glassman, Spec. Assist. Atty. Gen. commissioners at the same election.
Section 375A.12, subd. 2 itself uses both the word "op-
tion" and the word "plan." That provision indicates that
the "options" are found in sections 375A.01 t�o 375A.10, and
the phrase "one such plan" is used in the �same sentence
which refers specifically to section 375A.01. In addition,
section 375A.12, subd. 3 establishes the methods to initiate
a referendum, and provides that if a vote is initiated
COUNTY• FORM OF GOVERNMENT• REFERENDA: In by petit•ion that document must request that s vote be
referendum to consider adopting neaw form of government held "on the adoption of one or more of the options pro-
under fiiinn. Stat. ch. 375A (1973 Supp.), voters may also vided by sections 375A.01 to 375A.10" Moreover, throughout
vote on proposal to change number of county commission- chapter 375A, the word "plan" is used to refer only to one
ers as provided in that chapter. Section 375A.12, subd, 2 of the five optional forms of government's while the word
construed. "opt•ion"is used in reference not only to these five plans of
government, but also to the provision in section 375A.09
Keith M. Brownell, Esq. September 26, 1974 authorizing a change in the number of commissioners and
St. Louis County At•torney 125a-69 the provisions in section-s 375A.10 and 375A.11 authorizing
St. Louis County Court House (Cr. Ref. 125a-14) ehanges in certain county offices. ***
Duluth, Minnesota
In your letter to Attorney General Warren Spannaus •Section 375.01, subd. 2 provides that:
An optional form of county government may include
you present substantially the following any of the following:
FACTS (a) An elected county executive to be known as the
Pursuant to the pro��isions of Mirrn. Stat. � 375A.13 subd. elected executive plan;
1 (1973 Supp.), a district•court judge appointed a number of (b) A county manager, to be known as the county _
manager pian; f y
persons as the members of the St. Louis County Govern- (c) The chairman of the county board elected at large �
ment Study Commission. The Commission decided to re- by all the votere of the county, to be known as the
commend to the county's voters that the form of govern- at-large chairman ptan;
ment of the county be changed to the Elected Executiv�e (d) A county administrator, to be known as the coun2y
Plan, as provided for in section 375A.02. The group also administrator plan;
(e)A county auditor to have the additional powers
wishes to submit to the voters the issue of whether the and duties of county adminis�trator, to be known as the
number of county commissioners should be changed from county auditor-administrator plan.
seven to nine as is authorized by section 375A.09. (Emphasis added.)
You then ask substantially the following ►�For example, see footnote one. In addition, section
QUESTION 375A.02, subd. 1 pro��ides in part that:
May two questions — t•he adoption of a new form of In a county adopting the elected executive pian, the
government and the change in the number of county com- chiei executive officer shall be known as county execu-
missioners — be submitted to the voters at one election tive.
(Emphasis added.)
or may oniy one of these questions be presented at any Section 375A.03, subd. 1 provides in part that:
one eleCt•i0n? In a county adopting the county manager pian, the
OPINION chief executive officer shall be known as the county
manager . . .
Minn. Stat. 3§3i5A.01-375A.13 (1973 Supp.) authorize (Emphasis added.)
counties in Minnesota to adopt new forms of government Section 375A.04, subd. 1 provides in part that:
and to make other changes in the county go��ernment. In any county which has adopted either the elected
SeCtion 375A.01 lists the five plans of county government• executive or county manager plan there shall be no
which may be adopted, and sections 375A.02-375A.08 set board of health, library board, park board . . .
out those lans in detail. Section 375A.09 authorizes chan- �Emphasis added.)
P See also sections 375A.03, subd. 2; 375A.05, subds. 1-3;
ges in the number of county commissioners, and sections 375A.06, subd. 1; and 375A.08, subds. 1-2.
375A.10 and 375A.11 provide for the creation, abandonment.
and modification of certain county offices. s"`For example, section 375A.10, subd. 2 provides in part
The method for adopting the changes referred to in tbat:
In addition to the other options provided by sections
sections 375A.01-375A.10 iS found in seCtion 375A.12. Sub- 375A.01 to 375A.13, any county may institute one or more
division 2 of that section provides: of the following options; except that a c.ounty which has
The options provided in sections 375A.01 to 375A.10 adopted the auditor.administrator plan may not provide
for the appointment oi the auditor or !the consolidation
shall be adopted in any county only after an affirmative of the offices ot auditor and treasurer while the auditor- �
vote of the voters in the county on the question of the administrator plan is in force� � '''
adoption of the option. Except as pro��ided in section (a) Provide for the appointment of one or more of