344 Mass. 503 | Mass. | 1962
The appellant (Allied) appealed to the Appellate Tax Board (the board) from the refusal of the State Tax Commission to abate a corporate excise tax assessed against it for the year 1955. The board decided that the refusal to abate was right. Allied’s appeal to this court presents the issue whether error was shown in respect of the action of the Commissioner of Corporations and Taxation in determining for purposes of G. L. c. 63, § 30, cl. 4, and § 39, the amount of a foreign corporation’s intangible
Statutory authority to use such formula for this purpose was given for the first time by St. 1960, c. 548, § 3.
The statutes in 1955 provided as. follows:
(G. L. c. 63, § 39) “Except as otherwise provided herein, every foreign corporation shall pay annually ... an excise equal to the sum of the following . . .: (1) An amount equal to five dollars per thousand upon the value of its corporate excess employed by it within the commonwealth . . . (2) An amount equal to two and one half per cent of its net income determined ... in accordance with the provisions of this chapter”; (Gr. L. c. 63, § 30, Definitions) “When used in this section and sections thirty-one to fifty-two, inclusive, the following terms shall have the following meanings : . . . 4. ‘ Corporate excess employed within the commonwealth,’ by a foreign corporation, except as hereinafter provided, such proportion of the fair value of its capital stock on the last day of the taxable year ... as the value of the assets, both real and personal, employed in any business within the commonwealth on that date, after deducting therefrom the value of (a) and (b) following, bears to the value of the total assets of the corporation on said date: (a) Works, structures, real estate . . . [and other items] owned by it within the commonwealth subject to local taxation, except such part of said real estate as represents the interest of a mortgagee, (b) Securities [with stated exceptions] held in the commonwealth, the income of which, if any, if received by a natural person resident therein, would not be liable to taxation .... In determining the proportion of assets employed within the commonwealth, the commissioner may include such bank deposits in other states as are employed principally in the conduct of the business in the commonwealth . .(emphasis supplied).
Amendments in 1956 and 1958 (St. 1956, c. 550, § 2; St. 1958, c. 679, § 2) did not change the wording italicized
The board found, inter alla, these facts: Allied is a Delaware corporation, with a principal place of business in California. It is authorized to do business in forty-four States and has thirty-six offices in twenty-six States including Massachusetts. Allied’s business is sales financing. It deals wholly with intangibles. It buys and discounts the instalment notes of customers of sellers of lumber, carpets, furniture, and heating and plumbing supplies. The seller submits the buyer’s application for credit to Allied and, if Allied approves, the buyer signs a note to the seller who indorses it without recourse to Allied in exchange for Allied’s check. Allied sets up an account receivable and discounts the note with a Boston bank, but Allied “sees to it that the note is paid. ’ ’ A ledger card reporting each transaction is sent to Allied’s Los Angeles office. The Boston bank sends to that office a check for all the notes sold to it so that Allied’s Boston office “never sees or holds in Massachusetts the proceeds of all the notes it sells to the Boston bank.” The Boston office “services six New England States and upper New York State.”
Allied’s sole witness was the manager of its Boston office since July, 1956, who for fifteen years had worked for Allied in Portland, Oregon, Salt Lake City, Utah, and Boston.
In 1955, the gross income of the Boston branch was $102,600, or about ninety-five per cent of the figure ($107,664.33) which Allied reported in its return for 1955 as its Massachusetts intangibles on December 31, 1955. “On the national level,” by contrast, the corresponding figures were: gross income of $8,102,000, about twenty-five per cent of total intangibles of $31,336,123.85. Allied’s manager, the board found, was unable to explain this great disparity.
Allied’s 1955 return, for computation of that part of the excise tax which is based on the corporate excess employed within the Commonwealth, listed “actual Massachusetts intangibles” as follows :
Cash............................. $ 54,790.04
Accounts receivable............... 52,008.06
Notes receivable .................. 1,014.97
Less:
Unearned Discount............ 121.59
Reserve for losses ............ 27.15
Total .................... $107,664.33
The Commissioner refused to accept this schedule as the only intangibles employed in Massachusetts and used the formula. There is no dispute in respect of the figures used by the Commissioner. The figures needed for the formula were set out in Allied’s return to show that part of the excise tax which was based on its taxable net income.
The board appropriately summarized the formula prescribed by G. L. c. 63, § 38, as follows: “ [T]he value of
1. The use by the Commissioner of a formula not specified by G. L. c. 63, § 30, cl. 4, did not violate the statute. It was necessary that he determine “the value of the assets, both real and personal, employed in any business within the commonwealth.” The statute did not tell bim how to do this. It specified certain property situated within the Commonwealth which must be excluded, and one kind of intangible property situated without the Commonwealth which might be included. It did not in terms restrict the meaning of assets “employed in any business within the commonwealth” to assets physically or legally situated here. In context, we think, with the board, that the permission to include foreign bank deposits locally used is significant as recognition that intangibles situated away could be used locally for purposes of the statute, rather than as an exclusion of all foreign intangibles except those mentioned.
In Atlantic Lumber Co. v. Commissioner of Corps. & Taxn. 292 Mass. 51, 53, affd. 298 U. S. 553, this court said of this tax: “It is measured by property and net income fairly attributable to the business done within the Commonwealth. It is an excise for the commodity or privilege of having a place for the transaction of intrastate business
The findings show that in such a business as Allied’s the out-of-State intangibles may have very important uses within the Commonwealth. We conclude that the General Court did not intend to exclude such important assets from assets “employed . . . within the commonwealth.”
Legal situs of intangibles is, to a degree at least, determinable in the light of the purpose of the determination. National Leather Co. v. Commonwealth, 256 Mass. 419, affd. sub nom. National Leather Co. v. Massachusetts, 277 U. S. 413, 422-423 (capital stock of foreign subsidiaries of a Maine corporation doing business in Massachusetts was assumed to have no situs in Massachusetts for a direct property tax, but the Commonwealth might treat the stock as assets employed by the parent corporation in its business within the State for purposes of the excise tax).
A State, in imposing excises, may look to property beyond its borders to get the true value of things within it. Wallace v. Hines, 253 U. S. 66, 69. Bass, Ratcliff & Gretton, Ltd. v. State Tax Commn. 266 U. S. 271, 282. Underwood Typewriter Co. v. Chamberlain, 254 U. S. 113. Ford Motor Co. v. Beauchamp, 308 U. S. 331, 336-337. International Harvester Co. v. Evatt, 329 U. S. 416, 422-423. State Tax Commn. v. John H. Breck, Inc. 336 Mass. 277.
We construe c. 63, § 30, cl. 4, as drafted in recognition of this principle and as intended to give the Commissioner authority to determine by reasonable and appropriate means the assets of the taxpayer “employed in any business within the commonwealth” whatever their legal situs and even though the use is indirect. See State Tax Commn. v. Sears Roebuck & Co., ante, 471, 474.
2. Allied has not shown that the use of the formula was unreasonable or inappropriate or that it resulted in a wrong determination of the fact. On the contrary, the evidence tended to show that out-of-State intangibles were important in enabling Allied to maintain the Boston office line of credit
The burden is on the taxpayer to show error in the assessment and impropriety in the method used. State Tax Commn. v. John H. Breck, Inc. 336 Mass. 277, 299.
3. Two of Allied’s requests for rulings, which the board denied, stated good law, although one of them was ambiguous. They were:
“1. A foreign corporation is entitled to compute its corporate excess on the basis of the correct amount of assets actually employed in its Massachusetts business.
“2. A foreign corporation is not obliged to compute its corporate excess by the application of the statutory formula to its total intangibles.”
The findings show, however, that the denial of these rulings was in no respect a basis for the decision. In the circumstances there was no prejudicial error.
The ambiguity imported into request 1 by the use of the word “actually” to modify “employed” is a sufficient reason for declining to give it. The board was justified in construing the request as intended to ask a ruling that something more was required than the use of out-of-State intangibles in the way which the board rightly decided brought them within the statutory concept of assets “employed . . . within the commonwealth.”
The board stated in its “Findings of Fact and Report” and “Opinion” as follows: The fact that the Commissioner used the formula gave rise to the only issue in the case, that is, Allied challenged the use of the formula “when the corporation alleges it can and does enumerate the exact intangibles so employed and appearing as such in its books”; in view of the facts found the question came down to whether Allied had sustained its burden of proof that the Commissioner had included in his “measure” property not
The decision had nothing to do with the issue raised by request 2, that is, whether the taxpayer was obliged to use the formula in computing its intangibles. Inferentially, indeed, the decision recognized that the taxpayer may use whatever method it thinks appropriate. The holding, however, was, and rightly, that the Commissioner may recompute the tax, by a fair and appropriate means, and the consequent assessment stands if not shown to be wrong or superseded by the board’s redetermination as in State Tax Commn. v. Sears Roebuck & Co., ante, 471.
Decision affirmed.
