244 Mass. 530 | Mass. | 1923
This is a petition under G. L. c. 63, § 77, by a foreign corporation having a place of business in this Commonwealth for the abatement of taxes which it contends were illegally exacted for the year 1921. The case was submitted on agreed facts and reserved for our determination. The petitioner is a corporation organized under the laws of New Jersey. Its business is the manufacture and sale of cement. Its principal office is at Easton, Pennsylvania. Its mills are located in several other states outside of Massachusetts, from which shipments are made to various parts of the United States and to foreign countries. It main
The tax here in question was assessed under our corporation tax law now embodied in G. L. c. 63, and a slight additional tax under St. 1921, c. 493. The record shows that the amount of the tax was not affected by St. 1921, c. 361.
Domestic and foreign business corporations as distinguished from banking and insurance corporations and from public service corporations are defined and provision made for their taxation in G. L. c. 63, §§ 30-43, those relating particularly to foreign corporations being §§ 39-43. See also § 52. These relevant sections and St. 1921, c. 493, are printed above.
It is manifest from an examination of these sections (first enacted in St. 1919, c. 355) that the Legislature, departing from earlier corporation tax laws, has attempted to adopt a general principle whereby domestic and foreign corporations shall be treated with fairness on the same footing as to taxation. These
The general scheme of this tax law is that an excise is levied on both domestic and foreign business corporations doing business in this Commonwealth. Real estate and machinery used in manufacture by such corporations alone are subject to a local property tax in the city or town where situated. All other personal property, whether tangible or intangible, is exempt from direct or local taxation. The amount of the excise tax is measured as to a foreign corporation, § 39, by the sum of “An amount equal to five dollars per thousand upon the value of the corporate excess employed by it within the Commonwealth,” and “An amount equal to two and one half per cent of that part of its net income, as defined in section thirty and in this section, which is derived from business carried on within this Commonwealth,” with a further provision that a minimum tax of not less than one twentieth of one per cent of such proportion of the fair cash value of its shares of capital stock as its assets employed in business in this Commonwealth bear to its total assets employed in business. "Corporate excess employed within the Commonwealth” by a foreign corporation is defined by § 30, cl. 4, to be such proportion of the fair cash value of all its shares of capital stock as the value of its real and personal assets employed in business within the Commonwealth bears to the value of its total assets on a specified
The statute is an attempt to measure the excise on foreign corporations solely by the property and net income fairly attributable to the business done within this Commonwealth. This excise tax is in place of any other tax on personal property within the Commonwealth from which, except as to machinery used in manufacture or in supplying and distributing water, foreign corporations (and also domestic corporations) are expressly exempted by G. L. c. 59, § 5, cl. 16. Comparison of the sections of the tax act relating to the taxation of domestic corporations with those relating to foreign corporations shows that the same general definitions, exemptions and principles are followed as to both, except as the inherent differences as to domicil and as to allocation of residue of net income and of corporate excess require dissimilar provisions.
It is rightly conceded by the Attorney General that the petitioner was engaged in this Commonwealth exclusively in interstate commerce. Marconi Wireless Telegraph Co. of America v. Commonwealth, 218 Mass. 558, 567 to 569. Cheney Brothers Co. v. Massachusetts, 246 U. S. 147, 153.
The question to be decided is whether a foreign corporation having a usual place of business in this Commonwealth used for interstate commerce alone is subject to taxation under the tax law. The precise point now presented for decision was left open in Judson Freight Forwarding Co. v. Commonwealth, 242 Mass. 47, although the act in general was there held to be constitutional.
As matter of verbal construction it is plain that the tax law includes a foreign corporation such as the petitioner. Confessedly the petitioner “has a usual place of business in this Commonwealth” and is actually carrying on business here. The petitioner
The present tax act differs in its essential characteristics from those hitherto enacted respecting foreign corporations. The ■effect of St. 1903, c. 437, § 75, and St. 1909, c. 490, Part III, § 56, was to impose excises which prescribed the terms and conditions on which foreign corporations could do business within the Commonwealth, and which were in the nature of license fees as conditions precedent to the doing of such business. They were taxes upon the privilege of having an establishment for business in Massachusetts. They were not property taxes. The right to do business depended upon the payment of the tax, and prohibitive penalties followed failure to comply with the statutes and to make the specified payments. Baltic Mining Co. v. Commonwealth, 207 Mass. at page 388. Since the several States under the Constitution of the United States have no right to impose restrictions or regulations upon interstate commerce, it was held that these tax statutes did not apply to corporations engaged solely in interstate commerce at a place of business within the Commonwealth. Marconi Wireless Telegraph Co. of America v. Commonwealth, 218 Mass. 558, 561, 563-565, 567-569, and cases there collected. Old Dominion Co. v. Commonwealth, 237 Mass. 269.
The present tax act imposes the excise with respect to the carrying on of business by foreign corporations within the Commonwealth. It is an excise for the privilege of having a place of
1. The value of the corporate excess employed in the Commonwealth as a factor of the tax is not measured by the capital stock of the corporation. If it were, it would be invalid. International Paper Co. v. Massachusetts, 246 U. S. 135. It is measured by the value of the property of the foreign corporation, including its franchise, employed in the Commonwealth, after certain deductions are made. It seems to us that this factor of the tax stands under the protection of several decisions of the Supreme Court of the United States.
The right of a State to tax tangible property of a foreign corporation, not in transit but located within its borders, no matter what may be its use, is well settled. The petitioner has a small amount of tangible personal property permanently within the Commonwealth, upon which it pays no tax except by way of this factor of the excise.
The petitioner exercises within the Commonwealth its franchise to do business as a corporation. It did whatever was necessary to conduct a business yielding according to its return annual gross receipts assignable to Massachusetts of $424,982.70. The facts in Western Union Telegraph Co. v. Massachusetts, 125 U. S. 530, were that an excise was levied upon a telegraph company exercising a franchise in many States by virtue of laws of the United States and having poles and wires in this Commonwealth. It there was said that the State law attempted “to ascertain the just amount which any corporation engaged in business within its limits shall pay as a contribution to the support of its government upon the amount and value of the capital so employed by it therein. . . . The tax ... is in effect a tax . . . on account of property owned and used ... in the State of Massachusetts.” It was said in Pullman’s Palace Car Co. v. Pennsylvania, 141 U. S. 18, a case involving the taxation of cars used in interstate commerce, at page 25, “The tax now in question is
It is manifest as matter of common business knowledge that commerce within this Commonwealth yielding to the petitioner annual gross receipts of $424,982.70 must have involved credits, bills receivable and obligations to it of considerable amounts. No contention to the contrary has been urged by the petitioner. Such credits, bills receivable and obligations might be made subject to direct taxation within the Commonwealth by appropriate legislation under numerous decisions of the United States Supreme Court. Such credits, bills receivable and obligations constitute a part of “the value of the assets” of the petitioner “employed in . . . [Its] business within the Commonwealth” used as the basis of ascertaining “the corporate excess” of the petitioner “employed within the Commonwealth” upon which this factor of the excise is calculated.
This branch of the case seems to us to come within the scope of these words in Shaffer v. Carter, 252 U. S. 37, at page 52: “This is consonant with numerous decisions of this court sustaining State taxation of credits due to non-residents, New Orleans v. Stempel, 175 U. S. 309, 320, et seq.; Bristol v. Washington County,
It appears to us that under the principle deducible from all these decisions the tax, so far as it relates to the value of corporate excess of the petitioner, rightly may be levied.
2. The tax, as measured by the net income from business transacted in Massachusetts as a factor, is dependent upon net profits derived solely from interstate commerce. But there is no discrimination in the statute against interstate commerce. This net income is used as a measure applicable to all corporations alike. While not an income tax according to strict definition, in substance it affects net income alone, is measured by net income alone, is reasonable in amount and incidence, and is payable out of net income.
It was settled by Travis v. Yale & Towne Manuf. Co. 252 U. S. 60, that the income of non-residents was subject to taxation within the State where earned or accruing. That result was reached on the ground that, except in the particular restrictions imposed by the Federal Constitution, the States have complete dominion over persons, business and property within their borders, are charged with the duty of maintaining order and establishing security for such persons, business and property, and consequently may resort to any proper form of taxation of those derivingbenefits from their protection in order to defray expenses of government. In Peck & Co. v. Lowe, 247 U. S. 165, question arose as to the right of Congress, in view of the constitutional prohibition against laying a “tax or duty ... on articles exported from any State,” to tax net income derived by a domestic corporation chiefly from shipping goods to foreign countries and there selling them. It was said, page 174, “The tax in question is unlike any of those heretofore condemned. It is not laid on articles in course of exportation or on anything which inherently or by the usages of commerce is embraced in exportation or any of its processes. On the contrary, it is an income tax laid generally on net incomes. And while it cannot be applied to any income which Congress has no power to tax . . . , it is both nominally and actually a general
It seems to us that the constitutionality of the statute in the particulars here assailed is sustained by the decisions of the United States Supreme Court already cited and from some of which quotations have been made. The principles there declared, as we understand them, support the validity of the tax act here involved. In reaching that conclusion we are not unmindful of all that has been said and decided in Western Union Telegraph Co. v. Kansas, 216 U. S. 1, Looney v. Crane Co. 245 U. S. 178, Meyer v. Wells Fargo & Co. 223 U. S. 298, International Paper Co. v. Massachusetts, 246 U. S. 135, Wallace v. Director General of Railroads, 253 U. S. 66, Gillespie v. Oklahoma, 257 U. S. 501. The case at bar appears to us to be governed by the other line of decisions. See 32 Harvard Law Rev. 634-640, 646-649, and cases, there collected and reviewed. Superior v. Allouez Bay Dock Co. 166 Wis. 76, 80. The principle that the States can impose no direct burden upon interstate commerce, illustrated by cases like McCall v. California, 136 U. S. 104, Norfolk & Western Railroad v. Pennsylvania, 136 U. S. 114, International Text Book Co. v. Pigg, 217 U. S. 91, Crenshaw v. Arkansas, 227 U. S. 389, and Rogers v. Arkansas, 227 U. S. 401, appear to us to be inapplicable to the case at bar in that they related to statutes which imposed, that which in essence was a license fee as a condition prerequisite to doing interstate commerce.
The tax considered as a whole with both its main factors is general in nature and reasonable in amount. The tax upon the-petitioner in substance and effect, so far as concerns the factor off its corporate excess employed within the Commonwealth, is levied, upon its tangible personal property within the Commonwealth,
It is doubtful whether the remaining point argued by the petitioner is open under the last paragraph of the agreed facts, viz., “The amount of the tax assessed is not questioned, but may be referred to as bearing on the questions of law presented. No question of valuation is involved.” This appears to preclude inquiry now into the details of the computation or the methods of calculation, and to leave open only questions whether the statute on its face, according to its correct interpretation, is unconstitutional in its application to the facts under which the petitioner does business.
But if the matter be treated on its merits, the contention of the petitioner that its property outside the Commonwealth has been included in the tax and hence that it has been deprived of its property without due process of law, contrary to the Fourteenth Amendment to the United States Constitution, seems to us without substantial merit. This contention is founded on the method of allocation adopted by the commissioner. In the case of a foreign corporation not transacting its entire business within the Commonwealth, the tax is based, so far as concerns the proportion of net income allocated to this Commonwealth on (1) percentage of tangible assets in Massachusetts to all tangible assets, (2) per
The same reasoning applies to the suggestion that the tax is invalid because wages paid in connection with the Massachusetts office included in part services rendered by travelling salesmen, going to other States as well as Massachusetts.
Petition dismissed with costs.