251 Mass. 329 | Mass. | 1925
This is a petition under St. 1909, c. 490, Part III, § 70, by a Massachusetts corporation for the abatement of an excise tax assessed upon it for the year 1918. The petitioner was subject to a tax upon its corporate franchise under St. 1909, c. 490, Part III, §§ 39-43. It is provided by said § 41, Third, that there shall be deducted from the value of the corporate franchise, as there defined and ascertained, of a domestic corporation, “the value of its property situated in another State . . . and subject to taxation therein.” The petitioner owned merchandise located in New York on April 1, 1918, the value of which the tax commissioner declined to deduct from the value of its corporate franchise as otherwise determined according to law. The precise question is whether that merchandise was in New York “subject to taxation” within the meaning of those words in said § 41, Third.
Prior to the enactment of St. 1903, c. 437, § 72, no deduc
The words “subject to,” in describing title to property, followed by such words as “mortgage,” “lien” or “other
All these considerations lead to the conclusion that, in order to require the deduction under said § 41, Third, there must be actually levied upon the property situated in another State a tax under its taxation laws.
The further question arises whether this merchandise of the petitioner situated in New York was thus “subject to taxation” in that State. During 1918 there was in force in New York a franchise tax levied upon corporations such as the petitioner for the privilege of “exercising its franchises in this State in a corporate or organized capacity.” Such a corporation was required to file a report stating the amount of its net income for the last preceding fiscal or calendar year. The allocation of net income to New York in the case of corporations doing business both in that State and elsewhere was made in the main upon a basis of the proportion, which certain assets, regarded as having a situs or origin in New York, bore to the corporation’s total like assets where-ever located. Corporations taxable under that law were given complete exemption from taxation, State and local, upon or in respect to their personal property situate in New York, so far as here material. People v. Collins, 178 N. Y. Supp. 65; affirmed, on opinion below, by the Appellate Division in 193 App. Div. (N. Y.) 925, and by the Court of Appeals in 232 N. Y. 502. Though in name and form a franchise tax, the corporation income tax law has been held to be in substance, tendency and practical operation a tax upon the income itself. People v. Knapp, 230 N. Y. 48; motion for reargument denied, 231 N. Y. 516; petition for writ of certiorari denied, State Tax Commissioner v. New York, 256
Upon these facts, the merchandise of the petitioner was not “subject to taxation” in New York. Manifestly it is not taxed directly but is expressly exempted from taxation. The franchise tax upon the income of the corporation bears no direct relation to the value of the merchandise in New York. The value of that merchandise is a factor in calculating the net income, upon which the franchise tax is based. The franchise tax is not upon the income derived from the merchandise located in New York. That income is merely a part of the net income upon which the tax-is assessed. It is quite possible under the law of New York that a franchise tax might be levied on a corporation which may have derived no income from its New York property or business. A tax upon income derived from property is in essence a tax upon the property. Opinion of the Justices, 220 Mass. 613, 624. But that principle has no relevancy to the facts of this record. The franchise tax upon the petitioner in New York for the privilege of there doing business is too remote from the income of its merchandise situated in New York to permit the conclusion that the merchandise is there “subject to taxation,” as those words are used in said § 41, Third.
Petitioner’s exceptions overruled.
Petition dismissed with costs.