250 A.D. 149 | N.Y. App. Div. | 1937
Petitioner, a Delaware corporation, brings up for review its franchise tax assessments for four years. The taxes for 1929 and 1932 were computed under the option designated (2) of subdivision 10 of section 214 of the Tax Law, and were based on the value of its entire capital stock. For 1930 and 1931 the taxes were measured by petitioner’s entire net income under sections 209, 214 and 215. The taxes were paid under protest, the petitioner has obtained an order of certiorari to review the assessments, and asks for a refund. The Commission seeks to sustain the legality of the taxes computed under option (2) of section 214 upon the entire capital stock, and the taxes measured by the entire net income under section 209 upon the ground that petitioner transacted all its business and employed its entire capital in New York.
Petitioner submits the argument (1) that it neither did business nor employed capital within the State of New York or elsewhere, but was engaged in the conservation and investment of accumulations, which is not classified as engaging in business under franchise taxing laws; (2) that should it be determined that its activities amount to doing business, instead of conserving and investing accumulations, it argues, concerning the taxes of 1930 and 1931 measured by its entire net income, that a part of the business was transacted outside the State of New York, and that the only statutory warrant for measuring the tax by the entire net income rather than by the fraction thereof attributable to
“ Real property and tangible personal property shall be taken at its actual value where located. The value of share stock of another corporation owned by a corporation liable hereunder shall for purposes of allocation of assets be apportioned in and out of the State in accordance with the value of the physical property in and out of the State representing such share stock.” It is argued that this subdivision, while not in express terms permitting a tax to be measured by capital located outside the State, prescribes an arbitrary rule as to the taxable situs of intangibles, for shareholders do not own the corporate property of a corporation issuing stock, but are entitled only to participate in profits and upon liquidation to share in the distribution of assets after the payment of debts, and, therefore, that in fixing the taxable situs of the property of a shareholder, the location of the tangible property lof the corporation issuing the share may not be considered. (Rhode Island Hospital Trust Co. v. Doughton, 270 U. S. 69, and similar authorities.) This argument as to subdivision 9 is somewhat collateral, as that section was not applied by the Commission, the tax being computed on the entire capital, that subdivision applying only to a tax computed on the part of the capital stock
Petitioner was incorporated under the laws of Delaware in January, 1929, and during that year purchased in New York about $2,500,000 of the stock of corporations engaged in the tobacco and allied trades, and thereafter during the years involved bought at least thirty-one other issues and sold at least twenty-nine. This “ trading ” or “ reinvestment ” resulted in profits of about $225,000 during two of the years and a loss of $450,000 during the remainder of the period. It continuously loaned money on call in varying amounts up to $300,000.. No similar activities occurred at any place outside the State. At all times it had money on deposit in varying amounts up to $78,000 and no bank deposit outside the State. It did not rent an office, but owned office furniture located in the offices occupied by its president and vice-president in New York city, and there had part time office employees drawing varying aggregate annual salaries up to $6,500. Meetings of the directors were held at this office. It had no other office except the statutory office in Delaware. It incurred expenses in New York for legal services, printing, stationery, postage, rental of safe deposit vault and for stock registry and stamps. In reports to the State Tax Department it stated its business to be trading and dealing in securities, but an official who was a witness before the Commission, in describing its activities, distinguished between “ trading ” and “ investing,” saying that the latter was the occupation of petitioner, and that its officers and employees investigated, studied and did research work outside New York in connection with the tobacco trade; and that the loaning of money in New York did not amount to the doing of business as it was but a temporary use of surplus funds for which it received meager compensation.
“ The word ‘ business ’ embraces everything about which a person can be employed; and a sum is ‘ invested ’ whenever its amount is represented by anything but money.” (Parker Mills v. Commissioners of Taxes, 23 N. Y. 242, 243, 244.) “ It remains to consider whether these corporations are engaged in business.
‘ Business ’ is a very comprehensive term and embraces everything about which a person can be employed.” (Flint v. Stone Tracy Co., 220 U. S. 107, 171.) Business is defined as “ That which occupies the time, attention and labor of men for the purpose of livelihood or profit.” (Bouvier’s Law Dict. [Rawle’s 3d Rev.] p. 406; Flint v. Stone Tracy Co., supra, p. 171.) “ The doing of a single act pertaining to a particular business will not be considered engaging in or carrying on the business, yet a series of such acts would be so considered.” (Bouvier’s Law Dict. [Rawle’s 3d Rev.] p. 406.) In
The assertion that petitioner’s capital was all outside the State of New York rests upon the ancient maxim (mobilia sequuntur personam) that movables follow the person of the owner and that as petitioner secured its franchise to be a corporation in Delaware, the juristic concept follows that its person, and, therefore, its intangible property, was there. Latterly intangibles have been determined to have a taxable situs of their own which may be away from the domicile of the owner if they have become integral parts of some local business. (Farmers Loan & Trust Co. v. Minnesota, 280 U. S. 204, 213.) The certificates of stock kept in New York to be traded in there, had acquired a “ business situs ” and a “ commercial domicile ” there at the place where “ the mafiagement functioned.” (Wheeling Steel Corp. v. Fox, 298 U. S. 193.)
Thus having arrived at a conclusion that petitioner transacted all of its business in New York and that all of its capital was employed there, the constitutionality of subdivision 9 and the last paragraph of subdivision 10 (now subdivision 11) of section 214 is not involved, as the determination of the State Tax Commission may be sustained under unquestioned provisions of the statute. Assuming without granting that the questioned provisions are unconstitutional, petitioner has not suffered and, therefore, may not raise the question.
The determination should be confirmed, with fifty dollars costs and disbursements.
Rhodes, McNamee, Bliss and Heffebnan, JJ., concur.
Determination confirmed, with fifty dollars costs and disbursements.