Queens Run Refractories Co. v. Commonwealth

270 Mass. 19 | Mass. | 1930

Carroll, J.

This is a petition under G. L. c. 63, § 77, to recover an excise tax, assessed under the authority of G. L. c. 63, § 32, which enacts that every domestic corporation shall pay annually “with respect to the carrying on or doing of business by it” an excise as set forth in the statute. A decree was entered denying the petition and the petitioner appealed.

The petitioner was organized under the laws of this Commonwealth on June 23, 1920. Its charter gave it broad powers. After incorporation the petitioner bought in the open market the shares of stock of three Pennsylvania corporations which were carrying on the business of mining, manufacturing and dealing in brick products. The stock was purchased by the petitioner from shareholders of the Pennsylvania corporations partly by exchange of stock of the petitioner for the stock of the Pennsylvania corporations and partly by cash obtained by the sale of the petitioner’s capital stock in the open market. It received dividends on the stock of the Pennsylvania corporations held by it, and paid dividends from the funds thus obtained to its own stockholders. The petitioner made temporary loans to two of the Pennsylvania corporations out of its funds which were at the time of the loans idle. On September 28, 1921, the petitioner, having acquired the entire capital stock of the three Pennsylvania corporations, gave back to these corporations this stock and received in exchange the entire capital assets of the said corporations. The petitioner filed a tax return on April 12, 1921, and an amended return on September 30, 1921. The tax was assessed based on the information in this amended return. There has been a partial abatement of the tax. On August 12, 1922, the petitioner paid to the respondent the amount of the tax as finally determined. It seeks to recover the excise for the year 1920 imposed under the authority of G. L. c. 63 as amended, especially § 32.

The issue raised by the petitioner in this proceeding is this: Did its activities prior to April 1, 1921, constitute “doing of business” so as to render it subject to an excise tax? It contends that no business was carried on by it within the Commonwealth or elsewhere prior to April 1, 1921. The respondent’s contention is that the petitioner was engaged in “doing of business”; that the tax was levied in conformity with the- statute. The respondent admits that the ultimate purpose of the petitioner was to engage in the business of making and selling bricks, but contends that the methods employed and the activities of the petitioner to bring about this ultimate result were a “doing of business ” differing somewhat from the nature of the ultimate business but none the less a “doing of business.”

Considering all of the activities in which the petitioner was engaged during the year in question, it was doing business and it was occupied in the “doing of business” within the meaning of the statute. The corporation ‘‘ was organized for profit and was doing what it principally was organized to do in order to realize profit. The cases must be exceptional, when such activities of such corporations do not amount to doing business in the sense of the statutes.” Edwards v. Chile Copper Co. 270 U. S. 452, 455. In purchasing the stock of the Pennsylvania corporations, collecting dividends and distributing them to the stockholders, and in making temporary loans, the petitioner was doing business, and therefore taxable under the statute. The purchases made in the open market involved negotiations and the making of terms, and this was doing business. This question was fully considered in Copper Range Co. v. Commonwealth, 218 Mass. 558, 576, 577, affirmed in Cheney Brothers Co. v. Massachusetts, 246 U. S. 147, 155. In our opinion the case at bar cannot be distinguished from that case. See Springdale Finishing Co. v. Commonwealth, 242 Mass. 37.

The petitioner was not a mere “naked repository of corporate power, dormant so far as any possibility of profit to itself is concerned.” Attorney General v. Boston & Albany Railroad, 233 Mass. 460, 464. It was an active, living corporation, engaged in a course of business transactions preliminary to its final purpose, transactions which called for business judgment. It was more than the mere possessor of a corporate franchise. It was not similar to a corporation which had leased all its property, it was actively engaged in the pursuit of its business and was therefore taxable. Fore River Shipbuilding Corp. v. Commonwealth, 248 Mass. 137. In the recent case of Boston & Providence Railroad v. Old Colony Railroad, 269 Mass. 190, the meaning of the word “business” is discussed and the cases collected.

Decree affirmed with costs.