Alpha Portland Cement Co. v. Commonwealth

• Decision Date: 16 April 1923
• Citation: 244 Mass. 530
• Parties: ALPHA PORTLAND CEMENT COMPANY v. COMMONWEALTH.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

244 Mass. 530

ALPHA PORTLAND CEMENT COMPANY v. COMMONWEALTH.

Supreme Judicial Court of Massachusetts, Suffolk.

April 16, 1923

November 22, 1922.

Present: RUGG, C.

J., DE COURCY CROSBY, & CARROLL, JJ.

Tax, Excise on foreign corporation. Interstate Commerce. Corporation Taxation. Constitutional Law, Taxation.

The legislation set forth in G.L.c. 63, Sections 30-43, 52, constitutes an effort on the part of the General Court on the one hand to avoid a basis for taxation of for eign corporations offensive to limitations imposed upon the power of the State by the Constitution of the United States, and on the other hand to minimize the preferences in favor of foreign corporations revealed by the practical operation of corporation tax laws theretofore in force. Per RUGG, C.J.

The tax law embodied in G.L.c. 63, Sections 30-43, 52, placing as it does both domestic and foreign corporations on common ground as to taxation except so far as essential differences require different treatment in details, follows the policy established in this Commonwealth for many years of levying an excise instead of a property tax on corporate franchises and corporate transaction of business. Per RUGG, C.J.

The excise imposed by G.L.c. 63, Sections 39-43, upon foreign corporations doing business in this Commonwealth is intended to be measured solely by the property and net income fairly attributable to the business done by them within this Commonwealth and 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 are expressly exempted by G.L.c. 59, Section 5 cl.

16.

The excise upon a foreign corporation having a usual place of business in this Commonwealth used by it solely for interstate commerce, which is plainly provided for by the language of G.L.c. 63 Sections 39-43, rightly may be levied, it not being repugnant to provisions of the

Federal Constitution either by reason of the method of measuring the valuation of the "corporate excess employed within the Commonwealth," as defined by Section 30, cl. 4, of the statute, which is one factor forming the basis for the computation of the tax, or by reason of the use, as a second factor in such computation, of the amount of the net income of the corporation from business transacted in this Commonwealth.

The tax above described considered as a whole with both its main factors is general in nature and reasonable in amount and violates no guaranty established by the Constitution of the United States.

A tax, levied under the statute above described upon a foreign corporation with a usual place of business in this Commonwealth which it used solely for the purposes of interstate commerce, was in the amount of $800.45.

The only property of the corporation in the Commonwealth was its office furniture, valued at $573. Its gross receipts were $12,774,825, and its total net income was $1,148.041. Attributable to business in this

Commonwealth were gross receipts of $424,982, and net profits of $15,370. Wages paid to employees in the Commonwealth were considered and included in them were wages paid for services rendered by salesmen going also to other States. The validity of the computation being raised by a petition under G.L.c. 63, Section 77, it was held, that

(1) A contention of the petitioner that its property outside the Commonwealth had been included in the tax and hence that it had been deprived of its property without due process of law, contrary to the

Fourteenth Amendment of the United States Constitution, was without merit;

(2) The question was not whether a subsidiary percentage standing alone may impinge upon property outside the Commonwealth, but whether the use of all of the percentages makes the final result a tax which violates constitutional guaranties;

(3) Excises may be measured to some extent by property not subject to direct taxation;

(4) It did not appear that the proportion of net income ultimately allocated to this Commonwealth was in excess of a just amount;

(5) The inclusion in the computation of wages paid salesmen who operated in other States was not sufficient alone to make the tax invalid.

PETITION, filed in the Supreme Judicial Court on November 30, 1921, under G.L.c. 63, Section 77, for recovery of a tax of $800.45 alleged to have been assessed to the petitioner, a foreign corporation, under the provisions of G.L.c. 63, and St. 1921, cc. 361, 493, and paid by it under protest.

The case was reserved by Crosby, J., for determination by the full court upon the pleadings and an agreed statement of facts. Material facts are described in the opinion.

Relevant statutory provisions of G.L.c. 63, are as follows: "Section 30. When used in this section and sections thirty-one to fifty-two, inclusive, the following terms shall have the following meanings:

"1. `Domestic business corporation', every corporation organized under or subject to chapter one hundred and fifty-six.

"2. `Foreign corporation', every corporation, association or organization established, organized or chartered under laws other than those of the Commonwealth, for purposes for which domestic corporations may be organized under chapter one hundred and fifty-six, which has a usual place of business in this Commonwealth, or is engaged here, permanently or temporarily, in the construction, erection, alteration or repair of a building, bridge, railroad, railway or structure of any kind.

"3. `Corporate excess', in the case of a domestic business corporation the fair cash value of all the shares constituting the capital stock of a corporation on the first day of April when the return called for by section thirty-five is due, less the value of the following:

"(a) The works, structures, real estate, machinery, poles, underground conduits, wires and pipes 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, the income of which, if any, if received by a natural person resident in this Commonwealth, would not be liable to taxation, except shares in national banks and voluntary associations, trusts and partnerships.

"(c) Its real estate, machinery, merchandise and other tangible property situated in another State or country, except such part thereof as represents the interest of a mortgagee.

"(d) If any portion of its cash and accounts and bills receivable, excluding notes, is attributable to an office outside the Commonwealth, the same proportion of its cash and accounts and bills receivable, excluding notes, which its real estate, machinery and merchandise situated in another State or country bear to its total real estate, machinery and merchandise, to the extent that such proportion fairly represents, in the judgment of the commissioner, the amount which is properly allocable to such other State or country.

"4. `Corporate excess employed within the Commonwealth' by a foreign corporation, such proportion of the fair cash value of all the shares constituting the capital stock on the first day of April when the return called for by section thirty-five is due as the value of the assets, both real and personal, employed in any business within the Commonwealth on that date, bears to the value of the total assets of the corporation on said date, less the value of the following:

"(a) Works, structures, real estate, machinery, poles, underground conduits, wires and pipes 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 held in the Commonwealth, the income of which, if any, if received by a natural person resident therein, would not be liable to taxation, except shares in national banks, voluntary associations, trusts and partnerships. 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.

"5. `Net income', except as otherwise provided in sections thirty-four and thirty-nine, the net income for the taxable year as required to be returned by the corporation to the federal government under the federal revenue act of nineteen hundred and eighteen, and, in the case of a domestic business corporation, such interest and dividends, not so required to be returned as net income, as would be taxable if received by an inhabitant of this Commonwealth; less, both in the case of a domestic business corporation and of a foreign corporation, interest, so required to be returned, which is received upon bonds, notes and certificates of indebtedness of the United States.

"6. `Taxable year', the fiscal or calendar year for which the corporation was required to make its last return to the federal government due prior to April first of the year in which the tax is to be assessed, or, if such return was for a fractional period, a full year, including and ending with such fractional period.

"Section 31. In determining the corporate excess of a domestic business corporation, or the corporate excess employed within the Commonwealth by a foreign corporation, there shall not be deducted the value of shares in national banks and in voluntary associations, trusts and partnerships, nor of other securities the income of which, if owned by a natural person resident in this. Commonwealth, would be liable to taxation nor shall there be deducted the value of any shares of stock of the corporation itself owned directly or indirectly by it or for its benefit; and the commissioner, in determining for the purposes of...