268 U.S. 203 (1924), Alpha Portland Cement Co. v. Commonwealth

Citation:268 U.S. 203, 45 S.Ct. 477, 69 L.Ed. 916
Party Name:Alpha Portland Cement Co. v. Commonwealth
Case Date:May 04, 1925
Court:United States Supreme Court
 
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268 U.S. 203 (1924)

45 S.Ct. 477, 69 L.Ed. 916

Alpha Portland Cement Co.

v.

Commonwealth

United States Supreme Court

May 4, 1925

ERROR TO THE SUPREME JUDICIAL COURT

OF THE STATE OF MASSACHUSETTS

Syllabus

1. A state may not impose upon a foreign corporation which transacts only interstate business within her borders an excise tax measured by a combination of the total value of capital shares attributed to transactions therein and the proportion of net income attributed to such transactions. Mass.Gen.Ls. c. 63. P. 216.

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2. Any excise laid on account of interstate commerce is invalid, without regard to measure or amount. P. 217.

3. Under the Commerce Clause and the Fourteenth Amendment, a state may not burden interstate commerce or tax property beyond her borders under the guise of regulating or taxing intrastate business; the amount demanded is unimportant, and payment as a condition precedent to doing business is not a controlling element. Baltic Mining Co. v. Massachusetts, 231 U.S. 68, 87, in part disapproved. P. 218.

248 Mass. 156, 244 id. 530, reversed.

Error to judgments of the Supreme Judicial Court of Massachusetts sustaining excise taxes imposed on the plaintiff in error corporation.

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MCREYNOLDS, J., lead opinion

MR. JUSTICE McREYNOLDS delivered the opinion of the Court.

Plaintiff in error claims that the commonwealth illegally exacted of it $800.45 as an excise tax for the year 1921, and $567.57 plus $22.97 interest for 1922. The court below upheld the tax, and definitely ruled that it was not repugnant to the Fourteenth Amendment or the commerce clause of the federal Constitution. 244 Mass. 530,

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248 Mass. 156. With negligible exceptions, the assessments followed the Corporation Tax Law (Gen.Acts 1919, c. 355), now codified in Gen.Laws, c. 63. Chapters 361 and 493, Gen. Acts 1921, are subsidiary, and demand no particular notice. Record No. 327 discloses how the assessments were calculated, also the essential facts hereinafter stated. The opinion in No. 103 discusses the fundamental questions of law; the later one is supplementary and explanatory.

The statute provides that

every foreign corporation shall pay annually, with respect to the carrying on or doing of business by it within the commonwealth, an excise equal to the sum of . . . five dollars per thousand upon the value of the corporate excess employed by it within the commonwealth

and "two and one-half percent of that part of its net income . . . which is derived from business carried on within the commonwealth," provided that the total tax shall be not less than an amount equal to one-twentieth of one percent of such proportion of the fair cash value of its capital stock as its assets employed within the state shall bear to the total assets. Annual returns, and additional information when demanded, must be filed with the commissioner. He is empowered to determine, under prescribed rules, the net portion of income from business within the state, but, if dissatisfied, any corporation may file

a statement in such detail as the commissioner shall require showing the amount of its annual net income derived from business carried on within the commonwealth.

Section 42. Credit for 5 percent of dividends paid to inhabitants of the state is authorized. Pertinent portions of the general statute are in the margin. *

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[45 S.Ct. 478] We accept the following statements in the opinion below:

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 maintains an office in Boston in charge of a district sales manager, with a clerk, where its correspondence and other natural business activities in connection with the receipt of orders and shipments of goods for the New England states are conducted. The

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office is used as headquarters for traveling salesmen, who solicit orders in Massachusetts and the other New England states. Orders so taken are transmitted at the Boston office by mail to the principal office at Easton, Pennsylvania, where exclusively they are passed upon, and, if accepted, the goods [45 S.Ct. 479] are shipped and invoices sent directly to the customer. Remittances usually are made to the petitioner at Easton, though in exceptional instances prepayments or collections are made by the salesmen and immediately transmitted to Easton. No samples or other merchandise are kept in this commonwealth.

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The only property of the petitioner in Massachusetts is its office furniture, valued at $573. It maintains no bank account here, its salaries and office rent being paid from its principal office. Incidental expenses are paid from an account not exceeding $1,000 kept by the district sales manager in his own name. No corporate books, records, or meetings are in Massachusetts. There is no controversy as to the facts, valuations, or computation of the tax. The issues between the parties relate solely to the correct interpretation of our corporate tax law as to foreign corporations and to the constitutionality of that

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law in its application to the petitioner. . . . It is rightly conceded by the Attorney General that the petitioner was engaged in this commonwealth exclusively in interstate commerce.

Having ascertained the necessary items, the comptroller made the calculations indicated below. The corporation's total net income returned for federal taxation, after allowances, amounted to $707,577.98; $7,602,090.21 (although not quite accurate) was treated as the total value of intangible assets.

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Amount of Tax Measured by Net Income

Average value of tangible property in

Massachusetts, $573. Divide this by

average value all tangible property

$16,992,355.22; multiply resulting

fraction by $235,859.33 (1/3 of

$707,577.98, supra) . . . . . . . . . = $ 8.02

Wages, salaries, etc., assignable to

Massachusetts, $11,493.38. Divide

this by amount of all wages, salaries,

etc., $1,650,614.73: multiply

resulting fraction by $235,859.33

(one-third of $707,577.98, supra) . . = 1,642.29

Gross receipts assignable to

Massachusetts, $343,204.60. Divide

this by gross receipts from all

business, $10,717,546.43; multiply

resulting fraction by $235,859.33

(one-third of $707,577.98, supra) . . = $7,552.22

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Net income . . . . . . . . . . . . . $9,202.53

2 1/2% of $9,202.53. . . . . . . $230.06

Less 5% of dividends paid

Massachusetts inhabitants . . . . 42.15

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Total according to income . . . . . . $ 187.91

Amount of Tax Measured by Corporate Excess

Income assigned to Massachusetts...

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