Alpha Portland Cement Co v. Commonwealth of Massachusetts
| Decision Date | 04 May 1925 |
| Docket Number | 327,Nos. 103,s. 103 |
| Citation | 268 U.S. 203,44 A.L.R. 1219,69 L.Ed. 916,45 S.Ct. 477 |
| Parties | ALPHA PORTLAND CEMENT CO. v. COMMONWEALTH OF MASSACHUSETTS |
| Court | U.S. Supreme Court |
Messrs. Louis H. Porter and F. Carroll Taylor, both of New York City, and John G. Palfrey, of Boston, Mass., for plaintiff in error.
Messrs. Alexander Lincoln and Jay R. Benton, both of Boston, Mass., for the Commonwealth of Massachusetts.
[Argument of Counsel from pages 204-205 intentionally omitted] 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 (article 1, § 8, cl. 3). 244 Mass. 530, 139 N. E. 158 248 Mass. 156, 142 N. E. 762. 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 (G. L. Mass. c. 63, § 39) 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 per cent. 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 1 per cent. 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 per cent. of dividends paid to inhabitants of the state is authorized. Pertinent portions of the general statute (G. L. Mass. c. 63) are in the margin.1
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, Pa. 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 office is used as headquarters for travelling 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, Pa., where exclusively they are passed upon, and if accepted, the goods 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.
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 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.
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 (one-third of
$707,577.98, supra)........................... equals. $ 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)........................................ equals. 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).............. equals. 7,552.22
---------
Net income............................................ $9,202.53
2 1/2 per cent. of $9,202.53. $230.06
Less 5 per cent. of dividends paid
Massachusetts inhabitants................................. 42.15
------
Total according to income............................... $187.91
Amount of Tax Measured by Corporate Excess.
Amount of Tax Measured by Corporate Excess.
Income assigned to Massachusetts, as above shown $9,202.53. Divide this by $707,577.98 (entire apportionable net income); multiply resulting fraction by $7,602,090.21 (used for total intangible assets). This yields $98,827.17, which was taken as the value of intangible assets assignable to Massachusetts. The tangible assets, $573, were added and $99,400 became the total accepted value of assets assignable to the state.
Cash value of the company's capital stock was fixed at $16,352,162; all assets, $21,406,098. Divide $99,400 by $21,406,098; multiply resulting fraction by $16,352,162; the result is $75,932.08—the 'corporate excess.' Five dollars per thousand upon this is $379.66.
Total assessment for 1922 ($187.91 plus $379.66), $567.57.
In the course of its opinion the court below said:
'This tax law, 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. Eaton, Crane & Pike Co. v. Commonwealth, 237 Mass. 523.
'The general scheme of this tax law is that an excise is levied on both domestic and foreign business corporations doing business in this commonwealth. Real estate and machinery used in manufacture by such corporations alone are subject to a local property tax in the city or town where situated. All other personal property, whether tangible or intangible, is exempt from direct or local taxation. The amount of the excise tax is measured as to a foreign corporation (section 39) by the sum of 'an amount equal to five dollars per thousand upon the value of the corporate excess employed by it within the commonwealth,' and 'an amount equal to 2 1/2 per cent. of that part of its net income, as defined in section thirty and in this section, which is derived from business carried on within this commonwealth,' with a further provision that a minimum tax of not less than one-twentieth of 1 per cent. of such proportion of the fair cash value of its shares of capital stock as its assets employed in business in this commonwealth bear to its total assets employed in business. * * * 'The statute is an attempt to measure the excise on foreign corporations solely by the property and net income fairly attributable to the business done within this commonwealth. This excise tax 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 (and also domestic corporations) are expressly exempted by G. L. c. 59, § 5, cl. 16. * * *
'The present tax act imposes the excise with respect to the carrying on of business by foreign corporations within the commonwealth. It is an excise for the privilege of having a place of business under the protection of our laws and with the financial, commercial and other advantages flowing therefrom, measured solely by the property and net income fairly attributable to the business done here by a foreign corporation. The excise is measured by two factors: (1) The value of the corporate excess employed within the commonwealth; and (2) the net income derived from business within the commonwealth.
'1. The value of the corporate excess employed in the commonwealth as a factor of the tax is not measured by the capital stock of the corporation....
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