American Unif. Co.  v. Commonwealth

• Decision Date: 07 January 1921
• Citation: 237 Mass. 42,129 N.E. 622
• Parties: AMERICAN UNIFORM CO., Inc., v. COMMONWEALTH.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

237 Mass. 42

129 N.E. 622

AMERICAN UNIFORM CO., Inc.,

v.COMMONWEALTH.

Supreme Judicial Court of Massachusetts, Suffolk.

Jan. 7, 1921.

Reservation and Report from Supreme Judicial Court, Suffolk County; Edward P. Pierce, Judge.

Petition for abatement of tax by the American Uniform Company, Incorporated, against the Commonwealth. On reservation and report by a single Justice of the Supreme Judicial Court to the full court. Petition dismissed.

Lee M. Friedman, Paul D. Turner, and Friedman & Atherton, all of Boston, for plaintiff.

J. Weston Allen, Atty. Gen., and Charles R. Cabot, Asst. Atty. Gen., for the Commonwealth.

RUGG, C. J.

The petitioner seeks abatement of an excise tax levied on it as a foreign corporation for the privilege of doing business in this commonwealth under St. 1909, c. 490, pt. 3, § 56, as amended by St. 1918, c. 235. The latter statute added to the earlier section the words ‘provided, that for the purpose of assessing the excise upon corporations whose stock was issued without a par value one hundred dollars shall be considered par,’ re-enacting the section ‘so as to read’ as printed in the margin.¹

[2] It is now beyond question that the tax imposed by the section before the amendment was a pure excise and was within the power of the general court both under the Constitution of the commonwealth and that of the United States. That has been settled. Baltic Mining Co. v. Commonwealth, 207 Mass. 381, 93 N. E. 831;S. S. White Dental Co. v. Commonwealth, 212 Mass. 35, 98 N. E. 1056, Ann. Cas. 1913C, 805, both decisions being affirmed by the United States Supreme Court in 231 U. S. 68, 34 Sup. Ct. 15, 58 L. Ed. 127;Cheney Bros. Co. v. Massachusetts, 246 U. S. 147, 38 Sup. Ct. 295, 62 L. Ed. 632. Whatever invalidity was engrafted upon our foreign corporation tax law by St. 1914, c. 724, was removed on its repeal by St. 1918, c. 76. Lawton Spinning Co. v. Commonwealth, 232 Mass. 28, 121 N. E. 518.

The only question presented by this record is whether St. 1918, c. 235, is unconstitutional in its effect upon the petitioner. The allegations of the petition (which for the purposes of this case must be taken as true under the demurrer), summarily stated, are that the petitioner is a foreign corporation with an authorized capital of 110,000 shares of no par value, that it has complied with the laws of this commonwealth as to doing business here and has filed the required certificate; that it seasonably offered to prove to the tax commissioner that the par value of its shares of stock was not $100 per share and that their actual value did not exceed $10 per share and that the tax commissioner refused to receive evidence and assessed the excise in accordance with St. 1918, c. 235, at $2,000. Shortly, the question is whether it is within the power of the general court to require that the excise tax on foreign corporations for the privilege of doing local business in Massachusetts which have issued shares of stock without par value, shall be measured on the basis of $100 per share.

Under the federal and state Constitutions the transaction of local business within this commonwealth by foreign corporations is a privilege which may be granted or denied by the commonwealth. If the sovereignty confers the gift, it may fix its own terms, provided they are not contrary to the Constitution. A fixed excise of $2,000 doubtless might be charged each foreign corporation for the privilege of doing here a local business without violating any right guaranteed by the Constitution of the United States. That is the maximum amount of the excise under any circumstances, no matter how large may be the capital. The excise simply is measured by the par value of the shares up to that fixed maximum. Before the enactment of St. 1918, c. 235, as well as since, the actual value or the market value of the shares has been of no consequence whatever. Two foreign corporations, each of the same amount of capital stock at par, one on the verge of bankruptcy and its stock valueless both in truth and on the market, and the other highly prosperous and its stock both in truth and on the market worth double its par value, would pay the same excise under the law. The reason for this is that the tax is an excise and not a property tax. It stands on the same footing in this respect in principle as most license taxes. Before the enactment of St. 1918, c. 235, the foreign corporation excise law made no express provision touching those corporations which had issued capital stock without par value. Doubtless it became necessary to make some provision for the excise to be exacted of this class of foreign corporations. It was a practical legislative question how to deal with a somewhat perplexing problem. It would have been unfair to other corporations the actual value of whose stock is less than par, to establish the actual value of the stock of this class of corporations as the measure of the excise. Moreover, to pursue that course would have similitude to a property tax rather than an excise. It would be open to attack on the constitutional ground that it was an attempt to tax property outside the state, a ground held fatal in International Paper Co. v. United States, 246 U. S. 135, 38 Sup. Ct. 292, 62 L. Ed. 624, Ann. Cas. 1918C, 617. It is common knowledge that the par value of the shares of very many business corporations is $100 each. It well may be that the general court had definite knowledge as to facts in this particular. At any rate it was its duty to adopt some measure for the excise to be charged against such corporations, reasonably fair to them as compared with the excise levied on other foreign corporations. Excise upon corporations have been measured in a great variety of ways. Worcester v. Board of Tax Appeal, 184 Mass. 460, 69 N. E. 330;A. J. Tower v. Commonwealth, 223 Mass. 371, 111 N. E. 966;Farr Alpaca Co. v. Commonwealth, 212 Mass. 156, 98 N. E. 1078;Pratt v. Street...