Assessors of Boston v. Commissioner of Corporations and Taxation

Citation323 Mass. 730,84 N.E.2d 129
CourtUnited States State Supreme Judicial Court of Massachusetts
Decision Date14 February 1949
PartiesASSESSORS OF BOSTON v. COMMISSIONER OF CORPORATIONS AND TAXATION & another (and eleven other cases [1]).

December 9, 10 1948.

Present: QUA, C.

J., LUMMUS, RONAN SPALDING, & WILLIAMS, JJ.

Taxation Manufacturing corporation; Personal property tax: machinery exemption. Corporation, Manufacturing corporation. Words, "Manufacturing." The word "manufacturing," as used in Section 38C and in Section 42B of G.

L. (Ter. Ed.) c. 63, as appearing respectively in Section 1 and in Section 2 of St. 1937, c. 383, has no technical meaning.

In determining as a fact whether certain domestic and foreign corporations were manufacturing corporations so that the machinery used by them was exempt from local taxation under G. L. (Ter. Ed.) c. 63, Section 38C and

Section 42B, as appearing respectively in Section 1 and in Section 2 of

St. 1937, c.

383, those statutes must be fairly construed and reasonably applied so as to effectuate the intent of the General Court in enacting them, namely, to promote the general welfare of the Commonwealth by inducing new industries to locate here and to foster the expansion and development of our own industries, so that the production of goods shall be stimulated, steady employment afforded to our citizens, and a large measure of prosperity obtained.

The mere fact that a finished product has the same name as the raw material is not decisive in determining whether a corporation producing it is a manufacturing corporation within Section 38C or Section 42B of G. L.

(Ter. Ed.) c. 63, as appearing respectively in Section 1 and in Section 2 of St. 1937, c. 383.

That the manufacturing part of the business of a corporation is not nearly so profitable as its nonmanufacturing part is not decisive of its classification under Section 38C or Section 42B of G. L. (Ter. Ed.) c.

63, as appearing respectively in Section 1 and in Section 2 of St. 1937, c. 383.

To be a manufacturing corporation whose machinery is exempt from local taxation under Section 38C or Section 42B of G. L. (Ter. Ed.) c. 63, as appearing respectively in Section 1 and in Section 2 of St. 1937, c.

383, it need not be wholly or principally engaged in manufacturing; it is enough that the manufacturing part of its business is important and material when considered in the light of its entire business.

The exemption of the machinery of a manufacturing corporation from local taxation granted by Section 38C and by Section 42B of G. L. (Ter. Ed.) c. 63, as appearing respectively in Section 1 and in Section 2 of St.

1937, c. 383, is of all its machinery, not only of its machinery actually used in manufacturing.

The mere fact that a process leading toward the manufacture of a completed article is performed by a corporation as an independent contractor is not determinative of the question whether it is a manufacturing corporation entitled to have its machinery exempt from local taxation under Section 38C or Section 42B of G. L. (Ter. Ed.) c. 63, as appearing respectively in Section 1 and in Section 2 of St. 1937, c. 383.

That the form and nature of a material partly wrought still continued to be of the original material was not decisive that, when further processed, it did not become a manufactured product so that a corporation processing it was a manufacturing corporation under Section 38C or

Section 42B of G. L. (Ter. Ed.) c. 63, as appearing respectively in Section 1 and in Section 2 of St. 1937, c. 383, if the product when finished had been changed into a new article designed for a particular use.

The Appellate Tax Board rightly decided that certain domestic and foreign corporations were manufacturing corporations whose machinery was exempt from local taxation under either Section 38C or Section 42B of G. L.

(Ter. Ed.) c. 63, as appearing respectively in Section 1 and in Section 2 of St. 1937, c. 383, where it appeared from agreed facts that they were engaged in processes of manufacture, respectively, in changing raw coffee beans into marketable coffee; in producing soft drinks; in making fruit syrups and shredded fruit peel products; in making a chocolate milk beverage, ice cream mix, and soft cheese from milk; in scouring raw wool by various processes so that it became a product usable in making cloth; in processing glass, manufactured outside the Commonwealth, into various usable forms; in processing paper through various forms into new articles for particular uses; and in cutting, arranging, stapling, stitching and covering printed sheets to form pamphlets, books and magazines.

APPEALS from decisions of the Appellate Tax Board.

W. H. Kerr, (W.

A. McDermott, Assistant Corporation Counsel, with him,) for Assessors of Boston.

R. W. Cutler, Jr., Assistant Attorney General, for the Commissioner of Corporations and Taxation.

F. M. Ives, (F.

H. Perry with him,) for Dwinell-Wright Company.

A. L. Hyland, for LaTouraine Coffee Co. and another. G. B. Rowlings, for Orange Food Products, Inc., and another.

J. T. Noonan, (H.

V. Atherton with him,) for Coca-Cola Bottling Company of Boston.

E. L. Twomey, for Whiting Milk Company.

J. P. Graham, (W.

F. A. Graham & T.

J. Donoghue with him,) for Merchants Wool Scouring Company and another.

R. W. Meserve, for Carter, Rice and Company Corporation. J. Hunt, for Boston Mailing Company.

No argument nor brief for American Dry Ginger Ale Company, Incorporated.

RONAN, J. These are twelve appeals by the board of assessors of Boston from decisions of the Appellate Tax Board. The commissioner of corporations and taxation, acting under G. L. (Ter. Ed.) c 58, Section 2, as most recently amended by St. 1941, c. 726, Section 2, prepared and submitted on April 17, 1947, to the board of assessors a list of corporations known to him to be liable on January 1, 1947, to taxation under G. L. (Ter. Ed.) cc. 59, 60A and 63, in which list he classified as manufacturing corporations the twelve corporations hereinafter mentioned. The commissioner having failed to act within twenty days upon applications of the board of assessors filed with him on May 15, 1947, seeking a change in the classification of these twelve corporations on the ground that they were business but not manufacturing corporations, the board of assessors on June 20, 1947, appealed to the Appellate Tax Board. Each of these corporations was allowed to intervene by the Appellate Tax Board in the appeal in which its classification was questioned. All these twelve appeals were heard by the Appellate Tax Board upon statements of agreed facts, and the board decided that these corporations had been properly classified as manufacturing corporations.

The board adopted and accepted as true all the facts contained in each statement of agreed facts and these findings of fact are final, leaving open the question, as raised by the appellant before the board, whether on those findings the decision of the board was vitiated by error of law. Assessors of Boston v. Boston, Revere Beach & Lynn Railroad, 319 Mass. 378 . Brockton Knights of Columbus Building Association, Inc. v. Assessors of Brockton, 321 Mass. 110 .

The only question presented for decision in these appeals is whether the Appellate Tax Board was right in deciding that those corporations which were organized under the laws of this Commonwealth were domestic manufacturing corporations as defined in G. L. (Ter. Ed.) c. 63, Section 38C, as appearing in St. 1937, c. 383, Section 1, and whether the remainder of these corporations, which were organized under the laws of other States, were foreign manufacturing corporations as defined in G. L. (Ter. Ed.) c. 63, Section 42B, as appearing in St. 1937, c. 383, Section 2.

The importance of classifying a corporation as a business or as a manufacturing corporation lies in the fact that the machinery used by a business corporation in the conduct of its business is subject to local taxation at the tax rate fixed by the assessors of the city or town in which the machinery is located, while the machinery of a manufacturing corporation is exempt from local taxation and there is substituted for such local taxation a tax at the rate of $5 per thousand in the assessment of the corporate franchise tax. G. L. (Ter. Ed.) c. 59, Section 5, Sixteenth (see St. 1941, c. 467); c. 63, Sections 32, 38C, 39, 42B, as amended.

The nature of the entire businesses actually conducted by these corporations respectively must be examined in order to determine whether their commercial activities conducted in this Commonwealth are such that they may be properly considered as engaged in manufacturing and to such a degree that they may fairly be considered as manufacturing corporations.

The first group of these corporations consists of four corporations, Dwinell-Wright Company, Stanley W. Ferguson, Inc., LaTouraine Coffee Co., and Standard Brands Incorporated, whose business consists in the importation and purchase of green coffee beans, preparing the coffee for the market by roasting, grinding and packaging it, and selling the product. All of them have plants in Boston where these coffee operations are conducted. Dwinell-Wright Company employs one hundred twelve persons, all of whom except three are engaged in preparing the raw coffee for the market. Ninety-seven per cent of its total sales in 1946 or

$4,252,585 was derived from the sales of coffee. Stanley W. Ferguson, Inc. employs over one hundred persons, one half of whom are engaged in the various activities necessitated in converting the raw coffee into a marketable product. Its sales of coffee in 1946 amounted to over $3,500,000 and constituted ninety-five per cent of its total sales. LaTouraine Coffee...

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