A.C. Lawrence Leather Co. v. Commonwealth

• Court: Supreme Judicial Court of Massachusetts
• Writing for the Court: RUGG
• Citation: A.C. Lawrence Leather Co. v. Commonwealth, 254 Mass. 609, 150 N.E. 851 (Mass. 1926)
• Decision Date: 01 March 1926
• Parties: A. C. LAWRENCE LEATHER CO. v. COMMONWEALTH. NATIONAL CALFSKIN CO. v. SAME.

254 Mass. 609

150 N.E. 851

A. C. LAWRENCE LEATHER CO.

v.COMMONWEALTH.

NATIONAL CALFSKIN CO.

v.SAME.

Supreme Judicial Court of Massachusetts, Suffolk.

March 1, 1926.

Case Reserved from Supreme Judicial Court.

Separate petitions by the A. C. Lawrence Leather Company and by the National Calfskin Company against the Commonwealth of Massachusetts for abatement of excise taxes levied in 1923. On reservation to the full court. Petitions dismissed.P. Nichols, of Boston (P. B. Smith, of Boston, of counsel), for petitioners.

A. Lincoln, Asst. Atty. Gen., for the Commonwealth.

RUGG, C. J.

These are petitions for the abatement of excise taxes levied for the year 1923 on two foreign corporations. Identical questions of law are raised in each. The petitioners are severally incorporated under the laws of Maine. The A. T. Lawrence Leather Company has been tanning hides and selling the leather resulting therefrom. It does business in this commonwealth and in other States. In 1919 its entire capital stock was purchased by the National Leather Company and has since been held by that company. The National Calfskin Company conducts its business of tanning hides exclusively within this Commonwealth. Its entire capital stock was purchased in 1919 by the National Leather Company and has since been held by that corporation. The National Leather Company, also incorporated under the laws of Maine, does business only in this Commonwealth, although most of its property is located in other States. Its business is purchasing hides and skins, having them tanned by other companies, and selling the leather through the tanners. The National Leather Company in 1922 and 1923 controlled through stock ownership eight subsidiary companies, including the two petitioners. Of these, three, including the two petitioners and one other, were foreign corporations doing business in this Commonwealth. None of the remaining five were incorporated under the laws of, authorized to do, or actually conducting, business within this Commonwealth. In the year 1923 prior to April 1, these nine corporations filed a consolidated return of their income for 1922 to the Federal government. In June, 1923, the National Leather Company filed a consolidated return of corporate excess and net income of the nine corporations, and asked that they be taxed on their combined corporate excess and net income under St. 1923, c. 254, § 2. In October, 1923, a consolidated return was filed showing the combined corporate excess and net income of the four corporations doing business in this Commonwealth. The request for assessment on the consolidated corporate excess and net income was denied by the commissioner. The request was made that the four corporations doing business in this Commonwealth be taxed upon their combined net income under G. L. c. 63, § 39. In the year 1922 the petitioners had received net income, but the other two corporations doing business in this Commonwealth had suffered losses much greater than the combined net income of the petitioners, so that the combined net income of these four corporations was nothing. The combined net income of the National Leather Company and its eight subsidiaries also was nothing. The Commissioner assessed the four corporations doing business here upon their net income separately, that upon the National Leather Company being nothing on this item, but that upon the two petitioners being substantial.

[1] The question upon these facts, as stated by the petitioners, is whether, when four affiliated corporations, which, with others not doing business in this Commonwealth, filed a consolidated return of income to the Federal government, elect to be assessed upon their combined net income, can a tax be lawfully imposed upon one or more of them which earned income during the year although the group as a whole conducted its business at a loss? The answer to this question depends upon the construction of this paragraph from G. L. c. 63, § 39:

‘(2) An amount equal to two and one half per cent. of that part of its net...