Carlos Ruggles Lumber Co. v. Commonwealth

• Decision Date: 30 November 1927
• Parties: CARLOS RUGGLES LUMBER CO. v. COMMONWEALTH.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

261 Mass. 450

158 N.E. 899

CARLOS RUGGLES LUMBER CO.

v.COMMONWEALTH.

Supreme Judicial Court of Massachusetts, Suffolk.

Nov. 30, 1927.

Case Reserved from Supreme Judicial Court, Suffolk County.

Petition by the Carlos Ruggles Lumber Company against the Commonwealth for the abatement of an excise tax. On reservation. Remanded to the county court for the calculation of the correct excise tax.

See, also, 158 N. E. 897.Philip Nichols, of Boston (C. E. Bell, of Springfield, of counsel), for petitioner.

A. K. Reading, Atty. Gen. (A. Lincoln, of Boston, of counsel), for the Commonwealth.

RUGG, C. J.

This petition is brought under G. L. c. 63, § 27, by a domestic corporation for the abatement of an excise tax assessed upon it. The agreed facts are that the principal place of business of the petitioner was at Springfield within this commonwealth. There it maintained an office where its usual corporate functions were carried on and from which its dividends were distributed. It maintained no other office or place of business, permanent or temporary, in any state other than this commonwealth. Its sole business was buying lumber and lumber products in certain Southern and Western states of the Union and in the Dominion of Canada, and in selling and shipping the same to purchasers in certain other states of the Union. It also sold lumber for owners of lumber mills in a similar way for a commission. In most instances the petitioner did not buy lumber until it was ordered by a customer and then it was usually shipped directly to the purchaser, although sometimes it was shipped to a diverting point and thence to the purchaser. The buying and selling was done by the president and salesmen of the petitioner, some of whom lived outside this commonwealth. All sales were made subject to confirmation at the home office in Springfield. At no time has the petitioner made purchases within a state and sold or delivered the same to a purchaser within the same state. It has not had a lumber yard or any supply of lumber in this commonwealth for sale either within or without this commonwealth. In addition to its main profits, the petitioner derived a small income from interest on customers' notes and from deposits in banks both within and without this commonwealth.

The present controversy relates to the income for the year 1924. An excise tax was levied on the total net income of the petitioner without apportionment. The tax was assessed under that part of G. L. c. 63, § 32, which provides that--

‘* * * Every domestic business corporation shall pay annually, with respect to the carrying on or doing of business by it, an excise equal to the sum of the following: * * * (1) An amount equal to five dollars per thousand upon the value of its corporate excess. (2) An amount equal to two and one half per cent. of that part of its net income, as defined in this chapter, which is derived from business carried on within the commonwealth.’

[1] This part of the statute must be interpreted in connection with section 38 of the same chapter, which provides in effect that, if the corporation carries on no business outside this commonwealth, the whole of the business income shall be allocated to this commonwealth, a formula for allocation to this commonwealth of a part of the net income being there established only for corporations conducting business both within and outside this commonwealth based upon a comparison between the value of their tangible property situated within this commonwealth and the value of all such property wherever situated.

The petitioner is incorporated under the laws of this commonwealth. The tax here in issue is not a franchise tax on the right of the petitioner to exist as a corporation, such as were our earlier corporation tax laws. It is not a tax on tangible property. It is not an income tax. It is an excise tax on the ‘carrying on or doing of business' by the petitioner. G. L. c. 63, § 32; Judson Freight Forwarding Co. v. Commonwealth, 242 Mass. 47, 136 N. E. 375, 27 A. L. R. 1131;Alpha Portland Cement Co. v. Massachusetts, 268 U. S. 203, 213, 216, 45 S. Ct. 477, 69 L. Ed. 916, 44 A. L. R. 1219. It is manifest that the petitioner during the year in question was ‘carrying on’ and ‘doing business' in this commonwealth which was not interstate in its nature. Its main office and principal place of business were here. Its ‘corporate functions' were carried on here. This descriptive phrase must include as matter of fair interpretation the holding of meetings of directors and of stockholders, the declaration of dividends, the maintenance of essential corporate offices such as those of the president, treasurer and secretary, the making of corporate records, the keeping of the books of the treasurer and whatever else may be necessary for the continuance of corporate existence. The dividends were distributed in this commonwealth. The petitioner deposited money in banks here and received interest on the same. With respect to precisely similar facts except that foreign corporations were involved instated of a domestic corporation it was said in Cheney Bros. Co. v. Massachusetts, 246 U. S. 147, at page 155, 38 S. Ct. 295, 297 (62 L. Ed. 632), affirming Copper Range Co. v. Commonwealth and Champion Cooper Co. v. Commonwealth, 218 Mass. 558, 576-579, 106 N. E. 310, 318, 319:

‘The exaction of a tax for the exercise of such corporate faculties is within the power of the state. Interstate commerce is not affected.’

And at page 156 (38 S. Ct. 297):

‘These corporate activities in Massachusetts are not interstate commerce and may be made the basis of an excise tax by that state.’

The circumstance that those words were used touching foreign rather than domestic corporations is immaterial in its bearing on the issues here raised. Althoubh those cases arose under an earlier tax law, the exact question involved was the same as one here presented, namely, whether the activities described constituted a doing of business within this commonwealth not interstate in nature. Thus it is settled by authoritative adjudication that the contention of the petitioner to the effect that it is not subject to any excise because its business is exclusively interstate in nature cannot be supported. The petitioner was doing some business...