Carlos Ruggles Lumber Co. v. Commonwealth

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

261 Mass. 450

CARLOS RUGGLES LUMBER COMPANY v. COMMONWEALTH.

Supreme Judicial Court of Massachusetts, Suffolk.

November 30, 1927

March 8, 1927.

Present: RUGG, C.

J., BRALEY, PIERCE CARROLL, & WAIT, JJ.

Tax, Excise on corporation. Corporation, Taxation. Interstate Commerce. Words, "Carrying on or doing of business." A Massachusetts corporation maintained an office in a city of this

Commonwealth where its usual corporate functions were carried on and from which its dividends were distributed. Its sole business was buying and selling lumber and lumber products through its president and salesmen, in certain southern and western States and in the Dominion of

Canada, and selling and shipping the same to purchasers in certain other States and it sold lumber for owners of lumber mills in a similar way for a commission. At no time did it make a purchase within a State and sell and deliver the same to a purchaser within the same State.

Generally, a purchase of lumber was not made until it was ordered by a customer and then it usually was shipped directly to the purchaser, although sometimes it was shipped to a diverting point and thence to the purchaser. All sales were made subject to confirmation at the home office in this Commonwealth. It did not have a lumber yard or any supply of lumber in this Commonwealth for sale either within or without this

Commonwealth. There was a small income from interest on customers' notes and from deposits in banks both within and without this Commonwealth. An excise tax was levied, computed on the total net income of the petitioner without apportionment. Held that

(1) The corporation was "carrying on" and "doing" in this Commonwealth some "business" which was not interstate in its nature, under G.L.c. 63, Section 32;

(2) It seems, that that portion of the corporation's business which consisted of selling lumber on a commission was not interstate commerce;

(3) It was improper to levy upon the corporation an excise tax computed upon its total net income: it was entitled to an allowance under G.L.c. 63, Section 38, on the basis of carrying on business both inside and outside the Commonwealth.

PETITION under G.L.c. 63, Section 77, filed in the Supreme Judicial Court for the county of Suffolk on November 2, 1925, for the abatement in whole or in part of a tax assessed upon the petitioner for the year 1924.

The petition was reserved by Wait, J., for determination by the full court upon the petition, the answer, and an agreed statement of facts. Material facts are stated in the opinion.

P. Nichols, for the petitioner. A.K. Reading, Attorney General, for the Commonwealth, submitted a brief.

RUGG, C.J. This petition is brought under G.L.c. 63, Section 77, 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, Section 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." 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, Section 32. Judson Freight Forwarding Co. v. Commonwealth, 242 Mass. 47 . Alpha Portland Cement Co. v. Massachusetts, 248 U.S. 203, 213, 216. 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...