Comm'r of Corps. & Taxation v. Bd. of Assessors of Boston

• Decision Date: 07 March 1949
• Citation: 324 Mass. 32,84 N.E.2d 531
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court
• Parties: COMMISSIONER OF CORPORATIONS AND TAXATION (PALMER & PARKER CO., Intervenor) v. BOARD OF ASSESSORS OF BOSTON. COMMISSIONER OF CORPORATIONS AND TAXATION (SALADA TEA CO., Intervenor) v. BOARD OF ASSESSORS OF BOSTON.

324 Mass. 32

84 N.E.2d 531

COMMISSIONER OF CORPORATIONS AND TAXATION (PALMER & PARKER CO., Intervenor)

v.BOARD OF ASSESSORS OF BOSTON.

COMMISSIONER OF CORPORATIONS AND TAXATION (SALADA TEA CO., Intervenor)

v.BOARD OF ASSESSORS OF BOSTON.

Supreme Judicial Court of Massachusetts, Suffolk.

March 7, 1949.

Appeal from Appellate Tax Board.

Consolidated proceedings by Commissioner of Corporations and Taxation and Palmer & Parker Company and Salada Tea Company, interveners, opposed by Board of Assessors of Boston, to determine whether interveners should be classified as business or manufacturing corporations for tax purposes. From decisions of Appellate Tax Board holding the interveners should have been classified as business and not as manufacturing corporations, the Commissioner and interveners appeal.

Decision for Commissioner in each case.

Before QUA, C. J., and LUMMUS, RONAN, WILKINS and SPALDING, JJ.

E. C. Park and P. F. Grogan, both of Boston, for Palmer & Parker Co.

W. H. Kerr, of Boston, for Assessors of Boston.

F. E. Kelly, Atty. Gen., and H. W. Radovsky, Asst. Atty. Gen., for the Commissioner of Corp. and Tax.

R. Ely, of Boston, and R. A. Cormier, of Boston, for Salada Tea Co.

RONAN, Justice.

The commissioner of corporations and taxation classified the intervener in the first proceeding, Palmer & Parker Company, as a domestic manufacturing corporation and the intervener in the second proceeding, Salada Tea Company, as a foreign manufacturing corporation, in a list prepared by him in accordance with G.L. (Ter.Ed.) c. 58, § 2, as most recently amended by St. 1941, c. 726, § 2, and submitted on April 17, 1947, to the board of assessors of Boston as a list of corporations liable on January 1, 1947, to taxation in the city of Boston under G.L. (Ter.Ed.) cc. 59, 60A and 63. The commissioner having failed to change the classification of these interveners in accordance with applications of the board of assessors, the latter appealed to the Appellate Tax Board, which decided that they should have been classified as business and not as manufacturing corporations. The appeals of the commissioner and the intervener in each proceeding bring these cases here.

Palmer & Parker Company is engaged in the importation of mahogany logs, the processing of them into veneer and lumber, and the sale of the veneer and lumber. Its plant is located in Boston where it employs seventy-five persons. Mahogany logs are cut from trees selected by the company's logging expeditions in Africa, Central America and South America are shipped to Boston, where they are stored in a salt water bay adjoining the plant to prevent drying out and to protect them from infestation by insects. When needed, the logs are placed upon a movable saw carriage and the outer surfaces of each log are sawed off so as to form a four-sided log. The log is then examined for texture, figure and grain, and, if found suitable for veneer, portions or flitches, as they are called in the trade, are cut from the log in the form of flat slabs lengthwise, or are cut for quartered stock diagonally toward the center of the log. Some flitches range from six to sixteen feet in length and some vary from six to twenty-five inches in thickness. The flitches are placed in vats containing steam and water for such time as a skilled vat operator determines will be sufficient to prevent cracking of the wood during the slicing operations. The flitches are then put in a slicing machine and sliced into sheets varying from one one-hundredth to one eighth of an inch in thickness, dried, graded and sold. Logs not suitable for veneer and portions of logs remaining after the flitches have been cut out are sawed into boards in such a way as to produce figured, quartered or plain mahogany. The edges and ends of the boards are trimmed and, after being sorted according to grade, length and thickness, the boards are put upon racks to dry and are finally kiln dried. About one third of these boards are planed. The production of boards constitutes about eighty per cent of the company's business and the production of veneer the remaining twenty per cent of its business.

Salada Tea Company, a foreign corporation, has its principal place of business in Boston. It is engaged in importing, sifting, cutting and blending tea, making bags and boxes for tea bags, making boxes for all packaged tea, and selling tea throughout the United States. It employs three hundred fifty-two persons in this Commonwealth. The capital invested here amounts to $3,168,668.06.

Dried tea leaves are imported in bulk from the Orient. The tea is removed from different chests to secure the proper blend, placed in a conveyor system, inspected, put through the cutting machines from which it is discharged into a large rotating tank where it is mixed to produce the company's brand of tea, and then conveyed into large glass containers from which it flows to the tea bag making machines and to the box filling machines.

Tea bags of the pillow type are produced in large quantities by the thirty-five machines operated by the company. Two rolls of special filter paper are fed into each machine; the paper is folded longitudinally, and drawn over a funnel-shaped device which forms the bag; tea flows into the bags in amounts measured by a weighing device so that each bag contains precisely the right amount of tea, the flow of tea being synchronized with the flow of paper; the open edges of the bags are sealed; and the rows of tea bags, which are still attached to each other, are separated by cutting knives into single bags and deposited in a chute from which they are taken and packed by hand into cartons. These machines attach tags bearing the company's brand name to the bags intended for the restaurant trade. Each box into which the tea bags are packed is made from a piece of cardboard, which is cut to shape, scored and printed by the concern from which it is purchased. The piece of cardboard is automatically feb by suction into a machine which forms the folded piece of cardboard into a box, glues and seals the bottom of the box, and inserts and glues a paper lining to the inside of the box. The cartons are then filled by hand with tea bags, and the tops of the boxes are then glued and sealed by machinery.

Boxes for packaged tea are formed by machinery out of pieces of cardboard, each piece being really a folded or flat box, and these boxes are filled by machinery in substantially the same manner as are the tea bags.

Nearly $1,500,000 of the company's capital is invested in making and filling tea bags and the boxes into which these tea bags are packed, and nearly $500,000 is invested in the making of boxes for packaged tea and the packaging of tea in them. The cost of making the tea bags and boxes for these bags represents forty-one per cent of the operating costs of the company. The making of boxes for packaged tea represents thirteen per cent of such cost. A little less than eighteen per cent of all the tea sold by the company is sold in this Commonwealth.

Each case was submitted to the Appellate Tax Board upon a statement of agreed facts. The question presented in the first case is whether the board was in error in deciding that the intervener should have been classified by the commissioner as a domestic business corporation as defined in G.L. (Ter.Ed.) c. 63, § 30, cl. 1, and not as a domestic manufacturing corporation as defined in G.L. (Ter.Ed.) c. 63, § 38C, as appearing in St.1937, c. 383, § 1; and in the second case whether there was error in deciding that the intervener should have been classified by the commissioner as a foreign corporation as defined in G.L. (Ter.Ed.) c. 63, § 30, cl. 2, as amended by St. 1943, c. 459, § 1, and not as a foreign manufacturing corporation as defined in G.L. (Ter.Ed.) c. 63, § 42B, as appearing in St.1937, c. 383, § 2.

The legislative history of the pertinent statutes granting, manufacturing corporations an exemption from local taxation upon their cachinery, G.L. (Ter.Ed.) c. 59, § 5, Sixteenth, as appearing in St.1941, c. 467, and imposing an excise tax on such machinery at the rate of $5 per thousand valuation, G.L. (Ter.Ed.) c. 63, §§ 30, cl. 1, 38C, 39(1), 42B, as amended, the legislative purpose and intent in passing these statutes, the interpretation of these enactments, and their application to various corporations engaged in many different kinds of commercial activities, have been recently discussed by this court and...