Commissioner of Corporations and Taxation v. Assessors of Boston
| Decision Date | 28 February 1947 |
| Court | United States State Supreme Judicial Court of Massachusetts Supreme Court |
| Parties | COMMISSIONER OF CORPORATIONS AND TAXATION & another v. ASSESSORS OF BOSTON. COMMISSIONER OF CORPORATIONS AND TAXATION & another v. |
February 5, 1947.
Present: FIELD, C.
J., QUA, RONAN & SPALDING, JJ.
Taxation, Personal property tax: machinery, exemption; Manufacturing corporation. Corporation, Manufacturing corporation. Words "Manufacturing."
A domestic corporation operating a chain of retail food stores, a part of whose business was manufacturing in the production and preparation of bread, pastry, jams, jellies and other foods and a foreign meat packing corporation, a part of whose business was manufacturing in the making of sausages, the curing and smoking of bacon and ham and the production of lard, were respectively a "domestic manufacturing corporation" within G.
L. (Ter. Ed.) c 63, Section 38C, as appearing in St. 1937, c. 383, Section 1, and a "foreign manufacturing corporation" within G. L. (Ter.
Ed.) c. 63, Section 42B, as appearing in St. 1937, c. 383, Section 2, where such manufacturing by each corporation was substantial.
APPEALS from decisions by the Appellate Tax Board.
E. L. Twomey, (J.
A. Perkins with him,) for Armour and Company, intervener.
A. L. Hyland, for First National Stores Inc., intervener.
W. G. Perrin, Assistant Attorney General, (R.
J. Cotter, Jr., Assistant Attorney General, with him,) for the Commissioner of Corporations and Taxation.
W. H. Kerr, (S.
Rosen, Assistant Corporation Counsel, with him,) for the assessors of Boston.
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, forwarded to the board of assessors of the city of Boston a list of corporations known to him to be liable to taxation in the said city under G. L. (Ter. Ed.) cc. 59, 60A, 63, in which he classified as a domestic manufacturing corporation the First National Stores Inc., and as a foreign manufacturing corporation
Armour and Company. The board of assessors seasonably filed applications with the commissioner, stating that these classifications were incorrect and stating the kind of classification that should have been made. The commissioner having failed to act within twenty days, the board of assessors filed appeals from the classification of these corporations with the Appellate Tax Board. Each corporation was allowed to intervene in the appeal in which its classification was questioned. The Appellate Tax Board found that the First National Stores Inc. was a domestic business corporation, and that Armour and Company was a foreign business corporation. The commissioner and the First National Stores Inc. appealed in the first case, and the commissioner and Armour and Company appealed in the second case.
The Appellate Tax Board found that the First National Stores Inc. was a corporation organized under the laws of this Commonwealth, and that it conducted a general retail business selling food products in a number of retail stores throughout New England and in some parts of the State of New York. It owned and operated machinery for the baking of bread and pastry and the processing of food. It made preserves, jams, jellies, peanut butter, mayonnaise, extracts, bread, cake, and carbonated beverages, roasted coffee, prepared bacon and corned beef, manufactured sausages, and smoked hams. It sold these products together with similar products which it purchased from others. Live stock was bought, slaughtered and dressed in the corporation's plant. The corporation also maintained a plant for printing price tickets, inventory forms and books. A laundry was conducted for cleaning the coats worn by the clerks in its various stores and by employees in different departments. The gross sales for the year ending September 30, 1944, were $165,952,948, of which approximately $30,000,000 represented goods processed by the corporation, for the production of which it employed nine hundred forty-three persons. The assessors conceded that certain of these "activities performed by the First National Stores Inc. constitute manufacturing."
The Appellate Tax Board found that Armour and Company was incorporated under the laws of the State of Illinois. It had three usual places of business in Boston: one plant where shipments of carcasses sent by the corporation were received and cut up for dealers, hotels and restaurants, and where sausages were made, lard produced, and bacon and hams prepared; the second plant where operations similar to those conducted at the first plant were conducted with the exception of producing lard; and the third plant where leather soles were cut from hides, graded and shipped to shoe manufacturers. Besides, two plants were maintained at Worcester and Springfield for the making of sausages. The gross sales in 1944 from all these plants located in this Commonwealth amounted to $44,427,544, of which $18,427,544 was derived from the sales of products processed in this Commonwealth, such as hams, sausages, lard, bacon and sole leather.
The only question presented in the first case is whether the Appellate Tax Board erred in deciding that the First National Stores Inc. should be classified as a "domestic business corporation" as defined in G. L. (Ter. Ed.) c. 63, Section 30, and not as a "domestic manufacturing corporation" as defined in G. L. (Ter. Ed.) c. 63, Section 38C, as appearing in St. 1937, c. 383, Section 1, and in the second case is whether the board erred in deciding that Armour and Company should be classified as a "foreign corporation" as defined in G. L. (Ter. Ed.) c. 63, Section 30, and not as a "foreign manufacturing corporation" as defined in G. L. (Ter. Ed.) c. 63, Section 42B, as appearing in St. 1937, c. 383, Section 2.
The adoption in 1916 of our present system of taxation of income precipitated a long and difficult struggle in this Commonwealth to discover a method of taxing national banks or their shareholders which would conform to the Constitution of the United States and to the acts of Congress. The history of legislation in an effort to accomplish this result is set forth in considerable detail in Commissioner of Corporations & Taxation v. Woburn National Bank, 315 Mass. 505 . Congress by an amendment of March 25, 1926, to U.S. Rev. Sts. Section 5219 (), authorized the imposition of a tax in one of four methods, one of which was upon the income of the banks provided "the rate shall not be higher than the rate assessed upon other financial corporations nor higher than the highest of the rates assessed by the taxing State upon mercantile, manufacturing, and business corporations doing business within its limits." The Legislature in 1930, acting in conformity with this act of Congress and in order to enable it to impose the highest rate in taxing the income of banks, separated manufacturing corporations from business corporations, and defined domestic manufacturing corporations and foreign manufacturing corporations. St. 1930, c. 220. By Section 5 of said c. 220, a new section was added to G.L.c. 63 -- Section 38C -- which, in so far as now material, provided that "Every corporation organized under or subject to chapter one hundred and fifty-six which is engaged in manufacturing shall, for the purposes of this chapter, be deemed to be a domestic manufacturing corporation." By Section 7 of said c. 220, another new section was inserted in G.L.c. 63 -- Section 42B -- which, in so far as now material, provided that "Every corporation, association or organization established, organized or chartered under laws other than those of the commonwealth, which has a usual place of business in the commonwealth and is engaged in manufacturing therein, shall, for the purposes of this chapter, be deemed a foreign manufacturing corporation." Both of these definitions have since continued, although the deduction allowed on account of the taxing of the machinery of manufacturing corporations as set forth in these two sections has since been changed. See St. 1937, c. 383, Sections 1, 2.
A radical change in the taxing of manufacturing corporations was effected by St. 1936, c. 362, Section 1, which exempted the machinery of manufacturing corporations from local taxation by amending G. L. (Ter. Ed.) c. 59, Section 5, Sixteenth. Clause Sixteenth as thus amended, in so far as it relates to the exemption from taxation of machinery owned by corporations, reads as follows: "property, other than real estate, poles, underground conduits, wires and pipes, and other than machinery used in the conduct of the business, owned by domestic business corporations or by foreign corporations, as defined in section thirty of chapter sixty-three; also property, other than real estate, poles, underground conduits, wires and pipes, owned by domestic manufacturing corporations, as defined in section thirty-eight C of said chapter, or by foreign manufacturing corporations, as defined in section forty-two B of said chapter." Statute 1936, c. 362, Section 2, amended G. L. (Ter. Ed.) c. 59, Section 18, Second, so as to make it consistent with said clause Sixteenth as thus amended in so far as the taxation of machinery was concerned. As to the present form of G. L. (Ter. Ed.) c. 59, Section 5, Sixteenth, see St. 1941, c. 467.
The assessors contend that neither of these corporations comes within these statutory definitions of manufacturing corporations. We must first inquire whether they were engaged in manufacturing in this Commonwealth. Manufacture ordinarily and commonly denotes the process of transforming raw or finished materials by hand...
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