Franki Foundation Co. v. State Tax Commission

• Decision Date: 19 April 1972
• Citation: 361 Mass. 614,281 N.E.2d 865
• Parties: FRANKI FOUNDATION COMPANY v. STATE TAX COMMISSION.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

Page 865

281 N.E.2d 865

361 Mass. 614

FRANKI FOUNDATION COMPANY v. STATE TAX COMMISSION.

Supreme Judicial Court of Massachusetts, Suffolk.

Argued Feb. 9, 1972.

Decided April 19, 1972.

Acheson H. Callaghan, Jr., Boston, for the taxpayer.

Robert H. Quinn, Atty. Gen., and Daniel J. Johnedis, Asst. Atty. Gen., for the State Tax Commission, submitted a brief.

Before CUTTER, SPIEGEL, REARDON, QUIRICO and BRAUCHER, JJ.

QUIRICO, Justice.

This is an appeal by the Franki Foundation Company (Franki), a Delaware corporation, under G.L. c. 58A, § 13, from a decision of the Appellate Tax Board (board) upholding the action of the State Tax Commission under the provisions of G.L. c. 58, § 2, as appearing in St.1965, c. 696, § 1, denying Franki's request for classification as a foreign manufacturing corporation for the year 1969. See G.L. c. 63, § 42B, as amended through St.1937, c. 383, § 2. The record on appeal before us includes the board's detailed findings of fact and its opinion filed pursuant to Franki's written request therefor as authorized by G.L. c. 58A, § 13, as amended.

The sole issue raised by this appeal is whether Franki's operations within the Commonwealth, as described in the board's subsidiary findings of fact, were of a nature that required the board to decide as a matter of law that they constituted manufacturing within the meaning of that word as used in G.L. c. 58, § 2, as amended. Franki contends that the board's conclusion that '(i) nsofar as it is a question of fact, . . . (Franki) is engaged in construction and not in manufacturing,' is error 'because this 'finding' is inconsistent with the Board's subsidiary findings of fact.' Franki also claims error in the board's denial of two requests for rulings that it is a 'manufacturing corporation within the meaning of G.L. c. 58, § 2,' and a 'foreign' manufacturing corporation within the meaning of G.L. c. 63, § 42B.'

Whether Franki is classified as a foreign manufacturing corporation with reference to its Massachusetts operations has a significant bearing on its tax liability to the Commonwealth and the cities and towns thereof. If it is a manufacturing corporation, its machinery is exempted by G.L. c. 59, § 5, Sixteenth (3), as appearing in St. 1957, c. 541, from the local taxes which would otherwise be assessed thereon by cities and towns under G.L. c. 59, § 2. Further, by § 5, Sixteenth (5), the classification of Franki as a manufacturing corporation by the commissioner of corporations and taxation, the commission or the board would be binding on the local assessors. 'The exemption provided by § 5, Sixteenth, is not a true exemption from taxation but is an integral part of the method of taxation applicable to all the property of a corporation subject to that section. Section 5, Sixteenth, read with the relevant sections of G.L. c. 63, merely determines which governmental unit may impose a tax upon, or measured by, particular property. Property not taxed to a corporation under § 5, Sixteenth, is included in the measure of the excise imposed on the corporation under G.L. c. 63, and thus is indirectly taxed.' Board of Assessors of Holyoke v. State Tax Commn., 355 Mass. 223, 234, 244 N.E.2d 287. Assessors of Boston v. Commissioner of Corps. & Taxn., 323 Mass. 730, 733, 84 N.E.2d 129.

We summarize the facts found by the board on the nature of Franki's operations in Massachusetts. Franki is in the business of making 'pressure injected footings' (footings) at sites where buildings and other structures are to be erected. The footings are a type of foundation unit designed and used to support the weight of the proposed superstructure. They are made at predetermined positions on the construction site. The basic materials used in making them are concrete or the ingredients for concrete, reinforcing steel and, in some instances, steel pipe.

In making such a footing Franki uses a machine designed for that purpose. The machines are of varying sizes but they all operate on the same principle. Each includes a heavy base or platform which in turn supports (a) its own engines or other power equipment and (b) a vertical metal structure called a 'lead.' The lead holds a heavy metal tube in position before it is driven into the ground, and guides it as it progresses into the ground. It also has a function in the raising and dropping of a heavy metal ram inside the tube.

A quantity of the concrete or other material to be used in making the footing is dropped into the bottom of the tube and there tamped by the ram to form a tight plug. The ram is then dropped from greater heights forcing the tube and its contents into the grounds at the prescribed footing location, displacing and compacting the soil around it as it goes down. When the tube has reached its desired depth, it is anchored to the machine to prevent it from penetrating farther. Repeated blows by the ram then break the plug friction and drive the plug partially out of the bottom of the tube. Additional material is fed into the top of the tube and successively forced out of the bottom of the tube into the soil by ram blows of 140,000 foot pounds. This results in the formation of a bulbous base for the footing at the bottom of the tube. The addition and compaction of material in the tube continues until the top of the footing reaches the desired level. Thereafter the tube is withdrawn from the ground. In some instances a metal casing is used inside the tube and is left in the ground as a part of the completed footing.

For the purpose of this decision it is not necessary to describe the detailed engineering formulas used by Franki to determine the number, size, depth and other characteristics of the footings required for the structure to be supported thereby.

The dominant word in the statutes which control the decision in this case is 'manufacturing,' but the statutes do not define the word. In such a case, 'the natural import of words according to the ordinary and approved usage of the language when applied to the subject-matter of the act, is to be considered as expressing the intention of the Legislature.' Boston & Maine R.R. v. Billerica, 262 Mass. 439, 444, 160 N.E. 419, 422. Also helpful in determining the intention of the Legislature is the history of the statute to be interpreted.

The exemption of machinery of a manufacturing corporation from local taxation under the present provisions of G.L. c. 59, § 5, Sixteenth (3), stems from § 1 of St. 1936, c. 362, entitled, 'An Act exempting the machinery of manufacturing corporations from local taxation and changing the methods of determining certain corporation taxes and of distributing certain taxes.' That statute was enacted pursuant to 1936 House Doc. No. 143, entitled, 'Report of the Special Commission Relative to Taxation of Tangible and Intangible Property and Certain Related Matters.' One of the recommendations made by the special commission was the elimination of municipal taxes on 'machinery used in manufacturing.' It is evident from a reading of the commission's entire report that it used the word 'manufacturing' in relation to the production of goods in 'mills and factories.' ^{1 1} This purpose was implicitly recognized by this court in Assessors of Boston v. Commissioner of Corps. & Taxn., 323 Mass. 730, where we said (p. 741, 84 N.E.2d 129 p. 137): 'The statutes granting exemption from the local tax on the machinery of corporations engaged in manufacturing must be fairly construed and reasonably applied in order to effectuate the legislative intent...