H.P. Hood & Sons v. Commonwealth

• Decision Date: 20 May 1920
• Citation: 127 N.E. 497,235 Mass. 572
• Parties: H. P. HOOD & SONS v. COMMONWEALTH.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

235 Mass. 572

127 N.E. 497

H. P. HOOD & SONS

v.COMMONWEALTH.

Supreme Judicial Court of Massachusetts, Suffolk.

May 20, 1920.

Appeal from Supreme Judicial Court, Suffolk County.

Petition for abatement of tax by H. P. Hood & Sons against the Commonwealth of Massachusetts. From decree of a single justice of the Supreme Judicial Court dismissing the petition, petitioner appeals to the full court. Decree affirmed.William R. Sears and Alexander Lincoln, both of Boston, for appellant.

Henry A. Wyman, Atty. Gen., and Wm. Harold Hitchcock, Asst. Atty. Gen., for the Commonwealth.

RUGG, C. J.

This is a petition for the abatement of a tax assessed under St. 1918, c. 253. It is brought under St. 1918, c. 255, § 7, which is made applicable to taxes imposed under said chapter 253, by section 4 thereof. The petitioner is a corporation organized under the laws of the state of Maine and having a usual place of business in Boston within this commonwealth. Its principal business is the buying of milk in the country from farmers who make daily deliveries, the transportation of that milk to Boston and the sale of most of it there by daily deliveries to regular customers, who are either consumers or retail dealers. About 90 per cent. of the milk so purchased originates in New York and in New England states other than Massachusetts. In the great majority of instances the farmer delivers the milk either to the employé at the train which transports it to Boston or to the petitioner's milk station near the railroad station. The milk is shipped in cans belonging to the petitioner, by whom the freight charges are paid, and is carried by the railroad day after day on the same train. At Boston the milk is removed from the cans, pasteurized, put in other cans or bottles, and distributed forthwith to its customers, chiefly from the petitioner's wagons, or to retail milk dealers or through its own retail stores. The petitioner, as incidental to its main business, also manufactures and sells other milk products both inside and outside of Massachusetts, and sells other dairy products. The amount of the net income of the petitioner for the period in question, derived from sales of milk and other articles either outside of Massachusetts or by direct shipment to its customers inside the commonwealth from outside its limits, is approximately 15.7 per cent. of its total net income. Confessedly this part of its income is not subject to the tax.

It is not contended that the method by which the tax was assessed was correct. Any error in this particular is said to have been due to insufficient information furnished to the tax commissioner by the petitioner. But, however that may be, no controversy is made concerning the method of assessment, because it is agreed that if the petitioner is made liable by said chapter 253 to a tax on the remaining portion of its net income, after deducting said 15.7 per cent., the petition is to be dismissed. Therefore, it must be assumed that the tax actually levied is at least not in excess of the amount justly due if the petitioner is liable to taxation for the net income derived from that portion of its business which ends in selling from its stock in Massachusetts to customers receiving deliveries in Massachusetts, excluding all net income derived from sales outside Massachusetts and within Massachusetts by direct shipment to customers from other states.

The petitioner contends that its income on which the tax is levied was derived from interstate commerce, and hence is not taxable under the statute.

The title of St. 1908, 253 is ‘An act imposing an additional tax upon the net incomes of on foreign corporations.’ It is provided by section 5 that the tax ‘shall be construed as a temporary emergency tax levied in addition to all other taxes imposed on foreign corporations, and not to any extent as a part of the system of taxation established by sections fifty-four to fifty-six, inclusive, of part III’ of the general tax act providing for an excise measured by authorized capital, but limited to $2,000. The excise imposed by these last sections is not here involved. See Cheney Bros. Co. v. Massachusetts, 246 U. S. 147, 38 Sup. Ct. 295, 62 L. Ed. 632;Lawton Spinning Co. v. Commonwealth, 232 Mass. 28, 121 N. E. 518. The present statute requires that every foreign corporation shall pay a tax on the net income for its next preceding fiscal or calendar year ‘upon which income such corporation is required to pay a tax to the United States.’ By section 3 it is provided that--

‘If any such corporation carries on business outside of this commonwealth, or owns property beyond its jurisdiction, or is to any extent engaged in interstate or foreign commerce, that portion only of its net income which is not derived from the said sources shall be apportioned to this commonwealth and taxed hereunder.’

The present tax is not discriminatory against foreign corporations. An additional tax on domestic corporations quite as onerous in its terms was imposed by St. 1918, c. 255, taking effect on the same day as the statute here in question. See American Printing Co. v. Commonwealth, 231 Mass. 237, 120 N. E. 686.

[2] The statute in imposing the additional tax expressly exempts from its scope interstate commerce and property outside the commonwealth. It avoids the provisions which caused the statute under review in International Paper Co. v. Massachusetts, 246 U. S. 135, 38 Sup. Ct. 292, 62 L. Ed. 624, Ann. Cas. 1918C, 617, to be stricken down. It is indubitable that that part of the petitioner's business which consists of transporting the milk bought outside this commonwealth to Boston is interstate commerce. Interstate commerce comes to an end, however, when the milk thus transported in interstate commerce is delivered in Boston. The petitioner then undertakes a new and distinct method of dealing with the milk, utterly different from interstate commerce. It removes the milk from the cans in which it has been the subject of interstate commerce and makes it a part of the common stock of merchandise within this commonwealth. It then pasteurizes the milk, which is a subjection of it to heat for the purpose of inducing certain chemical changes. See Commonwealth v. Boston White Cross Milk Co., 209 Mass. 30, 95 N. E. 85, Ann. Cas. 1912B, 386. That process closely resembles ‘manufacture’ as that word is applied to fabricated articles. It then puts the milk into other receptacles for purposes of sale and sells and delivers it chiefly from its own wagons or stores to retail customers and also to other retail dealers in or near Boston. The net income is derived wholly, so far as measured in cash receipts, from these retail or wholesale sales from the stock, which previously has become a part of the commonstock of merchandise within the commonwealth. Interstate commerce has been utilized as a preliminary. The part it played ended when the milk reached its terminus at Boston. Thereafter every step in...