H. P. Hood & Sons v. Commonwealth

• Citation: 235 Mass. 572
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court
• Decision Date: 19 May 1920
• Parties: H. P. HOOD & SONS v. COMMONWEALTH.

235 Mass. 572

H. P. HOOD & SONS v. COMMONWEALTH.

Supreme Judicial Court of Massachusetts, Suffolk.

May 19, 1920

January 16, 1920.

Present: RUGG, C.

J., BRALEY, DE COURCY, & JENNEY, JJ.

Tax, On income of foreign corporation. Corporation, Foreign. Constitutional Law, Taxation of income of foreign corporation, Interstate commerce. Interstate Commerce.

The principal business of a corporation, organized under the laws of Maine and having a usual place of business in Boston in this Commonwealth, was the buying of milk from farmers transporting it to Boston and there selling it by daily deliveries to retail dealers and consumers. About ninety per cent of such milk was purchased in States other than

Massachusetts. The milk in the great majority of instances was delivered by the farmers to the employee at the train or to the corporation's milk station, whence it was shipped daily by railroad to Boston in cans of the corporation, which paid the freight charges. At Boston the milk was removed from the cans, pasteurized, put into other cans or bottles and distributed, chiefly by vehicles of the corporation, to its customers or to its own retail stores. The corporation also manufactured and sold certain other milk and dairy products both within and outside of

Massachusetts. Upon a bill in equity by the corporation seeking the abatement of a tax upon its net income for the year ending January 31,

1918, assessed under St. 1918, c. 253, it was held, that (1) By the provisions of Section 3 of the statute, income derived by the corporation from sales of milk and other articles either outside of

Massachusetts or by direct shipment from outside of Massachusetts to its customers within the Commonwealth was not subject to taxation;

(2) The corporation ceased to be engaged in interstate commerce as to the milk when, after its arrival in Boston, it changed the method of dealing with and disposing of it;

(3) The transactions with the milk after its arrival in Boston were domestic transactions, and net income derived therefrom was subject to the tax imposed by the statute;

(4) The statute did not impose a direct burden upon interstate commerce and violated no right secured to the corporation by the Federal

Constitution.

BILL IN EQUITY filed in the Supreme Judicial Court on February 4, 1919 under St. 1918, c. 253, Section 4; c. 255, Section 7, for the abatement of a tax assessed upon the plaintiff's income for the year ending January 31, 1918.

The suit was heard by Carroll, J., upon an agreed statement of facts. Material facts are stated in the opinion. By order of the single justice, a final decree was entered dismissing the bill. The plaintiff appealed.

Material portions of St. 1918, c. 253, are as follows: "Section 1. Every foreign corporation, as defined in section thirty-nine of Part III of chapter four hundred and ninety of the acts of nineteen hundred and nine, shall pay a tax to the Commonwealth computed upon the net income for its fiscal or calendar year next preceding, as hereinafter provided, upon which income such corporation is required to pay a tax to the United States. Each corporation subject to the tax imposed by this act shall render to the tax commissioner, under oath or affirmation of its treasurer or assistant treasurer, on or before the first day of July in the year nineteen hundred and eighteen, unless the fiscal year of the corporation for which it made return to the collector of internal revenue ended between the thirtieth day of April and the first day of July, both inclusive, in which case the said report shall be rendered by the corporation within sixty days after the date of the closing of its said fiscal year, a true copy of the last return made to the collector of internal revenue, of the annual net income arising or accruing from all sources in its fiscal or calendar year next preceding, stating the name and situation of the principal place of business of the corporation; the kind of business transacted, and a list of all subsidiary companies, if any, with the situation of the principal place of business of each; the gross amount of its income during the said year from all sources, and the amount of its ordinary necessary expenses paid out of earnings in the maintenance and operation of the business and properties of the corporation; such other information as may be requested by the United States treasury department for the purpose of ascertaining the total amount of net income taxable under the United States income tax act; the net income of the corporation after making the deductions authorized; the amount of taxes paid upon its income to the internal revenue department for the year next preceding the one for which such return is made. . . .

"Section 3. 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. Each corporation, in connection with the return required by section one of this act, shall state in such form as the tax commissioner shall prescribe what portion or amount of its annual net income is apportionable to this Commonwealth, as provided in this section. A tax is hereby laid on every such corporation of one per cent of the said income to be assessed in the manner hereinafter provided. . . .

"Section 5. The tax imposed by this act 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 chapter four hundred and ninety of the acts of nineteen hundred and nine and acts in amendment thereof or in addition thereto."

A. Lincoln, for the plaintiff. W. H. Hitchcock, Assistant Attorney General, for the Commonwealth.

RUGG, C. J. This is a bill in equity for the abatement of a tax assessed under St. 1918, c. 253. It is brought under St. 1918, c. 255 Section 7, which is made applicable to taxes imposed under said c. 253, by Section 4 thereof.

The plaintiff 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 ninety 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 employee at the train which transports it to Boston" or to the plaintiff's milk station near the railroad station. The milk is shipped in cans belonging to the plaintiff, by whom the freight charges are paid, and is carried by 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 plaintiff's wagons, or to retail milk dealers or through its own retail stores. The plaintiff, 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 plaintiff 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 fifteen and seven tenths 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 plaintiff. But, however that may be, no controversy is made concerning the method of assessment, because it is agreed that if the plaintiff is made liable by St. 1918, c. 253, to a tax on the remaining portion of its net income after deducting said fifteen and seven tenths per cent, the bill 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 plaintiff 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.

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