Holland Furnace Co. v. Department of Treasury, 8136-8138.

• Decision Date: 17 February 1943
• Docket Number: No. 8136-8138.,8136-8138.
• Citation: 133 F.2d 212
• Parties: HOLLAND FURNACE CO. et al. v. DEPARTMENT OF TREASURY OF STATE OF INDIANA et al.
• Court: U.S. Court of Appeals — Seventh Circuit

133 F.2d 212 (1943)

HOLLAND FURNACE CO. et al. v. DEPARTMENT OF TREASURY OF STATE OF INDIANA et al.

Nos. 8136-8138.

Circuit Court of Appeals, Seventh Circuit.

January 30, 1943.

Rehearing Denied February 17, 1943.

Earl B. Barnes, Alan W. Boyd, and Charles M. Wells, all of Indianapolis, Ind., and Benj. F. J. Odell, of Chicago, Ill., for appellants.

Geo. N. Beamer, Atty. Gen., and David I. Day, Jr., and Byron B. Emswiller, Deputy Attys. Gen., all of Indianapolis, Ind., for appellees.

Before SPARKS, KERNER, and MINTON, Circuit Judges.

KERNER, Circuit Judge.

These suits were separately brought to recover taxes collected from the plaintiffs by the Department of Treasury of the State of Indiana under the Indiana Gross Income Tax Act of 1933 and that Act as amended.¹ The cases were referred to a Master in Chancery, who made findings of fact based upon a stipulation of facts, and stated his conclusions of law thereon. The District Court adopted the Master's findings of fact, confirmed his conclusions of law, and rendered judgments for costs against the plaintiffs, from which the plaintiffs separately appealed. Here, the appeals were consolidated for hearing and disposition.

Holland Furnace Company, a Michigan corporation, manufactures at Holland, Michigan, furnaces and heating appliances. It is qualified to do business in Indiana where it maintains sales offices at various cities, and its employees, as agents, solicit written contracts. Each contract provides that Holland furnish and install at the customer's premises a particular heating system for a stipulated amount, payable at Holland's office in Michigan, Holland retaining the title until the contract is paid in full. A specified portion of the price was in payment of the cost of installation, registers, regulators, and fittings. Neither the furnaces nor equipment were custom made, and could be erected and put in place by any experienced person, but the installations were all made by workmen trained in Holland's factory.

Interstate Roofing and Supply Company is an Illinois corporation with its principal place of business at Chicago, Illinois, and is qualified to do business in Indiana. It has no place of business within that State, but sends its salesmen from Illinois into Indiana, who solicit contracts with owners of buildings in Indiana requiring asphalt or composition shingles to be applied to roofs and sides of houses. Interstate buys the shingles from jobbers outside of Indiana, and transports them to its customers in Indiana. After the contract is approved and accepted by Interstate at Chicago, Illinois, Interstate sends its employees from Illinois to the structure covered by the contract in Indiana and they apply the shingles. The purchase price is paid in Illinois. The material can be applied by any experienced person in that line of work, but the applications are made by Interstate's trained employees.

Great Lakes Dredge & Dock Company and Fitz Simons & Connell Dredge & Dock Company are New Jersey and Illinois corporations, respectively, with their principal offices and places of business at Chicago, Illinois, and qualified to do business in Indiana. Great Lakes and Fitz Simons' receipts consisted of amounts set forth in written contracts calling for the construction in Lake Michigan, within the territorial limits of Indiana, of breakwaters, lighthouses, mooring piles and other work, and the furnishing of the materials in connection therewith. All of these plaintiffs' engineers, superintendents, and supervisors had headquarters in Chicago, Illinois. Some of the personnel at the construction situs slept on vessels and others were taken by the plaintiffs or traveled at the plaintiffs' expense to and from Chicago daily. All of the payments in the amounts specified in the contracts were made at their Chicago offices, and the materials which the plaintiffs purchased outside of Indiana were transported to the sites in Indiana.

As to Holland and Fitz Simons, the gross receipts were received during 1935 to 1939, inclusive, and as to Interstate and Great Lakes, during 1933 to 1939, inclusive.

The appellants insist that their only activities were the solicitation of orders and installation of equipment in aid of interstate commerce; that the work, labor and materials furnished and used by them were purchased elsewhere and transported to Indiana; and that the acceptance of orders, as well as the manufacture or purchase of the equipment and the managerial and administrative phases of the businesses, occurred outside of Indiana. Appellants Great Lakes and Fitz Simons admit that "the activities at the construction sites were * * * intrastate in character" — that is, no portion of the activities taxed occurred outside the jurisdiction of the State of Indiana. On these premises it is contended that the receipts were not subject to the Act. Gwin, White & Prince v. Henneford, 305 U. S. 434, 59 S.Ct. 325, 83 L.Ed. 272; Western Live Stock v. Bureau, 303 U.S. 250, 58 S.Ct. 546, 82 L.Ed. 823, 115 A. L.R. 944; James v. Dravo, etc., 302 U. S. 134, 58 S.Ct. 208, 82 L.Ed. 155, 114 A.L.R. 318; and Dravo Contracting Co. v. James, 4 Cir., 114 F.2d 242, are cited in support of the contentions. We believe that the Henneford and the Western Live Stock cases are inapplicable because the tax there involved discriminated against interstate commerce, and that the Dravo cases are of no aid to the appellants.

The Holland and Interstate contracts were contracts to perform work and furnish labor and materials at specified places in Indiana; such contracts are local in character; Smith Corp. v. Ellis, 257 Mass. 269, 153 N.E. 548, 549; and Walstrom v. Oliver, etc., 161 Ala. 608, 50 So. 46, 48; and we have no hesitancy in saying that the State of Indiana has the right to apply its gross income tax to business actually transacted within its borders, notwithstanding that interstate commerce, as an incident, may have intervened at some point in the transaction. It is the effect of the tax upon commerce which interests the courts. To be sure, when the possible effect of a state tax is to place interstate commerce at a disadvantage and cumulative burdens are imposed, competitively, with purely local trade, the fact that the tax is conditioned on a local event will not save it, but where interstate commerce is not subjected to a double tax burden to which intrastate commerce is not exposed, the tax is not invalid, Adams Mfg. Co. v. Storen, 304 U.S. 307, 311, 58 S.Ct. 913, 82 L.Ed. 1365, 117 A.L.R. 429; Western...