In re G. H. Hammond Co.

• Decision Date: 28 March 1929
• Docket Number: No. 139.,139.
• Citation: 224 N.W. 655,246 Mich. 179
• Parties: In re G. H. HAMMOND CO.
• Court: Michigan Supreme Court

246 Mich. 179

224 N.W. 655

In re G. H. HAMMOND CO.

No. 139.

Supreme Court of Michigan.

March 28, 1929.

Certiorari to Corporation Tax Appeal Board.

Certiorari by the G. H. Hammond Company to review an order of the corporation tax appeal board, affirming computation of privilege fee to be paid by petitioner. Determination of secretary of state and corporation tax appeal board affirmed.

Argued before the Entire Bench.Stevenson, Butzel, Eaman & Long, of Detroit (Victor W. Klein, of Detroit, of counsel), for plaintiff.

Wilber M. Brucker, Atty. Gen., and Harry A. Metcalf, Asst. Atty. Gen. (Alice E. Alexander, of Lansing, of counsel), for defendant.

NORTH, C. J.

The appellant is a Michigan corporation. Under Act No. 85 of the Public Acts 1921, as amended, it is required to pay the state an annual privilege fee. In computing this tax, the secretary of state included the following items: Cash in banks (none in Michigan) $230,086.36; notes and accounts receivable $1,764,265.14; membership in Chicago Board of Trade $2,300; and deferred charges $54,076.87. The G. H. Hammond Company opposed this method of computing the amount it should pay, on the ground that it has never conducted any of its business within the state of Michigan, that it does not own or use any tangible property physically located within this state, and that its main office is in Chicago where it operates a large meat packing plant and carries on other business necessarily incident thereto. The plaintiff's contention as stated in its brief is:

‘That since the statute prescribes the tax upon corporations for and as one upon the privilege of exercising the corporate franchise and of doing business within this State, it cannot, by any proper rule of construction, apply to domestic corporations owning and using no property, conducting and transacting no business of any nature whatsoever, in Michigan.

‘That even though the statute does apply, it cannot properly be construed so as to include in the computation of the tax the four items of intangibles, which were created and used exclusively in connection with business done and property located without the State, having a commercial and taxable situs in states other than Michigan.’

It is also urged that the construction given the statute by the secretary of state works a discrimination against domestic corporations, and renders that act unconstitutional as being in violation of the Fourteenth Amendment to the Federal Constitution. With one exception, the questions here presented are disposed of by the decision handed down herewith in Re Truscon Steel Co. (Mich.) 224 N. W. 653. In that case the plaintiff maintained an office and conducted a small part of its business in this state; while in the instant case, the G. H. Hammond Company has no property physically located in Michigan, conducts none of its business in this state, and maintains its principal office in Illinois; although, in accordance with the provision of the Michigan Corporation Act, it has designaged a charter office in this state. It is the contention of the G. H. Hammond Company that the privilege tax cannot be imposed upon a domestice corporation, unless it is doing business in Michigan; while it is asserted in behalf of the state that every corporation organized under the Michigan law must pay the privilege fee annually, notwithstanding it does no business in Michigan, because it has (in the words of the statute) ‘the privilege of exercising its franchise and of transacting its business within this state’; and for that right or privilege the excise tax is imposed by the statute under which the appellant is incorporated.

It is apparent from the context of the statute itself that this provision was intended to apply to every corporation organized under the laws of this state. Section 4 of the Act, in part, reads: ‘Every corporation organized or doing business under the laws of this State, * * * shall, * * * for the privilege of exercising its franchise and of transacting its business within this State, pay to the Secretary of State, an annual fee,’ etc.

Michigan has seen fit to adopt legislation by which the annual privilege fee is imposed upon a corporation organized under its laws, regardless of whether the corporation does any business within the state. The can be no question but that the state is possessed of the power to impose such a tax upon its domestic corporations.

The question now before us is so squarely ruled by the decision in Cream of Wheat Co. v. Grand Forks, 253 U. S. 325, 40 S. Ct. 558, 64 L. Ed. 931, that we quote somewhat at length. The annual tax there sustained was imposed under the laws of North Dakota and was construed to be ‘in substance and effect * * * a tax upon the privilege of being a corporation.’ Justice Brandeis delivering the opinion of the court said:

‘The Cream of...