Int'l Paper Co. v. Commonwealth

• Citation: 228 Mass. 101,117 N.E. 246
• Parties: INTERNATIONAL PAPER CO. v. COMMONWEALTH.
• Decision Date: 13 September 1917
• Court: United States State Supreme Judicial Court of Massachusetts

228 Mass. 101

117 N.E. 246

INTERNATIONAL PAPER CO.

v.COMMONWEALTH.

Supreme Judicial Court of Massachusetts, Suffolk.

Sept. 13, 1917.

Exceptions from Supreme Judicial Court, Suffolk County; William Caleb Loring, Judge.

Petition by the International Paper Company against the Commonwealth of Massachusetts to recover an excise tax. On exceptions to a decree dismissing the petition. Petition dismissed.

Chas. A. Snow, Frank T. Benner, and Wm. P. Evarts, all of Boston, for petitioners.

Henry C. Attwill, Atty. Gen., and Wm. Harold Hitchcock, Asst. Atty. Gen., for the Commonwealth.

Phillips Ketchum, of Boston, amicus curiae.

RUGG, C. J.

This is a petition by a corporation organized under the laws of the state of New York to recover an excise tax paid by it, levied for the privilege of doing business in this commonwealth, assessed to it under St. 1909, c. 490, pt. 3, § 56, and St. 1914, c. 724. The material facts are that the authorized capital stock of the petitioner is $45,000,000, of which between $39,000,000 and $40,000,000 has been issued and is outstanding. Its charter confers authority ‘to maintain, conduct and manage in the state of New York and elsewhere the business of manufacturing, producing, selling and dealing in all kinds of paper.’ It maintains and operates 23 paper mills or plants connected with the manufacture of paper, chiefly located in New York, Vermont, New Hampshire and Maine. At Montague in this commonwealth it owns and operates a paper mill comprising real estate, water power, machinery and personal property, where is manufactured paper sold in Massachusetts and also in other states of this country. The petitioner maintains a selling office at Boston, with bookkeeping and clerical force, where sales and contracts for sale of paper for delivery both within and without this state are made by two salesmen subject to approval by employés of the petitioner at its main office in New York. About 86 per cent. of sales and contracts negotiated and made through its Boston office or for execution in Massachusetts require or contemplate the transportation and delivery of goods from a mill located outside Massachusetts to purchasers in Massachusetts or from its Massachusetts mill to purchasers outside Massachusetts; and about 14 per cent. of such sales and contracts relate to goods to be delivered to a Massachusetts purchaser from its Massachusetts mill. No stock of goods is kept on hand in Massachusetts from which sales are made deliverable, the contracts being largely on long terms for the entire supply of paper required for newspapers, but the petitioner aims to have on hand at its mills and in transit ample stock to supply the needs of its customers.

Every question presented upon this record would be settled contrary to the contentions of the petitioner by Keystone Watch Case Co. v. Com., 212 Mass. 50, 98 N. E. 1063,Attorney General v. Electric Storage Battery Co., 188 Mass. 239, 74 N. E. 467,Marconi Wireless Telegraph Co. v. Com., 218 Mass. 558, 106 N. E. 310, Ann. Cas. 1916C, 214, and by Baltic Mining Co. v. Com., 207 Mass. 381, 93 N. E. 831, and S. S. White Dental Manufacturing Co. v. Com., 212 Mass. 35, 98 N. E. 1056, Ann. Cas. 1913C, 805, both affirmed in 231 U. S. 68, 34 Sup. Ct. 15, 58 L. Ed. 127, except for the fact that a part of the excise tax here complained of was assessed under the provisions of St. 1914, c. 724, enacted since those decisions.

The constitutionality of that statute is assailed. Its crucial section is printed in a footnote.¹

The foreign corporation tax law heretofore considered (St. 1909, c. 490, pt. 3, § 56²) has exacted from every foreign corporation doing a domestic business within the commonwealth an excise tax of one-fiftieth of 1 per cent. on the par value of its authorized capital stock, the maximum amount in no event to exceed $2,000 in any year. By the St. 1914, c. 724, that maximum is removed and an excise at a lower rate is imposed measured by the excess of authorized capital stock over $10,000,000.

The question is whether the removal of a maximum limitation of the excise and its measurement in part as to the corporations having an authorized capitalization in excess of $10,000,000 at a rate different from that applied to capitalization up to that sum destroy the validity of the excise.

[3] The tax levied by said section 56 is strictly an excise and not a property tax, and does not violate any provision of the Constitution of Massachusetts or of the United States Constitution. That was decided by the decisions already cited. It was affirmed by the United States Supreme Court in 231 U. S. 68, 34 Sup. Ct. 15, 58 L. Ed. 127. Hence the general nature and purpose of our foreign corporation tax law is settled. It is not open to further discussion. That general nature and purpose does not appear to us to be changed by St. 1914, c. 724. The circumstance that by its terms the entire authorized capital is used for a measure of the excise is not fatal. That particular point as a federal question is foreclosed by binding decisions. It was said in Pembina Consolidated Silver Mining & Milling Co. v. Pennsylvania, 125 U. S. 181, at page 186, 8 Sup. Ct. 737, at page 739, 31 L. Ed. 650, that:

The state ‘could make the grant of the privilege [of doing intrastate business by a foreign corporation] conditional upon the payment of the license tax, and fix the sum according to the amount of the authorized capital of the corporation.’

The same point was decided in Horn Silver Mining Co. v. New York, 143 U. S. 305, 12 Sup. Ct. 403, 36 L. Ed. 164. The statute there attacked as violative of the federal Constitution imposed an excise measured by a percentage on its capital stock with modifications dependent upon dividends or want of dividends. It there was said, at page 315 of 143 U. S., at page 405 of 12 Sup. Ct.,36 L. Ed. 164:

‘Having the absolute power of excluding the foreign corporation the state may, of course, impose such conditions upon permitting the corporation to do business within its limits as it may judge expedient; and it may make the grant or privilege dependent upon the payment of a specific license tax, or a sum proportioned to the amount of its capital.’

And again at page 317:

‘There seems to be a hardship in estimating the amount of the tax upon the corporation, for doing business within the state, according to the amount of its business or capital without the state. That is a matter, however, resting entirely in the control of the state, and not a matter of federal law, and with which, of course, this court can in no way interfere. * * * It is said that against nearly all other foreign corporations, except this one, the taxes upon their franchises have been computed upon the basis of the capital employed within the state; but as to that we can only repeat what was said in the Court of Appeals of the state, that, if this be true, the defendant may have reason to complain of unjust discrimination and may properly appeal for relief to the Legislature of the state, but that is not within the power of the court to grant any relief however great the hardship upon it. The extent of the tax is a matter purely of state regulation, and any interference with it is beyond the jurisdiction of this court. The objection that it operates as a direct interference with interstate commerce we do not think tenable.’

The words quoted from the two decisions of the United States Supreme Court last cited were not chance expressions used in the course of an argument by way of illustration, but were directed to the precise terms of statutes imposing an excise tax exacted as a condition to the doing of domestic business by a foreign corporation. Cohen v. Virginia, 6 Wheat. 264, 399, 5 L. Ed. 257. These expressions were used with deliberation in pronouncing important judgments, and formed essential links in the chain of reasoning by which conclusions were reached. In Kansas City, Ft. Scott & Memphis Railway v. Kansas, 240 U. S. 227, 36 Sup. Ct. 261, 60 L. Ed. 617, this principle was reaffirmed. It was said at pages 232 and 233 of 240 U. S., at page 262 of 36 Sup. Ct.,60 L. Ed. 617:

‘The authority of the state to tax this privilege, or franchise, has always been recognized and it is well settled that a tax of this sort is not necessarily rendered invalid because it is measured by capital stock which in part may represent property not subject to the state's taxing power. Thus, in Society for Savings v. Coite, 6 Wall. 594, 606, 607 , the power to levy the franchise tax was deemed to be ‘wholly unaffected’ by the fact that the corporation had invested in federal securities; and in Home Ins. Co. v. New York, 134 U. S. 594, 599, 600, 10 Sup. Ct. 593, 33 L. Ed. 1025, it was held that a tax upon the privilege of being a corporation was not rendered invalid because a portion of its capital (the tax being measured by dividends) was represented by United States bonds. These cases were cited with distinct approval and the rule they applied in distinguishing between the subject and the measure of the tax was recognized as an established one, in Flint v. Stone-Tracy Co., 220 U. S. 107, 165, 31 Sup. Ct. 342, 55 L. Ed. 389, Ann. Cas. 1912B, 1312. It is also manifest that the state is not debarred from imposing a tax upon the granted privilege of being a corporation because the corporation is engaged in interstate as well as intrastate commerce. Delaware Railroad Tax, 18 Wall. 206, 231, 232, 21 L. Ed. 888;State Railroad Tax Cases, 92 U. S. 575, 603, 23 L. Ed. 663; Philadelphia & Southern S. S. Co. v. Pennsylvania, supra;¹Ashley v. Ryan, 153 U. S. 436, 14 Sup. Ct. 865, 38 L. Ed. 773;Cornell Steamboat Co. v. Sohmer, 235 U. S. 549, 559, 560, 35 Sup. Ct. 162, 59 L. Ed. 355. And, agreeably to the principle above mentioned, it has never been and cannot be maintained that an annual tax upon this privilege is in itself, and in all cases, repugnant to the federal power merely because it is measured by...