A.J. Tower Co. v. Commonwealth

• Decision Date: 07 March 1916
• Citation: 223 Mass. 371,111 N.E. 966
• Parties: A. J. TOWER CO. v. COMMONWEALTH.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

223 Mass. 371

111 N.E. 966

A. J. TOWER CO.

v.COMMONWEALTH.

Supreme Judicial Court of Massachusetts, Suffolk.

March 7, 1916.

Case Reserved from Supreme Judicial Court, Suffolk County.

Suit by the A. J. Tower Company against the Commonwealth of Massachusetts. Case reserved on petition and answer. Petition dismissed.

Fish, Richardson, Herrick & Neave, of Boston (J. W. Farley and Stafford F. Johnson, both of Boston, of counsel), for petitioner.

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

RUGG, C. J.

This suit is brought to test the validity of the excise tax laid upon the plaintiff's franchise as a corporation. The material facts are that the plaintiff, a domestic corporation, owned shares in national banks doing business in Boston, which were assessed to the plaintiff and the tax thereon paid by the respective banks in accordance with the assumed requirements of the general tax act. St. 1909, c. 490, pt. 3, §§ 11 to 20. The validity of that assessment is not before us. In determining the amount of the franchise tax to be levied on the plaintiff, the tax commissioner treated these shares of national bank stock as ‘securities which if owned by a natural person resident in this commonwealth would be liable to taxation,’ part 3, § 43, of the tax act, and refused to make deductions of them as ‘securities which if owned by a natural resident of this commonwealth would not be liable to taxation,’ under section 41 of the same part.

This method was in accordance with the tax law. Shares of stock in a national bank, if owned by a natural person resident in the commonwealth, are made subject to taxation. It is provided by section 11, part 3, that:

‘All the shares of stock in banks * * * existing by authority of the United States or of the commonwealth, and located within the commonwealth, shall be assessed to the owner thereof in the city or town in which such bank is located.’

By the two following sections, the bank is required to pay the tax and is given a lien upon the shares for such payment. This tax is levied by authority of U. S. Rev. St. § 5219.

The tax thus assessed upon the shares of stock in national banks is not a tax upon the banks, but upon the shareholders. That is the plain language of the statute. The tax is assessed to the owners of the shares. Although the bank is required to pay the tax, it makes that payment not in its own right, but as agent for the shareholder. This follows, also, from the provision that the bank is given a lien on the shares for the payment of the tax. It hardly could be given a lien for its own tax. Impliedly it has a right of action if necessary to recover the amount so paid. So are the decisions. Nat. Bank of Commerce v. New Bedford, 155 Mass. 313, 316, 29 N. E. 532;Van Allen v. Assessors, 3 Wall. 573, 584, 18 L. Ed. 229;Home Savs. Bank v. Des Moines, 205 U. S. 503, 518, 27 Sup. Ct. 571, 51 L. Ed. 901;Nat. Bank v. Gill, 218 Fed. 600, 134 C. C. A. 358. See Corry v. Baltimore, 196 U. S. 466, 472, 25 Sup. Ct. 297,49 L. Ed. 556.

The contention that natural persons, when owners, are liable only to assessment and not to taxation, is untenable. The assessment confessedly is made to the owner. But the tax is clearly paid on his account and by the bank as his special agent for that purpose. Tappan v. Merchants' Nat. Bank, 19 Wall. 490, 22 L. Ed. 189. The indubitable conclusion is that shares of stock in national banks, when owned by a natural person resident in the commonwealth, are liable to taxation.

It is urged that the Legislature otherwise has manifested an intention that such stock should not be included in the assets upon which the corporation franchise tax is computed. Reliance is placed on that part of section 17 which provides that:

‘No bank, the shares of which are liable to taxation by section eleven, shall be liable thereto under the provisions of section forty-three, nor shall the shareholders be liable to taxation for their shares therein for any purpose, except under the provisions of this part.’

The words ‘this part’ in this connection are not fairly referable to the sections dealing with the taxation of bank shares, but mean part 3 of the tax act, which relates to ‘Taxation of Corporations.’ It is used manifestly in contrast to ‘part 1’ and the other divisionsof the act called parts. Section 17 has no bearing upon the present issue. Its effect is to exempt banks whose shares are taxed under section 11 from a franchise excise under section 43, and to provide that the shareholders shall not be subjected to a property tax other than that established by section 11. The plaintiff is not taxed for a property tax on the shares save under section 11. Moreover, the exception at the end of the section evidently contemplates the possibility that they may be considered in determining the corporation excise tax of the owner of shares.

The express provision of section 18, to the effect that in collecting the excise upon the franchises of savings banks and of insurance companies, certain deductions are to be made of the amounts paid as property tax upon shares of stock in national banks owned by savings banks or insurance companies, is strong argument that no such deduction was intended as to other corporations.

The most formidable argument against this interpretation is that in a certain limited way it results in the consideration, for the purpose of fixing the excise tax, of property which already has been subjected to taxation. That affords no constitutional objection to the validity of an excise tax statute. The tax levied upon the plaintiff, in determining the amount of which these shares were considered, is strictly an excise and not a property tax. It is an excise upon the privilege or commodity or franchise of existing and doing business as a corporation. Baltic Mining Co. v. Com., 207 Mass. 381, 93 N. E. 831, and S. S. White Dental Mfg. 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. It is no objection to the validity of such an excise that, in measuring its amount, consideration is given to property which could not be taxed, such as government bonds, Com. v. Hamilton Co., 12 Allen, 298, affirmed in 6 Wall. 611, 18 L. Ed. 907; real estate and personal property located in another state and there taxed, American Glue Co. v. Com., 195 Mass. 528, 81 N. E. 302,122 Am. St. Rep. 268; imported merchandise in bond, Farr Alpaca Co. v. Com., 212 Mass. 156, 98 N. E. 1078; or corporate stocks taxed in another jurisdiction, Bellows Falls Power Co. v. Com., 222 Mass. 51, 109 N. E. 891. As was said in Flint v. Stone Tracy Co., 220 U. S. 107, at page 163, 31 Sup. Ct. 342, at page 354 [55 L. Ed. 389, Ann. Cas. 1912B, 1312]:

‘The distinction lies between the attempt to tax the property as such and to measure a legitimate tax upon the privileges involved in the use of such property.’

Such taxation is not double taxation in a constitutional sense. Doubtless every reasonable presumption is to be made against even this kind of quasi double taxation. If the instant statute involved a general scheme of such taxation, perhaps other considerations would arise. See Oliver v. Washington Mills, 11 Allen, 268, 279;Loring v. Beverly, 110 N. E. 974. But it does not evince a broad design to that end. It happens that in this comparatively narrow class of cases, probably not involving large numbers of persons or considerable amounts of property, there is an appearance of double taxation. Of course, if...