National Leather Co v. Commonwealth of Massachusetts

• Decision Date: 28 May 1928
• Docket Number: No. 205,205
• Citation: 48 S.Ct. 534,277 U.S. 413,72 L.Ed. 935
• Parties: NATIONAL LEATHER CO. v. COMMONWEALTH OF MASSACHUSETTS
• Court: U.S. Supreme Court

277 U.S. 413

48 S.Ct. 534

72 L.Ed. 935

NATIONAL LEATHER CO.

v COMMONWEALTH OF MASSACHUSETTS.

No. 205.

Argued Feb. 23, 1928.

Decided May 28, 1928.

Mr. Philip Nichols, of Boston, Mass., for plaintiff in error.

[Argument of Counsel from pages 414-417 intentionally omitted] Messrs. James S. Eastham, of Lawrence, Mass., and F. Delano Putnam, of Boston, Mass., for defendant in error.

[Argument of Counsel from pages 414-417 intentionally omitted] Mr. Justice SANFORD delivered the opinion of the Court.

The National Leather Co., a Maine corporation, applied by two petitions to the Supreme Judicial Court of Massachusetts for Suffolk County,¹ for the abatement of portions of the taxes that had been exacted of it by the commissioner of corporations and taxation, under chapter 63 of the General Laws, for the privilege of carrying on business in Massachusetts in the years 1922 and 1923. The petitions alleged that the statute as applied was an attempt to tax property not within the jurisdiction of Massachusetts and repugnant to the Fourteenth Amendment. The cases were consolidated, and at the hearing, by order of the presiding justice, were reserved for determination by the full court upon the pleadings and an agreed statement of facts. The court in banc sustained the excise, 256 Mass. 419, 152 N. E. 916, and in accordance with its rescript the court for Suffolk County dismissed the petitions. The writ for error was properly directed to the latter court. See Davis v. Cohen Co., 268 U. S. 638, 639, 45 S. Ct. 633 (69 L. Ed. 1129).

The statute provides that every foreign corporation shall pay annually 'with respect to the carrying on or doing of business by it within the Commonwealth,' an excise consisting in part of an amount 'equal to five dollars per thousand upon the value of the corporate excess employed by it within the Commonwealth,' which is defined as 'such proportion of the fair cash value of all the shares constituting the capital stock * * * as the value of the assets, both real and personal, employed in any business within the Commonwealth * * * bears to the value of the total assets of the corporation,' with certain exceptions not here material. Section 30, cl. 4; section 39(1).

The business of the National Leather Co.-hereinafter called the petitioner-was the purchasing of hides and skins, having them tanned by other companies, and selling the leather through the tanners. It operated no tanneries itself. Its business was conducted wholly in Massachusetts; its business offices were located there; and it carried on no active business outside the state. Among other properties it owned the entire capital stock, except a few qualifying shares, of the A. C. Lawrence Co. and the National Calfskin Co., two other Maine corporations. Its upper leather was tanned chiefly by these two subsidiary corporations; and its sole leather by other corporations in which it had no interest.

The business of the Lawrence Company was the tanning of hides, principally for upper leather, which it sold on a commission basis. Most of its tanning was done for the petitioner. Its tanneries were in Massachusetts, where it was engaged in business, but it was qualified to do business and had selling branches in four or five other States. The business of the Calfskin Company was tanning hides of the petitioner. Its tannery was in Massachusetts, where it was engaged in business. It had no property or selling branches outside Massachusetts, and was not qualified to do business in any other State except Maine.

In determining the portions of the excises based upon 'corporate excess' the commissioner included all the capital stock of the Lawrence Company and the Calfskin Company owned by the petitioner, as part of the assets employed by it in business within Massachusetts; but did not include any stocks owned by it in other corporations which were not engaged in business within Massachusetts.

The petitions for abatement were directed solely to the portions of the excises assessed by reason of this inclusion of the capital stocks of the Lawrence and Calfskin Companies.

The petitioner contends that the inclusion of these stocks as part of the assets employed by it in business in Massachusetts for the purpose of measuring its taxable corporate excess is in effect the imposition of a tax upon the stocks themselves; that these stocks, as distinguished from the assets of the subsidiary corporations, had no situs in Massachusetts and were not within its jurisdiction; and that the statute, so applied, is therefore beyond the power of the State and violates the due process clause of the Fourteenth Amendment.

The Massachusetts court, in holding that the statute had been properly construed and applied by the commissioner and in sustaining the validity of the taxes, said:

'The commissioner * * * in determining under G. L. c. 63, § 44, the 'corporate excess employed within the commonwealth by, every foreign corporation' doing domestic business here, is required to give those words the definition and to follow the legislative mandate in G. L. c. 63, § 30, cl. 4. * * * The petitioner held the stock in its two subsidiary corporations for the lawful prosecution of its business. All the facts...