People ex rel. Bass v. State Tax Comm'n

• Decision Date: 18 October 1921
• Citation: 232 N.Y. 42,133 N.E. 122
• Parties: PEOPLE ex rel. BASS, RATCLIFF & GRETTON, Limited, v. STATE TAX COMMISSION.
• Court: New York Court of Appeals Court of Appeals

232 N.Y. 42

133 N.E. 122

PEOPLE ex rel. BASS, RATCLIFF & GRETTON, Limited,

v.STATE TAX COMMISSION.

Court of Appeals of New York.

Oct. 18, 1921.

Certiorari by the People of the State of New York, on the relation of Bass, Ratcliff & Gretton, Limited, to review a determination of the State Tax Commission in assessing a franchise tax. From an order of the Appellate Division, Third Department (-- App. Div. --, 189 N. Y. Supp. 952), affiming the determination of the Commissioners, the relator appeals.

Affirmed.

Appeal from Supreme Court, Appellate Division, Third Department.

Robert C. Beatty, of New York City, for appellant.

Charles D. Newton, Atty. Gen. (C. T. Dawes, of Albany, of counsel), for respondent.

POUND, J.

Relator is a foreign manufacturing corporation organized under the laws of Great Britain and authorized to do business in the state of New York. For the privilege of doing business in this state it must annually pay in advance for the year beginning November 1st next preceding an annual franchise tax to be computed by the tax commission upon the basis of its net income for the year preceding. Tax Law (Consol Laws, c. 60) § 209. Its business in New York was the importation and sale of Bass ale manufactured at Burton-on-the-Trent. The question is as to the amount of the annual franchise tax for the year beginning November 1, 1918. It had in the year 1918 total segregated assets wherever located $3,212,405; actual value of shares of stock of other corporations $845,195-a total of $4,057,600. Limiting the value of such shares to 10 per cent. of the aggregate real and tangible personal property (Tax Law, § 214, subd. 6), the commission found total assets of $3,501,483; assets in New York $44,117. Its total net income for the year was $2,185,600. Its total sales in New York for the year amounted to about $240,000. Its net income from the New York business was nothing. The state tax commission under section 215 of the Tax Law providing for the computation of the tax by a comparison of total assets with assets in New York allocated as taxable income to the state of New York in the sum of $27,537.68, and computed a tax thereon at the rate of 3 per cent., amounting to $826.14. This tax was in lieu of all other taxes on personal property, capital stock, or income. Tax Law, § 219-j, and section 350, subd. 7. The method of computation is stated in detail in the recent case of People ex rel. Alpha P. C. Co. v. Knapp, 230 N. Y. 48, 129 N. E. 202.

The sole question considered on this appeal is the constitutionality of the operation of the Tax Law, which makes as the basis of relator's taxable net income in New York a portion of its net income earned wholly outside the state.

[1] The tax is denominated a franchise tax, and, although we have said in another connection (People ex rel. Alpha P. C. Co. v. Knapp. supra, 230 N. Y. 57, 129 N. E. 205) that ‘the tax imposed upon this franchise must be held in practical operation to be a tax upon the income. * * * This tax is equivalent to a tax upon relator's income,’ it is primarily a tax levied for the privilege of doing business in the state. Relator's business, although unprofitable in the year 1918, was extensive in its nature.

When in the practical workings of the statute by virtue of circumstances a year's business produces no net income, is so much of the statute as provides for a comparison of...