S.S. White Dental Mfg. Co. v. Com.
| Decision Date | 24 May 1912 |
| Citation | 98 N.E. 1056,212 Mass. 35 |
| Parties | S. S. WHITE DENTAL MFG. CO. v. COMMONWEALTH. |
| Court | United States State Supreme Judicial Court of Massachusetts Supreme Court |
C. A. Snow, W. P. Everts, and J. H. Knight, all of Boston, for petitioner.
J. M Swift and Andrew Marshall, both of Boston, for the Commonwealth.
The petitioner is a foreign corporation organized under the laws of Pennsylvania, where are its principal offices. Its business is manufacturing artificial teeth and dental instruments and supplies and buying and selling such products. It does not manufacture in Massachusetts, but it has maintained for ten years in Boston a salesroom, offices store and stockrooms, where it keeps a stock of goods sufficient for carrying on its business. At this place 54 persons are employed, 12 of whom are salesmen traveling in New England and the maritime provinces. It sells goods at wholesale and retail over its counters. About 50 per cent. of its sales are to persons residing in Massachusetts. Sales of nearly an equal quantity are made at the Boston place of business for delivery to purchasers outside of Massachusetts. Goods so sold are not transported by the petitioner, but by common carriers, the petitioner receiving a bill of lading in which it is named as consignor, and the purchaser as consignee. The bill of lading is mailed to the consignee, who, upon its surrender to the carrier, receives the goods. Other orders are received at the Boston office, which are filled by deliveries from factories of the petitioner in other states. Approximately 10 per cent. of the total sales of the petitioner are made in Massachusetts, one-half of this percentage being to residents of Massachusetts, and one-half to purchasers residing outside of Massachusetts. The petitioner's authorized and issued capital stock is $1,000,000. Its stock on hand, fixtures and bank deposits in Boston average $100,000. For the year 1911 the petitioner paid to the commonwealth an excise under St. 1909, c. 490, pt. 3; 56, which was measured by one-fiftieth of 1 per cent. of the petitioner's authorized capital stock, and amounted to $200. This petition is brought to recover the excise so paid.
The several grounds of this claim by the petitioner relate to the constitutionality of the excise on foreign corporations for doing business in the commonwealth provided by St. 1909, c. 490, pt. 3, § 56, and may be grouped as follows: (1) That it imposes an unlawful burden on interstate commerce. (2) That it takes property without due process of law. (3) That it violates the requirement for equal protection of the law. The constitutionality of this statute was before this court first in Attorney General v. Elecric Storage Battery Co., 188 Mass. 239, 74 N.E. 467, 3 Ann. Cas. 631. There it was held as not intended to apply to foreign corporations having places of business in this commonwealth devoted exclusively to interstate business, and, as so interpreted, 'plainly constitutional.' In Baltic Mining Co. v. Com., 207 Mass. 381, 93 N.E. 831, its constitutionality was discussed again. In behalf of the petitioner there it was urged that Western Union Telegraph Co. v. Kansas, 216 U.S. 1, 30 S.Ct. 190, 54 L.Ed. 355, and Pullman Co. v. Kansas, 216 U.S. 56, 30 S.Ct. 232, 54 L.Ed. 378, required an overruling of Attorney General v. Electric Storage Battery Co., but it was held in an exhaustive opinion of the court, speaking through Chief Justice Knowlton, that our statute was not governed by these decisions, and was constitutional notwithstanding them. We are asked to review and overrule these two decisions of our own, by reason of further recent decisions of the United States Supreme Court. The material part of the statute is that foreign corporations are required to pay an annual excise of 'one-fiftieth of 1 per cent. of the par value of its authorized capital stock as stated in its annual certificate of condition; but the amount of such excise tax shall not in any one year exceed the sum of $2,000.'
1. It is urged, first, that this is not really an excise, but a property tax upon all the property of the petitioner as represented by its capital stock, and hence a direct burden upon interstate commerce.
Before examining the federal cases relied upon by the petitioner, a reference to the nature of our system of exacting revenue from corporations will be helpful, for the purpose of determining whether the tax is what the Legislature called it, namely, an excise or whether it is a property tax, as is now contended. Under our Constitution, which has been the organic law of this commonwealth since 1780, taxes are of two kinds, property taxes and excises. The first of these must be both proportional and reasonable. The latter need not be proportional, but only reasonable. This distinction has been marked often in legislation, and defined somewhat in judicial decision. It was said in 1815, by Chief Justice Parker in Portland Bank v. Apthorp, 12 Mass. 252, 255:
The broad power of levying excises has arisen from the grant to the Legislature in the Constitution to impose them upon (among other subjects) any 'commodities' within the commonwealth. This word is of comprehensive signification, and includes the privilege of transacting business as a corporation, whether domestic or foreign, within the commonwealth. Com. v. Lancaster Savs. Bank, 123 Mass. 493-495.
It has been said many times, through the years since the adoption of the Constitution, that any property tax in order to be valid under the Constitution must be proportional, and any such tax assessed upon certain property, at a rate different from that upon other property, is disproportionate. Oliver v. Washington Mills, 11 Allen, 268, 275; Cheshire v. County Commrs., 118 Mass. 386, 389; Northampton v. County Commrs., 145 Mass. 108, 109, 13 N.E. 388; Opinion of Justices, 195 Mass. 607, 84 N.E. 499; Opinion of Justices, 208 Mass. 616, 94 N.E. 1043. The policy of the commonwealth relative to the taxation of corporations, both domestic and foreign, has been founded upon this distinction between a property tax and an excise. It was established in 1862 as to savings banks, and in 1864 as to business corporations. The constitutionality of these acts was attacked. The excise upon the commodity of exercising the business of a savings bank was based upon the amount of its deposits, and upon that of being a business corporation on the market value of its capital stock after deducting its real estate and machinery, if any taxed locally.
These excises were sustained as valid, on the ground that they were not property taxes. Com. v. People's Five Cent Savs Bank, 5 Allen, 428; Com. v. Provident Inst. for Savs., 12 Allen, 312; Com. v. Hamilton Mfg. Co., 12 Allen, 298. In the last two cases, the constitutionality of the statutes was assailed on the further ground that each corporation had a substantial part of its assets invested in bonds of the United States which were exempt from taxation under the Constitution of the United States. It was urged with great earnestness that an excise was unconstitutional which was based, in one case, upon the amount of deposits, a large part of which was invested in United States bonds, and in the other upon market value of shares deriving a material and ascertainable part of their value from the ownership of such bonds. On this ground each case was taken to the Supreme Court of the United States. Provident Inst. for Savs. v. Mass., 6 Wall. 611, 18 L.Ed. 907; Hamilton Co. v. Mass., 6 Wall. 632, 18 L.Ed. 904. In the opinion in the latter case, it was said at 6 Wall. 639-640 (18 L.Ed. 904): 'Separated from the peculiar provision of the state Constitution, and the long practice under the original decision [Portland Bank v. Apthorp, 12 Mass. 252] the present decision of the state court upon the subject might well be criticised as founded in unsubstantial distinctions, but when weighed as an exposition of that peculiar clause and in view of the long practice of the state, commencing long before the prior decision was made, it is not possible to withhold from the conclusion a full and unqualified concurrence. * * * Property taxation and excise taxation, as authorized in the Constitution of the state, are perfectly distinct, and the two systems are easily distinguished from each other, if we adopt the definition of the word 'commodities' as uniformly given by the courts of the state and as universally understood by the taxpayers and assessors.' Society for Savs. v. Coite, 6 Wall. 594, 18 L.Ed. 897. The Legislature has applied the principle of an excise to telegraph and telephone companies, whether foreign or domestic, operating lines partly within and partly without the state, and these, though differing in the mode of ascertainment from the one now under consideration, have been upheld. Western Union Telegraph Co. v. Mass., 125 U.S. 530, 8 S.Ct. 961, 31 L.Ed. 790; Mass. v. Western Union Telegraph...
To continue reading
Request your trial