Springdale Finishing Co. v. Commonwealth

• Decision Date: 30 June 1922
• Parties: SPRINGDALE FINISHING CO. v. COMMONWEALTH.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

242 Mass. 37

136 N.E. 250

SPRINGDALE FINISHING CO.

v.COMMONWEALTH.

Supreme Judicial Court of Massachusetts, Suffolk.

June 30, 1922.

Case Reserved from Supreme Judicial Court, Suffolk County; John C. Crosby, Judge.

Proceeding by the Springdale Finishing Company against the Commonwealth for abatement of an excise tax assessed against it on February 28, 1921, as of July 24, 1920. Reserved by a single justice on the petition, answer and agreed statement of facts for the determination of the full court. Petiion dismissed.

From the agreed statement of facts it appeared that a tax was assessed upon petitioner as of April 1, 1920, and paid. On July 29, 1920, the petitioner disposed of all of its assets and business, and thereafter the commissioner of corporations and taxation assessed a tax as of a date five days before such sale, based on the petitioner's net income from January 1, 1920, to the date of the sale.

S. R. Wrightington, of Boston, for petitioner.

J. Weston Allen, Atty. Gen., and Edwin H. Abbott, Jr., Asst. Atty. Gen., for the Commonwealth.

RUGG, C. J.

This is a petition under G. L. c. 63, § 77, for the abatement of a tax alleged to have been exacted illegally. The petitioner, a corporation organized under the laws of this commonwealth, confessedly was carrying on business within this commonwealth up to July 29, 1920. On that date it conveyed all its assets and business to a Delaware corporation. No notice of this sale was given to the tax commissioner or any other officer of the commonwealth before November 16, 1920. On September 21, 1920, at a stockholders' meeting held in Massachusetts, the dissolution of the petitioner as a corporation was authorized. On November 12, 1920, petition for dissolution was filed and decree granting same was entered on March 10, 1921. The fiscal year of the petitioner was coterminous with the calendar year. The last return of net income rendered by the petitioner to the federal government next prior to April 1, 1920, covered the period from January 1, 1919, to December 31, 1919, both inclusive. The tax here in issue was in truth measured in respect of income for the period January 1, 1920, to July 29, 1920, both inclusive, under St. 1919, c. 355, as amended by St. 1920, c. 549, now G. L. c. 63.

The tax is an excise and not a property tax. It is so declared in section 2 of said chapter 355. There is no reason to doubt the accuracy of the name given to it by the General Court. S. S. White Co. v. Commonwealth, 212 Mass. 35, 43, 98 N. E. 1056, Ann. Cas. 1913C, 805. It is in substance as well as in name an excise. It is imposed upon every domestic corporation ‘with respect to the carrying on or doing business by it.’ Said chapter 355 follows both in form and substance the system of raising revenue for the support of government from domestic corporations by excise rather than by property tax, which long has been established in this commonwealth. Eaton, Crane & Pike Co. v. Commonwealth, 237 Mass. 523, 527, 130 N. E. 99;Farr Alpaca Co. v. Commonwealth, 212 Mass. 156, 98 N. E. 1078, and cases there collected; Bellows Falls Power Co. v. Commonwealth, 222 Mass. 51, 109 N. E. 891, Ann. Cas. 1916C, 834.

This tax is a single excise measured by the sum of a percentage on its corporate excess added to a percentage on its net income as those terms are defined in the act. Section 2. Although both property and income are used as a basis for its calculation, the tax is nevertheless an excise on the commodity of exercising the corporate franchise and not a tax on property or on income. The tax here assailed was levied in respect to the doing of business during the calendar year beginning on January 1, 1920. This is the plain effect of said chapter 355. That act was approved on July 24, 1919. By section 33 it went into effect on January 1, 1920. The first return under the act was required to be filed by the corporation during the first ten days of April, 1920, as of the 1st day of that April. Section 4. The items of that return included the corporate excess as of that 1st day of April and the ‘net income for the taxable year as required to be reported by the corporation in its last prior return to the federal government.’ That ‘last prior return’ was and of necessity must have been for the calendar year 1919. The next excise tax, being that here in question, was levied in respect to the doing of business during the calendar year beginning with January 1, 1920. This part of the excise is levied for a period of time that is past and not for a period in the future. The effect of the statute was to impose an excise for the commodity of carrying on business by a domestic corporation for a less period than one...