William A. Slater Mills, Inc. v. Gilpatric

• Decision Date: 07 July 1922
• Citation: 97 Conn. 521,117 A. 806
• Court: Connecticut Supreme Court
• Parties: WILLIAM A. SLATER MILLS, Inc., v. GILPATRIC, STATE TREASURER.

117 A. 806

97 Conn. 521

WILLIAM A. SLATER MILLS, Inc., v. GILPATRIC, STATE TREASURER.

Supreme Court of Errors of Connecticut.

July 7, 1922

Case Reserved from Superior Court, Hartford County; John P Kellogg, Judge.

Action by Wm. A. Slater Mills, Inc., against G. Harold Gilpatric State Treasurer, to recover a tax paid by plaintiff with interest. Case reserved for the advice of the Supreme Court of Errors. Superior court advised that the tax is not illegal.

Arthur L. Shipman, of Hartford, for plaintiff.

Ralph M. Grant, of Hartford, for defendant.

WHEELER, C.J.

The question under this reservation upon which the advice of this court is desired arises upon the stipulated facts. The essential facts are: That the plaintiff is a Massachusetts corporation, and in 1916 was duly admitted as a foreign corporation to transact certain business operations in Connecticut, and continued such operations until June 30 1920, when it ceased them and filed its certificate of withdrawal with the Secretary of State.

On March 21, 1921, the Tax Commissioner directed the plaintiff to file its income report for the year 1920 with his department up to the date when its certificate of withdrawal was filed in the office of the Secretary. The plaintiff under protest pretext filed a return within the time as extended by the tax commissioner, showing income, as reported in its United States Income Tax Return, of $315,102.23 for the period from January 1, 1920, to June 30 1920. The tax commissioner, acting under chapter 73 of the General Statutes, assessed on or about August 1, 1921, against the plaintiff a tax of 2 per cent. of the said net income of the plaintiff received during the period it transacted business in Connecticut during 1920, viz. $6,302.84, and plaintiff subsequently, on or about August 24, 1921, paid the same. We understand from this record that all the net income of the plaintiff upon which this tax of 2 per centum was assessed was derived from its business as carried on in Connecticut between January 1 and June 30, 1920, and shall in our consideration of the case treat this as one of the facts in the case.

Upon these facts the parties reserve the following question of law: Is the assessment of a tax upon the plaintiff under chapter 73 of the General Statutes on or about August 1, 1921, illegal for the reason that the plaintiff had ceased to do any business in the state of Connecticut on or before June 30, 1920? General Statutes, § 1391 defines the term " company" as used in chapter 73, and includes within it " every corporation, joint-stock company or association carrying on business in this state which is required to report to the collector of internal revenue for the district in which such company has its principal place of business for the purpose of the assessment, collection and payment of an income tax," and excepts certain named companies.

General Statutes, § 1392, provides:

" Each such company, except as provided in section 1391, shall pay a tax annually to the state computed upon the net income for its fiscal or calendar year next preceding, as hereinafter provided, upon which income such company is required to pay a tax to the United States. Each company subject to the tax imposed under this chapter shall render to the tax commissioner *** a true copy of the last return made to the Collector of Internal Revenue, of the annual net income arising or accruing from all sources in its fiscal or the calendar year next preceding, stating," certain designated facts.

General Statutes, § 1395, provides:

" The tax commissioner, on or before the first day of July in each year, shall make a list of companies subject to the tax computed upon their net incomes, *** and a tax is laid on each such company equal to two per centum of such net income, and the tax commissioner shall enter the amount of such tax against the name of each such company."

The tax so authorized is an excise tax. Underwood Typewriter Co. v. Chamberlain, 94 Conn. 47, 108 A. 154.

The legislative purpose of these provisions was to require corporations of the character of the plaintiff, carrying on business in this state, to pay to the state for the privilege of transacting business within it an excise tax of 2 per centum upon their net income for the fiscal or calendar year next preceding upon which income they were required to pay a tax to the United States. The tax was required to be computed upon the income as shown in the last return made to the Collector of Internal Revenue. This method of computation was convenient for the state and for the corporation. No objection is made to the imposition of a tax of this character. It fell on all corporations, domestic and foreign alike, except certain excepted ones.

These statutory provisions did not intend to impose a tax upon a foreign corporation for any period when it had not begun to carry on, or had ceased to carry on, business within the state. The tax commissioner's direction to this plaintiff accords with this interpretation of these statutory provisions, and undoubtedly represented the practical construction made by the tax officials. The copy of the last return which the corporation shall render to the Tax Commissioner is intended by the statute to be for a period when the corporation is carrying on business in the state, and the tax required to be paid is intended by the Legislature to cover such period. The legislative intent in imposing this tax on the plaintiff while " carrying on business in the state" is shown in the use of the word " business" -the fair implication from this word is that it intends business done in the state. Some classes of foreign corporations are so taxed, and it is not to be presumed that the Legislature discriminated between different classes of foreign corporations, but rather that the intention was to apply in this particular a like method to all. People v. Equitable Trust Co., 96 N.Y. 394.

The controverted grounds upon which the plaintiff rests its contention that the tax in question is illegal are twofold:

First, that this tax could not be laid upon it since it was not carrying on business when the report was required by the statute, or when the tax was laid.

Second, that the state had no jurisdiction of it for tax purposes, either in April or July, 1921, and hence the tax laid was in violation of the Fourteenth Amendment of the federal Constitution.

The plaintiff rests its first ground principally upon the proposition that the tax, being an excise tax, must be laid upon the...