Massachusetts Stats., 1909, a. 490, Pt. III, § 56, imposed
an annual excise upon every foreign corporation, for the privilege
of doing local business, of 1/50 of 1% of the par value of its
authorized capital stock, subject, however, to a maximum limit of
$2,000.00.
Held valid, as applied to corporations doing
local as well as interstate business, upon the authority of
Baltic Mining Co. v. Massachusetts, 231 U. S.
68.
International Paper Co. v. Massachusetts,
ante, 246 U. S. 135,
distinguished.
The following activities are
held to constitute local
business, affording bases for the tax: .
1. Keeping up a stock of repair parts at a place of business,
and supplying and selling them, in part locally, to users of
machines made by the corporation in another state and sold in
interstate commerce.
Case of
Lanston Monotype Co.
Page 246 U. S. 148
2. Repairing automobiles made in another state and disposed of
in interstate commerce, and selling second-hand automobiles taken
in exchange for new ones so disposed of. Case of
Locomobile Co.
of America.
3. Where a corporation, to promote local trade in its product
manufactured in another state and sold in interstate commerce to
wholesalers, maintained a local office with agents who solicited
orders from local retailers and turned them over to local
wholesalers, who filled them and were paid by the retailers. Case
of
Northwestern Consolidated Milling Co.
4. Where a holding company had an office in the taxing state,
pursuant to its articles, where it held stockholders' and
directors' meetings, kept corporate records and accounts, received
and deposited in bank regular dividends, and paid the money, less
salaries and expenses, regularly as dividends to its stockholders.
Case of
Copper Range Co.
5. Maintaining a local office, pursuant to corporate articles,
where proceeds of operations in another state are received,
deposited locally, distributed to shareholders, less salaries and
expenses, and where directors hold their regular meetings, elect
officers, and manage the general business of the corporation. Case
of
Champion Copper Co.
The fact that a local business stimulates interstate business
and that its abandonment would have the opposite effect does not
make it any the less local. Case of
Locomobile Co. of
America.
Where a foreign corporation maintains and employs a local
office, with a stock of samples and a force of office and traveling
salesmen, merely to obtain orders locally and in other states,
subject to approval by its home office, for its goods to be shipped
directly to the customers from its home state, the business is part
of its interstate commerce, and not subject to local excise
taxation. Case of
Cheney Brothers Co. And the action of
such office in obtaining orders from customers residing in the home
state of the corporation and in transmitting them to the home state
where they are approved and filled is interstate intercourse, not
local business in the state where the office is established.
Id.
A state may impose a different rate of taxation upon foreign
corporations for the privilege of doing local business than it
imposes upon the primary franchises of its own corporations, and,
by merely permitting or licensing a foreign corporation to engage
in local business and acquire local property, it does not surrender
or abridge,
quoad
Page 246 U. S. 149
such corporation, it power to change and revise its taxing
system and tax rates. Hence, where a foreign corporation acquired
real property and specially improved it at large cost, but still
the property was such that the investment might be retrieved if
need be,
held that a subsequent increase in its excise
without corresponding change in the tax bearing on domestic
corporations would not deny it the equal protection of the laws.
Southern Ry. Co. v. Greene, 216 U.
S. 400, distinguished. Case of
White Co.
218 Mass. 558 reversed in part and affirmed in part.
The case is stated in the opinion.
Page 246 U. S. 152
MR. JUSTICE VAN DEVANTER delivered the opinion of the Court.
We here are concerned with an excise tax imposed by
Massachusetts in 1913 on each of seven foreign corporations on the
ground that each was doing a local business in the state.
Objections to the tax based on the commerce clause of the
Constitution and the due process and equal protection clauses of
the Fourteenth Amendment were overruled by the state court. 218
Mass. 558. The tax was imposed under St.1909, c. 490, Part III,
§ 56, before the maximum limit was removed by St.1914, c. 724,
§ 1, and, in that respect, the case is like
Baltic Mining
Co. v. Massachusetts, 231 U. S. 68, and
unlike
International Paper Co. v. Massachusetts, ante,
246 U. S. 135.
Whether in other respects it is like
Baltic Mining Co. v.
Massachusetts is the matter to be determined, and this
requires that the business done by each of the seven corporations
be considered.
Page 246 U. S. 153
CHENEY BROTHERS COMPANY
This is a Connecticut corporation whose general business is
manufacturing and selling silk fabrics. It maintains in Boston a
selling office with one office salesman, and four other salesmen
who travel through New England. The salesmen solicit and take
orders, subject to approval by the home office in Connecticut, and
it ships directly to the purchasers. No stock of goods is kept in
the Boston office, but only samples used in soliciting and taking
orders. Copies and records of orders are retained, but no
bookkeeping is done, and the office makes no collections. The
salesmen and the office rent are paid directly from Connecticut,
and the other expenses of the office are paid from a small deposit
kept in Boston for the purpose. No other business is done in the
state.
We do not perceive anything in this that can be regarded as a
local business, as distinguished from interstate commerce. The
maintenance of the Boston office and the display therein of a
supply of samples are in furtherance of the company's interstate
business, and have no other purpose. Like the employment of the
salesmen, they are among the means by which that business is
carried on, and share its immunity from state taxation.
McCall
v. California, 136 U. S. 104;
Norfolk & Western R. Co. v. Pennsylvania, 136 U.
S. 114;
Crenshaw v. Arkansas, 227 U.
S. 389;
Rogers v. Arkansas, 227 U.
S. 401. Nor is the situation changed by inferring, as
the state court did, that orders from customers in Connecticut
sometimes are taken by salesmen connected with the Boston office,
and, after transmission to and approval by the home office, are
filled by shipments from the company's mill in Connecticut to such
customers. In such cases, it doubtless is true that the resulting
sale is local to Connecticut, but the action of the Boston office
in receiving the order and transmitting it to the home office
partakes more of
Page 246 U. S. 154
the nature of interstate intercourse than of business local to
Massachusetts, and affords no basis for an excise tax in that
state.
International Text Book Co. v. Pigg, 217 U. S.
91,
217 U. S.
106-107. We think the tax on this company was
essentially a tax on doing an interstate business, and therefore
repugnant to the commerce clause.
LANSTON MONOTYPE COMPANY
This is a Virginia corporation which makes typesetting machines
in Philadelphia and sells them in interstate commerce. It has a
place of business in Massachusetts, where it keeps on hand a stock
of the several parts of its machines likely to be required for
purposes of repair. The stock is replenished weekly, and the parts
are sold extensively to those who use the machines in that and
adjacent states.
It is apparent, as we think, that a considerable portion of the
business of selling and supplying the repair parts is purely local,
and subject to local taxation.
LOCOMOBILE COMPANY OF AMERICA
This West Virginia corporation conducts an automobile factory in
Connecticut, and sells its automobiles in interstate commerce. It
does an extensive local business in Massachusetts in repairing cars
of its own make after they are sold and in use, and also in selling
second-hand cars taken in partial exchange for new ones. This local
business has some influence on the volume of interstate business
done by the company in the state, and its abandonment would tend to
reduce the purchases there of the company's automobiles. But this
does not make it any the less a local business. It must be judged
by what it is, rather than by its influence on another business.
See Delaware, Lackawanna & Western R. Co. v. Yurkonis,
238 U. S. 439,
238 U. S.
444-445.
Page 246 U. S. 155
NORTHWESTERN CONSOLIDATED MILLING COMPANY
This company was incorporated under the laws of Minnesota,
operates flour mills there, and sells the flour to wholesale
dealers throughout the county. It has an office in Massachusetts
where it employs several salesmen for the purpose of inducing local
tradesmen to carry and deal in its flour. These salesmen solicit
and take orders from retail dealers and turn the same over to the
nearest wholesale dealer, who fills the order and is paid by the
retailer. Thus, the salesman, although not in the employ of the
wholesaler, is selling flour for him. Of course, this is a domestic
business -- inducing one local merchant to buy a particular class
of goods from another -- and may be taxed by the state, regardless
of the motive with which it is conducted.
COPPER RANGE COMPANY
This is a Michigan corporation whose articles of association
contemplate that it shall have an office in Boston. It is a holding
company, and owns various corporate stocks and bonds and certain
mineral lands in Michigan. Its activities in Massachusetts consist
in holding stockholders' and directors' meetings, keeping corporate
records and financial books of account, receiving monthly dividends
from its holdings of stock, depositing the money in Boston banks
and paying the same out, less salaries and expenses, as dividends
to its stockholders three or four times a year. The exaction of a
tax for the exercise of such corporate faculties is within the
power of the state. Interstate commerce is not affected.
CHAMPION COPPER COMPANY
This is another Michigan corporation, which maintains an office
in Boston pursuant to a provision in its articles of association.
It deposits the proceeds of its mining and
Page 246 U. S. 156
smelting business in Michigan in Boston banks and, after paying
salaries and expenses, distributes the balance in dividends from
its Boston office. The management of its mine is under the control
of a general manager in Michigan, and he, in turn, is under the
control of the company's directors. The meetings of the latter,
which occur several times in a year, are held in the Boston office.
At these meetings, the directors receive reports from the treasurer
and general manager, vote dividends, elect officers, and authorize
the execution of deeds and the like for lands in Michigan. These
corporate activities in Massachusetts are not interstate commerce,
and may be made the basis of an excise tax by that state.
WHITE COMPANY
This is an Ohio corporation which is conducting a business,
conceded to be local, in Massachusetts. On being admitted to do
business therein, it acquired two pieces of land in Boston and at
large cost, specially improved and adapted them for use, the one as
an automobile service station and the other as a garage. A
subsequent change in the statute made the excise tax more onerous
than before, without, as it is said, any corresponding change being
made in the law relating to domestic corporations. In these
circumstances, the company insists that, by the imposition of the
tax, as defined in the statute of 1909, it is denied the equal
protection of the laws, and it relies on
Southern Ry. Co. v.
Greene, 216 U. S. 400. In
overruling this objection, the state court said, 218 Mass. 579:
"The real estate acquired by this petitioner is of a kind
adapted to a very considerable and increasing business, in which
there is general competition. The storage and care of automobiles
and the performance of necessary service for their repair,
maintenance, and operation is a widespread business in which large
amounts of capital
Page 246 U. S. 157
are invested and considerable numbers of persons are engaged.
Such establishments are frequent subjects for lease and sale. There
is nothing to indicate or to warrant the inference that the
petitioner's investment in real estate is not readily salable at
reasonable prices. It is not property of a nature irretrievably
devoted to a limited and monopolistic use and not readily available
either for other valuable uses or to other persons ready to devote
it to the same uses at prices fairly equivalent, subject to the
general vicissitudes of business conditions, to the original
investment. The
Greene case related to railroad property,
which is not susceptible of use for any other purpose without great
loss. In that opinion, it was said:"
"It must always be borne in mind that property put into railroad
transportation is put there permanently. It cannot be withdrawn at
the pleasure of the investors. . . . The railroad must stay, and,
as a permanent investment, its value to its owners may not be
destroyed."
Assenting, as we do, to what was thus said, it suffices to add,
first, that a state does not surrender or abridge its power to
change and revise its taxing system and tax rates by merely
licensing or permitting a foreign corporation to engage in local
business and acquire property within its limits, and, second,
that
"a state may impose a different rate of taxation upon a foreign
corporation for the privilege of doing business within the state
than it applies to its own corporations upon the franchise which
the state grants in creating them."
Kansas City, Memphis & Birmingham R. Co. v. Stiles,
242 U. S. 111,
242 U. S.
118.
Bearing in mind that the tax of which these corporations are now
complaining was imposed under the statute as it stood in 1913,
which was before the maximum limit was removed, it follows from our
decision in
Baltic Mining Co. v. Massachusetts that the
several objections based on the Constitution of the United States
are all
Page 246 U. S. 158
untenable, save in the instance of the Cheney Bros. Company. The
tax on that company, as before indicated, was a tax on interstate
business, and therefore void under the commerce clause.
Judgment reversed as to Cheney Bros. Company and affirmed as to
the other plaintiffs in error.
