and service of such injunction, it shall not be lawful for such § 207 company thereafter to exercise any franchise or transact any business in this state until such injunction be dissolved.

207. Act not to apply to foreign fire insurance companies.

SEC. 8. This act shall not apply to or in any manner affect the tax upon the premiums obtained in this state by foreign fire insurance companies and their agents, which tax shall be in lieu of the tax herein provided and shall be collected and distributed as is specially provided by law in relation thereto.

Application of the act.-"The scheme of this particular taxing act seems to be to impose taxes on three classes of corporations-certain "specified corporations doing business in the State wherever chartered, "those not doing business in this State, but holding their charters under "State authority, and a class of unspecified corporations, which must be "few in number, holding charters under and performing their functions "in the State.

"In the former class different provisions for taxation as amongst "themselves are adopted, and in the second and third classes named a "franchise tax is imposed based upon the amount of their capital stock." (Standard Underground Cable Co. v. Attorney-General, 46 N. J. Eq., 270.)

As to the first class, both domestic and foreign corporations are included. (Pipe Line Co. v. Berry, 52 N. J. Law, 308; s. c., 53 N. J. Law, 212.)

Nature of the tax.-The tax imposed by this act is a license or franchise tax. It is not a tax on property and this section is not a violation of the clause of the State constitution which provides that "property "shall be assessed for taxes under general rules, and by uniform rules, "according to its true value." (Standard Underground Cable Co. v. Attorney-General, 46 N. J. Eq., 270; Pipe Line Co. v. Berry, 52 N. J. Law, 308; s. c., 53 N. J. Law, 212; Art. IV., § 7, Par. 12). The Act of 1866 taxing property has not been superseded by this act. Taxation under this act was designed to provide revenue for the State. Taxation under the Act of 1866 is a local tax. (Pipe Line Co. v. Berry, 52 N. J. Law, 308; s. c., 53 N. J. Law, 212.)

Basis of the tax.-The tax is computed upon the basis of the capital stock issued and outstanding, and it is held that stock is issued when the company has received and accepted subscriptions for the same, whether paid for or not. (American Pig Iron, &c., Co. v. Assessors, 56 N. J. Law, 389.)

Continuance of tax.-As long as the corporation continues it is liable for this franchise tax. It continues after a receiver is appointed and until the dissolution of the company. (Kirkpatrick v. Assessors, 57 N. J. Law, 53.) Where the insolvent corporation is of a public character, such as a canal, railroad or turnpike corporation whose property and work are de

§207 pendent upon the franchise, and in whose continuance the public is interested, it is the duty of the receiver to take the franchise, keep it alive by the performance of corporate duties until it is ultimately sold, and consequently it is the receiver's duty to preserve the franchise and pay the franchise tax from year to year until the franchise passes from him. But in the case of a mere private corporation, after insolvency, the franchise is generally valueless, and no duty necessarily devolves on the receiver to care for it, and he will pay only that franchise tax which becomes a debt of the corporation prior to his appointment. If, however, he continues the business and uses the franchise it is his duty to pay the tax while he continues the business. And if, after the creditors of an insolvent corporation have been paid in full, there remains some money to distribute to stockholders, it seems that the receiver should pay all franchise taxes assessed after his appointment before he makes any distribution to stockholders, because it is the capital of the corporation that he then holds, which is pledged to satisfy all obligations of the corporation before it is free to be returned to the shareholders. (Mather's Sons' Co.'s Case, 52 N. J. Eq., 607.) The fact that the company has ceased to do business and to use its franchise, even though compelled so to do by the decree of a court enjoining the company from using certain patents which form the basis of the company's business, does not relieve it from the duty to pay the franchise tax. If it wishes to withdraw from active business, it must, to escape taxation, take proceedings to dissolve in the manner prescribed by law. In case of failure to pay such tax the act provides that proceedings may be instituted by the Attorney-General to enjoin the company from exercising its franchises until such tax is paid. (Edison Phonograph Co. v. Assessors, 55 N. J. Law, 55; Electro-Pneumatic Transit Co.'s Case, 51 N. J. Eq.,71.)

When a "proper case" is presented, the Court of Chancery has no discretion but must issue the injunction. (Electro-Pneumatic Transit Co.'s Case, 51 N. J. Eq., 71.)

Exemptions from paymnt of franchise taxes.-The statute wholly exempts from the payment of this tax manufacturing and mining corporations at least fifty per cent. of whose capital stock, issued and outstanding, is invested in mining or manufacturing carried on within this State. Where the amount so invested is less than fifty per cent. a deduction is allowed of the assessed value of the company's property used in manufacturing or mining. A manufacturing corporation cannot claim the exemption until it has actually located its factory within the State and begun work under its charter, and it can claim exemption only while it is actually engaged in the business of manufacturing within the State. (Norton Construction Co. v. Assessors, 53 N. J. Law, 564.) To determine whether the company is within the exception reference must be had to its actual business, for the business in which the capital of a company is invested, and not the objects for which the company was formed, as expressed in the certificate of incorporation, must be regarded. (Edison Phonograph Co. v. Assessors, 55 N. J. Law; 55.) It is not necessary that the manufacturing should be carried on directly by the company. It may, it seems, contract

with manufacturing agencies to manufacture for it, and if the manufac- § 207 turing is actually carried on withir the State the conditions of the statute are met. Thus, in the case of Phonograph Co. v. Assessors, 54 N. J. Law, 430, it was held that a corporation of this State which, by contract with another corporation located in New Jersey, gives to it the exclusive right to make phonographs, and takes all made, at the cost of materials and labor, with a percentage for profits and depreciation, and which has also an office and a factory where parts of the phonographs are made within the State, is a "manufacturing corporation carrying on business "in this State," and exempt from State taxes under this act. The court held that the relation of principal and agent subsisted and not that of buyer and seller.

Where the capital stock of a manufacturing company is invested in patents under which it manufactures, it is entitled to exemption for its capital invested in such patents as are necessary to carry on its manufacturing within the State of New Jersey. It must, however, actually manufacture within the State under the patents. Thus in the case of Phonograph Co. v. Assessors above cited, the total capital issued was $6,600,000—about $6,000 was invested in a small factory. About $40,000 of the capital was actually expended in organizing the company. The remainder of the capital represented the estimated value of patents. It appeared that all the goods manufactured and sold were prepared in New Jersey. The tax, amounting to about $6,500 a year, was accordingly set aside. In the case of Edison United Phonograph Co. v. Assessors, 57 N. J. Law, 520, the total capital was $1,000,000, of which $999,000 was issued for patent rights. The proof was that those rights included the right to manufacture speaking machines in New Jersey, Great Britain, France and some other foreign countries, and to sell and use such machines only in foreign lands beyond the limits of the United States and Canada. The company had no factory of its own in New Jersey, although it did manufacture through another company located in New Jersey. But there was no proof as to the amount of capital which was invested in the right to manufacture within New Jersey, and the court said that so far as the capital was used in acquiring the right to manufacture elsewhere, it was not invested in manufacturing within this State. On the facts presented the court refused to infer that fifty per cent. was invested in the right to manufacture in New Jersey, and as no deduction was asked for on account of the capital actually invested in manufacturing within the State, the taxes were affirmed with costs. The court said: "In view of "the fact that all the instruments made in New Jersey must be transported "great distances to foreign lands, before they can be used or sold, it would "seem that the right to manufacture them here must be of slight value "compared with the value of the right to manufacture them in or near to "the countries where the market must be found."

From the above cases it would seem, therefore, that in order to claim the exemption given by the statute, a manufacturing corporation must show:

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(1) That it has actually located its factory within the State of New Jersey and is engaged in the business of manufacturing under its charter

therein

(2) That at least 50 per cent. of its capital stock is invested in such manufacturing business carried on within the State.

(3) If capital stock has been issued for patents or patent rights, that such patents or patent rights are necessary for the manufacture in New Jersey.

What is manufacturing within the meaning of the act?—As pointed out above, it is what the company actually does, and not what it is authorized by its charter to do, that determines whether a company is engaged in manufacturing carried on in this State. In construing the statute the court will give the word "manufacturing" its popular sense. Therefore, it was held that printing and publishing a newspaper is not manufacturing, but that where a company is incorporated "to conduct and prosecute "the business of book printing and job printing, engraving, electrotyp"ing and lithographing," and its capital is invested in the prosecution of that business, and it manufactures on orders only, it is a manufacturing company within the meaning of the statute.

Evening Journal Association v. State Board of Assessors, 47 N. J. Law, 36; Printing Co. v. Assessors, 51 N. J. Law, 75; see also Newark Brass Works v. Assessors, decided by Supreme Court, June Term, 1899.

208. For failure for two years to pay state tax charter void, unless governor gives further time.

SECTION 1. If any corporation heretofore or hereafter created shall for two consecutive years neglect or refuse to pay the State any tax which has been or shall be assessed against it under any law of this state and made payable into the state treasury, the charter of such corporation shall be void, and all powers conferred by law upon such corporation are hereby declared inoperative and void, unless the governor shall, for good cause shown to him, give further time for the payment of such taxes, in which case a certificate thereof shall be filed by the governor in the office of the comptroller, stating the reasons therefor.

(Supplement of April 21, 1896, P. L., 319.)

209. Comptroller to report list of delinquents. Governor to issue proclamation declaring repeal of charter.

SEC. 2. On or before the first day of May in each year the comptroller shall report to the governor a list of all the corporations which for two years next preceding such report have failed, neglected or refused to pay the taxes assessed against them under any law of this state as above, and the governor shall forthwith

issue his proclamation, declaring under this act of the legislature that the charters of these corporations are repealed.

210. Proclamation to be filed and published.

SEC. 3.

The proclamation of the governor shall be filed in the office of the secretary of state, and published in such newspapers and for such length of time as the governor shall designate.

211. Penalty for exercising powers under charter after procla

mation.

SEC. 4. Any person or persons who shall exercise or attempt to exercise any powers under the charter of any such corporation after the issuing of such proclamation shall be deemed guilty of a misdemeanor, and shall be punished by imprisonment not exceeding one year, or a fine not exceeding one the usand dollars, or both, in the discretion of the court.

212. Attorney-general may proceed against corporations in arrears; receiver may be appointed.

SEC. 5. After any corporation of this state has failed and neglected for the space of two consecutive years to pay the taxes imposed on it by law, and the comptroller of this state shall have reported such corporation to the governor of this state, as provided in said amendatory act, then it shall be lawful for the attorney-general of this state to proceed against said corporation in the court of chancery of this state for the appointment of a receiver, or otherwise, and the said court in such proceeding shall ascertain the amount of the taxes remaining due and unpaid by such corporation to the state of New Jersey, and shall enter a final decree for the amount so ascertained, and thereupon a fieri facias or other process shall issue for the collection of the same as other debts are collected, and if no property which may be seized and sold on fieri facias shall be found within the said state of New Jersey, sufficient to pay such decree, the said court shall further order and decree that the said corporation, within ten days from and after the service of notice of such decree upon any officer of said corporation upon whom service of process may be lawfully made, or such notice as the court shall direct, shall assign and transfer to the trustees or receiver appointed by the court, and chose in action, or any patent or patents, or any

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