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Opinion of the Court.

law in its application to the petitioner. . . . It is rightly conceded by the Attorney General that the petitioner was engaged in this Commonwealth exclusively in interstate commerce."

Having ascertained the necessary items, the Comptroller made the calculations indicated below. The corporation's total net income returned for federal taxation, after allowances, amounted to $707,577.98; $7,602,090.21 (although not quite accurate) was treated as the total value of intangible assets.

commonwealth and sales otherwise determined by the commissioner to be attributable to the business conducted on such premises, (b) rentals or royalties from property situated, or from the use of patents, within the commonwealth; provided, that upon application by a corporation which owns or controls substantially all the capital stock of another corporation, or by the corporation so owned or controlled, the commissioner may impose the tax provided for by this chapter upon the income of the two corporations jointly in the same manner as though they were a single corporation, or may, in such other manner as he shall determine, equitably adjust the tax of the applying corporation. . .

"9. A rule shall not be deemed to be inapplicable merely because all the tangible property or the expenditure of a corporation for wages, salaries, commissions or other compensation, or the gross receipts of the corporation, are found to be situated, incurred, or received without the commonwealth."

Section 75. In addition to the methods provided by sections seventy-two and seventy-three [distraint or action in contract], taxes under this chapter, except section sixty-two [not here involved], may be collected by an information brought in the Supreme Judicial Court by the attorney general at the relation of the state treasurer. The Court may issue an injunction upon such information, restraining the further prosecution of the business of the company, association or corporation until such taxes, with interest and costs thereon, have been paid; but no telegraph company accepting the provisions of section fifty-two hundred and sixty-three of the Revised Statutes of the United States shall be enjoined from constructing, maintaining cr operating a telegraph line over and along any of the military or post roads of the United States within this commonwealth."

Opinion of the Court.

Amount of tax measured by net income.

Average value of tangible property in Mass., $573. Divide this by average value all tangible property, $16,992,355.22; multiply resulting fraction by $235,859.33 (% of $707,577.98, supra)...

Wages, salaries, etc., assignable to Mass., $11,493.38. Divide this by amount of all wages, salaries, etc., $1,650,614.73; multiply resulting fraction by $235,859.33 (% of $707,577.98, supra)

Gross receipts assignable to Mass., $343,204.60. Divide this by gross receipts from all business, $10,717,546.43; multiply resulting fraction by $235,859.33 (3 of $707,577.98, supra).

268 U.S.


=1, 642.29

Net income..

22% of $9,202.53...

Less 5% of dividends paid Mass.


Total according to income.


$9, 202.53




Amount of tax measured by corporate excess.

Income assigned to Massachusetts, as above shown, $9,202.53. Divide this by $707,577.98 (entire apportionable net income); multiply resulting fraction by $7,602,090.21 (used for total intangible assets). This yields $98,827.17, which was taken as the value of intangible assets assignable to Massachusetts. The tangible assets, $573, were added and $99,400 became the total accepted value of assets assignable to the State.

Cash value of the company's capital stock was fixed at $16,352,162; all assets $21,406,098. Divide $99,400 by


Opinion of the Court.


$21,406,098; multiply resulting fraction by $16,352,162; the result is $75,932.08-the "corporate excess." dollars per thousand upon this is $379.66.

Total Assessment for 1922 ($187.91 plus $379.66), $567.57.

In the course of its opinion the court below said

"This tax law, placing as it does both domestic and foreign corporations on common ground as to taxation except so far as essential differences require different treatment in details, follows the policy established in this Commonwealth for many years of levying an excise instead of a property tax on corporate franchises and corporate transaction of business. Eaton, Crane & Pike Co. v. Commonwealth, 237 Mass. 523.

"The general scheme of this tax law is that an excise is levied on both domestic and foreign business corporations doing business in this Commonwealth. Real estate and machinery used in manufacture by such corporations alone are subject to a local property tax in the city or town where situated. All other personal property, whether tangible or intangible, is exempt from direct or local taxation. The amount of the excise tax is measured as to a foreign corporation, § 39, by the sum of 'An amount equal to five dollars per thousand upon the value of the corporate excess employed by it within the Commonwealth,' and 'An amount equal to two and one half per cent of that part of its net income, as defined in section thirty and in this section, which is derived from business carried on within this Commonwealth,' with a further provision that a minimum tax [shall be paid] of not less than one twentieth of one per cent of such proportion of the fair cash value of its shares of capital stock as its assets employed in business in this Commonwealth bear to its total assets employed in busi

ness. . .

Opinion of the Court.

268 U.S.

"The statute is an attempt to measure the excise on foreign corporations solely by the property and net income fairly attributable to the business done within this. Commonwealth. This excise tax is in place of any other tax on personal property within the Commonwealth from which, except as to machinery used in manufacture or in supplying and distributing water, foreign corporations (and also domestic corporations) are expressly exempted by G. L. c. 59, § 5, cl. 16. .

"The present tax act imposes the excise with respect. to the carrying on of business by foreign corporations within the Commonwealth. It is an excise for the privilege of having a place of business under the protection of our laws and with the financial, commercial and other advantages flowing therefrom, measured solely by the property and net income fairly attributable to the business done here by a foreign corporation. The excise is measured by two factors, (1) the value of the corporate excess employed within the Commonwealth, and (2) the net income derived from business within the Commonwealth.

"1. The value of the corporate excess employed in the Commonwealth as a factor of the tax is not measured by the capital stock of the corporation. If it were, it would be invalid. International Paper Co. v. Massachusetts, 246 U. S. 135. It is measured by the value of the property of the foreign corporation, including its franchise, employed in the Commonwealth, after certain deductions are made. It seems to us that this factor of the tax stands under the protection of several decisions of the Supreme Court of the United States.

"It is manifest as matter of common business knowledge that commerce within this Commonwealth yielding to the petitioner annual gross receipts of $424,982.70 must have involved credits, bills receivable and obligations to it of considerable amounts. No contention to the con


Opinion of the Court.

trary has been urged by the petitioner. Such credits, bills receivable and obligations might be made subject to direct taxation within the Commonwealth by appropriate legislation under numerous decisions of the United States Supreme Court. Such credits, bills receivable and obligations constitute a part of 'the value of the assets' of the petitioner 'employed in [its] business within the Commonwealth' used as the basis of ascertaining the corporate excess' of the petitioner' employed within the Commonwealth' upon which this factor of the excise is calculated. .

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"2. The tax, as measured by the net income from business transacted in Massachusetts as a factor, is dependent upon net profits derived solely from interstate commerce. But there is no discrimination in the statute against interstate commerce. This net income is used as a measure applicable to all corporations alike. While not an income tax according to strict definition, in substance it affects net income alone, is measured by net income alone, is reasonable in amount and incidence, and is payable out of net income.

"The tax considered as a whole with both its main factors is general in nature and reasonable in amount. The tax upon the petitioner in substance and effect, so far as concerns the factor of its corporate excess employed within the Commonwealth, is levied upon its tangible personal property within the Commonwealth, upon the credits due it from debtors within this Commonwealth, and upon the exercise of its franchise within this Commonwealth, and, so far as concerns the factor of its income, upon the net income derived from business in this Commonwealth after all losses and expenses have been paid. It is not directed against interstate commerce or property outside the State but is confined to business done, property located, capital employed and net income earned within the Commonwealth. It affects interstate

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