g. - Examples of the straight tax, where neither the maximum nor the minimum applies.

Suppose a mining corporation operating in another State, with a capital of $1,000,000; non-taxable securities, $100,000; taxable securities, $50,000; merchandise, $50,000, and real estate and machinery out of the State, $800,000.

The tax in this case, under section 72, is on the capital stock $1,000,000 (assuming it to be selling at par), less the nontaxable securities and property out of the State, amounting to $900,000, or $100,000. The tax on this is $1,600.

The maximum in this case would be 120 per cent. of the real estate, machinery, merchandise and taxable securities amounting to $900,000, or $1,080,000 less the real estate, machinery and non-taxable securities amounting to $900,000, or $180,000, which is more than the amount on which the straight tax is levied. Therefore, the maximum does not apply.

The minimum tax in this case would be $1,000; this is less than the straight tax, therefore it does not apply.

h. Examples of the maximum.

(1) Suppose a corporation with a capital of $500,000, owning real estate, $100,000; machinery, $100,000; merchandise, $100,000; taxable securities, $50,000; non-taxable securities, $50,000, and taxable property out of the State, $50,000.

If there were no maximum provision, the tax would be on the capital stock, $500,000 (assuming it to be selling at par), less the real estate, machinery and non-taxable securities and the property situated out of the State, amounting in all to $300,000; leaving $200,000 as the amount upon which the franchise tax of (usually about) $16 per thousand would be levied; the total tax being $3,200.

But under the maximum provision the tax is upon 120 per cent. of the value of the real estate, machinery, merchandise and taxable securities (amounting to $350,000), or $420,000; less the deductions specified above, amounting to $300,000; leaving $120,000 as the maximum amount on which the tax can be levied. This being less than $200,000, the maximum applies, and the tax in this case would be only $1,920.

(2) Suppose a corporation with a capital of $250,000, and $100,000 in real estate and machinery. In this case, if there were no maximum, the tax would be upon $150,000, the excess of the capital stock over the value of the real estate and machinery. But the maximum amount taxable is 120 per cent. of the value of the real estate and machinery, less the value of the real estate and machinery, or $20,000, so that the tax in this case would be only $320.

i. Examples of the minimum.

(1) Suppose a corporation having a capital of $100,000, with property amounting to $97,000 outside of the State, and the balance in non-taxable securities, $3,000. Here there would be no straight tax at all. But the minimum applies, and there being no local tax, the franchise tax is $100.

(2) Suppose the last case to be varied so that the corporation has property outside the State of $95,000; non-taxable securities, $2,000, and taxable securities, $3,000. Then the straight tax would be on $100,000 less ($95,000+ $2,000), or $3,000, and the tax would be $48. But minimum franchise tax is $100, so that here the minimum applies.

(3) In the rare case where the maximum and the minimum both apply and the minimum is larger than the maximum, the board of appeal has decided that the minimum governs. Such a case would be where the stock of a corporation owning valuable patents and good-will had a high market value, and the corporation had only a small amount of real estate and machinery. For example, if the market value of the stock were $250,000, and the value of the real estate and machinery were $10,000, the maximum tax would be on $2,000, or $32. The minimum tax would be $250 less $160, or $90.

j. Examples where there is no franchise tax at all.

Suppose a holding corporation having no property except the non-taxable stock of other Massachusetts corporations, a small amount of real estate and machinery and taxable property out of Massachusetts other than real estate, machinery and merchandise. Suppose the various amounts to be as follows:

Capital, $100,000; real estate, $7,000; non-taxable securities, $90,000; property out of State, $3,000.

Here the straight tax would be on $100,000 (7,000 + 90,000+ 3,000), or nothing. The maximum naturally would not apply. The minimum tax would be $100, less the local tax on the real estate, or $112, and therefore would not apply. § 75, Taxation of foreign corporations-a. Excise tax. "Every foreign corporation of the classes described in section fifty-eight shall, in each year, at the time of filing its annual certificate of condition, pay to the treasurer and receiver general, for the use of the commonwealth, an excise tax to be assessed by the tax commissioner of one hundredth of one per cent of the par value of its authorized capital stock as stated in its annual certificate of condition; but it may deduct from such tax the amount of taxes upon property paid by it to any city or town in the commonwealth during the preceding year, and the amount of such excise tax shall not in any one year exceed the sum of two thousand dollars." 2030

return to

It is also provided by statute that: "Assessors shall annually, on or before the first Monday of August the tax commissioner the names of all foreign corporations which have a usual place of business within [each] city or town." 2031

Prior to the act of 1903, there was no exercise tax on the capital stock of foreign corporations. This tax is for the commodity or privilege of having a place of business in the State, 2032 and is constitutional.2033

After May 1, 1908, this section will read as follows:

"Every foreign córporation of the classes described in section fifty-eight shall, in each year, at the time of filing its annual

2030 St. 1903, c. 437, § 75. Citations. American Can Co. v. Com., 188 Mass. 2, 3; Atty.-Gen. v. Electric Storage Battery Co., 188 Mass. 239. 2031 St. 1904, c. 181, amending R. L., c. 12, § 93, and in effect Apr. 25, 1904.

2032 Atty.-Gen. v. Electric Storage Battery Co., 188 Mass. 239.

2033 Commonwealth v. Lancaster Savings Bank, 123 Mass. 493; Atty.Gen. v. Bay State Mining Co., 99 Mass. 148; Portland Bank v. Apthorp, 12 Mass. 252; Liverpool Ins. Co. v. Massachusetts, 10 Wall. 566; Maine v Western Union Telegraph Co., 73 Me. 518.

certificate of condition, pay to the treasurer and receiver general, for the use of the Commonwealth, an excise tax to be assessed by the tax commissioner of one fiftieth of one per cent of the par value of its authorized capital stock as stated in its annual certificate of condition; but the amount of such excise tax shall not in any one year exceed the sum of two thousand dollars." 2034

In other words, the tax is to be raised from one-hundredth of one per cent. to one-fiftieth, and the deduction of the local tax is abolished. This will go far to abolish a certain taxation advantage in incorporating in Maine and New Jersey in the case of small corporations.

b. Corporations liable to the tax.

The classes of foreign corporations described in § 58 include every one" which has a usual place of business in this Commonwealth, or which is engaged in this Commonwealth, permanently or temporarily, and with or without a usual place of business therein, in the construction, erection, alteration or repair of a building, bridge, railroad, railway or structure of any kind."

This section does not apply to corporations which are engaged within the Commonwealth solely in interstate commerce.2035 Thus, it does not apply to a foreign express company receiving no goods for delivery in Massachusetts.2036 But it does apply to corporations having an office here and engaged in both interstate and local business.2037

c. Application of the maximum.

When the percentage exceeds the sum of $2,000, the amount of the local tax is to be deducted (until May 1, 1908) from the whole amount of the tax before it is reduced to $2,000.2038

2034 St. 1907, c. 578, §§ 1, 2.

2035 Atty.-Gen. v. Electric Storage Battery Co., 188 Mass. 239, 240; Gloucester Ferry Co. v. Pennsylvania, 114 U. S. 196; Norfolk & Western R. R. v. Pennsylvania, 136 U. S. 114.

2036 2 Op. Atty.-Gen. 493. Cf. Leloup v. Mobile, 127 U. S. 640.

2037 Atty.-Gen. v. Electric Storage Battery Co., 188 Mass. 239, 241; Pennsylvania Railroad v. Knight, 192 U. S. 21; Pullman Co. v. Adams, 189 U. S. 420.

2038 American Can Co. v. Com., 188 Mass. 1.

d. Local tax.

Under § 71 of the act, foreign corporations are taxable on their real estate, machinery and merchandise in the cities or towns in which such property is situated.

The personal property of foreign corporations has been taxed even when that of domestic corporations was not, 2039 and the word" merchandise " in section 71 is synonymous with tangible property which could be sold.2040 It has been held that an office where business is carried on, and where furniture and fixtures are kept is a shop" within the statutes as to taxa

tion. 2041

2042

The following have been held subject to taxation as personal property: (1) Office furniture and fixtures; 2043 (2) property pledged to the corporation, which carries on a loan business; 2044 sewing machines kept in the store of the corporation for sale or lease; 2045 (3) lanterns used by a corporation under a contract for lighting a city; 2046 (4) cash carriers leased for profit to stores. 2047

On the other hand, a foreign corporation is not taxable on money deposited in national banks within the Commonwealth; 2048 nor on debts due to the corporation.2049

The pipes and water mains of a water company, in private land, are not "machinery " within R. L., c. 12, § 23, cl. 2, so as to be taxable where they are situated.2050

The local tax is properly assessed to the foreign corporation and not in rem against the particular property taxed.2

2051

2039 Blackstone Mfg. Co. v. Blackstone, 13 Gray, 488; Boston Loan Co. v. Boston, 137 Mass. 332.

2040 N. E., etc., S. S. Co. v. Commonwealth, 81 N. E. 286.

2041 Boston Loan Co. v. Boston, 137 Mass. 332.

2042 See R. L., c. 12, § 23.

2043 Boston Loan Co. v. Boston, 137 Mass. 332.

2044 Boston Loan Co. v. Boston, 137 Mass. 332, 335.

2045 Singer Manuf. Co. v. County Commissioners, 139 Mass. 266.

2046 Rising Sun, etc., Co. v. Boston, 181 Mass. 211.

2047 Lamson Consolidated, etc., Co. v. Boston, 170 Mass. 354. Cf. R.

L., c. 12, § 23, cl. 2.

2048 Boston Investment Co. v. Boston, 158 Mass. 461.

2049 New York Biscuit Co. v. Cambridge, 161 Mass. 326.

2050 Coffin v. Artesian Water Co., 193 Mass. 274. Cf. Dudley v. Jamaica,

Pond Aqueduct Co., 100 Mass. 183.

2051 Scollard v. American Felt Co., 194 Mass. 127.