New York v. Roberts, 171 U.S. 658 (1898)

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New York v. Roberts

No. 21

Argued April 20-21, 1898
Decided October 31, 1898
171 U.S. 658

ERROR TO THE SUPREME COURT

OF THE STATE OF NEW YORK

Syllabus

The statutes of the New York, providing that

Every corporation, joint stock company or association whatever, now or hereafter incorporated, organized or formed under, by or pursuant to law in this state or in any other state or country and doing business in this state, except only saving banks and institutions for savings, life insurance companies, banks, foreign insurance companies, manufacturing or mining corporations or companies wholly engaged in carrying on manufacture or mining ores within this state, and agricultural and horticultural societies or associations, which exceptions, however, shall not include gas companies, trust companies, electric or steam heating, lighting and power companies, shall be liable to and shall pay a tax as a tax upon its franchise or business into the state treasury annually, to be computed as follows:

and that

The amount of capital stock which shall be the basis for tax in the case of every corporation, joint stock company, and association liable to taxation thereunder shall be the amount of capital stock employed within this state,

as construed by the highest court of that state, are not repugnant to the Constitution of the United States.

It must be regarded as finally settled by frequent decisions of this Court that, subject to certain limitations as respects interstate and foreign commerce, a state may impose such conditions upon permitting a foreign corporation to do business within its limits as it may judge expedient, and that it may make the grant or privilege dependent upon the payment of a specific license tax, or a sum proportioned to the amount of its capital used within the state.

Parke, Davis & Company is the name of a corporation organized under the laws of the State of Michigan for the manufacture and sale of chemical and pharmaceutical preparations. The factory is situated in the City of Detroit. The corporation has a warehouse and depot in the City of New York, and there keeps on hand varying quantities of its manufactured products, which are there sold at wholesale in original packages. The concern is represented in New York by John Clay as manager, who is paid a salary. The business of selling the manufactured articles is carried on in all respects like the ordinary sales of consigned goods. Clay, in his own name, but for the use of the company, imports crude drugs from foreign countries at the port of New York. Such crude drugs are, in large part, sent to the Detroit factory for use, but some portions are sold in the original packages in the City of New York.

The corporation pays an annual rental for its place of business in New York of $12,500, employs there a force of over fifty persons, and expended for the New York branch annually, for the years 1890 to 1894, inclusive, from $102,000 to $172,000. The property owned in New York, in the way of business fixtures, is valued at $15,000. The average stock of goods sent from Michigan and carried in New York during those years was $50,000. It also employed in New York during that period a continuing capital, used in the purchase and sale of crude drugs, of from $23,000 to $62,000 per year.

Upon this state of facts, the Comptroller of New York imposed, for 1894 and five previous years, an annual tax based upon the sum of $90,000, as "capital employed within the state."

At the time of the imposition of this tax, the provisions of the statute here drawn in question were as follows (Laws 1880, c. 542, § 3, as amended by Laws 1881, c. 361; Laws 1885, c. 359; Laws 1889, cc. 193, 353):

Every corporation, joint stock company, or association whatever, now or hereafter incorporated, organized or formed under, by, or pursuant to law in this state or in any other state or country and doing business in this state, except only savings banks and institutions for savings, life insurance companies, banks, foreign insurance companies, manufacturing or mining corporations or companies wholly engaged in carrying on manufacture or mining ores within this state, and agricultural and horticultural societies or associations, which exceptions, however, shall not include gas companies, trust companies, electric or steam heating, lighting and power companies, shall be liable to and shall pay a tax as a tax upon its franchise or business into the state treasury annually, to be computed as follows.

Then come provisions grading the tax according to annual dividends. The tax originally fell upon the entire capital of a corporation, but the statute was amended in 1885 so as to read:

The amount of capital stock which shall be the basis for tax under the provisions of section three [supra] in the case of every corporation, joint stock company and association liable to taxation thereunder, shall be the amount of capital stock employed within this state.

Parke, Davis & Company, through their said manager, filed a petition in the New York supreme court praying for a writ of certiorari directed to the comptroller in order to subject his assessment to correction. In the petition it was alleged that the only capital in any proper sense employed by the company within the State of New York in the sale of its products was its leasehold of the warehouse and the office furniture and fixtures, not exceeding in value $15,000; that said company, being a manufacturing corporation, was exempt from taxation under the laws of the State of New York; that the comptroller erred in deciding that goods manufactured by said corporation, and stored at its depot in New York, are capital employed in said state within the meaning of the statute; that if said statute was correctly interpreted by the comptroller, then said statute was unconstitutional and void as in contravention of the Constitution of the United States and the amendments thereof.

To the certiorari granted upon said petition the comptroller duly made a return, alleging that his acts and proceedings were valid.

The cause was heard at the December term, 1895, of said court, and judgment was entered quashing the writ of certiorari and confirming the comptroller’s assessment. From that judgment an appeal was taken to the Court of Appeals of the State of New York, and on June 9, 1896, the cause was heard, the order and judgment of the supreme court were affirmed, and the record remitted to the supreme court. 91 Hun. 158, 149 N.Y. 608.

Whereupon the cause was brought to this Court by a writ of error duly prayed for and allowed.