Summary
In People ex rel. Niagara River Hydraulic Co. v. Roberts (30 App. Div. 180; affd. unanimously without opinion in 157 N.Y. 676), where certain unimproved real estate was held for a number of years but no active business was done by the company, it was held that there was no liability for the franchise tax inasmuch as there was no capital employed within the State.
Summary of this case from People ex rel. Waclark Realty Co. v. GausOpinion
May Term, 1898.
Edward C. Perkins and J. Burnet Nash, for the relator
G.D.B. Hasbrouck, Deputy Attorney-General, for the respondent.
The contention of the relator is that the tax contemplated by the statute is upon the active use of its capital in its corporate business, not upon the passive holding of it in the form of an unproductive investment.
The learned Attorney-General relies upon the letter of the statute which declares that "every corporation * * * incorporated under any law of this State, * * * except * * * manufacturing corporations carrying on manufacture within this State * * * shall be subject to and pay a tax," etc. (§ 3, chap. 542, Laws of 1880.) As the relator does no manufacturing, it is not exempt upon that ground. ( People v. Horn Silver Mining Co., 105 N.Y. 82; People ex rel. Tiffany Co. v. Campbell, 144 id. 173.)
The franchise tax is imposed upon domestic corporations because of their franchise. It is based upon their capital "employed within this State" and graduated according to dividends earned. In respect to foreign corporations, we do not grant them their franchises, but we permit them to do business here; and, as we should not accord them superior advantages over domestic corporations, we try to impose the same rate of taxation upon them, and thus we tax them upon their business, upon the same basis and scale. In People ex rel. Singer Mfg. Co. v. Wemple ( 150 N.Y. 46) it was held as to a foreign corporation that the money, whether capital or surplus, which it invested in real estate here, not for the transaction of its ordinary business, but for rental, was not "employed within this State" within the meaning of the statute. If capital can be invested without being employed, the case before us seems to be a fair instance of it. Of course, the statute does not contemplate that a foreign corporation shall, in this respect, be more favored than a domestic one, and hence we must hold that the relator was not liable to the franchise tax.
The determination of the Comptroller should be reversed, with fifty dollars costs and disbursements.
All concurred, except PUTNAM, J., dissenting.
Determination of Comptroller reversed, with fifty dollars costs and disbursements.