Goldman v. Tax Commissioner

Loring, J. The question in this case is whether (money received, by a pawnbroker by way of interest on loans made by him in the course of his business should be taxed at six per cent under § 2 of the income tax act (St. 1916, c. 269) or at one and one half per cent under § 5 of that act. The petitioner, who is a pawnbroker and a dealer in second hand articles, received $871 as interest on loans made by him as a pawnbroker. A tax was assessed upon him at the rate of six per cent on the ground that the $871 was received by him as interest from . . . money at interest” within St. 1916, c. 269, § 2 (a). The petition now before us is brought to obtain an abatement of that tax. If the $871 was not taxable under § 2, no tax was due from the petitioner because the net income received by the petitioner from his whole business did not exceed $2,000. The petitioner’s first contention is that, under and by force of the decisions of this court construing the tax acts in force before the enactment of the income tax act here in question, “money at interest” did not include money lent by a pawnbroker in the course of his business and for that reason the same words in St. 1916, c. 269, § 2 (a), do not include money so lent. The second contention of the petitioner is that interest received on money lent by him as a pawnbroker is taxable under § 5 and not under § 2 because it is money “received from dealing and trafficking with tangible personal property” and that the proposition that it is money “received from dealing and trafficking with tangible personal property” was established by the decisions of this court before the income tax act here in question was enacted. Both contentions are based upon the decision made in Boston Loan Co. v. Boston, 137 Mass. 332. We do not find it necessary to determine how far the conclusion drawn in the petitioner’s first contention is or is not correct. The second contention is founded on a mis [556] apprehension of the decision made in Boston Loan Co. v. Boston, ubi supra. What was decided in that case was that a pawnbroker’s place of business was a shop within Gen. Sts. c. 11, § 12, cl. 1, because in lending money at interest a pawnbroker carries on the business of trafficking in money and the pledgee’s title to tangible personal property acquired by him as security for money so lent is a part of his stock in trade in the same sense that the fixtures at his place of business are a part of his stock in trade and taxable as such in the town where he had his place of business or shop on the first day of May within Gen. Sts. c. 11, § 12, cl. 1. It was not there decided nor does it follow from what was there decided that interest received on loan's made by a pawnbroker is not in fact income received from money at interest, much less that such interest could not be treated by the Legislature as such. There would be great force in the proposition that interest received on loans made by a pawnbroker or (as in the case at bar) by a pawnbroker and dealer in second hand articles in the course of his business as a pawnbroker is income from “professions, employments, trade or business” within § 5 and not income derived by way of “interest from ... money at interest” within §2 (a) were it not for the clause at the end of § 5 which provides that “Interest and dividends taxable under section two of this act shall not be taxed under this section.” This clause at the end of § 5 is a direct implication that interest and dividends received as part of an income “derived from professions, employments, trade or business” can be taxed as income under § 2. In other words this clause at the end of § 5 is a direct implication that- the tax commissioner can analyze the income “derived from professions, employments, trade or business” and tax at six per cent so much of it as is income within § 2 and the balance of that income “from professions, employments, trade or business” at one and one half per cent. This consideration is decisive of the question now before us. It follows that the tax imposed upon the interest amounting to $871 received by the petitioner in the course of his business as a pawnbroker was taxable under St. 1916, c. 269, § 2, and the entry must be Petition dismissed.