Springdale Finishing Co. v. Commonwealth

Rugg, C. J. This is a petition under G. L. c. 63, § 77, for the abatement of a tax alleged to have been exacted illegally. The petitioner, a corporation organized under the laws of this Commonwealth, confessedly was carrying on business within this Commonwealth up to July 29, 1920. On that date it conveyed all its assets and business to a Delaware corporation. No notice of this sale was given to the tax commissioner or any other officer of the Commonwealth before November 16, 1920. On September 21, 1920, at a stockholders’ meeting held in Massachusetts, the dissolution of the petitioner as a corporation was authorized. On November 12, 1920, a petition for dissolution was filed and a decree granting it was entered on March 10, 1921. The fiscal year of the petitioner was coterminous with the calendar year. The last return of net income rendered by the petitioner to the federal government next prior to April 1, 1920, covered the period from January 1, 1919, to December 31, 1919, both inclusive. The tax here in issue was in truth measured in respect of income for the period January 1, 1920, to July 29, 1920, both inclusive, under St. 1919, c. 355, as amended by St. 1920, c. 549 (see now G. L. c. 63). The tax is an excise and not a property tax. It is so declared in § 2 of said c. 355. There is no reason to doubt the accuracy of the name given to it by the General Court. S. S. White Dental Manuf. Co. v. Commonwealth, 212 Mass. 35, 43. It is in substance as well as in name an excise. It is imposed upon every domestic corporation “with respect to the carrying on or doing of business by it.” Said c. 355 follows both in form and substance the system of raising revenue for the support of government from domestic corporations by excise rather than by property tax, which long has been established in this Commonwealth. Eaton, Crane & Pike Co. v. Commonwealth, 237 Mass. 523, 527. Farr Alpaca Co. v. Commonwealth, 212 Mass. 156, and cases there collected. Bellows Falls Power Co. v. Commonwealth, 222 Mass. 51. This tax is a single excise measured by the sum of a percentage [41] on its corporate excess added to a percentage on its net income as those terms are defined in the act. § 2. Although both property and income are used as a basis for its calculation, the tax is nevertheless an excise on the commodity of exercising the corporate franchise and not a tax on property or on income. The tax here assailed was levied in respect to the doing of business during the calendar year beginning on January 1, 1920. This is the plain effect of said c. 355. That act was approved on July 24, 1919. By § 33 it went into effect on January 1, 1920. The first return under the act was required to be filed by the corporation during the first ten days of April, 1920, as of the first day of that April. § 4. The items of that return included the corporate excess as of that first day of April and the “net income for the taxable year as required to be reported by the corporation in its last prior return to the federal government.” § 3. That “last prior return” was and of necessity must have been for the calendar year 1919. The next excise tax, being that here in question, was levied in respect to the doing of business during the calendar year beginning with January 1, 1920. This part of the excise is levied for a period of time that is past and not for a period in the future. The effect of the statute was to impose an excise for the commodity of carrying on business by a domestic corporation for a less period than one year in' cases where such business was not carried on for an entire year. That this was the purpose of the General Court is manifest from the present phrase of the law in G. L. c. 63, § 30, cl. 6. For many years the corporate excise tax was levied upon domestic corporations with respect to their corporate excess on a day certain. Martin L. Hall Co. v. Commonwealth, 215 Mass. 326. If there was no corporate excess on that date for any reason, no excise was due even though the commodity of carrying on business had been exercised during a considerable fraction of the preceding tax year. Commonwealth v. Lancaster Savings Bank, 123 Mass. 493. The income period established by said c. 355 is not coincident with the assessment day respecting the corporate excess. But that does not affect the validity of the excise. Income naturally imports duration of time for its measurement and property a single date for its ascertainment. Kimball v. Cotting, 229 Mass. 541. [42] Consideration of the history of the corporate excise tax law does not affect this conclusion.' It does not lead to double taxation for the same period. It is simply the establishment of a new and different standard for measuring the excise, which looks in part to a period that is past and not alone to the corporate excess on a given date. The petitioner enjoyed the commodity of carrying on business as usual until July 29, 1920. The holding of a stockholders’ meeting in September, 1920, also was an act of carrying on business. These corporate activities are legally subject to an excise. Old Dominion Co. v. Commonwealth, 237 Mass. 269. It is not necessary to determine whether the petitioner was subject to the tax until dissolved. The present excise rightly was levied as of July 24, 1920. It was provided by St. 1910, c. 187, § 1, as amended by St. 1919, c. 349, § 19 (see now G. L. 63, § 76), that “The sale or transfer otherwise than in the ordinary course of trade and in the regular and usual prosecution of the corporation’s business, of any part or the whole of the assets of a corporation [such as the petitioner] . . ., shall be fraudulent and void as against the Commonwealth, unless such corporation shall, at least five days before the sale or transfer, notify the tax commissioner of the proposed sale or transfer. . . . Whenever such a corporation shall make such a sale or transfer, the tax . . . shall become due and payable at the time when the tax commissioner is so notified, or, if he is not so notified, at the time when he should have been notified.” The petitioner became subject to the terms of this section because it sold and transferred all its assets and business on July 29, 1920, without notice to the tax commissioner. This section applies to an excise tax already laid although not due. But it applies equally to any excise tax not assessed but which rightly may be levied for any period ending with such sale, although the normal time for such levy has not yet arrived. Violation of this section accelerates the time for assessment as well as for collection. Since by the terms of this section the excise became due five days before the sale, namely, on July 24, 1920, interest was recoverable from that date. Petition dismissed with costs.