People ex rel. A. N. Kellogg Newspaper Co. v. Roberts

LANDON, J. The relator’s business ih this state is the procurement of orders for advertising and the collection of payment therefor. The orders themselves are in part executed by the relator outside of the state, and the execution finished by the relator’s customers, to whom it furnishes “patent insides” or “outsides,” so called, containing the advertisements. It has an agency within the state to procure orders for the business it does without the state. It has an office here as a convenient headquarters. Its bank balance here consists of its collections in payment for its business done elsewhere, and temporarily deposited here. The wages of its employés here, and the rent of its office, are paid from its earnings, as the nature of its business and its payments of dividends imply. It is proper to take earnings, rent, wages, bank balances, and everything else into consideration that will throw light upon the amount of capital employed within this state, but discrimination must be used to perceive what light is thus thrown. We think it is demonstrated that the relator’s capital is not employed in this state within the meaning of the statute. To illustrate: Mr. Smith orders through the New York office his advertisement inserted in 100 newspapers in the state of Wisconsin, and pays $500 to the New York office therefor. The New York office sends the advertisements and list of papers to the Chicago office, and deposits the money in a New York bank to the credit of the relator. The relator, at Chicago, checks against the deposit, to pay expenses here or elsewhere. The relator renders the services and supplies in Chicago which result in the execution of the order. It is plain that no part of the order has been executed in New York, nor any part of the relator’s capital used there for the purpose of executing it either in Chicago or Wisconsin, unless it be the office furniture and rent. Office conveniences are permitted here to a foreign corporation doing business in another state to solicit orders to be executed in other states, without liability to our franchise tax. People v. Campbell, 139 N. Y. 68, 34 N. E. 753; People v. Roberts, 8 App. Div. 201, 40 N. Y. Supp. 417, affirmed 131 N. Y. 619, 45 N. E. 1134; People v. Roberts, 154 N. Y. 1, 47 N. E. 974. The materials which the Chicago office furnished to newspaper publishers in this state did not constitute the employment of capital here, within the meaning of the statutes imposing a franchise tax. People v. Roberts, 22 App. Div. 282, 47 N. Y. Supp. 949. Some stress is placed by the comptroller upon the form of the relator’s returns for the years 1893, 1894, and 1895; but the testimony taken, as well as the nature of the relator’s business, show [868] that these returns were made under a misapprehension of the law as to what constitutes the employment of capital. The determination of the comptroller is reversed, but, because of the fact last stated above, without costs.