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U.S. Supreme Court

Cheney Bros. Co. v. Massachusetts, 246 U.S. 147 (1918)

Cheney Brothers Company v. Massachusetts

No. 12

Argued April 20, 1916

Restored to docket for reargument May 21, 1917

Reargued October 19, 1917

Decided March 4, 1918

246 U.S. 147


Massachusetts Stats., 1909, a. 490, Pt. III, § 56, imposed an annual excise upon every foreign corporation, for the privilege of doing local business, of 1/50 of 1% of the par value of its authorized capital stock, subject, however, to a maximum limit of $2,000.00. Held valid, as applied to corporations doing local as well as interstate business, upon the authority of Baltic Mining Co. v. Massachusetts, 231 U. S. 68. International Paper Co. v. Massachusetts, ante, 246 U. S. 135, distinguished.

The following activities are held to constitute local business, affording bases for the tax: .

1. Keeping up a stock of repair parts at a place of business, and supplying and selling them, in part locally, to users of machines made by the corporation in another state and sold in interstate commerce.

Case of Lanston Monotype Co.

Page 246 U. S. 148

2. Repairing automobiles made in another state and disposed of in interstate commerce, and selling second-hand automobiles taken in exchange for new ones so disposed of. Case of Locomobile Co. of America.

3. Where a corporation, to promote local trade in its product manufactured in another state and sold in interstate commerce to wholesalers, maintained a local office with agents who solicited orders from local retailers and turned them over to local wholesalers, who filled them and were paid by the retailers. Case of Northwestern Consolidated Milling Co.

4. Where a holding company had an office in the taxing state, pursuant to its articles, where it held stockholders' and directors' meetings, kept corporate records and accounts, received and deposited in bank regular dividends, and paid the money, less salaries and expenses, regularly as dividends to its stockholders. Case of Copper Range Co.

5. Maintaining a local office, pursuant to corporate articles, where proceeds of operations in another state are received, deposited locally, distributed to shareholders, less salaries and expenses, and where directors hold their regular meetings, elect officers, and manage the general business of the corporation. Case of Champion Copper Co.

The fact that a local business stimulates interstate business and that its abandonment would have the opposite effect does not make it any the less local. Case of Locomobile Co. of America.

Where a foreign corporation maintains and employs a local office, with a stock of samples and a force of office and traveling salesmen, merely to obtain orders locally and in other states, subject to approval by its home office, for its goods to be shipped directly to the customers from its home state, the business is part of its interstate commerce, and not subject to local excise taxation. Case of Cheney Brothers Co. And the action of such office in obtaining orders from customers residing in the home state of the corporation and in transmitting them to the home state where they are approved and filled is interstate intercourse, not local business in the state where the office is established. Id.

A state may impose a different rate of taxation upon foreign corporations for the privilege of doing local business than it imposes upon the primary franchises of its own corporations, and, by merely permitting or licensing a foreign corporation to engage in local business and acquire local property, it does not surrender or abridge, quoad

Page 246 U. S. 149

such corporation, it power to change and revise its taxing system and tax rates. Hence, where a foreign corporation acquired real property and specially improved it at large cost, but still the property was such that the investment might be retrieved if need be, held that a subsequent increase in its excise without corresponding change in the tax bearing on domestic corporations would not deny it the equal protection of the laws. Southern Ry. Co. v. Greene, 216 U. S. 400, distinguished. Case of White Co.

218 Mass. 558 reversed in part and affirmed in part.

The case is stated in the opinion.

Page 246 U. S. 152

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