People ex rel. Consolidated Ginseng Co. of America v. Kelsey

The only question for our determination is whether the relator’s license fee should be computed on its authorized capital stock of $2,000,000, or upon the $240,000 of capital employed by the relator in this state. The license tax on foreign corporations is provided by section 181 of the tax law (chapter 908, p. 856, Laws 1896, as amended by chapter 558, p. 1365, Laws 1901). The section is headed, “License Tax on Foreign Corporations,” and it provides :

“Every foreign corporation * * * authorized to do business under the general corporation law shall pay to the State Treasurer for the use of the state, a license fee of one eighth of one per centum for the privilege of exercising its corporate franchises, or carrying on its business in such corporate or organized capacity in this state to be computed upon the basis of the capital stock employed by it within this state during the first year of carrying on its business in this state, and if any year thereafter any such corporation shall employ an increased amount of its capital stock within this state the same license fee shall be due and payable upon any such increase. * * *”

The franchise tax on domestic corporations is provided by section 182 of the tax law. By such section the franchise tax on domestic

When the case of People ex rel. Commercial Cable Co. v. Morgan was in this court ( 86 App. Div. 577 , 83 N. Y. Supp. 998 ), the relator in that case contended that the amount of capital stock employed within this state is, under section 182, deemed to be such proportion of the capital stock of the corporation as the amount of capital employed within this state bears to the entire capital of the corporation. Such contention of said relator was not sustained in this court. When that case was in the Court of Appeals ( 178 N. Y. 433 , 70 N. E. 967 ), that court, in construing the provisions of said section 182 of the tax law, used the following language:

“What, then, Is ,the basis upon which the tax is to be computed? Is it the share stock held by individuals, or is it the capital held by the corporation? The tax is upon the corporation. It would seem to follow that the amount of the tax is to be measured by something that the corporation owns. A franchise stock corporation owns three things: (1) Its capital, existing in money or property; (2) its surplus, if any; (3) its franchise. The franchise is the thing taxed, and the tax is ‘computed upon the basis of the amount of its capital stock employed within the state.’ The share stock, or, in other words, the paper certificates, held and owned by individuals, are not employed within this state. It is the capital represented by such certificates that is so employed. The total share stock of a domestic corporation may be held by nonresidents, and yet all of its capital may be employed within the state. In such a case there would be absolutely no basis for taxation, unless the capital of the corporation, instead of the share stock held by its members, is the thing upon which the tax is to be computed. In construing this section of the corporation tax law, the authorized issue of the share stock of a corporation needs to be considered only as fixing the limit beyond which a corporate franchise cannot be taxed in a case where all of the corporate capital, is employed within" this state. This court has held that the term ‘capital stock,’ as used in statutes similar to the one under consideration, means, not share stock, but the property of the corporation contributed by its stockholders, or otherwise obtained by it, to the extent required in its charter. Williams v. West. Union Tel. Co., 93 N. Y. 162 . The expression ‘capital stock’ is often loosely used in speech, and sometimes in statutory phraseology, to denote capital and nothing more. State v. Morris-town Fire. Ass’n, 23 N. J. Law, 195 . In Burrall v. Bushwick R. Co., 75 N. Y. 211 , capital stock was defined as ‘money or property which is put in a single corporate fund by those who, by subscription therefor, become members of a corporate body.’ ‘Capital stock’ and ‘capital’ are practically the equivalent of each other, when considered as a basis for a franchise tax.”

The language so used is applicable to the case now under consideration. It is the latest expression of the courts construing the meaning of the words “capital stock employed in this state,” as used in the tax law. It is controlling upon us, and it is also in accord with the previous expressions of this court. The license fee should

The determination of the Comptroller should be modified by reducing the license fee to $300, and, as so modified, confirmed, with $50 costs and disbursements to the relator. All concur.