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The same principles of taxation apply to domestic and foreign corporations in determining the amount of capital stock employed within the state for the purposes of the annual franchise tax. If there is no property or business done in the state there is no basis for the tax.

Requirements for taxation of foreign corporation.—Two concurring conditions are necessary for the taxation of foreign corporations under sections 181 and 182 of the Tax Law:

1. Foreign corporations shall be doing business in the state;

2. Its capital, or some part thereof, shall be "employed within this state."

People ex rel. Chicago Junc. Ry. Co. v. Roberts, 154 N. Y.

1 (1897); rev'g 90 Hun, 474.

See also People ex rel. Harlin & H. Co. v. Campbell, 139

N. Y. 68 (1893). Interstate commerce.-A railroad incorporated in another state, having terminal facilities and real estate here, employing workmen and keeping money in bank in this state, incidental to its business, of forwarding and receiving passengers between New York and other states, is engaged in interstate commerce and not taxable on its capital employed here. People ex rel. Pa. R. R. v. Wemple, 65 Hun, 252 (1892) aff’d 138 N. Y. 1. But a railroad employing its capital in cab service, beginning and ending in this state, for which a separate charge is made, is taxable thereon,

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since it is not a part of the interstate commerce of a railroad company. The tax is not on the property of the company, but on its privilege of exercising its corporate franchises. People ex rel. Penn. R. R. v. Knight, 67 App. Div. 398 (1901); affd 171 N. Y. 354 (1902); aff'd in 192 U. S. 21 (1904).

A more recent case, People ex rel. International Elevator Co. v. Roberts, 116 App. Div. 30 (1906), intimates that the franchise tax may be imposed on a corporation engaged in interstate commerce, provided part of its business is done in the state.

Good-will; United States copyrights; patents.-Good-will of a foreign corporation carrying on business in this state and nowhere else is subject to a franchise tax under sections 181 and 182 of the Tax Law. People ex rel. Johnson Co. v. Roberts, 159 N. Y. 70 (1889). In the last named case it was held that the copyrights were not taxable, but a later case overruled so much of the decision as was applicable to the taxation of copyrights and clearly upheld the right of the state to impose a franchise tax on a corporation owning letters patent or copyrights. People ex rel. U. S. Aluminum Printing Co. v. Knight, 174 N. Y. 475 (1903); see, also, People ex rel. Edison El. Ill. Co. v. Wemple, 61 Hun, 53 (1891).

Some of the business corporations in the cases above cited are now taxed under Article 9-a of the Tax Law on net income on a somewhat different basis, but the rules laid down in these cases continue to apply to corporations now taxable under Sections 181 and 182 of the Tax Law.

When Foreign Corporations Have Been Held to Be Doing

Business or Employing Capital Within the State. Selling western mortgages.—A foreign corporation having an office in New York for the sale of mortgages on western real estate, depositing the proceeds of sale in New York, and sending the funds to the home office for re-investment, is doing business within the state. People ex rel. N. E. Loan & Invest. Co. v. Roberts, 25 App. Div. 16 (1898).

A foreign corporation is doing business when it becomes a special partner in a limited partnership within this state, and is liable to taxation on the amount of its capital contributed to the partnership. People ex rel. Badische Anilin & Soda Fabrik Co. v. Roberts, 152 N. Y. 59 (1897); O'Brien, J., dissenting.

When Foreign Corporations Are Not Doing Business or

Employing Capital in the State. Foreign corporation carrying on business through brokers. -A foreign corporation carrying on business through brokers in this state, consigning goods to them for sale at a price fixed by it, or in fulfillment of orders approved by it, was held not to be carrying on business here, although the proceeds of sale were deposited in bank in New York to its credit. People ex rel. Southern Cotton Oil Co. v. Roberts, 25 App. Div. 13 (1898). The court said in this case that “the goods consigned to commission merchants were in their possession and control, and their disposition in accordance with the directions of the relator was a part of their business, not the business of the relator. A commission merchant has ordinarily a right to sell in his own name (Story's Agency, Secs. 33 and 34). As to the public he is the dealer."

In another case, People ex rel. Washington Mills v. Roberts, 8 App. Div. 201 (1896), it was held that where a foreign corporation solicited orders through agents in the state, which were filled from the factory in the home office, and leased offices, kept samples and a bank account in New York State, it was not taxable here. This case was followed in People ex rel. H. P. Smith v. Roberts, 27 App. Div. 455 (1898). The court held in these cases that the business of soliciting orders in the state was not taxable, and that the bank account and samples were not taxable, but merely incidental to the business of soliciting orders.

Newspaper advertising agency forwarding printed matter. -A case on the same lines is that of People ex rel. A. M. Kellogg Newspaper Co. v. Roberts, 30 App. Div. 150 (1898). This was a foreign corporation with a home office at Chicago, Illinois, which was engaged in forwarding printed matter from its home office to be used by New York newspapers, and had an office in New York for soliciting advertisements. These advertisements were forwarded to Chicago and the collections made thereon were deposited in a New York bank and credited to the Chicago office. It was held not to be capital employed in the state.

An earlier and frequently cited case in which the right of a foreign corporation to maintain an office and salaried agent here, was maintained, was People ex rel. Harlin & Hollingsworth Co. v. Campbell, 139 N. Y. 68 (1893). The business of this corporation was manufacturing and equipping railway and steamship cars in the State of Delaware, where all its business was transacted and manufacturing done. While the maintenance of a New York office might be doing business, there was no capital employed by the corporation which would subject it to a tax under the statute.

Telephone companies leasing telephones to local companies. -In People v. American Bell Telephone Co., 117 N. Y. 241 (1889), reversing 50 Hun, 114, it was held that where a Massachusetts company leased to certain corporations in this state, under contracts executed in Boston, telephones which were delivered to lessees in that city, at its office, the local companies supplying poles, wires, plant, agents, etc., but the lessor company supplying much of the capital of the local companies, that the lessor company was not carrying on business in this state within the act.

Cases which seem to be overruled by the amendment of 1906.-Under the law prior to 1906 a foreign corporation investing its capital in the stock of another corporation, domestic or foreign, was not engaged in business in the state, even if the corporation in whose stock its capital was invested was so engaged in business. People ex rel. Chicago Junc. Ry. Co. v. Roberts, 154 N. Y. 1 (1897); People ex rel. Edison Co. v. Kelsey, 101 App. Div. 205 (1905); People v. American Bell Telephone Company, 117 N. Y. 241 (1889).

The present statute expressly declares that "for the purposes of taxation the capital of a corporation invested in the stock of another corporation shall be deemed to be assets located where the physical property represented by such stock is located.”

This also changes the rule in the case of a domestic corporation investing its capital in the stock of another corporation, domestic or foreign. Such a corporation investing its capital in the stock of a foreign corporation was formerly not taxable, but if its capital was invested in the stock of a domestic corporation it was held to be taxable. People ex rel. Edison Electric Light Company v. Campbell, 138 N. Y. 543 (1893); same v. same, 148 N. Y. 690 (1896). Under the present law such corporations are taxable only if the physical property represented by such stock is located in the state.

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