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sold and delivered to customers outside the State, is a separable class of income, and that such business is transacted and located without the State. The incidental management from the home office in Wisconsin and the accounting for the proceeds to it, does not make it taxable in Wisconsin.

In the same case, the point was raised and decided as to the constitutionality of taxing income derived from goods sold to customers outside the State from branch offices maintained outside the State, from the standpoint of levying a tax upon transactions in interstate commerce. The court held “the manufacture, the management, and the conduct of the business at the home office are the controlling features in the process of disposing of the article and constitute the source out of which the income issues, and give it a situs within the State under the Income Tax Law.”

The reasoning of the court was in substance as follows: That the income tax is not a tax on property as such, but is a tax on the income under the amendment of the Constitution of Wisconsin; that the income tax law did not seek to reach property or an interest in property as such, but to reach incomes having either a situs within the State or a source within the State; that income is the net result of many combined elements, of which the manufacture, the

management and conduct of the business at the home office are essential and controlling, and that the different elements are not absolutely separable, and that it is no objection to taxing income produced in part from the profits of business conducted through branch offices in other states, and dealings at the branch offices with customers in other states, that it came from property of itself non-taxable.

This case distinguished the Philadelphia & $. S. Co. v. Pennsylvania, 122 U. S. 326, where a tax levied on the gross receipts of a steamship company for interstate freight was held to be a tax upon interstate commerce, and therefore invalid, and it relied for the distinction on Flint v. Stone Tracy Co., 220 U. S. 107, to the effect that it is no valid objection to the standard of measuring a privilege tax, that there is included within the standard, as part of it, property which as such, could not be directly taxed.

For the affirmance in the United States Supreme Court on June 3d, 1918, Justice Pitney, in writing the opinion, quoted from Postal Telegraph Cable Co. v. Adams, 155 U. S. 688, 695-696, as follows:

“But property in a State belonging to a corporation, whether foreign or domestic, engaged in foreign or interstate commerce, may be taxed, or a tax may be imposed on the corporation on account of its property within a State, and may take the form of a tax for the privilege of exercising its franchises within the State, if the ascertainment of the amount is made dependent in fact on the value of its property situated within the State (the exaction, therefore, not being susceptible of exceeding the sum which might be leviable directly thereon), and if payment be not made a condition precedent to the right to carry on the business, but its enforcement left to the ordinary means devised for the collection of taxes.".

In another portion of his opinion, in pointing out the distinction between a tax which is a direct burden on interstate commerce, and one which is an indirect burden, he says:

“The correct line of distinction is so well illustrated in two cases decided at the present term that we hardly need go further. In Crew Levick Co. v. Pennsylvania, 245 U. S. 292, we held that a state tax upon the business of selling goods in foreign commerce, measured by a certain percentage of the gross transactions in such commerce, was by its necessary effect a tax upon the commerce, and at the same time a duty upon exports, contrary to sections 8 and 10 of Article I of the Constitution, since it operated to lay a direct burden upon every transaction by withholding for the use of the State a part of every dollar received. On the other hand, in Peck & Co. v, Love, Col. leotor, decided May 20th last, ante, p. we held that the Income Tax Act of October 30, 1913, Chap. 16, Sec. 2, 38 Stat. 166, 172, when carried into effect by imposing an assessment upon the entire net income of a corporation approximately three-fourths of which was derived from the export of goods to foreign countries, did not amount to laying a tax or duty on articles exported within the meaning of Art. I, Sec. 9, cl. 5, of the Constitution.

The distinction between a direct and an indirect burden by way of tax or duty was developed, and it was shown that an income tax laid generally on net incomes, not on income from exportation because of its source or in the way of discrimination, but just as it was laid on other income, and affecting only the net receipts from exportation

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after all expenses were paid and losses adjusted and the recipient of the income was free to use it as he chose, was only an indirect burden.

"The difference in effect between a tax measured by gross receipts and one measured by net income, recognized by our decisions, is manifest and substantial, and it affords a convenient and workable basis of distinction between a direct and immediate burden upon the business affected and a charge that is only indirect and incidental. A tax upon gross receipts affects each transaction in proportion to its magnitude and irrespective of whether it is profitable or otherwise. Conceivably it may be sufficient to make the difference between profit and loss, or to so diminish the profit as to impede or discourage the conduct of the commerce. A tax upon the net profits has not the same deterrent effect, since it does not arise at all unless a gain is shown over and above expenses and losses, and the tax cannot be heavy unless the profits are large. Such a tax, when imposed upon net incomes from whatever source arising, is but a method of distributing the cost of government, like a tax upon property, or upon franchises treated as property; and if there be no discrimination against interstate commerce, either in the admeasurement of the tax or in the means adopted for enforcing it, it constitutes one of the ordinary and general bur. dens of government, from which persons and corporations otherwise subject to the jurisdiction of the States are not exempted by the Federal Constitution because they happen to be engaged in commerce among the States,

"And so we hold that the Wisconsin income tax law, as applied to the plaintiff in the case before us, cannot be deemed to be so direct a burden upon the plaintiff's interstate business as to amount to an unconstitutional interference with or regulation of commerce among the States. It was measured not by the gross receipts, but by the net proceeds from this part of plaintiff's business, along with a like imposition upon its income derived from other sources, and in the same way that other corporations doing business within the State are taxed upon that proportion of their income derived from business transacted and property located within the State, whatever the nature of their business. Judgment affirmed.”

This opinion has been quoted here at length because it is the last word emanating from the Supreme Court of the United States, on this subject, and also because it is directly concerned with an income tax very similar in its application to that of the New York franchise tax on the net income of corporations.

5. Connecticut income tax case.

The Connecticut Income Tax Law, which is substantially like the New York statute, imposes a tax of two per cent. on the net income of miscellaneous corporations based on their return made to the United States Treasury Department. It affects practically the same class of corporations that is comprehended under the New York Law. The Connnecticut Law was passed in 1915, constituting Part 4, Chapter 292 of the Public Acts of 1915, and was amended by Chapter 298 of the Public Acts of 1917. This law came before the Connecticut courts in the case of Underwood Typewriter Co. v. Chamberlain, 102 Atlantic, 600 (December, 1917). In that case, the appellant, Underwood Typewriter Company, a Delaware corporation, had its principal office in Wilmington, Delaware; its main office was in New York City, where it contended that it was engaged in interstate commerce; its manufacturing plant was in Hartford, Connecticut, the larger part of its property and assets was located beyond the limits of Connecticut, but a large part of its tangible personal property and real estate was located in Connecticut and was used there for manufacturing purposes. The appellants contention was that the State of Connecticut, under the guise of a franchise or privilege tax, could not impose a tax upon a foreign corporation, measured by its income from interstate commerce, although nearly one-half of its real estate and tangible personal property was located in Connecticut. While this was the question presented by the complaint, the State of Connecticut raised by demurrer, the point that plaintiff had voluntarily paid the tax demanded, and that if one pays an alleged unconstitutional tax on demand, the amount cannot be recovered. The latter point was decided in favor of the contestant without involving the decision of the question as to the validity of the law, the court holding that the plaintiff's payment of the tax under protest was not a voluntary payment but a payment under duress.

In view of the decision of the United States Supreme Court in U. S. Glue Co. v. Town of Oak Creek, cited supra, it may be doubted whether the main ground of appeal has not been covered by the decision of the Federal Court of last resort.



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Domestic corporations.

Under Section 211, every corporation taxable under Article 9-a, is required to transmit to the State Tax Commission, a report of its taxable condition. Under Section 209, every domestic corporation except those expressly specified in Section 210, is taxable, and if it be assumed that those corporations, not dissolved, are exercising or capable of exercising their corporate franchises, it is incumbent on them to file reports. The word "taxable" is used in the statute in the sense of liable to taxation. The law will infer (in the absence of proof to the contrary) that capital invested in business yields an income, and that a domestic corporation is a "stock" corporation. McLean, Receiver of Taxes v. Julien Elec. Co., 28 Abb. N. C. 349. It has also been held in connection with the construction of a similar term such as "corporation deriving an income or profit," that it applies to every moneyed or stock corporation organized for the purpose of acquiring income or profit, and does not apply to financial condition.

In connection with Federal reports it has been held that the duty to make returns depends upon corporate or associational existence and not upon the receipt of income.

Treasury Decision 2090, December 14, 1914.

Article 9-a provides for the payment of a tax by a "domestic corporation for the privelege of exercising its franchise in this state in a corporate or organized capacity," and this does not mean actively engaged in business, nor does it mean that the corporation need be in receipt of a gross or net income, for, under the last paragraph of Section 214 there is a minimum tax of $10 irrespective of whether the corporation earns anything or not. In the imposition of the federal capital stock tax, it has been held that

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