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the words "capital” and “capital stock” as well as the words "employed” in reference to capital, are defined. In that case it was held that a domestic corporation incorporated “for improving the breed of horses” and owning two tracts of land, one of which was paid for out of the capital stock, the other of which was paid for out of profits, is subject to a franchise tax under section 182 of the Tax Law, although it claimed it was not exercising its franchise under its certificate of incorporation, and that its capital was simply lying dormant. When the company used its capital to purchase real estate, it was employing its capital in the state. “Using” is employing. Citing People ex rel. Fifth Ave. Bldg. Co. v. Williams, 198 N. Y. 238 (1910); People ex rel. Vandervoort v. Glynn, 194 N. Y. 387; People ex rel. 14th St. Realty Co. v. Kelsey, 110 App. Div. 797 (1909). The fact that one of the two tracts of land was paid for out of the capital stock and the other out of profits is immaterial. Both are capital. The words "capital stock" and "capital” are practically equivalent within the meaning of the provisions of the franchise tax. By "capital stock” is meant the value of the net assets, and since surplus forms part of the capital, it must be taken into account in valuing the capital stock. People ex rel. Commercial Cable Co. v. Morgan, 178 N. Y. 433 (1904); People ex rel. Wiebusch & Hilger Co. v. Roberts, 154 N. Y. 101 (1897).

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Real estate; property without the state.---Real estate ployed in business within the state may be taxed, even though it results in double taxation. This does not make the law unconstitutional. People ex rel. Postal Tel. Co. v. Campbell, 70 Hun, 507 (1893). If the real estate is not within the state, the capital so invested is not taxable here. People ex rel. American Surety Co. . Campbell, 74 Hun, 101 (1893); af?d 143 N. Y. 625. The same rule applies to United States bonds deposited in other states. Ibid.

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Nor will freight cars permanently outside of the state be taxed as capital employed within the state. People v. Campbell and Roberts, 88 Hun, 545 (1895).

Outstanding accounts of domestic corporations.--Outstanding accounts, representing property of a domestic corporation invested outside of the state, and which has never come within the state, have been held to be capital employed without the state. People ex rel Rees v. Miller, 90 App. Div. 591 (1904). This decision has been modified, but does not seem to have been overruled, on the point cited in People ex rel Williams v. Sohmer, 151 App. Div. 764 (1912).

Joint stock company taxable.—Joint stock companies were held liable to taxation under the law as amended. The insertion of words "or organized” in Chapter 361 of the Laws of 1881 indicated that the legislature did not intend to confine the third section of Chapter 542 of the Laws of 1880 to bodies which were strictly incorporated. People ex rel. Platt v. Wemple, 117 N. Y. 136; aff’g 52 Hun, 434 (1889). The legislature amended this section by making it applicable to a "corporation, joint stock company or association, incorporated, organized or formed.” (Chap. 353, L. 1889, now included in sec. 182 Tax Law.)

Amount of franchise tax payable by corporations with shares without nominal or par value under chap. 351, L. 1912.-The franchise tax upon any corporation issuing such shares of stock payable under sec. 182 of the tax law shall be determined by the amount of the gross assets of such corporation employed in any business within this state, less such proportion of its liabilities as shall represent the ratio of its gross assets employed in any business within this state to its entire gross assets wherever employed in business, and the rate of such franchise tax shall be fixed in the manner provided in said sec. 182 of the tax law. For this purpose the rate of dividends shall be computed by dividing the total amount of dividends which have been paid during the year by the amount of assets of the corporation upon the first day of such year.

NOTE.-After ascertaining the total amount taxable as above, if there are several classes of stock, the preferred having preference in payment of principal, it would appear that the value of the common may be determined by deducting the proportionate share of the par value of the preferred from such amount.

CHAPTER V.

PRINCIPLES DETERMINING TAXATION OF FOREIGN CORPORA

TIONS UNDER SECTIONS 181 AND 182 OF THE Tax Law.

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. Where a domestic corporation with a principal office in New York moves its office for the transaction of business to Pennsylvania and carries on all operations there, although maintaining a bank account in New York, the tax can be levied only on the bank account, as the rest of the capital is employed without the state. People ex rel. Davis-Colby Ore Roasting Co. v. Campbell, 66 Hun, 146 (1892).

What is meant by a foreign corporation doing business, or exercising its corporate franchises within the state.-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).

1

Outstanding accounts of foreign corporations.-A foreign corporation engaged in the advertising business in New York

City and doing all of its business from its New York office, where its moneys were collected, contracts made, and funds deposited in bank, is taxable there for outstanding accounts due on advertising from non-residents of the state, the business being conducted as an entirety and managed from the New York office. People ex rel. Williams Company v. Sohmer, 151 App. Div. 764 (1912).

Interstate commerce not taxable.—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). 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, 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); aff’d 171 N. Y. 354 (1902); aff’d in 192 U. S. 21 (1904).

A very 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.

Foreign commerce; imported goods.-A foreign corporation partly engaged in foreign commerce and partly engaged in domestic commerce is taxable under Chapter 542, Laws of 1880 (section 182, Tax Law), on imported goods. The imposition of the tax is not an interference with commerce. If the company is wholly engaged in interstate or foreign commerce the question as to whether the business is a private one or of a quasipublic character like that of a common carrier is then to be considered. People ex rel. Klipstein v. Roberts, 36 App. Div. 597 (1899).

The fact that a foreign corporation employs its capital in the state in the business of foreign commerce does not exempt it from taxation. People ex rel. Eppens, Smith & Wieman Co. v. Roberts, 51 App. Div. 152 (1900).

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. People ex rel. Johnson Co. v. Roberts, 159 N. Y. 70 (1899). 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).

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

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