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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, 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.

CHAPTER VI.

EXEMPTION OF MANUFACTURING AND OTHER CORPORATIONS

FROM ANNUAL FRANCHISE Tax.

The section of the Tax Law exempting manufacturing and other corporations has been materially changed since the enactment of Chapter 361, Laws of 1881, which had its origin in that part of Chapter 542, Laws of 1880, excepting certain corporations from the payment of the franchise tax.

The original law, besides exempting manufacturing and mining corporations, also exempted banks, foreign insurance companies and life insurance companies, and, later, other amendments exempted various other classes of corporations.

By Chapter 542, Laws of 1880, manufacturing corporations were required to be wholly engaged in manufacturing within the state.

The courts interpreted the amendment to signify that if any part of the capital of the corporation was not actively employed in manufacturing within the state, the entire capital was taxable.

The cases of People ex rel. Western Elec. Co. v. Campbell, 145 N. Y. 587, aff'g 80 Hun, 466 (1895); People ex rel. F. A. Stokes v. Roberts, 90 Hun, 533 (1895); People ex rel. Schwarzchild Co. v. Roberts, 11 App. Div. 449 (1896), brought out the hardship of the law.

It was held, however, in People ex rel. Tiffany Co. v. Campbell, 144 N. Y. 166 (1894), that a domestic corporation, which employed ultra vires a small part of its capital in business other than manufacturing and with this exception was wholly engaged in manufacturing within the state, was only taxable on the capital employed ultra vires.

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In the Tax Law of 1896 (section 183) the rigor of this rule was relaxed; the corporation was not required to be wholly engaged in manufacturing, but was exempt only to the extent of the capital actually so employed.

By Chapter 558, Laws of 1901, another important amendment was added by which at least forty per cent. of the capital stock of a manufacturing corporation must be invested by it in the state and used in manufacturing to entitle it to the exemption.

The present provisions of the statute read as follows:

Certain corporations exempt from tax on capital stock.–Banks, savings banks, institutions for savings, title guaranty, insurance or surety corporations, every trust company incorporated, organized or formed, under, by or pursuant to a law of this state, and any company authorized to do a trust company business, solely or in connection with any other business, under a general or special law of this state, laundering corporations, manufacturing corporations to the extent only of the capital actually employed in this state in manufacturing, and in the sale of the product of such manufacturing, mining corporations wholly engaged in mining ores within this state, agricultural and horti. cultural societies or associations, and corporations, joint stock companies or associations owning or operating elevated railroads or sur. face railroads not operated by steam, or formed for supplying water or gas for electric or steam heating, lighting or power purposes, and liable to a tax under sections one hundred and eighty-five and one hundred and eighty-six of this chapter, shall be exempt from the payment of the taxes prescribed by section one hundred and eighty-two of this chapter. But such a laundering, manufacturing or mining corporation shall not be exempted from the payment of such tax, unless at least forty per centum of the capital stock of such corporation is invested in property in this state, and used by it in its laundering, manufacturing or mining business in this state. (Former sec. 183, Tax Law, as amended by ch. 785, L. 1897, ch. 558, L. 1901, and ch. 474, L. 1906.)

Source: Ch. 542, L. 1880, as amended by ch. 361, L. 1881.

Purpose of exempting manufacturing companies. The purpose of exemption granted by Chapter 542 of the Laws of 1880, as amended by Chapter 522 of the Laws of 1890, was the de

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