People ex rel. Niagara River Hydraulic Co. v. Roberts

The contention of the relator is that the tax contemplated by the statute is upon the active use of its capital in its corporate business, not upon the passive holding of it in the form of an unproductive- investment. The learned attorney general relies upon the letter of the statute, which declares that “every corporation i;" * organized, under any law of this state, except manufacturing * corporations * carrying on manufactures within this state * * shall be subject to and pay a tax,” etc. Laws 1880, c. 542, § 3. As the relator does no manufacturing, it is not exempt upon that ground.- People v. Horn Silver-Min. Co., 105 N. Y. 82, 11 N. E. 155; People v. Campbell, 144 N. Y. 173, 38 N. E. 990. The franchise tax is imposed upon domestic corporations because of their franchise. It is based upon their capital “employed within this state,” and graduated according to dividends earned. In respect to foreign corporations, we do not grant them their franchises, but we permit them to do business here; and, as we should not accord them superior advantages over domestic corporations, we try to impose the same rate of taxation upon them, and thus we tax them upon- their business upon the same basis and scale. In People v. Wemple, 150 N. Y. 46, 44 N. E. 787, it was held as to a foreign corporation that the money, whether capital or surplus, which it invested in real estate here, riot for the transaction of its ordinary business, but for rental, was not “employed within this state,” within the meaning of the statute. If capital can be. invested without being employed, the case before us seems to be a fair instance of it. Of course, the statute does not contemplate that a foreign corporation shall, in this respect, be more favored than a domestic one, and hence we must hold that the relator was not liable to the franchise tax.

Determination of the comptroller reversed, with $50 costs and disbursements. All concur, except'PUTNAM, J., dissenting.