Marshall-Wells Co. v. Commissioner of Taxation , 220 Minn. 458 ( 1945 )

1. The facts in the instant case and the legal questions raised by them are the same as those in Cargill, Inc. v. Spaeth, 215 Minn. 540, 10 N.W.2d 728. Decision here should be controlled by the Cargill case. Instead, it is diametrically opposed to it. In the Cargill case, the taxpayer was a foreign (Delaware) corporation having its commercial domicile in the state. It received dividends declared upon the stock of three foreign (a Delaware, an Illinois, and a Nebraska) corporations, in which it owned all the stock. None of the subsidiaries did any business in the state. The stocks of the subsidiaries werenot used by the parent in its business. The intercorporate relationship between Cargill and its subsidiaries was that (215 Minn. 542, 10 N.W. [2d] 730):

"* * * The separate entity of the parent and of the stock-owned subsidiaries was observed. Each transacted its own business as a separate corporation. In their intercorporate relations they made contracts, leases, and charges for services and use of the money the same as if no such relationship existed."

In the instant case, the facts are identical, except for such immaterial ones as those that the parent corporation here is a New Jersey instead of a Delaware corporation and that it receives the dividends declared on the stock of only one wholly stock-owned subsidiary, a Canadian corporation, instead of three subsidiaries organized under the laws of different States.

The ultimate question in both cases is the same. In the Cargill case, the decision of the commissioner of taxation, affirmed by the board of tax appeals, was (215 Minn. 544,10 N.W. [2d] 731) —

"that each of the subsidiaries was an independent corporate entity in law and in fact; that each taxpayer had a 'commercial domicile' in Minnesota, in consequence of which it was taxable here upon income from intangibles from sources outside the state the same as a resident of the state or a corporation organized under the laws thereof, and that the items in question were not to be apportioned under the income tax law, but were to be assigned in toto to Minnesota for purposes of income taxation."

In the instant case, precisely the same decision was made by the commissioner and affirmed by the board of tax appeals. In the Cargill case, construing the statute, we said (215 Minn. 548,10 N.W. [2d] 733), "§ 23(b),³ assigning to this state income from intangibles not employed in the business of the recipient, if the recipient is domiciled within the state, is a statutory application of the rule that income from intangibles follows the domicile of the recipient." (Italics supplied.) We held that a foreign corporation is domiciled here if it has itscommercial domicile here, and that, in consequence of such commercial domicile, it is taxable here upon dividends received by it as the owner of stocks in other foreign corporations. We there followed the decisions of the Supreme Court of the United States holding that a foreign corporation having its commercial domicile in a state other than that of its incorporation sustains such a relationship to that state as to be subject there to state taxation, ad valorem and income, upon its intangibles, even though such intangibles are not used by it in transacting business in the taxing state. We said (215 Minn. 549,10 N.W. [2d] 733):

"Corporations are organized in some states in full recognition of the fact that they will depart therefrom to other states to establish their business homes. As a practical matter, the migration is no different from that of an individual. Legal fiction should be made to yield to reality. A corporation may make its actual, as distinguished from its technically legal, home in a state other than that of its incorporation. Where a corporation, organized under the laws of one state, transacts no business there and establishes its principal office in another, where it manages and directs its business, it acquires a commercial domicile there, in virtue of which it is subject to taxation there upon its intangibles, even though its business may extend into other states. For purposes of taxation, intangibles have a situs at the taxpayer's commercial domicile. Memphis Natural Gas Co. v. Beeler, 315 U.S. 649,62 S. Ct. 857, 86 L. ed. 1090; First Bank Stock Corp. v. Minnesota,301 U.S. 234, 57 S. Ct. 677, 81 L. ed. 1061, 113 A.L.R. 228 (affirming 197 Minn. 544, 267 N.W. 519, 269 N.W. 37); Wheeling Steel Corp. v. Fox, 298 U.S. 193, 56 S. Ct. 773,80 L. ed. 1143. Because here Minnesota was the taxpayer's commercial domicile, it was taxable here upon the dividends received from its foreign subsidiaries, although they transacted no business here. See annotation, 102 A.L.R. 78."

In Maytag Co. v. Commr. of Taxation, 218 Minn. 460,17 N.W.2d 37, we approved the rule thus announced in the Cargill case.

The majority opinion here attempts to distinguish the Cargill case from the instant one by stating that in the Cargill case the business of the parent and subsidiaries was a"unitary" one and that the subsidiaries were engaged in performing "subsidiary functions" of the parent's business. There is no basis in fact for the attempted distinction. The facts are directly to the contrary. In the Cargill case, as stated above, the corporate identities of the parent and of the subsidiaries were separate and distinct and so were the businesses of each. There was nothing unitary about either the corporate existence or the business of each. The business of a foreign corporation is said to be unitary where the corporation owns branches in several states and the entire operations of its business through its principal place of business and branches contribute to its entire net income. Butler Bros. v. McColgan, 315 U.S. 501, 62 S. Ct. 701, 86 L. ed. 991; Hans Rees' Sons, Inc. v. North Carolina ex rel. Maxwell, 283 U.S. 123,51 S. Ct. 385, 75 L. ed. 879. In the very nature of things, there could have been no unitary relationship between Cargill and its Illinois and Nebraska subsidiaries for the reason that the laws of those states (and the constitution of Nebraska) prohibited the parent from transacting the business in question within their respective borders. Consequently, the business of the subsidiaries was not that of the parent, but their own. As we said, quoting from Garber v. Bancamerica-Blair Corp. 205 Minn. 275, 282, 285 N.W. 723, 727:

"* * * Where * * * the corporate separation is maintained and the subsidiary conducts its own business, the subsidiary, not the parent, is doing the business."

The decision here is, for the reason stated, diametrically opposed to that in the Cargill case.

2. Decision here against the taxpayer is compelled also by our decision in Canisteo Corp. v. Spaeth, 211 Minn. 185,300 N.W. 596. In that case, we held that a Delaware corporation, qualified to do business in this state, as this taxpayer is, was subject to a tax, under § 23(b) of the income tax act, on its income received from securities in the physical possession of an agent in New York, where, as here, the corporation had its business headquarters in this state. There we held that, while the corporation was technically domiciled in Delaware and while ordinarily we would accord to the word "domiciled" its technical meaning, § 2⁴ of the act compelled a construction that the word "domiciled" as used in § 23(b) meant any foreign corporation qualified to do business in the state. Speaking for the court, Mr. Justice Stone said (211 Minn. 188,300 N.W. 597):

"So the tax on respondent is an income tax only in the sense that it is measured by income. It is essentially an excise tax on the privilege of being here for the transaction of business.

"Section 2, read together with the whole of the act, particularly § 23(b), indicates that when in the latter the word 'domiciled' was used the intent was to include foreign corporations legally doing business here under local law. Any other construction would produce not only irreconcilable conflict between the two sections but also, and in large measure, would defeat a plainly declared purpose of the law."

The Canisteo case was followed in the Cargill case,supra.

In Chestnut Securities Co. v. Oklahoma Tax Comm. (10 Cir.)125 F.2d 571 (certiorari denied, 316 U.S. 668,62 S. Ct. 1035, 86 L. ed. 1744), is an elaborate consideration of the question. There, a state income tax was imposed upon the entire income of a Delaware corporation licensed to do business in Oklahoma and having its principal place of business (its commercial domicile) there, notwithstanding the fact that its intangible assets were located outside the state. These consisted of stocks, bonds, and notes. The Oklahoma statute declared that any foreign corporation licensed to do business in the state should be deemed a "resident" thereof in the same manner as § 23(b) of our statute, as construed in the Canisteo case, declares such a corporation doing business in our state to be "domiciled" here. The court said of the Oklahoma statute (125 F. [2d] 575):

"* * * Warrant for the asserted power to tax is derived from dominion over the corporation, whose relationship is the source of the intangible property sought to be taxed. Its exercise is justified by opportunities given, protection afforded and benefits conferred by the taxing state.

"There is a realistic and practical basis for such a rule in the rationale of our complex and interrelated system of taxation."

The Canisteo case cannot be distinguished from the instant one upon the ground that there the taxpayer was engaged in dealing in securities, because that is not the basis upon which the decision rests. It rests upon the fact that there the taxpayer was domiciled in the state within the meaning of the state income tax act because it was qualified to do business here. The taxpayer here is liable for the tax for exactly the same reasons as the taxpayer was in the Canisteo case.

3. I can see no justification for applying a different rule to this taxpayer than was applied to those in the Cargill and Canisteo cases. Of course, the rules laid down in prior cases may be departed from in proper cases. The propriety of so doing was discussed in the majority and dissenting opinions in such recent cases as Park Construction Co. v. Independent School Dist.209 Minn. 182, 296 N.W. 475, 135 A.L.R. 59, and in the dissent in Pattridge v. Palmer, 201 Minn. 387, 277 N.W. 18. Whatever justification there may be for departure from the rule ofstare decisis in proper cases, there is none here. This is a case simply of applying one rule to one taxpayer and another and different rule to another taxpayer, with the result that one is held not liable for a tax for which the other was held liable in identical fact situations. Such a state of affairs should not be. It denies evenhanded justice to all similarly circumstanced. There ought to be uniformity, certainty, and stability in the law. Unless that is true, neither the bar nor the public can know what the law is or how to govern themselves accordingly. Change of rule by decision of appellate courts makes uniformity, certainty, and stability of the law impossible. To those who must guide their conduct in important matters by applicable rules of law, such change is a source of legitimate fear and complaint. Voicing such fear, the Kentucky court, in American Barge Line Co. v. Jefferson County, 246 Ky. 573,55 S.W.2d 416, impliedly criticized the Supreme Court of the United States by stating that it reached its conclusion by applying the rule announced in numerous cited decisions of the Supreme Court of the United States (246 Ky. 577,55 S.W. [2d] 418), "Assuming that the precedents just cited will be adhered to by the Supreme Court * * *." In truth, every appellate court merits sharp criticism for change of rule in successive cases. Such changes of rule tend to bring its adjudications, no matter how painstakingly and carefully considered or how solemnly announced, "into the same class as arestricted railroad ticket, good for this day and train only" (italics supplied), as Mr. Justice Roberts said in his dissent in Smith v. Allwright, 321 U.S. 649, 669, 64 S. Ct. 757, 768,88 L. ed. 987, 151 A.L.R. 1110. So it is here.

Consequently, I think that we should follow the Cargill and Canisteo cases here and apply to this taxpayer the same rules we applied to the taxpayers in those cases.

Aside from the value of precedents as a guide to the bar and the public, they have a definite value to the court rendering them as settling rules for decision and thus making unnecessary the reconsideration of the same questions in successive cases as if they were res integra. Denial of such benefits from precedents makes judicial work unnecessarily burdensome. Here, it is particularly so, as the length of the opinions clearly shows.

4. There is no basis for holding that, notwithstanding our decision in Cargill, Inc. v. Spaeth, 215 Minn. 540,10 N.W.2d 728, supra, the rule laid down by the decisions of the Supreme Court of the United States is that intangibles owned by a foreign corporation having a commercial domicile within the state are not taxable there unless used by it in the transaction of its business within the state. The rule that intangibles owned by a foreign corporation having only a formal office in the state of incorporation where it transacts no business and having a commercial domicile within a state where it manages and directs its business are taxable at its commercial domicile was first announced in Wheeling Steel Corp. v. Fox, 298 U.S. 193, 56 S. Ct. 773, 80 L. ed. 1143, where a Delaware corporation, having only a so-called paper office in that state and its general business office in West Virginia, where the "management functioned," approved contracts, controlled receipts and expenditures, was held liable for an ad valorem tax on bank deposits in banks both in and without the state and on accounts receivable only a fraction of which represented local manufacture and most of which represented manufacture at the company's plants in other states. The court held that the intangibles were localized where the corporation was and that, because the management of the corporation was localized in West Virginia, so was the corporation itself, thereby localizing the intangibles for purposes of state taxation. The court said that the corporation had acquired a "commercial domicile" in the taxing state, thereby rendering its intangibles subject to state taxes. It was in this connection that the court used this language arguendo (298 U.S. 211, 56 S. Ct. 777, 80 L. ed. 1148):

"* * * To attribute to Delaware, merely as the chartering State, the credits arising in the course of the business established in another State, and to deny to the latter the power to tax such credits upon the ground that it violates due process to treat the credits as within its jurisdiction, is to make a legal fiction dominate realities in a fashion quite as extreme as that which would attribute to the chartering State all the tangible possessions of the Corporation without regard to their actual location."

It is argued in that case that the words "arising in the course of the business established in another State" indicate that the intangibles must be used in transacting business within the taxing state. That argument entirely misconceives what the court meant, viz., that if a foreign corporation establishes its business in a state other than that of incorporation it in effect acquires a domicile there — a commercial domicile — and for all practical purposes is to be regarded in law as it is in fact as a domiciliary of the state. This is clear from the discussion of the limitations of the rule of mobiliasequuntur personam, where the court points out that intangibles have no physical situs, because they lack physical characteristics, and that situs is attributable to them only in legal conception. The situs attributed is that of the owner; where the owner is, there its intangibles are also. If the owner migrates, it should in all logic be deemed to take with it the attributable situs of its intangibles.

It was the consensus that the decision in the Wheeling Steel case had brought the law relative to taxation of intangibles of foreign corporations in line with actualities. In the Canisteo⁵ and Cargill cases, we, the same as other courts, took notice of the fact that corporations depart from the states of incorporation to establish their business homes elsewhere. As well said by Mr. Justice Cardozo in International Milling Co. v. Columbia Transp. Co. 292 U.S. 511, 519, 54 S. Ct. 797, 799, 78 L. ed. 1396, 1400 (reversing 189 Minn. 507, 250 N.W. 186), where a Delaware corporation having its principal office and place of business in Minnesota was suing in the place of its residence:

"* * * At the outset, we mark the fact that the petitioner, though a Delaware corporation, is suing in the state of its business activities. For many purposes, its domicile in law is in the state of its creation (Shaw v. Quincy Mining Co.,145 U.S. 444, 12 S. Ct. 935, 36 L. ed. 768; Seaboard Rice Milling Co. v. Chicago, R.I. P. Ry. Co., 270 U.S. 363, 46 S. Ct. 247,70 L. ed. 633), but it is living its life elsewhere. In a veryreal and practical sense, it is a resident of the forum, like the plaintiff in the Taylor case (266 U.S. 200, 207,46 S. Ct. 47, 69 L. ed. 247, 42 A.L.R. 1232), who was domiciled in one state and resided in another. Certainly its relation to the locality was so permanent and intimate as to relieve it of the opprobrium of an impertinent intruder when it went into the local courts." (Italics supplied.)

Logically, domicile in fact should carry with it all the consequences flowing from domicile. That is exactly what the court held in the Wheeling Steel case. This is made crystal-clear in Memphis Natural Gas Co. v. Beeler,315 U.S. 649, 652, 62 S. Ct. 857, 860, 86 L. ed. 1090, 1094, where the court said, upholding a nondiscriminatory state tax by the state of Tennessee upon the net income of a foreign corporation having a commercial domicile in that state:

"* * * It has thus established a commercial domicile in Tennessee by virtue of which it is subject to taxation there upon its intangibles, unless such taxation infringes the commerce clause. Wheeling Steel Corp. v. Fox, 298 U.S. 193,56 S. Ct. 773, 80 L. ed. 1143."

In short, the rationale of the Wheeling Steel decision is that, where a foreign corporation acquires a commercial domicile in a state, that state acquires jurisdiction of the corporation itself analogous to the jurisdiction of the state of its legal domicile. This is an independent ground of jurisdiction separate from that where jurisdiction is acquired over a res by reason of its localization within the state. The former reaches the owner of the res and through the owner the res also. Spector Motor Service, Inc. v. Walsh (2 Cir.) 139 F.2d 809, reversed on other grounds, 323 U.S. 101, 65 S. Ct. 152, 89 L. ed. ___; Smith v. Ajax Pipe Line Co. (8 Cir.) 87 F.2d 567 (holding upon the authority of the Wheeling Steel case that, where a Delaware corporation doing an interstate pipeline business established a commercial domicile in Missouri, it was subject there to a state property tax on bank deposits in New York banks); Annotations, 143 A.L.R. 370; 113 A.L.R. 234; 85 U. of Pa. L.Rev. 121; Ramsey, "A New Theory of Corporate Domicile for Tax Purposes," 23 Am. Bar Assn. J. 543; Rottschaefer, Constitutional Law, p. 649.

In commenting on the Wheeling Steel case, Goodrich, Conflict of Laws (2 ed.) p. 105, says:

"* * * The Supreme Court permitted this taxation, pointing out that the assets in question had acquired a business situs in West Virginia, and that the corporation had a 'commercial domicile' there. It seems that in cases of this sort, the so-called commercial domicile is the important factor to search for. Once it appears that a foreign corporation has made the taxing state the real center of its business activity it is proper for the taxing state to treat the corporation as sufficiently connected with that state to render its intangible property taxable there. The conclusion that this is the real basis of the Wheeling Steel decision, is strengthened by a still more recent case."

The "more recent case" referred to is First Bank Stock Corp. v. Minnesota, 301 U.S. 234, 57 S. Ct. 677, 81 L. ed. 1061, 113 A.L.R. 228.

The cases cited in the majority opinion are distinguishable.First, all of them are distinguishable upon the ground that none of them involve a case of commercial domicile as the instant case does. Second, some of them involve the allocation of income among states for purposes of taxation by means of a formula, where a foreign corporation, having its principal place of business in the state of its incorporation, does business in several other states seeking to tax the part of its earnings attributable to the business transacted in such states. In these cases the place of the corporation's technical or paper domicile and its actual one were the same. Among these are Butler Bros. v. McColgan, 315 U.S. 501, 62 S. Ct. 701, 86 L. ed. 991 (involving the statutory formula of California for taxing earnings from business transacted there by an Illinois corporation having its principal place of business in Illinois). Of similar import are Hans Rees' Sons, Inc. v. North Carolina ex rel. Maxwell, 283 U.S. 123, 51 S. Ct. 385,75 L.ed. 879; Air-way Electric Appliance Corp. v. Day, 266 U.S. 71,45 S. Ct. 12, 69 L. ed. 169; Underwood Typewriter Co. v. Chamberlain, 254 U.S. 113, 41 S. Ct. 45, 65 L. ed. 165; International Paper Co. v. Massachusetts, 246 U.S. 135,38 S. Ct. 292, 62 L. ed. 624, Ann. Cas. 1918C, 617. It is clear that such cases involved essentially different problems from that presented here. That the Supreme Court did not intend by its decision in the case of Butler Bros. v. McColgan,315 U.S. 501, 62 S. Ct. 701, 86 L. ed. 991, supra, to change or modify its views that intangibles of a foreign corporation are taxable at its commercial domicile is manifest from the fact that those views were reiterated less than a month later in Memphis Natural Gas Co. v. Beeler, 315 U.S. 649, 62 S. Ct. 857,86 L.ed. 1090, supra. Both cases are found in the same volume of the United States reports. Third, other cases are there cited involving state taxes upon the receipts of foreign corporations derived from business transacted in the state of their actual as well as legal domicile, where the business from which the receipts were derived had no connection with the taxing state. The distinction is that in such cases neither the corporation nor the intangibles were localized in the taxing state; here they are, in virtue of the taxpayer's commercial domicile in this state. Such cases clearly are not in point. Connecticut General L. Ins. Co. v. Johnson, 303 U.S. 77, 58 S. Ct. 436,82 L. ed. 673 (California tax on receipts derived from reinsurance contracts entered into by a Connecticut corporation in Connecticut); James v. Dravo Contracting Co. 302 U.S. 134, 58 S. Ct. 208,82 L.ed. 155, 114 A.L.R. 318 (West Virginia gross receipts tax on part of a Pennsylvania corporation's business transacted in Pennsylvania).

While a state has no jurisdiction over the out-of-state transactions of a foreign corporation, even where the corporation is doing business within the state, it does have such jurisdiction where the foreign corporation has established a commercial domicile within the state. Reviewing many of the decisions of the Supreme Court of the United States cited in these opinions and others also, the rule has been stated in 23 Am. Jur., Foreign Corporations, § 98, as follows:

"* * * However, the general doctrine [that a state has no jurisdiction over out-of-state transactions of a foreign corporation] may be inapplicable where any effect of the local law beyond the borders of the state is merely incidental to corporate activities within them, over which the state has jurisdiction, and this appears to be true where the state may be said to have a grip on the corporate activities by virtue of the fact that the corporation has established its commercial domicil therein."

The state cases cited are all distinguishable. Unlike the instant case, none of them involved a question of commercial domicile. At the outset, it should be noted that all the state cases cited are found in an annotation in 104 A.L.R. 806,et seq. at pp. 807 to 809. The same annotation at p. 809 cites Alabama, New York, Virginia, and West Virginia cases upholding the right of state taxation. The case annotated is that of Re Wheeling Steel Corp. Assessment (State of West Virginia, Appellant) 115 W. Va. 553, 177 S.E. 535, 104 A.L.R. 802, affirmed under title of Wheeling Steel Corp. v. Fox in298 U.S. 193, 56 S. Ct. 773, 80 L. ed. 1143. The conclusion of the annotator (p. 812) was that the better reason supported the view that intangibles are taxable at a foreign corporation's commercial domicile.⁶

Some further differences may be noted. In Foster-Cherry Comm. Co. v. Caskey, 66 Kan. 600, 72 P. 268, the question was whether doing business in a state through a branch drew to that state the capital stock of a corporation having its principal place of business in another state where it was incorporated. The case of Ayer Lord Tie Co. v. Keown, 122 Ky. 580,93 S.W. 588, did not involve intangibles at all. It involved ties cut and delivered to a common carrier which were held to be exempt from state taxation upon the ground that the ties were in interstate commerce under the rule of Coe v. Errol,116 U.S. 517, 6 S. Ct. 475, 29 L. ed. 715. See, State v. Continental Oil Co. 218 Minn. 123, 18 N.W.2d 542. In American Barge Line Co. v. Jefferson County, 246 Ky. 573, 55 S.W.2d 416,supra, the facts were different, in that accounts receivable were not kept at the company's office in Kentucky, although they were collected there. These were held not to have a "business situs" in Kentucky. The court pointed out that no attempt was made to show such a situs. That case was decided prior to the Wheeling Steel case. The court attempted to follow numerous decisions of the Supreme Court with a prefatory remark, quoted above (246 Ky. 577, 55 S.W. [2d] 418): "Assuming that the precedents just cited will be adhered to by the Supreme Court * * *." In Commonwealth v. Consolidated Cas. Co. 170 Ky. 103,185 S.W. 508, the bonds sought to be taxed had acquired an actual situs at the domicile of the taxpayer in West Virginia. The later Oklahoma cases follow the Wheeling Steel case. Sunray Oil Corp. v. Oklahoma Tax Comm. 192 Okla. 159, 134 P.2d 995. The comment in Chestnut Securities Co. v. Oklahoma Tax Comm. (10 Cir.) 125 F.2d 571 (certiorari denied, 316 U.S. 668,62 S. Ct. 1035, 86 L. ed. 1744), supra, that the Wisconsin court in Newport Company v. Wisconsin Tax Comm. 219 Wis. 293,261 N.W. 884, 100 A.L.R. 1204, certiorari denied, 297 U.S. 720,56 S. Ct. 598, 80 L. ed. 1004, misconceived the applicable federal rule, as the Wheeling Steel and other decisions rendered by the Supreme Court of the United States plainly show, applies to all the state cases cited where the fact situation in any substantial respect resembles the instant case.

It should be observed that in First Bank Stock Corp. v. Minnesota, 301 U.S. 234, 57 S. Ct. 677, 81 L. ed. 1061, 113 A.L.R. 228, the state's claim was that the stocks in question had acquired a business situs here in virtue of the fact that the taxpayer dealt in such stocks here. That contention was sustained and was the basis of our decision. In affirming, although no question of commercial domicile was involved — the claim being that the res rather than the taxpayer had a situs here — the Supreme Court of the United States gave as a separate and adequate reason for sustaining the tax the one, additional to that of business situs here of the stocks, that the taxpayer itself had acquired a commercial domicile here. The court said that the taxpayer's business was sufficiently identified with the state "to establish a 'commercial domicil' there, and to give business situs there, for purposes of taxation, to intangibles which are used in the business or are incidental to it, and have thus 'become integral parts of some local business.' " (Italics supplied.) The conjunctive "and" clearly shows that commercial situs of the corporation itself and business situs of its intangibles are separate concepts and that the court regarded them as sufficient, separate grounds for sustaining the tax, but the decision was placed upon the latter ground. See, Annotations, 143 A.L.R. 370 and 113 A.L.R. 234,supra. Because the court indicated that commercial domicile was an independent ground for sustaining the tax, the decision is regarded as indicating an intention to apply the doctrine in such cases. See, Goodrich, Conflict of Laws (2 ed.) p. 105,supra. The later case of Memphis Natural Gas Co. v. Beeler,315 U.S. 649, 62 S. Ct. 857, 86 L. ed. 1090, supra, clearly shows that this was the court's intention.

In conclusion, I think that we should follow the Canisteo and Cargill cases. Further, I think that the rule here announced is a sort of judicial throwback by which form and fiction of a paper corporate domicile is made to control the realities of actual domicile.

³ Section 23(b) has been amended in respects not here material.

⁴ Section 2 was amended by Ex. Sess. L. 1937, c. 49, § 2, in a respect no way material here.

⁵ In the Canisteo case, Mr. Justice Stone said (211 Minn. at p. 186, 300 N.W. p. 596) that, because the Delaware corporation there involved had its business headquarters here, "Its only business home was here in Minnesota, * * *."

⁶ "* * * It would seem, in justice and fairness to the state where the principal business is conducted, and where the bulk of the protection is afforded, that the power constitutionally reserved to the domicil to tax in certain fields presupposes a domicil not merely in form, but in reality and in substance, — not merely a 'paper domicil,' but one which ordinarily carries the substantial characteristics of a domicil in fact. Furthermore, should that power be conceded even to such a domicil, its existence, without its actual exercise, should not, in fairness to such other state, exclude the latter from the power to tax. While it may be conceded that the existence, irrespective of its exercise, of the power to tax in the domicil, is the test of its exclusive character, yet the idea that a state, itself waiving its right to tax, may, by virtue of its mere nominal claim to a corporation, obstruct its being taxed in another state where it receives its main protection, does not appeal to an impartial mind. In such case the latter state is the de facto domicil of the corporation, and when fact conflicts with form the modern trend, particularly in the field of taxation, is to ignore the latter. That is the basis of the rule upholding the power, and sometimes the exclusive power, of a state to tax intangibles of nonresidents having a business situs in the state. That is the basis also of the rule upholding the exclusive power of the actual situs of tangibles to tax the same. May not, and should not, the same fundamental principle be applied in respect of taxation of a corporation whose domicil in the state claiming, but not exercising, its power to tax, is not a 'domicil' in the strict sense of that word, but at most a paper relation, often assumed as a subterfuge to avoid just taxation?"