People ex rel. Eastern Bermudez Asphalt Paving Co. v. Morgan , 70 N.Y.S. 516 ( 1901 )

Chase, J.:

This court has recently held (People ex rel. Syracuse Imp. Co. v. Morgan, 59 App. Div. 302) that the preparation of a street for the laying of a pavement and placing of the paving thereupon is not in any sense a process of manufacture within the meaning of the statute. The statute relating to exemptions as it existed in 1898 is as follows: “ Banks, savings, banks * * * 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 * * * shall be exempt from, the payment of the taxes prescribed by section one hundred and eighty-two of this chapter.” (Tax Law [Laws of 1896, chap. 908], § 183, as amd. by Laws of 1897, chap. 785.)

Corporations for the purpose of carrying on manufacture were formerly organized under the General Manufacturing Act of 1848 (Chap. 40) and other statutes having special reference to the organization of corporations to do a manufacturing business. Such statutes have been repealed and corporations for the purpose of carrying on any lawful business purpose or purposes other than a moneyed corporation or a corporation provided for by the Banking, the Insurance, the Railroad and the Transportation Corporations Laws, are now formed under the Business Corporations Law. There can be no special significance in the words “ manufacturing corporations,” as they are now used in the Tax Law. These words should be given their ordinary meaning and held to apply to all corporations authorized by charter to do a manufacturing business. Even prior tp the repeal of the statute of 1848 and the other statutes having special reference to the organization of corporations for manufacturing purposes these words were construed to relate to corporations actually engaged in manufacturing, and not to corporations organized under any particular act.

In People ex rel. Edison Electric Illuminating Co. v. Wemple (129 N. Y. 664) the court say : “ We do not think it is material how, or under what particular statute the relator came into existence ás a corporation. The' material question' is, whether during' the. years for which the tax in'question was paid, it was engaged in business as a manufacturing company within this state.” (See Nassau Gas Light Co. v. City of Brooklyn, 89 N. Y. 409.) The relator in. this case was organized as a business corporation. The manufacture of aspbaltum for its own use is expressly stated-in-its certificate-, as one of the objects of its incorporation, and so far as its plant is. adapted to. the manufacture of asphaltum for.salé, such business could be conducted within the terms of its articles of incorporation. "Was. the relator actually-employing any of- its capital in manufacturing ?

For the production of the compound the relator-has invested a. large amount of capital in the plant. The building and all the..apparatus connected therewith is permanent in its nature and cannot be moved, except, if taken down, the materials could in part be used, in rebuilding the plant in another place.

, The compound is made of different raw materials.-to which is-applied-labor and skill with the aid of machinery-and mechanical appliances, resulting, in the production of a new-and distinct substance. None of the raw materials alone are of any value fórtho purpose for which the compound is to be used. The natural products are entirely changed by artificial combination and extreme; heat, making a well-known and commonly used ".material-. We are of .the opinion that the production of the compound by the relator is. manufacturing within the ordinary meaning of that word, arid as . that word .has been defined by the. courts..of this State; (People ex rel. Waterman Co. v. Morgan, 48 App. Div. 395 ; People ex rel. Devoe Co. v. Roberts, 51 id. 77; People ex rel. Brush Electric Mfg. Co. v. Wemple, 129 N. Y. 543.)

Under-the. statute as it now'exists and- existed in 1898 only the: capital actually-employed in manufacturing in this State is exempt from the tax. It is immaterial, therefore, whether the capital so. employed is the principal part of the capital of the corporation.. Even if the business -of manufactui’ing is only incidental to- other-lawful business of the corporation the exemption would still be within the express terms of the statute. The capital of a corporation now ■ lawfully employed in manufacturing in this State in ,- tile-regular course of business 'is entitled to the -exemption without reference- to -the extent of the capital so employed. ■ ■ ■ ;

The relator in People ex rel. Journeay & B. Co. v. Roberts (37 App. Div. 1) had a capital stock of $1,000,000 and was engaged in conducting a department store. This court allowed it a deduction of $75,000 for capital employed in manufacturing cloaks and other articles in connection with their business of buying and selling merchandise. The Court of Appeals (People ex rel. Seth Thomas Clock Co. v. Wemple, 133 N. Y. 323), in construing the phrase “ Manufacturing * * * corporations carrying on manufacture * * * within this state,” as used in the statute as it existed prior to 1889, uses this language: “ If it was carrying on enough of its manufacturing operations in this state so that it could be said, fairly and reasonably, to be engaged in manufacturing here, then it came within the letter and the spirit of the exemption clause, and neither the comptroller nor the courts had the right to hold that because only a comparatively small portion of all its manufacturing operations were carried on here, it' was not, for that reason, within the exemption. If the corporation, in the ordinary and regular course of its business, in good faith and not for the purpose of evading the law, was actually carrying on any part of its manufacturing operations here, that was enough. It was not left for the taxing officer or the courts to prescribe how much or what percentage of its whole manufacturing business should be done within this state in order to entitle the corporation to claim the exemption.”

The relator in the year 1898 used all the asphaltum manufactured by it in connection with the construction of streets or floors under contract made by it for such construction and did not sell any of its product so manufactured to others except as stated. Although the compound must be used before it has been allowed to become hardened there is no reason why it could not be made to order or sold wherever it could be quickly delivered. . Many articles upon the market require immediate delivery after they are manufactured or they will become worthless. We do not think the purpose of the statute requires that the relator be refused exemption of the capital actually employed in manufacturing the asphaltum simply because the manufactured product for the year in question was all consumed in carrying out contracts lawfully made by it. The purpose of the statute as repeatedly held by the courts is to furnish inducements to productive industries to locate their plants and carry on their bnei.ness in this State and thus contribute- to its. general prosperity and aggregate wealth. "Any corporation carrying on manufacturing business- within the State must necessarily have visible, tangible -property liable under the general laws of the State to taxation. People ex rel. Tiffany & Co. v. Campbell, 80 Hun, 95 ; S. C., 144 N. Y. 166; People v. Horn Silver Mining Co., 105 N. Y. 76; People ex rel. Blackinton Co. v. Roberts, 4 App. Div. 388.) That the making of -paving bricks is manufacturing will .not be questioned. ■ If the relator were a corporation lawfully engaged in manufacturing paving bricks in this-State-should it not.be exempt from the tax to the extent • of the capital employed in such manufacturing even, if the paving brick so manufactured had been conSmned in carrying out contracts lawfully made by it in constructing streets and highways ? We think a reasonable construction, of the statute would require such exemption. The relator-is exempt from the corporation franchise tax to the extent of the amount, of its. capital so employed in the preparation o.f the compound, It is difficult to determine from the confused condition of the record just how much of the capital is employed in such manufacturing, but it. appears to be not less than three-fourths thereof.

The determination of the Comptroller is modified só as to reduce, the tax imposed upon'the relator to the sum of eighteen dollars-and seventy-five cents, with ten dollars costs and disbursements .to the, relator. •

All concurred, except. Kellogg, J., dissenting.