APPEAL FROM THE DISTRICT COURT OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF NEW YORK.
MR. JUSTICE SANFORD delivered the opinion of the Court.
The Gorham Manufacturing Company brought this suit in equity in the District Court to enjoin the collection of a tax assessed against it under Article 9-A of the Tax Law of New York, alleging that the provisions of this Article were in conflict with the due process clause of the Fourteenth Amendment and the commerce clause of the Constitution. The District Court, upon final hearing, dismissed the bill.274 Fed. 975. And this direct appeal was prosecuted. Jud. Code, § 238.*fn1
This Article*fn2 provides that for the privilege of doing business in the State every foreign manufacturing and mercantile corporation*fn3 shall pay in advance an annual franchise tax, to be computed by the State Tax Commission, at the rate of three per centum, upon the net income of the corporation for the preceding year. §§ 209, 215. This net income is "presumably the same" as that upon which the corporation is required to pay a tax to the United States, § 209; but the amount thereof as returned to the United States is subject to any correction for fraud, evasion or errors, ascertained by the Commission. § 214. If the entire business of the corporation is not transacted within the State, the tax is to be based upon the portion of such ascertained net income determined by the proportion which the aggregate value of specified classes of the
assets of the corporation within the State bears to the aggregate value of all of such classes of assets wherever located. § 214. The corporation shall make the Commission a report showing the State of its organization "and the kind of business transacted"; the amount of its net income for the preceding year as returned to the United States, and, if inaccurate, the amount claimed to be its net income; the value of the specified classes of its assets, within the State and wherever located; and such other facts as the Commission may require for the purpose of making the computation required. § 211. The Commission shall audit and state the account and compute the tax thereon. § 219a.
If within one year after the account is audited and stated the corporation files an application for revision, "the commission shall grant a hearing thereon and if it shall be made to appear upon any such hearing by evidence submitted to it or otherwise, that any such account included taxes or other charges which could not have been lawfully demanded, or that payment has been illegally . . . exacted of any such, account, the commission shall resettle the same according to law and the facts, and adjust the account for taxes accordingly." § 218. The determination of the Commission upon any application for revision may be reviewed, both upon the law and the facts, upon certiorari by the Supreme Court, on all the evidence, papers and proceedings before the Commission, and, if found erroneous or illegal, the account shall be corrected and restated; and from any determination by the Supreme Court an appeal may be taken to the Court of Appeals.*fn4 §§ 199, 219.
The Gorham Company is a Rhode Island corporation, engaged, under its charter, in the business of manufacturing and selling silverware, bronze and metal ware. All of its manufacturing is done in Rhode Island. It has there its main office and sells its ware to customers in all the States of the Union and some foreign countries. It also has a branch office and showrooms in New York City, where it keeps on hand a stock of its ware, partly samples, makes sales to customers from such stock and takes orders for ware to be shipped from the Rhode Island factory. In 1917, however, it also engaged extensively in the manufacture and sale of munitions. No part of this business was carried on in New York.
The Company, in 1918, made a report to the Commission in compliance with the Tax Law. In this report, both as originally filed and later amended, it stated that the business which it transacted was "manufacturing and selling silverware, bronze and metal ware"; gave the amount of its net income for the year 1917 as determined by the United States, claiming only one deduction therefrom, namely, the amount paid for federal income taxes, and stated the aggregate values of the classes of its assets specified in the Tax Law, both in New York and wherever located. It did not, however, show that it was also engaged in manufacturing and selling munitions, that its net income as reported was derived to any extent from that business, or that it did not manufacture any ware in New York.
The Commission thereupon audited and stated the Company's account, and computed the tax thereon, of which it gave the Company notice.*fn5 The Company, however,
did not apply to the Commission for a revision of the account and resettlement of the tax, but, within less than one year after the account had been audited and stated, brought this suit in ...