New York Ex Rel. Edward & John Burke, Ltd. v. Wells

Background

A foreign importing company with a home office in Dublin operated a permanent sales business in New York. The State assessed $94,617.93 against office furniture, cash on hand and in bank, and amounts receivable from bills and accounts. The importer argued those items (other than furniture) were really proceeds from imported goods and therefore protected from state taxation by the Constitution’s ban on state imposts.

Reasoning

The Court addressed whether money and notes that come from sales of imported goods still count as protected imports while they are held and used in New York. The Court reviewed prior decisions recognizing that goods kept and sold in their original packages remain protected until they are sold or mixed with local property. Here, however, the importer ran a permanent New York business, kept cash in New York banks, held sales notes there for collection, and kept sums on hand to run the business and pay duties. Because the proceeds were held and used as capital in that local business, they lost the special character of imports and became taxable like other invested capital. The Court therefore found the State’s tax on the cash and notes lawful.

Real world impact

The ruling means that foreign merchants who run ongoing operations in a State and keep cash or receivables there can be taxed on that capital. It affirms that money or notes held and used in a local business do not automatically remain immune as "imports." The Court affirmed the lower-court judgment.