Locomobile Co. Of America v. Commonwealth of Massachusetts
Headline: Court strikes down Massachusetts excise tax tied to a company's entire authorized capital, blocking collection of a $1,300 levy on an out-of-state manufacturer doing both local and interstate business.
Holding: The Court reversed the state court and held that the Massachusetts excise tax, calculated as a percentage of a corporation's entire authorized capital after removal of a statutory cap, was invalid as like earlier struck-down taxes.
- Prevents Massachusetts from collecting this capital-based excise from the company.
- Limits states' ability to tax companies that do interstate business on whole authorized capital.
- Protects manufacturers selling across states from similar capital-based state levies.
Summary
Background
A West Virginia corporation that manufactures goods in Connecticut but sells them widely across state lines was taxed $1,300 by Massachusetts for doing local business there in 1915. The company did both interstate and local sales in Massachusetts. The tax was set as a percentage of the company's entire authorized capital, and it was imposed after Massachusetts removed a previous statutory maximum limit in 1914. A Massachusetts court had sustained the tax, but the case reached the national Court for review.
Reasoning
The Court considered whether a state excise calculated on a corporation's entire authorized capital could be applied to this company. The opinion said the changed Massachusetts statute was in essence the same as several earlier state taxes the Court had already found invalid in cases like Western Union Telegraph Co., Pullman Company, Ludwig, and Looney v. Crane Company. The Court noted it had just reached a related conclusion in International Paper Co. v. Massachusetts and concluded the Massachusetts tax could not stand. The Court therefore reversed the state court's judgment.
Real world impact
The reversal prevents Massachusetts from enforcing this capital-based excise against the company and overturns the state court decision. The ruling suggests other state statutes that tax a company's whole authorized capital in similar fashion are likely invalid. Businesses that manufacture in one state but sell in others may avoid similar state levies under this ruling, while states will need to revise or limit capital-based taxes to fit the Court's prior decisions.
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