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People ex rel. Badische Anilin & Soda Fabrik v. Roberts, 6 E.H. Smith 59, 152 N.Y. 59, 46 N.E. 161, 36 L.R.A. 756

Facts

The Badische Anilin & Soda Fabrik is a foreign corporation from Germany that became a special partner in a New York limited partnership in 1879, contributing $150,000 to the partnership, which imported and sold chemicals. The corporation's products were sold in the U.S. through this partnership, but it had no corporate office or agency in New York, nor did any of its stockholders reside in the state. The comptroller imposed a tax on the corporation, claiming it was doing business in New York based on its investment in the partnership.

The relator is a foreign corporation, organized under the laws of the grand duchy of Baden, in the empire of Germany.

Issue

Is the Badische Anilin & Soda Fabrik subject to taxation in New York for doing business in the state based solely on its status as a special partner in a limited partnership?

The contention on the part of the appellant is that a foreign corporation cannot be deemed to be doing business in this state by virtue solely of the fact that it is interested as a special partner in a limited partnership here.

Rule

Under chapter 542 of the Laws of 1880, foreign corporations doing business in New York are subject to taxation based on the capital employed within the state.

The law under which the comptroller of the state exercises the authority to tax corporations for the benefit of the state had its origin in chapter 542 of the Laws of 1880, and has been added to or modified through amendatory acts since then.

Analysis

The court analyzed whether the foreign corporation was actually engaged in business in New York. It concluded that the corporation's investment in the local partnership constituted doing business, as the partnership was the means through which the corporation marketed its products in the state. The court emphasized that the substance of the transaction indicated the corporation was present in New York for business purposes, despite its limited partnership status.

If agencies are adopted, not independent, but of which, in fact, the foreign corporation is a member, and through which its business is done, can we and should we say that in that way it has placed itself beyond the reach of the taxing officer?

Conclusion

The court affirmed the comptroller's decision to impose the tax, ruling that the Badische Anilin & Soda Fabrik was indeed doing business in New York through its partnership.

The order appealed from should be affirmed, with costs.

Who won?

The state comptroller prevailed in this case, as the court found that the foreign corporation was engaged in business in New York and thus subject to taxation.

The decision of the question presented to us for our review is not without difficulty, and depends somewhat upon the intent of legislation, as explained by our decisions, and the policy which the state must be regarded as pursuing.

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