
    People ex rel. Park, Davis and Company, App’lt, v. James A. Roberts, as Comptroller, etc., Resp’t.
    
      (Supreme Court, General Term, Third Department,
    
    
      Filed December 28, 1895.)
    
    1. Taxes—Corporation—Foreign.
    A tax upon the privilege granted to a foreign corporation for doing business in this state, measured by the amount of its capital stock employed in such business within this state, is within the power of the legislature.
    :2. Same.
    Establishing a place for the sale of its goods within this state, paying rent therefor, hiring and employing agents and employees to conduct such business and selling its products from such place, constitute transacting business within this state by a foreign corporation.
    Certiorari to review the action of comptroller, in assessing a corporation tax on relator.
    
      James McKeen, for relator;
    
      T. E. Hancock, Atty. Gen. (G. D. B. Hasbrouck, Dep. Atty. Gen., of counsel), for resp’t.
   Herrick, J.

This is a proceeding to review by certiorari the decision of the comptroller of the state in assessing and levying a corporation tax upon the relator. The relator is incorporated for manufacturing purposes under the laws of the state of Michigan, and is engaged in the business of manufacturing preparations for pharmacists and chemists. Such manufacture consists in the preparation of chemical compounds and pharmacists’ preparations, by taking the-crude materials, and, by various processes, producing them in a concentrated form, convenient for using for medicines, such as fruit extracts and solid extracts. The factory is situated in the city of Detroit, Mich. Prior to the years for which the relator has been taxed by the comptroller, the relator shipped its products in unbroken packages, to a wholesale drug concern in the city of New York, which sold the same upon commission. The house to which it consigned its goods did not give its exclusive attention to the sale of the relator's merchandise, but was a general dealer. For the purpose of having exclusive attention given to its line o£ goods, the relator changed its m,ethod of doing business, and selected a person named Clay, to whom it consigned its products. There is a debit and credit account between them of the goods received by him and of the amount sold-. He remits the amount of sales made, and receives from it a stated salary. He is not paid by commission. A stock of its products is always kept on hand by him. Stores are leased and clerks employed at its expense. Such expense ranged from $102,000 in the year 1890 to $172,000 in the year 1894, which includes salaries of employees, rentals, insurances and repairs. The orders received in New York city and its immediate vicinity are supplied from this store or headquarters in New York city. Orders received in what are known as “ the country districts ” (that is, in places at considerable distance from New York city) are filled by transmitting such orders to the home establishment, at Detroit, Mich., and the goods are shipped direct from the factory, there, to the persons ordering them. The stock carried in" the store in New York city is of the average amount of $50,000. Mr. Olay, also purchases crude drugs in Europe, which he imports to this country through the port of New York. A portion of such importations are sent to the home establishment at Detroit, and another portion is sold from the New York store. Purchases of crude drugs are also made by him in New York. Some are shipped to Detroit, and some sold in New York city. These goods are purchased upon the credit of the relator. It invests no cash in their purchase.

It is contended by the relator that Mr. Clay is not its agent; that he is carrying on an independent business in its drugs, and stands in the same relation to it as any merchant in such city purchasing its drugs, or of a commission merchant to whom it should consign goods to be sold upon commission; and that, therefore, it should not be taxed as a corporation doing business in this state. Without entering into any discussion as to what constitutes the relation of principal and agent, it seems to me very clear that Mr. Clay is in fact the agent of the relator. The rent of the establishment from which its drugs are sold in New York city is paid by it. It pays the insurance, taxes, and repairs. It pays the salaries of the various employees engaged in conducting the business there. It keeps a stock of goods, to a large amount, at the store in New York city. Charging the goods to him, and keeping a debit and credit account between .itself and Clay, is simply a convenient way of keeping an account of its transactions with its New York city branch. That is its distributing agency in the state of New York. The goods that are purchased by Mr. Clay in Europe are purchased upon its credit. The entire proceeds of the sales in New York city are transmitted by Clay to the relator.. He is paid a stated compensation, which is not dependent upon or measured by the amount of sales or of the profits. He appears to be simply its representative, managing and conducting its business in the city of New York for and on its behalf. But relator- further contends, assuming that Olay is its agent, that it is carrying on a manufacturing business, that the sale of its products is a necessary incident to the manufacturing business, and that if it was incorporated under the laws of the state of Hew York, and doing business- here, it would, at least to the extent of the products of its own manufacture, be exempt from taxation within the case of People ex rel. Tiffany & Co. v. Campbell, 144 N. Y. 166; 63 St. Rep. 44; and at most only be taxable upon the business that it.transacts in goods other than those manufactured by itself; and it claims that under article 4, § 2, of the constitution of the United States, providing that “the citizens of each state shall be entitled to all the privileges and immunities of citizens in the several states,” it should be permitted to do business upon the same footing as domestic corporations wholly engaged in manufacturing; and, if taxed at all, -should only be taxed upon that business which is carried on by it outside of its corporate powers, as was done in Tiffany Case. We do not -think that this last contention can prevail. The right of citizens to associate themselves together and do business as a corporation is not-a natural or inherent right, but is a special privilege granted by the sovereign power; and a privilege so granted cannot be exercised in a sovereignty other than that granting it, except by comity. To hold otherwise would extend the power of such sovereignty beyond its territory, and give to it laws extraterritorial force and effect. Again, coiporations are not citizens, within the meaning of that clause of the Constitution relied upon. The privileges and immunities secured to citizens of each state in the several states by the provision in question are those privileges and immunities which are common to the citizens in the latter states, under their Constitution and laws, by virtue of their being citizens. Special privileges enjoyed by citizens in their own states are not secured in other states by this provision. It was not intended by the provision to give the laws of one state any operation in other states. They can have no such operation, except by the permission, expressed or implied,' of those states. The special privileges which they confer must therefore be enjoyed at home unless the assent of other states to their enjoyment therein be given.” Paul v. Virginia, 8 Wall. 168; People v. Imlay, 20 Barb. 68-80. The right of the state to exclude foreign corporations has been repeatedly adjudicated upon, and is well settled. People v. Fire Ass'n of Philadelphia, 92 N. Y. 311. The right of a corporation incorporated in a foreign state to do business in this state being dependent upon the assent of this state, it may impose such reasonable terms and conditions upon such assent as it deems proper. It is unnecessary to cite authorities to show that a tax upon that privilege of doing business here, measured by the amount of it capital stock employed in such business within this state, is one entirely within its power. That establishing a place for the sale of goods within this state, paying rent therefor, hiring and employing agents and employees to conduct such business, and selling its products from such place, is transacting business within this state, it seems to me, can admit of no question. That a business so conducted and Carried on is not interstate commerce, which will prevent the corporation carrying it on from being taxed, has been held in the case of People ex rel. Southern C. O. Co. v. Wemple, 131 N. Y. 63; 42 St. Rep. 632.

The writ of certiorari should therefore be quashed, and the decision of the comptroller affirmed, with $50 costs and disbursements. All concur.  