John M. Kellogg, P. J.:
The form which a transaction assumes often creates temporary embarrassment to the court, but when the substance of the transaction is known the difficulties disappear. The substance is the matter for real consideration.
If the relator were a New York State corporation, engaged in interstate commerce, the tax would be a valid franchise tax. (Horn Silver Mining Co. v. New York, 143 U. S. 305; Kansas City Railway v. Kansas, 240 id. 227; Maine v. Grand Trunk R. Co., 142 id. 217; American Refrigerator Transit Co. v. Hall, 174 id. 70; People ex rel. Pennsylvania R. R. Co. v. Knight, 171 N. Y. 354; 192 U. S. 21.)
“ The right and privilege, or the franchise, as it may be termed, of being a corporation, is of great value to its members, and is considered as property separate and distinct from [30]*30the property which the corporation itself may acquire. According to the law of most States this franchise or privilege of being a corporation is deemed personal property, and is subject to separate taxation. * * * However it may be regarded, it is the condition upon which a foreign corporation can do business in the State, and in doing such business it puts itself under the law of the State, however that may be characterized.” (Horn Silver Mining Co. v. New York, supra, 313, 315.)
In Maine v. Grand Trunk R. Co. (supra) a franchise tax based upon gross receipts of the railroad engaged in interstate commerce was upheld. The reasoning of the court applies with great force to this case.
Chief Judge Cullen, in People ex rel. Cornell Steamboat Co. v. Sohmer (206 N. Y. 651), says that a franchise tax “ ‘ is levied on the corporation for the privilege, as the statute declares, of carrying on its business in a corporate or organized capacity; not of doing business, but of doing business in a corporate capacity; ’ in other words, exclusively for the privilege of being a corporation instead of a partnership. And the additional franchise tax required by section 184 is, in my opinion, exactly of the same character. I doubt whether in the true sense of the term it is to be considered a tax, but should not rather be deemed a compensation exacted for the privilege which the State might refuse. If the parties beneficially interested in the appellant are dissatisfied with the price exacted by the State they may have the corporation dissolved and as individuals carry on the same business that is being done now without the cost of any such charge.” (Affd., 235 U. S. 549.)
The question, then, is whether the fact that the relator is a foreign corporation, incapable of doing business in this State without the permission of the State, can exercise its franchise without the payment of the same franchise tax exacted from State corporations engaged in the same business. In this view the relator is not seeking relief from a discrimination made against it, but is seeking- to establish that a discrimination must be made in its favor, giving it an advantage over State corporations engaged in a similar business.
That a franchise tax may be required of a foreign cor[31]*31poration, as a condition of exercising its corporate privileges in this State, without regard to whether it is engaged in interstate or foreign commerce, must be conceded. (New York State v. Roberts, 171 U. S. 658.) We quote from that case from pages 662 and 663: “If the object of the law in question was to impose a tax upon products of other States, while exempting similar domestic goods from taxation, there might be room to contend that such a distinction was constitutionally objectionable as tending to affect or regulate commerce between the States. But we think that obviously such is not the purpose of this legislation. * * * It will be perceived that the tax is prescribed as well for New York corporations as for those of other States. * * * So that it is apparent that there is no purpose disclosed in the statute either to distinguish between New York corporations and those of other States to the detriment of the latter, or to subject property out of the State to taxation.”
The Franchise Tax Law in this State has been a gradual growth, and the present law is the result of many years experience. Section 186 of the Tax Law, now under consideration, is not an isolated statute attempting to get at non-resident corporations or interstate business, but is part of the general tax scheme and applies to all corporations, no matter where organized or what business they were transacting. The basis of the scheme was equality, and fairness to all. By section 180 an organization tax is required of a domestic corporation, and by section 181 a license tax, for the first year, is required of foreign corporations, thus putting foreign and domestic corporations upon a substantial equality. Section 182 imposes a general franchise tax upon all corporations, to be computed upon the basis of the amount of capital employed in the State during the preceding year. Section 183 exempts from the payments required by section 182 certain corporations and provides for them in following sections. It is evident that there are cases where it is difficult to appraise the value of the right to do business in a corporate name, and it is usually recognized that such value may properly be measured by the amount of capital stock employed and the dividends declared thereon or upon the results which flow from the business which the Legislature permits to be carried on by an artificial person. [32]*32Section 182, in using the capital employed in the State as a measure, does not refer to the capital to be employed during the tax year, because that is uncertain at the time the tax is levied, but as a convenient basis measures the tax by the capital employed during the preceding year. In these cases the capital stock is not taxed as capital stock, or the earnings taxed as earnings, or the dividends as dividends, but they are used solely as measures for arriving at the value of the right to do business. Section 186, now under review, is a part of the general scheme, and measures the amount of compensation to be paid to the State for the privilege of doing business as a corporation in part by earnings and part by excess dividends. There is nothing in the act from which it can be spelled out that a foreign corporation, or one engaged in interstate commerce, is treated in any other way than a domestic corporation engaged in domestic business. The legislation must be assumed to have been enacted in good faith and for no ulterior purposes.
A corporation engaged in interstate commerce is not for that reason exempt from local taxation. It is subject to the same property and franchise tax as other corporations. (International Text Book Co. v. Tone, 220 N. Y. 313.)
In construing a general tax law the court will not seek to overthrow it by captious objections, but will apply to it the familiar rule that every intendment is in favor of the legality of the act. The spirit of the statute and not its words is controlling.
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John M. Kellogg, P. J.:
The form which a transaction assumes often creates temporary embarrassment to the court, but when the substance of the transaction is known the difficulties disappear. The substance is the matter for real consideration.
If the relator were a New York State corporation, engaged in interstate commerce, the tax would be a valid franchise tax. (Horn Silver Mining Co. v. New York, 143 U. S. 305; Kansas City Railway v. Kansas, 240 id. 227; Maine v. Grand Trunk R. Co., 142 id. 217; American Refrigerator Transit Co. v. Hall, 174 id. 70; People ex rel. Pennsylvania R. R. Co. v. Knight, 171 N. Y. 354; 192 U. S. 21.)
“ The right and privilege, or the franchise, as it may be termed, of being a corporation, is of great value to its members, and is considered as property separate and distinct from [30]*30the property which the corporation itself may acquire. According to the law of most States this franchise or privilege of being a corporation is deemed personal property, and is subject to separate taxation. * * * However it may be regarded, it is the condition upon which a foreign corporation can do business in the State, and in doing such business it puts itself under the law of the State, however that may be characterized.” (Horn Silver Mining Co. v. New York, supra, 313, 315.)
In Maine v. Grand Trunk R. Co. (supra) a franchise tax based upon gross receipts of the railroad engaged in interstate commerce was upheld. The reasoning of the court applies with great force to this case.
Chief Judge Cullen, in People ex rel. Cornell Steamboat Co. v. Sohmer (206 N. Y. 651), says that a franchise tax “ ‘ is levied on the corporation for the privilege, as the statute declares, of carrying on its business in a corporate or organized capacity; not of doing business, but of doing business in a corporate capacity; ’ in other words, exclusively for the privilege of being a corporation instead of a partnership. And the additional franchise tax required by section 184 is, in my opinion, exactly of the same character. I doubt whether in the true sense of the term it is to be considered a tax, but should not rather be deemed a compensation exacted for the privilege which the State might refuse. If the parties beneficially interested in the appellant are dissatisfied with the price exacted by the State they may have the corporation dissolved and as individuals carry on the same business that is being done now without the cost of any such charge.” (Affd., 235 U. S. 549.)
The question, then, is whether the fact that the relator is a foreign corporation, incapable of doing business in this State without the permission of the State, can exercise its franchise without the payment of the same franchise tax exacted from State corporations engaged in the same business. In this view the relator is not seeking relief from a discrimination made against it, but is seeking- to establish that a discrimination must be made in its favor, giving it an advantage over State corporations engaged in a similar business.
That a franchise tax may be required of a foreign cor[31]*31poration, as a condition of exercising its corporate privileges in this State, without regard to whether it is engaged in interstate or foreign commerce, must be conceded. (New York State v. Roberts, 171 U. S. 658.) We quote from that case from pages 662 and 663: “If the object of the law in question was to impose a tax upon products of other States, while exempting similar domestic goods from taxation, there might be room to contend that such a distinction was constitutionally objectionable as tending to affect or regulate commerce between the States. But we think that obviously such is not the purpose of this legislation. * * * It will be perceived that the tax is prescribed as well for New York corporations as for those of other States. * * * So that it is apparent that there is no purpose disclosed in the statute either to distinguish between New York corporations and those of other States to the detriment of the latter, or to subject property out of the State to taxation.”
The Franchise Tax Law in this State has been a gradual growth, and the present law is the result of many years experience. Section 186 of the Tax Law, now under consideration, is not an isolated statute attempting to get at non-resident corporations or interstate business, but is part of the general tax scheme and applies to all corporations, no matter where organized or what business they were transacting. The basis of the scheme was equality, and fairness to all. By section 180 an organization tax is required of a domestic corporation, and by section 181 a license tax, for the first year, is required of foreign corporations, thus putting foreign and domestic corporations upon a substantial equality. Section 182 imposes a general franchise tax upon all corporations, to be computed upon the basis of the amount of capital employed in the State during the preceding year. Section 183 exempts from the payments required by section 182 certain corporations and provides for them in following sections. It is evident that there are cases where it is difficult to appraise the value of the right to do business in a corporate name, and it is usually recognized that such value may properly be measured by the amount of capital stock employed and the dividends declared thereon or upon the results which flow from the business which the Legislature permits to be carried on by an artificial person. [32]*32Section 182, in using the capital employed in the State as a measure, does not refer to the capital to be employed during the tax year, because that is uncertain at the time the tax is levied, but as a convenient basis measures the tax by the capital employed during the preceding year. In these cases the capital stock is not taxed as capital stock, or the earnings taxed as earnings, or the dividends as dividends, but they are used solely as measures for arriving at the value of the right to do business. Section 186, now under review, is a part of the general scheme, and measures the amount of compensation to be paid to the State for the privilege of doing business as a corporation in part by earnings and part by excess dividends. There is nothing in the act from which it can be spelled out that a foreign corporation, or one engaged in interstate commerce, is treated in any other way than a domestic corporation engaged in domestic business. The legislation must be assumed to have been enacted in good faith and for no ulterior purposes.
A corporation engaged in interstate commerce is not for that reason exempt from local taxation. It is subject to the same property and franchise tax as other corporations. (International Text Book Co. v. Tone, 220 N. Y. 313.)
In construing a general tax law the court will not seek to overthrow it by captious objections, but will apply to it the familiar rule that every intendment is in favor of the legality of the act. The spirit of the statute and not its words is controlling. The real question in these cases always is, was an unfair discrimination intended against interstate commerce? Is the relator’s gas taxed because it is moved from one State to another, or is the relator paying the same franchise tax that every other corporation engaged in a like business is paying? (Reymann Brewing Co v. Brister, 179 U. S. 445; Armour & Co. v. Virginia, 246 id. 1.) We may quote with profit the concluding words of Chief Justice White’s opinion in the latter case: “ In other words, to resume, the error of the argument results from confounding the direct burden necessarily arising from a statute which is unconstitutional because it exercises a power concerning interstate commerce not possessed or because of the unlawful discriminations which its provisions express or by operation [33]*33necessarily bring about and the indirect and wholly negligible influence on interstate commerce, even if in some aspects detrimental, arising from a statute which there was power to enact and in which there was an absence of all discrimination, whether express or implied as the result of the necessary operation and effect of its provisions. The distinction between the two has been enforced from the beginning as vital to the perpetuation of our constitutional system. Indeed, as correctly pointed out by the court below, that principle as applied in adjudged cases is here directly applicable and authoritatively controlling. [New York State v. Roberts, 171 U. S. 658; Reymann Brewing Co. v. Brister, 179 U. S. 445.] In saying this we have not overlooked or failed to consider the many cases cited in the argument at bar on the theory that they are to the contrary, when in fact they all rest upon the conclusion that a direct burden on interstate commerce arose from statutes inherently void for want of power or if within the power possessed were intrinsically repugnant to the commerce clause because of discriminations against interstate commerce which they contained.”
Any tax against a corporation affects its business, lessens its property and naturally increases the sale price of its commodities. Those considerations are, however, incidents following from the fact of taxation. If waterworks companies, gas companies, electric or steam heating, lighting and power companies had not been exempted from section 182, and the relator had been taxed under that section, there could be no reasonable question as to the validity of the tax. If section 186 had contained the provision found in section 182 that the tax is to be computed upon the basis of the earnings and excess dividends, there could be no question about its validity. The language used in section 186, under which this tax is imposed, is perhaps unfortunate in saying that the tax “ shall be ” a certain per cent upon the gross earnings instead of providing that it shall be computed upon the basis of, or shall be measured by the gross earnings and excess dividends. But the intent of the statute is clear, and the section cannot be destroyed by the unfortunate expression when the other provisions of the statute make it clear that the earnings [34]*34and the excess dividends were to be considered merely as a basis or measure for computing the value of the right to do business in the State.
It is not seriously contended that the tax is excessive, or that it is more than would have fallen upon the relator if it had not been excepted from the provisions of section 182. The business of bringing gas into the State and selling it cannot be prevented or hampered by State law. The relator had the right fco form a corporation in this State for the handling and sale of the gas, but it chose to pay for the privilege of handling the gas as a foreign corporation. It is quite immaterial to it, or to the State, whether it pays for the privilege of furnishing the gas as a domestic or as a foreign corporation; it pays only because the State permits an artificial person to transact business in this State and because the relator felt that it was for its interest to purchase from the State that right. In construing this statute we must apply the familiar rule of judging it by the company it keeps, and the general tenor of the Tax Law makes it clear that no burden is cast upon the business or earnings, but that they are used solely as a measure for determining, in a reasonable and just way, what the privilege acquired from the State is worth?
In Galveston, Harrisburg, etc., R. Co. v. Texas (210 U. S. 217) the court says (pp. 225, 227): “ It being once admitted, as of course it must be, that not every law that affects commerce among the States is a regulation of it in a constitutional sense, nice distinctions are to be expected. Regulation and commerce among the States both are practical rather than technical conceptions, and, naturally, their limits must be fixed by practical lines. As the property of companies engaged in such commerce may be taxed, Pullman’s Palace Car Co. v. Pennsylvania, 141 U. S. 18, and may be taxed at its value as it is, in its organic relations, and not merely as a congeries of unrelated items, taxes on such property have been sustained that took account of the augmentation of value from the commerce in which it was engaged. Adams Express Co. v. Ohio State Auditor, 165 U. S. 194; S. C.,
“ ‘ By whatever name the exaction may be called, if it amounts to no more than the ordinary tax upon property or a just equivalent therefor, ascertained by reference thereto, it is not open to attack as inconsistent with the Constitution.’ Postal Telegraph Cable Co. v. Adams, 155 U. S. 688, 697. See New York, Lake Erie & Western R. R. Co. v. Pennsylvania, 158 U. S. 431, 438, 439. The question is whether this is such a tax. It appears sufficiently, perhaps from what has been said, that we are to look for a practical rather than a logical or philosophical distinction. The State must be allowed to tax the property and to tax it at its actual value as a going concern. On the other hand the State cannot tax the interstate business. The two necessities hardly admit of an absolute logical reconciliation. Yet the distinction is not without sense. When a Legislature is trying simply to value property, it is less likely to attempt to or effect injurious regulation than when it is aiming directly at the receipts from interstate commerce. A practical line can be drawn b'y taking the whole scheme of taxation into account. That must be done by this court as best it can. Neither the State courts nor the Legislatures, by giving the tax a particular name or by the use of some form of words, can take away our duty to consider its nature and effect. If it bears upon commerce among the States so directly as to amount to a regulation in a relatively immediate way, it will not be saved by name or form. Stockard v. Morgan, 185 U. S. 27, 37; Asbell v. Kansas, 209 U. S. 251, 254, 256.”
The relator has acquired from the State the valuable property right, which the State was not bound to concede, but which it was willing to give for a consideration. The relator has agreed to pay the consideration, and section 186 of the [36]*36Tax Law provides the manner in which the compensation is to be measured for the privilege granted. It is not a tax upon earnings or excess dividends, but the value of the franchise granted is measured by the results flowing from the franchise. The earnings and excess dividends are mere measures used to arrive at the just value.
Clearly the tax in question is a franchise tax. In speaking of such a tax in Home Insurance Co. v. New York (134 U. S. 594, 600) Justice Field said: “The validity of the tax can in no way be dependent upon the mode which the State may deem fit to adopt in fixing the amount for any year which it will exact for the franchise. No constitutional objection lies in the way of a legislative body prescribing any mode of measurement to determine the amount it will charge for the privileges it bestows.”
People ex rel. Pennsylvania R. R. Co. v. Wemple (138 N. Y. 1) is not in our way. There the relator operated a ferry from its terminal in New Jersey to the docks at New York city. It transacted no other business in the State except to load and unload at the dock its passengers and freight in interstate commerce. The tax was not a franchise tax, but was levied under “ An act to provide for raising taxes for the use of the State upon certain corporations, joint-stock companies and associations.” (Laws of 1880, chap. 542, as amd.) The court did not feel called upon to determine whether the relator could be excluded from the State in the particular business " it was carrying on, but said - that there was no attempt to exclude it; it was doing the business by comity alone and not by permission of the State. Chapter 240 of the Laws of 1895 and section 181 of chapter 908 of the Laws of 1896 and section 181 of the present law were thereafter passed, requiring a foreign corporation to pay a franchise and license tax for the privilege of doing business in this State in a corporate capacity. A foreign vessel upon the waters of the United States is unloading its foreign cargo at a dock with the permission of the owner in the city of New York. It is evident that the State cannot tax it for the privilege of doing business in this State or in any .other way. Here the relator has gas wells in Pennsylvania. It lays mains and establishes stations in the State of New York to bring its [37]*37gas here, selling it to our citizens in competition with local dealers. It cannot be said that the mere fact that it carries its gas across the State line gives it an advantage over domestic corporations engaged in selling gas. I favor confirmation.
All concurred, except H. T. Kellogg, J., dissenting, with an opinion in which Woodward, J., concurred.
Adams Express Co. v. Kentucky.— [Rep.