business is to be conducted, the foreign corporation must organize a separate corporation in this state if it does not wish to make reports here as to its entire business.

In case such a corporation is organized, the relationship of "sale" and not "agency" should be created between the two companies. In other words, the parent company should sell the goods outright and not upon consignment or commission, and all collections for goods sold from the storehouse would have to be received by the subsidiary company.

These are general principles that should be observed in determining whether or not a corporation is doing business in the state. As the Supreme Court of the United States held in the International Harvester case (234 U. S. 579), each case must depend upon its own facts to show that a corporation is doing business within a particular state.

Two comparatively recent decisions of the Court of Appeals of the state of New York afford a good illustration of the legal and business points upon which the court based its opinion. Although the facts in the cases were practically the same and the same judge rendered both decisions, in one case it was held that the facts did not constitute doing business in the state and in the other that such facts did constitute doing business in the state. Both cases, however, bear out the principle stated above.

INTERNATIONAL TEXT BOOK Co. v. TONE (220 N. Y.

313).

DECISION. The plaintiff, a foreign corporation, has its principal place of business in Scranton, Pennsylvania. From there it gives. instruction by correspondence. It has agencies in New York in charge of division superintendents and assistants. Their sole duty is to solicit pupils, whose applications for membership must be sent to the home office for acceptance. No contracts are closed here. No instruction is given in New York. No books are sold in New York. The subscribers receive their instructions through text books and papers mailed from Scranton, Pennsylvania. They send their reports for examination or correction to the same place. . . .

In this school the defendant became a pupil under a written contract. He signed in New York his application for membership, and

the plaintiff accepted it in Scranton. He promised monthly payments, which he failed to make. His defense was that the plaintiff has not complied with section 15 of the General Corporation Laws (Cons. Laws, Ch. 23) or with section 181 of the Tax Law (Cons. Laws, Ch. 60) and is, therefore, unable to maintain this action. . . . The trial judge sustained the defense and the Appellate Division affirmed his ruling.

In that judgment we are unable to concur. The plaintiff was engaged in interstate commerce. . . . . It did nothing in New York except in furtherance of that commerce. It solicited orders, which did not ripen into contracts until accepted in Pennsylvania. It fulfilled its contracts by the transmission of information through the medium of the mails. Section 15 of the General Corporation Law and section 181 of the Tax Law are not aimed at such activities. .. Business may be sufficient to subject the foreign corporation that does it to the service of process, and yet insufficient to require it to take out a license. In Tauza v. Susquehanna Coal Co. (220 N. Y. 259), decided herewith, this distinction is emphasized. . .

. . . . If section 181 of the Tax Law were a tax upon property, and not a license tax, or if the plaintiff's activities were not those of interstate commerce, exclusively, a different situation would be before us. . . . . The distinction between the license taxes and taxes upon property is sometimes a close one. This tax, however, though measured by the amount of capital employed within the state, is by its very terms a license tax. In this it differs from the franchise tax imposed by section 182. It supplements the license scheme of the General Corporation Law, and is limited to corporations authorized to do business under the law. "Its enforcement" is not "left to the ordinary means devised for the collection of taxes." (Postal Tel. Cable Co. v. Adams, 155 U. S. 688, 695; St. Louis S. W. Ry. Co. v. Arkansas, 235 U. S. 350, 365) but the forfeiture of the right to sue is the penalty of non-payment (Sioux Remedy Co. v. Cope, supra) The transactions of interstate commerce are not subject to such restrictions.

TAUZA V. SUSQUEHANNA COAL Co. (220 N. Y. 259).— DECISION. The plaintiff, a resident of this state, has brought suit against the Susquehanna Coal Co., a Pennsylvania corporation. The defendant's principal office is in Philadelphia, but it has a branch office in New York which is in charge of one Peterson. Peterson's duties are described by the defendant as those of a general sales agent. He has eight salesmen under him who are subject to his orders. A suite of offices is maintained in the Equitable Building in the city of New York, and there the sales agent and his subordinates make their headquarters. The sign on the door is "Susquehanna Coal Co., Walter Peterson, Sales Agent." The office contains eleven

desks and other suitable equipment. In addition to the salesmen there are other employees, presumably stenographers and clerks. The salesmen meet daily and receive instructions from their superior. All sales in New York are subject, however, to confirmation by the home office in Philadelphia. The duty of Peterson and his subordinates is to procure orders which are not binding until approved. All payments are made by customers to the treasurer in Philadelphia; the salesmen are without authority to receive or indorse checks. A bank account in the name of the company is kept in New York and is subject to Peterson's control, but the payments made from it are for the salaries of employees and for petty cash disbursements in- . cidental to the maintenance of the office. The defendant's coal yards are in Pennsylvania and from there its shipments are made. They are made not on isolated occasions but as part of an established course of business. . . .

To do these things is to do business within this state in such a sense and in such a degree as to subject the corporation doing them to the jurisdiction of our courts. The decision of the Supreme Court in International Harvester Co. v. Kentucky (234 U. S. 579) is precisely applicable. There, sales agents in Kentucky solicited orders. subject to approval of a general agent in the home state. They did this, not casually and occasionally, but systematically and regularly. Unlike the defendant's agents, they did not have an office to give to their activities a fixed and local habitation. The finding was that travelers negotiating sales were not to have any headquarters or place of business in that state, though they were permitted to reside there (234 U. S. at p. 584). Yet because their activities were systematic and regular the corporation was held to have been brought within Kentucky, and, therefore, to be subject to process of the Kentucky courts. "Here," said the court (p. 585), “was a continuous course of business in the solicitation of orders which were sent to another state and in response to which the machines of the Harvester Company were delivered within the state of Kentucky. This was a course of business, not a single transaction." . . .

. . . . Activities insufficient to make out the transaction of business, within the meaning of the statutes, may yet be sufficient to bring the corporation within the state so as to render it amenable to process (International Text Book Co. v. Tone, decided herewith [220 N. Y. 313]). In construing statutes which license foreign corporations to do business within our borders we are to avoid unlawful interference by the state with interstate commerce. The question in such cases is not merely whether the corporation is here, but whether its activities are so related to interstate commerce that it, by a denial of a license, be prevented from being here (International Text Book Co. v. Pigg, 217 U. S. 91). . . . . To hold that a state can not burden interstate commerce or pass laws which regulate it "is

a long way from holding that the ordinary process of courts may not reach corporations carrying on business within the state which is wholly of an interstate commerce character." . . .

COMMENTS. These two cases resolve themselves into this proposition of law, which, in spite of the large number of inharmonious decisions that have been rendered on this subject, can be accepted as controlling within the state; viz., although the business carried on by a foreign corporation is entirely interstate in its character, such corporation may be subject to the "ordinary process of courts" in the state, provided the activities of agents of the corporation are systematic and regular, but the state cannot burden such "interstate commerce or pass laws which regulate it."

Corporations exempt under the law.―

LAW. Section 210. Corporations wholly engaged in the purchase, sale and holding of real estate for themselves, holding corporations whose principal income is derived from holding the stocks and bonds of other corporations and corporations liable to a tax under sections one hundred and eighty-four to one hundred and eighty-nine inclusive of this chapter, banks, savings banks, institutions for savings, title guaranty, insurance or surety corporations shall be exempt from the payment of the taxes prescribed by this article.

The following corporations are taxable under the various sections mentioned above:

1. Steam surface railroad, canal, steamboat and other

transportation corporations, which are subject to tax, under section 184, of Chapter 62 (laws 1909). 2. Corporations owning or operating elevated railroads or surface railroads, which are not operated by steam, waterworks companies, gas companies, and electric or steam heating, lighting and power companies, which are subject to tax, under sections 185 and 186.

3. Insurance companies, which are subject to tax, under section 187.

4. Trust companies, subject to tax, under section 188.

5. Investment companies, subject to tax, under section

188-A.

6. Savings banks, subject to tax, under section 189, including banks, savings banks, institutions of savings, title guaranty, insurance or surety corporations.

INTERPRETATION OF THE TERM "HOLDING CORPORATIONS."-Under date of June 27, 1919, the State Tax Department authorized the publication of the following as its interpretation of the term "holding corporations" as used in section 210 of article 9-A of the tax law. (The Corporation Trust Company.)

Thompson on corporations, Second edition, volume four, page 4091, says:

"A holding corporation is one organized for the purpose of owning and holding the stock of other corporations."

It should be noted that there are two concurrent purposes. First, the "owning" and second, the "holding of stocks." The word and is used conjunctively and the three words as here used together indicate a permanency of ownership for a specific purpose.

The purpose of a holding company as indicated in all the cases examined, is to control the management and dictate the conduct of the affairs of another or other corporations.

The mere holding of financial investments in the securities of various corporations of divergent character either as investments or as the repository for another corporation, or for individuals, cannot constitute a holding corporation, within the ordinary significance of the expression.

There seems to be no legal determination of what constitutes a holding corporation and it is a fair presumption, in the absence of such a definition, that the term as used in the act should be given the meaning generally accepted in the ordinary course of business. It has always conveyed the idea of permanent control through the ownership of the majority of the stock of another corporation or of other corporations doing a business of an inter-related character.

It has never been construed to mean a corporation engaged in buying and selling securities or in syndicate transactions. In other words, it is not a dealer in securities but one engaged in owning and holding securities for the purpose of controlling another or other corporations.

The language of section 210 of the tax law, so far as the question involved is concerned, extends the exemption to holding corporations of a definite class, namely, those "whose principal income is