Chief Features.

VERMONT.

I. GENERAL VIEW.

The chief features of corporate taxation in Vermont are two. First. The "annual license tax" upon capital stock of all corporations doing business in Vermont. Unincorporated associations doing business in Vermont pay this tax upon their assets.

Second. Transportation and transmission companies (except express, which are taxed on mileage, and palace car, which are taxed on capital invested in the State) have the option of being taxed on property or on gross earnings. They also pay the "license tax."

All of the above taxes are for state purposes.

General Corporation Tax on Capital Stock or "Deposit."a

Domestic corporations and foreign corporations and associations doing business in the State pay the "annual license tax" above mentioned. For companies having a capital stock this tax is based on the par value thereof, and for those having no capital stock this tax is based on assets ("deposit"). It is collected by the State for state purposes.

Railroad, etc., Company Tax-On Property or on Earnings.

Domestic and foreign railroad, street-railway, telegraph, telephone, steamboat, and car (not palace car) companies doing business in the State are taxed by the State for state purposes upon property, or, in lieu thereof, on gross earnings. The real and personal property used in operating or carrying on the business of the company is not taxed for local purposes. They also pay the "license tax."

Express Company Tax-On Mileage.

Domestic and foreign express companies are taxed by the State for state purposes on the mileage of routes or lines located wholly within the State, upon or over which express matter is transported between points in Vermont. They also pay the "license tax."

a The Commissioner of State Taxes states that "deposit" means about the same as 'assets." It is the basis of the "annual license tax" on companies having no capital stock for such basis.

Palace-Car Company Tax-On Capital Invested in State.

Domestic and foreign sleeping, parlor, dining, or other similar car companies ("palace car" companies), are taxed by the State for state purposes upon the amount of capital invested or used by the company in the State. They also pay the "license tax." A railroad owning or operating its own cars and paying the state tax on its property, or gross earnings, is exempt from payment of this tax.

Property Tax.

Real estate of railroads not used in the business, and goods, wares, merchandise, stock in trade, and material and machinery used in manufacture are taxed to corporations the same as is the property of individuals. Property of those corporations which are specially taxed is generally exempt unless, under an alternative provision, they elect to be taxed upon a property basis.

Foreign Corporations.

Foreign corporations in Vermont are generally subject to the same provisions of corporate taxation as are similar domestic corporations.

Stockholders and Bondholders.

The shares of stock in domestic and foreign corporations (except railroads, telephone, insurance, surety, steamboat, car, and transportation companies) are taxed to the holders as personal property. In the case of "manufacturing, mercantile, or trading" companies deduction is made for all property taxed to the corporation. In the case of "all other corporations" deduction is made for real estate so taxed only.

Bonds are taxed to the holders as personal property.

Administration.

The administration of the law governing the taxation of corporations is in the hands of the Commissioner of State Taxes, appointed biennially by the Governor."

a Sources of revenue in Vermont:

Towns. The cities and towns derive their revenues from (a) property and polls; (b) occupation taxes and licenses; (c) school taxes.

Counties. The revenue of the county is derived from (a) property and polls collected by the towns; (b) business taxes and licenses.

State. The state revenue is derived from (a) property and polls collected by the towns; (b) inheritance tax; (c) corporation taxes; (d) business taxes and licenses; (e) fees and fines.

II. DETAILS AS TO THE CONSTITUTION AND THE

STATUTES.

CONSTITUTION.

The constitution of Vermont contains no passage dealing specifically with taxation. It says generally that every member of society must contribute his proportion toward the expense of protection of life, liberty, and property, and that the purpose of a tax ought to appear to the legislature of more service to the community than the money would be if not so collected."

The constitution requires that in order to pass a bill raising a state tax there must be a vote of two-thirds of the representatives."

General Property Tax.

STATUTES.

In Vermont corporations have been for the most part classified and each class subjected to a special tax, as hereinafter described. There are exempted from the general property tax the real and personal estate used in operating a railroad, steamboat, car or transportation company, or used in carrying on express, telegraph, or telephone business in the State, and the shares of stock in domestic telephone, telegraph, steamboat, car and transportation companies."

Real estate of railroad corporations, not used in operating their roads, is taxed like that of individuals."

Goods, wares, merchandise, stock in trade, including stock used in the business of the mechanic arts and machinery used in manufacture, if belonging to corporations, are taxed as if belonging to individuals./

Manufacturing establishments, quarries, mines, machinery, and buildings necessary for use in the business, machinery put into unoccupied buildings, capital and personal property used in the

a Chap. 1, art. 9 (1777).

b Chap. 2, sec. 9.

c Except as otherwise indicated, the rererences as given herein are to the sections of the revision known as Public Statutes," which contain the acts up to and including 1906. The statutes passed since then have been consulted. The laws of the 1908 session of the legislature, which adjourned January 29, 1909, have also been included.

d Pub. Stats., sec. 797, as amended by Acts of 1908, p. 27.

business, if the amount invested exceeds $1,000, may be exempted from taxation for a period not exceeding ten years from commencement of business, provided the town so votes."

Stockholders and Bondholders."

Shares of stock in corporations, domestic and foreign, are taxed locally to the owner like other personal property, if he resides in the State; and if he is a nonresident the tax is paid locally by the corporation and a lien on the stock in favor of the corporation is thereupon created. Deduction is made for all property taxed to manufacturing, mercantile, and trading companies in Vermont or elsewhere. In taxing stock of other corporations deduction is made for real estate taxed in Vermont or elsewhere." excepted from the above tax the shares of stock in railroad, domestic "telephone, telegraph, insurance, surety, guaranty, steamboat, car (not palace car) and transportation companies.” ƒ Shares of stock, bonds, and other evidences of indebtedness belonging to insurance or surety companies are not taxable.

There are

Shares of stock in a foreign corporation, when all the stock of such corporation is taxed in the home State, are exempt from taxation in the hands of the holder."

Bonds of corporations are taxed in the hands of the holder like other personal property."

a Pub. Stats., sec. 499.

Exemption of such corporations by vote exempts stockholders. Richardson v. St. Albans, 72 Vt., 1 (1899).

The act held not in contravention of constitution of Vermont, chap. I, art. 9. Colton v. Montpelier, 71 Vt., 413 (1899).

b See "Holders of stock," under "Comments," p. 83, infra.

e Pub. Stats., sec. 515.

As is usually the case, very little stock is actually reached. The Tax Commissioner once made a list of $9,000,000 of stocks, and upon examination it appeared that about 3 per cent was taxed. The Commission of 1908 recommends that the administration of this law be transferred from the local authorities to the State Tax Commission. (See Report, p. 28.)

d Pub. Stats., sec. 516.

The Tax Commissioner states that very little value is left to be taxed after the deductions are made.

e Pub. Stats., sec. 520.

Ibid., sec. 797, as amended by Acts of 1908, p. 27.

9 Ibid., sec. 496, III.

For effect of this provision, see p. 83, infra. This exemption is held to extend to shares in a Canadian corporation which pays in Canada a tax upon its capital. The words "another State" include foreign countries. Foster v. Steven, 63 Vt., 175 (1890). h Pub. Stats., sec. 494.

Corporate bonds are evidently listed as personal property, there being no law with special reference to them.

a

Tax on Capital Stock or "Deposit." "

Domestic corporations, foreign corporations doing business in the State, and associations and joint stock companies doing business in the State pay what is called an "annual license tax.” For companies having a capital stock the tax is based on the par value. For those having no capital stock the tax is based on assets referred to in the statute as "deposit." Because of the very general application of this provision it is given in full:

"Every foreign corporation doing business in this State, and every association or joint stock company doing business in this State issuing shares of stock or dividing its corporate rights or property into shares, and every domestic corporation shall, except as hereinafter provided, pay an annual license tax to the State. Corporations organized solely for charitable, religious, or educational purposes, cemetery associations, and all corporations having no capital stock or deposit as hereinafter defined, shall be exempt from the payment of the annual license tax."

*

"The word 'deposit' as used in this chapter relative to any tax * shall include all moneys or securities deposited with or held by savings banks, trust companies, savings bank and trust companies, savings institutions, building and loan associations, and all mutual or cooperative institutions for savings; all assets held by any corporation or association engaged in any commercial, manufacturing, or other business, carried on in whole or in part upon the mutual or cooperative plan, or which exercises corporate functions in this State; and all assets held by insurance, surety, or guaranty companies or associations as surplus, or as necessary reserve under any contract of insurance, suretyship, or guarantyship."

"A corporation subject to the payment of the annual license tax and having capital stock or deposit of fifty thousand dollars or less is hereby assessed an annual license tax of ten dollars, and for each fifty thousand dollars or fractional part thereof of capital stock or deposit in excess of fifty thousand dollars, five dollars. But no annual license tax, except as otherwise provided in this chapter, shall exceed fifty dollars."e

a See "Annual license tax," in "Comments," p. 81, infra.

b Pub. Stats., sec. 752.

A former statute imposing a license upon the business of peddling goods not manufactured in the State was declared unconstitutional as conflicting with the fourteenth amendment to the Constitution of the United States. State v. Hoyt, 71 Vt., 59 (1899).

The Attorney-General of Vermont has held that "other business" means the business for which the corporation or association was organized, which may not be for profit.

d Pub. Stats., sec. 753.

The Commissioner of State Taxes states that "deposit" means about the same as "assets." It is the basis of the "annual license tax" on companies having no capital stock for such basis.

e Pub. Stats., sec. 754.

A corporation in the hands of a receiver and doing no business is free from payment of annual license or franchise tax. State v. Bradford Savings Bank, 71 Vt., 234 (1899). The distinction between a franchise tax and property tax is elaborated in State v. Franklin County Savings Bank, 74 Vt., 246 (1902).