The People of the State of New York ex rel. Automatic Vending Company, Relator, v. Otto Kelsey, as Comptroller of the State of New York, Respondent

The People of the State of New York ex rel. Automatic Vending Company, Relator, v. Otto Kelsey, as Comptroller of the State of New York, Respondent. Franchise and license t'aximposed upon a foreign corporation—patentsunder which its manufactures may be assessed at the par value of the stock issued therefor— the fact that some of the patents are without value does not require, a reduction. In estimating, for the purpose of fixing the license and -franchise tax to be paid by ■ a foreign corporation, the value of certain patents, under which it is engaged in manufacturing, and in payment for which it- has -issued a portion of its capital stock; the Comptroller is justified in determining such patents to be worth the par value of the stock issued in payment for the patents, especially where the corporation has declared a six per cent dividend on its stock during the year for which the tax is levied. The Comptroller is not obliged, under such circumstances, to make any deduction on account of patents which the corporation declares have proved worthless, especially .when it does not appear that the remaining patents are not worth the sum paid in capital stock for all of the patents. Certiorari issued out of the Supreme Court and attested on the 22d day of June, 1904, directed to Otto Kelsey, as Comptroller of the State of New York, commanding him to certify and return to the office of the clerk of the county of Albany all and' singular his proceedings had in relation to the assessment of a license fee and franchise tax against the relator for the year ending October 31, 1903. Charles A. Collin, for the relator. John Cunneen, Attorney-General, and William H. Wood, Deputy Attorney-General, for the respondent. [MAJORITY — Houghton, J.:] Houghton, J.: The relator is a foreign corporation and' manufactures and leases weighing scales and automatic vending or “slot” machines, and sells supplies therefor. The several parts of the machines are manufactured by' anothér corporation in New Jersey and they are shipped to the relator at New York where they are assembled by it and the complete machines distributed throughout various States." The capital stock is $1,000,000, upon which a six per cent dividend was paid for the year in question. Of the stock $784,637.86 was issued, at . par, in payment for various patents relating to the machines manufactured and leased by the relator. It is- claimed that many of these patents proveed worthless, and that it is of no great benefit to the relator to manufacture under them,' and that this fact should have been taken into consideration by the Comptroller in determining the amount df capital - employed by -the; relator within the State. . - . ■ •Upon.the rehearing before the Comptroller the president of the relator testified that $132,212.11 of its capital was employed within ■the State, and $132-,084.97 outside. The Comptroller took, this proportion of slightly moré.than half employed within the State, and determined that $500,240 was so employed, and assessed the license tax under section 181 of the Tax Law'(Laws, of. 1896,. chap. 908, as amd. by Laws of 1901, chap. 558) on that basis. In so' doing he must have assumed that the large remainder of the capital was represented by rights under the patents. ' We see no vice in this. The Comptroller was not bound to accept the relator’s. estimate of their value, or its statement that it could as well carry on its business without them. He had a right to take into consideration, the price paid,, especially in view of the fact that the corporation manufacturing under them was enablbd to pay a six per cent dividend on the large amount of stock issued for their purchase. - i Eights under a patent may be of uncertain value, difficult to ascertain. It is possible that a manufacturing corporation might make as great profit without them ; but where it is manufacturing under patents, we know of no better practical, method of ascertaining the value of the rights for -the purposes of license and franchise tax, -than to assume that they are worth' what was paid for them. The situation is not unlike the ascertaining of the. value of the good will of a business, which was -recently under consideration by this court in People ex rel. Koechl & Co. v. Morgan (96 App. Div. 110), In that case we held that it was not improper for the Comptroller to estimate tBe good will at' the amount which was'paid for ft. But it is said that two of' the five patents for which upwards of six hundred thousand dollars in stock was issu.ed, have proved worthless. It does not appear what amount was paid for each ■patent, and in the absence of such proof we cannot say how much, if anything, should be deducted. It may be that those which have proved available are worth the price paid for all. About thirty-five per cent of all the machines leased throughout the United States are leased within the State of New York. If the relator did not have ,a place of business within the State and -employ additional capital therein, possibly this proportion would xepresent its only capital employed within the State. Its entire business, however, is affected hy, and in a measure dependent upon, its rights under its patents; and we are of the opinion that sufficient ■does not appear to authorize us in disturbing the finding of the -Comptroller. For some reason, not clear, the franchise tax was assessed upon á lower basis than was the license tax. This is to the advantage of "the relator and not a cause of complaint on its part. . The determination of the Comptroller should be affirmed, with fifty dollars costs and disbursements.' Determination of the Comptroller unanimously confirmed, with fifty dollars costs and disbursements.