Source: http://supreme.nolo.com/us/299/366/case.html
Timestamp: 2019-04-18 14:20:57+00:00

Document:
1. An intangible property right may have a "business situs" in a State for tax purposes either because the right grows out of the actual transactions of a business there localized, or because its exercise is fixed there, exclusively or dominantly. P. 299 U. S. 371.
2. A nonresident of New York, owning a seat in the New York Stock Exchange, who, by its rules, is privileged personaily to buy and sell securities in the market it affords only by going upon the floor of the Exchange in New York, is taxable in New York upon the profits derived by him from the sale of a "right" in a new membership appurtenant to his old one, although he may have no office or abode in New York and may fill all the orders of his customers for purchase or sale of securities by sending the orders to New York for execution on the floor of the Exchange by fellow members. P. 299 U. S. 372.
271 N.Y. 594; 3 N.E. 2d 201; 271 N.Y. 618, 3 N.E. 2d 213, affirmed.
Appeal from the affirmance of a judgment, 246 App.Div. 652, 283 N.Y.S. 219, in a proceeding by certiorari, which sustained a tax assessed by the New York Tax Commission.
The question here presented relates to the constitutional validity of a tax imposed by the New York upon the profits realized by a nonresident upon the sale of a right appurtenant to membership in the New York Stock Exchange.
"contravenes the Fourteenth Amendment of the Federal Constitution as an extraterritorial tax, and such question was presented and necessarily passed upon but not sustained by the court."
271 N.Y. 594, 3 N.E.2d 201; 271 N.Y. 618, 3 N.E.2d 213. The case comes here on appeal.
The relator, in challenging the jurisdiction of the New York to lay the tax, stresses the points that the relator and his copartners have always been domiciled in Massachusetts; that they have never had an office or abode in New York and have never carried on business there; that, while they advertise themselves in Boston as members of the New York Stock Exchange and accept orders from customers at their Boston office for execution on the New York Stock Exchange, none of that business is conducted by the relator or his copartners on the floor of that Exchange; that they do not buy and sell securities on the Exchange for their firm account; that orders requiring execution on the Exchange are telegraphed to members of the Exchange who have business offices in New York and who execute their orders on the Exchange in their own names, acting as correspondents, lending money on the security of the stock purchased and other collateral delivered to them. This business of relator's firm in 1929 involved approximately $150,000,000 worth of securities. And it appears that, by reason of relator's membership in the Exchange, his firm was able to have their New York correspondents execute orders at 40 percent of the commission fixed for nonmembers. Relator's firm charges its customers the fixed minimum commissions which they would have to pay any stock exchange house, and these commissions are divided with their New York correspondents by mutual agreement.
rule property of that sort is taxable only at the domicile of the owner, and that, unless the membership has a "business situs" in New York, it is not taxable there. Farmers' Loan & Trust Co. v. Minnesota, 280 U. S. 204, 280 U. S. 213; Beidler v. South Carolina Tax Commission, 282 U. S. 1, 282 U. S. 8; First National Bank v. Maine, 284 U. S. 312, 284 U. S. 329-331; Wheeling Steel Corp. v. Fox, 298 U. S. 193, 298 U. S. 209-211. He contends that the membership cannot be said to have a business situs in New York because he and his copartners reside and transact all their business in Massachusetts.
We think that the argument fails to give adequate consideration to the nature and incidents of the membership. When we speak of a "business situs" of intangible property in the taxing State, we are indulging in a metaphor. We express the idea of localization by virtue of the attributes of the intangible right in relation to the conduct of affairs at a particular place. The right may grow out of the actual transactions of a localized business or the right may be identified with a particular place because the exercise of the right is fixed exclusively or dominantly at that place. In the latter case, the localization for the purpose of transacting business may constitute a business situs quite as clearly as the conduct of the business itself.
is the right to conduct transactions at that market place. That privilege of conducting the business of the buying and selling of securities on the floor of the Exchange is the dominant feature of the membership or "seat." Its very nature localizes it at the Exchange. It is a privilege which can be exercised nowhere else. The nature of that right is not altered by the failure to exercise it. Wherever the owner may reside, he must go to the Exchange to exercise his privilege to trade upon its floor. If he prefers to have his customers' orders executed through other members, still they must execute these orders on the Exchange under its rules. Such orders are executed on his behalf, and, by virtue of his membership and of the execution of his orders upon the Exchange, he becomes entitled to the concession in commissions for which the rules provide.
supra, and later cases upon that point. See Wheeling Steel Corp. v. Fox, supra.
See Belton v. Hatch, 109 N.Y. 593, 595, 596, 17 N.E. 225; People ex rel. Lemmon v. Feitner, 167 N.Y. 1, 4, 11, 13, 60 N.E. 265; Meyer, "The Law of Stock Brokers and Stock Exchanges," pp. 13-16, 75-79.
Weston v. Ives, 97 N.Y. 222; Belton v. Hatch, 109 N.Y. 593, 17 N.E. 225; Matter of Grant, 132 App.Div. 739, 742, 116 N.Y.S. 767, 1152; Hyde v. Woods, 94 U. S. 523; Sparhawk v. Yerkes, 142 U. S. 1, 142 U. S. 12; Meyer, op. cit., pp. 115-117.

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