This controversy has been submitted for the purpose of determining whether the defendant is liable to taxation in the state of New York as a foreign corporation doing business therein. The statutes under which the plaintiff claims the right to collect the tax in question are those which were passed in the years 1880 and 1881, whereby foreign capital employed in business in the state of New York, and which received the same protection that is extended to domestic capital, is compelled to contribute in the same manner to governmental support. The provisions of section 3 of the Laws of 1880, as amended by the Laws of 1881, are that every corporation, joint-stock company, or association whatever, now or hereafter incorporated or-organized under any law of this state, or now or hereafter incorporated or *739organized by or under the laws of any other state or country, and doing business within this state, shall be subject to and pay a tax as a tax upon its corporate franchise into the treasury of the state annually,—a certain per centum, ■upon dividends made and declared by it. Section 6 of the act provides that, “in addition to the taxes above provided for, every corporation formed for .railroad, canal, steam-boat, ferry, express, navigation, or transportation purposes, and every elevated railway company, and every other corporation, joint-stock company, or association now or hereafter incorporated or organized by •or under any law of this state, or now or hereafter incorporated or organized ■by or under the laws of any other state or country, and doing business in this state, and owning, operating, or leasing to or from any other corporation, joint-stock company, or association, .any railroad, canal, steam-boat, ferry, express, navigation, pipe-line, or transportation route or line, or elevated railway, or other device for the transportation of freight or passengers, or in any way engaged in the business of transporting freights or passengers, and every telegraph company or telephone company incorporated under the laws of this ■or any other state, and doing business in this state, and every express company or association, palace car or sleeping car company or association, incorporated or unincorporated, doing business in this state, shall pay to .the state treasurer, for the use of the state, as a tax upon its corporate franchise or business in this state, a tax at the rate of five-tenths of one per centum upon the gross earnings in this state of said corporation or company or association. ” It will be seen, therefore, that, as far as the defendant is concerned, the question which determines this liability under the provisions of this act to taxation is entirely one of fact, namely, does the corporation do business within ■this state within the meaning of the act? It is urged upon the part of the plaintiff that because the defendant has property within this state which is being used by the lessees thereof within this state, therefore in some way the territory, enterprise, and prosperity of the people of the state are used by the defendant, and that the case comes within the spirit of the enactments hereinbefore cited. That a tax such as is contemplated by section 3 of the act in question is within the powers of the legislature seems to have been admitted in the case of People v. Trust Co., 96 N. Y. 387, which company was a Connecticut corporation, claimed to be doing business within this state, and which had been taxed upon its business in the manner provided by the said third section. It was held in that case “that the tax on the business of foreign corporations done in this state is a specific tax, and hence no apportionment or appraisal was required. Such a mode of taxation has been resorted to by all governments. It was extensively used by the federal government during the late war, and at other periods of its history. A poll-tax is specific, and the legislature can constitutionally impose the same poll-tax upon every citizen, without reference to his ability to pay. So it can impose a tax upon all watches, carriages, pianos, dogs, spirituous liquors, and other chattels, without reference to their value. On the same principle it can impose an arbitrary tax upon any avocation or business, without estimating its volume or value. It may impose a specific tax upon any saloon keeper, or hotel keeper, •or banker, or broker, or trader; and for these views, sustained by the history •of all governments, if any authority is needed, it is found in the case of People v. Mayor, 4 N. Y. 419. Such taxes are generally arbitrary, unjust, and unequal, and have been resorted to by governments in great financial straits. While they are free from constitutional objections, unless imposed pro bono publico to restrain, suppress, or regulate some obnoxious trade or business, they must generally receive the condemnation of wise and enlightened statesmanship. The legislature therefore had the power to impose an arbitrary sum as a tax upon the business of all corporations done within the state, and no harm is done because this act apportions the tax at least according to the ability of the corporations to pay.” It will thus be seen that the power of the *740government of the state of New York to levy a tax upon the business of any foreign corporation engaged in business within the state has been expressly recognized, and is not now open for discussion. In the case to which attention has .been called the question arose as to whether in the case of a foreign-corporation there was any method of apportioning the tax, and upon this-question the court say: “We find no authority in this act for apportioning the tax upon such a corporation as this according to the amount of dividends-earned in this state, or according to the amount of capital employed in this state, and hence the defendant, if liable for any of this tax, cannot complain of the amount thereof. ” But in the case then under consideration the court was precluded from discussing the question as to whether the corporation, within the meaning of the act, did business within this state, because it appeared from the record that it was admitted that the corporation in question did business within this state within the meaning of the act. The court refrained from discussing that question, and only determined the liability of the corporation to taxation under these circumstances. It follows from the principles and rules laid down in that case that, if the defendant in this action did business within this state within the meaning of this act, it is liable for the full tax provided for by the third section thereof. The court, however, in the language which was used in incidentally referring to the meaning of the words in the statute, “doing business within this state,” clearly indicated its opinion that when the act provided as the measure of the tax the amount of dividends earned by the entire business of the corporation, or the entire cash value of its capital stock, that the statute meant in its use of the words “its corporate business,” substantially the whole or the main corporate business which it was chartered to prosecute. It is evident that this construction was placed upon the act because of the magnitude of the tax which would otherwise be imposed upon the corporation, even if the smallest amount of business was transacted by the corporation within this state, under any other construction of the words in question.
After the decision of this case, the legislature, appreciating the justice of the construction and of the criticism which had been passed by the court of appeals upon the act then under consideration, in 1885 amended the act so as to meet the suggestions contained in the decision of the court of appeals, and provided that, instead of a corporation being taxed upon the whole amount of its dividends earned, or the entire cash value of its capital stock, if it did any business within the state, that the amount of the capital stock which should be the basis for taxation under the provisions of section 3 of the act in question should be the amount of capital stock employed within this state. It is clear that under the act, as it originally stood, the whole or the main corporate business of the defendant was not transacted within this state, and therefore it was not liable to taxation upon its business, as provided by section 3 of the act. The defendant is a foreign corporation, organized under the laws of Massachusetts. It has its office in the state of Massachusetts, and it rents certain property which is manufactured in Massachusetts and owned in Massachusetts, namely, telephone receivers and transmitters, to corporations organized under the laws of the state of New York for use by such corporations in the state of New York in the conduct of their business. The rents reserved for the use of this property are to be paid in Massachusetts. The property itself is delivered in Massachusetts, and the property is used within the state of New York entirely by the servants, agents, and employes of the New York corporations. There is one branch of this business, however, which is to be distinguished from this, in that thé lessors of the property are the American Bell Telephone Company, and the lessees are the persons using the instruments, and the rent is to be paid directly to the defendant. It is true that in practice this rent is collected by the New York corporation, but the contracting parties are the users of the instrument *741and the defendant. The defendant therefore is the owner of property within the state of New York from which it derives rental, and which is rented for the purpose of being used in the state of New York. It is certainly, therefore, doing some business within the state of New York under the leases with the subordinate corporations. It has the most minute supervision of the instruments leased, it regulates the conduct of the business in very minute particulars, and provides for the efficient service by those instruments, whereby the use of the same may be extended, and the demand therefore increased. It is urged that because the defendant has no agent, servant, or employe within this state, except as has been mentioned, that therefore it is transacting no business within the state. As far as the instruments leased by the defendant to the individual users are concerned, it certainly is directly carrying on business within this state. But all this does not bring the business of the ■defendant within the rule suggested in the case cited, because it is by no means the whole or the main corporate business which the defendant was chartered to transact. It is therefore apparent that under the rule laid down in the case cited the defendant was not taxable prior to the amendment of the act of 1885. We think, however, that from that time it was. A change was manifestly made by the amendment in question in reference to the taxation of foreign corporations. The judicial interpretation enunciated in the decision in •question liad evidently been called to the attention of the legislature, and the injustice of taxing a foreign corporation upon the whole of its dividends earned, or the entire cash value of its capital stock, even if it did but a small portion of its business within this state, recognized, and therefore the amendment of the act passed in 1885 (being chapter 501 of the Laws of that year) was adopted. This legislation clearly shows that it was the intention of the legislature to impose the tax provided for by section 3 of the original act upon all foreign corporations who did any business within this state, no matter whether such business formed the whole or the main corporate business of •such corporation, or a small or infinitesimal part thereof. To the extent that the corporation did business within this state, to that extent should its capital stock be taxed. Applying this change in legislation to the facts appearing upon this submission, it would appear, therefore, that the defendant was liable to taxation upon so much of its capital stock as was employed w'ithin this state. It did some of its business within this state, as has already been seen, •and thus it rendered itself liable to taxation under this new legislation, and it •cannot legally escape for the reason that the main part of its corporate business is done elsewhere. We are of opinion, therefore, that since the passage of the act of 1885 the defendant has been doing business within this state within the meaning of the statute, as amended, and is liable for the tax upon its business, to be assessed upon the amount of its capital stock employed within this state, and is also liable to taxation upon its gross earnings in this state. These earnings are the rentals which are received by the defendant from the leasing of its property situate within this state. The apportionment of the tax ’upon the capital stock is necessarily more difficult and uncertain, but a fair and reasonable rule for guidance would be to ascertain the ratio which the number of telephones used within this state bears to the whole number of the telephones used in the country; the entire capital of the defendant being engaged in the telephone business throughout the Union, and the value of such capital depending largely upon patents which secure the right to use the apparatus owned by the defendant. It is impossible to apportion precisely the proportions of these patents which are used in the telephone business in the state, otherwise than by measuring the same according to the ratio just mentioned.