38 Mass. App. Ct. 917

February 1, 1995

Joseph I. Schindler for the taxpayer.

Amy Spector, Assistant Attorney General, for the Commissioner of Revenue.

Dunkin' Donuts Northeast Distribution Center, Inc. (the taxpayer), appeals from a decision of the Appellate Tax Board (the board) pursuant to G. L. c. 58A, Section 13. The case was submitted to the board on a joint statement of facts, exhibits, and briefs, and we draw the facts from that stipulated record.

The taxpayer was organized under the laws of Delaware as a nonprofit corporation without capital stock. It is one of several regional distribution centers jointly established by Dunkin' Donuts, Inc., the franchisor, and its franchise owners in various geographical regions. Each distribution center purchases food and supplies in bulk and sells the products to the franchisee members at advantageous prices. After deducting its expenses of operations, the taxpayer distributes its net income as patronage dividends to the franchisees.

For the tax years 1982, 1983, and 1987, the taxpayer paid the Massachusetts corporate excise tax, and filed an application for the abatement of the tax for each of those years. The Commissioner of Revenue denied the applications for abatement, and the board affirmed those denials.

The sole issue on appeal is whether the taxpayer is exempt from the corporate excise tax as an agricultural cooperative. An exemption for foreign corporations is provided by G. L. c. 157, Section 18, but only if the foreign corporation is organized "for a similar purpose" to corporations organized under G. L. c. 157, Section 10. [Note 1] Section 10, which is part of a portion of c. 157

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that carries the caption, "AGRICULTURAL AND OTHER COOPERATIVE CORPORATIONS WITHOUT CAPITAL STOCK," permits the incorporation, without capital stock, of "Agricultural and horticultural associations engaged in any branch of agriculture . . . and any other farming activity or business, if instituted for the mutual benefit of their members and formed for the purpose of doing business without profit to the association itself . . . ."

The taxpayer argues that it falls within Section 18 because it is "formed for the purpose of doing business without profit to the association itself." The argument is that Section 18 refers to a "similar purpose" to that described in Section 10; Section 10 contains the words "for the purpose of doing business without profit"; therefore the only condition for the inclusion of a foreign corporation within the terms of Section 18 is that the corporation be engaged in a nonprofit activity, and the taxpayer is so engaged.

The taxpayer's argument is not persuasive. Section 18 exempts from taxation under c. 63 -- and imposes a tax under the provisions of c. 59 -- domestic corporations organized under Section 10 and foreign corporations organized "for a similar purpose." There is nothing in Section 18 that remotely suggests a legislative intent to favor foreign corporations over domestic corporations by eliminating, for foreign corporations only, the requirement that the corporation be engaged in a farming activity for the mutual benefit of its members. On the contrary, Section 18 is clear in its purpose to place domestic and foreign corporations on the same footing but only if organized and operating for the same or similar purposes. The taxpayer, not being a corporation (as the taxpayer concedes) which operates for an agricultural or any other farming purpose, has the burden of proving its right to the abatement, M&T Charters, Inc. v. Commissioner of Rev., 404 Mass. 137 , 140 (1989). It has failed to do so. [Note 2] A distribution center which buys and sells food and supplies for its franchisee members is not operating for an agricultural purpose and is not engaged in any farming activity. Accordingly, the decision of the board is affirmed.

So ordered.


[Note 1] General Laws c. 63, Section 30, provides that corporations subject to the corporate excise tax do not include corporations organized under the provisions of G. L. c. 157, Section 10.

[Note 2] The appellant cites Ocean Spray Cranberries, Inc. v. State Tax Commn., 355 Mass. 592 (1969). That case involved, as the board observed, the application of the corporate excise tax to a farmers' cooperative classified as a foreign manufacturing corporation, and has no bearing on this case.