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STATEMENT OF MR. G. H. EISWALD, PRESIDENT OF THE CHARLES WILLIAM STORES (INC.), NEW YORK.

Mr. EISWALD. The statement I will make to the committee is submitted by the following:

J. I. Zook, treasurer, Montgomery Ward & Co., Chicago.

S. G. Rosenbaum, president, the National Cloak & Suit Co., New York.

W. R. Heath, vice president, the Larkin Co., of Buffalo.

G. H. Eiswald, president, the Charles William Stores, New York. Milton Cone, president, the Spotless Co., Richmond, Va.

These gentlemen represent their respective corporations, and in addition the majority of the so-called mail-order houses of the United States.

Our subject is a tax of 1 per cent on sales by mail, proposed in the revenue bill now under consideration by the Senate Finance Committee, to wit [reading]:

SEC. 1905. That on and after January first, nineteen hundred and nineteen, every person, any part of whose business consists of the retailing of merchandise through or upon orders received by mail, shall pay annually a special excise tax equivalent to one per centum of the gross amount in excess of $100,000 received by such person from such retail sales during the preceding year ending June thirtieth.

The necessity for revenue by the Government is recognized, and every just and fair method of producing it will meet with our hearty approval and assistance.

We offer no objection to a tax of 1 per cent on sales as a tax, provided it is levied on all sales, irrespective of the way in which they are made. Such a tax is just, moderate, easy of determination and collection, and, if applied to all sales, would yield enormous revenue. If applied to sales by mail only it would yield at the most a relatively small amount.

In passing, we wish to direct your attention without further comment to the ambiguity of the section under consideration.

Senator PENROSE. Did you present these views to the Ways and Means Committee?

Mr. EISWALD. Substantially, Senator.

Senator PENROSE. And they overruled your objections?

Mr. EISWALD. The Ways and Means Committee appointed a subcommittee to hear our case, and the subcommittee, consisting of five members, reported unanimously in favor of reconsideration of this clause. But the Ways and Means Committee as a whole, I am told, overruled the recommendation of their subcommittee.

The language of this bill is open to various interpretations, entirely irreconcilable with justice and inviting controversy and litigation, and possibly leading to great difficulty of administration.

It is apparent that the great bulk of the revenue received by the Government from this source will be from so-called mail-order houses and those large retail establishments who invite orders by mail.

We list herewith all of the retail mail-order houses in the United States of which we have any knowledge, and have placed opposite their names the amount of business which they did for the calendar year ending December 31, 1917.

In the case of those houses marked (a) the figures are taken from official reports which are a matter of public record.

In the case of those houses marked (b) the figures are from information given us by the respective chief executives of the houses in question.

In the case of those markd (3) the figures are generously estimated.

(a) Sears, Roebuck & Co., Chicago, Ill.

(a) Montgomery Ward & Co., Chicago, Ill. (a) National Cloak & Suit Co., New York.

(c) Larkin Co., Buffalo, N. Y--

(b) Charles William Stores, New York_

(b) Bellas Hess & Co., New York..

(c) Hartman Furniture & Carpet Co., Chicago.

(c) Spiegel-May-Stern Co., Chicago, Ill.

(e) The Catalogue House (Phillipsborn), Chicago, Ill.

(c) M. W. Savage Factories, Minneapolis___.

(c) The Wm. Galloway Co., Waterloo, Iowa..
(b) Standard Mail Order Co., New York.
(c) Straus & Schram, Chicago, Ill_--

(c) Pacific Coast Mail Order Co., Los Angeles, Cal_

(e) Chicago Mail Order Co., Chicago, Ill__

(b) Perry Dame & Co., New York..

(e) Cussins & Fearn, Columbus, Ohio--

(b) Spotless Co., Richmond, Va_.

(e) Harris Bros., Chicago, Ill

(e) Crofts & Reid, Chicago, Ill.

(e) Hamilton Garment Co., New York__

(c) Knickerbocker Mail Order Co., New York..

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$165, 807, 608

19, 533,000

73, 512, 645

27, 649, 537

20, 000, 000

12, 000, 000

8, 000, 000

6, 000, 000

5, 500, 000

5, 000, 000

4, 000, 000

4, 000, 000 3, 000, 000 3, 000, 000 1,750,000 1, 514, 000 750, 000

600, 000

500, 000

500,000

250,000

250,000

363, 117, 276

In addition to these houses there are a number of department and specialty stores who do more than $100,000 of business by mail. These concerns, such as

Marshall Field & Co., Chicago, Ill.
The Fair, Chicago, Ill.

The Boston Store, Chicago, Ill.
Carson, Pirie & Scott, Chicago, Ill.
John Wanamaker, Philadelphia and
New York.

Franklin Simon & Co., New York.

B. Altman & Co., New York.

Best & Co., New York.
Stern Bros., New York.
Bedell & Co., New York.

Jordan Marsh & Co., Boston, Mass.
Weinstock, Lubin & Co., Sacramento,
Cal.

and others, are not generally known as mail-order houses and only a small percentage of their business is done by mail.

Also there are some houses, such as seed distributors, nurserymen, and manufacturers of wire fences, stock foods, bicycles, windmills, household ranges, kitchen utensils, agricultural implements, etc., who sell their specialties at retail by mail. It is estimated that the total mail order sales of all the classes of business mentioned in this and the preceding paragraph are not in excess of $50,000,000 or $60,000,000.

It will be seen from the foregoing figures that the total mail-order business of the United States is very likely not in excess of $425,000,000. Therefore, a tax of 1 per cent on sales would not yield more than $4,250,000 of annual revenue. This sum we consider a generous maximum, and furthermore, this tax would so reduce the profits of business houses that the excess-profits tax which many of them pay would also be reduced.

In some of the larger houses it is figured that their net payment on tax would be reduced by 20 per cent as a result of the

imposition of this 1 per cent sales tax. Instead of yielding the Government an increased revenue of $4,250,000, it is doubtful whether the net revenue to the Government on account of this tax would be in excess of $3,500,000.

The business popularly called the mail-order business is a retail business. It consists of marketing merchandise of various kinds directly from factory to consumer, eliminating the jobber and middleman. It sells groceries and provisions, clothing, dry goods, agricultural implements, occupational tools, household articles, and other goods for the farm and home. Its customers are principally farmers, mechanics, laborers, and people living in the villages and small towns where shopping facilities are limited. Mail-order houses do very little business in the larger towns and cities where shopping facilities are good, but do provide the people living in the country districts and small towns with the ample assortments and lower prices that can usually be obtained only in the large cities.

Its method of sale involves the use of the United States mail instead of the use of sales people or stores.

The mail-order business does not enjoy any special or unusual postal privilege or franchise of any sort. On the contrary, most mail-order houses, in order to facilitate the handling of their letters, catalogues and parcels, do at their own expense a great deal of sorting, routing, bagging, and carting, thus relieving the Post Office Department of much work which it is required to perform for the smaller users of the mails.

The Post Office Department generally, from expressions which we have heard, regard the mail-order business as profitable to them, a business easy to handle on account of its large volume and unity.

The mail-order business, generally speaking, is done on a high plane. All mail-order houses of which we have any knowledge do business upon the basis of refunding the money to the customer, together with all transportation charges, for any goods which are not satisfactory. The mail-order concerns are nationally famous for their efficient methods of administration. The whole business has been developed by supplying its customers with reliable merchandise at substantial savings.

The mail-order business performs a great economic function by keeping prices down to a lower margin of profit and stimulating competition

Senator THOMAS. Are they doing any business in the District of Columbia?

Mr. EISWALD. Very little, I am sorry to say.

The mail-order business performs a great economic function by keeping prices down to a lower margin of profit and stimulating competition, thus directly benefiting the people living in the country and small towns. The country merchant regards the mail-order catalogue as the great price maker.

We wish to quote from a letter written to Congressman H. B. Flood, on August 30, 1918, by Mr. A. B. Thornhill, president of a large farmers' grange, with 20,000 members in the State of Virginia alone (reading):

I am writing to call your attention to the fact that the mail-order houses sell nearly all of their goods to the farmers in the rural districts, and very little

or any goes to the city consumers.

The organized farmers of our State have a contract with the Spotless Co., in Richmond, a mail-order house, and we have found it the only lever we had to keep down the retail prices under the existing circumstances.

The retail merchants' association is so well organized that it is hard to tell just what the country people would pay for their goods except for this competition.

If this tax could be extended to all business alike, then it would not be a hardship on any one class.

We contend that the savings made by our customers through their dealings with us enables them to accumulate property and, therefore, we are a substantial factor in aiding to build up the communities in which they live.

It

We offer no objection to any tax that is not discriminatory, but we wish to point out that this proposed tax, if constitutional, will be class legislation, punitive in its effect and meager in its results. proposes to tax a very small group of business concerns, apparently, because they secure their orders through one of the great governmental agencies-the United States mail. It does not tax an article sold to a customer who makes use of the railroads or trolleys for the purpose of calling at a store in person to make his purchases; it does not tax the purchase made by telegraph or telephone; it does tax the purchase that is made through the mail. It means that a bill of groceries sold over the telephone or by means of the telegraph goes free, while the same order sent in by mail is taxed. It means that a shirt or plow sold by mail must bear a tax of 1 per cent, while a shirt or plow sold over the counter or by a salesman goes free.

Senator THOMAS. Is that entirely true? We have a tax on telephone messages, except local messages, and we also have a tax on all telegraph messages.

Mr. EISWALD. The sale goes free.

Senator LODGE. And there is also an added tax on letters.

Senator THOMAS. And also, as the Senator from Massachusetts suggests, an added tax on letters.

Senator McCUMBER. That is not a tax on the sale.

Senator THOMAS. No; it is not a tax on sales, but it is a tax upon the transaction.

Mr. EISWALD. We believe this is just as consistent as proposing to tax the manufacturer who uses water power in his business, and not one who uses steam. It is similar to a proposition to tax a self-service restaurant, the automatic style, and not a restaurant which employs waiters.

Our Government seeks to bring the producer and the consumer closer together for the purpose of preventing profiteering and reducing the high cost of living. By what theory, therefore, are sales by mail to be taxed and other sales not? One merchant makes a sale over the counter or through a traveling representative, and his sale is approved. Another man makes a sale by means of a letter or a catalogue, and his sale is taxed.

A tax on the sales of mail-order business would not be a tax on property, or on profits, or on a commodity, but would be a tax on a method-in this case a method of selling merchandise-and therefore, would be a discrimination.

We wish to point out that this tax will, in many cases, be confiscatory, because there are a number of mail-order houses who have

made no profit during the year 1918. A tax on their gross sales, therefore, would be confiscation of part of their capital.

This tax is retroactive for 18 months; it proposes a tax on all mail sales made since July 1, 1917. The retroactive feature levies tribute on a few business houses and must be paid out of their capital. Although the Government must have immediate revenue, it can not, in fairness, and with proper regard for the conservation of business, resort to such punitive and throttling measures. A universal tax collected by revenue stamps on all sales would bring immediate and thereafter daily revenue.

There is perhaps no one agency which is so productive of profitable revenue to the Post Office Department as the mail-order business, through the payment of postage on its letters and its catalogues and other printed matter, the shipment of merchandise by parcel post, and through the creation of first-class mail, registered mail, and money-order business from its customers as a result of the distribution of its printed matter.

It is conservatively estimated that the amount of postal revenue produced by the mail-order houses within the scope of the proposed tax amounts to $24,000,000 per annum. To discourage the business can not help but appreciably curtail this revenue of the Post Office Department.

It is claimed by a few that mail-order houses pay no local taxes at the points at which they deliver their goods. We submit to your committee that it is contrary to custom and to the spirit of our institutions to call upon a concern to pay taxes both at the point at which it carries its merchandise and at which it delivers it.

The farmer raises his wheat in Iowa and ships it to Chicago or Minneapolis to be sold. He pays taxes in Iowa and not in Illinois or Minnesota.

The cotton goods manufacturer weaves his cloth in North Carolina and sell it in Boston or Philadelphia. He pays taxes in North Carolina and not in Massachusetts or Pennsylvania.

The stockman raises horses in Ohio and sells them in New York State. He pays taxes in Ohio and not in New York.

The miner produces coal in Pennsylvania, Indiana, or West Virginia and ships it to every part of the United States. He pays taxes only at the point at which he produces his coal.

We state, furthermore, that mail-order houses not only pay taxes at the points at which they carry their various stocks, but also pay to the United States Government every tax so far assessed against every other retailer.

The selling of commodities by mail direct to the consumer gives to millions of our rural population the facilities of the cheap markets of the large cities; it provides them with the opportunity for selection from stocks infinitely larger than are carried by retailers in rural districts; it keeps prices down by maintaining a lower margin of profit; and it stimulates competition, thus insuring to consumers the lowest possible prices.

The mail-order business is one of the main agencies in aiding the farmer and the wage earner in the rural districts and small towns to keep down the ever-rising cost of living, and we submit to your committee that it would be an injustice both to the consumer and to business to place a discriminatory tax on this important factor in

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