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FERMENTED LIQUOR.

(144.)

Tax on fermented liquors.

Opinion of the Attorney-General-Upon the question of the rate of tax on beer in storage June 14, 1898, it is held that the rate was $1.85 per barrel and not $2.

TREASURY DEPARTMENT,

OFFICE OF COMMISSIONER OF INTERNAL REVENUE,

Washington, D. C., June 4, 1900.

To collectors of internal revenue and others concerned:

The appended opinion of the United States Attorney-General, relating to the question of the rate of tax on fermented liquors, is published for the information of internal-revenue officers and others concerned. G. W. WILSON, Commissioner.

DEPARTMENT OF JUSTICE, Washington, D. C., June 2, 1900.

The SECRETARY OF THE TREASURY.

SIR: I have the honor to acknowledge receipt of yours of March 12, 1900, in which you resubmit the following question (which was set out in yours of March 13, 1899), and ask my opinion:

"Is the tax upon fermented liquors, bearing the old $1 stamp, which were removed from the brewery on June 14 without the new $2 stamp, owing to the failure of the Government to furnish same, a tax of $2 per barrel, or of $1.85, or of 85 cents?"

The law as it existed (section 3339, Revised Statutes) before the act of June 13, 1898, known as the war-revenue act, went into effect, levied upon every barrel of lager beer containing 31 gallons or less a tax of $1, which was paid by stamp. The first section of the war-revenue act is as follows:

"That there shall be paid, in lieu of the tax of one dollar now imposed by law, a tax of two dollars on all beer, lager beer, ale, porter, and other similar fermented liquors, brewed or manufactured and sold, or stored in warehouse, or removed for consumption or sale, within the United States, by whatever name such liquors may be called, for every barrel containing not more than thirty one gallons; and at a like rate for any other quantity or for the fractional parts of a barrel authorized and defined by law. And section thirty-three hundred and thirty-nine of the Revised Statutes is hereby amended accordingly: Provided, That a discount of seven and one-half per centum shall be allowed upon all sales by collectors to brewers of the stamps provided for the payment of said tax: Provided, further, That the additional tax imposed in this section on all fermented liquors stored in warehouse to which a stamp had been affixed shall be assessed and collected in the manner now provided by law for the collection of taxes not paid by stamps."

In the outset, by the provisions of this section, a tax of $2, in lieu of the then-existing tax of $1 per barrel, is levied upon each barrel of lager beer and other fermented liquors brewed or manufactured and sold, or stored in warehouse, or removed for consumption or sale within

the United States. If the lawmakers had stopped here, there could be no doubt that the tax had been increased from $1 to $2 per barrel.

But they go further and provide "that a discount of seven and onehalf per centum shall be allowed upon all sales by collectors to brewers of the stamps provided for the payment of said tax." In other words, the collectors are required by the law to sell to the brewer the $2 worth of stamps necessary to pay the tax upon a 31-gallon barrel of beer for $1.85; and, although the stamps, when affixed to the barrel of beer, indicate a tax of $2, yet, in fact, the taxpayer has only paid and the Government has only received $1.85 therefor. And it can not be otherwise, for the tax has to be paid by stamps provided by the Government, and the law says that upon such stamps, when sold by the authorized agents of the Government, there must be allowed to the taxpayer who purchases them a discount of 7 per cent.

Under section 3339, as before stated, the tax was $1 per barrel, and this was without discount to the taxpayer. Therefore, to purchase the stamps required upon a barrel under the new law requires 85 cents in addition to the amount which was required to purchase the stamps before the latter law went into effect.

It appears that at the time the war-revenue act became operative some of the brewers or manufacturers had in their warehouses barrels of beer upon which they had already paid the tax of $1 and had affixed the stamps necessary to denote such payment; and now the question arises as to what should be the amount of assessment for additional tax upon barrels of beer found in this situation.

It will be observed that the last proviso of section 1, above quoted, directs that the additional tax imposed on all fermented liquors stored in warehouse to which a stamp had been affixed shall be assessed and collected in the manner now provided by law for the collection of taxes not paid by stamps. When the method of collecting the additional tax upon beer for which the existing tax of $1 had already been paid was prescribed by Congress in the above provision, it was no doubt in contemplation of the fact that the increase in the tax was 85 cents per barrel, and to require the purchase of stamps for the payment of such additional tax would have levied a greater rate upon beer of this class than upon beer which was to be wholly tax-paid under the new law. The brewer had already paid a tax of $1 per barrel; and then, to buy another $1 stamp under the new régime, less the 7 per cent discount, would cost him 92 cents, thus making his tax upon his barrel of beer $1.92, when the tax upon others under the new law was only $1.85. The plan of collecting by assessment, therefore, the additional tax upon beer which had already paid the anterior tax was adopted in order that the tax might be uniform upon all beer going upon the market at the same time. It is stated by the Commissioner of Internal Revenue in his letter inclosed with yours that owing to the failure of the Government to furnish the stamps which became necessary under the new law for use upon barrels of beer, certain of the brewers who had already paid the $1 tax were permitted by the Government to attach to each barrel another $1 stamp of the old series, which stamp cost the brewer $1, having been sold to him without discount. In such case it is evident that the Government received $1 tax, when under the law it was entitled to receive only 85 cents. There is no express authority for the use of the old stamps to pay the additional tax upon beer already tax-paid at the rate of $1 per barrel found in the warehouses when the new tax went into effect, for the provision in section 1 quoted is that this tax

shall be assessed and collected in the manner provided by law for the collection of taxes not paid by stamps. So these old stamps could not have been used by the brewers under the new law without the consent of the collecting officers of the Government; these officers must have induced, or at least permitted, the use of such stamps; otherwise the barrels of beer to which they were attached would have gone upon the market liable to seizure because of being improperly stamped.

It seems to me, under such circumstances, that it would be applying a very harsh rule to hold that, by reason of the failure of the Government to provide suitable stamps, and by permitting the use of other stamps, the taxpayer should be the sufferer and should bear the burden of 15 cents more on each barrel of his beer than by law he was required to pay.

I, therefore, advise you that under the war-revenue act the whole tax upon a barrel of not more than 31 gallons of beer, lager beer, ale, porter, and other similar fermented liquors, is not $2, but $1.85, to be paid by stamps attached to the barrel, though under the law the stamp or stamps attached to such barrel indicate the tax to be $2.

I am further of the opinion that in all cases where the collecting officers of the United States have collected, by stamp, assessment, or otherwise, more than 85 cents per barrel additional upon beer which had theretofore paid the $1 tax, whatever sum so collected over and above 85 cents per barrel was erroneous.

Respectfully,

JAS. E. BOYD, Assistant Attorney-General.

Approved: JOHN W. GRIGGS, Attorney General.

(175.)

Discount on beer stamps.

The decision of the United States circuit court of appeals for the seventh circuit, in the case of Coyne, Collector, v. Manhattan Brewing Company, accepted as final.-The act of July 24, 1897 (30 Stat., 206), which repealed the provision of section 3341, Revised Statutes, that the Commissioner of Internal Revenue should allow upon all sales of beer stamps to any brewer, and by him used in his business, a deduction of 71⁄2 per cent, did not affect the taxpaying value of stamps purchased before it went into effect, and upon which the deduction was allowed, but which were not used until after it went into effect.

TREASURY DEPARTMENT,

OFFICE OF COMMISSIONER OF INTERNAL REVENUE,

Washington, D. C., July 7, 1900. SIR: Your letter of the 16th ultimo, reporting that the court of appeals had affirmed the decision of Judge Kohlsaat in the case of Coyne, Collector, v. Manhattan Brewing Company, was duly received. There have been a number of suits which have been instituted against collectors, in which the same question is involved as in this case. tion 3341, Revised Statutes, provided that

Sec

The Commissioner of Internal Revenve shall allow upon all sales of such stamps [for the tax on fermented liquors] to any brewer, and by him used in his business, a deduction of seven and one-half per cent.

The internal-revenue collector, pursuant to the uniform practice, sold stamps to the plaintiffs, who were brewers, and upon such sales, and at the times thereof, allowed a deduction of 7 per cent. These stamps,

although purchased before for use, were not actually used in payment of taxes until after the Dingley Act took effect, which act omitted, and thereby repealed, the previous statutory direction for the allowance of the deduction above stated.

Your attention is called to the decision in the case of the Nassau Brewing Company v. Moore, Collector (97 Fed. Rep., 206), and that of the Gerst Brewing Company v. Nunn (99 Fed. Rep., 939).

All the cases which have been tried, both in the circuit court and in the circuit court of appeals, have been decided against the Government. The court, in the case of the Nassau Brewing Company v. Moore, Collector, said:

When the Government of the United States, following the practice observed by it for many years, sold at a deduction of 7 per cent a stamp of the denomination of $1, and assured the purchaser that the stamp was worth a whole dollar for the purpose of paying taxes, such stamp should have a taxpaying power equal to the highest obligation issued by the Government; and if, after such sale, the purchaser used the stamp in his business, he should be deemed to have fulfilled every obligation resting upon him, and to have perfected the right initiated by his purchase.

This office has decided not to contest the matter any further, but will accept the decision of the court in the case of Coyne, Collector, v. Manhattan Brewing Company. Please notify the plaintiff that the claim will be paid if presented in the proper form through the collector of internal revenue.

The other suits in the United States circuit court, in your district, against Collector Coyne, in which the same question is involved, will be disposed of in the same manner-that is, the claims for refund will be adjusted on the basis of the decision in the case above-mentioned.

Respectfully, ROBT. WILLIAMS, Jr., Acting Commissioner. Mr. S. H. BETHEA, United States Attorney, Chicago, Ill.

HAWAII.
(120.)

Exportations to Hawaii of articles subject to internal-revenue tax.

TREASURY DEPARTMENT,

OFFICE OF COMMISSIONER OF INTERNAL REVENUE,

To collectors of internal revenue:

Washington, D. C., May 5, 1900.

From and after June 14, 1900, the following articles manufactured or produced in the United States can not be exported to the Territory of Hawaii in bond without the payment of tax, nor with the benefit of drawback as heretofore, viz, distilled spirits, stills, aud worms; tobacco, snuff, cigars, and cigarettes; fermented liquors; playing cards;

oleomargarine; mixed flour; proprietary articles; medicines, bottled wine, and all other products named in Schedule B of the war-revenue act of June 13, 1898.

(125.)

G. W. WILSON, Commissioner.

Exports to Hawaii.

Date of sailing of vessel to be regarded as date of exportation of domestic articles exported to Hawaiian Territory prior to June 14, 1900.

TREASURY DEPARTMENT,

OFFICE OF COMMISSIONER OF INTERNAL REVENUE,

Washington, D. C., May 12, 1900.

SIR: I am in receipt of your letter of the 9th instant, in reference to the shipment of tobacco to Hawaiian ports from and after June 14, 1900, the date on which the act of Congress, entitled "An Act To provide a government for the Territory of Hawaii," takes effect.

In reply to your inquiry whether the published decision of this office of the 5th instant, that articles subject to internal-revenue tax can not be exported to Hawaii in bond, or with benefit of drawback, from and after June 14, 1900, applies to tobacco bonded for export prior to, but in transit in this country after, that date, you are informed that, in the case of Simpson et al. v. Peaslee (20 How., 571), the date of sailing of the vessel was held to be the date of exportation, and that the same rule for determining the actual date of exportation will apply to shipments under internal-revenue laws, and, as will be seen, without reference to the date of bonding or removing the goods for export.

With reference to the decision of May 5, referred to, I would state that in accordance with the opinion of the honorable Attorney-General of July 22, 1898 (embodied in T. D. 19783), the Hawaiian Islands, since their annexation to the United States (July, 1898), have been regarded, so far as our commercial relations are concerned, as foreign territory, and that they will be so regarded until the act named, which extends the laws of the United States (so far as applicable to these islands), takes effect.

On and after that date, articles produced in or shipped to the Territory of Hawaii will be subject to the same internal-revenue taxes as are imposed on like articles produced or sold in any other portion of the United States.

Respectfully,

Mr. W. H. HANCOCK, Richmond, Va.

G. W. WILSON, Commissioner.

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