Revenue Revision Studies, 1937: Excise Taxes (cont.)

[Previous]

     Yield for the fiscal year - 1936 - $ 5,531,122.72
     Yield for the fiscal year - 1937 -   5,800,000.00 Estimated
     Number of taxpayers                  1,200
     Rate of tax - 10 per cent of manufacturer's, producer's, or
                   importer's sale price.

Statutory Background -- Section 600(f) of the Revenue Act of 1917, effective October 4, 1917, first imposed the Federal tax on the sale by the manufacturer, producer, or importer of tennis rackets, golf clubs, baseball bats, lacrosse sticks, balls of all kinds, including baseballs, footballs, tennis, golf, lacrosse, billiards and pool balls, chess and checker boards and pieces, dice, games, and parts of games. The tax was levied at the rate of 3 per cent of the price for which such articles were sold. This section specifically exempted playing cards, and children's games and toys.

Section 900(5) of the Revenue Act of 1918, effective February 25, 1919, reenacted the tax on the sale of sporting goods, but enlarged the scope thereof to include tennis rackets, nets, racket covers and presses, skates, snowshoes, skis, toboggans, canoe paddles and cushions, polo mallets, baseball bats, gloves, masks, protectors, shoes and uniforms, football helmets, harness and goals, basketball goals and uniforms, golf bags and clubs, lacrosse sticks, balls of all kinds, including baseballs, footballs, tennis, golf, lacrosse, billiard and pool balls, fishing rods and reels, billiard and pool tables, chess and checker boards and pieces, dice, games and parts of games, and all similar articles commonly or commercially known as sporting goods, and increased the rate of tax to 10 per cent of the sale price. This section also specifically exempted playing cards and children's games and toys. This tax was repealed on January 1, 1922, by section 1400(a) of the Revenue Act of 1921.

The tax on sporting goods, etc., was revived by section 609 of the Revenue Act of 1932, effective June 21, 1932, which imposes a tax of 10 per cent on the sale by the manufacturer, producer, or importer of tennis rackets, tennis racket frames and strings, nets, racket covers and presses, skates, snowshoes, skis, toboggans, canoe paddles, polo mallets, baseball bats, gloves, masks, protectors, shoes and uniforms, football helmets, harness and uniforms, basketball goals and uniforms, golf bags and clubs, lacrosse sticks, balls of all kinds, including baseballs, footballs, tennis, golf, lacrosse, billiard and pool balls, fishing rods and reels, billiard and pool tables, chess and checker boards and pieces, dice, games and parts of games, and all similar articles commonly or commercially known as sporting goods. This section specifically exempts playing cards and children's games and toys.

As originally enacted by Congress, section 609 of the Revenue Act of 1932 was to be effective during the period June 21, 1932 to July 1, 1934. Section 212 of the National Industrial Recovery Act extended the expiration date to July 1, 1935. Public Resolution No. 36 - 74th Congress, (H.R. 324) extended such date to July 1, 1937. Unless further extended, this tax is automatically repealed as of July 1, 1937.

Economic Basis. -- This tax is an excise tax payable by the manufacturer, producer, or importer on his sale or use of the taxable articles. The use of sporting goods, especially the articles named in the statute, has expanded to a great extent in the last few years and the tax indirectly affects practically all classes of citizens. The sporting goods industry is growing rapidly and tax is being paid in all but 6 of the 64 collection districts. A check of the returns for one month shows that the number of taxpayers filing returns for this tax is approximately 1,200.

Inequities. -- With respect to any conflict in the subject taxed, no doubt these products are affected by some of the excise taxes imposed by the several States. There is no information available to show the extent to which the State taxes may conflict with the Federal tax. No conflict exists between the instant tax and other Federal taxes.

With respect to the measure of the tax in relation to the articles taxed, it has been contended by some branches of the industry, especially manufacturers of cheaply made articles for use by children at play, that the tax rate of 10 per cent is practically prohibitive. However, it is believed that, applied to the industry as a whole, the tax in force is not excessive.

It is believed that an economic survey of the industry will show that generally there has boon no retarding of trade, curtailment of consumption, or use of substitutes due to the imposition of this tax. This conclusion is supported by the steady yearly increase in the revenue obtained from this source. It may be, however, that the tax has to some extent retarded the production of certain of the cheaply made specialties or children's articles.

There have been no flagrant attempts to avoid or evade this tax, although some confusion and objection has been encountered relative to the taxability of articles not specifically named in the law.

Administrative Difficulties. -- There is no involved Bureau procedure relative to the administration of this tax. The records, etc., required to be kept by the Bureau's regulations are no more than those usually required by those taxpayers for their own purposes.

The principal difficulty arises in the classification of taxable and nontaxable articles. Thus, questions are presented as to whether certain articles not specifically mentioned in the statute, nevertheless, come within the general classification of "sporting goods" and so are subject to the tax. Similarly, even as to articles specifically mentioned in the statute, questions arise as to whether particular articles, because of their size or type of construction, are within or beyond the scope of the tax.

Wherever possible, a line of demarcation has been drawn between the taxable and nontaxable articles based on the size or measurement of the particular article. Under certain sizes, specific articles are considered as mere toys or imitations incapable of a use for sport. For example, tennis rackets, baseball bats, baseball and football uniforms, and pool and billiard tables, when made under certain sizes are considered as not subject to the tax. This rule can not be applied in all cases since all of the articles specified in the statute are not susceptible to measurement for such purpose. Baseball gloves are such an exception. Baseball gloves are made in some instances of cheap imitation leather or canvas and very small in size to be sold in chain stores at retail prices as low as 10 cents. However, it has been found impossible to formulate a line of demarcation in such case which may be applied uniformly. Hence, baseball gloves and other articles similarly circumstanced are subjected to the tax regardless of the size, retail sale price, or materials of which made.

The audit of the returns of this tax requires a detailed examination of the opening and closing inventories, production and cost records, uses of the products by taxpayer, sales and other distribution records and evidence supporting claims for exemption, refund, or credit.

No statistics are available from which the actual cost of collecting this tax may be determined. It is believed, however, that taken as a whole the cost of collecting this tax is about the general average.

In view of the substantial revenue derived therefrom, it is recommended that the tax on sporting goods be continued.

Tax On Firearms, Shells, And Cartridges. Section 610 Of The Revenue Act Of 1932.


     Yield for the fiscal year - 1936 - $ 2,494,574.54
     Yield for the fiscal year - 1937 -   2,700,000.00 Estimated
     Number of taxpayers                  100
     Rate of tax - 10 per cent of manufacturer's, producer's, or
                   importer's sale price.

Statutory Background. -- Section 900(10) of the Revenue Act of 1918, effective February 25, 1919, first imposed the Federal tax on the sale by the manufacturer, producer, or importer of firearms, shells, and cartridges, at the rate of 10 per cent of the price for which sold. This section specifically exempted the sales of such articles for the use of the United States, any political subdivision thereof, the District of Columbia, or any foreign country while engaged against the German Government in the World War.

Section 900(7) of the Revenue Act of 1921, effective January 1, 1922, reenacted the tax on the sale of firearms, shells, and cartridges. This section imposed the tax on the lease of such articles by the manufacturer, producer, or importer, as well as on the sale thereof. This section also reenacted the exemptions on the sale of such articles for the use of the United States, any State, Territory, or possession of the United States, any political subdivision thereof, or the District of Columbia, but omitted the exemption granted with respect to sales of such articles for the use of foreign countries engaged against the German Government in the World War.

The tax was reenacted without change in section 600(6) of the Revenue Act of 1924, effective July 3, 1924. The tax was repealed on February 26, 1926, by section 1200(a) of the Revenue Act of 1926.

The tax was revived by section 610 of the Revenue Act of 1932, effective June 21, 1932, which imposes a tax on the sale of firearms, shells, and cartridges by the manufacturer, producer, or importer, at the rate of 10 per cent of the price for which sold. This section specifically exempts the sale of such articles for the use of the United States, any State, Territory, or possession of the United States, any political subdivision thereof, or the District of Columbia. Pistols and revolvers are specifically excluded from the provisions of this section, since they are taxed under section 600(2) of the Revenue Act of 1926.

As originally enacted by Congress, section 610 of the Revenue Act of 1932 was to be effective during the period June 21, 1932 to July 1, 1934. Section 212 of the National industrial Recovery Act extended the expiration date to July 1, 1935. Public Resolution No. 36 - 74th Congress (H.R. 324) extended such date to July 1, 1937. Unless further extended, this tax is automatically repealed as of July 1, 1937.

Economic Basis. -- This tax is an excise tax payable by the manufacturer, producer, or importer on his sale or use of the articles specified. Tax is being paid in 30 of the 64 collection districts. A check of the returns for one month shows that the number of taxpayers filing returns for this tax is approximately 100.

Inequities. -- With respect to any conflict in the subjects taxed, no doubt these products are indirectly affected by some of the excise taxes imposed by the several States, but the State taxes differ from the Federal tax in the basis for the tax, the method of computation, and the class of taxpayers affected.

There is no conflict from the standpoint of the Federal taxes. While certain classes of firearms are taxed under the National Firearms Act, section 15 of that Act provides that the tax imposed by section 610 of the Revenue Act of 1932 shall not apply to any firearms specified as taxable under the National Firearms Act. Similarly, section 610 of the Revenue Act of 1932 specifically excludes pistols and revolvers which are taxed under section 600(2) of the Revenue Act of 1926.

This Bureau has no data as to whether there has been any retarding of trade, curtailment of consumption, or use of substitutes due to the imposition of this tax, except an apparent refutation in view of a constant increase in revenue receipts.

No particular difficulties have been encountered in the administration of this tax.

No statistics are available from which the actual cost of collecting this tax may be determined but since only a part of the time of the few employees assigned to this tax is consumed in the administration thereof, it is apparent that the cost of collection is extremely low.

The taxing statute as now worded is clear and simple. It is easy of administration, and no revisions are deemed necessary.

Tax On Cameras Section 611 Of The Revenue Act Of 1932.


     Yield for the fiscal year - 1936 - $ 577,925.70
     Yield for the fiscal year - 1937 -   700,000.00 Estimated.
     Number of taxpayers                  50
     Rate of tax - 10 per control manufacturer's sale price.

Statutory Background. -- A Federal tax at the rate of 3 per cent of the sale price was first imposed on the sale of cameras by the manufacturer, producer, or importer under section 600(j) of the Revenue Act of 1917, effective October 4, 1917.

Section 900(7) of the Revenue Act of 1918, effective February 25, 1919, continued the tax on cameras but extended the scope of the tax to include the lease of cameras and increased the rate of tax to 10 per cent of the price for which sold by the manufacturer, producer, or importer. This section also provided an exemption from the tax for cameras weighing over 100 pounds.

Section 900(4) of the Revenue Act of 1921, effective January 1, 1922, continued the tax on cameras weighing less than 100 pounds without change in rate and in addition extended the application of the tax to include lenses for such cameras,

Section 600(4) of the Revenue Act of 1924, effective July 3, 1924, reenacted section 900(4) of the Revenue Act of 1921 without change.

Section 1200(a) of the Revenue Act of 1926, effective February 26, 1926, repealed the tax.

The tax was revived by section 611 of the Revenue Act of 1932, effective June 21, 1932, under which a tax at the rate of 10 per cent of the sale price is imposed upon the sale by the manufacturer, producer, or importer of cameras (except aerial cameras) weighing not more than 100 pounds, and of lenses for such cameras.

As originally enacted by Congress, section 611 of the Revenue Act of 1932 was to be effective during the period June 21, 1932 to July 1, 1934. Section 212 of the National Industrial Recovery Act extended the expiration date to July 1, 1935. Public Resolution No. 36 - 74th Congress (H.R. 324) extended such date to July 1, 1937. Unless further extended, this tax is automatically repealed as of July 1, 1937.

Economic Basis. -- The tax is an excise tax and affects a comparatively small industry. Collections of the tax are reported in 21 of the 64 collection districts. A check of the returns for one month shows the number of taxpayers filing returns of this tax is approximately 50.

The usual factors controlling prices of staple products, such as supply and demand, quality of the product, methods and channels of distribution, and season of the year in which sold, apply in this instance.

Inequities. -- In the absence of definite information as to unit sales prices of manufacturers, no comparison can be made between the tax and the value of the article taxed. However, considered from the standpoint of the retail price, it is believed the tax is not excessive.

An economic survey of this industry will most likely disclose that there has been no retarding of trade nor curtailment of consumption due to the imposition of the tax.

Administrative Difficulties. -- No appreciable difficulties have been encountered in the administration of this tax. A minor question arose as to the taxability of small, cheap, imported cameras which sold on the average at a retail price of 25 cents each, but which did actually take a picture. In view of the fact that they were capable of taking a picture, such cameras were held to be taxable.

No statistics are available from which to determine the actual cost of collecting this tax. However, experience indicates that such cost is extremely low.

The audit of returns of this tax requires a detailed examination of production and sales records, and of supporting evidence relative to claims for exemption, refund and credits.

In view of the substantial revenue yielded by the tax and the simplicity of its administration, this Bureau recommends that the tax on cameras be continued.

Tax On Matches Section 612 Of The Revenue Act Of 1932, As Amended.


     Yield for the fiscal year -- 1936 -- $7,106,359.21
     Yield for the fiscal year -- 1937 --  7,200,000.00 Estimated
     Number of taxpayers                   50
     Rate of tax -- (a) 2 cents a thousand.
                    (b) 1/2 cent a thousand on paper matches in
                        books.
                    (c) 5 cents a thousand on fancy wooden matches,
                        and matches having a stained, dyed, or
                        colored stick, or stem, packed in boxes or
                        in bulk.

Statutory Background. -- The Federal tax on the sale of matches by the manufacturer, producer, or importer thereof, was first imposed by section 612 of the Revenue Act of 1932, effective June 21, 1932, at the rate of 2 cents a thousand, except that in the case of paper matches in books, the tax shall be 1/2 cent a thousand. Section 611 of the Revenue Act of 1934, effective May 11, 1934, amended section 612 of the Revenue Act of 1932 to increase the tax from 2 cents to 5 cents a thousand in the case of fancy wooden matches and wooden matches having a stained, dyed, or colored stick or stem, whether packed in boxes or in bulk.

As originally enacted the tax was to be effective during the period from June 21, 1932 to July 1, 1934. Section 212 of the National Industrial Recovery Act extended the expiration date to July 1, 1935. Public Resolution No. 36 -- 74th Congress (H.R. 324) extended such date to July 1, 1937. Unless further extended, this tax is automatically repealed as of July 1, 1937.

Economic Basis. -- The tax is an excise tax paid by the manufacturer, producer, or importer on his sale of the taxable products. Fancy wooden matches, and matches having a stained, dyed, or colored stick or stem, are of the type of matches imported from Japan and other foreign countries. The higher rate of tax thereon discourages the importation of such matches, thereby protecting domestic manufacturers. This is a sizeable industry but is confined to about 15 manufacturers and a few importers. Tax is being collected in only 21 of the 64 collection districts. A check of the returns for one month shows that the number of taxpayers filing returns of this tax is approximately 50.

No statistics are available in this Bureau from which the value of the products taxed may be determined, since the tax is imposed on quantity and not sales price.

Inequities. -- With respect to any conflict in the subject taxed, no doubt these products are indirectly affected by some of the excise taxes imposed by the several States, but the State taxes differed from the Federal tax in the basis for the tax, the method of computation, and the class of taxpayers affected.

In this instance, there is no conflict from the standpoint of Federal taxes. While the tax is imposed at varying rates according to certain specified classes or types of matches so as to indicate a possible inequity, no inequity apparently exists since the varying rates were imposed at the suggestion of domestic manufacturers to equalize competition.

With respect to the measure of the tax in relation to the value of the products taxed, in the absence of definite information as to manufacturers' selling prices, no accurate comparison can be made. However, the imposition of the tax has not resulted in any increase in prices to the consumer.

The experience of this Bureau has disclosed but very few cases of attempted avoidance or evasion of the tax on matches.

The audit of returns of this tax requires the usual examination of production and sales or other disposition records and verification of the evidence relied upon in support of claims for exemption and for refund or credit.

While no statistics have been compiled to show the actual cost of collection, it is apparent from the simplicity of its administration that the cost of collecting this tax is nominal.

It is recommended this tax be reenacted or the duration of the present statute be extended.

Tax On Candy Section 613 Of The Revenue Act Of 1932. Tax Repealed May 11, 1934.


     Rate of tax -- 2 per cent of the manufacturer's, producer's, or
                   importer's sale price.

Statutory Background. -- Section 900(9) of the Revenue Act of 1918, effective February 25, 1919, first imposed a tax on candy sold by the manufacturer, producer, or importer. The tax was levied at the rate of 5 per cent of the sale price. Section 900(6) of the Revenue Act of 1921, effective January 1, 1922, reenacted the tax on candy but changed the rate of tax to 3 per cent of the sale price. This tax was repealed on July 3, 1924, by section 1100(a) of the Revenue Act of 1924.

The tax on candy was revived by section 613 of the Revenue Act of 1932 under which section a tax of 2 per cent was levied on the sale of candy by the manufacturer, producer, or importer.

As originally enacted by Congress, section 613 of the Revenue Act of 1932 was to be effective during the period June 21, 1932 to July 1, 1934. Section 212 of the National Industrial Recovery Act extended the expiration date to July 1, 1935. This tax was repealed, however, by section 614 of the Revenue Act of 1934, effective May 11, 1934.

Economic Basis. -- This tax was an excise tax payable by the manufacturer, producer, or importer of candy. The industry is quite large due to the nature of the product which has a wide and extensive use and appeal. Tax was paid in all of the 64 collection districts.

No statistics are available in this Bureau from which the value of the product taxed may be determined, other than by assuming that the wholesale value was eleven times the tax paid. The price evidently varies to a great extent according to supply and demand, channels of distribution, quality of the product, and the season of the year in which sold.

Inequities. -- With respect to any conflict in the subject taxed, no doubt these products were indirectly affected by some of the excise taxes imposed by the several States. There was no conflict, however, from the standpoint of Federal taxes.

It is believed that an economic survey of this industry will show that generally there had been no retarding of trade, curtailment of consumption, or use of substitutes due to the imposition of this tax.

Administrative Difficulties. -- There was no involved Bureau procedure relative to the administration of this tax. The records, etc., required to be kept by the Bureau's regulations were no more than those usually required by these taxpayers for their own purposes.

No appreciable difficulties were encountered in the administration of this tax. In a few instances, some difficulty arose in determining whether certain products constituted candy within the meaning of the statute. In some cases, it was necessary to fix a "fair market price" for candy sold at retail. Thus, a few candy manufacturers sold at retail through their own retail stores and had no sale at wholesale upon which to base the tax. In such cases, the Commissioner, under the authority of section 619(b)(1) of the Revenue Act of 1932, determined a "fair market price" for purposes of the tax. There were not many such cases involved and rather than determine one formula to cover the entire industry as was done in respect to several other taxes based upon a certain percentage of the wholesale price, each case was considered and adjusted on its own merits.

The audit of the returns of this tax required a detailed examination of the opening and closing inventories, production and cost records, uses of the products by taxpayer, sales and other distribution records and evidence supporting claims for exemption, refund, or credit.

No recommendation is made with respect to the reenactment of this tax.

Tax On Chewing Gum Section 614 Of The Revenue Act Of 1932.


     Yield for the fiscal year  --  1936  --  $807,279.40
     Yield for the fiscal year  --  1937  --   830,000.00  Estimated
     Number of taxpayers                       40
     Rate of tax -- 2 per cent of manufacturer's, producer's, or
                    importer's sale price.

Statutory Background. -- The Federal tax on the sale of all chewing gum or substitutes therefor by the manufacturer, producer, or importer was first imposed by section 600(i) of the Revenue Act of 1917, effective October 4, 1917, at the rate of 2 per cent of the price for which sold. The tax was reenacted in section 900(6) of the Revenue Act of 1918, effective February 25, 1919, with an increase in the rate of tax to 3 per cent of the sale price. The tax was repealed on January 1, 1922, by Section 1400(a) of the Revenue Act of 1921.

The tax was revived by section 614 of the Revenue Act of 1932, effective June 21, 1932, which again fixed the rate at 2 per cent of the price for which the chewing gum or substitute is sold by the manufacturer, producer, or importer.

As originally enacted by Congress, section 614 of the Revenue Act of 1932, was to be effective during the period June 21, 1932 to July 1, 1934. Section 212 of the National Industrial Recovery Act extended the expiration date to July 1, 1935. Public Resolution No. 36 -- 74th Congress (H.R. 324) extended such date to July 1, 1937. Unless further extended, this tax is automatically repealed as of July 1, 1937.

Economic Basis. -- This tax is an excise tax payable by the manufacturer, producer, or importer of chewing gum on his sale or use thereof. While the product is widely used, the industry is not very large and tax is being collected in only 29 of the 64 collection districts. A check of the returns for one month shows that the number of taxpayers filing returns of this tax was approximately 40.

Inequities. -- With respect to any conflict in the subject taxed, no doubt these products are indirectly affected by some of the excise taxes imposed by the several States, but in general, the State taxes differ from the Federal tax in the basis for the tax, the method of computation, and the class of taxpayers affected. No conflict exists with respect to the Federal tax.

With respect to the measure of the tax in relation to the value of the products taxed, in the absence of definite information as to manufacturers' selling prices, no accurate comparison can be made. The tax rate is so low that it is not an appreciable restraint on sales. Possibly, because of the low rate of tax, no problems of tax avoidance or tax evasion have been involved.

It is believed that an economic survey of this industry will show that generally there has been no retarding of trade, curtailment of consumption, or use of substitutes due to the imposition of this tax.

The audit of the returns of this tax requires the usual examination of sales records.

No statistics are available from which the actual cost of collecting this tax may be determined. In view of the simplicity of its administration, the collection cost undoubtedly is negligible.

Since the tax yields considerable revenue with little difficulty of collection, it is recommended that the tax be continued.

Tax On Cereal Beverages Section 615(a)(1) Of The Revenue Act Of 1932. Tax Repealed May 11, 1934.

Statutory Background. -- Section 31B(b) of the Revenue Act of 1917, effective October 4, 1917, first imposed a tax of 1 cent a gallon on carbonated beverages (including carbonated cereal beverages) manufactured and sold by the manufacturer, producer, or importer of the carbonic acid gas used in the carbonation thereof. This tax was repealed as of February 25, 1919, by section 1400(a) of the Revenue Act of 1918.

Section 628(a) of the Revenue Act of 1918, effective February 25, 1919, imposed a tax at the rate of 15 per cent of the price for which sold on all beverages. derived wholly or in part from cereals or substitutes therefor, and containing less than one-half of 1 per cent of alcohol, sold by the manufacturer, producer, or importer, in bottles or closed containers. This tax was repealed as of January 1, 1922, by section 1400(a) of the Revenue Act of 1921.

Section 602(a) of the Revenue Act of 1921, effective January 1, 1922, imposed a tax at the rate of 2 cents a gallon on all beverages derived wholly or in part from cereals or substitutes therefor, containing less than one-half of one per cent of alcohol by volume, sold by the manufacturer, producer, or importer. This tax was repealed as of June 2, 1924, by section 1100(a) of the Revenue Act of 1924.

Section 903 of the Revenue Act of 1926, effective February 26, 1926, imposed a tax at the rate of one-tenth of 1 cent a gallon on all beverages derived wholly or in part from cereals or substitutes therefor, and containing less than one-half of one per centum of alcohol by volume, sold by the manufacturer, producer, or importer. This tax remained in effect until its repeal on June 28, 1928, by section 453 of the Revenue Act of 1928.

Section 615(a)(1) of the Revenue Act of 1932, effective June 21, 1932, imposed a tax at the rate of 1 1/4 cents a gallon on all beverages derived wholly or in part from cereals or substitutes therefor, containing less than one-half of 1 per centum of alcohol by volume, sold by the manufacturer, producer, or importer.

As originally enacted by Congress, section 615(a)(1) of the Revenue Act of 1932 was to be effective during the period June 21, 1932 to July 1, 1934. Section 212 of the National Industrial Recovery Act extended the expiration date to July 1, 1935. However, section 601 of the Revenue Act of 1934 repealed this tax, effective May 11, 1954.

Economic Basis. -- This tax was an excise tax on beverages known commonly as "near-beer" and was paid by the manufacturer, producer, or importer, on his sale or use of such products. The industry, while comparatively small, included a number of small bottling concerns throughout the country and tax was paid in all but 9 of the 64 collection districts. Production and receipts fell off rapidly after the repeal of the Eighteenth Amendment.

Inequities. -- With respect to any conflict in the subject taxed, no doubt these products were indirectly affected by some of the excise taxes imposed by the several States, but the State taxes differed from the Federal tax in the basis for the tax, the method of computation, and the class of taxpayers affected.

A conflict in Federal taxes may have resulted by reason of the taxes on beer, etc., and the taxes on certain constituent parts of cereal beverages imposed under subsections of section 615 of the Revenue Act of 1932. However, the administrative provisions of the statute were designed to prevent double taxation when complied with.

With respect to the measure of the tax in relation to the value of the products taxed, in the absence of definite information as to manufacturers' selling prices, no accurate comparison can be made. The rate of tax was low and hence the tax may not be regarded as having been excessive.

The audit of the records of a taxpayer in this industry required the usual verification of production and sales records.

No statistics are available from which the actual cost of collecting this tax may be determined but since only a part of the time of the few employees assigned to this tax was consumed in the administration thereof, it is apparent that the cost of collection was extremely low.

This tax was repealed effective May 10, 1934, and no recommendation is made with respect to its reenactment.

Tax On Unfermented Grape Juice Section 615(a)(2) Of The Revenue Act Of 1932. Tax Repealed May 11, 1934.

Statutory Background. -- Section 313(a) of the Revenue Act of 1917, effective October 4, 1917, first imposed a tax on all prepared syrups and extracts, including grape products falling within that category, (intended for use in the manufacture or production of beverages, commonly known as soft drinks, by soda fountains, bottling establishments, and other similar places) sold by the manufacturer, producer, or importer thereof, if so sold for not more than $1.30 per gallon, tax of 5 cents per gallon; if so sold for more than $1.30 send not more than $2.00 per gallon, tax of 8 cents per gallon; if so sold for more than $2.00 and not more than $3.00 per gallon, a tax of 10 cents per gallon; if so sold for more than $3.00 and not more than $4.00 per gallon, a tax of 15 cents per gallon; and if so sold for more than $4.00 per gallon, a tax of 20 cents per gallon.

Section 313(b) of the Revenue Act of 1917 imposed a tax at the rate of 1 cent a gallon on all unfermented grape juice sold by the manufacturer, producer, or importer in bottles or other closed containers.

These taxes were repealed as of February 25, 1919, by section 1400(a) of the Revenue Act of 1918.

Section 628(a) of the Revenue Act of 1918, effective February 25, 1919, reenacted the tax on all unfermented grape juice sold by the manufacturer, producer, or importer in bottles or other closed containers, but changed the rate of tax to 10 per cent of the price for which the product was sold. This tax remained in effect until its repeal on January 1, 1922, by section 1400(a) of the Revenue Act of 1921.

Section 602(b) of the Revenue Act of 1921, effective January 1, 1922, imposed a tax of 2 cents per gallon on all unfermented fruit juices, in natural or slightly concentrated form, or such fruit juices to which sugar had been added (as distinguished from finished or fountain syrups), intended for consumption as beverages with the addition of water or water and sugar, and all imitations of such fruit juices, sold by the manufacturer, producer, or importer. This tax was repealed on June 2,1924, by section 1100(a) of the Revenue Act of 1924.

Section 615(a)(2) of the Revenue Act of 1932, effective June 21 1932, imposed a tax at the rate of 5 cents a gallon on unfermented grape Juice, in natural or concentrated form (whether or not sugar had been added), containing 35 per centum or less of sugar by weight, sold by the manufacturer, producer, or importer.

As originally enacted by Congress, section 615(a)(2) of the Revenue Act of 1932 was to be effective during the period June 21, 1932 to July 1, 1934. Section 212 of the National Industrial Recovery Act extended the expiration date to July 1, 1935. However, section 601 of the Revenue Act of 1934 repealed this tax, effective May 11, 1934.

Economic Basis. -- This tax was an excise tax and was paid by the manufacturer, producer, or importer on his sale of the taxable product. This industry, while comparatively small, embraced a number of small concerns scattered over the entire country, and tax was paid in all but 6 of the 64 collection districts.

No statistics are available in this Bureau from which the value of the products taxed may be determined. The price evidently varied to a great extent according to supply and demand, channels of distribution, quality of the product, and season of the year in which sold.

Inequities. -- With respect to any conflict in the subject taxed,no doubt these products were indirectly affected by some of the excise taxes imposed by the several States, but the State taxes differed from the Federal tax in the basis for the tax, the method of computation, and the class of taxpayers affected.

Some conflict with respect to Federal taxes may have resulted by reason of the taxes imposed on distilled spirits and liquors and the taxes imposed under section 601(c)(3) and the other subsections of section 615 of the Revenue Act of 1932 on constituents of soft drinks.

With respect to the measure of the tax in relation to the value of the products taxed, in the absence of definite information as to manufacturer's selling prices, no accurate comparison can be made.

The methods of tax avoidance or evasion were confined in this instance to the keeping of insufficient records for tax purposes.

No appreciable difficulties were encountered in the administration of this tax, except in determining the sugar content by weight of some of the products, and in distinguishing between what is commercially known as "grape juice and similar products known as "jelly stock" and "grape must". The audit of returns in this instance required the usual examination of production and sales records.

No statistics are available from which the actual cost of collecting this tax may be determined but the cost was in line with the average cost of collecting the respective miscellaneous and excise taxes.

The tax was repealed effective May 10, 1934, and its reenactment is not recommended.

Tax On Unfermented Fruit Juices And Carbonated Beverages. Section 615(a)(3) Of The Revenue Act Of 1932. Tax Repealed May 11, 1934.

Statutory Background. -- Section 313(b) of the Revenue Act of 1917, effective October 4, 1917, imposed a tax at the rate of 1 cent a gallon on all unfermented grape juice, containing less than one-half of 1 per cent of alcohol, sold by the manufacturer, producer, or importer thereof, in bottles or other closed containers, and on carbonated beverages, manufactured and sold by the manufacturer, producer, or importer of the carbonic acid gas in the carbonation thereof. This tax was repealed as of February 25, 1919, by section 1400(a) of the Revenue Act of 1918.

Section 628(a) of the Revenue Act of 1918, effective February 25, 1919, imposed upon all beverages derived wholly or in part from cereals or substitutes therefor, and containing less than one-half of one per centum of alcohol, sold by the manufacturer, producer, or importer, in bottles or other closed containers, a tax equivalent to 15 per centum of the price for which so sold: and upon all unfermented grape juice, ginger ale, root beer, sarsaparilla, pop, artificial mineral waters (carbonated or not carbonated), other carbonated waters or beverages, and other soft drinks, sold by the manufacturer, producer, or importer, in bottles or other closed containers, a tax equivalent to 10 per centum of the price for which so sold. These taxes continued in effect until their repeal on January 1,1922, by section 1400(a) of the Revenue Act of 1921.

Section 602(b) of the Revenue Act of 1921, effective January 1, 1922, imposed a tax of 2 cents per gallon upon all unfermented fruit juices, in natural or slightly concentrated form or such fruit juices to which sugar had been added (as distinguished from finished or fountain sirups), intended for consumption as beverages with the addition of water or water and sugar, and upon all imitations of any such fruit juices, and upon all carbonated beverages, commonly known as soft drinks (except those described in subdivision (a) of this section, or cereal beverages), manufactured, compounded, or mixed by the use of concentrate, essence, or extract, instead of a finished or fountain sirup, sold by the manufacturer, producer, or importer. This tax was repealed on June 2, 1924, by section 1100(a) of the Revenue Act of 1924.

Section 615(a)(3) of the Revenue Act of 1932, effective June 21, 1932, imposed a tax of 2 cents per gallon on all unfermented fruit juices (except grape juice which was taxed separately under subdivision (a)(2) of this section), in natural or slightly concentrated form, or such fruit juices to which sugar had been added (as distinguished from finished or fountain syrups), intended for consumption as beverages with the addition of water or water and sugar, and upon all imitations of any such fruit juices, and upon all carbonated beverages, commonly known as soft drinks (except those described in paragraph (1) of this section, or cereal beverages), manufactured, compounded, or mixed by the use of concentrate, essence, or extract, instead of a finished or fountain syrup, sold by the manufacturer, producer, or importer.

As originally enacted by Congress, section 615(a)(3) of the Revenue Act of 1932, was to be effective during the period June 21, 1932 to July 1, 1934. Section 212 of the National Industrial Recovery Act extended the expiration date to July 1, 1935. However, section 601 of the Revenue Act of 1934 repealed this tax, effective May 11, 1934.

Economic Basis. -- This tax was an excise tax and was paid by the manufacturer, producer, or importer, on his sale or use of the taxable products. Although comparatively small, the industry embraced a number of small concerns scattered over the entire country, and tax was paid in every one of the 64 collection districts.

No statistics are available in this Bureau from which the value of the products taxes may be determined.

A conflict with respect to Federal taxes may have resulted due to the taxes on certain constituent parts of soft drinks imposed under other subsections of section 615 of the Revenue Act of 1932, but the administrative provisions of the statute were designed to prevent double taxation when complied with.

With respect to the measure of the tax in relation to the value of the products taxed, in the absence of definite information as to manufacturer's selling prices, no accurate comparison can be made.

The methods of tax avoidance or evasion were confined in this instance to the keeping of insufficient records for tax purposes.

The audit of the records of a taxpayer in this industry required an examination of production and sales records.

No statistics are available from which the actual cost of collecting this tax may be determined but the collection necessitated many investigations of numerous small producers so that the collection cost appears to have been relatively high.

The reenactment of this tax is not recommended by this Bureau.