T. Galaxy Corporation, No. 3925 (May 26, 1994)
Docket No. SIZ-94-3-31-40

                    UNITED STATES OF AMERICA

                  SMALL BUSINESS ADMINISTRATION

                 OFFICE OF HEARINGS AND APPEALS

                        WASHINGTON, D.C.

SIZE APPEAL OF:                    )
                                   )
T. Galaxy Corporation              )
                                   )
     Appellant                     )  Docket No.  SIZ-94-3-31-40
                                   )
Economic Injury Disaster Loan      )
Application No. 7931-00609         )
SBA Area 3 Disaster Office         )
Fort Worth, Texas                  )

                             DIGEST

Establishments primarily engaged in the retail sale of clothing,
furnishings, and accessories for men, women, and children,
without specializing in sales for an individual sex or age group,
is properly classified under Standard Industrial Classification
code 5651 (Family Clothing Stores).

                            DECISION
                                
                          May 26, 1994

WHITE, Administrative Judge, Presiding:

Jurisdiction

This appeal of a size determination is decided pursuant to the
Small Business Act of 1958, 15 U.S.C. 631 et seq., and the
regulations codified at 13 CFR Part 121.

Issue

What is the appropriate Standard Industrial Classification code
and size standard for this EIDL applicant?

Facts

T. Galaxy Corporation (Galaxy or Appellant) submitted an
application for an Economic Injury Disaster Loan (EIDL) to the
Area 3 Disaster Office of the Small Business Administration (SBA
or Agency).  By letter dated December 13, 1993, the Disaster

Office rendered an informal size determination which stated that
Galaxy did not qualify as a small business concern and, as a
result, was ineligible for financial assistance.  1/

On December 21, 1993, Galaxy "appealed" this December 13, 1993,
determination to the Area Director.  In response to this appeal,
the Disaster Office issued a formal size determination on
February 22, 1994, which stated, in part, that:

     We have reviewed the SBA Form No. 355 (Application for Small
     Business Size Determination), which you submitted as part of
     your reconsideration request.  This report reflects that you
     have identified your business under the Standard Industrial
     Code No. 5651 which is defined as a family clothing store
     which is primarily engaged in the retail sales of clothing,
     furnishings, and accessories for men, women, and children,
     without specializing in sales for an individual sex or age
     group.  You also reflected on the SBA No. 355 report that
     the products you sell are collegiate active wear (75%),
     fashion active wear (20%), and children's active wear (5%).

     After a thorough review, SBA has determined that your
     primary activity is still retail custom print tee shirt
     stores and retail sports apparel stores.  The SIC code for
     this type of establishment is No. 5699 defined as
     miscellaneous apparel and accessory stores.  SBA based this
     determination on the following factors.  In written
     correspondence dated November 15, 1993, your business
     summary stated that by 1988, T. Galaxy had evolved and grown
     into one of the largest screen printing and retail
     sportswear companies in the United States.  You also
     provided SBA with several articles which showed several
     slogans printed on your T-Shirts and according to one of the
     articles sales generated were approximately 100,000 T-Shirts
     annually.  Additionally, Dunn & Bradstreet reflects your SIC
     code as No. 5699 and reflects your operation as a retail
     sports apparel (80%) and wholesale silk screen sports
     apparel (20%).  Based on this information, it is our opinion
     that SIC code 5699 accurately reflects T. Galaxy's primary
     activity.  We must conclude that in your case, the Average
     Annual Receipts (AAR) total approximately $3,664,000.00
     which does exceed the size standard for SIC code No. 5699,
     which is $3,500,000.00 2/ in annual receipts/sales. 3/
     [Footnotes added.]

By letter dated February 15, 1994, which was prior to the
Disaster Office's February 22, 1994 formal size determination,
Galaxy filed a Notice of Appeal with this Office which stated, in
part, that: 4/

     Through written and oral communications with the SBA, we
     have realized that the original SIC code designation was
     based on:

          a)   Our D&B classification
          b)   The narrative which was part of the original
               FEMA loan application
          
     We feel that the use of D&B was not accurate as our
     classification had been determined 18 years ago when we
     originated the business.  Through the years the business had
     evolved from a sporting goods store to a store of unisex
     clothing...family apparel.  We eliminated such hard goods as
     racquets, hockey sticks, tennis balls, etc. and expanded
     into unisex apparel, as we expanded into mall locations.
     
     Webster's Dictionary defines sportswear as "clothing
     suitable for recreation." Indeed, our merchandise fits this
     definition.  However, as society's dress has become more
     casual over the years, our apparel offering of sweaters,
     jackets, rugby jerseys, etc. seemed to better fit the family
     apparel category.  Photographs accompanying this appeal
     will illustrate that our merchandise could easily fit
     business casual in most companies.
     
To further support its continuing argument that SIC code 5651,
"Family Clothing & Unisex Clothing Store," was the appropriate
SIC code, Galaxy submitted letters from two of its mall locations
which classified the firm as a "family apparel merchant." The
"Crossroads Mall" letter, dated February 11, 1994, stated, in
part, that:

     I am writing to clarify our classification of T. Galaxy as a
     family apparel merchant in Crossroads Mall.

     Our criteria for a merchant to be placed in this category is
     as follows: The merchant must carry apparel for men, women,
     and children; both tops and bottoms will be offered for
     their customers; and four season merchandising will occur in
     the store.  The merchant will offer a range of merchandise
     through the year appropriate for each season.

In addition, the pertinent portion of the "North Grand" letter,
dated February 16, 1994, is as follows:

     ...A store like T. Galaxy belongs in family apparel because
     the merchandise is a mix of unisex, mens and womens
     clothing....
     
Both stated that "The Gap" was a store typically found in
Galaxy's category.

Discussion

The guidelines for the selection of the appropriate SIC code for
an EIDL loan applicant are codified at 13 CFR 121.802.  Pertinent
portions of this regulation are as follows:

     (a)(1) An applicant concern for an SBA Disaster Loan
     ...must meet a two-fold size standard.  It must meet the
     size standard designated for the industry in which the
     appellant, including its affiliates, is primarily engaged
     and the size standard designated for the industry in which
     the applicant concern, not including its affiliates, is
     primarily engaged.  These size standards are set forth in
     Section 121.601 of this regulation.  [Emphasis in original.]

            *     *    *    *     *    *
                                
     (b)  In determining what is the primary industry in which a
     concern applying for financial assistance is engaged, primary
     consideration shall be given to the distribution of receipts,
     employees and costs of doing business among differing industries
     in which a concern is operating for the most recently completed
     fiscal year of the concern....

SIC code 5699, selected by the Disaster Office for this EIDL loan
applicant, is defined as follows in the SIC Manual: 5/

     Miscellaneous Apparel and Accessory Stores
     
     Establishments primarily engaged in the retail sale of
     specialized lines of apparel and accessories, not elsewhere
     classified, such as uniforms, bathing suits, raincoats,
     riding apparel, sports apparel, umbrellas, wigs, and
     toupees....
     
In addition to the stores shown in the above narrative, these
stores are listed under SIC code 5699 as well:
     
     Belts, apparel: custom-retail
     Custom tailors-retail
     Dresses made to order-retail
     Dressmakers' shops, custom-retail
     Merchant tailors-retail
     Shirts, custom made-retail
     Tee shirts, custom printed-retail

The SIC Manual definition of SIC code 5651, advocated by the
Appellant, is as follows:

     Family Clothing Stores

     Establishments primarily engaged in the retail sale of
     clothing, furnishings, and accessories for men, women, and
     children, without specializing in sales for an individual
     sex or age group.

These specific stores are listed under SIC code 5651:

     Family clothing stores-retail
     Jeans stores-retail
     Unisex clothing stores-retail

In this case, the Disaster Office stated that Galaxy's primary
activity was "retail custom print tee shirt stores and retail
sports apparel stores" and, in support of its position noted that
the Dun and Bradstreet report reflected that 80 percent of
Galaxy's operation was in retail sports apparel and 20 percent in
wholesale silk screen sports apparel.   However, SIC code 5699
covers retail custom tee shirt stores, not wholesale.   Further,
whether wholesale or retail, it does not appear from the record,
nor did the Disaster Office so determine, that Galaxy's primary
source of receipts are from custom printed tee shirt sales.
Therefore, we find that Galaxy's primary activity cannot properly
be classified in the retail custom printing tee shirt category.

As for Galaxy's primary activity being classified in the retail
sports apparel category, we note that all other comparable stores
listed under SIC code 5699 are highly specialized, with a very
limited product or service.   Whereas, Galaxy's retail clothing
line is much broader and, at a minimum, certainly is no more
limited than a retail jeans store listed under 5651.  Further,
the reason given for Galaxy's classification as a family apparel
merchant by the two malls, as noted in their previously cited
letters, also meets the family clothing store definition in the
SIC Manual.  Therefore, the appropriate classification for the
Appellant is deemed to be SIC code 5651, which has a size
standard of $4.5 million or less in average annual receipts.

Conclusion

The Disaster Office determination that SIC code 5699 is the
appropriate SIC code for this EIDL applicant is REVERSED.  The
appropriate SIC code is 5651, Family Clothing Stores, with a size
standard of $4.5 million.

This constitutes the final decision of the Small Business
Administration.  See 13 CFR 121.1720(a), (b), and (c).

                              _______________________________
                              G. Stephen Wright (Presiding)
                              Administrative Judge
                              
                              
                              ________________________________
                              Gloria E. Blazsik (Concurring)
                              Administrative Judge
                              
                              
                              _________________________________
                              Elwin H. White (Concurring)
                              Administrative Judge

___________________

1/   Pursuant to 13 CFR 121.801 and 13 CFR 123.41(b), an EIDL
     loan applicant must qualify as a small business concern.

2/   It is noted that SIC code 5699's $3.5 million size standard
     was increased to $5.0 million on April 22, 1994, but only
     applies to applications for financial assistance received by
     SBA on or after this date.

3/   Galaxy's average annual receipts figure also includes
     receipts for MBH, Ltd., an affiliate.  However, Galaxy's
     receipts substantially exceed those of its affiliate.

4/   This Notice of Appeal stated that the Disaster Office
     declined Galaxy's December 21, 1993 appeal to the Area
     Director by phone on January 24, 1994, but that no formal
     letter had been received as of February 11, 1994.

5/   Standard Industrial Classification Manual, 1987 ed.