The times., 1901-06-20
A TEST CASE ON STOCK TAXES
The Revenue Collectors Notification
to w, ID. Hibbs tS Co.

The Bureau of Internal Revenue will
have. a local brokers' tax case to decide
in few days, possibly today, that will
be of great Importance to the entire coun-
try. involving millions of dollars in taxes,
and the whole stock brokerage business.
A test case has been raised regarding the
firm of w. B. Hibbs 81 Co, of this city,
by the deputy collector of informal reve-
nue. for the District of Columbia, and Col
lector B. F. Parlett, of the Baltimore dis
trict Mr. Flibbs has been notified by the
deputy collector that he is expected to
pay a tax Of 81 on every transaction in
stocks for his customers. in addition to
the tax of a similar amount now paid
by his correspondents in New York.
After interviewing Secretary Gage and
Commissioner Yerkes regarding the mat
ter Mr. Hibbs has written to Collector
Parlett, of Baltimore, making a protest
against the decision. 1t is supposed that
this letter viii be forwarded to Commits
sioner Yerkes In the near future and
final decision made by him in the matter.
The case is raised under the new inter
nal revenue law, passed last March, which
was supposed to be directed entirely
against firms doing what is called a
bucketshop business. Under this law a
recognized stock exchange is taxed dOu-
BILE. Numerous different cases have been
taken up involving different conditions of
the bucketshop business. The present
case makes a departure and if the con-
tention of the collector is upheld it will
mean that every broker through whose
hands transaction in stocks passes will
have to pay a tax on it irrespective of the
nature of his business.
The contention in the Hibbs case is that
more than one transaction is required
when Mr.. Hibbs' customer orders the pur-
chase of stock, and Mr.. Hibbs orders the
purchase from his correspondent in New
York It is claimed that Mr. Hibbs first
buys the stock from his New York cor
respondent and then sells 1t to his GUS
toner. making at least two transactions
AS the business is conducted at present
the New York firm, Ladenburg ThaImann
& Co, pays a tax on all transactions
made there, and Mr.. Hibbs, acting as
their correspondent and as the agent of
his customer, has paid no extra tax The
customer In Washington has had the tax
charged to Mis- account and Ladenburg
Thalmann & Co. have charged the tax to
Mr.. Hibbs. The local collector now wishes
the tax to be collected twice.
The contention of the commission
brokers regarding such transactions is
that only one purchase or sale is made in
each case Mr.. TIibbs and the other
brokers doing the same character of bust
ness all have correspondents in New York
who are members of the New York Stock
Exchange Mr.. Hibbs himself is also a
member of the exchange. 1t is claimed
by him that he is doing a commission
business in stocks in the same way that
wheat or pork is sold by commission
merchant. The transaction as it is con-
strued by the brokers and as it has been
Interpreted generally in the past is that
an order by a customer in Washington
is simply turned over to the New York
firm for execution.
II is pointed out by the brokers gem
eraIly fiat such a transaction frequently
masses through several hands before II is
executed. Mr.. Hibbs, for instance, will