The Washington times., 1901-08-03
A BROK ER'S BOLD TEST CASE
S amp Tax Law Persisfently NiO-
lated to Force a Decision.
George &. Thomas. of New York,
Finally Compcls Revenue officers
to Arrest Him Risks IUpriSon
ment and n Million in Fines.

To test The cnnstitutionality Of the Gov
crnment tax on the sale ana transfer of
stocks. George c. Thomas. a member oi
the Board of Directors of the Consoh-
dated stock and Petroleum Exchange, OF
NV York refused TO comply with the
act Of Congr, IS relating TO the payment
of taxes on such transactions, and as Il
result thereof was arrested yesterday at
noon in New York City by direction ot
.Ioan W. Yerkcs Commissioner of Internal
Revenue Tine controversy has attracted
considerable attention throughout the
country and especially in the larger cities
where transactions in stocks and other Sc
cuflties are frequent.
The violation of the law was first
brought to the attention of the Comfnis-
sioner OF Internal Revenue few days
ago. when he was informed by the col
lector of internal revenue for the Second
District of New York that Mr.. Thomas
had refused TO pay the Government tax
on stock sold or transferred. 1t was eX-
plained that Mr. Thomas claimed that the
tax was unconstitutional, and the coliec-
tor at New York asked for instructions as
to what course to pursue.
Mr. YerkeS Immediately advised him TO
lay the matter before the District At
torney and in conjunction with him TO
institute legal proceedings against Mr.
Thomas The law which MIR. Thomas
hclds to he unconstitutional is q part of
the act of June IS. 1898, as amended by
section $. act OF March ?. 1871. Schedule y.
and relates to stamp taxes. The part
objected to reads as follows: "On ali
sales. or agreements to sell. or memoran-
da of sales or deliveries or transfers of
shares or certificates of stock in any as
sociation. company, or corporation.
whether made upon or shown by the
books Of the association, company. or cor
poratioE, or by any assignment in blank,
or by any delivery. or by any paper or
agreement or memorandum or other evi-
dence Of transfer or sale. whether enti-
tling the holder in any manner to the
benefit of such stock. or to secure the fu-
ture payment of money or for the future
transfer of any stock, on each hundred
dollars of face value or fraction thereof,
2 cents"
AS the result of Mr. Yerkes' instruc-
tions. Mr.. Thomas was arrested yesterday
by an agent of the Internal Revenue De-
partment The arrest of Mr.. Thomas was
made on his own invitation, as Mr.. Thorn
as had decided TO make test case by
transferring stock without affixing the
stamps and paying the tax.
On May % Mr.. Thomas began to defy
the collector Of internal revenue. and,
in order that there should be no conceal
ment of his disobedience of the revenue
law. he made a report to his legal advis-
ers and the lawyers sent notice to Col
lector Treat. Mr.. Thomas has continued
to transfer stocks unstamped since May,
and the LAWYERS have continued to keep
Mr Treat Informed of the brokers' con-
tumacious attitude, but tn collector
made no move to enforce the regulations
in the case of Mr.. Thomas until Thurs
day, when revenue agent waited upon
Mr. Thomas and told him to appear at
the. office of Collector Treat at noon yes
terday and be arrested.
It was learned that there was an ar
rangement to have Mr.. Thomas taken
before United States Commissioner
cI,x~rSs~. apa Teid TO- --i-i ti-a charge
of violating the internal revenue law,
Mr.. Thomas was able TO give bail, and
his counsel demurred tc his trial On the
ground that the law providing for the
tax he refused to pay is uaconstitution-
al. If the contention of the lawyers is
sustained by the courts. Mr.. Thomas gets
off easily. If the law is declared tc he
he has no defence and
must plettu Sullly 10 lIIe charge ol NiOidt-
ing the law.
The penalty for violating the tax reg
ulation is a fine Of not less than $500 and
not more than s1,e00, or imprisonment for
six months, or both, in-the discretion OF
the court.
As Mr.. Thomas has been refusing to pay
the tax for more than two months, it is
alleged that he has made himself liable
to fines amounting to more than sl,Wp,OO9
and to Imprisonment for about so years.
He was reported TO have said Thursday
that he might be willing to be kept in
Jail 800 years If the fines were remitted
Many brokers will be interested in the
case of Mr.. Thomas. because the tax on
stock transfers will have to stop II the
law is declared unconstitutional, and
brokers who have paid the tax will have
CLAIMS against the Government for the
amount of the tax collected.
In speaking Of the matter Mr.. 1erkes
said yesterday that inasmuch as the
matter is now in the hands of the judi
ciary, he did not care to give an opinion
ON the matter.
SPJRJTnAIISTS TO MEET.