The Pacific commercial advertiser. [volume] (Honolulu, Hawaiian Islands) 1885-1921, 1906-09-15
PLANTATION
TAX SUITS
Mr.. Prosser Shows the
Nature of Issue
Involved.

In the taxation cases of Laupahoehoe
and three other sugar producing cor
porations, pending in the Supreme
Court, the Government side of the
question is shown by the following
extracts from the brief of NJ F. Pros
ser, Deputy Attorney General:
Since the passage of the income
tax law in the year 1901, each of the
corporations above named as appellees
has returned it's income for the year
preceding the date of such return at
the difference between the cost of run
ming or managing the corporation a
whole for the year and the actual
money received by it during the same
period of time from sales of mer-
chandise, sugar, etc. This year, for
the first time since the passage of the
act in question the corporations above
named claimed the right TO change
their former method of making re-
turns, and, as representing their net
income during the preceding taxation
seriod, to show the amount received
from the sale of merchandise, sugar,
etc, and from that amount deduct the
cost of the actual production of the
sugar sold. While this form of making
return is not unfair or improper frem
some points of view, if followed out
year after year, yet the effect of the
appellees changing their form of re-
turn at this time is to charge against
their total income for the preceding
taxation period sum of money rep
resenting expenses and cost of produc-
tion incurred prior to said taxation
period and already allowed as a proper
expense and charge to the appellees
during a preceding period.
The actual cost of production of
sugar extends over a period of time
approximating two years and into the
cost of the production of such sugar
necessarily goes every expense from
the time of the clearing of land pre-
paratory to planting, until the sugar
itself is actually placed upon the mar
ket and sold.
cit is the contention of appellant
herein that the statute contemplates
that there shall be tax levied upon
the income of every corporation doing
business within the Territory of Ha
wall, and that the income of any such
corporation properly speaking shall rep
resent its actual net profits for the
the difference between the actual cost
of maintaining and running the corpor-
alton and the sum of money received
by such corporation during the same
period from sales and other sources
Constituting the statute in accordance
with the foregoing proposition, and
quoting authorities, Mr.. Prosser goes
on to give an illustration of how the
system of making returns, contended
for as correct by appellees, works:
"Take the case of a corporation
whose yearly production of sugar
amounts to 10000 tons OF that amount
at the date of making the return only
one half of the total crop, or 5000 tons,
has been marketed For the sake of
argument say that the sugar nets so
per ton and costs to produce $50 per
ton We find the actual value of the
sugar produced for the period of one
year to be 100000. We find that the
cost of producing the same is 100000.
We find an actual profit of 100000 on
the investment during period of one
year. The same property or income
returned by appellees might be very
easily returned as follows:
Received from sales of sugar,
5000 tons at SO ton. =. $3.50, 900
Cost of running plantation for
the period of one year. So. 100000
Total loss for the year. /. $4,000
s'This is exactly what happened the
first year that the income tax went in
to effect and this balance in favor of
the CORPORATIONS has been carried ever
since, and it is only at this time, when
the law puts into effect this first period
of six months, that the Territory has
an opportunity of obtaining from the
corporations a proper amount of tax