Evening star. [volume] (Washington, D.C.) 1854-1972, 1948-02-15
West Defends Lew
On Nonresidents'
Sales in Capital

SdIeS IN LdplfdI |
Corporation Counsel Vernon E.
West yesterday defended the fair
ness of the Districts 1947 Revenue
Act which, among other levies,
places a 5 per cent franchise tax
on the net returns Of nonresident
dealers selling goods here.
In a report to the House and
Senate District Committees, Mr..
West noted that District merchants
are subject to the tax and would
encounter unfair" competition if
nonresident firms were exempt.
In addition, he stressed that the
Districts personal income levy was
restricted in order to exempt the
salaries of Government employees
claiming domicile in one of the
States.
He estimated that the now pro-
posed amendment of the business
franchise levy likely would mean
the loss of several million dollars an
nually in city revenues and warned
that, under basic law, the Commits
sioners are required to adjust thei
realty tax rate to prevent any deficit
under District appropriations.
Issue Raised at Capitol.
The issue was raised recently when
Representative Smith, Democrat, OF
Virginia, sponsored bill for repeal
of the District tax on manufactured
products shipped into the District.
At the other end of the Capitol,
Senator Umstead, Democrat, of
North Carolina. raised questions
about this levy. on the complaint OF
merchants in his State, who have
been doing business in the District.
The question is to be considered
during coming weeks when the
Fiscal subcommittee of the House
and Senate District Committees re-
view the latest District tax law.
Among proposed changes, the Dis
trict Commissioners are suggesting
repeal of the individual income levy,
after year, and the substitution OF
2 Der cent general sales tax. Sena-
tor Cain, Republican, of Washing
ton, head of the Senate Fiscal Sub
committee, is seeking repeal OF the
individual income levy.
Cites Court Decisions.
Mr.. West, in his brief, reviewed
the history of recent District tax
legislation, cited court decisions and
congressional reports outlining the
purposes of the last act, and con-
Guided:
There seems to be no question
that the mere solicitation OF orders
for the sale of personal property in
the District, when such solicitation
is regular and sustained, constitutes
doing business and therefore the In |
come therefrom is and properly I
should be subject to taxation under
the 1947 act. -"
Sales should be apportioned to
the taxing jurisdiction where the
markets are found, from which the
business is received or where the
customers are located. Certainly,
solicitation is the very heart of mer-
chandising. It is therefore just and
proper that domestic and foreign
corporations and unincorporated !
businesses selling millions of dol
lars worth of tangible personal prop
erty to customers in the District
should pay the franchise tax i'm
posed by; the 1947 Act on the net
income derived from such sales /,
Mr.. West made the point that
while the per cent on net income
APPLIES to sales where title passes
in the District, or sales from stocks
located in the District, the rate is
cut in half where the sales are made
from stocks located outside the Dis
trict, or where title passes outside !
the District. And in the latter cases, II
he added, the tax applies only If the
orders are solicited in the District
or the orders are accepted or the
sales contracts contaminated in the
District.
Points to Limited Sources. Il
On the reactions to the Districts
finances he wrote:
The sources of revenue for the
District are limited. Congress has
seen fit to exempt Federal officers
and employees from the tax on their
Federal salaries and wages and any
income they may have from sources
without the District.
More than so per cent OF all the
real property in the District has been
exempted from real estate taxation
by acts of CONGRESS. Much of such
property has been exempted because
it is owned by the United States
or by organizations whose activi-
ties are national in scope"
Property owners here would have
to sustain the greater part of the
additional local burden, unless Con-
gress adopts other new revenue
measures, Mr.. West said.
There are many States, he con-
tinued. which impose taxes upon
both domestic and foreign" cor
porations for the privilege of en-
gaging in business.
He cited the case of Maryland,
which uses as one of the elements
in arriving at the pportionment
factor, the ratio of gross sales made
during the taxable year, which were
principally secured, negotiated or
effected by employees, agents, offices
or branches of corporation located
in that State. to the gross sales made
everywhere.
HALL Il