Source: https://supreme.justia.com/cases/federal/us/323/582/
Timestamp: 2019-04-19 18:58:36+00:00

Document:
1. Under § 603 of the Revenue Act of 1932, which imposed on toilet preparations sold by manufacturers or producers an excise tax of a stated percentage of the selling price, held that advertising and selling expenses were not excludable from the selling price in computing the tax. P. 323 U. S. 584.
2. In computing the selling price for purposes of the tax levied by § 603 of the Revenue Act of 1932, § 619(a) provides on certain conditions for the exclusion of "A transportation, delivery, insurance, installation, or other charge . . ." Held that the term "other charge" does not embrace advertising and selling expenses. P. 323 U. S. 584.
3. By the rule of ejusdem generis, applicable here since it does not conflict with the general purpose of the statute, the term "other charge" in § 619(a) is limited to expenses similar in character to those incurred for transportation, delivery, insurance, and installation -- all of which are incurred subsequent to the preparation of an article for shipment and are not included in the manufacturer's f.o.b. selling price. P. 323 U. S. 585.
4. The construction here given the Act accords with the consistent administrative construction, and is required by accepted rules of statutory construction. P. 323 U. S. 586.
5. It is not for the courts to afford relief from such inequalities and discriminations as inevitably result where a flat tax is measured by wholesale selling prices. P. 323 U. S. 586.
6. Section 619(b) of the Revenue Act of 1932 is inapplicable where sales were made at wholesale, and does not require a different result from that here reached. P. 323 U. S. 587.
Certiorari, post, p. 690, to review the reversal of a judgment for the taxpayer, 52 F.Supp. 292, in a suit for a tax refund.
Section 603 of the Revenue Act of 1932, c. 209, 47 Stat. 169, 261, Internal Revenue Code, § 3401, imposes on toilet preparations sold by manufacturers or producers an excise tax equivalent to stated percentages "of the price for which so sold." Petitioner was subject to this tax from October 1, 1936, to June 30, 1939, and has sought a refund of a portion of the tax paid on the ground that its selling and advertising expenses should have been excluded from the selling prices in computing the tax. The District Court, after trial, upheld this claim and awarded a refund, 52 F.Supp. 292, but the court below reversed that judgment, 141 F.2d 380. The alleged conflict with the decisions of the Circuit Court of Appeals for the Seventh Circuit in Campana Corp. v. Harrison, 114 F.2d 400, and Campana Corp. v. Harrison, 135 F.2d 334, led us to grant certiorari.
charge. A transportation, delivery, insurance, installation, or other charge (not required by the foregoing sentence to be included) shall be excluded from the price only if the amount thereof is established to the satisfaction of the Commissioner, in accordance with the regulations."
Petitioner contends that advertising and selling expenses fall within the term "other charge" appearing in the last sentence of Section 619(a), and hence are excludable in determining the selling price for tax purposes. This claim, however, is refuted by both the spirit and the letter of this statutory provision.
Congress sought in the Revenue Act of 1932 to use the manufacturer's or wholesaler's selling price, rather than the retail price, as the measure of the excise taxes imposed by Section 603. 75 Cong.Rec. 11383, 11657. Section 619(a) was designed to lay down specific rules for determining this selling price, especially in relation to costs incurred after the article itself had been manufactured. It provides for the use of the manufacturer's or producer's f.o.b. price at the factory or place of production. In essence, all manufacturing and other charges incurred prior to the actual shipment of an article and reflected separately or otherwise in the f.o.b. wholesale price are to be included in the sale price underlying the tax, while all charges incurred subsequent thereto are to be excluded. Hence, any additional charge which a purchaser would not be required to pay if he accepted delivery of the article at the factory or place of production may be so excluded. See H.Rep. No. 708 (72d Cong., 1st Sess.) p. 37; S.Rep. No. 665, Part 3 (72d Cong., 1st Sess.) p. 3; H.Conf.Rep. No. 1492 (72d Cong., 1st Sess.) p. 22.
technically as manufacturing costs, it is obvious that they are incurred prior to the actual shipment of articles to wholesale purchasers, and that they enter into the composition of the wholesale selling price. Even if the purchaser accepts delivery at the factory, he pays for the advertising and selling expenses. Thus, they must be included in the taxable sales price.
The inclusion of these expenses is plainly warranted by the language of Section 619(a). Pre-shipment charges relative to coverings, containers and placing an article in condition for shipment are specifically included in the determination of the selling price. But a subsequent "transportation, delivery, insurance, installation, or other charge" is to be excluded if properly established. In the setting of this case, no rule of reason or grammar justifies placing advertising and selling expenses within the meaning of this exclusionary sentence.
statements [Footnote 4] relating to the desirability of eliminating discriminations against manufacturers making retail sales cannot be taken as evidence of a desire to prevent the natural inequalities that result when a tax is placed on the wholesale selling price.
The parenthetical matter following the term "other charge" in the last sentence of Section 619(a) -- "(not required by the foregoing sentence to be included)" -- is not significant in this case. It serves simply to provide that, to the extent that the provisions for inclusion and exclusion may overlap, the former shall control.
"a transportation, delivery, insurance, or other charge, and the wholesaler's salesmen's commissions and costs and expenses of advertising and selling."
(Italics added.) Section 3(b) made this amendment prospective only, and hence Section 3(a) cannot be taken as a Congressional declaration that the advertising and selling expenses were intended to be excluded from the selling price under the Revenue Act of 1932. On the contrary, the very fact that Congress found it necessary in 1939 to exclude such expenses specifically is persuasive evidence that, prior thereto, advertising and selling expenses were not meant to be excluded.
Congress has subsequently realized that the excise tax on the wholesale selling price created tax inequalities among manufacturers. In Section 552 of the Revenue Act of 1941, 55 Stat. 687, 718, Congress substituted a retail excise tax for the manufacturer's excise tax on toilet preparations. The reasons assigned for the change were that, under the earlier law, "evasion is substantial, and inequitable competitive situations are created." H.Rep. No. 1040 (77th Cong., 1st Sess.), p. 33.
See H.Rep. No. 708 (72d Cong., 1st Sess.), pp. 32-33; 75 Cong., Rec. 5693, 5694.

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