White Rock Mineral Springs Co. v. Edwards

• Decision Date: 31 December 1928
• Citation: 23 F.2d 539
• Parties: WHITE ROCK MINERAL SPRINGS CO. v. EDWARDS, Collector of Internal Revenue.
• Court: U.S. District Court — Southern District of New York

23 F.2d 539 (1928)

WHITE ROCK MINERAL SPRINGS CO. v. EDWARDS, Collector of Internal Revenue.

District Court, S. D. New York.

O'Brien, Boardman, Fox, Memhard & Early, Morgan J. O'Brien, Jr., and Isidor Bregoff, all of New York City, for plaintiff.

Charles H. Tuttle, U. S. Atty., and Samuel C. Coleman, Asst. U. S. Atty., both of New York City, for defendant.

GODDARD, District Judge.

Motion by defendant to dismiss complaint, on the ground that it does not set forth a cause of action.

Plaintiff is a corporation engaged in the business of dispensing carbonated spring water and the manufacturing and dispensing of ginger ale, both being known in the trade as "White Rock" beverages. The sales of these beverages concededly were subject to the tax imposed by section 628 of title VI of the Revenue Act of 1918 (Comp. St. Ann. Supp. § 6161½d), which, so far as now material, reads as follows:

"There shall be levied, assessed, collected, and paid * * * upon all unfermented grape juice, ginger ale, * * * artificial mineral waters (carbonated or not carbonated), * * * and other soft drinks, * * * a tax equivalent to 10 per cent. of the price for which so sold."

During the tax period in question, commencing February 25, 1919, and ending April 30, 1920, plaintiff paid a total tax of $154,634.78, that being 10 per cent. of the invoice price of its beverages to its customers. It claims that the total tax which was properly collectable was $138,394.44, leaving an excess of $16,240.35. To recover this excess the suit was brought.

The plaintiff contends that its invoice price included both the selling price and the tax, that the actual selling price was ten-elevenths of the invoice price, and that the remaining one-eleventh was the tax of 10 per cent. The government has taken the invoice price as the price for which the product was sold and computed and collected the tax accordingly.

The act went into effect February 24, 1919. On February 21, 1918, plaintiff sent to all its customers a circular telegram relating to White Rock water reading as follows:

"We will be compelled to advance prices approximately one dollar per case upon signing of tax bill now pending. We will protect your present prices on any goods we may bill you on or before February twenty-fourth. Wire answer."

The schedule of price lists shows that there was a flat increase of $1 per case. In two instances the increase of a dollar was more than 10 per cent. of the old selling price and in one instance it was less. The plaintiff made no change in prices for White Rock ginger ale until July 23, 1919, when it sent to its customers the following circular:

"We regret to have to advise you that, owing to the current high cost of production, and the high expenses of all kinds that we have to meet, not to mention the federal beverage tax of ten per cent. that we pay on White Rock ginger ale, but to provide for which we have not heretofore changed our prices on that product, we shall be obliged to make our billing prices to you on White Rock ginger ale, effective on and after August 1, 1919, as follows:

                  Per case of 50 bottles ................. $7.25
                   "   "   "  24    " ....................  3.50
                   "   "   " 100 half bottles ............ 10.50
                   "   "   "  24  "      " ...............  2.75
                   "   "   "  48 nips ....................  4.00
                

"F. o. b. Waukesha, Wisconsin.

It appears from this schedule that there was a net advance of $1 a case — not an increase of 10 per cent. on the then prevailing price. The following is a typical invoice of plaintiff's product to its customers:

"Please make all checks payable to the order of White Rock Mineral Springs Co.

"White Rock Mineral Springs Co.

"100 Broadway, New York, March 27, 1919. "Stacy Fruit Co., Fort Dodge, Iowa. "Shipped via Soo c/o C&OW. Ordered through _____.

"Terms: 2% ten days, sixty days net, f. o. b. Waukesha.

                   15 cases White Rock  50 bottles       $7.25  $  108.75
                   10 cases White Rock 100 half bottles  10.50     105.00
                   10 cases White Rock 100 splits         8.00      80.00
                   60 cases ginger ale  50 bottles        6.25     375.00
                   20 cases   "     "   24   "            3.00      60.00
                   40 cases   "     "  100 half bottles   9.50     380.00
                   15 cases   "     "   24   "    "       2.50      37.50
                  100 cases   "     "   48 nips           2.50     250.00
                    5 cases Still Rock 50 bottles         4.75      23.75
                                                                _________
                                                                $1,420.00
                    "Free goods
                  4 cases ginger ale 100 half bottles
                  3 case     "    "  48 nips
                    "Advertising matter
                 60 match stands
                100 superiority C. A. signs
                 50 White Rock C. A. signs.
                 50 White Rock banners.
                 50 cut outs

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