Anargyros v. Edwards

• Decision Date: 14 October 1927
• Citation: 22 F.2d 707
• Parties: ANARGYROS v. EDWARDS, Collector of Internal Revenue.
• Court: U.S. District Court — Southern District of New York

22 F.2d 707 (1927)

ANARGYROS v. EDWARDS, Collector of Internal Revenue.

District Court, S. D. New York.

October 14, 1927.

Lord, Day & Lord and Franklin Grady, 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, and E. E. Angevine, Atty., Bureau of Internal Revenue, of Washington, D. C., for defendant.

GODDARD, District Judge.

Motion to dismiss the amended complaint in an action brought to recover from William H. Edwards, former collector of internal revenue, the sum of $17.10 paid as a tax under protest. The plaintiff, during the period beginning July 1, 1920, and ending June 30, 1921, was engaged in the manufacture and sale of cigarettes. On July 27, 1921, the plaintiff paid the tax which the collector claimed and demanded as then due and payable by the plaintiff under the provisions of section 1002 of title 10 of the Revenue Act of 1918, approved February 24, 1919 (Comp. St. § 5980p).

The plaintiff alleges (and for the purposes of this motion the allegations set forth in its complaint are to be regarded as the facts) that the collector, in computing the tax, included in the total of cigarettes sold by plaintiff cigarettes which it had manufactured and exported during the fiscal year beginning July 1, 1920, and ending June 30, 1921. Plaintiff contends that the tax collected from it is excessive in the said amount of $17.10, on the ground that this amount represents the tax upon exported cigarettes, and is therefore contrary to section 6194 of the Compiled Statutes (26 USCA § 785), which provides that manufactured tobacco, snuff, and cigars may be exported without payment of tax.

The Revenue Act of 1918, approved February 24, 1919 (40 Stat. 1057 Comp. St. § 5980p), in title 10, "Special Taxes," provides in part as follows:

"Sec. 1002. That on and after January 1, 1919, there shall be levied, collected and paid annually, in lieu of the taxes imposed by section 408 of the Revenue Act of 1916, the following special taxes, the amount of such taxes to be computed on the basis of the sales for the preceding year ending June 30: * * * Manufacturers of cigarettes, including small cigars weighing not more than three pounds per thousand, shall each pay at the rate of 6 cents for every ten thousand cigarettes, or fraction thereof. In arriving at the amount of special tax to be paid under this section, and in the levy and collection of such tax, each person engaged in the manufacture of more than one of the classes of articles specified in this section shall be considered and deemed a manufacturer of each class separately."

Under this same title 10, relating to "Special Taxes," is section 1000 (Comp. St. § 5980n) which imposes a capital stock tax upon corporations in the nature of a special excise tax of $1 for each $1,000, of the fair average value of the capital stock of the corporation, and section 1001 (Comp. St. § 5980o), which imposes a "special tax" upon certain persons in certain enumerated occupations, such as brokers, upon whom a tax of $50 per annum is imposed; proprietors of theaters, upon whom a tax of from $50 to $200 is imposed, according to the seating capacity of the theater; pawnbrokers, being taxed $100; brewers, distillers, liquor dealers, and manufacturers of stills, being taxed $1,000, etc.

Section 1005 of title 10 provides: "Any person who carries on any business or occupation for which a special tax is imposed by sections 1000, 1001, or 1002, without having paid the special tax therein provided, shall, besides being liable for the payment of such special tax, be subject to a penalty of not more than $1,000, or to imprisonment for not more than one year, or both." U. S. Compiled Statutes 1916, Annotated 1919 Supp. vol. 1, p. 1197, § 5980s.

The plaintiff's contention is that, under the provisions of section 8194 of the Compiled Statutes its manufactured cigarettes may be exported without the payment of the tax imposed under section 1002. Section 6194, U. S. Comp. Stat. (Act August 4, 1886, § 1, 24 Stat. 218 26 USCA § 785), reads: "* * * Manufactured tobacco, snuff, and cigars may be removed for export to a foreign country without payment of tax, under such regulations, and the making of such entries, and the filing of such bonds and bills of lading as the Commissioner of Internal Revenue, with the approval of the Secretary of the Treasury, shall prescribe."

Under section 6197, U. S. Comp. Stat. (26 USCA § 822): "Cigarettes and cheroots shall be held to be cigars under the meaning of this chapter."

The question is whether the tax imposed by section 1002 is a tax upon cigarettes, or a tax upon the manufacturer of cigarettes, which is fixed or measured by the number of cigarettes manufactured and sold during a specified period.

It seems to me, from the reading of the sections set forth above and the others relating to the subject, that Congress imposed taxes of two kinds: One, a tax on the product; the other, a special tax on certain enumerated occupations, such as broker, proprietor of a theater, liquor dealer, and including that of manufacturer of cigarettes. The last paragraph of section 1002 states:

"Each person engaged in the manufacture of more than one of the classes of articles specified in this section shall be considered and deemed a manufacturer of each class separately."

That the "special tax" was a tax on the occupation, as distinct from a tax on the product, is further emphasized by section 1005, wherein it states: "Any person who carries on any business or occupation for which a special tax is imposed by sections 1000, 1001, or 1002, without having paid the special tax * * * shall, besides being liable for the payment of such special tax, be subject to a penalty * * * or to imprisonment."

The amount of this special tax is measured by the amount of sales per year. Congress might have made it a flat tax, but apparently,...