Gellman v. United States
| Decision Date | 26 January 1955 |
| Docket Number | Civ. A. No. 4324. |
| Citation | 129 F. Supp. 291 |
| Parties | Nathan GELLMAN, Burt Horwitz and Peter Podany, co-partners, d/b/a Gellman Brothers, Plaintiffs, v. UNITED STATES of America, Defendant. |
| Court | U.S. District Court — District of Minnesota |
Maurice Weinstein, Milwaukee, Wis., and Charles Halpern, Minneapolis, Minn., for plaintiffs.
H. Brian Holland, Asst. Atty. Gen., Andres D. Sharpe and David W. Richter, Sp. Assts. to the Atty. Gen., and George E. MacKinnon, U. S. Atty., and Alex Dim, Asst. U. S. Atty., St. Paul, Minn., for the United States.
This is a suit for recovery of amounts alleged to have been wrongfully collected from plaintiffs as federal retail excise taxes with respect to certain luggage and jewelry sold by plaintiffs and a predecessor corporation during the period January 1, 1947 through February 1951.
The plaintiffs are co-partners under the name Gellman Brothers. The firm and its predecessors of the same name have been engaged since 1919 in the business of selling a variety of premium and novelty merchandise. For many years it has issued catalogs descriptive of its line of goods and in consequence the bulk of its sales are made in response to mail orders although it also sells through direct solicitation of customers as well as to those who call at its place of business in Minneapolis. The firm has a large volume of trade and the sales here in question constituted a small fraction of its total business.
The Collector of Internal Revenue following an examination of plaintiff's books and records determined that certain leather goods and items of jewelry were sold by Gellman Brothers to its customers "at retail", that such sales were subject to tax under Sections 1651 (a) and 2400 of the Internal Revenue Code, 26 U.S.C.A. §§ 1651(a) and 2400, and assessed a tax with respect thereto in the amount of $9,770.83. The tax plus interest thereon or a total of $10,952.13 was paid by plaintiffs under protest on January 23, 1952.
Plaintiffs filed timely claims for refund and, the Government having taken no action on the claims within six months of such filing, commenced this suit for refund.
The Government concedes that the original assessment was erroneous in that the tax should properly have been assessed in the amount of $8,374.18 instead of $9,770.83. As a consequence of this concession there remains in dispute here that lesser amount and the interest paid thereon.
The taxpayers concede that the revised amount was properly computed with respect to articles sold by them and that the articles sold were within the purview of one or the other of the sections mentioned, but contend that the articles were not "sold at retail" and accordingly that the tax did not attach.
The Government urges that the articles were "sold at retail" when the last sale occurred prior to use by an ultimate consumer, or in other words that the articles were sold at retail upon that sale which was not for resale. On the other hand plaintiffs contend that their sales were made at "wholesale" for the reason among others that the purchasers had a profit or business motive in buying the articles. It is apparent that under either theory the subsequent disposition of the goods by those who purchased from Gellman Brothers is a relevant factor for consideration here.
In this connection the parties have stipulated that the sales in question were made to five general categories of purchasers and with a few exceptions have reached agreement as to the subsequent use or disposition made of the goods. The substance of the stipulation with reference to the sales made for the period January 1, 1950 through February 1951 may be summarized as follows:
Category of Customer Sales Tax
(1) — Lodges, Churches & Clubs 100% disposed
of by these customers as prizes $ 3,449.11 $ 477.29
(2) — Bars, Taverns & Cafes 50% disposed of
as prizes 1,736.08 259.19
50% disposition not agreed but plaintiffs
contend was resold 1,736.17 259.19
(3) — Industrial Concerns
100% disposed of in following manner
without specific allocation
(a) given as premiums in connection with
sale of other merchandise
(b) given as incentive awards to employees
(c) given as awards to employees or preferred
customers 457.60 50.55
(4) — Operators, Concessionaires and Pocket
Merchants (Peddlers)
30% sold to operators and disposed of as
prizes on games 6,101.82 970.12
50% sold to concessionaires and disposed
of as prizes 10,169.69 1,616.88
10% sold to operators — disposition not
agreed but plaintiffs contend was resold 2,033.94 323.37
10% sold to pocket merchants — disposition
not agreed but plaintiffs contend
was resold by them 2,033.94 323.37
(5) — Individuals
100% disposed of by personal or family
use 5,196.17 670.95
__________ _________
Total for period January 1, 1950 through February
1951 $32,914.42 $4,950.91
The parties have further stipulated that sales for the years 1947 through 1949, upon which the tax was estimated in the amount of $3,423.27, were made to customers in the various categories in the same proportions as shown in the summary and disposed of by them in the manner there indicated.
Viewed in the light of the subsequent disposition made by these purchasers it is apparent that the sales in question fall into three general groups: (1) sales to customers who dispose of the merchandise as gifts to employees or preferred customers, as premiums in connection with the sale of other goods, or as prizes in the operation of games of chance, or to stimulate attendance at picnics, bazaars or other events conducted by these customers, (2) sales to those individuals who buy for their own or family use, (3) sales to customers who taxpayers claim resell the merchandise to others.
All of these articles were sold by Gellman Brothers but were they sold at "retail" within the meaning of that term as employed in the statutes?
It is axiomatic of course that the primary task of interpretation is the discovery of legislative intent or purpose and the effectuation of that intent if such is possible without doing violence to the meaning of the words employed. As stated in Helvering v. Stockholms Enskilda Bank, 293 U.S. 84, 93, 55 S.Ct. 50, 54, 79 L.Ed. 211:
"The intention of the lawmaker controls in the construction of taxing acts as it does in the construction of other statutes, and that intention is to be ascertained, not by taking the word or clause in question from its setting and viewing it apart, but by considering it in connection with the context, the general purposes of the statute in which it is found, the occasion and circumstances of its use, and other appropriate tests for the ascertainment of the legislative will."
Congress in enacting these provisions selected certain categories of articles which may be described as luxury goods. Having selected these subjects it must be assumed unless a contrary intention is evidenced that it intended the tax to bear upon all of the named articles without exception. Having made such selection it was also necessary to indicate the event in the history of each article, between the time it appeared upon the scene through manufacture or importation and the time it disappeared through consumption or use, upon which the tax was to attach. At the time Section 2400 was enacted there was in existence a tax on toilet preparations in the nature of a manufacturer's excise and similar taxes upon jewelry had previously been in effect.
The nature of the manufacturer's excise is indicated in Indian Motorcycle Co. v. United States, 283 U.S. 570, 574, 51 S.Ct. 601, 602, 75 L.Ed. 1277, where the court stated:
The reasons for shifting the incidence of the present tax to a transaction occurring later in the distributive process are evidenced by the report of the House Committee on Ways and Means, H. R. Rep. No. 1040, 77th Cong., 1st Sess. 33 (1941), where with reference to manufacturer's excises it is stated:
.
Certainly this expression does not indicate an intent to allow any of the named articles to escape untaxed.
The process of defining the appropriate event upon which the present tax was to attach is apparent. As in the case of the manufacturer's excise the event selected was a sale of the article, a readily identifiable transaction which provides a convenient and workable basis for the computation of the tax. But in the course of distribution the article may be sold many times and it must be assumed that only one...
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Salvation Army v. United States
...user. They were made because of a legal activity of the Salvation Army. As such, they were sales at retail. See Gellman v. United States, D.C.Minn. 1955, 129 F.Supp. 291. Since there is no exemption for sales of luggage made for religious purposes, the tax was properly imposed upon these Th......