Kin-Septic Co. v. United States
| Decision Date | 04 February 1946 |
| Docket Number | No. 46202.,46202. |
| Citation | 64 F. Supp. 142 |
| Parties | KIN-SEPTIC CO. v. UNITED STATES. |
| Court | U.S. Claims Court |
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Theodore B. Benson, of Washington, D. C., for plaintiff.
Elizabeth B. Davis, of Washington, D. C., and Samuel O. Clark, Jr., Asst. Atty. Gen. (Robert N. Anderson and Fred K. Dyar, both of Washington, D. C., on the brief), for defendant.
Before WHALEY, Chief Justice, and LITTLETON, WHITAKER, JONES, and MADDEN, Judges.
The plaintiff sues for a refund of manufacturer's excise tax imposed under Section 603 of the Revenue Act of 1932, 47 Stat. 169, 261, 26 U.S.C.A. Int.Rev.Acts, page 608, for the period from January 1, 1934, to August 31, 1936.
Plaintiff is a manufacturer of cosmetics which were bottled, packed, and labeled, and sold through another corporation. One individual owned more than 90 percent of the common stock of the plaintiff corporation and more than 95 percent of the stock of the other corporation. He was the president and manager of both corporations. The same building and the same employees were used by both corporations. The second corporation sold the cosmetics to the trade.
The question is whether the tax should be based on the price at which the commodities were furnished to the second corporation or whether it should be levied on the price at which the disposal corporation sold them to the trade.
Section 603 of the Revenue Act of 1932, supra, imposes a tax upon certain toilet articles sold by the manufacturer on a percentage of the price for which they are sold.
Section 619 of the act is as follows:
the tax under this title shall (if based on the price for which the article is sold) be computed on the price for which such articles are sold, in the ordinary course of trade, by manufacturers or producers thereof, as determined by the Commissioner.
"(c) In the case of (1) a lease, (2) a contract for the sale of an article wherein it is provided that the price shall be paid by installments and title to the article sold does not pass until a future date notwithstanding partial payment by installments, or (3) a conditional sale, there shall be paid upon each payment with respect to the article that portion of the total tax which is proportionate to the portion of the total amount to be paid represented by such payment." 26 U.S. C.A. Int.Rev.Acts, page 618.
The plaintiff corporation was organized in 1930. During the period involved in this proceeding plaintiff had outstanding 992 shares of common stock which were held as follows:
Shares
E. A. Henske ................. 950
R. L. Henske (his wife) ...... 1
G. Bass ...................... 18
Others ....................... 23
During the same period the ownership of the 85 shares of preferred stock outstanding were held as follows:
Shares
E. A. Henske ................. 48
R. L. Henske ................. 1
G. Bass ...................... 18
Others ....................... 18
From the time of its incorporation in 1930 through December 1933 toilet and other preparations were manufactured, bottled and labeled by plaintiff and sold to E. A. Henske, trading as an individual under the name of York Pharmacal Company. During that period the federal manufacturer's excise tax on such preparations was computed, reported and paid by plaintiff on the basis of prices at which the articles were sold to customers by the York Pharmacal Company. After December 1933 plaintiff sought to have the tax assessed and paid on the basis of the price at which it billed its goods to the York Company instead of the price the York Company sold to the trade.
On January 1, 1934, a...
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...manufacturing corporation and that the constructive sale price provisions of the Commissioner would apply. Id. In Kin-Septic v. United States, 64 F.Supp. 142 (Ct.Cl.1946), the owner of a cosmetics manufacturing corporation set up a distributing corporation which assumed responsibility for t......
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