United States v. Keeton, 7282.
| Decision Date | 08 November 1956 |
| Docket Number | No. 7282.,7282. |
| Parties | UNITED STATES of America, Appellant, v. H. H. KEETON, Sr., Trading and Doing Business as Virginia Auto Top Company, Appellee. |
| Court | U.S. Court of Appeals — Fourth Circuit |
Walter R. Gelles, Attorney, Department of Justice, Washington, D. C. (Charles K. Rice, Asst. Atty. Gen., Lee A. Jackson and I. Henry Kutz, Attorneys, Department of Justice, Washington, D. C., L. S. Parsons, Jr., U. S. Atty., Norfolk, Va., and R. R. Ryder, Asst. U. S. Atty., Richmond, Va., on brief), for appellant.
H. Brice Graves and Ralph H. Ferrell, Jr., Richmond, Va. (Hunton, Williams, Gay, Moore & Powell, Richmond, Va., on brief), for appellee.
Before PARKER, Chief Judge, and SOPER and FAHY*, Circuit Judges.
Appellee taxpayer1 sued the United States in the District Court for the Eastern District of Virginia to recover the amount of certain excise taxes he had paid on an assessment under section 3403(c) of the Internal Revenue Code of 1939, 53 Stat. 410, as amended, 26 U.S.C. § 3403 (1952).2 The court gave judgment for the taxpayer and the United States appeals.
The taxes were levied on the theory that taxpayer was a manufacturer3 who sold automobile accessories, namely, automobile seat covers, and thus came within the excise tax imposed by section 3403(c). Footnote 2, supra. There is no dispute that automobile seat covers are automobile accessories. The District Court so held. And see Universal Battery Co. v. United States, 281 U.S. 580, 583-584, 50 S.Ct. 422, 74 L.Ed. 1051; Masao Hirasuna v. McKenney, D. C., 135 F.Supp. 897 (D.C.Hawaii). The question is whether taxpayer manufactured and sold such seat covers. If so he was not entitled to obtain judgment against the United States for the amount of tax he had paid.
Taxpayer's business insofar as here relevant may be described as the making of automobile seat covers on special orders of customers who select the material to be used from fabrics he carries in stock. Taxpayer reported to the Internal Revenue Service 60 per cent of the total charges incident to these covers for the tax period in question. The remaining 40 per cent of his charges was attributed to fitting and installation. Accordingly the disputed tax amounts to 8 percentum of 60 percentum of the total price of the covers.4
The price taxpayer fixed was for the completed job, which varied according to the value of the particular material selected by the customer. The price also included an item for fashioning and installing the cover in the car. In the end the price was made up of the cost of material and labor, an allowance for overhead, and a percentage for profit.5
In making the seat covers taxpayer removes the seats and rear backrests of the automobile and places them on a table. The front backrests are left in the car. The material to cover each surface is measured and cut somewhat larger than the surface. This material is then drawn over the surface and marked with chalk around the edges. It is next removed and cut at the chalk markings. A binding is sewed around the edges, and the cut sections are sewed together and trimming is attached. The covers so made are not sewed to the seats of the car but are clamped by means of hog rings to the metal frames encircling the seats and backrests. When completed the seat covers constitute separate articles; they are not integral parts of the seats or backrests of the car. Furthermore, taxpayer does not sell the materials separately. He sells the finished product.
The District Court held taxpayer did not sell a manufactured article, expressing disagreement with the contrary conclusion reached in like factual circumstances in Masao Hirasuna v. McKenney, supra. The court pointed out that three steps were necessary before the accessory becomes part of the car, i. e. (a) the raw materials, (b) the actual manufacture of the raw materials into a finished, useful object, and (c) the installation of this object. Applying this three-step test it considered as raw materials those used in making the fabric, so that the bolt of fabric, which taxpayer purchased, constituted the manufactured object, i. e. "the accessory," and the cutting and attaching of the fabric to the automobile constituted installation. Our difficulty with this analysis is that while it is true the fabric had been manufactured independently it became thereafter part of an additional manufacturing process leading to a finished seat cover.
Appellee contends that Congress had in mind automobile accessories which were first manufactured and then carried in stock as completed articles, that is,...
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Martin's Auto Trimming, Inc. v. Riddell
...courts have uniformly held that such tax applies to such sales. Masao Hirasuna v. McKenney, 9 Cir., 1957, 245 F.2d 98; United States v. Keeton, 4 Cir., 1956, 238 F.2d 878, certiorari denied 353 U.S. 973, 77 S.Ct. 1056, 1 L.Ed.2d 1135; Campbell v. Brown, 5 Cir., 1957, 245 F.2d In an effort t......
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Masao Hirasuna v. McKenney
...considered and rejected by the United States Court of Appeals for the Fourth Judicial Circuit in the very recent case of United States v. Keeton, 4 Cir., 238 F.2d 878 decided November 8, 1956.3 We are in accord with the view expressed in the Keeton Appellant's principal contention appears t......
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Campbell v. Brown
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