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SALLER v. UNITED STATES

May 20, 1940

SALLER
v.
UNITED STATES



The opinion of the court was delivered by: KALODNER

This case arises upon a motion to dismiss the complaint and, therefore, the facts alleged therein must be accepted as true for the purposes of the present decision. Prior to the effective date of the processing tax on rye, imposed under the Agricultural Adjustment Act of 1933, 7 U.S.C.A. § 601 et seq., plaintiff had contracted to purchase the output of rye whiskey of the Harford Pure Rye Distillers, Inc., at a fixed price base, which agreement did not by its terms permit the addition to the price of any taxes. Subsequent to the imposition of the aforementioned tax, the processor-vendor added to the bills for deliveries of whiskey after such date the amount of processing taxes involved in the processing of rye contained in the whiskey. Plaintiff paid these amounts to his vendor, totalling $5,238.10, under Section 18 of the Agricultural Adjustment Act, 7 U.S.C.A. § 618. In turn, the vendor paid the amounts involved as processing taxes to the Collector of Internal Revenue.Plaintiff resold the whiskey thus purchased at prices which did not include these additional sums paid. Thus, he bore the burden of the taxes involved. (Par. 4.)

In United States v. Butler, 1936, 297 U.S. 1, 56 S. Ct. 312, 80 L. Ed. 477, 102 A.L.R. 914, and Rickert Rice Mills Inc. v. Fontenot, 1936, 297 U.S. 110, 56 S. Ct. 374, 80 L. Ed. 513, it was held that the taxes imposed by the Agricultural Adjustment Act were unconstitutional and void. Thereafter, plaintiff recovered $4,365 on a claim for payment arising under Section 602 of the Revenue Act of 1936, 7 U.S.C.A. § 642, because of whiskey held for sale at the first moment of January 6, 1936. (Par. 5.) Plaintiff also filed a claim for refund, under Section 903 of the Revenue Act, 7 U.S.C.A. § 645, for $5,238.10 representing the additional amounts paid by virtue of Section 18 of the Agricultural Adjustment Act, allegedly as processing taxes to the United States through the agency of the processorvendor, allowing, however, a credit for $4,365, thus leaving a balance of $873.10. (Par. 5.) The Commissioner of Internal Revenue disallowed the claim on the ground that under Title VII of the Revenue Act of 1936, 7 U.S.C.A. § 644 et seq., taxes paid under the Agricultural Adjustment Act could be recovered only by the person who paid such taxes to the United States and plaintiff was not that person. (Par. 7.) Plaintiff thereupon petitioned the United States Processing Tax Board of Review (Par. 7.), which dismissed the petition on the ground that plaintiff had not paid any processing taxes to the United States within the meaning of Title VII of the Revenue Act of 1936. (Plaintiff's brief, pp. 2, 3.)

 Alleging that the additional amounts paid to his vendor were paid as taxes as required by Section 18 of the Agricultural Adjustment Act (Par. 8.), plaintiff brings this action against the United States to recover the sum of $873.10 with interest, averring that this court has jurisdiction under either or both of the following statutes: (a) the Revenue Act of 1936, Title VII, 7 U.S.C.A. § 644 et seq.; (b) the Judicial Code, Section 24(20) as amended, 28 U.S.C.A. § 41(20). (Par. 1.)

 Defendant moves to dismiss the complaint on the ground that this court is without jurisdiction over the subject matter.

 In view of the numerous statutory provisions involved herein, for purposes of clarity it would appear desirable to summarize the legislative background of the case. To obtain revenue to further its purposes, the Agricultural Adjustment Act of 1933 imposed the following taxes: (1) A processing tax on the first domestic processing of enumerated basic agricultural commodities, to be paid by the processor, Section 9, 48 Stat. 35, 7 U.S.C.A. § 609; (2) Compensating taxes (a) on the first domestic processing of any competing commodity which the Secretary of Agriculture finds placing processors of basic agricultural commodities at a disadvantage due to the competitive advantage otherwise enjoyed because of the tax imposed upon the basic commodity, Section 15(d), 48 Stat. 39, 7 U.S.C.A. § 615(d), and (b) on any article processed or manufactured wholly or in chief value from any commodity with respect to which a processing tax is, in effect, imported into the United States from any foreign country or possession of the United States to which the act does not apply, Section 15(e), 48 Stat. 40; 7 U.S.C.A. § 615(e), (3) A floor stocks tax on articles already processed wholly or in chief value from any commodity upon which a processing tax is levied and which are held for sale or other disposition on the date that the processing tax with respect to that commodity takes effect, Section 16, 48 Stat. 40, 7 U.S.C.A. § 616. Section 18 of the Act, 48 Stat. 41, 7 U.S.C.A. § 618, provided:

 "(a) If (1) any processor, jobber, or wholesaler has, prior to the date a tax with respect to any commodity is first imposed under this title [chapter], made a bona fide contract of sale for delivery on or after such date, of any article processed wholly or in chief value from such commodity, and if (2) such contract does not permit the addition to the amount to be paid thereunder of the whole of such tax, then (unless the contract prohibits such addition) the vendee shall pay so much of the tax as is not permitted to be added to the contract price.

 "(b) Taxes payable by the vendee shall be paid to the vendor at the time the sale is consummated and shall be collected and paid to the United States by the vendor in the same manner as other taxes under this title [chapter]. In case of failure or refusal by the vendee to pay such taxes to the vendor, the vendor shall report the facts to the Commissioner of Internal Revenue who shall cause collections of such taxes to be made from the vendee."

 In United States v. Butler, supra, the Agricultural Adjustment Act was held unconstitutional. Thereafter, in the Revenue Act of 1936, Congress enacted provisions authorizing refunds of amounts collected under the invalid Act. Title IV, Section 602(a), of the Revenue Act provides: "There shall be paid to any person who, at the first moment of January 6, 1936, held for sale or other disposition (including manufacturing or further processing) any article processed wholly or in chief value from a commodity subject to processing tax, an amount computed as provided in subsection (b), except that no such payment shall be made to the processor or other person who paid or was liable for the tax with respect to the articles on which the claim is based."

 Section 602(b) prohibits recovery in excess of the amount of the burden of the tax with respect to the article which was shifted to the claimant in the price he paid for the article and in excess of that part of this burden which the claimant has not passed on to his vendees. Section 602 merely is a gratuity extended by Congress to certain dealers who bore the burden of taxes in increased purchase prices but who did not directly pay any tax under the Agricultural Adjustment Act. Seligman's Inc. v. United States, D.C., W.D.La.1939, 30 F.Supp. 895.

 Title VII of the Revenue Act deals explicitly with refunds of taxes collected under the Agricultural Adjustment Act. Section 902 thereof 7 U.S.C.A. § 644, provides:

 "No refund shall be made or allowed, in pursuance of court decisions or otherwise, of any amount paid by or collected from any claimant as tax under the Agricultural Adjustment Act [this chapter], unless the claimant establishes to the satisfaction of the Commissioner in accordance with regulations prescribed by him, with the approval of the Secretary, or to the satisfaction of the trial court, or the Board of Review in cases provided for under section 906 [648 of this title], as the case may be --

 "(a) That he bore the burden of such tax and has not been relieved thereof nor reimbursed therefor nor shifted such burden, directly or indirectly, * * *." (Italics supplied.)

 Section 905, 7 U.S.C.A. § 647, dealing with the jurisdiction of courts, declares: "Concurrent with the Court of Claims, the District Courts of the United States (except as provided in section 906 [648] of this title) shall have jurisdiction of cases to which this title applies, regardless of the amount in controversy, if such district courts would have had jurisdiction of such cases but for limitations under ...


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