of the floor tax. The government, on the other hand, vigorously denies this assertion, and maintains that the evidence submitted proves only that 16 per cent of the floor tax was borne by the plaintiff. I have concluded that the government's position is correct for the following reasons:
There was introduced in evidence (plaintiff's Exhibit 4) a detailed calculation of the plaintiff's costs for the three months' period extending from April 2, 1933 to July 1, 1933 (which was the period immediately preceding the effective date of the floor tax), and a similar calculation for the three months' period extending from July 2 to September 30, 1933. The floor tax applied to stocks of flour on hand as of July 9, 1933. The plaintiff's Exhibit 4 likewise included a statement as to the sales prices of its products for the said two periods. These calculations, which were supplemented by testimony of a certified public accountant who testified for the plaintiff, would appear on the surface to indicate that while the selling price of the commodities manufactured by the plaintiff increased to the extent of $2.16 per barrel on the average during the three months' accounting period subsequent to the imposition of the tax, the plaintiff's costs (excluding the floor tax) increased to the extent of $2.38 per barrel on the average and, therefore, that the rise in cost other than tax, more than offset the increase in the sales price -- which, if correct, would indicate that the plaintiff bore the full burden of tax.
The government, however, supported by its witness who reviewed the plaintiff's tax calculation, contends that the plaintiff's calculation is incorrect because there is included in the cost of the material for the period extending from July to September, 1933, processing tax in the amount of $1.38 per barrel. The government contends that this item must be eliminated from the cost, thereby reducing the cost of sales per barrel during the July to September period, and consequently reducing the plaintiff's figure of increase in costs of sales for the second period from $2.38 to $1 per barrel.
Plaintiff concedes that there is included in the amount of $5.18, representing the cost of flour in the July to September period, the sum of $1.38, representing processing tax, and there is likewise included a figure of 7( per pound, which represents the first payment of floor tax on the amount of 640 barrels which were on hand as of July 9, 1933. The government raises no issue with respect to the inclusion of the latter item of cost.
No processing tax was paid with respect to the 640 barrels of flour which the plaintiff had on hand on July 9, 1933. This inventory was subject to the floor tax, but not to the processing tax. I am concerned with proof that the floor tax on these 640 barrels of flour was not shifted to the plaintiff's customers in the form of an increase in the price. To demonstrate that there was no such shift, plaintiff in its Exhibit No. 4 presents figures with respect to sales prices, cost of sales and gross margin of profit for the three months' period preceding and succeeding the approximate date when the floor tax was effective. Naturally, if the increase in the sales price per barrel ($2.16) was offset completely by an increase in materials or other cost of production (exclusive of taxes), the plaintiff would have readily shown that it bore the burden of the floor tax.
After eliminating the said item of processing tax from the cost of flour in the July to September period, I conclude that the plaintiff's increased costs per barrel of flour in the July to September period were only $1 as against $2.38, claimed by the plaintiff. Applying the increased cost of sales of $1 against the increase in the sales price of $2.16, I find that plaintiff recovered $1.16 per barrel in the form of an increase in the sales price during the July to September period. Plaintiff bore the burden of and is entitled to recover 22( out of each $1.38 paid per barrel in floor tax, or 16 per cent of the total amount of floor tax paid (i.e., 16 per cent of $720.55). Accordingly, plaintiff is entitled to recover the sum of $115.29.
Judgment should be entered for the plaintiff in the amount of $115.29 with interest from the date of payment, March 2, 1934.