which they state that they are about to take out a license for a tobacco factory, and ask if they would be permitted to buy different tobacco from various factories, already cut but not packed, whereby they could blend their own mixtures and put them in statutory packages. They also state that they are already aware that they can purchase Havana scraps and put it up in statutory packages. They ask to be furnished a copy of the regulations appertaining to the steps necessary to be taken by them to qualify as manufacturers of tobacco. They have been referred to you.

You are advised that a manufacturer of tobacco is not permitted to sell cut or granulated tobacco in bulk, as material, and without payment of tax, to another manufacturer, although the latter may intend to properly pack and stamp it as required by the statutes.

All cut and granulated tobacco which is merchantable as a manufactured cut or smoking tobacco is subject to tax in the hands of the manufacturer, and he is not allowed to dispose of merchantable manufactured tobacco to another manufacturer of tobacco under a special permit.

One manufacturer may, under a special permit, sell to another manufacturer refuse scraps, fine-cut shorts, the refuse of fine-cut chewing tobacco, clippings, cuttings, and sweeping of tobacco; and only these classes or kinds of material can properly be transferred from one manufacturer to another.

Manufactured tobacco, whether cut, granulated, or scraps, the process or manufacture of which has been completed, is not subject to sale and transfer by one manufacturer to another, but must be properly packed, labeled, and stamped before it is removed from the place of manufacture.

The office calls your especial attention to these rulings for the reason that in your district, and the Third district of New York, there are a number of persons who have qualified as manufacturers of tobacco for the sole purpose of buying and selling scraps, cuttings, clippings, waste, and sweepings of tobacco under the statute, and the office has reason to believe that they are using cutting machines and cleaning machines, and assort, size, and clean their tobacco in such manner that it has become a cut or granulated tobacco, the process or manufacture of which has been completed, and which products are not, under the statute, subject to transfer to other manufacturers, and they are required to properly pack, label, and stamp the same before removal from the place of manufacture.

Respectfully, yours,

ROBT. WILLIAMS, Jr.,
Acting Commissioner.

Mr. CHAS. H. TREAT, Collector Second District, New York, N. Y.

(21518.)

Sale of tobacco stems.

Manufacturers of tobacco or cigars may sell tobacco stems in their natural condition to other manufacturers, to qualified dealers in leaf tobacco, or to persons who buy tobacco stems in their natural condition exclusively for export, the purchaser of the stems not being required to qualify as a manufacturer of tobacco nor to export in bond the stems purchased from manufacturers.

TREASURY DEPARTMENT,

OFFICE OF COMMISSIONER OF INTERNAL REVENUE,

Washington, D. C., August 16, 1899.

Mr. E. T. FRANKS, Collector Second District, Owensboro, Ky. SIR: This office has received your letter, dated 11th instant, inclosing one dated the 10th from Messrs. Smith & Scott, manufacturers of tobacco at Paducah, Ky., in which they urge that the present regulations relating to the sale of tobacco stems in their natural condition may be so modified as to permit their sale by manufacturers of tobacco to qualified dealers in leaf tobacco or to persons who purchase tobacco stems exclusively for export, the purchasers of such tobacco stems to be relieved from the regulation which requires them to qualify as manufacturers of tobacco and export their stems in bond.

This subject has recently been carefully considered by the office with a view of removing the restrictions placed upon the sale of stems by manufacturers of tobacco or cigars and giving them advantages extended to leaf dealers who stem their tobacco. The office is now disposed to remove the restriction, and hereafter manufacturers of tobacco or cigars will be privileged to sell their tobacco stems in their natural condition to either one of the three classes of persons herein mentioned, to wit: First, to other qualified manufacturers of tobacco or cigars; second, to qualified dealers in leaf tobacco; and, third, to persons who buy the tobacco stems in their natural condition, in packages, exclusively for export.

The manufacturer desiring to sell his tobacco stems will be required to procure a special permit from the collector of his district authorizing the sale, and in making such application the manufacturer will state the actual quantity of tobacco stems which he desires to sell and the business and name of the person to whom he desires to sell the same, if not a manufacturer of tobacco or cigars; and if a manufacturer of tobacco, rule 2 of the regulations, series 7, No. 8, revised August 27, 1898, page 7, will be observed.

Tobacco stems intended to be sold to persons other than duly registered dealers in leaf tobacco or duly registered manufacturers of tobacco, snuff, or cigars, or to persons who purchase tobacco stems exclusively for export, must first be rendered unfit for use as material in making smoking tobacco or snuff by admixture with ashes, sulphur, lime, bone dust, or other similar articles, as now provided by

regulations, after which the stems may be sold to persons who desire to reduce the same to fertilizers, insecticides, or sheep wash.

Dealers in leaf tobacco required to make entry in red ink on debit side of Book 59 of tobacco returned, and, after checking, the collector will omit reporting the sale on abstracts, Form 434 or 435.

TREASURY DEPARTMENT,

OFFICE OF COMMISSIONER OF INTERNAL REVENUE,

Washington, D. C., August 19, 1899.

SIR: Your abstract on Form 434, reporting sales of leaf tobacco to nonresident manufacturers of tobacco or cigars during the quarter ended March 31, 1899, shows a sale on January 3, 1899, of 294 pounds of leaf tobacco by N. Guenther to Chas. H. Seaman, a manufacturer of cigars in the Seventh district of Indiana.

This tobacco was not taken up in the accounts of the manufacturer, and Collector Henry has sent to this office an affidavit of this purchaser in which he states that he received the tobacco on January 6 and returned it to the seller on January 7, 1899.

This tobacco, when returned, should have been entered with the receipts of leaf tobacco in N. Guenther's Book 59 on the date it was received. Dealers in leaf tobacco, when tobacco is returned to them, should make an entry in red ink on the debit side of Book 59, showing the date and quantity of tobacco returned, the name of the person returning the same, and using the word "returned." This would balance the first entry showing sale, the red ink entry would at once call the collector's attention to the case, and the accounts could be checked and the sale omitted from abstracts, Form 434 or 435. Respectfully, yours, ROBT. WILLIAMS, Jr., Acting Commissioner.

Mr. BERNHARD BETTMANN,

Collector First District, Cincinnati, Ohio.

(21561.)

Special-tax liabilities-Basis for computation.

Dealers in leaf tobacco may transfer leaf tobacco to themselves as manufacturers of cigars and such transfers will not be taken into account in estimating the liability to special taxes.-Such transactions do not constitute sales within the meaning of the statute.

TREASURY DEPARTMENT,

OFFICE OF COMMISSIONER OF INTERNAL REVENUE,

Washington, D. C., September 1, 1899.

SIR: Replying to your letter dated 29th instant, inclosing one from J. R. Bricker & Co., dealers in leaf tobacco, and also cigar makers.

relative to the payment of special tax as dealers in leaf tobacco, you are advised that notwithstanding their records may show they sold 128,219 pounds of leaf tobacco during the last fiscal year, if you find that they transferred all of this tobacco to themselves as cigar makers, except 37,948 pounds sold to outside parties, this last account should be taken as a basis for the computation of the tax. Having sold less than 50,000 pounds, they would incur liability to special tax, for the present year, at the minimum rate, $6.

It appears that the larger portion of their leaf tobacco is purchased for subsequent use by them at their factory; and where they transfer leaf tobacco to themselves, as cigar makers, from themselves, as dealers in leaf tobacco, such transaction does not constitute a sale within the meaning of the statute. And, so far as such transactions are concerned, such transfers should not be taken into account in estimating the liability to special taxes.

Transactions of this character are to be encouraged rather than discouraged, and, under the rule, manufacturers will have an opportunity to store their surplus stocks of leaf tobacco outside of their factory premises. In such cases, the tobacco would be properly accounted for on their books as leaf dealers until the same was actually transferred to the factory, a condition which is more satisfactory than to authorize outside storage by manufacturers.

Respectfully, yours,

ROBT. WILLIAMS, Jr.,

Acting Commissioner.

Mr. H. L. HERSHEY, Collector Ninth District, Lancaster, Pa.

WAREHOUSE RECEIPTS.

(See also DECISIONS 20914, p. 21; 21044, p. 90; 21524, p. 317.)

(20484.)

Stamps on warehouse receipts.

Opinion of the honorable Attorney-General on the question of the proper construction to be put upon the clause of Schedule A of the war-revenue act relative to stamps upon warehouse receipts.

TREASURY DEPARTMENT,

OFFICE OF COMMISSIONER OF INTERNAL REVENUE,

Washington, D. C., January 3, 1899.

The appended opinion of the honorable Attorney-General is hereby promulgated for the information and guidance of all officers of the Internal-Revenue Service.

N. B. SCOTT, Commissioner.

DEPARTMENT OF JUSTICE, Washington, D. C., December 29, 1898.

The SECRETARY OF THE TREASURY.

SIR: I have the honor to acknowledge the receipt of yours of the 29th of October, 1898, inclosing copy of letter from the Commissioner of Internal Revenue, in which you ask my opinion as to the proper construction to be put upon the clause of Schedule A of the war-revenue act relating to stamps upon warehouse receipts. The clause referred to is as follows:

"Warehouse receipt for any goods, merchandise, or property of any kind held on storage in any public or private warehouse or yard, except receipts for agricultural products deposited by the actual grower thereof in the regular course of trade for sale, twenty-five cents."

Omitting the portion of this statute excepting from its operation receipts for agricultural products deposited by the actual grower thereof in the regular course of trade for sale, it is a reproduction of a like provision in the revenue act of July 1, 1862. (See 12 Stat. L., Ch. 119, Schedule B, p. 483.)

The construction placed upon this clause of the statute of 1862 is found in Boutwell's Manual of the U. S. Tax System, p. 340, ruling No. 241, and it is held that

"All receipts for grain or other property of any kind on storage in any public or private warehouse or yard, are 'warehouse receipts' within the meaning of the excise law, and are each subject to a stamp duty of twenty-five cents, without regard to the quantity specified, or the time for which the property is stored."

I concur in this construction of the former law, and, the language of the statute now under consideration being the same as that contained in the former law, I adopt it as the proper interpretation of the provision of the act of 1898 above quoted.

The contention made in the brief filed by the representative of the warehousemen that, in order to be taxable, a receipt given for goods, merchandise, or property held on storage in a warehouse must be a negotiable paper is, in my opinion, untenable. A receipt is a writing acknowledging the taking of money or goods, and may or may not be negotiable, as the party by whom it is given may choose to make it, or local laws may provide; but, whatever its character in this respect, it is still a receipt, and a receipt given for goods, merchandise, or property held on storage in a warehouse is a warehouse receipt. A warehouse receipt is nothing more nor less than the written statement of the warehouseman that certain goods, merchandise, or property are deposited in his warehouse and held on storage for some particular person or persons. It is the written evidence of the storage of the property. This is the paper or instrument which, in my opinion, it is the intention of the law to tax, and I think such intention is plainly and unequivocally expressed in the language of the law.

I, therefore, advise you that all receipts given for goods, merchandise, or property held on storage in a warehouse require the stamp provided for by the clause of the war-revenue act above recited. Respectfully, yours, JAMES E. BOYD, Assistant Attorney-General.

Approved:

JOHN W. GRIGGS, Attorney-General.