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The CHAIRMAN. Your argument would not approve misbranding:
Mr. Taylor. Certainly not. So long as competition is the rule of industry, enterprises will prosper or fail only as they are able to meet the needs of the public. To insist that Government taxing powers be used to hinder one legitimate industry for the benefit of a competing cne is to undermine the foundation of private enterprise and our competitive system. If margarine can be taxed to protect the butter market, then what is to prevent the Government from taxing pork to protect beef, aluminum to protect steel, cigars to protect cigarettes, or any one of a number of products against its competitor ?
Legislation such as this can have no justification, least of all in this country, for it most certainly deprives the Nation of the fullest utilization of its capacities for production.
And, finally, in the last analysis, by stifling competition, it makes the industry whose market is protected unresponsive to public demands and lessens the need and desire on the part of such industry to increase production and lower prices. For these reasons, gentlemen, we earnestly hope that the Congress will repeal all of these taxes, and I thank you for hearing us.
The CHAIRMAN. Thank you very much.
H. O. Smith, Jr., United States Wholesale Grocers Association, is the next witness.
Identify yourself to the reporter.
STATEMENT OF HAROLD 0. SMITH, JR., EXECUTIVE VICE PRESI
DENT, UNITED STATES WHOLESALE GROCERS ASSOCIATION, WASHINGTON, D. C.
Mr. SMITH. My name is Harold O. Smith, Jr. I am executive vice president of the United States Wholesale Grocers Association, Inc., a national trade organization of wholesale food and grocery distributors, with headquarters in Washington, D. C.
Senator HAWKES. Is there not a national wholesale grocers organization also ?
Mr. SMITH. There is a wholesale grocers organization likewise representing wholesaler grocers called National America.
Senator HAWKES. How does the size of your association compare with that?
Mr. Smith. That I do not know. They do not publish figures on their membership, and we do not on ours. We have possibly a few less members.
Senator HAWKES. But you are an over-all organization covering the whole United States?
Mr. Smrh. That is right.
Mr. Smith. We have seven or eight members in Hawaii, one in Alaska, and they are pretty well spread out.
I appear as a proponent of the Rivers' bill, H. R. 2245, which passed the House by an overwhelming majority. We urge that you report out this bill without change or amendment. You have had or will have presented to you the case for the repeal of restrictions on oleomargarine from the viewpoint of the processors, such outstanding farmer proponents as the cotton and soybean interests, the nutritionists, the retailers and the consumers.
We desire, therefore, to center our presentation on the multitudinous and burdensome record keeping rules and monthly reports of receipts and sales of oleomargarine imposed on wholesalers, and the large aggregation of penalties to which they are subject for possible violations of extensive and technical regulations. It is difficult for the wholesaler to move without subjecting himself to one or more of the nine severe penalties prescribed by the Bureau of Internal Revenue under existing law, in connection with margarine taxes.
The wholesaler is required to pay an annual occupational license fee of $200 for uncolored margarine and $480 for colored margarine. But this is just the beginning of his expense and troubles. It costs our members whom we have queried on this subject from $60 to $100 a month for clerical work to make out monthly reports required. That is
per establishment. If the man has 8 or 10 branches or more, it is multiplied by that number.
These reports are much more burdensome on the wholesaler than on the manufacturer. The manufacturer must file reports of his sales but the wholesaler must file monthly reports of his purchases from manufacturers and also of his sales to retail grocers and other outlets. The retailer must observe certain regulations that are burdensome enough, but he does not file any reports of this nature. The wholesaler is thus saddled with a double load—reports on both his incoming and his outgoing shipments. It is to be observed from the figures I have given that it costs the wholesaler for such reports several times the amount of his license fees.
The wholesaler is required to make monthly reports of each individual shipment received from consignors; of each individual shipment or delivery to other wholesalers; of each individual shipment to retailers and consumers; of each individual shipment returned to suppliers; and similar statements under separate headings on oleomargarine disposed of as grease or for other inedible purposes or destroyed. In addition monthly reports must show:
1. Total pounds on hand at the beginning of the month.
6. Total pounds accidentally destroyed, lost in transit, or unaccounted for, with explanations. There are in all 11 specific report requirements. The statements of shipments or deliveries to retailers and consumers during the month must also give the aggregate quantity for each customer at each point of delivery. These statements must be entered on the form under a heading “Disposals to retail dealers and consumers" typewritten in capital letters in the center of the page, and must be arranged by States (with State names written in capital letters in the center of the page), and with surnames of consignees arranged in alphabetical order for each State. Where a purchaser has a number of stores to which shipments or deliveries were made, entries for the separate stores must be arranged alphabetically by names of the cities or towns, alphabetically by names of streets, and numerically by street number where there are two or more stores on the same street.
The reports by wholesale grocers must be made under oath for each month by the 15th of the following month, with separate reports for uncolored and for colored margarine, if any, and copies kept for 4 years on Forms 217 and 217 (a).
As a result of the expense and trouble incurred by wholesalers for reports, comparatively few of our members handle margarine. Our association received 226 replies to a questionnaire on margarine sent out by us to a cross section of our members on February 20, 1948. Of that number only 28 now handle margarine, but 135 said they would do so if the taxes and other restrictions were removed. Quite a few said they had handled margarine in the past but had discontinued doing so because of the taxes, high license fees and the bother, worry, and expense of making out the reports.
The wholesale grocer is required to keep records (separate records for uncolored and for colored margarine, if any), entered at his place of business not later than the day following each transaction and kept there for 4 years. The regulations prescribe 7 points of record keeping and 11 points of report making-a total of 18 specifications. There is a fine of $50 to $500 or imprisonment for 30 days to 6 months for each violation of requirements as to records or reports. There are eight additional major penalties to which the wholesaler is subject for possible violations of other regulations running from fines of $50 to $2,000 and imprisonment up to 2 years.
Í desire to file for the record as a part of my presentation a complete statement of the requirements for records, reports, and penalties for wholesale grocers who handle oleomargarine.
That is attached, Mr. Chairman.
The CHAIRMAN. That will be inserted immediately following your remarks.
Mr. SMITH. Thank you.
Judging from this ply on ply of restrictions and penalties, you might think the wholesaler was handling a poisonous drug or lethal concoction or was trying to dispose of dynamtie, TNT, or atomic bombs or was on the point of being lured into some form of smuggling or supplying a black market or participating in other such shady rackets.
He is, of course, doing nothing of the kind. He is merely attempting to supply the consuming public through his retail customers, with a healthful article of food consisting of a composite of important products derived from the farms of this Nation.
Is there any reason or justice why distributors of a healthful food should any longer be so hampered? We ask you to loose them from these restrictions, let them enjoy the freedom to serve the American consumer in the way she desires to be served. We ask that you free margarine from these taxes and let it find its true place in the national economy on its merits alone. In this wide country of ours there is prosperity enough for both margarine and butter, for all types of farmers and all types of farm commodities.
The CHAIRMAN. Thank you very much, indeed.
(The information is as follows:)
RECORDS, REPORTS, AND PENALTIES FOR WHOLESALE GROCERS HANDLING
(Reference Regulations No. 9, Bureau of Internal Revenue, United States
Treasury Department, and statutes there set forth) A wholesale grocer is required to keep records (separate records for uncolored and for colored oleomargarine, if any), entered at his place of business not later than the day following each transaction and kept there for 4 years, including the following:
1. Records of actual weight of oleomargarine returned to or by the wholesaler as to other oleomargarine, records of quantities indicated by the tax-paid stamps on the packages.
2. Records of the number of pounds in each consignment received, name and address of consignee, and date of receipt.
3. Number of pounds in each lot disposed of, name of the consignee, address to which delivered, and date of shipment.
4. Separate records of deliveries to each retail store where the purchaser operates more than one store.
5. Special record of persons ordering oleomargarine for shipment or delivery to others.
6. Separate records of oleomargarine returned by customers.
7. Separate records of oleomargarine returned by the wholesaler to the manufacturer or other seller.
Reports under oath of the following items of information must be made for each month, by the 15th of the following month (separate reports for uncolored and for colored oleomargarine, if any), and copies kept for 4 years (Forms 217 and 217-a):
1. Total pounds on hand at the beginning of the month.
6. Total pounds accidentally destroyed, lost in transit, or unaccounted for, with explanations.
7. Statement of each individual shipment received during the month, including date of invoice, name and address of consignor, whether consignor is a manufacturer or a dealer, and number of pounds, with an explanation if there is any difference between invoice and actual poundage.
8. Statement of each individual shipment or delivery to other wholesalers during the month, including date of invoice, name and address of consignee (if name of consignee is a trade name, the names of owners must also be given; names and addresses on customers' special-tax stamps must be given, and if the shipment or delivery is to a different address that must also be given), number of pounds, and (for the States of California, Illinois, Missouri, New Jersey, New York, Ohio, Pennsylvania, and Texas) the county in which consignee is located. These statements must be entered on the form under a heading "Disposals to wholesale dealers” typewritten in capital letters in the center of the page, and must be arranged with names of consignees in alphabetical order, and all shipments or deliveries to each consignee grouped together, in order by dates.
9. Statements of shipments or deliveries to retailers and consumers during the month, including the same details as item 7 above, but giving the aggregate quantity for each customer at each point of delivery. These statements must be entered on the form under a heading “Disposals to retail dealers and consumers" typewritten in capital letters in the center of the page, and must be arranged by States (with State names typewritten in capital letters in the center of the page), and with surnames of consignees arranged in alphabetical order for each State. Where a purchaser has a number of stores to which shipments or deliveries were made, entries for the separate stores must be arranged alphabetically by names of the cities or towns, alphabetically by names of streets, and numerically by street number where there are two or more stores one the same street.
10. Statement of each individual shipment or delivery of oleomargarine returned to suppliers during the month, including date of consignment, name and address of consignee, and number of pounds. These statements must be entered
on the form under a heading “Returned to shipper" typewritten in capital letters in the center of the page.
11. Similar statments, under separate headings, on oleomargarine disposed of as grease or for other inedible purposes or destroyed.
And the wholesale grocer is subject to these among other penalties, in addition to tax of $200, or of $480 for those who handle any colored oleomargarine:
1. Fine of $500 to $2,000 for nonpayment of special tax (liability for special tax is incurred at each place other than registered premises where oleomargarine is sold or offered for sale).
2. Penalty of $1,000 and forfeiture to the Government of all oleomargarine owned by him, or in which he has any ownership interest, for selling oleomargarine other than in original stamped packages ($2,000 penalty, and forfeiture, if quantity sold is less than 10 pounds).
3. Penalty of $1,000 and forfeiture of all oleomargarine, for making any sale unless the order is received and the sale consummated, the oleomargarine addressed and billed, and the sale recorded, at the wholesale grocer's registered place of business.
4. Separate and additional special-tax for each place of delivery when a purchase money draft is attached to bill of lading unless the bill of lading is endorsed specifically and not in blank to and the draft drawn on the person ordering.
5. Penalty of $1,000 and forfeiture of all oleomargarine, for having colored oleomargarine on the wholesale grocer's premises if he has not paid special tax as a dealer in colored margarine.
6. Fine of $50 to $500, and imprisonment for 30 days to 6 months, for each violation of requirements as to records or reports.
7. Fine of up to $1,000 and imprisonment up to 2 years, for selling, offering for sale, delivering, or offering for delivery, any oleomargarine not in prescribed new wooden, tin-plate or paper packages.
8. Penalty of $50 for each purchase or receipt of any oleomargarine not branded or stamped as required.
9. Penalty of $100 for each purchase or receipt of any oleomargarine from a manufacturer who has not paid the special tax, and forfeiture of such oleomargarine.
And various other penalties.
The CHAIRMAN. Identify yourself for the record, please. STATEMENT OF ERSEL WALLEY, PRESIDENT, AMERICAN SOYBEAN
ASSOCIATION, FORT WAYNE, IND.
Mr. WALLEY. Mr. Chairman and members of the Committee on Finance, my name is Ersel Walley. I live in Fort Wayne, Ind., and am engaged in farm management and rural appraising service in Ohio, Indiana, and Michigan. As a tenant farmer, as owner-operator, and as a farm owner, in northwestern Ohio, I have grown soybeans for 27 years. Currently, I am president of the American Soybean Association, the Nation-wide growers organization.
This statement is made on behalf of that organization to explain its position and attitude on the question of removing taxes on margarine.
The American Soybean Association felt that it was forced, at this time, to take an interest in margarine legislation. This interest was prompted by our opinion, now well sustained, that public sentiment would force the passage of legislation this year removing the restrictive taxes on yellow margarine, which now apply at the manufacturer, wholesaler, retailer, and consumer level.
Our way of life is based upon supplying to consumers the products which they want in the form in which they want them. This practice has contributed to our economic progress—our achievement of a relatively high standard of living.