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SPECIAL TAXES AND STAMP TAXES.

ACT OF OCTOBER 22, 1914.

GENERAL PROVISIONS.

Acts of 1862 and 1898 considered.

The provisions of the acts of July 1, 1862, and June 13, 1898, are considered in construing stamp taxes under the act of October 22, 1914. (In re Hawley, 220 Fed. 373, 1915.)

Construction.

The rule that the internal-revenue law should be strictly construed in favor of exemption is but a rule of construction, which yields when the intent of the statute is manifest. (In re Hawley, 220 Fed. 373, 1915.)

Constitutionality.

The statute is not void, as imposing (sec. 3) a direct tax upon the property of a banker merely because of his ownership of such property as the act does not tax property as such but levies a special license tax upon one engaged in a particular business, because of the privilege he is exercising, and the fact, if true, that the amount paid is the same as would be paid had all the property of the banker been taxed on an assessed value basis, is merely incidental and accidental. (Real Estate Title, Ins. & Trust. Co., v. Lederer, 229 Fed. 799, 1916.)

The tax imposed by section 3 (1) of this act upon bankers for capital used in the banking business is a franchise tax, and is not subject to attack on the ground that it is a direct tax not apportioned. (Anderson v. Farmers' Loan & Trust Co., 241 Fed. 323, 1917.)

SECTION 3-OCCUPATIONAL TAXES.

SPECIAL TAXES.

SEC. 3. That on and after November first, nineteen hundred and fourteen, special taxes shall be, and hereby are, imposed annually as follows, that is to say:

First. Bankers shall pay $1 for each $1,000 of capital used or employed, and in estimating capital surplus and undivided profits shall be included. The amount of such annual tax shall in all cases be computed on the basis of the capital, surplus, and undivided profits for the preceding fiscal year. Every person, firm, or company, and every incorporated or other bank, having a place of business where credits are opened by the deposit or collection of money or currency, subject to be paid or remitted upon draft, check, or order, or where money is advanced or loaned on stocks, bonds, bullion, bills of exchange, or promissory notes, or where stocks, bonds, bullion, bills of exchange, or promissory notes are received for discount or sale, shall be a banker under this act: Provided, That any postal savings bank, or savings bank having

no capital stock, and whose business is confined to receiving deposits and loaning or investing the same for the benefit of its depositors, and which does no other business of banking, shall not be subject to this tax.

Second. Brokers shall pay $30. Every person, firm, or company, whose business it is to negotiate purchases or sales of stocks, bonds, exchange, bullion, coined money, bank notes, promissory notes, or other securities, for themselves or others, shall be regarded as a broker: Provided, That any person having paid the special tax as a banker shall not be required to pay the special tax as a broker.

Third. Pawnbrokers shall pay $50. Every person, firm, or company whose business or occupation it is to take or receive, by way of pledge, pawn, or exchange, any goods, wares, or merchandise, or any kind of personal property whatever, as security for the repayment of money loaned thereon, shall be deemed a pawnbroker.

Fourth. Commercial brokers shall pay $20. Every person, firm, or company whose business it is as a broker to negotiate sales or purchases of goods, wares, produce, or merchandise, or to negotiate freights and other business for the owners of vessels, or for the shippers or consignors or consignees of freight carried by vessels, shall be regarded as a commercial broker under this act.

Fifth. Custom-house brokers shall pay $10. Every person, firm, or company whose occupation it is, as the agent of others, to arrange entries and other custom-house papers, or transact business at any port of entry relating to the importation or exportation of goods, wares, or merchandise, shall be regarded as a custom-house broker.

Sixth. Proprietors of theaters, museums, and concert halls, where a charge for admission is made, having a seating capacity of not more than two hundred and fifty, shall pay $25; having a seating capacity of more than two hundred and fifty and not exceeding five hundred, shall pay $50; having a seating capacity exceeding five hundred and not exceeding eight hundred, shall pay $75; having a seating capacity of more than eight hundred, shall pay $100. Every edifice used for the purpose of dramatic or operatic or other representations, plays, or performances, for admission to which entrance money is received, not including halls or armories rented or used occasionally for concerts or theatrical representations, shall be regarded as a theater: Provided, That whenever any such edifice is under lease at the passage of this act, the tax shall be paid by the lessee, unless otherwise stipulated between the parties to said lease.

Seventh. The proprietor or proprietors of circuses shall pay $100. Every building, space, tent, or area where feats of horsemanship or acrobatic sports or theatrical performances not otherwise provided for in this act are exhibited shall be regarded as a circus: Provided, That no special tax paid in one State, Territory, or the District of Columbia shall exempt exhibitions from the tax in another State, Territory, or the District of Columbia, and but one special tax shall be imposed for exhibitions within any one State, Territory, or District.

Eighth. Proprietors or agents of all other public exhibitions or shows for money not enumerated in this section shall pay $10: Provided, That a special tax paid in one State, Territory, or the District of Columbia, shall not exempt exhibitions from the tax in another State, Territory, or the District of Columbia, and but one special tax shall be required for exhibitions within any one State, Territory, or the District of Columbia: Provided further, That this paragraph shall not apply to Chautauquas, lecture lyceums, agricultural or industrial fairs, or exhibitions held under the auspices of religious or charitable associations.

Ninth. Proprietors of bowling alleys and billard rooms shall pay $5 for each alley or table. Every building or place where bowls are thrown or where games of billards or pool are played and that are open to the public, with or without price, shall be regarded as a bowling alley or a billiard room, respectively.

Tenth. Commission merchants shall pay $20. Every person, firm, or company whose business or occupation it is to receive into his or its possession any goods, wares,

or merchandise to sell the same on commission shall be regarded as a commission merchant: Provided, That any person having paid the special tax as a commercial broker shall not be required to pay the special tax as a commission merchant: Provided further, That this provision shall not apply to commission houses run upon a cooperative plan.

Section 3 (1)-Special tax on bankers.

What, if any, of the capital of a corporation engaged in banking and other kinds of business, is employed in banking, within act October 22, 1914, is a fact to be found. (Real Estate Title, Ins. See also this case under

& Trust Co. v. Lederer, 229 Fed. 799, 1916.) "Constitutionality."

A corporation, engaged not only in the banking business, but also in the title, insurance, and other kinds of business kept entirely separate from its other moneys a sum equal to its aggregate of deposits, and a sum equal to the aggregate of its capital and surplus invested on chosen securities, called "capital investments." Its capital investments were invested in real estate and other investments of a less mobile character than investments commonly termed "liquid," while the deposits were invested in securities which were more readily convertible into cash, and these investments were kept separate from its other investments. It from time to time put out statements of its financial condition, showing its assets to consist of cash on hand, etc., and showing the aggregate amount of its liabilities, in which were included, to balance the statement, the amount of its capital stock, surplus, and undivided profits, which were not less than the amount which measured the tax imposed on it under the act of October 22, 1914, and paid by it. Held, That the fact did not show that it did not use or employ any part of its capital in banking and it was not entitled to recover back such tax, as the character of a banker's investments can have no bearing upon the question of the amount of capital invested in the business, and the capital, surplus, or undivided profits, either separately or in a lump, can not be segregated from a bank's other assets and identified as such. (Real Estate Title, Ins. & Trust Co. v. Lederer, 229 Fed. 799, 1916.) A trust company, chartered to do a banking as well as a trust company business, which was authorized to discount commercial paper and accept drafts, and which held investments to an amount exceeding its capital, surplus, and undivided profits, opened a so-called capital investment account, to which bonds and mortgages were debited to an amount exceeding the capital, surplus, and undivided profits. The trust company, while doing a trust company business, also did a considerable banking business. Held, That when a trust company is organized, obtains subscription for capital stock, and then opens its doors and begins business, its assets comprise all its property, and it is liable for taxation upon that portion of its capital and surplus actually employed in the banking business, regardless of its artificial

methods of designating the employment of such property. (Anderson v. Farmers' Loan & Trust Co., 241 Fed. 322, 1917.)

Deposits are not the property of the depositors, but of the bank receiving them; the relation of a bank and its depositor being that of a debtor and creditor, so that deposits and investments are equally assets of the bank. (Id.)

The collector of internal revenue, having been informed by the officers of a trust company that it was engaged in a banking business, may, without requiring a further return, when the one made by officers failed to disclose the amount of the company's capital and surplus used in the banking business, proceed in accordance with Revised Statutes, section 3176, to assess the tax imposed on such property by this act. (Id.)

Though a return did not furnish a basis for the assessment, the collector's assessment against a trust company engaged in the banking business under this act is prima facie valid.

For a trust company doing a banking business, assessed under this act to recover the amount of an asessment on the ground that it was imposed on funds not used in the banking business, the trust company has the burden of showing that the tax was not in fact due. Proof of irregularity in the method of assessment is not sufficient. (Anderson v. Farmers' Loan & Trust Co., 241 Fed. 322, 1917.)

A bank which, in addition to its banking business, acts as trustee, receiver, executor, or administrator, or engages in underwriting or promoting new enterprises, or refinancing old enterprises, or buys and sells securities on its own account for profit, is subject to the tax imposed by the first paragraph of section 3 of the act of October 22, 1914, upon the total amount of its capital, including surplus and undivided profits, unless it be shown that a specific portion of its capital is used in such other business and that such use does not constitute banking. (Fidelity Tr. Co., of Baltimore, Md., v. Miles, Collector; and Baltimore Tr. Co. v. Miles. Decided in U. S. D. C. Dist. of Maryland, 258 Fed. 770, 1919.)

That a bank deals on its own account in stocks and bonds or other securities does not exempt the capital employed therein from the special tax imposed by section 3 (1). (Id.)

That a corporation engaged mainly in the business of examining and insuring real estate titles also carried on a savings bank business, which it keeps separate from its other business, such other business not affecting it, except as giving it credit and facilitating the getting of customers for its bank, does not make the total amount of capital, surplus, and undivided profits used in the insurance business subject to the special tax imposed by act of Congress October 22, 1914, section 3, paragraph 1; the amount used in the banking business as such only being subject thereto. (Title Guarantee & Trust Co. v. Miles, 258 Fed. 771.)

Section 3 (8)-Proprietors or agents of all other public exhibitions or shows for money not enumerated in this section.

A corporation using the term "Lyceum Bureau" in its title, engaged in the business of supplying Chautauqua and lyceum courses throughout the country with lecturers and entertainers, is subject to tax on professional show features, for they do not fall within the exception in the act. (Redpath Lyceum Bureau v. Pickering, 251 Fed. 49, 1918.) Petition for writ of certiorari denied in United States Supreme Court, 246 U. S. 677.

The expression "lecture lyceum" as used in the provision of this section excepting the same from tax liability does not include independent show units engaged for certain occasions by lecture bureaus. (Id.)

SECTIONS 5 AND 6-ADHESIVE STAMPS.

TAX ON INSTRUMENTS.

SEC. 5. That on and after the first day of December, nineteen hundred and fourteen, there shall be levied, collected, and paid, for and in respect of the several bonds, debentures, or certificates of stock and of indebtedness, and other documents, instruments, matters, and things mentioned and described in Schedule A of this act, or for or in respect of the vellum, parchment, or paper upon which such instruments, matters, or things, or any of them, shall be written or printed by any person or persons, or party who shall make, sign, or issue the same, or for whose use or benefit the same shall be made, signed, or issued, the several taxes or sums of money set down in figures against the same, respectively, or otherwise specified or set forth in the said schedule.

TAXES UNDER SCHEDULE B.

And there shall also be levied, collected, and paid, for and in respect to the preparations, matters, and things mentioned and described in Schedule B of this act, manufactured, sold, or removed for sale, the several taxes or sums of money set down in words or figures against the same, respectively, or otherwise specified or set forth in Schedule B of this act.

PENALTY.

SEC. 6. That if any person or persons shall make, sign, or issue, or cause to be made, signed, or issued, any instrument, document, or paper of any kind or description whatsoever, without the same being duly stamped for denoting the tax hereby imposed thereon, or without having thereupon an adhesive stamp to denote said tax, such person or persons shall be deemed guilty of a misdemeanor, and upon conviction thereof shall pay a fine of not more than $100, at the discretion of the court.

SECTION 5-STAMP TAXES.

(See cases under section 22, Schedule A, for tax on specific instruments; Schedule B for proprietary stamp tax.)

Under section 5, imposing a stamp tax, and section 6, imposing a penalty, and section 11, in regard to registering, issuing, or transferring any instrument without the tax, the stamp need not be attached to the paper before the paper is signed or partially executed if it is subsequently affixed before the paper is issued, as the

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