Comments
![handle is hein.journals/nylr32 and id is 1004 raw text is: COMMENTS
FEDERAL TAXATION-THE MANUFACTURERS' EXCISE TAX-FACTORs DETER-
MINING WHETHER A BUSINESS ACTIVITY CONSTITUTES MANUFACTURING.*-
Manufacturers' excise taxes1 are levied by the federal government upon
sales by the manufacturer or producer of certain enumerated articles.2
Although often unrecognized by the consuming public when buried in the
unit price charged for an article, these taxes provide an important source of
revenue for the Government,3 and may have an effect upon the success of
a business enterprise.4 For the tax to attach, there must be (1) a saleu of
a (2) taxable article6 by the (3) manufacturer or producer7 of such arti-
* United States v. Keeton, 238 F.2d 878 (4th Cir. 1956).
1 Int. Rev. Code of 1954, c. 32. Excise taxes are taxes levied upon the sale of a
particular commodity, or upon the practice of an occupation. Bouvier, Law Dictionary
377 (Baldwin ed. 1926). See Tax Foundation, Project Note No. 40, Federal Excise Taxes
7-8 (1956); Note, 56 Colum. L. Rev. 77 (1956). For a brief history of the development
of excise taxes, see Tax Foundation, supra at 9-18, indicating that the present excise tax
system is essentially the result of emergency wartime needs for revenue, and that little
has been done to provide a permanent excise system since the first excise tax . . . [was
enacted] in 1791. Id. at 18. Most of the present manufacturers' excise taxes date
from Revenue Act of 1932, §§ 601-29, 47 Stat. 259-70, and although there have been
some amendments to the law, there has been no substantial overhaul. See Tranmal,
Prospects for Improvement in Administration of Excise Taxes: Forand Committee Hear-
ings Resumed, 4 J. Taxation 126, 128 (1956). The principal advantages of excise
taxes are discussed in Tax Foundation, supra at 29-35. The manufacturers' excise taxes
are computed upon a certain percentage of the price for which a taxable item is sold
by its manufacturer. See F. W. Fitch Co. v. United States, 323 U.S. 582 (1945).
2 The Int. Rev. Code of 1954 subjects certain items to a tax: § 4061 (auto-
mobiles and related items), § 4071 (tires and tubes), § 4081 (gasoline), § 4091 (lubrlcat.
ing oil), § 4111 (refrigeration equipment), § 4121 (electric, gas and oil appliances), § 4131
(electric light bulbs), § 4141 (radio and television sets, phonographs and records), § 4151
(musical instruments), § 4161 (sporting goods), § 4171 (photographic equipment),
§ 4181 (firearms), § 4191 (business machines), § 4201 (pens, mechanical pencils and
lighters), and § 4211 (matches). Importers of the above-enumerated items may also
be subject to these taxes. Treatment of the sale by an importer of taxable items is not
within the scope of this Comment. As to importers, see U.S. Truck Sales Co. v. United
States, 229 F.2d 693 (6th Cir. 1956).
3 In recent years excise taxes have provided approximately 14 per cent of total
federal tax collections. Tax Foundation, supra note 1, at 35. See note 35 infra.
4 Although the tax is levied upon the manufacturer, its burden may be, and usually
is, shifted to the consumer. Parker, The National Debt and Excise Taxes, 34 Taxes
399, 400 (1956). The businessman who is uncertain that the tax applies to his sales Is
placed in a precarious position. If he unnecessarily pays the tax, he overprices his
article by the amount of the tax to the advantage of his better advised competitors.
If he does not pay the tax, he may be compelled to pay it at some later time yhcn
his chance of recovering it from the consumer has passed. Cooley and Weaver,
Excise Tax Refunds on Warranty Costs, 33 Taxes 647, 648 (1955).
5 But the statute has included use by the manufacturer under certain circumstances
as a taxable sale. Int. Rev. Code of 1954, § 4218. It has also provided for certain
exempt sales. Int. Rev. Code of 1954, §§ 4220-25. See Moore, When Is a Sale Not a
Sale?, 25 Taxes 326 (1947).
6 Taxable articles may be specifically enumerated, see note 2 supra, or referred
to as parts or accessories, Int. Rev. Code of 1954, § 4061(b), or components,/ Int.
Rev. Code of 1954, §§ 4111, 4141, of enumerated articles. In the first situation, the
principal methods of determining whether an article is the same as, or sufficiently similar
Imaged with the Permission of N.Y.U. Law Review](ViewImageLocal?handle=hein.journals/nylr32&div=68&collection=&method=preview&ext=.png&size=3)
What Is HeinOnline?
Contact us for annual subscription options:
Already a HeinOnline Subscriber?
profiles profiles most
Comments
Contact us for annual subscription options:
Already a HeinOnline Subscriber?
profiles profiles most
Comments
Contact us for annual subscription options:
Already a HeinOnline Subscriber?
profiles profiles most