Theodore B. Benson, of Washington, D. C., for plaintiff.

        Elizabeth B. Davis, of Washington, D. C., and Samuel O. Clark, Jr., Asst. Atty. Gen. (Robert N. Anderson and Fred K. Dyar, both of Washington, D. C., on the brief), for defendant.

        Before WHALEY, Chief Justice, and LITTLETON, WHITAKER, JONES, and MADDEN, Judges.

        This case having been heard by the Court of Claims, the court, upon the evidence and the report of a commissioner, makes the following special findings of fact:

        1. Plaintiff is a Missouri corporation which was incorporated August 22, 1930, to manufacture, buy, and sell chemicals, antiseptics, patent medicines, soaps, and creams of all kinds. The incorporators were E. A. Henske; his wife, R. L. Henske; and W. O. Brach.

        2. Plaintiff's authorized capital stock consisted of 1,000 shares of no par common stock and 500 shares of preferred stock. The common stock was set up on the books at a value of $1 a share and the preferred stock at a value of $100 a share. 998 shares of the common stock and 50 shares of the preferred stock were issued to E. A. Henske in consideration of his conveyance to the corporation of a formula for making medical products known as 'Kin-Septic' which he had previously acquired from his father. During the period involved in this proceeding, plaintiff had outstanding 992 shares of common stock which were held as follows:

	Shares
E. A. Henske .....	950
R. L. Henske .......	1
G. Bass ...........	18
Others ............	23

        During the same period, plaintiff had outstanding 85 shares of preferred stock which were held as follows:

	Shares
E. A. Henske ......	48
R. L. Henske .......	1
G. Bass ...........	18
Others ............	18

        3. From its incorporation to and including the month of December 1933, toilet and other preparations were prepared, bottled and labeled by plaintiff and sold to E. A. Henske, trading as an individual under the name of 'York Pharmacal Company.' The Federal manufacturer's excise tax on such toilet preparations was computed by plaintiff on the basis of prices at which the articles were sold to customers at wholesale by the York Pharmacal Company and duly paid to the collector.

        4. January 1, 1934, a contract was entered into between plaintiff and E. A. Henske, trading as York Pharmacal Company, which contained the following provisions:

        '1. The Kin-Septic Company shall not sell direct or indirectly to anyone except through the York Pharmacal Company, and the York Pharmacal Company agrees to handle for sale no items not furnished by the Kin-Septic Company.         '2. The Kin-Septic Company shall furnish in bulk any drug, cosmetic or allied item that the York Pharmacal Company requests, or if the Kin-Septic Company refuses, then the York Pharmacal Company can buy such item elsewhere. The price that the York Pharmacal Company shall pay the Kin-Septic Company for all items shall be the actual cost of the materials, plus a profit of 20%. Where the item is not manufactured by the Kin-Septic Company, but bought outright, the same percentage applies for the price that the York Pharmacal Company shall pay.         '3. The Kin-Septic Company is to furnish the items in bulk; however, the York Pharmacal Company is to do all bottling, labeling, capping, selling, advertising, etc., at the York Pharmacal Company's cost, and all additional equipment necessary to be had by either the Kin-Septic Company or the York Pharmacal Company shall be bought and paid for at the cost of the York Pharmacal Company.         '4. The York Pharmacal Company guarantees the Kin-Septic Company a net profit each year of 7% on the par value of all outstanding stock, after all deductions for taxes have first been made, for any one year, and in the event that neither the York Pharmacal Company or the Kin-Septic Company shows a profit, a sum equal to said guarantee shall be deemed at the end of such year, as an amount due and owing to the Kin-Septic Company, irrespective of previous or future years' profits or losses.         '5. Inasmuch as it is considered by the parties hereto that the price percentage above mentioned, in fairness to both Companies, has to be at this time considered more or less tentative, the parties hereto shall agree on the first day of each year as to the percentage of profit to be paid to the Kin-Septic Company for the ensuing year, either more or less, but in no case shall it be less than the guarantee above mentioned, and the prices and percentage of profit above mentioned shall be considered the profit for the year 1934, and such percentage adjusted from year to year, so as to be fair to both Companies, however, in the event the Companies cannot agree on the percentage for any one year, each of them shall select an arbitrator, which arbitrators shall in turn select another arbitrator, and the percentage fixed by said three arbitrators appointed, shall be binding on both parties without further appeal.

        'Each Company reserves the right to cancel this agreement upon three years' notice to the other, said notice to be made during the month of December of any year, and at no other time.

        'In the event of cancellation, all trademarks and patent rights taken out by the York Pharmacal Company shall remain its property, and all formulae shall be considered the property of the Kin-Septic Company.

        'For the purpose of mutual cooperation and economy, and in consideration of the percentage of profit allowed above, the two Companies shall at least temporarily, and for such future time as the parties may agree, occupy the same premises, and the rent and other costs shall be apportioned as follows:

	Kin-Septic Company	York Pharmacal Company
	Percent	Percent
General Expense ...............	20	80
Legal & Auditing ..............	20	80
Light, Heat, and Power ........	20	80
Prtg. & Stationery ............	20	80
Postage .......................	20	80
Telephone and Telegraph .......	20	80
Misc. Supplies ................	20	80
Salaries and Wages ............	20	80
Rent ..........................	50	50
Auto Expense of E. A. Henske ..	50	50
Salary of E. A. Henske ........	50	50
Repairs and Maintenance .......	50	50
G. Bass Salary ................	90	10

        'Additional items of expense, not listed above, that may occur from time to time, shall be apportioned in accordance with mutual agreement in writing to be made by the parties hereto.'

        That agreement remained in force without amendment until October 23, 1935, at which time it was amended to permit plaintiff to sell to others than the York Pharmacal Company, but provided that the prices to the York Pharmacal Company should be the same as to all other customers.

January 2, 1936, a further amendment to the agreement was made which provided, among other things, that paragraph 3 of the contract shall be interpreted in accordance with the intention of the parties to mean

        'That all machinery for manufacturing shall be bought and paid for at the cost of the Kin-Septic Company, and all equipment for bottling, labeling, capping, selling, advertising, etc., shall be bought and paid for at the cost of the York Pharmacal Company.'

        The agreement and the amendments were duly lived up to by the parties.

        5. Shortly after the execution of the original agreement, namely January 20, 1934, E. A. Henske caused the York Pharmacal Company, hereinafter referred to as 'York,' to be incorporated under the laws of the State of Missouri, and transferred to that corporation his rights and obligations under the contract of January 1, 1934, referred to in the preceding finding, in exchange for 1,000 shares of its authorized capital stock, of which he transferred 1 share to R. L. Henske and 18 shares to G. Bass. Throughout the period involved in this proceeding, the capital stock of York continued to be held in that manner, namely: E. A. Henske, 931 shares; R. L. Henske, 1 share; and G. Bass, 18 shares. These three stockholders were at all times directors.

        6. At all times herein involved, plaintiff and York occupied the same premises under a lease as joint lessees and each paid one-half the rent. Both names at all times (including the period prior to the incorporation of York) appeared on the transom over the entrance to the building. E. A. Henske was president and managed both companies. The business expenses were allocated between the two companies as provided in the contract of January 1, 1934, which allocation included the payment by each company of one-half of the salary of E. A. Henske. G. Bass was also an employee of both companies and under the contract 90 percent of his salary was paid by plaintiff and 10 percent by York. Plaintiff purchased the machinery necessary for and paid the expenses of manufacturing the contents of the preparations and York purchased the machinery for and paid the expenses of bottling, capping, labeling, and selling the various products to the public. The bottles, jars, caps, labels, and wrappers were purchased by York from parties other than plaintiff.

        7. Plaintiff at first manufactured only one item--a skin antiseptic called 'Kin-Septic'--and thereafter other items were added from time to time, some of which were taxable and some of which were not. Up to July 1933, the only article manufactured by plaintiff which was subject to the tax involved in this proceeding was mouth wash. The following list shows the dates that plaintiff began manufacturing or handling the other specified types of taxable items:

        November 1933, Wave Set and Brilliantine.         March 1934, Hair Oil.         November 1934, Shampoo and Shave Cream.         February 1935, Hair Tonic.         March 1935, Bay Rum, Lilac Vegetal, Glycerin and Rose Water.         April 1935, Nail Polish.         May 1935, Almond Lotion.         June 1935, Lemon Lotion, Balm Lotion, and Perfume.         May 1936, Suntan Oil, Lady York Wave Set, and After Shave Lotion.         August 1936, Cold Cream and Vanishing Cream.

        Plaintiff also added and manufactured other items during this period which were non-taxable.

        8. Plaintiff purchased raw materials in carload lots. It usually sold manufactured items to York in drums which were returned by the latter. The sales price by plaintiff to York , included cost of the raw material, manufacturing cost, a profit of 20 or 25 percent and the manufacturer's excise tax as computed under the provisions of Section 603 of the Revenue Act of 1932 and based upon the prices at which the items were sold by plaintiff to York.

        9. The items purchased by York from plaintiff were of a standard variety such as are commonly sold at retail in Five and Ten Cent Stores and York's sales of these items were largely to stores of that character. All taxable items sold by York were purchased from plaintiff. These sales were made under York labels. York's costs, selling prices, profit, etc., are illustrated by the following items:

Size	Lilac vegetal (gross)	Bay rum (gross)	Quinine hair tonic (gross)
Contents * ..................................	$2.08	$2.08	$2.08
4-oz. Bottles ................................	2.01	2.01	2.01
Caps ..........................................	.25	.25	.25
Labels ........................................	.30	.30	.30
Labor .........................................	.60	.60	.60
Cellophane Wrapping ..................	..............................................
12% sales promotion costs on sales price .........	.81	.81	.81
	-------	------	------
Total Cost ................................	6.05	6.05	6.05
Average sales price .......................	6.78	6.78	6.78
	-------	--------	-------
Profit--York Pharmacal Co......................	12%	12%	12%
Profit--Kin-Septic Co. on contents ............	20%	20%	20%
	--------	-------	------
Contents * ..................................	$4.16	$4.16	$4.16
8-oz. Bottles ................................	3.11	3.11	3.11
Caps ..........................................	.28	.28	.28
Labels ........................................	.30	.30	.30
Labor .........................................	.60	.60	.60
Cellophane Wrapping ..................	...............................................
12% sales promotion costs on sales price ...........	1.17	1.17	1.17
	------	-------	-----
Total Cost ................................	9.62	9.62	9.62
Average sales price .......................	9.78	9.78	9.78
	-------	------	-------
Profit--York Pharmacal Co...................	0.017%	0.017%	0.017%
Profit--Kin-Septic Co. on contents ............	20%	20%	20%
	-----	-------	----
Contents * ..................................	$8.32	$8.32	$8.32
16-oz. Bottles ...............................	3.82	3.82	3.82
Caps ..........................................	.28	.28	.28
Labels ........................................	.30	.30	.30
Labor .........................................	.75	.75	.75
Cellophane Wrapping ..................	................................................
12% sales promotion costs on sales price ...........	1.81	1.81	1.81
	--------	-------	------
Total Cost ...............................	15.28	15.28	15.28
Average sales price ......................	15.12	15.12	15.12
	-------	------	-------
Profit--York Pharmacal Co.............	...............................................
Profit--Kin-Septic So. on contents ............	20%	20%	20%

FN* Contents price is the actual price (plus tax) paid by the York Pharmacal Company to the Kin-Septic Company.

        The cost of contents as shown in the above tabulation represents the selling price by plaintiff to York which price was made up as shown in the preceding finding. The amount shown as '12% sales promotion costs on sales price' was an amount determined by York at the end of the year by adding its salesmen's salaries and expenses, costs of catalogs and circulars, etc., and determining the percentage of that total to the amount of its gross sales. York did no advertising and had no advertising costs.         The profit realized by York on the items sold varied from approximately 1% to 48% except in two sizes of cold cream and vanishing cream where small losses are shown, all computations of profits or losses being computed as set out in the above tabulation.

        10. The prices at which the taxable items herein involved were sold by plaintiff to York were not at a substantial variance from the prices at which similar items were otherwise being sold on the market at the same time. The prices at which these items were sold by York to its customers at wholesale were approximately the same as those received by plaintiff for the same items to the same or similar customers prior to the execution of the contract of January 1, 1934, and referred to in finding 4 to the extent plaintiff was dealing in these items prior to January 1, 1934.

        11. On all sales of toilet preparations made by plaintiff to York on and after January 1, 1934, plaintiff made its returns of the manufacturer's excise tax under Section 603 of the Revenue Act of 1932 and paid the tax determined on the basis of the prices for which the several toilet preparations were sold in bulk to York.

        12. For the period from January 1. 1934, to October 31, 1936, the Commissioner of Internal Revenue recomputed the manufacturer's excise tax on the basis of prices at which the toilet preparations were sold by York to its customers. On the basis of that recomputation, the Commissioner assessed an additional tax against plaintiff which plaintiff paid in various amounts over the period February 25, 1937, to September 23, 1941. The total amount so paid during that period, including interest and penalties, amounted to $14,079.25, a small portion of which was applicable to the period prior to the date of the incorporation of York. The date and amount of each payment are set forth in plaintiff's Exhibit 3 which is incorporated herein by reference. In the event the court should hold that plaintiff is entitled to recover in this proceeding, the parties have agreed to file a stipulation of the amount of the foregoing assessment which applies to the period subsequent to the incorporation of York.

        13. November 8, 1941, plaintiff filed a claim for refund of $14,079.25, the tax, penalty, and interest paid as set out in finding 12. The grounds for the claim were set out as follows:

        'The Commissioner of Internal Revenue erroneously determined the excise tax on the basis of the price for which the toilet preparations were sold by the York Pharmacal Company, and proceeded to assess and collect $12,435.99 additional tax, together with $621.80 penalties and $1,021.46 interest, in the total sum of $14,079.25.         'The taxpayer demands the refund of the said $14,079.25, for the reason that the tax under Section 603 of the Revenue Act of 1932 should be computed on the basis of the price for which sold through E. A. Henske, trading as the York Pharmacal Company, and to the York Pharmacal Company, a corporation, the price being the fair market price under contracts entered into with E. A. Henske and the York Pharmacal Company at arm's length.         'The taxpayer further claims that, if the prices at which sold through E. A. Henske, trading as the York Pharmacal Company, and the York Pharmacal Company, a corporation, are to be used as the basis of the tax, then the price should be adjusted by deducting therefrom the cost of selling the toilet preparations.'

        The Commissioner rejected that claim June 16, 1944.

        JONES, Judge.

        The plaintiff sues for a refund of manufacturer's excise tax imposed under Section 603 of the Revenue Act of 1932, 47 Stat. 169, 261, 26 U.S.C.A. Int.Rev.Acts, page 608, for the period from January 1, 1934, to August 31, 1936.

        Plaintiff is a manufacturer of cosmetics which were bottled, packed, and labeled, and sold through another corporation. One individual owned more than 90 percent of the common stock of the plaintiff corporation and more than 95 percent of the stock of the other corporation. He was the president and manager of both corporations. The same building and the same employees were used by both corporations. The second corporation sold the cosmetics to the trade.

         The question is whether the tax should be based on the price at which the commodities were furnished to the second corporation or whether it should be levied on the price at which the disposal corporation sold them to the trade.

        Section 603 of the Revenue Act of 1932, supra, imposes a tax upon certain toilet articles sold by the manufacturer on a percentage of the price for which they are sold.

        Section 619 of the act is as follows:

        '(a) In determining, for the purposes of this title, the price for which an article is sold, there shall be included any charge for coverings and containers of whatever nature, and any charge incident to placing the article in condition packed ready for shipment, but there shall be excluded the amount of tax imposed by this title, whether or not stated as a separate charge. A transportation, delivery, insurance, installation, or other charge (not required by the foregoing sentence to be included) shall be excluded from the price only if the amount thereof is established to the satisfaction of the Commissioner, in accordance with the regulations.         '(b) If an article is----         '(1) sold at retail;         '(2) sold on consignment; or         '(3) sold (otherwise than through an arm's-length transaction) at less than the fair market price; the tax under this title shall (if based on the price for which the article is sold) be computed on the price for which such articles are sold, in the ordinary course of trade, by manufacturers or producers thereof, as determined by the Commissioner.         '(c) In the case of (1) a lease, (2) a contract for the sale of an article wherein it is provided that the price shall be paid by installments and title to the article sold does not pass until a future date notwithstanding partial payment by installments, or (3) a conditional sale, there shall be paid upon each payment with respect to the article that portion of the total tax which is proportionate to the portion of the total amount to be paid represented by such payment.' 26 U.S.C.A. Int.Rev.Acts, page 618.

        The plaintiff corporation was organized in 1930. During the period involved in this proceeding plaintiff had outstanding 992 shares of common stock which were held as follows:

	Shares
E. A. Henske ................	950
R. L. Henske (his wife) .......	1
G. Bass ......................	18
Others .......................	23

        During the same period the ownership of the 85 shares of preferred stock outstanding were held as follows:

	Shares
E. A. Henske ......	48
R. L. Henske .......	1
G. Bass ...........	18
Others ............	18

        From the time of its incorporation in 1930 through December 1933 toilet and other preparations were manufactured, bottled and labeled by plaintiff and sold to E. A. Henske, trading as an individual under the name of York Pharmacal Company. During that period the federal manufacturer's excise tax on such preparations was computed, reported and paid by plaintiff on the basis of prices at which the articles were sold to customers by the York Pharmacal Company. After December 1933 plaintiff sought to have the tax assessed and paid on the basis of the price at which it billed its goods to the York Company instead of the price the York Company sold to the trade.

        On January 1, 1934, a contract was entered into between the plaintiff and E. A. Henske trading as York Pharmacal Company, by the terms of which the Pharmacal Company was to purchase from the plaintiff the commodities at the actual cost of materials plus a profit of 20 percent and a guaranteed net profit of 7 percent on the par value of all outstanding stock. Shortly thereafter, on January 20, 1934, E. A. Henske caused the York Pharmacal Company to be incorporated and transferred to that corporation his rights and obligations under the contract of January 1, 1934, in exchange for 1,000 shares of its authorized capital stock of which he transferred one share to R. L. Henske and 18 shares to G. Bass. Throughout the period involved in this proceeding the capital stock of the York Pharmacal Company continued to be held in the same manner.

        At all times during the period involved plaintiff and the York Pharmacal Company occupied the same premises under a lease as joint lessees, and each paid one-half the rent. Both names at all times appeared on the transom over the entrance to the building. E. A. Henske was president of and managed both companies. Apparently the Commissioner of Internal Revenue concluded that notwithstanding he put on a new cap in the form of a contract on January 1, 1934, and a corporate suit of clothes January 20, 1934, he was still Mr. Henske; that he was still doing business at the same old stand, and that the primary purpose of the new arrangement was to reduce the amount of the tax.

        The Commissioner determined the amount of the tax upon the basis of the prices at which the York Company sold at wholesale to the trade.

        Plaintiff filed a timely claim for refund contending that the prices at which it sold to the York Pharmacal Company should be used as a basis. In the alternate it contended that the cost of selling should be eliminated.

        The question is whether the Commissioner of Internal Revenue used the proper basis.

        The exact question on a very similar set of facts was decided adversely to the contention of the plaintiff in the case of Ayer v. United States, 38 F.Supp. 284, 93 Ct.Cl. 386. Practically the same issues were involved in Bourjois, Inc., v. McGowan, 2 Cir., 85 F.2d 510, certiorari denied 300 U.S. 682, 57 S.Ct. 753, 81 L.Ed. 885; Campana Corporation v. Harrison, 7 Cir., 114 F.2d 400. The reasoning in those cases need not be repeated here.

         Plaintiff's alternate suggestion that the costs of selling should be eliminated was decided adversely by the Supreme Court in the case of F. W. Fitch Co. v. United States, 323 U.S. 582, 65 S.Ct. 409.

        The fact that the ownership of the stock of both corporations was so nearly complete in one man who managed both corporations, that he used the same premises and the same employees, makes it impossible to escape the conclusion that the Commissioner was right in treating them as one organization for the purpose of calculating the manufacturer's excise tax involved in this suit.

        The petition will be dismissed. It is so ordered.

        WHALEY, Chief Justice, and WHITAKER and LITTLETON, Judges, concur.

        MADDEN, Judge, took no part in the decision of this case.