Summary
In Samuel Winslow Skate Mfg. Co. v. U.S., 50 F.2d 299, 72 Ct.Cl. 323, certiorari denied Endicott v. United States, 285 U.S. 555, 52 S.Ct. 456, 76 L.Ed. 944, this court considered the question of whether various types of skates adapted for use by children were "skates" within the meaning of an earlier revenue law imposing an excise tax on sporting goods.
Summary of this case from Hine v. United StatesOpinion
No. H-74.
June 1, 1931.
Suit by the Samuel Winslow Skate Manufacturing Company against the United States.
Petition dismissed.
This is a suit for the recovery of excise taxes alleged to have been illegally assessed and collected on a certain type of roller skates, under section 900 of the Revenue Act of 1918.
The court, upon the report of a commissioner and the evidence, makes the following special findings of fact:
1. The Samuel Winslow Skate Manufacturing Company, plaintiff herein, was established in the year 1856 and incorporated in the year 1886 under the laws of the commonwealth of Massachusetts. Its factory and main office were and are in the city of Worcester in the said commonwealth.
2. The plaintiff's principal business during the years involved in this action, and for many years prior thereto, was that of the manufacture and sale of ice skates and roller skates.
In addition to its regular line of single-runner ice skates, the plaintiff manufactured and sold an article known as a "sled skate" made on a small, light, malleable extension frame, which was adjustable as to length, with two pairs of parallel runners riveted thereto, and equipped with webbing toe and ankle straps to secure it to the foot of the wearer. The "sled skate" was designed especially for the use of children between the ages of three and six in skating or sliding about over ice or thickly crusted snow.
The several styles and types of roller skates manufactured and sold by the plaintiff during the period involved herein were susceptible of being separated into five principal groups.
The first group would include those roller skates which were designed for roller skating rinks or theatrical or athletic use. They were made of a solid plate with edges turned under and a truss underneath for additional strength. The material used for plates and parts was cold-rolled steel. Roller bearing rolls of nickel-plated "web" steel, fiber, Asiatic Turkey boxwood, or aluminum were optional. Such roller skates were made in individual sizes for both men and women.
The second group would include the double-bar extension models in which the material used for plates and parts was cold-rolled steel as in the case of those skates of the preceding group. The skates of the second group were of sufficiently rugged construction for adult rink use. Parallel steel bars attached to the under side of the frame made them adjustable as to length. They were provided with foot clamps, steel heelplates, and russet grain leather ankle straps.
The third group would comprise the various styles of single-bar extension roller skates, which, although generally resembling those of the second group, both as to construction and as to materials used, with the exception of the substitution of the single extension bar for the double bar and a leather heelplate for the steel plate, were much lighter in weight.
The fourth and fifth groups, which together with the "sled skates" hereinbefore referred to are the only groups which are involved in this proceeding, would include those which are generally designated as "sidewalk roller skates." The extension plates of each of the two latter groups were made of very light malleable material. Those of the fourth group were equipped with roller bearing rolls, whereas those of the fifth group were fitted with cast-iron rollers. Both roller skates of the fourth and fifth groups were especially designed for the use of children and were generally used by children between the ages of seven and twelve. They were by reason of their design, as well as the materials of which they were made, neither intended nor reasonably adapted for adult use.
3. During the period involved herein, and for many years prior thereto, the word "skate" in its commonly accepted trade and commercial usage was used to designate an ice skate. A roller skate was regarded and considered in the trade as a separate and distinct article of commerce, and was customarily specifically designated and referred to as such. The children's extension sidewalk roller skates hereinbefore referred to were in the trade commercially known and considered as toys and playthings, and were not regarded as sporting goods.
4. During the month of July, 1920, the plaintiff disclosed to the Commissioner of Internal Revenue that it had made no excise tax returns under the Revenue Act of 1918, and that no taxes had been paid since the effective date of that act — namely, February 24, 1919. Thereafter, and pursuant to an investigation of the plaintiff's books of account by an internal revenue agent, and under date of August 26, 1920, said agent recommended the assessment of tax and penalties as follows:
============================================================ | Tax | 25% | 5% | Total --------|-------------|------------|------------------------ 1919 | | | | | | | | Feb. | $1,070 99 | $267 76 | $53 55 | $1,392 30 Mar. | 4,736 08 | 1,184 02 | 236 80 | 6,156 90 Apr. | 2,690 91 | 672 73 | 134 55 | 3,498 19 May | 610 69 | 152 67 | 30 53 | 793 89 June | 792 28 | 198 07 | 39 61 | 1,029 96 July | 1,628 50 | 407 13 | 81 43 | 2,117 06 Aug. | 2,094 99 | 523 75 | 104 75 | 2,723 49 Sept. | 3,848 52 | 962 13 | 192 43 | 5,003 08 Oct. | 4,175 61 | 1,043 90 | 208 78 | 5,428 29 Nov. | 2,852 68 | 713 17 | 142 63 | 3,708 48 Dec. | 4,170 92 | 1,042 73 | 208 55 | 5,422 20 | | | | 1920 | | | | | | | | Jan. | 2,375 77 | 593 94 | 118 79 | 3,088 50 Feb. | 1,986 37 | 496 59 | 99 32 | 2,582 28 Mar. | 3,768 97 | 942 24 | 188 45 | 4,899 66 Apr. | 2,842 37 | 710 59 | 142 12 | 3,695 08 May | 5,949 61 | 1,487 40 | 297 48 | 7,734 49 June | 2,907 71 | 726 93 | 145 39 | 3,780 03 |-------------|------------|-----------|------------ | 48,502 97 | 12,125 75 | 2,425 16 | 63,053 88 ------------------------------------------------------------
The Commissioner of Internal Revenue on his August, 1920, list (supplemental) dated November 17, 1920, page 2, line 8, assessed against plaintiff the following taxes: $48,502.97 tax; $12,125.75 and $2,425.16 penalties, as set out above.
5. Of the amount so assessed the plaintiff on and between March 31, 1922, and May 14, 1923, both dates inclusive, paid to the collector of internal revenue, Boston, Mass., certain sums totaling $24,501.30 by nine voucher checks. Upon receipt of such payments the collector issued receipts therefor on forms entitled. "Notice and Demand for Sales Tax."
6. On July 2, 1924, plaintiff duly filed in the office of the collector of internal revenue at Boston, Mass., a claim for refund of a portion of the tax paid as above set out in the total sum of $18,678.63 for the months of February to November, 1919, both inclusive.
The tax paid by plaintiff as aforesaid was based upon sales of articles manufactured by it as follows:
============================================================== | | Sidewalk | | | Total paid | roller | Sled | Total refund | | skates | skates | claim ---------|-------------|------------|-----------|------------- 1919 | | | | | | | | Feb. | $1,070 99 | $1,061 70 | ......... | $1,061 70 Mar. | 4,736 08 | 4,736 08 | ......... | 4,736 08 Apr. | 2,690 91 | 2,556 87 | ......... | 2,556 87 May | 610 69 | 556 78 | ......... | 556 78 June | 792 29 | 680 40 | $0 15 | 680 55 July | 1,628 50 | 1,592 75 | 1 38 | 1,594 13 Aug. | 2,095 00 | 823 78 | 84 23 | 908 01 Sept. | 3,848 53 | 2,481 57 | 43 18 | 2,524 75 Oct. | 4,175 62 | 2,755 47 | 67 22 | 2,822 69 Nov. | 2,852 69 | 1,191 34 | 45 73 | 1,237 07 |-------------|------------|-----------|----------- Total | 24,501 30 | 18,436 74 | 241 89 | 18,678 63 --------------------------------------------------------------
Of the sums so paid $18,436.74 was paid on sidewalk roller skates, $241.89 on so-called sled skates, and $5,822.57 on ice skates and certain types of roller skates classified by the plaintiff as sporting goods. The plaintiff does not claim the refund of this latter sum in this proceeding.
7. On December 1, 1924, the plaintiff's said claim for refund was rejected in full, and the Commissioner of Internal Revenue addressed the following letter of rejection to the plaintiff:
"Reference is made to your claim for the refund of $18,678.63, manufacturer's excise tax, penalties, and interest paid for the period from February 25, 1919, to June 30, 1920.
"It appears that the tax involved was paid on certain skates manufactured and sold by you, which you contend are children's toys and not taxable under section 900 of the Revenue Act of 1918.
"You are advised that very careful consideration has been given to the matter of the taxability of the skates in question, and it is held that they are properly subject to the tax imposed by section 900 of the Revenue Act of 1918.
"The claim is accordingly rejected in full."
The plaintiff thereafter made a request upon the Commissioner of Internal Revenue that the determination theretofore made be reviewed. After further consideration, the Commissioner of Internal Revenue on September 15, 1925, affirmed the action theretofore taken by the unit holding that the particular skates in question were taxable.
8. The plaintiff is the sole owner of the claim herein presented, and no assignment or transfer of said claim or any part thereof, or interest therein, has been made to any person, persons, or corporation.
9. The plaintiff has at all times borne true allegiance to the Government of the United States, and has not in any way voluntarily aided, abetted, or given encouragement to rebellion against the government.
Jay Clark, Jr., of Worcester, Mass., for plaintiff.
Joseph H. Sheppard, of Washington, D.C., and Charles B. Rugg, Asst. Atty. Gen., for the United States.
Before BOOTH, Chief Justice, and WHALEY, WILLIAMS, LITTLETON, and GREEN, Judges.
This tax case involves a construction of section 900 of the Revenue Act of 1918 ( 40 Stat. 1057, 1122). The sole issue is whether the excise tax of ten per centum of the price for which a certain type of roller skates was sold applies to that type. The taxing act taxed the manufacturer, producer, or importer ten per centum of the price for which "skates" were sold, and plaintiff contends that sidewalk roller skates, manufactured and adapted for use by children of from seven to twelve years of age in skating on sidewalks, are not taxable, and seeks refund of the taxes collected by the Commissioner of Internal Revenue upon all such roller skates.
The plaintiff is a Massachusetts corporation engaged, among other activities, in manufacturing ice, roller, and what it designates as sled skates. On November 17, 1920, the Commissioner of Internal Revenue assessed against the plaintiff the following taxes: $48,502.97 tax, $14,550.91 penalties. The plaintiff had not made any excise tax returns under the act of 1918.
Section 900 of the Revenue Act of 1918 ( 40 Stat. 1057, 1122) provides as follows:
"Sec. 900. That there shall be levied, assessed, collected, and paid upon the following articles sold or leased by the manufacturer, producer, or importer, a tax equivalent to the following percentages of the price for which so sold or leased — * * *
"(5) Tennis rackets, nets, racket covers and presses, skates, snowshoes, skis, toboggans, canoe paddles and cushions, polo mallets, baseball bats, gloves, masks, protectors, shoes and uniforms, football helmets, harness and goals, basket-ball goals and uniforms, golf bags and clubs, lacrosse sticks, balls of all kinds, including baseballs, footballs, tennis, golf, lacrosse, billiard and pool balls, fishing rods and reels, billiard and pool tables, chess and checker boards and pieces, dice, games and parts of games (except playing cards and children's toys and games), and all similar articles commonly or commercially known as sporting goods, 10 per centum."
The plaintiff on July 2, 1924, filed its claim for a refund of $18,678.63 of the total amount of tax paid for the months of February to November, 1919, inclusive, predicating its claim upon an allegation that sidewalk roller and sled skates did not fall within the taxing statute and hence were not taxable. The refund claim was rejected by the Commissioner on December 1, 1924. This suit is for the recovery of said sum.
Plaintiff's insistence in its final analysis converges to the single issue, that the word "skates" in the taxing act includes only ice skates. True, it concedes tax liability and paid taxes upon an alleged type of roller skates, but this concession is rested upon the so-called residuary clause of the revenue law taxing "all similar articles commonly or commercially known as sporting goods." The record establishes that for many years prior to the period herein involved the plaintiff manufactured and sold several types of roller and ice skates. One type of roller skates was constructed along substantial lines, made strong and durable for theatrical and athletic use. Another type, less substantial, adapted more for general adult use, was made and sold in quantities. A third type differing from the ones just mentioned, while constructed along identical lines, was somewhat lighter in weight, doubtless an inducement for purchase, appealing to skaters desiring a minimum of weight. The fourth type, the type exclusively involved in this suit, designated as "sidewalk roller skates," was of light weight, much less substantial as to parts of construction and designed especially for children. Means for adjusting the skates to varying sizes of shoes obtained, and, in so far as the skate itself is concerned, differed from all the previous types only in material used to make the same. They were not intended for adult use because not susceptible to the wear and tear such use necessarily involved. The plaintiff insists that they are classifiable as children's toys and hence exempt from taxation under the revenue act. Section 900 of the Revenue Act under consideration, after designating by name a large number of articles known as sporting goods, provides in this connection as follows: "Games and parts of games (except playing cards and children's toys and games), and all similar articles commonly or commercially known as sporting goods." If this contention is sustainable, as pointed out in defendant's brief, the above parenthetical clause modifies the taxability of each of the articles enumerated in the statutes, and is distinct legislation intended to exempt any of the articles mentioned if they are in fact mere toys. Aside from the fact that the punctuation used and the obvious intention of the law negative plaintiff's argument, we do not believe this particular type of skates may be considered as children's toys within the meaning of the taxing statute. Beyond doubt, they are so constructed as to glide over concrete walks, function in every particular as adult skates function, and afford the same pleasurable sensation that roller skates in general afford. A child sufficiently old to use them may adjust them for use, and they are in no sense mere imitations of useful articles which serve to amuse and entertain children, but which in themselves are incapable of functioning as the original and are not so designed and intended. A child acquiring a miniature pair of roller skates to affix to a doll or other imitation of a person acquires a mere toy. A child acquiring a pair of sidewalk roller skates uses them for an entirely different purpose than noted above, and obtains precisely the same sensations and exercise an adult obtains from their use. They are not toys in the ordinary and common acceptation of the term, but, as we think, a type of roller skates made and adapted for the use of children old enough to use roller skates and especially useful for the designed purpose. The plaintiff in its interesting and able brief urges as a means of construing the statute that the Congress used the word "skates" in its commonly accepted trade and commercial meaning, and that as so used it could not include any other type of skates than ice skates. A large number of cases are cited to sustain the contention. The cases cited have to do exclusively with the classification of merchandise imported into the United States, and involve without exception the applicable tariff rates to the same. The cases cited, too many to review, do not, we think, apply. The revenue act under consideration was passed at a time when Congress was intending to tax articles which a majority of the people could very well get along without, i.e., luxuries and semiluxuries. As a source of revenue Congress resorted to this class of articles and imposed upon them a tax to help defray the enormous expense of the war and was, we think, intending to use descriptive designations in their generic sense, a tax imposed in accord with the taxpayers' ability to pay and necessarily and essentially incapable of being set forth in detail in all respects, and hence made general as to the subject matter by the residuary clause of the statute. LaBelle Iron Works v. United States, 256 U.S. 377, 386, 41 S. Ct. 528, 65 L. Ed. 998. In the case of Jordan v. Roche, 228 U.S. 436, 445, 33 S. Ct. 573, 575, 57 L. Ed. 908, the court said:
"A general answer to them is that the purpose of the Foraker act was, as we have said, to subject Porto Rican articles to the internal revenue laws of the United States, and under those laws, articles are taxed not by their commercial names or uses, but according to their alcoholic content, under the generic name of `distilled spirits.'"
We think the fact that sidewalk roller skates were commercially known as toys is immaterial. A taxing act is involved and its terms prevail. Congress was not dealing with commercial distinctions, but with articles as generally understood and recognized.
What we have said applies with equal force to sled skates. We think the different types of skates made and sold by the plaintiff were in all respects skates, and that the variation in design and structure was no more than a purpose to cater to the wants of those desiring to use skates, either roller, ice, sled, or sidewalk, a commercial intent to supply the trade with a type of skate adapted to the particular use and status of the prospective customers, a mere variation in style and structure of an existing and long-identified article of amusement and exercise well known and easily recognizable as "skates."
The petition will be dismissed. It is so ordered.