Brief for the Respondent in Opposition — Fuhrman & Forster Co. v. Commissioner

SN INN ai oars a oe tn ake aos Page

Jurisdiction — — — — - 4

Question presented ; ‘ :

Statutes and regulations involved _ __

Statement __- Nhe

Argument.___-_--_- ae

Conclusion _ - , . hie ‘

Appendix - - -- -- . ; ; Sona err vere ee ee

CITATIO.,

. S

Cases:

srogenrs wa “ef = : “no Ad S. 337... --...-...--- 8

Ar » V¥. 8c F . :

rari denied, 310 U. 8. 645...._. 109 F. (2d) 278, certio-

Carbon Steel Co. v. Lewellyn, 251 U~ S. ‘i

= & ee a agrees. 104 F. (2d) 563. __.

rain Belt Supply Co. v. ~OMMI185 oner, 109 F. (2d) 490,

certiorari denied, 310 U.S.648. 5,6

Lucas v. Kentucky Distilleries & TL ehouse Co., 70 F. (2d) :

883__- , oe aleg es he insaieneg te Se ee ee 9

New Consumers Bread Co. v. Com Msioner, 115 F. (2d) 162. 5

Oswald Jaeger Baking Co. v. Commizsioner, 108 F. (2d) 375

certiorari denied, 309 U.S. 683_ TA Ces ee 5

Southwestern Serum Co. v. Commis ioner, 108 F. (2d) 843,

certiorari denied, 310 U.S. 628. tf Gets ee 5,6

Trunz Pork Stores v. Rasquin, 100. om We. ......... 2&8

Warner-Patterson Co. v. United Staes, 68 C. Cls. 237___- 9

White v. Hopkins, 51 F. (2d) 159 9

Zinsmaster Baking Co. v. Commissoner, 109 F. (2d) 738,

certiorari denied, 310 U.8.653...........sisi“‘(i(‘(swtCit*;# 5

Statutes:

Agricultural Adjustment Act, ¢. 25,48 Stat. 31:

See. 9 (U.S. C., Title 7, See. 69)______- Speett arses 11

Revenue Act of 1936, ¢. 690, 49 Stitt. 1648:

Sec. 902 (U.S. C. Supp. V, Tile 7, See. 644) ca AS

See. 905 (U.S. C. Supp. V, Tile 7, Sec. 647) hee 14

Sec. 906 (U.S. C. Supp. V, Tite 7, Sec. 648) 7,14

Sec. 907 (U. 8S. C. Supp. V, Tide 7, Sec. 649) 16

See. 910 (U. S. C. Supp. V, Tife 7, See. 652)_._.._- 8, 16

See. 913 (U.S. C. Supp. V, Tite 7, See. 655) 7, 16

See. 916 (U.S. C. Supp. V, Tide 7, See. 658) oe: 17

2S5S54—41 1 (a)

II

Miscellaneous: Page

Treasury Regulations 81, promulgated under the Agricul-

tural Adjustment Act, Art. 2------------------------ 17

Treasury Regulations 96, promulgated under the Revenue

Act of 1936:

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Guthe Supreme Court of the Wnited States

OctToBeR TERM, 1940

No. 650

FUHRMAN & ForsTER COMPANY, PETITIONER

Vv.

Guy T. HELVERING, COMMISSIONER OF INTERNAL

REVENUE

ON PETITION FOR A WRIT OF CERTIORARI TO THE UNITED

STATES CIRCUIT COURT OF APPEALS FOR THE SEVENTH

CIRCUIT

BRIEF FOR THE RESPONDENT IN OPPOSITION

OPINIONS BELOW

The order of dismissal of the United States

Processing Tax Board of Review, together with

supporting and dissenting memoranda, is printed

in the record at pages 53 to 57, inclusive. The

opinion of the Circuit Court of Appeals for the

Seventh Circuit (R. 87-94) is reported at 114 F.

(2d) 863.

JURISDICTION

The judgment of the Circuit Court of Appeals

was entered July 22, 1940. (R. 94.) <A petition

(1)

BERTAPELLE ELIS

2

for rehearing was denied by the Cireuit Court of

Appeals on October 1, 1940. (R. 95.) The peti-

tion for a writ of certiorari was filed on Decem-

ber 26, 1940. The jurisdiction of this Court is in-

voked under Section 240 (a) of the Judicial Code,

as amended by the Act of February 12%, 1925.

QUESTION PRESENTED

Whether the United States Processing Tax

Board of Review properly dismissed the petition

for review for lack of jurisdiction.

STATUTES AND REGULATIONS INVOLVED

The pertinent provisions of the statutes and reg-

ulations involved are printed in the Appendix,

infra, pp. 11-25.

STATEMENT

This proceeding was instituted before the United

States Processing ax Board of Review by a peti-

tion filed September 1, 1938 (R. 3-8), and an

amended petition filed April 24, 1939 (R. 42-48),

to review the disallowance by the Commissioner of

Internal Revenue of petitioner’s claim for refund

of $260,675.15. This sum represents $258,086.02

paid to C. A. Burnette Company, a custom slaugh-

terer, on account of processing taxes imposed upon

the latter under the Agricultural Adjustment Act,

c. 25, 48 Stat. 31, upon the slaughtering by ©. A.

Burnette Company of hogs owned by the petitioner,

and $2,589.13 paid by petitioner directly to the Col-

lector of Internal Revenue as processing taxes due

3

upon the slaughtering by the C. A. Burnette Com-

pany of hogs owned by the petitioner. (R. 42-43.)

Upon motion by the Commissioner (R. 49-50), the

Processing Tax Board of Review dismissed the

proceeding before it for lack of jurisdiction, three

members dissenting (R. 53-57). The Circuit

Court of Appeals for the Seventh Circuit affirmed.

(R. 87-94.)

Insofar as material here, the amended petition

filed with the Processing Tax Board of Review (R.

42-48) alleges that the petitioner is an Illinois cor-

poration organized January 2, 1920, with its prin-

cipal office at Chicago; that its business is confined

to the purchase and slaughter of hogs and the gale

of the resultant pork products to wholesale and re-

tail meat dealers, jobbers, hotels, restaurants, and

others. (R. 43.)

Petitioner purchased the hogs on which the

processing tax in controversy was paid. They

were bought in the open market in the customary

manner from commission houses or direct from

the producer, or both. The petitioner’s buyer se-

lected the animals and otherwise settled the terms

of purchase, the billing for which was to C. A.

Burnette Company, a custom slaughterer. The

C. A. Burnette Company always received the cash

or charged the account of the petitioner, prior to

actual payment, for the hogs purchased, on the fol-

lowing day. The C. A. Burnette Company slaugh-

tered the hogs for a fee, usually under the super-

4

vision of the buyer employed by the petitioner.

The employee who supervised the killing process

had authority to require the work to be done by

methods that were considered to be the most

favorable to the petitioner. (R. 43.)

The tax imposed upon the slaughtering of the

hogs slaughtered for the petitioner was at first

paid by the petitioner directly to the Collector of

Internal Revenue. Payments made by the peti-

tioner later were refunded to the petitioner with

instructions to pay C. A. Burnette Company. (R.

43.) Thereafter payment of the processing tax

was made by C. A. Burnette Company on all of

the hogs slaughtered for petitioner, and the peti-

tioner was compelled to pay the amount of the tax

to C. A. Burnette Company. The money thus col-

lected from petitioner actually was used by C. A.

Burnette Company to pay the processing tax on

the hogs slaughtered for petitioner. Petitioner

always paid the killing charge and the processing

tax by separate checks and recorded the disburse-

ments on its records as processing taxes paid.

(R. 44-45.) :

The only exception to this method of payment

was the payment by petitioner of $2,589.13 di-

rectly to the Collector of Internal Revenue on July

1, 1935, on account of processing taxes due for the

month of May, 1935. (R. 43-44.)

ARGUMENT

The Cireuit Courts of Appeals have held with-

out exception that Title VII of the Revenue Act

ih” eal

0

of 1936 authorizes refunds only to persons who

actually paid to the Government amounts col-

lected as tax under the Agricultural Adjustment

Act. See F. & F. Laboratories v. Commissioner,

104 F. (2d) 563 (C, C. A. Tth); Oswald Jaeger

Baking Co. v. Commissioner, 108 F. (2d) 375 (C.

©. A. 7th), certiorari denied, 309 U. S. 683; Zins-

master Baking Co. v. Commissioner, 109 F. (2d)

738 (C. C. A. 8th), certiorari denied, 310 U. S.

653; New Consumers Bread Co. v. Commissioner,

115 F. (2d) 162 (C. C. A. 3d). The issue is sim-

ply whether, under the circumstances of this case,

the petitioner or the slaughterer was the taxpayer.

1. In its argument (Br. 19-39) petitioner at-

tempts to show, contrary to the rulings of the

Commissioner of Internal Revenue and the deci-

sion of the court below, that it, instead of ©. A.

Burnette Company, was the first domestic proc-

essor of hogs within the meaning of the Agricul-

tural Adjustment Act and as such was liable for

the tax involved—that C. A. Burnette Company

only acted as its agent in making the payments.

The court below correctly held that C. A.

Burnette Company was the first domestic proc-

essor and as such liable for the tax. This part

of the court’s decision is not in conflict with any

other decision, but appears to be supported by the

decisions in Southwestern Serum Co. v. Commis-

sioner, 108 F. (2d) 848 (C. C. A. 10th), certiorari

denied, 310 U. S. 628; Grain Belt Supply Co. v.

Commissioner, 109 F. (2d) 490 (C. C. A. 8th),

6

certiorari denied, 310 U. S. 648; and Arabi Packing

Co. v. Commissioner, 109 F. (2d) 278 (C. ©. A.

Sth), certiorari denied, 310 U. S. 645. See, also,

Article 2 of Treasury Regulations 81, infra, pro-

mulgated under authority of the Agricultural

Adjustment Act.

In the Southwestern Serum Co. case and the

Grain Belt Supply Co. case the petitioners killed

their own hogs by slitting the throat, drew off the

blood for use in manufacturing anti-cholera serum,

and sold the whole carcasses to Cudahy & Company.

The Commissioner held that the killing of the hogs

constituted the first domestic processing and col-

lected the tax from the serum companies. Their

right to sue for a refund was not questioned, but

recovery was denied because they failed to show

they bore the burden of the tax. In the Arabi

Packing Co. case the petitioner was a custom

slaughterer and its right to sue for a refund was

not questioned. Its appeal was dismissed because

the Processing Tax Board of Review was not given

jurisdiction of claims for refund of amounts paid

as processing taxes by custom processors, such

jurisdiction having been vested in the District

Courts and the Court of Claims.

Furthermore, the question whether the Commis-

sioner was right or wrong in taxing C. A. Burnette

Company as the first domestic processor is imma-

terial in this proceeding. The tax actually was

paid by that company as its own liability and it

7

is recognized as the taxpayer for the purposes of

Title VII of the 1936 Act. That Congress so in-

tended is clear from the provisions of the Act.

Section 906 of the Act, infra, gives concurrent

jurisdiction to the District Courts and the Court of

Claims of suits to recover all amounts paid as tax

under the Agricultural Adjustment Act, except

amounts paid as processing tax as defined in See-

tion 913 (b); Section 906, infra, gives the Proc-

Tax Board of Review jurisdiction of claims

for refund of amounts paid as processing tax; and

Section 913 (b), infra, defines processing tax as

used in Title VII as any exaction denominated a

processing tax under the Agricultural Adjustment

Act except any amount paid as tax with respect

to the processing of a commodity for a customer

for a charge or fee. Treasury Regulations 96,

promulgated under authority of Section 916 of the

1936 Act, infra, give full effect to the provisions of

the Act by providing for the filing of refund claims

by custom processors. See Articles 101, 201, 501-

505, of Regulations 96, infra.

2. Petitioner alleges that the decision below is

in conflict with the decision of the Cireuit Court

of Appeals for the Second Cireuit in Trunz Pork

Stores v. Rasquin, 100 F. (2d) 399 (Pet. 6-7). In

that case the Trunz Pork Stores, as did the peti-

tioner in this case, purchased live hogs and had

them slaughtered by a public abattoir for a charge

or fee. Fora time it paid the processing tax but

285854—41——-2

essing

TAPES PRN bo 2s

SIDES ORL EER CAL TE ICE TIEN SIE Dt

8

later was advised that the slaughterer was liable for

the tax, whereupon it filed a claim for refund of

the amount which it had paid. Upon the expira-

tion of six months without action having been

taken by the Commissioner upon its claim, and

without having filed a claim under the Revenue

Act of 1936, it brought suit against the Collector

of Internal Revenue in the District Court of the

United States for the Eastern District of New

York. The action was dismissed by the District

Court for lack of jurisdiction (22 F. Supp. 1020),

and its decision was affirmed by the Cireuit Court

of Appeals. The opinions of both courts indicate

that the ground for dismissal was that the claim

was for an amount paid as processing tax, over

which the Processing Tax Board of Review is

given exclusive jurisdiction.’

In the Trunz case, the Commissioner had failed

to refund the tax to the packer, who had paid it

as the taxpayer. In the circumstances of that case

it would be difficult to hold that the slaughterer,

who had in fact paid none of the tax in question

was the taxpayer, and certainly the packer there

was the actual taxpayer. Here, on the contrary,

1 There ‘were other factors which deprived those courts of

jurisdiction. For one thing, the suit was brought against the

Collector of Internal Revenue, contrary to the provisions of

Section 910 of the 1936 Act, infra. See Anniston Mfg. Co.

vy. Davis, 301 U.S. 337. Then, again, it does not appear from

either opinion that the taxpayer alleged that it had borne

all or any part of the burden of the amount sued for as re-

quired by Section 902, infra.

9

the Commissioner had refunded the taxes to peti-

tioner and had collected from the slaughterer.

Petitioner, therefore, whatever the case with the

Trunz Pork Stores, could not be viewed as the

person from whom the tax was collected.

The only possible conflict between the Trunz de-

cision and that below would be as to the $2,589.13

which petitioner paid directly to the Collector of

Internal Revenue on July 1, 1935. The record

does not explain whether this was an administra-

tive oversight or a payment made, as agent or as

volunteer, to avoid collection procedures: directed

against the slaughterer (see R. 43-44). Petition-

er, in its ‘Reasons’? makes only passing reference

to this payment, and that in a different connection

(Pet. 6-14, 13). This isolated payment, ignored

in the reasoning of the Board of Review and the

court below, does not seem to us to raise a conflict

of decisions,

There is no conflict with the other decisions cited

hy petitioner. (Pet. 7-9.) None arose under Title

VII of the Revenue Act of 1936. Carbon Steel Co.

v. Lewellyn, 251 U. S. 501, cited by petitioner

(Pet. 8), involved the question whether the Steel

Company was liable for a manufacturers excise

tax. The same is true of Warner-Patterson Co. v.

United States, 68 C. Cls. 237, cited by petitioner

(Pet.9). In White v. Hopkins, 51 F. (2d) 159 (C,

C. A. 5th), and Lucas v. Kentucky Distilleries &

Warchouse Co., 70 F. (2d) 883 (C. C. A. 6th), the

Ne ae

eS me NEE

i

a hil

10

suit was brought by the party who was charged

with, and who actually paid, the taxes involved,

The only analogy to the present case is with respect

to the $2,589.13 paid by this petitioner on July 1

1935, the circumstances of which are obscure.

’

CONCLUSION

There is no conflict of decisions. The decision

below is fully supported by the facts and the law.

The petition should be denied.

Respectfully submitted,

FraNcis BIppLe,

Solicitor General.

SAMUEL O. CLARK, Jr.,

Assistant Attorney General.

SEWALL KEY,

WARNER W. GARDNER,

F. E. YouNGMAN,

Special Assistants to the Attorney General.

JANUARY 1941.

PCIE

AEF

Re AY