# Appendix — District of Columbia v. Radio Corp. of America > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386418_0762%3A3 ## Record - **Collection:** Supreme Court brief - **Document type:** Appendix - **Published:** January 1, 1956 - **Citation:** 352 U.S. 845 ## Text APPENDIX A OPINION OF THE COURT UNITED STATES COURT OF APPEALS FOR THE DISTRICT OF COLUMBIA CIRCUIT No. 12,927 District oF COLUMBIA, PETITIONER Vv. Rapio Corporation OF AMERICA, RESPONDENT Petition for Review of Decision of the District of Columbia Tax Court Decided April 5, 1956 Mr. Henry bk. Wixon, Assistant Corporation Couu- sel for the District of Columbia, with whom Messry, Vernon E. West, Corporation Counsel, Chester HH, Gray, Principal Assistant Corporation Counsel, and George C. Updeqraf?, Assistant Corporation Counsel, were on the brief, for yp: titioner, Mr. Loftus FE. Becker for respondent. Messrs, Rob- ert G. Zeller and John A, Gilmore were on the briet for respondent. Mr. James FE. Greeley also entered an appearance for respondent. Before Winsurn K. Miuier, Bazeron and Danater Circuit Judges. Winbur K. Miuuer, Circwi? Judge: The question in this case is whether the District of Columbia must la CERI tO ON, 2a refund certain franchise taxes paid under protest by the Radio Corporation of America. The Ineome and Franchise Tax Act of 1947, as amended, § 47-1551 et seq., D. C. Code (1951), imposes a franchise tax upon every corporation and unincorpo- rated business ‘‘for the privilege of carrying on or engaging in any trade or business within the District and of receiving such other income as is derived from sources within the District ....’’ The measure of the tax is that portion of the corporation’s net income ‘tas is fairly attributable to any trade or business earried on or engaged in within the Distriet and such other net income as is derived from sources within the District .. ..’’ § 47-1580.. It is provided by §$ 47-1580a: ‘*. . . Where the net income of a corpo- ration or unincorporated business is derived from sources both within and without the District, the portion thereof subject to tax under this article shill be determined under regulation or regulations pre- seribed by the Commissioners. . . .”’ August 31, 1948, the Commissioners ‘of the District promulgated regulations pursuant to the statutory authority quoted above, which include the following: See. 10-2(d). ‘*. .. If the trade or business i * >. 2 a . 2 “Sec. 10-2(d). Income from Trade or Busi- ness. If the trade or business is carried on en- tirely within the District, the entire gross income from trade or business shall be allocated to the District. If the trade or business is carried on partly within and partly without the District, that portion of the gross income from trade or business to be apportioned to the District shall be deter- mined as follows: “©(1) Income from sales of tangible personai property. ‘‘a. Where gross income for any taxable year is derived from the manufacture and sale or pur- 7b chase and sale of tangible personal property, the portion thereof to be apportioned to the District shall be such percentage of the total of such gross income as the District sales made during such taxable year bear to the total sales made every- where during such taxable year. For the purpose of this regulation the phrase ‘District sales’ shall mean the gross receipts from all sales made which were principally secured, negotiated, or effected by owners, employees, agents, officers and branches of the corporation or unincorporated business located in the District; and the phrase ‘total sales’ shall mean the gross receipts from all sales.’ The foregoing regulations promulgated August 31, 1948, contained the following provision: “Src. 17. Effective date of Amendments, The amendments made by these regulations shall apply to the taxable year or part thereof begin- ning on the first day of January, 1948, and to sueceeding taxable years.”’ On March 17, 1953, the Commissioners of the Dis- trict of Columbia amended Section 10-2(d)(1)a of the regulations to provide as follows: ‘“‘Sec. 10-2(d)(1)a. Where gross income for any taxable year is derived from the manufacture and sale or purchase and sale of tangible personal property, the portion thereof to be apportioned to the District shall be such percentage of the total of such gross income as the District sales made during such taxable year bear to the total sales made everywhere during such taxable year. For the purpose of this regulation the phrase ‘District sales’ shall mean the gross receipts from all sales made which were principally secured, negotiated, or effected by owners, employees, agents, officers and branches of the corporation or 8b unincorporated business in the District; and the phrase ‘total sales’ shall mean the gross receipts from all sales.’’ On August 6, 1953, the Commissioners further amended the regulations applicable to income and franchise taxes. Section 10-2 of these regulations, as amended on August 6, 1953, provided as follows: ‘‘Sec, 10-2. The measure of the franchise tax shall be that portion of the net income of the corporation and unincorporated business as is fairly attributable to any trade or business carried on or engaged in within the District, as defined in the Act, and such other net income as is derived from sources within the District. The portion of such net income which is ‘fairly attributable’ to any trade or business or such other net income as is derived from sources within the District shall be determined by allocation and apportion- ment thereof as prescribed in Sees. 10-2(b), 1°- 2(d), 10-2(e).”’ Section 10-2(b) of the regulations was amended to read as follows: ‘¢*Sec. 10-2(b). The word ‘allocated’ as herein- after used in reference to income and deductions therefrom means a determination based upon actual figures specifically applicable thereto; and the word ‘apportioned’ as hereinafter used in reference to net income means a ratable portion determined on a percentage basis. If the entire net income is derived from engaging in a trade or business within the District or from sources within the District, all of such income shall be allocated to the District. If the net income !s derived from engaging in a trade or business partly within and partly without the District or from sources both within or without the District, BROS HIN) 9b such income shall be allocated and apportioned in accordance with the specific provisions or formu- lae prescribed in these regulations.”’ Section 10-2(d)(1)a of the regulations was amended to read as follows: ‘Sec, 10-2(d). If the trade or business is carried on or engaged in wholly within the Dis- trict, the entire net income trom trade or business shall be allocated to the District. If the trade or business is carried on partly within and partly without the District, that portion of the net in- come from trade or business to be apportioned to the District shall be determined as follows: “(1) Income from sales of tangible personal property. ‘“(a) Where income for any taxable year is de- rived from the manufacture and sale or purchase and sale of tangible personal property, the por- tion thereof to be apportioned to the District shall be such percentage of the total of such in- come as the District sales made during such tax- able year bear to the total sales made everywhere during such taxable year. Every corporation and unincorporated business which carries on or en- gages in business in the District within the mean- ing of the words ‘trade or business’ as defined in the Act is, unless specifically exempted by some provision of the Act, subject to tax. For the pur- pose of this regulation, the phrase ‘District sales’ shall mean all sales to District customers the in- come from which is fairly attributable to the trade or business carried on or engaged in within the District, ineluding solicitation in the District by salesmen or other representatives of the tax- payer, that portion of sales to customers outside the District the income from which is fairly at- tributable to the trade or business carried on in the District, and sales of tangible personal prop- erty the income from which is from District sourees.”’ | “yy f 10b By Section 15 of the amendments of August 6, 1993, | the effective date of those amendments was prescribed} as follows: “Seetion 15. Effective Date of Amendments, The amendments made by these regulations shall apply to the taxable year or part thereof begin- ning on the first day of January, 1948, and to, succeeding taxable years.”’ APPENDIX C REPORT OF THE COMMITTEE ON THE DIS- TRICT OF COLUMBIA, UNITED STATES SENATE, ACCOMPANYING 8.2409, ENACTED AS THE ACT OF May 8, 1948, 62 Stat. 206, ch. 246, AMENDING THE DISTRICT OF COLUM- BIA INCOME AND FRANCHISE TAX ACT OF 1947, 61 Stat. 328, ch. 258 (Senate Report No. 1042, 80th Congress, 2d Session). ‘The Committee on the District of Columbia, to whom was referred the bill (S. 2409) to amend an act entitled ‘An act to provide revenue for the District of Columbia, and for other purposes,’ approved July 16, 1947, having considered the same, report favorably thereon without amend- ment and recommend that the bill do pass. ‘“The purpose of the bill is to clarify and limit the imposition of a tax upon the income of corp- orations or businesses which is ‘derived from sourees within the District of Columbia.’ Due to the language appearing in the existing District of Columbia income-tax law, the imposition or assessment of the income tax was_ heretofore made against concerns casually engaged in busi- ness within the borders of the District of Colum- bia by such means as telephone, mail orders, traveling salesmen, and other nonconsistent means of solicitation. This bill will correct such situa- tion, and limit the imposition of an income tax to those concerns factually engaged in business on their own account or through representatives or agents within the District of Columbia.” le } 2e REPORT OF THE COMMITTEE ON THE DIS- ; TRICT OF COLUMBIA, UNITED STATES © j HOUSE OF REPRESENTATIVES, ACCOM- PANYING S. 2409, ENACTED AS THE ACT OF May 3, 1948, 62 Stat. 206, ch. 246, AMEND- ING THE DISTRICT OF COLUMBIA INCOME AND FRANCHISE TAX ACT OF 1947, 61 Stat. 328, ch. 258 (House Report No. 1792, 80th Con- gress, 2d Session). ‘“The Committee on the District of Columbia, to whom was referred the bill (S. 2409) to amend | an act entitled ‘An act to provide revenue for the | District of Columbia, and for other purposes,’ | approved July 16, 1947, having considered the ’/ same, report favorably thereon with amendments and recommend that the bill as amended do pass. ‘“The amendments are as follows: ‘‘Strike all but enacting clause and insert the following: “That paragraph lettered (h) of section 4 of title I of article I of the Act entitled ‘An Act to provide revenue for the District of Columbia, and for other purposes’, approved July 16, 1947, is amended by striking out the period at the end of the paragraph, inserting a colon, and the follow- ing: ‘Provided, however, That the words ‘‘trade or business”’ shall not include, for the purposes of this article— “(1) Sales of tangible personal property whereby title to such property passes within or without the District, by a corporation or unin- corporated business which does not physically have or maintain an office, warehouse, or other } place of business in the District, and whieh has no officer, agent, or representative having an office or other place of business in the District, during the taxable year; or ‘©(2) Sales of tangible personal property by a corporation or unincorporated business which does not maintain an office or other place of busi- ness in the Distriet and which has no office, agent, a 3e or representative in the District except for the sole purpose of doing business with the United States, but such corporations and unincorporated businesses shall be subject to the licensing pro- visions in title XIV of this article. ‘‘Kor purposes of this proviso, the words ‘agent’ or ‘representative’ shall not include any inde- pendent broker engaged independently in regu- larly soliciting orders in the District for sellers and who holds himself out as such. ‘SHC. 2. Section 1 of title X of article I of said Act is amended by striking out the period at the end of the section, inserting a colon, and the following: ‘Provided further, That income de- rived from the sale of tangible personal property by a corporation or unincorporated business not carrying on or engaging in trade or business within the District as defined in title I of this article shall not be considered as income from sources within the District for purposes of this article, with the exception of income from sales to the United States not excluded from gross in- come as provided in title III, seetion 2(b) (18) of this article." “SEC. 3. Paragraph lettered (b) of section 2 of title IIT of article I of said Act is amended by adding thereto the following subparagraph : ‘(13) Income derived from the sale of tangible personal property to the United States by corp- orations and unincorporated businesses having their principal places of business located outside the District, which property is delivered from places outside the District for use outside the Distric: . ided, however, That the taxpayer shall fi) _to the Assessor a statement in writ- ing of the amount of gross sales so made and, if required by the Assessor, a list of the names of the agencies of the United States through which such property was sold.’ “SEC. 4. Section 4 of title XTV of article I of said Act is repealed, “SEC. 5. The amendments made by this Act shall apply to the taxable year or part thereof BAD: OLD COE AS DARA AREY eA A TE AIS La LES ES me er oe om 4c beginning on the Ist day of January 1948, and to succeeding taxable years. “The purpose of the bill, as amended, is to clarify the language and intent in the District of Columbia Income and Franchise Tax Act of 1947, in order that the tax so provided be not imposed on corporations and unincorporated businesses which do not maintain places of business or rep- resentatives in the District of Columbia, or on such concerns which maintain places of business or representatives in the District for the sole purpose of doing business with the United States, in respect to sales of tangible personal property delivered outside the District for use outside the District. ‘‘Complaints were received by Members of the Congress from business organizations located out- side the District which did business in the District through solicitation by salesmen and others who did not maintain business offices in the District. As a result of such complaints, H. R. 5317 and H. R. 5563, Eightieth Congress, Second session, were introduced. Those bills were intended to amend the 1947 act to exempt from taxation in- come derived from the procurement of orders for the sale of personal property by means of tele- phonic communication, correspondence, or solici- tation by salesmen in the District where such orders required acceptance without the District before binding the parties and title to such prop- erty passed without the District, as well as the income derived from sales of personal property to the United States unless the taxpayer was en- gaged in business in the District and such prop- erty was delivered for use within the District. The language of H. R_ 5317 and H. R. 5563 was the same as that contained in section 1 of the act of June 22, 1942 (56 Stat. 376, title 47, sec. 1502(b), D.C. Code 1940, supp. V), which amended the District of Columbia Income Tax Act of 1939. Those bills met with opposition by District tax officials because, in their view, the prior Jaw on which the two bills were based resulted in inequit- 2 33 e b ae : % Se. re S B A P 9 : ae able taxation and much administrative difficulty and litigation. ‘‘Hearings on the subject were held before the Joint Subcommittee on Fiscal Affairs of the Com- mittees on the District of Columbia, and, there- after, conferences were held by District tax offi- cials and some of the interested representatives of manufacturing organizations in efforts to for- mulate amendments to the 1947 act which would be satisfactory to the complaining taxpayers and alleviate the difficulties of the tax officials. As a result of the hearings and conference, bill H. R. 6050 and companion bill S. 2409 were introduced. Subsequently on April 12, 1948, the bill (S. 2409) was passed by the Senate and referred to the House Committee on the District of Columbia. ‘‘Representatives of the Navy Department of the United States and a corporation doing busi- ness with the United States suggested amend- ments with respect to sales of tangible personal property to the United States which property is delivered from places outside the District for use outside the District, when the selling corporations or unincorporated businesses do not have their principal places of business in the District. Ad- ditional conferences were held by District tax officials and interested representatives of the United States and others, as indicated above, and the amendments with respect to sales made to the United States, which this committee recommends, were agreed upon. * * *.”’ wane INDEX PAGE Findings of Facts and Opinion of the District of Columbia Tax Court: Findings of Facts _------------------------------------------------ 1 (AIOE: 5 + 5 ss soe eect ea Computation for entry of decision submitted by the District of Colum- bia Under Rule 30 of the Rules of Procedure before the District of Paar aii ee NRE oe oe on ee oe oem armen eae | ee a a eh ee eT AOE OE Te a eS eeas ac Excerpts from Transcript of Proceedings: Opening Statement of Counsel for respondent --.-.-.--..----------- 57 John 8S. Carter: Direct Examination : , : A Se: Cross Examination _- : Puke Eden eee —— Conder C. Henry: Direct Examination _- atte ees = sah) 64 Cross Examination - Sees ee. fae : 67 James P. Veach: oeeees RRINIEM (te a cnn — Cross Examination z oS a UE Re nas Re 69 Allen Buxton Mills: Direct Examination ple ed ee eR rene ae eR gee Cross Examination - Oia i AP Nh i Pee Pe Noe Dies ee og te ee 7 Mimi’ \emmininnintae 2 20 2) eee ee en Se Martin Polikoff: Direct Examination : 2 eee 2 _ 80 Cross Examination SE SD PIE IES = Redirect Tevainnnee oe ce 88 Recross Examination As = ee nS 5 ese 89 i Se ao ag a DAT a RRR TES Rp Raa ae “ag agte ERR TIT» ee i be alti Le PE OBNG NITE INE OI me MSHS “ " Ie iar UE ae : il INDEX—Continued 2 Pace 4 Harold F. Bersche: | See eee Re a ae CEC a a Soe ee eT a4 ; 4 RAN INI oot acne Seen ede pam neGietin mei _ 104 : Sy, I ta 3d sien diaia eee Silane 3a 3 ee A EONAR RTT 3 Edward O. Welker: EOI, NI a hi a ninc hccccnccenatsice scidhi enindeeceiiaonsoisach Saas 106 } RS ROI ENE Se ; Francis H. Engel: ; I Se i eas Senn ete ieaes 118 bo SES ARS EE Te Redirect Examination ria slacks nsiioc a naicipasiRkaaplad Dees bin eiskc a James H. Hickey: is I on ee mininicanenieesiaaeman ee aren nn 9 De ad whine eaten eae 130 William L. Hopkins: SSS SS SS a EN Oe ee a aI 136 a ee ene aa ey ae os Se salieri ee Howard L. Pettit: Direct Examination __-___- EE SEALY ee PO Ve = 144 Charles William Kraus: Direct Examination _ : OER ey es we Sones - 146 SOA INI Sook cae ce ee en neen dr nedenatannnnnns canes Exhibits: Petitioner’s Exhibit No. 1—RCA Sales to District customers of products by departments for years 1949, 1950 and 1951 ._.__.._- 149 2 Petitioner’s Exhibit No. 2—RCA Tube Department sales to District 3 customers for years 1949, 1950 and 1951 -__--_.-----...---... -... M9 Fd Petitioner’s Exhibit No. 3—RCA Enfiineering Products Department 4 sales to District customers for years 1949, 1950 and 1951 _. _.____ 149 : Petitioner's Exhibit No. 10—RCA Home Instrument Department : sales to District customers for years 1949, 1950 and 1951 2 150 we 2 Bien. Eetes te 19 FILED JUN 29 1955 District of Columbia Tax Court Docket No. 1463 FINDINGS OF FACTS AND OPINION The petitioner here seeks a reduction of an assessment of franchise taxes assessed against it for the calendar years 1949, 1950 and 1951. It claims that the Assessor erred in determining that certain sales of tangible personal property to customers in the District of Columbia were ‘District sales’? within the meaning of pertinent regulations ; and that the use of the proceeds of such sales as a factor in a formula for the apportionment of its net income by which the tax was measured was improper. FINDINGS OF FACTS I In General 1. The petitioner is a Delaware corporation, with its principal office at 30 Rockefeller Plaza, New York, N. Y. 2. During the taxable years involved the domestic manu- facturing and sales activities of the petitioner were con- ducted by four product departments, each organized as a separate business, each had its own general manager (us- ually a vice-president of the petitioner), chief engineer and engineering staff, financial department and sales depart- ment. Each department had its own separate manufactur- ing facilities and general office. The departments were 1 SEINE FBG EATER OMY stat | POLITIC VETO CEH bil a ek att 2 connected at the highest echelon of management only, Such departments were the Engineering Products Depart- ment, Home Instrument Department, Record Department and Tube Department. 3. The Home Instrument Department had its general office at Camden, New Jersey, and its manufacturing facil- ities at Camden, New Jersey, Indianapolis, Indiana, and Bloomington, Indiana. It manufactured and _ sold 20 radio sets, television sets and phonographs. It had no office, manufacturing facilities, warehouse or stock of goods in the District of Columbia. 4. The Record Department had its general offices at Camden, New Jersey, with its manufacturing facilities at Indianapolis, Indiana, and for a part of the taxable period at Cannonsburg, Pennsylvania, New York, New York, and Los Angeles, California. It manufactured, sold and leased phonograph and other recording records, part of which were leased to radio broadcasting stations in the District of Columbia. d. The Tube Department had its general offices at Har- rison, New Jersey, and its manufacturing facilities at Lan- caster, Pennsylvania, Marion, Indiana and Indianapolis, Indiana. It manufactured and sold electron tubes, tube parts, tube-making machinery and batteries. It had no manufacturing facilities, warehouse or stock of goods in the District of Columbia. It had no office in the District of Columbia during 1949, 1950 and the first four months of 1951. In May, 1951 the Tube Department opened an of- fice at 1757 K Street, N.W., Washington, D. C. In it were employed a secretary and one representative whose duty it was to maintain liaison between the Federal Govern- ment’s purchasing agencies and the management of the Tube Department. 6. The Engineering Products Department had its gen- eral offices at Camden, New Jersey, and its manufacturing facilities at Camden, New Jersey, Detroit, Michigan, and o>) 0 Los Angeles, California. It manufactured and sold indus- trial electronic equipment and special apparatus for the United States Government. It had no manufacturing fa- cilities, warehouse or stock of goods in the District of Columbia. It had an office in the Commonwealth Building, Washington, D. C., in which two other activities of the petitioner, namely, the Patent Department and the Fre- quency Bureau, had office space. The principal function of the Washington office of the Engineering Products Depart- ment Was to maintain contact with, and to assist the Fed- eral Government in connection with its needs for electronic equipment, chiefly with respect to military equipment such as radar, sonar and special communications devices. 7. In addition to the four products departments herein- before described, there were maintained and oper- 21 ated by the petitioner two activities, namely, Patent Department and Frequency Bureau, in the P istrict of Columbia. 8. The Patent Department had its headquarters at Princeton, New Jersey. It maintained an office in the Com: monwealth Building. Washington, D. C., which was a re- search and training office for the petitioner's patent attor neys. It consisted of nine professional employees and three secretaries. Its only connection with other departments and divisions of the petitioner was to handle patent dis- closures originating therein. Its personnel had nothing to do with the sale of the petitioner’s products. Its office space was used solely by its own personnel. 9. The Frequency Bureau was a part of the Laboratories Division of the petitioner located at Princeton, New Jersey. It had an office in the Commonwealth Building, Washing- ton, D. C. It consisted of three professional employees and three secretaries. The function of the Frequency Bureau was to advise the petitioner and its subsidiaries on the use and assignment of frequencies granted by the Department of State, the Federal Communications Commission and the 4 Department of Defense, and to obtain licenses for use of frequencies. Its representatives attended all international conferences on radio frequencies. It had nothing to do with the sale of the petitioner’s products and its office space was used solely by its own personnel. 10(a) The petitioner sold its products and leased its recording records to customers in the District of Columbia through its four products departments solely during the taxable years here involved and in the amounts following: Depertment 1949 1950 1951 Home Instrument $3,408,875.33 $5,282,511.93 $3,584,938.98 Record 261,529.41 308,190.87 424,864.39 Tube 440,829.70 574,767.65 724,257.98 Engineering Products 268,250.10 350,647.21 468,032.22 Total $4,379,484.54 $6,516,117.66 $5,202,093.57 (b) In the foregoing amounts relating to the Reeord De- partment are included amounts received by that depart- ment as rental of records to radio broadeasting stations in the Distriet of Columbia as follows : for 1949—$3,710.60, for 1950—$12,859.89 and for 1951—$16,760.00. (c) The products sold and leased by the petitioner 22 as above set forth were shipped by common carrier; did not come into the District of Columbia through any facilities maintained by petitioner; and were not shipped on a consignment basis. 11. The petitioner filed with the Assessor within the time provided by law, corporate franchise tax returns for the three taxable years here involved, and in respect of gross and net income, the apportionment thereof and the fran- chise taxes due the District of Columbia reported as follows: 1949 1950 1951 Total Gross Sal's $286,724,157.384 $452,676,201.68 $407,542,968.59 District of Columbia Sales 69,842.67 158,733.53 150,842.58 Apportionment Factor .00024359 .000350655 000370126 Total Net Income 37,069,963.56 90,749,804.67 40,461,785.10 District of Columbia Portion 8,751.96 31,103.74 13,953.64 Tax due District of Columbia 437.60 1,555.19 697.68 —_ od 12(a) On March 11, 1954, the Assessor sent by registered mail a deficiency notice to the petitioner to the effect that he intended to assess deficiencies in franchise taxes for the taxable years here involved in accordance with the accom- panying statement following: “RADIO CORPORATION OF AMERICA Front and Cooper Streets Camden, New Jersey Calendar Years _1949_ _ 1950 1951 Net income subject to apportionment $35,929,041.24 $88,701,818.59 $37,699,692.70 X apportionment factor* .015274 .014395 .012765 Portion attributable to D. C. $548,780.18 $1,276,862.68 $481,236.58 Tax @ 5% $27,439.01 $63.843.13 $24,061.83 Less amount reported 437.60 1,555.19 697.68 Deficiency $27,001.41 $62,287.94 $23,364.15 *Computation of apportionment factor: A. Total sales all sources $286,724,157.34 $452,676,201.68 $407,542,968.59 B. Total District sales, item 5, schedule M 4,379,484.54 6,516,1 17.66 5,202,093.57 Cc. ee factor (B + A) .015274 .014395 .012765 Based on the information furnished, it is our view that the above computations reflect the net income fairly attribut- able to business carried on within the District of Columbia.*’ (b) The statement of net income of the petitioner subject to apportionment in the foregoing computation by the As- sessor Was correct. 13(a) On September 21, 1954, the Assessor assessed the petitioner deficiencies in franchise taxes, plus interest, for the taxable years here involved as follows: 23 Year mid ___snberest Total 1949 $27,001.41 $7,182.38 $34,183.79 1950 62,287.94 12'831.32 75,119.26 1951 23,364.15 3,411.17 26,775.32 Total $112,653.50 $23,424.87 $136,078.37 ne AON F Shope _— 6 (b) On October 5, 1954, the petitioner paid such taxes to the Collector of Taxes. (c) In its amended petition the petitioner alleged that the taxes and interest in controversy are as follows: Year _Tax __ Interest _ _ Total_ 1949 $26,373.22 $ 7,015.28 $33,388.50 1950 61,452.71 12,659.26 74,111.97 1951 21,876.07 3,193.91 25,069.98 Total $109,702.00 $22,868.45 $132,570.45 (d) In its amended petition the petitioner conceded that during the taxable years it had ‘‘Distriet Sales’? as meant by the pertinent regulations as follows: _1949 _ 1950. _1951 Total District Sales $140,479.34 $178,150.06 $291,595.83 (e) In its amended petition the petitioner conceded that it owed to the District of Columbia the deficiencies in fran- chise taxes following: Year K Tax ee nterest a Total 1949 $ 628.19 $167.10 $ 795.29 1950 825.23 172.06 1,007.29 1951 1,488.08 217.26 1705.34 Total $2,951.50 $556.42 $3,507.92 14. This proceeding was filed on December 17, 1954. at Home Instrument Department Sales 15. Sales of products of the Home Instrument Depart- ment, namely, television and radio sets and phonographs, to customers in the District of Columbia were to the cus- tomers, for the years and in the amounts following: Customer 1949 1950 — 1951 Southern Whole- salers, Inc. $3,330,918.18 $5,184,251.96 $3,538,464.63 Fairfax Distributing Co., Ine, 59,677.25 67,315.17 28,541.81 RCA Affiliated Cos. 6,671.71 18,603.77 10,404.89 Other Customers 11,608.19 12,341.03 7,068.61 U. S. Government 459.04 Total $3,408,875.33 $5,282,511.93 $3,584,938.98 as tr to 7 16(a) Southern Wholesalers, Inc., was a wholesale dis- tributor of sundry articles with its office at 707 Edgewood Street, N. E., Washington, D. C. It was a wholesale 94 distributor of the products sf csc Tome Instrument Department, of the products of other departments of the petitioner and of the products of manufacturers other than the petitioner, such as refrigerators, ranges and wash- ing machines. It was appointed by a letter from RCA Vie- tor Company, Inc. dated January 15, 1934, and reading as follows: “Mr, William E. O'Connor, President, Southern Wholesalers, Inc., 1519-21 L Street, N. W,, Washington, D. C. Dear Mr, O’Connor: We take pleasure in extending to you an appoint- ment as of this date, and until further notice, as a Distributor for RCA Victor products, We suggest and recommend that you confine your sales of RCA Victor products to the territory which is outlined on the attached map. We are looking forward with pleasure to our future relations. Very truly yours, M. F. Burns, Merchandising Manager, Radio and Phonograph Division.’’ RCA Victor Company, Inc., was a subsidiary of the peti- tioner, and its home instrument business was operated by the Home Instrument Department during the taxable years, Among the products covered by the aforesaid letter were radio receivers and phonographs. s (od ad 8 (b) In its dealings with Southern Wholesalers, Inc., the Home Instrument Department followed the Distribu‘ors Quarterly Acceptance system of selling, hereinafter re- ferred to as ‘*DQA.’’ Each quarter of the year the Depart- neni determined the percentage of the total factory output which it was felt should reasonably be handled or moved by Southern Wholesalers, Inc. The field sales representa- tive of the Home Instrument Department then began negoti- ations with Southern Wholesalers, Inc., for the acceptance by the latter of the responsibility to move the quota of products allotted to it. If the quantities suggested or al- lotted were not satisfactory changes mutually satisfactory were made. As the merchandise was produced Southern Wholesalers, Inc., was notified as to what was scheduled for shipment in that particular weck. In the absence of any objection from Southern Wholesalers, Inc., the merchandise was shipped and billed in the ordinary course of 25 business. Southern Wholesalers, Inc., could have re- fused shipment at any time prior to the time of actual shipment. The DQA for the first and third quarters of the year were negotiated in Camden, New Jersey, and for the second and fourth quarters in Washington, D. C. Supple. mental DQA’s were in most instances negotiated by tele- phone from Philadelphia, Pennsylvania or Camden, New Jersey. (c) The field sales representative of the Home Instru- ment Department who represented the Department in its dealings with Southern Wholesalers, Inc., resided in Phila- delphia and had his office in Camden, New Jersey. Tis territory comprised Eastern Pennsylvania, Southern New Jersey, Delaware, Maryland, Distriet of Columbia and a part of Virginia. He was compensated by salary and re- ceived no sales commissions. He visited the Southern Wholesalers, Inc., about twelve times each year. On such visits he advised Southern Wholesalers, Ine., in the mer- chandising of the products of the Department, and discussed = : 9 such matters as the movement of merchandise, advertising, ' sales promotion programs, and sales training of personnel. He did not take orders for merchandise on his visits to Southern Wholesalers, Inc., or from any other customer in the District of Columbia. He did not enter into any agree- ment for the sale of merchandise to Southern Wholesalers, except the negotiation of the DQA. He did not use any of the offices of the petitioner in the District of Columbia. (d) The Home Instrument Department made available to Southern Wholesalers, Inc., a cooperative advertising fund used for sales promotional purposes by the latter. The fund was made up of equal contributions by both parties. Advertisements for which payment was made out of the cooperative fund were run over the name of Southern Whole- salers, Ine., or the names of retail dealers offering the products of the Home Instrument Department for sale. (e) Several times during the taxable years involved James H. Hickey, Assistant to the General Manager of the Home Instrument Department, who resided in Collings- wood, New Jersey, and whose office was in Camden, New Jersey, came to the District of Columbia to attend meetings or gatherings promoted by Southern Wholesalers, Ine., or in which that company was interested, such as dinners 26 given by that company to important officers of a customer, anniversary parties given by large depart- ment stores, other social gatherings and ‘‘pep”’ meetings of salesmen. On some, if not all of such occasions, Mr. Hickey was accompanied by the field sales representative. The purpose of attending such meetings and gatherings was to create good will and enthusiasm for the products of the Home Instrument Department, and no orders for merchan- dise were taken thereat. (f) Sales of products of the Home Instrument Depart- ment to Southern Wholesalers, Ine., were f.o.b. factory. Shipments from first to the middle of the month were due for payment by the end of the month, and shipments from 10 the middle te the end of the month were due for payment in the middle of the following month. 17(a) Fairfax Distributing Company, hereinafter called ‘*Fairfax’’ was a distributor of the products of the Home Instrument Department. It was formerly known as ‘‘E. M. Rosenthal Jewelry Company,’’ and was the purchasing organization or agency tor an affiliated group of retail jewelry stores. The individual stores placed their orders for the petitioner’s products through Fairfax as needed. It did not carry an inventory of goods, and did not purchase merchandise under the DQA system. It sold television and radio receivers manufactured by competitors of the peti- tioner. It was appointed distributor by letter, dated Decem- ber 27, 1939, reading as follows: **K. M. Rosenthal Jewelry Company Homer Building Washington, D. C. Gentlemen: We are pleased to appoint you a Distributor of RCA Victor Instruments. In making this appoint- ment, we suggest and recommend that you confine your sales of our products to your present list of dealers and other similar dealers that you may line up in the future. In accepting this appointment as our distributor, you do so with the understanding that it is subject to all of the terms and conditions of the sales and merchandising policies of the Company as it now exists, or as it may hereafter be changed at any time without notice. We recognize your right to discontinue handling our products at any time without notice, and we reserve the right to cancel your appointment as our —— 11 Distributor, or to change prices or discounts with- out notice to you. It is our desire to cooperate fully with you and we will be glad to discuss any problems that may confront you in the merchandising and sale of our products at any time. 27 With best wishes for maximum success, we are Cordially yours, RCA MANUFACTURING COMPANY, INC. J.B. Elliott Field Organization Headquarters.”’ (b) The Fairfax account was handled or carried on by the Assistant to the General Manager of the Home Instru- ment Department, whose home and office were without the District of Columbia. He came to the District of Colum- bia two or three times each of the taxable vears to call on Fairfax. Such were ‘‘prestige’’, or ‘‘good will’’ calls to promote the sale of the products of the Home Instrument Department. He never took an order for merchandise and did not visit any retail dealers. He did not use the office facilities of the petitioner in the District of Columbia. 18. Affiliated Companics to whom products of the Home Instrument Department were sold were affiliates or subsidi- aries of the petitioner in the District of Columbia, such as the National Broadcasting Company or another department of the petitioner, such as the Engineering Produets Depart- ment and Tube Department. The merchandise was shipped into the District of Columbia and billed to the affiliated com- panies. Orders for such merchandise were not procured by any representative of the petitioner. 19. Other Customers represented customers in the Dis- trict of Columbia other than Southern Wholesalers, Inc., Fairfax Distributing Co., affiliated companies and the United States Government. Sales represented merchandise shipped to other customers in the District of Columbia, Orders for such merchandise were not procured by any representative of the petitioner. 20. Neither the Home Instrument Department nor any employee of that Department maintained an office in the District of Columbia. No employee of that Department resided in the District of Columbia. 21. No employee of the petitioner other than employees of the Home Instrument Department had any duty or re- sponsibility regarding sales of its products; and no sales of its products were negotiated or made by any non-Horme Instrument Department employee. 22. None of the petitioner's sales of the products of the Hfome Instrument Departinent to customers in the 28 District were principally secured, uegotiated or ef- fected by employees, agents, officers or branches of petitioner located in the District of Columbia. 23. The petitioner conceded that the amount of gross income of $459.04 from sales of products of the Home In- strument Department to the United States Government and shipped into the District of Columbia was from sources within the District of Columbia. Ill Record Department Sales 24(a) The receipts of the Record Department from the sale and rental of RCA Victor records to customers in the District of Columbia were as follows: 1949 1950 1951 Sales $257,818.81 $295,330.98 $408,104.39 Rental 3,710.60 12,858.89 16,760.00 Total $261,529.41 $308,190.87 $424,864.39 (b) Sales of RCA Victor records by the Record Depart- ment were made to one customer only, namely, Southern Wholesalers, Ine. ————— 5 25(a) Southern Wholesalers, Ine., is described ii Fint- ings of Fact 16(a), which by reference is incorporated herein. It was eppointed a distributor of RCA Victor ree- ords by a letter dated January 15, 1954, quoted in full in that findings of fact. (b) The records sold to Southern Wholesalers, Inc., were sold f.o.b. Washington, D. C. No records were sold in con- signment. Orders by Southern Wholesalers, Inc., for ree- ords were subject to acceptance at the office of the Record Department without the District of Columbia. (ec) The field sales representative of the Record Depart- ment who handled the account of Southern Wholesalers, Ine., and who had dealings therewith resided, and had his office without the District of Columbia. His operative terri- tory was Eastern Pennsylvania, Southern New Jersey, parts of Delaware, of Maryland, of Virginia and of West Vir- ginia, and the Distriet of Columbia. He was the only field sales representative of the Record Department in that area. He worked out of the headquarters of the Record Depart- ment in Camden, New Jersey, and later out of New York, N.Y. He had nothing to dp with the sale of products of the other departments of the petitioner. No representa- 2 tive or other employee of the Record Department resided, or had an office in the District of Columbia. (d) The field sales representative came to Washington about once every three weeks. He did not make use of the office facilities of the petitioner in the District of Columbia. He did not receive or accept orders in the District of Colum- hia. All orders went directly to the Headquarters of the Record Department in Camden, New Jersey. On such trips he visited Southern Wholesalers, Inc. He reviewed the personnel of that conspany any then current matters regard- ing the promotion of sales and advertising campaigns. He investigated whether that company was ‘‘servicing’’ its customer's orders promptly and suggested promotion of advertising. He made suggestions concerning such matters, 14 which sometimes were followed and sometimes not, in which latter event nothing happened and no threat of any kind was made. The field representative made calls on retail dealers, radio broadcasting stations in company with the salesmen or the record manager of Southern Wholesalers, Ine. (e) The Record Department had a cooperative adver- tising fund with Southern Wholesalers, Inc., similar to that fund which the Home Instrument Department had with the latter, and described in Findings of Fact 16(d). (f) None of the petitioner’s sales of RCA Victor records by the Record Department to Southern Wholesalers, Inc, were principally secured, negotiated or effected by an em- ployee, agent, officer or branch of the petitioner in the District of Columbia. 26. Leasing of Records. The petitioner conceded that the gross income represented by rentals received from the leasing of records to customers or lessees in the District of Columbia, as set forth in Findings of Fact 24(a), was from sources within the District of Columbia. IV Tube Department Sales 27. The Tube Department manufactured and sold radio receiving tubes, power tubes, tubes for television, transis- ters, batteries, component parts and accessories. Sales of such products were under the jurisdiction or manage- ment of two units or organizations within the Tube De- _ partment, namely, Equipment Sales and Renewal 30 Sales.The Equipment Sales personnel handled sales to manufacturers of radio and television equipment and to the United States Government. The Renewal Sales personnel handled sales to distributors, radio stations and other types of customers. pe td tye tt tO Pt uw a Stone 15 98. Sales of products of the Tube Department to its various classes of customers located in the District of Co- lumbia were as follows: 1949 1950 1951 Franchised distributors $ 51,798.74 $127,338.72 $192,183.47 Other distributors’ 213,476.95 193,444.99 213,864.12 Radio stations 71,351.71 6,664.28 4,492.61 Manufacturers 22,976.91 87,127.41 75,736.80 Affiliated Companies 40,289.40 69,563.62 38,893.08 Miscellaneous 5,014.63 1,903.71 1,144.37 U. S. Government 35,921.36 89,724.92 197,943.53 Total $440,829.70 $574,767.65 $724,257.98 99, The distributors of the products of the Tube Depart- ment in the District of Columbia were Southern Whole- salers, Inc., Capitol Radio Wholesalers, Inec., Rucker Radio Wholesalers, Inc., and American Amplifier and Television Corporation. 20). Southern Wholesalers, Inc., was appointed distribu- tor of tubes and batteries by the letters following: a March 18, 1936 Southern Wholesalers, Inc. 1519 L Street, N. W. Washington, D. C. Gentlemen: We are pleased to appoint you as a distributor of RCA Transmitting Tubes and Amateur Equip- ment. In accepting this appointment as our Distributor you do so with the understanding that it is subject to all of the terms and conditions of the sales and merchandising policy of the Company as it now exists, or as it may hereafte be changed at any time without notice. ‘ The above information appears on Petitioner's Exhibit 2. The record does not disclose the difference, if any, between “Franchised distribu- tors” and “Other distributors.” 16 In appointing you as our Distributor we recognize your right to discontinue handling our products at any time without notice, and we reserve the right to cancel your appointment as our Distributor, ap- point additional outlets or to change prices or dis- counts without notice to you. It is our desire to cooperate fully with you and we will be glad to discuss any problems that may con- front you in the merchandising and sale of our product at any time. With best wishes for success, we are, Very truly yours, RCA MANUFACTURING CO., INC. R. A. Forbes, District Manager’’ _ May 20, 1938 Southern Wholesalers, Ine. 1519 L Street, N. W. Washington, D. C. Gentlemen: We are pleased to appoint you a wholesale distribu- tor of RCA Victor Radio Tubes. In making this appointment, we suggest and recommend that you confine your sales of RCA Victor Radio Tubes to the identical territory which you serve with RCA Victor instruments. In accepting this appointment as our Distributor you do so with the understanding that it is subject to all of the terms and conditions of the sales and merchandising policy of the Company as it now exists, or as it may hereafter be changed at any time without notice. 17 We recognize your right to discontinue handling our products at any time without notice, and we reserve the right to cancel your appointment as our Distributor, or to change prices or discounts without notice to you. It is our desire to cooperate fully with you and we will be glad to discuss any problems that may confront you in the merchandising and sale of our product at any time. With best wishes for success, we are Very truly yours, RCA MANUFACTURING COMPANY, INC, District Manager’’ sat June 18, 1945 Mr. Wm. FE. O’Connor Southern Wholesalers, Ine. 1519 L St., N. W. Washington, D. C. Dear Mr. O’Connor: We are pleased to appoint you a Distributor of RCA Batteries. In accepting this appointment as our Distributor, you do so with the understanding that it is subject to all of the terms and conditions of the sales and merchandising policy of the Company as it now exists, or as it may hereafter be changed at any time without notice. We recognize your right to discontinue handling our products at any time without notice, and we reserve the right to cancel your appointment as our Distributor, or to change prices or discounts with- out notice to you. 18 You will receive very shortly from the home office at Camden, complete policy, price, promotion and advertising information which will assist you in merchandising the product listed above. It is our desire to cooperate fully with you and we will be glad to discuss any problems that may con- front you in the merchandising and sale of our product at any time. is) 32 With best wishes for success, we are, Very truly yours, RADIO CORPORATION OF AMERICA RCA Victor Division J. G. Wilson Operating Vice President’’ 31. Capitol Radio Wholesalers, Inc., was appointed dis- tributor of tubes and batteries and laboratory measuring equipment by the letters following: "9 August 30, 1937 Capitol Radio Wholesalers 2120-14th Street, N. W. Washington, D.C. Gentlemen: We are pleased to appoint you as a distributor of Cunningham Tubes. In accepting this appointment as our Distributor you do so with the understanding that it is subject to all of the terms and conditions of the sales and merchandising policy of the Company as it now exists, or as it may hereafter be changed at any time without notice. In appointing you as our Distributor we recognize your right to discontinue handling our products at any time without notice, and we reserve the right we irs -- -- 19 to cancel your appointment as our Distributor, appoint additional outlets or to change prices or discounts without notice to you. It is our desire to cooperate fully with you and we will be glad to discuss any problems that may con- front you in the merchandising and sale of our product at any time. With best wishes for success, we are Very truly yours, W. H. Kelley, District Manager.”’ . 7 . 2 * . >. > -" November 12, 1946 Capitol Radio Wholesalers, Inc. 2120 Fourteenth Street, N. W. Washington, D.C. Gentlemen: We are pleased to appoint you a Distributor of RCA Batteries. In accepting this appointment as our Distributor, you do so with the understanding that it is subject to all of the terms and conditions of the sales and merchandising policy of the Company as it now exists, or as it may hereafter be changed at any time without notice. We recognize your right to discontinue handling our product at any time without notice, and we reserve the right to cancel your appointment as our Distributor, appoint additional out- lets, or change prices or discounts without notice to you. You will receive very shortly from the home office, complete policy, price, promotion and advertising SG RE RONEN cme gore args mente TM Tee PTT. 20 information which will assist you in merchandising RCA Batteries. It is our desire to cooperate fully with you and we will be glad to discuss any problems that may con- front you in the merchandising and sale of our product at any time. With best wishes for suecess, we are Very truly yours, RADIO CORPORATION OF AMERICA (RCA VICTOR DIVISION) Walter M. Norton Director of Distribution’’ ns January 27, 1947 Capitol Radio Wholesalers, Inc. 2120 Fourteenth Street, N. W. Washington, D. C. Gentlemen: We are pleased to appoint you a Distributor of RCA Laboratory Measuring Equipment. In accepting this appointment as our Distributor, you do so with the understanding that it is subject to all of the terms and conditions of the sales and merchandising policy of the Company as it now exists, or as it may hereafter be changed at any time without notice. We recognize your right to discontinue handling our product at any time without notice, and we reserve the right to cancel your appointment as our Distributor, appoint additional outlets, or to change prices or discounts without notice to you. aaa 21 You will receive very shortly from the home office, complete policy, price, promotion and advertising information which will assist you in merchandising Laboratory Measuring Equipment. It is our desire to cooperate fully with vou and we will be glad to discuss any problems that may con- front you in the merchandising and sale of our product at any time, With best wishes for success, we are Very truly yours, RADIO CORPORATION OF AMERICA (RCA VICTOR DIVISION) Walter M. Norton Director of Distribution’ 32. Rucker Radio Wholesalers, Inc., was appointed dis- tributor of tubes, batteries, amateur equipment and labora- O4 tory measuring equipment by the letters following: - October 26, 1939 Rucker Radio Wholesalers, Inc. 1220 14th Street, N. W. Washington, D. C. Gentlemen: We are pleased to appoint you as a distributor of RCA Parts. In accepting this appointment as our Distributor you do so with the understanding that it is subject to all of the terms and conditions of the sales and merchandising policy of the Company as it now exists, or as it may hereafter be changed at any time without notice. In appointing you as our Distributor we recognize your right to discontinue handling our products } LEVEN OTROS et YN BEN RY LTS 22 at any time without notice, and we reserve the right to cancel your appointment as our Distributor, appoint additional outlets or to change prices or discounts without notice to you. It is our desire to cooperate fully with you and we will be glad to discuss any problems that may con- front you in the merchandising and sale of our product at any time. With best wishes for suecess, we are Very truly yours, RCA MANUFACTURING CO., INC. W. H. Kelley Distriet Manager”’ * * * * * . * od . sis December 20, 1939 Rucker Radio Wholesalers, Ine. 1220 Fourteenth Street, N. W. Washington, D.C. Gentlemen: We are pleased to appoint you as a distributor of RCA Radiotron Receiving Tubes. In accepting this appointment as our distributor you do so with the understanding that it is subject to all of the terms and conditions of the sales and merchandising policy of the Company as it now exists, or as it may hereafter be changed at any time without notice. In appointing you as our Distributor we recognize your right to discontinue handling our products at any time without notice, and we reseve the right to ‘ancel your appointment as our Distributor, ap- point additional outlets or to change prices or discounts without notice to you. Fa 23 It is our desire to cooperate fully with you and we will be glad to discuss any problems that may con- front you in the merchandising and sale of our product at any time, With best wishes for success, we are Very truly yours, RCA MANUFACTURING CO., INC. W. H. Kelley District Manager”’ - January 21, 1941 Rucker Radio Wholesalers, Ine. 1312-14th Street, N. W. Washington, D. C. Gentlemen: Weare pleased to appoint you as a distributor of RCA Transmitting Tubes and Amateur Equip- ment. in accepting this appointment as our Distributor you do so with the understanding that it is subject to all of the terms and conditions of the sales and merchandising policy of the Company as it now exists, or as it may hereafter be changed at any time without notice. In appointing you as our Distributor we recognize your right to discontinue handling our products at any time without notice, and we reserve the right to cancel your appointment as our Distributor, ap- point additional outlets or to change prices or dis- counts without notice to you. It is our desire to cooperate fully with you and we will be glad to diseuss any problems that may con- Ayapetaes Pere 24 front you in the merchandising and sale of our product at any time. With best wishes for success, we are Very truly yours, RCA MANUFACTURING COMPANY, INC. M. F. Blakeslee District Manager’’ 9 March 10, 1949 Rucker Radio Wholesalers, 1312 - Fourteenth St., N. W. Washington, D.C. Gentlemen: Effective as of the above date, we are pleased to appoint you a Distributor for RCA Batteries and Laboratory Measuring Equipment. In accepting this appointment as our Distributor, you do so with the understanding that it is subject to all of the terms and conditions of the sales and merchandising policy of the Company as it now exists, or as it may hereafter be changed at any time without notice. We recognize your right to discontinue handling our products at any time without notice, and we reserve the right to cancel your appointment as our Distributor, appoint additional outlets, or to change prices or discounts without notice to you. You will receive very shortly from the home office, complete policy, price, promotion and advertising information which will assist yon in merchandising the products mentioned above. 36 25 It is our desire to cooperate fully with you and we shall be glad to discuss any problems that may con- front you in the merchandising and sale of our products at any time. With best wishes for success, We are Very truly yours, RADIO CORPORATION OF AMERICA (RCA VICTOR DIVISION) H. M. Winters”’ 36 33. American Amplifier and Television Corpora- tion, was appointed distributor of tubes by the letter dated December 2, 1940, reading as follows: “American Amplifier & Television Corp. 1427 Eye Street, N. W. Washington, D. C. Gentlemen: We are pleased to appoint you as a distributor of RCA Radiotron Receiving Tubes. In accepting this appointment as our Distributor you do so with the understanding that it is subject to all of the terms and conditions of the sales and merchandising policy of the Company as it now exists, or as it may hereafter be changed at any time without notice. In appointing you as our Distributor we recognize your right to discontinue handling our products at any time without notice, and we reserve the right to cancel your appointment as our Distributor, ap- point additional outlets or to change prices or discounts without notice to you. It is our desire to cooperate fully with you and we will be glad to discuss any problems that may con- 26 front you in the merchandising and sale of our product at any time. With best wishes for success, we are Very truly yours, RCA MANUFACTURING COMPANY, INC. M. F. Blakeslee District Manager’’ 34. One Renewal Sales representative, who resided and had his office without the District of Columbia was assigned to the territory consisting of the eastern half of Pennsyl- vania, Southern New Jersey, Delaware, Maryland, Northern Virginia and the District of Columbia. He worked out of Philadelphia and reported to the headquarters of the Tube Department at Harrison, New Jersey. He visited the Dis. trict of Columbia every six or seven weeks. During such visits he worked with the distributors in a counselling capacity and in connection with the Tube Department’s pro- motional activities. Orders for merchandise were sent di- rectly to the warehouse of the Tube Department located outside the District of Columbia. If an order was handed to the representative it was incidental. 39. One Equipment Sales representative, who resided and had his office outside of the District of Columbia, was as- signed a territory which extended from New Jersey to Florida, and included the District of Columbia. He a7 came to the District of Columbia every six or seven weeks. His visits lasted about three days, during which time he was in contact not only with customers in the District of Columbia, but in the surrounding areas of Mary- land, and Virginia. He handled sales to five or six manufac- turers in the District of Columbia. All such orders were sent to him at his office in Harrison, New Jersey. 36. All sales of products of the Tube Department to the United States Government were on open competitive bid- 27 ding. The bids for such business were prepared in Harrison, New Jersey. 37. The Tube Department maintained no office in the District of Columbia during the taxable years 1949, 1950, and the first fourth months of 1951. In May, 1951, it estab- lished an office in the District of Columbia for the purpose of maintaining liaison with the United States Government and obtaining information helpful in preparing bids on Gov- ernment business, as illustrated by the following excerpt from the testimony of the Manager of Marketing Services of the Tube Department, concerning the office in the District of Columbia as follows: “ a at ornact os of . - — 40 the corporation or unincorporated business in the District ; and the phrase ‘total sales’ shall mean the gross receipts from all sales.’’ Later, on August 6, 1953, Section 10-2(d) (1)a, was further amended by the Commissioners to read as follows: 45 ‘*a. Where income for any taxable year is derived from the manufacture and sale or purchase and sale of tangible personal property, the portion thereof to be apportioned to the District shall be such percentage of the total of such income as the District sales made during such taxable year bear to the total sales made everywhere during such taxable year. Every corporation and unincorpo- rated business which carries on or engages in bus- iness in the District within the meaning of the words ‘trade or business’ as defined in the Act is, unless specifically exempted by some provision of the Act, subject to tax. For the purpose of this regulation, the phrase ‘District sales’ shall mean all sales to District customers in the income from which is fairly attributable to the trade or business carried on or engaged in within the District, in- cluding solicitation in the District by salesmen or other representatives of the taxpayer, that por- tion of sales to customers outside the District the income from which is fairly attributable to the trade or business carried on in the District, and sales of tangible personal property the in- come from which is from District sourees.’’ Section 15 of the regulations adopted on August 6, 1953 recited that they ‘‘shall apply to the taxable year or part thereof beginning on the first day of January, 1948, and the succeeding taxable years.”’ W is th bia u latio cern of C Tl meré radi: tems year Colu Inst part whol app of it wert petit delin cour requ v. F 2d cust 7 tom men Depa Home Recor Tube Engi QO 46 41 What this Court is now called upon to do is to decide what s the tax liability of the petitioner to the District of Colum- jia under the foregoing provisions of the law and the regu- ations above quoted, coupled with the following facts con- erning the petitioner’s activities in relation to the District yf Columbia. The petitioner manufactures and sells many articles of nerchandise in the electronic field, including phonographs, radio and television sets, tubes, batteries, amplifying sys- ems, recording records and the like. During the taxable vears it sold its products to customers in the District of ‘olumbia through four product departments, namely, Home Instrument, Record, Tube and Engineering Products De- partments. A large quantity of merchandise was sold to wholesalers who were called ‘‘distributors’’ and who were appointed as such by letters from the petitioner or from one of its subsidiaries which it succeeded. Such ‘‘distributors”’ were no more than wholesalers, and were not agents of the petitioner. The circumstances of their appointment, the delineation of their relationship to the petitioner and the course of conduct of the parties did not measure up to the requirements of an agency as found in Carroll Electric Co. v. Freed-Eisemann Radio Co., 60 App. D. C., 228, 50 F. 2d 993, and the cases therein cited. They were merely customers, The petitioner’s gross receipts from business with cus- tomers in the District of Columbia by its product depart- ments during the taxable years were as follows: Department 1949 1950 1951 Home Instrument $3,408,875.33 $5,282,511.93 $3,584,938.98 Record 261,529.41 308,190.87 424,864.39 Tube 440,829.70 574,767.65 724,257.98 Engineering Products 268,250.10 350,647.21 468,032.22 $4,379,484.54 $6,516,117.66 $5,202,093.57 Of the foregoing there were sales to the United States of merchandise delivered in the District of Columbia 46 as follows: 42 Department _ 1949 1950 1951 Home Instrument $459.04 Tube $ 35,921.36 $89,724.92 $197,943.53 Engineering products 104,557.98 88,425.14 93,193.26 Total $140,479.34 $178,150.06 $291,595.83 In respect of the business done by the Record Department in the District of Columbia, part of the gross receipts repre- sented amounts received as rental of records to radio broad- casting stations and other lessees in the amounts following: 1949 1950 1951 $3,710.60 $12,859.89 $16,760.00 The petitioner concedes that sales to the United States were ‘‘ District sales’’ and should be considered as the sales factor in the formula for determining the portion of the petitioner’s net income that should be apportioned to the District of Columbia. It also concedes that the income from the rental of records to lessees in the District should be allocated to the District under Regulation 10-2(e) in force during the taxable years, and which, in part, provided that ‘Interest, dividends, rents and royalties received from sources in the District, shall be allocated to the District.” But as to other sales the petitioner insists that under the applicable regulations they were not ‘‘District sales’? and had no place in the computation of the correct. franchise tax to be assessed against it. From time to time field sales representatives and some of the officers of the petitioner visited the customers in the District to promote the sale of its products, including the negotiation of the ‘quota’’ of products which a particular customer was expected to take and sell, assistance in train- ing of selling personnel, visiting the retail customers of the wholesaler or distributor and generally creating good-will for the petitioner in the trade. The field sales representa- tives did not as a rule procure orders for merchandise. If such happened during the taxable Years it was incidental. aa a a—. ew AA i. ad al _ _ 43 None of the field sales representatives resided or had an office in the District of Columbia, and no sale of products to customers in the District of Columbia was secured, nego- tiated or effected by any employee, agent, officer or branch of the petitioner located in the District. 47 The Home Instrument and the Record Departments had no office in the District of Columbia. The Tube Department had an office in the District from May 1, 1951; and the Engineering Products Department had an office here during the three taxable vears. Such offices were solely for the purpose of liaison between the petitioner and the purchasing agencies of the United States Government, and their primary function was to assist the Government em- plovees in the preparation of specifications for tubes and electronic equipment and the like. Such offices made no sales, took no orders, All sales to the United States were made on bids prepared at the home office of the particular department and submitted by mail to the Government. The functions and activities of such offices were wholly unrelated to the sale of merchandise to other customers in the District of Columbia. The petitioner had two other offices in the Distriet of Columbia, one of the Patent Department for the sole pur- pose of attending to the patent features of the petitioner's business, such as the obtaining of patents and the like: and the other of the Frequency Bureau, the sole function of which was to advise the petitioner and its radio broadeast- ing subsidiaries, such as the National Broadeasting Com pany, on the use and assignment of the broadcasting fre- quencies by the Federal Communications Commission, De- partment of State and Department of Defense. Such offices had nothing to do with sales. The foregoing were the only offices or places of business of the petitioner in the District of Columbia. Its corporate office was in New York City, and all of its divisions, depart. ments and manufacturing plants were located without the District of Columbia. 44 To decide the issue before it, the Court must first de- ‘ermine what regulations apply—those in foree during the taxable vears or those adopted some years afterward. And then, having settled that matter, the Court must decide whether under the appropriate regulation and the facts the assessment here assailed was proper, and, if not, to what extent, The petitioner insists that the regulations in force during the taxable years should determine its liability— that 4s it is not fair to change the rules after the game is finished, so to speak. On the other hand, the respond- ent contends that the regulations adopted August 6, 1953, apply in this case, because in such regulations it was pro- vided that they should apply to the taxable vear beginning January 1, 1948 and all sueceeding taxable years. The petitioner as a second string to the bow argues that, even if the regulations of August 6, 1953, apply here, it is not liable for any part of the taxes involved, except that portion which is to be computed in relation to sales to the United States Government and to rentals of records in the District of Columbia. Such alternative position of the petitioner will not be considered or discussed by the Court, beeause the Court is of the opinion that the regulations in force during the taxable years govern the determination of the character of sales to customers in the District, that is to sav, whether or not they were ‘District sales’? for the purposes of ap- portionment of net income of the petitioner. The formula for the apportionment of net income of multi- state or unitary businesses, (Section 10-2(d)(1)a) adopted hy the Commissioners in exercise of the authority granted in the Income and Franchise Tax Act provided that in re- spect of the sale of tangible personal property there should he apportioned to the District that portion of the gross income of the unitary business as District sales bore to total sales of that business; and that ‘District sales” meant the gross receipts from sales which were principally 45 secured, negotiated, or effected by the owners, emp!orecs, agents, officers or branches of the business located in the Distriet."" The Court believes that such regulation was valid; that it was proper exercise of the authority granted the Commissioners in the Act, and that it did no violence to the letter or spirit to the Income and Franchise Tax Act. While as observed above, the formula with but one factor, gross receipts, Was somewhat hard on non-resident unitary businesses, and out of line with the formulas in many States. and while on the other hand, it was lenient in limiting such factor to sales secured, negotiated and effected the agents of the unitary business ‘‘located in the District,’’ it cannot be said to be in conflict with the Act. 49 In Pierre M. Ghent v. District of Columbia, Docket No. 1397, this Court was ealled up to decide whether a regulation adopted on March 17, 1958 could be applied to taxable years prior thereto, where, as here there was a valid contrary regulation in force during such taxable years. The Court gave a great deal of thought and study to the ques- tion; and in the course of its opinion in that case said: ‘*The Court is of the opinion that the regulations adopted March 17, 1953, are not applicable. While there is support in the decisions of the Supreme Court for the proposition that regulations may be applied retroactively, the rule seems to be that such cannot be done if during the taxable vear there were in effect contrary regulations pertaining to the subject matter. It is only where there are no prior regulations that retroactivity is permitted. In Helvering v. R..J. Reynolds Tobacco Company, 306 U.S. 110, 83 L. Hd. 536, 581, 59S. Ct. 423, an attempt was made to apply retroactively regula- tions adopted after the close of the taxable year there involved. Such was denied by the Supreme pore (ltd eaa ins nike IE LEE LE SOR IE hy gh OIL II 46 Court, speaking through Mr. Justice Roberts, who said: ‘Petitioner urges that the amendment oper- ates retroactively and governs the ascertain- ment of gross income for taxable periods prior to the date of its promulgation, and, further, since Congress has reenacted § 22 (a) in the Revenue Acts of (June 22) 1936, (49 Stat. at L. 1648, 1657, chap. 690) and (May 28) 1938 (52 Stat. at L. 452, 457, chap. 285, 26 U.S.C.A. § 22(a), it has approved the regulation as amended. We hoid that the respondent’s tax liability for the year 1929 is to be determined in conformity to the regulation then in force.’ Following the Reynolds ease closely was H]el- vering v. Wilshire Oil Company, 308 U.S. 95, 84 L. Ed. 101, 105, the opinion in which was delivered by Mr. Justice Douglas. There we find this lan- guage: ‘These regulations applied prospectively only and did not purport to reach back to earlier years when the taxpayer relied on a dif. ferent rule or practice.’ ss * * * ‘We are not dealing here, as was this Court in Helvering v. R.J. Reynolds Tobacco Co., 306 U.S. 110, 83 L. Ra. 936, 59 S. Ct. 324, supra, with regulations applied retroactively. These are applied prospectively only.’ “The second Reynolds case, namely, Helvering v. Reynolds, 313 U. 8. 428, 85 L. Kd. 1438, 1441, delivered by Judge Douglas also dealt likewise with 50 47 retroactivity of regulations. While retroactivity was permitted, it was done so by distinguishing that case from the first Reynolds case in this way: ‘Nor is Art. 113(a) (5)-1(b) of the Regula- tions condemned by Jeivering v. R. J. Rey- nolds Tebacco Co., 306 U.S. 110, 838 L. Ed. 536, 59 S. Ct. 423, supra. That case turned on its own special facts. The transactions there in question took place at a time when a regulation was in force which expressly negatived any tax liability. The regulation remained outstanding for a long time and was followed by several re-enactments of the statute. About five years after the transactions in question took place the prior regulation was amended so as to im- pose a tax liability. There are no such circum- stances here. No relevant regulation was in force at the time respondent sold the securities in 1934.’ (Emphasis supplied). ** Manhattan General Equipment Co. v. Com- missioner, 297 U.S. 129, 80 L.Ed. 528, relied upon by the respondent, was decided before the first Reynolds case. There is, however, no real conflict between the two cases, because in the Manhattan General Equipment case the earlier regulation was held to be invalid, so that for the purposes of the decision there was no prior regulation, as in the instant case. ‘‘The respondent has cited as supporting the va- lidity of regulations See. 325 of Mertens Law of Federal Income Taxation entitled ‘Power of the Commissioner to Apply Regulations Prospectively and Retroactively’ found on pages 102 to 110, in Vol. I of that very excellent work on taxation, OTF SIO TIE OT A Oy ose 48 There is nothing in the above mentioned section of Mertens to justify the position of the respondent. On the contrary it supports the proposal that regn- lations will not be applied retroactively where there has been a prior conirary regulation in effect dur- ing the taxable vears involved. After discussing the two Reynolds eases Mertens has this to say: ‘* * * * ‘It is reasonably clear that his decision in- dicates that the Supreme Court would approve changes in the regulaticns prospectively ap- plied where there had heen no prior regulation and it would reasonably follow that it would likewise approve prospective reguiations even though there had been prior regulations ex- pressing a contrary interpretation. The case is also authority for the point that the Supreme Court will approve retroactive regulations in- sofar as they are promulgated under an exist- ing statute and are issued within a reasonable time after the enactment of that aet where there are no prior regulations to the contrary. The Supreme Court would also probably ap- prove a retroactive application of the regula- tions under prior acts where there was no specific regulation to the contrary in existence during the prior vears, although the decision in the later Reynolds case is not direct author- ity for this conclusion. The language of the opinion in the later Rey- nolds case permits the argument that regula- tions will not be retroactively applied where they are in conflict with a regulation to the con- trary, which was in force during the prior year and which covered the issue specifically. ‘* a * *? 49 ‘See also Aluminum Company of America v. United States, 122 F. 2d 615.”’ The Pierre M. Ghent case was appealed to the United States Court of Appeals for the District of Columbia Cir- cuit, and was reversed on another ground. See District of Columbia v. Pierre M. Ghent, 220 F, 2d 210. The Court of Appeals did not reject, or disturb this Court’s holding in respect of the retroactive application of the regulation, but rather approved it by deciding the case on the regulation which this Court held applicable under principles stated in the excerpt of the opinion above quoted. This is clear from the language in the second paragraph of Footnote (1) of the opinion of the Court of Appeals as follows: ‘*The regu- lations adopted under authority of the statute, and in force during the three vears in question ete,’’ and from the opin- ion itself. This Court is still of the same view as expressed in the Pierre M. Ghent case, and holds here, as it did 31 there, that the regulations adopted after the close of the taxabie years cannot operate retroactively where there was during such vears a valid contrary regulation. The regulations in force during the taxable years in- volved, as will be seen above, defined ‘District sales** as those ‘‘principally secured, negotiated or effected by owners, employees, agents, officers, and branches of the corporation or unincorporated business located in the District’. In Owens-Illinois Glass Co. v. District of Columbia, Docket No. 1215, this Court was called up, on remand from the United States Court of Appeals, to interpret and apply Section 10-2(d)(1)a, of the Regulations, that is to say, what the word ‘‘located’’ therein meant. The respondent insists that the opinion of this « ourt in that respect was erroneous ; and that *‘Faced with this dilemma the Commissioners on Au- gust 6, 1953, amended the regulations promulgated October 16, 1950, supra, and made the effective date January 1, 1948"*. There was another course open to the respondent, INA LIP Sa RE Ctl) ee fate kia 50 namely, appeal to the United States Court of Appeals, a step which this Court regrets was not taken, because the correct meaning of the word ‘‘located’’ would have been finally determined. As it is the opinion of this Court in the Owens-Illinois Glass Co., case, is precedent which should be followed. It is hoped, however, that the two principal legal questions herein presented may be finally and satis- factorily settled by an appeal from the decision in this case to the United States Court of Appeals. With that in mind, it would seem appropriate to quote more at length, per- haps, than ordinarily would be required, from the opinion of thi. Court in the Owens-Illinois Glass Co., ease as follows: ‘*The solution of the question, therefore, turns on the meaning of the word ‘located’. The petitioner claims that it has the implication of permanency or settled locale as distinguished from temporary physical presence, and that none of the officers or agents who secured, negotiated or effected the sales to customers in the District of Columbia were located therein. On the other hand the respondent contends that the term ‘located’ has some relation to time, in that, if the selling officer or agent was physically present in the District of Columbia at the time he secured, negotiated or effected the sale. then he was ‘located’ in the District and the re- quirement for a valid assessment under the regula- tions was met. The Court believes that the position of the respondent is untenable and that the peti- tics» is correct in its contention that the selling agent must have some permanent connection with the District of Columbia, such as residence or at- tachment to an office or branch of the taxnaying cor- poration in the District of Columbia. The Court believes that under the findings as made none of the agents or officers securing, negotiating or effecting 51 sales to customers in the District of Columbia was located therein. “There is nothing peculiarly technical about the regulations, and remembering that their pur- pose is to administer the law and explain its provis- ions to the ordinary citizen the words should be given their ordinary and accepted meaning. None of the dictionaries, ordinary or legal, define the word ‘located’ in the setting in which it is found in the regulations, but the definition of the word ‘Joeate’ is as follows in several dictionaries : “In Webster’s Collegiate Dictionary: ‘2. To set or establish in a particular spot. 4. To as- sign a place to.—v.i. Collog. To take up one’s residence ; to settle.’ “In Funk & Wagnalls New College Standard Dictionary: ‘1. To establish or place in a par- ticular situation or spot; place; settle. 7. To settle; establish residence; also to reside or live’. “In Universal Self-Pronouncing Diction- ary: ‘to place, establish; mark out and deter- mine the position of: v.i. to settle’. “In Webster’s National Dictionary, 2nd Ed. (1944) : £2. To set or establish in a particular spot, or position; to station. To establish in a charge or office. Intransitive—te place oneself ; to take up one’s residence; to settle; as, he loeated in Ohio. (Colloq.)’ “There is no applicable definition in ‘Words & Phrases’ or Bouvier’s Law Dictionary, but in Black’s Law Directory the word ‘locate’ is defined as ‘to ascertain and place the position of some- thing’; and in Baldwin’s Pocket Law Dictionary 52 the term is stated to mean ‘to place,; to fix, ascer- tain or designate the place (locus) of a thing’. ‘‘If the respondent were correct in its claim as to the interpretation of Section 10-2(d)(1)a of the regulations, the word ‘located’ could very well be stricken from the pertinent phrase so as to make it read ‘principally secured, negotiated or effected by owners, employees, agents, officers and branches of the corporation or unincorporated business in the District’. The regulations were expertly drawn and it is apparent that the draftsmen had the fa- cility of expression. It is not believed that such draftsmen would have included the word ‘located’ in the phrase or that the Commissioners would have approved the regulations if such word was intended to have no meaning. ‘It is interesting to note that on March 17, 1953, the Commissioners amended Section 10-2(d)(1)a by striking out the word ‘located’, so that the per- tinent part of the regulation now in force actually does read ‘principaliy secured, negotiated, or ef- fected by owners, employees, agents, officers and branches of the corporation or unincorporated bus- iness in the District of Columbia’. In that connee- tion in its brief to which was attached the amended regulation of March 17, 1953, the respondent claims that this case should be disposed of on the basis of such amended regulation instead of that in force during the taxable year here involved. Such con- tention is without merit.’’ It appears from the facts and from the Court's interpre- tation of the regulations in foree during the taxable years, that, in respect of sales of the petitioner s products to customers in the District of Columbia, none of such sales were secured, negotiated or effected by any employee, agent, offi of 53 officer or branch of the petitioner located in the District of Columbia. That being so the gross receipts from such sales, except, of course, sales to the United States, 33 have no place, and must not be included in the sales factor in the formula for the apportionment of the net income of the petitioner to the District of Columbia. The petitioner has conceded that the gross receipts from sales to the United States of merchandise delivered in the Dis- tric’ of Columbia, and the amounts received as rentals of records to lessees in the District comprise income from sources within the District. The correct computation, there- fore, of the franchise taxes that were due by the petitioner for the three taxable years involved will require the elimina- tion from the sales factor of the amount of gross receipts from sales to customers in the District of Columbia, other than the United States, and the inclusion in the sales factor the amount of gross receipts from sales to the United States. To the portion of the net income thus determined there must be added the amount received as rental of records to lessees in the District of Columbia, plus interest at the rate of 6 per centum per annum on the total amount for each year respectively from the due date of the returns re- spectively, to October 5, 1954. The refund to which the petitioner is entitled is to be computed by deducting the previous taxes and interest that were due on October 5, 1954, from the franchise taxes and interest paid on that date for the taxable years involved. To the sum of such net amounts must be added interest at the rate of 4+ per centum per annum for the period from October 5, 1954, to date of pay- ment of the refund, minus one month. Decision will be entered under Rule 30. /s/ Jo. V. Morgan Jo. V. Morgan, Judge ne re eee o4 54 FILED JUL 15 1955 District of Columbia Tax Court Docket No. 1463 COMPUTATION FOR ENTRY OF DECISION UNDER RULE 30 OF THE RULES OF PROCEDURE BEFORE THE DISTRICT OF COLUMBIA TAX COURT Pursuant to the opinion of this Court entered in the above- entitled cause on June 29, 1955, wherein this Court stated that the decision of this Court would be entered pursuant to Rule 30 of the Rules of Procedure before the District of Columbia Tax Court, the District of Columbia submits to the Court a computation, as set forth on Exhibit ‘‘A”’ at- tached hereto, of the refunds of tax to be entered in this case in accordance with the findings of fact and opinion of this Court. On February 2, 1955, petitioner Radio Corporation of America filed a motion for continuance of the hearing of this case from February 9, 1955 to Mareh 9, 1955, which motion was granted by this Court on February 3, 1955. Pa ragraph three of the motion of petitioner for continuance stated: ‘*3. In the event that this motion is granted, the petitioner agrees to waive interest for the period of one month on any refund which may be allowed.”’ Respondent District of Columbia does not, by the filing of this computation of the amount of refunds of 5H) tax due petitioner, concede the correctness of the conclusion of the District of Columbia Tax Court that petitioner is entitled to a refund of any of the taxes assessed against it. wine itd ow — el rp +3 or or COMPUTATION OF DISTRICT OF COLU MBIA UNDER RULE 30 OF REFUNDS OF TAX DUE PETITIONER RADIO CORPORATION OF AMERICA Calendar Years 2 2 1951 Net income subject to apportionment $ 35,929,041.24 $ 88,701,818.59 $ 37,699,692.70 x apportionment factor* .000490 .000394 000715 Portion attributable to D. C. 17,605.23 34,948.52 26,955.28 Rental income allocable to D. C. 3,710.60 12,859.89 16,760.00 Corrected D, C, net taxable income $ 21,315.83 $ 47,808.41 $ 43,715.28 Tax @ 5% 1,065.79 2,390.42 2,185.76 Less amount reported on return 437.60 1,555.19 697.68 Deficiency $ 628.19 $ 835.23 $ 1,488.08 *Computation of apportionment factor: A. Total sales all sources $286,724,157.84 $452,676,201.68 $407,542,968.59 B. Total District sales: Sales to U.S. Government 1. Tube Depart- ment $ 35,921.36 $ $9,724.92 $ 197,943.53 2. Engineering Products Dept. 104,557.98 88,425.14 93,193.26 3. Home Instrument 459.04 Total $ 140,479.34 $ 178,150.06 $ 291,595.83 C. Apportionment factor (BA) .000490 -000394 .000715 57 Calendar Years 1949 1950 1951 Summary ‘ "% a Tax reported on return $ 437.60 $ 1,555.19 $ 697.68 Deficiency assessments Tax 27,001.41 62,287.94 23,364.15 Interest 7,182.88 12,831.32 3,411.17 Total tax & interest asessed & paid $ 34,621.39 $ 76,674.45 $ 27,473.00 a ee oe 56 Corrected: Tax per return 437.60 1,555.19 697.68 Deficiency pursuant to opinion of D. C. Tax Court Tax 628.19 835.23 1,488.08 Interest (Due date of return to 10/5/54 168.56 174.00 220.73 Total tax liability $ 1,234.35 $ 2,564.42 $ 2,406.49 Refund Computation Totals Total tax & interest asessed and paid $ 34,621.39 $ 76,674.45 $ 27,473.00 $138,768.84 Total tax liability ; wa to opinion of "D.C. Tax Court 1,234.35 2,564.42 2,406.49 6,205.26 Amount refundable to petitioner pursuant to opinion of D, C, Tax Court $ 33,387.04 $ 74,110.03 $ 25,066.51 $132,563.58 58 FILED JUL 22 1955 Distriet of Columbia Tax Court Docket No, 1463 DECISION The petitioner and the respondent having each filed herein its computation under Rule 30, and the Court having con- sidered said computations and the evidence taken at. the hearing of this appeal and the findings heretofore made herein, it is by the Court this 22nd day of July, 1955, ADJUDGED AND DETERMINED, That. franchise taxes and interest thereon for the calendar year 1949, in the total sum of $33,387.04 were erroneously assessed and collected from the petitioner; and that the petitioner is en- titled to a refund thereof with interest thereon at the rate of + per centum per annum from October 5, 1954, to date of payment of the refund, minus one month, and it is FURTHER ADJUDGED AND DETERMINED, That franchise taxes and interest thereon for the calendar year 19° ses tio at. to. MI cal er! th tel Oc on a7 1950, in the total sum of $74,110.03, were erroneously as- sessed and colleeted from the petitioner; and that the peti- tioner is entitled to a refund thereof with interest thereon at the rate of 4 per centum per annuin from October 5, 1954, to date of payment of the refund, minus one month, AND IT IS FURTHER ADJUDGED AND DETER- MINED, That franchise taxes and interest thereon for the calendar year 1951, in the total sum of $25,066.51, were erroneously assessed and collected from the petitioner ; and that the petitioner is entitled to a refund thereof with in- terest thereon at the rate of 4 per centum per annum from October 5, 1954, to date of payment of the refund, minus one month, s/ Jo. V. Morgan Jo. V. Morgan Judge 64 PROCEEDINGS THE COURT: You may proceed, MR. ZELLER: If the Court please, this is an appeal by the Radio Corporation of America from the assessment of franchise taxes under the District of Columbia Franchise Tax Act of 1947 as amended. Now, the years in issue here today are 1949, 1950 and 1951. R.C.A,, and 1 shall so refer to the petitioner, Your Honor, is a corporation organized under and existing under the laws of the State of Delaware. Its principal place of business is maintained at New York City, at 50 Rockefeller Plaza. R.C.A. makes sales throughout the United States inelud- ing the District of Columbia. R.C.A. duly filed franchise tax returns for the years which are here in issue. -& os The essential question in this case today is what is the correct measure of the tax imposed on the R.CLA. under the District of Columbia Franchise Tax Law. This stands on the proper apportionment of R.C.A.’s income for 1949, 50 and °51, between sources within and sources without the District, Now, the Franchise Tax Law prescribes that that appor- tionment shall be determined under regulations adopted by the Commisisoners of the District of Columbia, 65 not by the Assessor. The regulations in force during the Years in ques- tion provided that the income of a corporation derived from a trade or business carried on beth within and without the District should be apportioned on the basis of a comparison of the gross sales of the company everywhere with sales defined in the regulation as District sales. And that, Your Honor, seems to be the phrase of art with which we are concerned here today. * . * * * * . * * * Now, the terms ‘District sales’? under the regulations which were actually in effect during the vears “49, °50 and ‘ol means the sales principally secured or negotiated by ageits, officers or employers of the taxpayer located—and T emphasize located—in the District of Columbia. I want to point out at the outset, Your Honor, that there is an issue between R.CLA, and the Assessor as to which regulations are applicable to the years here in question. During these years “49, °50 and ‘Ol, the test laid down by the regulation which was then in force st 66 it in some reform, was whether the sale was m a salesman who was located in the District. Now, the problem, whether this regtation and this test ought to be applied, arises because, on Masch 7, 1950, the Commissioner amended the regulation to strike out the word *‘loeated.”’ ating ade by a9 Subsequently, on August 6, 1953, the regulation was fur- ther revised for what appears to be the evident purpose of eliminating the test of whether the salesman was located 4 in the District. : Moreover, the assessor claims that these amendments ; are retroactive so as to change the rule which actually ' existed during the vears in question when the sales were ; made, 1 Now, it is our, R.C.A.’s position here today, that the assessment objected to is wrong for the following reasons: e If you apply the regulation which was actually in effect s during the years in question, the fact is, as we shall show, iN the great majority of the R.C.A.’s sales which the Assessor £ has treated as District sales, were not District sales because é they were not made by salesmen located in the District. We do not believe that the 1953 regulation which pur- ; ported to eliminate this test of location retroactively can be applied retrosctively under the decisions of this Court in the Owens-Illinois and Lever Brothers cases, nor 67 under the decision of the Court of Appeals for the 2 District of Columbia in the Pierre Ghent case. 7 Moreover, our proof will show that a very substantial part of the R.C.A, sales to customers located in the District were not District sales, again to use the phrase, even within the meaning of the 1953 regulations. . . . . . : * . . . 7) Thereupon, JOHN S. CARTER being first duly sworn, testified upon his oath as follows: DIRECT EXAMINATION BY MR. ZELLER: Q. Mr. Carter, will you state your full name for the record? A. John S, Carter. anes 60 Q. What is vour residence?) A. 219 East Main Street, Moorestown, New Jersey. Q. What is your occupation? A. My position is vice presi- dent, Finance and Administration, Radio Corporation of America. Q. How long have you been with RCA? A. Since 1935. Q. Where is vour office located, sir? A. In Camden, New Jersey. Q. Where was your office located during the vears in question, 1949, °50, 51? A. In Camden, New Jersey. * * * * * * oe * . 76 Q. Would you tell us, Mr. Carter, sow the domestic 77 manufacturing and sales activities of RCA were organized during these three vears: 1949, °50, °51? A. The domestic manufacturing and sales activities of RCA were conducted by four products departments. These were the Engineering Products Department, the Home Instru- ments Department, the Record Department and the Tube Department. Each of these departments was organized as a separate business. By that I mean that they had a general manager who was usually a vice president of the corporation; they had their own chief engineer and engineering staff; they had their own financial department, headed by a comptrol- ler; they had their own sales department headed by a sales manager; they designed and produced their own line of products which varied from year to year; they had their own manufacturing facilities and they had their own general office. In the case of Engineering Products, that general office was located at Camden, “ew Jersey and their manufactur- ing facilities were located at Camden, Detroit and Los An- geles, I believe. In the case of Home Instruments, the general office was located at Camden, New Jersey, with manufacturing facili- ties at Camden, Indianapolis and Bloomington. se A. th tie 61 THE COURT: Llinois? THE WITNESS: Indiana, sir. I should have added when I was speaking of Engineering Products, that this 78 product department manufactures and sells indus- trial electronic equipment both to commercial crs- tomers and special apparatus for the United States Govern- ment. The Home Instrument Department manufactures and sells radio sets, television sets, and phonographs. The Tube Department had its general office at Harrison, New Jersey; it manufactures and sells electron tubes, tube parts, tube-making machinery, and batteries. It had manufacturing facilities at that time at Harrison, New Jersey, Lancaster, Pennsylvania, Marion, indiana, and Indianapolis, Indiana. THE COURT: I think it should be understood, if it is not already—certainly I understand it—that what the wit ness is testifying and what other witnesses will testify is the situation as existed during the taxable years involved. THE WITNESS: I believe I have not talked about the Record Department. This company is located in Camden, New Jersey, with their general offices and its manufacturing facilities at In- dianapolis and for at least a part of the period, at 79 Cannonsburg, Pennsylvania, and New York City and Los Angeles. BY MR. ZELLER: Q. Mr. Carter, I believe you may have misspoken your- self. You referred to the Record Department as a company. A. Record Department,—I am sorry. Q. Can you tell us whether or not, Mr. Carter, any of these four products departments had manufacturing facili- ties in the District of Columbia? A. They did not. eh.» ewes: RpeROE IR Sire 50045 62 Q. Can you tell us whether or not any of these four products departments maintained a warehouse or stock of goods here in the District? A. They did not. Q. Did any part of RCA, regardless of whether it was a products department or not, have manufacturing facilities in the District? A. No, sir. Q. Would your answer be the same as to the maintenance of warehouses or stocks of goods in the District? A. It would be the same answer: No. 80 BY MR. ZELLER: Q. How did the products sold by RCA to customers located in the District come into the District? A. They were shipped by various means from sources outside the District of Columbia. THY COURT: By common carriers? THE WITNESS: Yes, sir. BY MR. ZELLER: Q. Will you tell us what offices in the District were main- tained by RCA during the three vears in question? A. The Engineering Products Department had an office in the Com- monwealth Building on ‘*K*’ Street, I believe, during the entire period in question. Within that office there were two other activities of RCA that had office space. Those were the Patent Department and Frequency Bureau. I believe that those two activities were there during the entire period in question. The Tube Department opened an office at ** KK’? Street, and I believe the address was 1757—it was the Beacon Building —and I think the date was about the middie, May or June of 1950, or 1951, I believe. + * e ° * . ° . * . la an ra ae 63 Sl CROSS EXAMINATION BY MR. WIXON: S4 Q. The Engineering Products Department of the Radio Corporation of America, I understand, main- tains an office on K Street in the Distriet of Columbia or maintained an office on K Street in the District of Columbia during the tax years here in question? A. Yes, sir, Q. Do you know how many employees were located at that particular office on K Street during these years? A. No, sir. Q. You have no idea, sir?) A. Ihave an idea, but I cannot testify with accuracy. Q. What was the title, sir, of the o...cer of the corporation who was in charge of the Engineering Products Depart- ment? A. Vice president and general manager, I believe. Q. And he would be a vice president and general manager of the Radio Corporation of America? A. Correct. Q. Now, all of the officers, I take it, and employees of the Radio Corporation of America who were connected with these departments were actually employees of the Radio Corporation of America, were they not, sir, rather than employees or officers of a department of the Corpora- A. They were employees or officers of the 85 tion. Radio Corporation of America. : > o al * * * * > * 86 THE COURT: You are familiar with the corporate structure of RCA, are you not, generally? THE WITNESS: Yes, sir. THE COURT: And it has a president and Board of Directors, too? THE WITNESS: Yes, sir. THE COURT: Operates like most other corporations, does it not? THE WITNESS: Yes, sir. Bee air iias at | LEILA DLAI TD TOL Hise AES SA DOLE ER LEAT PR PIE weet "RSL a PRO SE he 64 THE COURT: These separate divisions, they have their own bank accounts and finances? 87 THE WITNESS: The individual product depart- ments do not have their own bank accounts. During this period, the Victor Division operated its own bank ac- count and would maintain bank accounts for each product division. THE COURT: Well, some of them made a profit, did they not? THE WITNESS: Yes, sir. THE COURT: Where did the profits go? THE WITNESS: The profits went to the Radio Corpora- tion of America. THE COURT: And were distributed to the stockholders? THE WITNESS: Pardon? THE COURT: And were distributed to the stockholders? THE WITNESS: Distributed to stockholders in the form of dividends. THE COURT: All right, that is all. 88 Thereupon, CONDER C. HENRY being first duly sworn, testified upon his oath as follows: DIRECT EXAMINATION BY MR. ZELLER: Q. Will you please state your name for the record, please? A. My name is Conder C. Henry and my official address today is 711 14th Street, N. W., Washington, D. C. Q. Is that your office address in the District? A. Yes, sir. Q. What is your residence, sir? A. My residence address is 4482 Argyle Terrace, N. W. te 65 (. What is your occupation, Mr. Henry? A. I am man- ager of the Washington Patent Department of Radio Cor- poration of America. Q. And how long has the Patent Department had a Wash- ington office, to your knowledge? A. Well, I came with the department in February, 1946. They had a Patent Depart- ment before I arrived. I cannot tell you the exact date, but I understand it has been some years. 7 e e * a 2 e 89 Q. Now, will you tell us, Mr. Henry, what the function of your office was? By that I mean the Washington office of the RCA Patent Department during these years in question: ’49, ’50, ’51? 2 * . A. During those three years the function of the office was primarily a search office for RCA. It also was a training office for patent attorneys. In addition to that, it was more or less a trouble-shooting office for patent applications that were in trouble in connection with patent office in the courts. By that I mean, we did every phase of the work connected with the prosecution of the patent applications through the patent office and the courts. Q. When you say it was a search office, Mr. Henry, what do you mean by that? A. I mean that the bulk of the work in connection with the new invention consists in making an investigation of the prior art to determine the extent of novelty in that invention. On the basis of that search a judg- ment is made as to whether or not to prepare and 90 ‘file an application for patent in the first place. Now, that would be one aspect of the search work. Another aspect would be to make searches of the prior art to determine the validity of patents which RCA may want to buy. Then another aspect of it, to complete the answer, is to make what is known as patent approval searches. ae PABA BLL EE AL POD as Fe POMESES OM NOH ARYA EE PROP EIEIO E RUE Hes Mpa aT PRY LPIA 66 Q. Mr. Henry, will you tell us whether your office had any connection with the Victor Division of RCA? A. The only connection that we had with RCA Victor or any other branch of RCA would be to handle patent disclosures orig- inating in those divisions. * * * * = * * * . * Q. Were those the duties which you have already de- seribed for the record, all of your duties, Mr. Henry? A. Well, I had nothing to do with sales, if that is 91 what— THE COURT: He just asked you, did you have any other duties besides those you mentioned? THE WITNESS: No other specific duties, no, sir. Q. Can you tell us whether or not anyone not connected with your office made use of your office during these three years? * * * * * * * 2 . * THE WITNESS: The Legal Department has used my office during those years. BY MR. ZELLER: Q. Any other department? ? £ z he Dearth ee Ree renee SUPT 0, 84 147 _—srbasis for that was? a 150 Q. During these trips to Washington, did you ever make use of any of the office facilities of offices main- tained by RCA in the District? A. No, sir, T never did. 86 Q. Now, on these oceasions of your visits to Washington, where you did not discuss the DQA because it was not up, what did you and the distributor discuss? A. Routine busi- ness, such as movement of merchandise, advertising and sales promotion programs, sales training of their personnel and_ or dealer personnel, dealer visitations made with 151 their Southern Wholesalers sales personnel or execu- tives. * * * * * * * = * . 152 CROSS-EXAMINATION BY MR. WIXON: Q. Mr. Polikoff, did you happen to have occasion during these years we are speaking of to visit Fairfax Distributing Corporation? A, Not in those vears, no, (). They were dealers for your products, were they not? A. Fairfax was a distributor of our product; ves, sir. Q. I believe you testified vou came to the District of Columbia probably a dozen times or so during these years! A. Yes, sir. Q. And that you visited the Southern Wholesalers Com- pany on several occasions during those visits. That is to say, You went to see them two or three times out of the dozen or so Visits you made? A, No, no. T would see them 158 on each of my visits here. Q. Was that your purpose particularly in coming here? A, Not particularly. (). You came here to observe the over-all distribution of the product? A. Yes, sir. (). How long did vou stay on each one of those visits? A. It would vary from a matter of a day to three or four or maybe five days. Q. Did you go out with the salesmea for the Southern Wholesalers? A. Yes, sir. 87 Q). What did you do when you went out with them? A. I would help train them in the sale of our merchandise, help them train the dealer in the sale of the merchandise. | would aid the distributor salesmen in aiding the dealer in the sale and promotion of our goods. Q. Did you take any orders for merchandise on your visits to Southern Wholesalers?) A. I did not, no. Q. Did you take them for relaying to anyone? A. Would vou kindly repeat that? Q. I asked you if you would take any orders for 134 merchandise? A. From or for? Q. From, for Southern Wholesalers. A. I did not personally, (). Did you take any orders for anybody else? A. I did not. Q. Did you relay any orders which might have been placed by Southern Wholesalers of some other organization to the main office or the office from which you operated?) A, No, sir. Q. Did you make arrangements for the taking of orders? A, No. Q. Did you enter into agreements for the sale of merchan- dise to the Southern Wholesalers?) A, No. Q. I believe you said you came down here with the ex- press purpose from time to time of determining the amount of merchandise which the Southern Wholesalers people would require in their operation; is that a fact? A. Yes, sir. Q. Did you ascertain what they might be expected to re- quire in the course of their operations on your visit to them? A. Yes, sir. Q. Wasn't that one of your major purposes as the 155. representative, sales representative, to ascercain what by way of merchandise should be required, what would be required, rather? A. I would say that would be one of my important functions. Fad hn pit ee, RELI R GIG E IE PGE Ne phe ae a Ones 2 ODP nt: A Sy SRDE VPA RTE “PR AG + (Resor 88 eres premieres: 88 Q. The sale of merchandise was your primary function, was it not? A. I would say so; yes, sir. Q. Who, if anyone, handled the matter for Fairfax Dis- tributing Company? A. During the years in question, I don’t know. (). Somebody did but it was not you; is that it? A. That is right. Q. What type of products did they purchase from the company, if you know?) A. Radio only. Q. Radios? A. Yes. Q. Did that include the component parts, records which might be played on a record player, and things of that sort? A. Not to my knowledge. (). Did vou ever have oceasion on vour visits to Southern Wholesalers to arrange for the return of merchandise 156 to the Radio Corporation of America? A. No. . * * 7 * * * * * * Q. In your discussions with representatives of Southern Wholesalers, was it your purpose to determine how much merchandise the distributor would require in addition to that which had been given to him on a DQA? A, Yes, sir. Q. Did you sell him or attempt to sell him additional mer- chandise from time to time? A. Yes. Q. In other words, you solicited him to buy merchandise over and above that which he had already purchased; is that right? A. Tf such merchandise was available; ves, sir. * . 7 . * * * a * * 157 REDIRECT EXAMINATION BY MR. ZELLER: Q. At the outset of the cross-examination, Mr. Polikoff, I believe you may have misspoken yourself. Can you tell us whether you came down to Washington a dozen times or so during these three years or during each of the three years? A. I would say during each of the three years. 89 Q. On another occasion counsel was examining you with respect to your visits to retailers here in the District of Columbia, and I believe you testified as to whether or not you took orders for or from Southern Wholesalers. Did you mean your testimony on that occasion to be as to whether you had taken orders for or from Southern Whole- calers in connection with those visits to retailers? A. I thought I had made that point clear that I did not solicit business from any dealers at the time of my visits. That was the function of Southern Wholesalers’ representative. MR. ZELLER: That is all. RECROSS-EXAMINATION BY MR. WIXON: (). I believe you said you went out with the sales repre- sentatives of Southern Wholesalers and that you 138 went with them to the outlets of Southern Whole- salers for their Radio Corporation of America prod- ucts. That is to say, they were the persons from whom they got orders? A. Yes. Q. What did you do when you went to these reiail estab- lishments? I take it they were all retail establishinents. A. Yes, that is correct. Q. What was your purpose in going to see the merchan- disers? A. Having a svy.erior knowledge of the product, I would go into probably greater detail with regard to the product and its sale ability in aiding Southern Wholesalers representatives in consummating a transaction with the dealers. Q. In other words, you were there in a capacity, or acting in a sense not only for the Radio Corporation of America but for Southern Wholesalers in an attempt to sell on be- half of Southern Wholesalers merchandise which it had for sale? A. I would say in an advisory capacity. Q. You answered questions from the retailers regarding the merchandise offered for sale? A. Yes. ones epee pe te a . ' PES Ee IAS OE TSI IIE TY BER BEA, SERRE PR Ae as ing PIES ELIE SPI A: 90 159 (). You stated the advantages to be gained from purchasing any equipment or some other commodity with which you might be familiar? A. Yes. Q. Would it be correct to say that your efforts were di- rected to supplementing and to aiding in the sale of mer- chandise of the Radio Corporation of America through Southern Wholesalers? A. Yes, sir. 160 THE COURT: What was the character of the Southern Wholesalers business? Was it a distributor or a jobber or what? THE WITNESS: They are wholesale distributors of our product. THE COURT: What is the difference between a distribu- tor and a wholesaler or a jobber? THE WITNESS: A wholesaler sells to dealers. THE COURT: What does a distributor do? THE WITNESS: A distributor serves the same function. It might be just another name. THE COURT: Would you answer that there is no dis- tinction between them? THE WITNESS: I would say that there is no distinction between a wholesaler and distributor. THE COURT: What other products besides yours did Southern Wholesaling Company sell? THE WITNESS: Refrigerators and ranges and washing machines. THE COURT: Did they sell any competing radio and tele- vision equipment? THE WITNESS: No. 161 THE COURT: Was that in their contract that they should not sell? THE WITNESS: No. THE COURT: Was that their understanding? THE WITNESS: No. THE COURT: You did not limit it to that? a r C 91 THE WITNESS: No. THE COURT: Did any of your distributors or whole- salers sell other products besides the products of the Radio Corporation of America? THE WITNESS: That I do not know. THE COURT: I mean in your territory. THE WITNESS: In my territory I would say no. THE COURT: When you convinced the Southern Whole- salers Company, or they convinced you, that they ought to have additional equipment or material or products, what did you do? Did you take an order? THE WITNESS: Yes, I would take an order subject to our ability to ship against it. THE COURT: In the ordinary course of business you would take an order that was approved some place else, or did you approve it? THE WITNESS: No, I did not approve it. It would be approved in Camden. THE COURT: But you solicited specific orders? 162 THE WITNESS: If I had information to the effect that there might be merchandise available, then I would solicit. THE COURT: Was it in writing? THE WITNESS: They would give it to me in writing at times or they might make it verbal. THE COURT: You don’t know anything about Fairfax? THE WITNESS: Oh, I know of them. During the years we are talking about, I had no contact with them. THE COURT: Do vou know how they got material and who solicited them? THE WITNESS: I do not recall during the years in question who particularly might have solicited their busi- ness. MR. WIXON: In view of your Honor’s questions, might Task this? THE COURT: Yes. 92 BY MR. WIXON: Q. On all these oceasions when vou talked with the South- ern Wholesalers, do I understand they never gave you an order for any merchandise? TH" COURT: He said he did not take orders. MR. WIXON: On my examination he told me he never got any orders. MR. ZELLER: That was the point I tried to clear 163 up on redirect examination. I think the witness mis- understood your question. He was thinking in terms of these visits to retailers and you will recall that was the line of examination. You may recall, &ir. Wixon, it was brought out on direct examination, too, that he did come down here and take orders two times a year in the DQA and occasionally on these supplementary matters. THE COURT: It is cleared up now. MR. WIXON: Yes, it is. THE COURT: The way I thought the witness understood it was that when he went on visits to the retailers, did he receive any orders for the Southern Wholesalers. MR. WIXON: I understood him to say no, he did not take orders from retailers. THE COURT: I understood that, but he does take orders from the Southern Wholesalers to the Radio Corporation of America. BY MR. WIXON: Q. Is that correct? A. Yes, sir. (). You accepted orders? THE COURT: He did not accept the orders. The orders were taken at Camden. 164 BY MR. WIXON: Q. During the years in question? A. Yes. » * - * * * * * * * 16 so pe 93 BY MR. WIXON: \. With respect to Fairfax, was there another sales repre- sentative who covered the same territory that you had? A. No, but there was a special assignment made to an in- dividual to contact Fairfax. Q. Do you know the reason for that? A. No, I do not. (). Was he an officer or an employee of the Radio Corpo- ration of America? A. He was an employee. Q. Was he under your supervision? A. No, he was not. Q. Was this a usual occurrence? MR. ZELLER: I object, your Honer. It is not ma- 165 terial. THE COURT: I think it is very important. It is something that has not been explained yet. BY MR. WIXON: (). Was it a usual occurrence? A. I don’t know. Q. Was it usual in your experience to have a distributor in your territory or the territory assigned to you to be serv- iced by somebody not under you who was not under your direction or control, or who did not operate with your knowl- edge? A. It could happen. Q. Was it usual? A. That I do not know, sir. THE COURT: He did not ask you whether it could hap- pen or not. Anything can happen. THE WITNESS: That is for sure. THE COURT: He asked you: Did it happen? BY MR. WIXON: Q. Did it happen? Was it usual for these things to occur ina territory serviced by you that a distributor within your territory would be serviced by some individual not under your control and not under direction and without your knowledge? A. This happens to be an unusual case. Q. Do you know the name of the gentleman? 166 A. I do not recall. 94 168 Whereupon HAROLD F. BERSCHE was called as a witness on behalf of the petitioner, and, hav- ing been first duly sworn, was examined and testified as fol- lows: THE COURT: Give your name and address to the stenog- rapher, please. THE WITNESS: Harold F. Bersche. My home address is 18 Erskine Drive, Morristown, New Jersey. DIRECT EXAMINATION BY MR. ZELLER: Q. What is your occupation, Mr. Bersche? A. I am man- ager of Marketing Services, the two divisions of the Radio Corporation of America. Q. Where is your office located?) A. Harrison, New Jer- sey. Q. How long have you been with the Radio Corporation of America? A. Going on eleven years. Q. Will you tell us whether or not during those eleven years you worked as a liaison in the general field of sales?! A. For the entire time up to the first of this past Janu- ary. 169 Q. What changes occurred since that time? A. | was appointed to my present responsibilities, my present job. Up to that time I was—let me back up. Up to January 1, 1948 I was District Manager, Southern California District. I was then made National Field Force Manager on January 1, 1948. On January 1, 1949 I was made Renewal Sales Manager, again of the two departments at that time of the Radio Corporation of America. ——_ owe oo * ni lu — ian eo 99 Q. Will you tell us what products are manufactured and sold by the two departments? A. Tubes, that is, receiving tubes, power tubes, picture tubes for television, transistors and other matters classified as tubes, batteries, component parts and accessories. Q. Will you tell us how sales of your tube department products are handled from an organizational standpoint, and when I say how they are handled I mean during these three years of 1949, 1950 and 1951? A. During the three years in question there was a division in the sales responsi- bility. There were two organizations. One was called the \quipment Sales Operation, whose principal respon- 170 sibility was to sell the products to manufacturers and the government. Then there was the Renewal Sales Operation, and that group covered sales to all other cus- tomer classifications. That would be Victor Instrument Distributors, plus the independent electronic distributors, broadcast stations, and so forth. Q. Mr. Bersche, I will ask you to assume for the purposes of your answer to the next question of mine that the books and records maintained by the tube department with regard to sales to customers located in the District of Columbia grouped the customers into the following categories: Fran- chise distributors, other distributors, radio stations, manu- facturers, affiliated companies, miscellaneous and United States Government. Now, will you tell us what the division of those classes of customers would be as between renewal sales and equipment sales. A. Renewal would handle all classifications with the exception of government and manu- facturers. Q. Will you tell us h [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386418_0762%3A3. Public record. Not legal advice.