from interstate commerce is going to work an additional hardship on the already harassed small businessmen. Since 90 percent of our members have less than 200 employees, the additional recordkeeping required by this type of a court decision, and subsequent action by all States to get in on the gravy, will mean more expense to each manufacturer. There must be some relief granted to these people. Rising costs and low-priced oversea competition have been squeezing apparel manufacturers for some time. Inasmuch as Congress has the right to regulate interstate commerce I firmly believe that Congress should provide remedial legislation. Further, I would like to urge that Congress immediately ban any State from taxing income derived from interstate commerce if the only activity in the State is sales solicitation and if the seller does not maintain an office, warehouse, or other place of business in the State. Our members pay taxes in Oregon and the other States in which they have an office, but obviously they have to have salesmen on the road to sell merchandise in other States as well. I sincerely hope that you will do everything in your power to aid these small businessmen in preventing this kind of taxation on interstate commerce. Sincerely yours, RICHARD PRUTER, Manager. Hon. RICHARD L. NEUBERGER, Senate Office Building, Washington, D.C. INDEPENDENT DISTRIBUTORS, DEAR SENATOR NEUBERGER: Your attention is requested to recent court action which upheld the right of Georgia and Minnesota to levy income taxes on nonresident business for income from interstate commerce conducted within their borders. More recently, Idaho, Tennessee, and Utah have passed laws providing for similar action by them. This will be an obvious temptation to other States despite the equally obvious ruinous effect upon small and large businesses, especially to businesses in States such as our own who recently decided to ignore the fact that, a dollar taxed by an agency other than its own, has been reduced accordingly. The tax accounting records alone would defeat many small businesses, but the inequities resulting from the privilege of any and every State to collect income taxes on interstate commerce would be chaotic to all business and should be declared by Congress to be illegal. Your interest and action in prohibiting this disease before it spreads is earnestly solicited. Very truly yours, INDEPENDENT DISTRIBUTORS, P.S.-Information regarding the above was learned from an editorial on page 20 of Farm and Power Equipment magazine, June 1959 issue. Hon. RICHARD L. NEUBERGER, E. L. S. WILSON RIVER LUMBER CO., U.S. Senate, Senate Office Building, Washington, D.C. DEAR SENATOR NEUBERGER: We feel that it is our duty to call to your attention the following bills: S. 2213 and Senate Joint Resolution 113. Senator, we urge you to immediately introduce legislation to accomplish the objectives of these bills, for the preservation of the economy of Oregon. Very truly yours, KEN FLEISCHMAN. Hon. RICHARD L. NEUBERGER, ZENITH LUMBER CO., Portland Oreg., July 16, 1959. U.S. Senate, Senate Office Building, Washington, D.C. DEAR SENATOR NEUBERGER: We feel that it is our duty to call to your attention Senate bill S. 2213 and Senate Joint Resolution 113. Senator Neuberger, we urge you to immediately introduce legislation to ac complish the objectives of these two bills which in essence will prevent business from paying income tax to many States where they ship goods but in which they do not maintain a place of business. It is our sincere belief that unless such legislation is instituted, not only will all of the employees of this company be affected, but every Oregon business which relies on interstate commerce for its revenue and thereby the whole economic structure of the State of Oregon. Very truly yours, JOHN JOHNSON. WESTERN MILL AND LUMBER CO., Hon. RICHARD L. NEUBERGER, U.S. Senate, Senate Office Building, DEAR SENATOR NEUBERGER: In order to maintain not only Oregon's economy but the economy of the United States as a whole, may we urge you to immediately take such steps as are necessary to introduce legislation to accomplish the objectives of S. 2213, and Senate Joint Resolution 113. We thank you for your efforts. Very truly yours, JOHN MALLOY, President. VAN WATERS & ROGERS, INC., Hon. RICHARD L. NEUBERGER, Senator, U.S. Senate, Washington, D.C. MY DEAR SENATOR NEUBERGER: On behalf of our company and all other small but expanding western businesses, we strongly urge you to support bill, H.R. 7757, introduced by Representative McCullock, of Ohio. This bill we consider most necessary in order to modify the effects of two recent U.S. Supreme Court decisions in the Northwestern States Cement and the Stockham Valves cases. These decisions now make it possible for a State to levy an income tax against a company which does not have an office or warehouse in that State, and which makes only occasional sales solicitations. Under these circumstances, not only the expense of the tax, but the tremendous job of recordkeeping, report filing, etc., would not at all be justified. Thank you for your serious effort to protect the right of business to operate in interstate commerce without undue burden. Yours very truly, GORDON GABIE, Assistant Manager. NORTH PACIFIC LUMBER CO., Hon. RICHARD L. NEUBERGER, U.S. Senate, Senate Office Building, DEAR SENATOR NEUBERGER: From a personal standpoint as one of your constituents and from the standpoint of my position with the above firm which employs some 120 others who are likewise your constituents, we cannot help but call to your attention Senate bill S. 2218 and Senate Joint Resolution 113. Senator Neuberger, we urge you to immediately introduce legislation to accomplish the objectives of these two bills which in essence will prevent business from paying income tax to many States where they ship goods but in which they do not maintain a place of business. It is our sincere belief that unless such legislation is instituted, not only will all of the employees of this company be affected, but every Oregon business which relies on interstate commerce for its revenue and thereby the whole economic structure of the State of Oregon. Very truly yours, DOUGLAS DAVID, President POSEY LUMBER, INC., Portland, Oreg., July 17, 1959. Hon. RICHARD L. NEUBERGER, DEAR SENATOR: We urge you to support and seek immediate action to insure passage before adjournment of the following bills: S. 2213, Senate Joint Resotion 113, in order to prevent State taxation of income derived exclusively from interstate commerce when the only activity within the State is sales solicitation and where no office, warehouse, stock or goods, or other place of business is maintained within the State. Yours very truly, GEO. E. LONG, Vice President. CHAPMAN LUMBER CO., Portland, Oreg., July 14, 1959. Hon. RICHARD L. NEUBERGER, DEAR SENATOR NEUBERGER: For us to be taxed by all the States we ship lumber products to and we ship to all of them-would be ruinous. The tax itself, as well as the added business expense caused, would be more than sufficient to drive us out of business. We feel sure that the businesses of all other medium and small concerns who ship anything to the various States would also be driven out of business. We urge you strongly to please hasten to visit the Senate Finance Committee chairman, Senator Byrd, to use all his efforts to pass bills H.R. 7757, House Joint Resolution 8019, House Joint Resolution 450, and H.R. 7715. Please fight hard on this matter and oblige. Respectfully yours, R. E. CHAPMAN, President. CASCADE PACIFIC LUMBER CO., Hon. RICHARD L. NEUBERGER, Washington, D.C. MY DEAR SENATOR: As you are no doubt aware, there appears to be a tendency for individual States to endeavor to collect income tax from businesses shipping goods strictly in interstate commerce and not maintaining offices, warehouses, or inventory within those States. This situation is further complicated by recent Supreme Court decisions. Federal legislation, therefore, is about the only means available to save businessmen from having to pay taxes in many States to where they would ordinarily in the course of business ship goods in interstate commerce. We understand there are at present two bills introduced in the Senate to correct this situation. We refer to S. 2213 and Senate Joint Resolution 113. We are not at this moment in position to say which of these two bills we would prefer but inasmuch as both have essentially the same objective, we respectfully ask your support of these or any compromise bill that might develop having the same objective, namely, to prevent State taxation of income derived exclusively from interstate commerce when the only activity on the part of the shipper is sales solicitation and eventual shipment of goods into that State. Business in interstate commerce today is hazardous enough, but it would become almost impossible if the shipper had to contend with various taxes that might possibly apply in the 48 States to which he might be called upon to ship. Yours very truly, JOHN H. HELM, President. WHITE STAG MANUFACTURING CO., Senator RICHARD L. NEUBERGER, Washington, D.C. DEAR DICK: A State income tax situation in the various States of the Union has arisen in recent months the potentialities of which open up some alarming possibilities that, if prudent action is not taken, a ridiculous financial burden could be placed on all firms in interstate commerce, regardless of where their home State is. Our company, and every other company in interstate commerce, is legally subject to State income taxes in many different States, even though our sales representatives merely solicit orders there and even though we maintain no office or warehouse there. That's the effect of recent decisions of the U.S. Supreme Court, upholding the power of the States to tax out-of-State corporations for the business activity they conduct in the taxing State, despite that such activity may be exclusively interstate commerce. If this situation is left unchanged, the consequences will be punitive for most firms in the country, large or small. On February 24, 1959, the Supreme Court ruled in two cases that the power to regulate interstate commerce granted by the Constitution to the Federal Government does not preclude the States from taxing the net income which an out-ofState corporation derives from sales within the taxing State, even though such transactions are exclusively interstate commerce. One case involved taxes imposed by Georgia, and another was an appeal by a corporate taxpayer from a similar Minnesota tax law. In both cases the firms' activities were devoted solely to the solicitation of orders which were sent by mail outside the State to their home office for acceptance. In both cases the taxes were levied on the portion of net income of the corporation presumed under a statutory formula to have been derived from activities in the taxing State. In Georgia, the words of the statute are worth noting for their breadth of coverage: "Every such corporation shall be deemed to be doing business within this State if it engages within this State in any activities * * * for the purpose of financial profit * * * whether or not it maintains an office *** within this State and whether or not such activity *** is connected with interstate * ** commerce." (The cases are T. W. Williams v. Stockham Valves & Fittings, Inc. and Northwestern States Portland Cement Company v. Minnesota.) When Louisiana, which has a similar statute, insisted on collecting taxes from Brown-Forman Distilling Co., which maintained no office in Louisiana and whose sales representatives in that State merely promoted and encouraged the purchase of the company's products without actually soliciting orders, the company appealed to the Supreme Court. In March, following the Stockham and Northwestern State cases, the Supreme Court refused to consider this Louisiana case, thus leaving the State court decision against the taxpayer undisturbed. Refusal of the Supreme Court to review a lower court holding need not necessarily be construed as complete agreement in all respects with the decision of the court below. Nevertheless, the practical consequences of these denials as they now stand have been to strengthen immeasurably the hand of the State tax collector and encourage an extension of his reach. Tax proceedings have already been commenced against firms whose activities within the taxing State consist of no more than the solicitation of orders by a traveling salesman or local sales representative. Under present circumstances, thousands of companies which have never considered themselves subject to such State taxes will now be under an indeterminable burden. Not only will they be expected to file returns and pay taxes in numerous States, but having failed to do so up to now, they also face the danger of being charged with tax arrears for previous years plus interest and penalties. I understand that the U.S. Senate Committee on Small Business will hold hearings on the subject. What form relief should take is not altogether clear. Some legal doubt has been voiced as to whether Congress has the constitutional right to step into this field and limit the tax power of the States, particularly after the Supreme Court has declared these States constitutionally unrestricted in imposing such levies. Several bills have been introduced which would have the effect of relieving firms from liability for such State taxes where their only activity within the taxing State consists of sales solicitation and where the taxpayer maintains no office, or warehouse, and where no stock of goods is carried. One such bill has been introduced by Senator Sparkman (S.J. Res. 113) in which he has been joined by Senators Humphrey, Saltonstall, Williams, and others. Other such measures have been introduced into the House by Congressmen McCullough of Ohio (H.R. 7757), and Miller of New York (H.J. Res. 431). On behalf of our company, an Oregon corporation, we are asking that immediate action be taken against these multi-State taxes. Sincerely yours, HAROLD S. HIRSCH, President. P.S.-The State of Oregon could possibly lose more income than it would gain because of our small consumption of outside goods. Let's not forget that if White Stag, for example, an Oregon corporation, pays income taxes to other States, this would clearly be an offset against the taxes it pays to its home State. We sell goods in every State in the Union, and some in greater volume than our sales in Oregon. With such huge deductions from our Oregon State income tax, Oregon would receive very little from us and other States in the Union more, and I doubt if Oregon's small consumption will enable it to tax out-of-State manufacturers for enough to make up for losses in tax income it now gets from Oregon manufacturers in interstate commerce. SCIENTIFIC SUPPLIES CO., Hon. RICHARD L. NEUBERGER, Senator, State of Oregon, Senate Office Building, Washington, D.C. DEAR SENATOR NEUBERGER: We would like to call your attention to House bill H.R. 7757 which has been introduced by Representative McCullough of the State of Ohio. This bill would prohibit State taxation of an out-of-State firm, when the only activity of said firm within such State is sales solicitation, and where no office, warehouse, stock of goods, or other place of business is maintained therein. We would appreciate your support of this bill because of our company's concern at the possibility of taxation by individual States of interstate commerce, of the type reecntly approved by the Supreme Court in its decision in the Northwestern State Cement and the Stockham Valve cases. Your cooperation in this matter would be much appreciated. Very truly yours, S. P. KELLY, Branch Manager. STATEMENT BY DANIEL S. RING, GENERAL COUNSEL, ON BEHALF OF THE NATIONAL PAINT, VARNISH, & LACQUER ASSOCIATION This statement presents the unqualified approval and endorsement by the National Paint, Varnish & Lacquer Association of the joint resolution and bills aimed at restricting States from taxing the proceeds of interstate transactions accruing to out-of-State firms. Our association represents 1,500 manufacturers who produce 94 percent of the total domestic output of paints, varnishes, and lacquers. The overwhelming percentage of our members are in the small business category who cannot afford business locations in States other than those in which their plants are located. With well-informed observers predicting that ultimately 50 States and more than 100 cities will be taxing net income from interstate transactions accruing to companies wholly removed from the taxing State, the burden on business (and especially upon small business) which this trend would produce is obvious. We endorse all legislation aimed at abolishing the same sort of burdens upon and obstacles to interstate commerce which threatened to disrupt the Union of the States between 1777 and 1783, under the Articles of Confederation. We believe that the bills under consideration will promote the U.S. Constitution's objective of a free flow of interstate commerce by eliminating a throttling taxation on it, which entails in addition to taxes to be paid, accounting and reporting expense of serious proportions on business, large and small. |