Set forth below are the actual answers received in response to my inquiry: To the best of my knowledge in neither the Northwestern States Portland Cement case nor in the Stockham Valve case did the companies sell their goods in more than half a dozen States and the burden both of reporting and tax paying would be correspondingly light in comparison with the problems facing our industry. In addition, as evidence of our inability to absorb additional tax burdens I should like to call your attention to the following comparative rates of profits on sales, after taxes, for manufacturing industries generally and for the textile mill products industry in which we are included: As you know our people generally already pay higher taxes than do our foreign competitors who, in addition to wage rates one-tenth of ours plus longer workdays and workweeks, are able to make their goods out of American cotton purchased at a lower rate than our people must pay. With these advantages, manufacturers in Japan, Hong Kong, and elsewhere have made sizable inroads into the U.S. market while foreign markets, where they exist at all, are generally made inaccessible to us by restrictions of one kind or another. In view of the above and because of the already heavy tax burden with which our members are saddled we should appreciate your committee's favorable consideration of legislation to correct the situation in which we now find ourselves with reference to State taxation of income derived from interstate commerce. Very truly yours, ROBERT D. MCCABE, Managing Director. STATEMENT BY THE NATIONAL WHOLESALE FURNITURE SALES MEN'S ASSOCIATION This National Wholesale Furniture Salesmen's Association, composed of nearly 6,000 wholesale furniture salesmen, representatives who travel in every county in the Nation, represent from one to four, sometimes more, home furnishings' manufacturers. The last available figures from the Department of Commerce (1953) show 3,015 household furniture manufacturers, of which number 50 percent of them do less than $200,000 a year. Only 17 percent of all these manufacturers do $1 million or over a year. This situation accounts for the necessity of our salesmen to represent two or more manufacturers in order to make a living. Some manufacturers cover a few States nearby to their factories, and others do cover the some 35 major selling areas of the country. The decisions of the Supreme Court in the Northwestern States and the Stockham Valves cases opens wide the gates for throwing many of our salesmen out of business because many small manufacturers cannot pay the taxes that can be further imposed by other States and must give up territories now solicited by their salesmen. It is a recognized fact that only Congress can enact legislation that will counteract, if not nullify, the ruling of the Supreme Court, and the Senate and House are to be congratulated upon recognizing the imperative necessity of correcting the confusion resulting from the recent Supreme Court action through the introduction of several measures in the Senate and House bearing down upon the almost presumptive and preemptory action by the Supreme Court of the land. We may logically consider, and perhaps conclude, that an outraged public opinion is now protesting, as we do, against repeated attempts to interfere with the processes of our democratic Government now resulting, as on previous occasions in recent years, in the manifestation of the fact that the presently constituted Supreme Court is going through the "period of confusion in the law," just as we passed through the period of "factional strife," (1789-1816); witnessed "the class struggle," (1820-60); the era of "popular rights," (1870-1900); and more recently, the pronouncements against "corporate and capitalistic controls," (1902-34). In all of these political and economic struggles, there has been an underlying urge to maintain judicial supremacy. The Supreme Court's approach to the current situations at a time when the Court itself is going through a period of confusion in the law, may now call for a new legislative approach to true values to preserve and to further strengthen the gains which the judiciary have accomplished during the past 150 years, deliberating and defining our immediate and future outlooks with implemented, thoughtful legislation. It is most encouraging to know that we have the power to curb the misuse or misknowledge concerning our national welfare and progress vested in the Congress to enact measures that will modify the unwarranted recent tax dilemma on interstate business. The several proposals now before the Congress curbing the power of the States to impose a net income tax on income derived by a person exclusively from the conduct of interstate commerce, solely by reason of the solicitation of orders in the State by such person, or by an agent or employee of such person, if such person maintains no stock or goods, plant, office, warehouse, other place of business within the State, has our complete appraisal and full support. We respectfully wish to go on record with the Senate Committee on Finance as favoring the proposed legislation and, for that reason, are requesting permission to file this statement for inclusion in the record. DON E. MOWRY, Executive Secretary. NATIONAL ASSOCIATION OF WASTE MATERIAL DEALERS, INC., Hon. HARRY F. BYRD, U.S. Senate, Washington, D.C. DEAR SENATOR BYRD: The National Association of Waste Material Dealers, Inc., comprised of the leading firms which are dealers in and processors of nonferrous scrap metals, paper stock, textile byproducts, and scrap rubber and plastics, are vitally interested in the proposed legislation currently pending be fore the Senate Finance Committee dealing with the subject of State taxation of interstate commerce. We earlier presented the views of this association to the Senate Small Business Committee when it was conducting hearings on this matter. We would like to hereby further emphasize this association's views now that specific legislation has been introduced dealing with this matter. Requiring small business concerns to face taxation by each of the States on sales made within those States would be a most serious blow to the firms in our industry. Secondary materials in finding their markets know no State boundaries. These commodities are bought and sold by concerns in every part of our country and subsequently can be shipped to two or three different concerns prior to their ultimate consumer destination. A great amount of business is transacted via telephone and the mails with no physical office being located in the State wherein the sale is consummated. Furthermore, the industry, since it is engaged in shipping raw materials, is a volume industry in that it depends on a vast collection system necessary to accumulate the quantities of raw materials demanded by American consuming mills and factories. We emphasize the above since the bookkeeping and legal requirements that would be imposed on firms in maintaining records of their State-to-State transactions would be multiplied in the case of our own industry where raw materials are being purchased, prepared, and finally shipped to consumers on a national and interstate basis. We are in sympathy with the problems of the States in collecting the necessary funds with which to run their governments; however, this method of taxation would place a most serious strain on small business. It is very possible that in many cases the expense of the burden of accounting and legal work on the individual firm would exceed the tax itself. The operations of our particular industry could be cited in detail in order to emphasize the great hardship that such State taxation would cause. Therefore, this association is in favor of legislation which would limit State taxation on interstate commerce and trust that the Finance Committee will favor that legislation which is best designed to perform this function. Respectfully yours, Senator HARRY F. BYRD, Chairman, Senate Finance Committee, Washington, D.C. M. J. MIGHDOLL, Administrator. THE STANLEY WORKS, New Britain, Conn., July 14, 1959. DEAR SENATOR: I have been informed that the Senate Finance Committee will hold hearings beginning July 21 on a bill of Senator Prescott Bush, S. 2213, to limit the power of the States to impose income taxes on income derived exclusively from the conduct of interstate commerce. It is our opinion that this is an excellent bill and that its adoption during the present session of the Congress is urgently required to prevent the imposition of an unfair burden of taxation and administrative expense upon industry. This problem has become serious since the U.S. Supreme Court, on February 24, 1959, handed down two decisions involving the corporation income tax laws of Minnesota and Georgia. In effect, the Supreme Court in these cases decided that a State's corporation income tax can be validly levied upon the portion of an out-of-State corporation's income fairly attributable to the taxing State, even though the sole activities of the corporation in the taxing State are part of interstate commerce. Although these two decisions both involve cases where the corporation had maintained a sales office in the taxing State, thus leaving it theoretically possible that the high court might conceivably reach the opposite conclusion if no sales office were maintained in the taxing State, this hope was dashed a week later when the Court dismissed the appeal of the taxpayer in a case involving the Louisiana corporation income tax. In the Louisiana case, no office was maintained in Louisiana by the corporation which merely sent salesmen into that State to take orders from local wholesale dealers. In determining net income taxable under the Connecticut corporation business tax, gross receipts from merchandise shipped from Connecticut are allocable to Connecticut, whether shipped in or out of the State. At present the Stanley Works is also required, under the tax laws of seven other States, to allocate to those States the sales of merchandise delivered into those States in interstate commerce from Connecticult. This means that we are subject to double State taxation on such sales. We carry stocks of goods in each of those States and have branch offices in all but one of them. We are greatly concerned that, in view of the U.S. Supreme Court decisions referred to above, other States will enact laws which will require us to pay taxes based on interstate shipments, even though we transact no business in the State other than the solicitation of orders by salesmen. We understand that three States have already amended their tax laws to take advantage of the situation. We are concerned not only with the cost of this double taxation but also with the tremendous administrative burden placed on industry. The extent of this burden is well described by Supreme Court Justice Frankfurter in his dissenting opinion in the cases previously referred to, as follows: "It will not, I believe, be gainsaid that there are thousands of relatively small or moderate size corporations doing exclusively interstate business spread over several States. To subject these corporations to a separate income tax in each of these States means that they will have to keep books, make returns, store records, and engage legal counsel, all to meet the divers and variegated tax laws of 49 States, with their different times for filing returns, different tax structures, different modes for determining 'net income' and different, often conflicting, formulas of apportionment. This will involve large increases in bookkeeping, accounting, and legal paraphernalia to meet these new demands. The cost of such a far-flung scheme for complying with the taxing requirements of the different States may well exceed the burden of the taxes themselves, especially in the case of small companies doing a small volume of business in several States." In view of the unfair double taxation and severe administrative burden which may be placed on industry as a result of the Supreme Court decisions, it is strongly urged that the Senate Finance Committee, as soon as possible, make a favorable report on bill S. 2213 so that it may be voted on during the present session of the Congress. Very truly yours, E. H. BURR, Treasurer. THE AMERICAN BRASS Co., Hon. HARRY FLOOD BYRD, Chairman, Finance Committee U.S. Senate, Washington, D.C. DEAR MR. BYRD: Senator Prescott Bush has advised me that hearings by the Finance Committee on limitation of the power of the States to impose income taxes on income derived exclusively from interstate commerce, have been scheduled to commence July 21, 1959. I would strongly urge that favorable consideration be given to this type of legislation and that an opportunity be given to Congress to vote on this question this year. The cost of administering multistate taxes as they presently exist is prohibitive from the standpoint of industry while resulting in insignificant revenue to the State. As an example, a recent study made in our company indicated an average cost of $200 per individual State income tax return. The average tax where no plant or warehouse existed, was less than $100. These average costs are probably paralleled or exceeded by most large industries. They would be much greater in a smaller business where electronic equipment for exhaustive analysis of sales and other factors affecting tax allocations is lacking. These added costs to small or medium size business could represent the difference between a marginal operation and an outright loss. I feel that the bill proposed by Senator Bush (S. 2213) is an initial step in a return to freedom from taxation in interstate commerce, that it would be In addition to strengthened by not limiting the type of tax to "net" income. taxes on net income several States have, or have proposed, taxes on gross income or variants thereof. Therefore we feel that all forms of income taxes on interstate commerce should be barred. A further improvement which could be made to S. 2213 is by the insertion of the word "general" following the word "no" in line 9, causing the limiting factors of the bill to read: "if such person maintains no general stock of goods, plant, office, warehouse, or other place of business within the State". This safeguard is necessary since a customary form of credit extension in interstate commerce consists of the consignment of goods to a customer until such time as he is in a position to purchase them for resale or other usage. Due to the serious import of the recent Supreme Court rulings affecting taxation of interstate commerce, I again urge your favorable attention to legislation promoting a return to the original constitutional concept of a tarirff free movement of goods within the several States. Yours very truly, E. M. BLESER, Treasurer. WALTER T. JOHNSON LUMBER CO., Re Senate bill S. 2213 and Senate Joint Resolution 113. Senator HARRY FLOOD BYRD, Washington, D.C. HONORED SIR: We respectfully take this means of urging your favorable action on either of the above bills which are before your committee and should be acted on during this session of Congress. Each of the above bills, we believe, covers the subject quite well, and certainly one of them should be enacted into law for the good of our economy as a whole. If this is not done, business will be seriously handicapped by being subject to income taxes on all interstate business which are levied by the various States in which the company does business. Not only does this cause heavy additional recordkeeping, but, of course, much greater tax charges generally. To us it seems an impossible situation, and we certainly hope that action can be taken during this Congress to secure the necessary relief from the effects of the recent Supreme Court decisions. Thank you in advance for anything which you can do toward correcting the above situation promptly, certainly will be very greatly appreciated. Respectfully yours, WALTER T. JOHNSON LUMBER CO., THE KERITE Co., Seymour, Conn., July 14, 1959. Hon. HARRY F. BYRD, Chairman, Senate Finance Committee, MY DEAR MR. BYRD: We have been in touch with our Congressmen and Senators of the State of Connecticut relative to the Superme Court decisions in the Stockham Valves and Northwest Portland Cement cases. The impact of these decisions on most of our small- or medium-size corporations in our area could be disastrous. As you must realize, all of us are doing interstate business, spread over many if not all of these States. These corporations and businesses will be subject to many new requirements as follows: 1. File a separate income tax return in each income tax State. 2. Keep additional books and storage of records. 3. Engage legal counsel to cope with the various tax laws of 48 States. 4. Comply with different deadlines for filing different tax structures, different modes for determining "net income," and the use of different (often conflicting) formulas of apportionment. 5. Increase bookkeeping and accounting staffs, plus legal paraphernalia, to meet these new demands. 6. Budget the cost of all these things well in excess of the burden of the taxes themselves. The decisions will stimulate, if indeed they do not compel, every State of the Union which has not already done so to enact an effective income tax law and devise a formula for apportionment to tax income of enterprises carrying on exclusively interstate commerce. It may even be possible to pay tax on more than 100 percent of net income because of variations in formulas. These added burdens to a small- or moderate-size company could easily make the difference between survival in Connecticut or reducing their business because the cost of keeping records and filing returns would not be justified in a low-volume area. |