So that you cannot interpret-you cannot interpret that to mean that under that word they would have to have a terminal facility there or a branch there, would you?

Senator TALMADGE. No. Link could be weak or strong.

Senator KERR. So the only conclusion I can draw is that the effect of this decision is that any State can tax any part of any taxpayer's business which is done in that State.

Senator TALMADGE. Unless the Court has defined in some other decision what the "nexus" situation must be for taxation in interstate

commerce.

I yield to the Senator from Maryland.

Senator BUTLER. I would line to ask the Senator this question: If a newspaper has an office in Washington to gather news to publish in a paper that is published in the State of New York, and some of those papers are distributed in Washington, would they be caught with this tax?

Senator KERR. And so would Life magazine.

Senator SPARKMAN. It seems to me if you rest upon that one sentence that would be true.

Senator BUTLER. Does this decision go to the point of having an office in the State seeking to tax and doing a local business from that office, or does it also apply simply because they have an office in a State that all interstate business is taxed?

Senator SPARKMAN. It does not limit it. Let me say this: The decision does not say that it does not apply to firms other than those maintaining a place of business.

It just happens that in both of these cases, the firms involved did maintain places of business within the respective States.

Senator BUTLER. Well, the sentence quoted by the Senator from Oklahoma

Senator SPARKMAN. Well, yes, I would say that if that stood alone, it would seem to cover everything. But I believe the whole decision ought to be read. The two cases are combined.

By the way, if you do not have it available, we do have it in the hearings, and I should be glad

Senator KERR. Would the Senator yield at that point, the Senator from Maryland?

Senator SPARKMAN. There is a copy.

Senator BUTLER. If a corporation is doing business out of the State of its domicile, if it has a plant there and is doing a strictly local business there, I can't see that that can properly be taxed. But if it ships from one State into another and simply because it happens to have an office there or is qualified to do business there, it is a little hard to follow the Supreme Court.

Senator SPARKMAN. I certainly agree completely with the Senator from Maryland. I was always taught to believe, I was taught that solicitation of orders in a State, for instance, to be filled by shipments coming from another State, was not subject to local taxation. In fact, I have actually won cases on that basis. But this seems that it might knock the props out from under that.

Senator BUTLER. And having represented a newspaper before I came here, I was always taught that the mere fact that you gathered news in a State other than the State in which the paper was published

does not subject that paper to tax or to qualification to do business in that State.

Senator SPARKMAN. Then you might like to read that decision and see if that still holds good.

Senator KERR. Would the Senator yield now?

If this statement in the syllabus of the case constitutes a general rule of law by reason of this decision, then naturally it would apply to the two cases that were involved specifically before the Court. Senator SPARKMAN. That is correct."

Senator KERR. And it would seem to me from the meager experience I had as a lawyer that when you have a general rule of law laid down, and then the description of specific cases and the holding they are subject to it, you have a situation entirely different from one which could be interpreted as a rule of law applying only to cases such as those specifically before the Court.

Senator SPARKMAN. Yes. I have tried to point out that I do not believe it would be safe to say that it applies only to cases such as these two, and yet the Supreme Court decisions so far relate only to those two.

Senator KERR. Except that in getting ready to handle the two, it lays down a general rule of law in that syllabus; does it not? Senator SPARKMAN. That sentence certainly does.

Senator KERR. Which is certainly far beyond the facts involved in the two specific cases.

Mr. STULTS. May I, Senator Kerr, point out that the Commerce Clearing House, in talking about this case, said:

Although the Supreme Court in the Northwestern and Stockham cases does not lay down any definite criteria for determining what constitutes sufficient nexus, it gives us a clue in citing Miller Brothers v. Maryland, a 1954 Supreme Court decision. In that case Maryland sought to require a Delaware merchant to collect and remit a purchaser's use tax on sales made in Delaware to Maryland residents.

The Supreme Court held that this was a denial of due process and stated: "Due process requires some definite link, some minimum connection between a State and the person, property, or transaction it seeks to tax."

The connection which was here insufficient was based upon newspaper and radio advertising, the mailing of circulars, and the deliveries of purchases in Maryland.

Now, here you find a

Senator KERR. That was a use tax, though.

Mr. STULTS. Yes, sir.

Senator KERR. That was a use tax.

Mr. STULTS. A use tax. But the courts

Senator KERR. That is a far different thing, as between the collection of a use tax

Mr. STULTS. That is right.

Senator KERR. Which nobody could doubt was due, and the fixing of an income tax with reference to which there is no doubt of the State to fix it.

Mr. STULTS. Yes, sir.

Senator KERR. In that case, as I understand it, there was no question about the power of the State to fix the use tax. The question that was before the Court was whether they could require another State to come there and collect it; wasn't that right?

Mr. STULTS. Yes, sir; that is right.

Senator KERR. Well, I can sure see the difference between that. I could see how that would not come under this conclusion.

Mr. STULTS. Yes.

The only point of interest and my reason for bringing it up was that the Supreme Court in this case did cite the Miller Bros. Furni

ture case.

Senator KERR. Yes.

The CHAIRMAN. Thank you very much, Senator Sparkman.

Senator SPARKMAN. Thank you, Mr. Chairman, and gentlemen of the committee.

Senator GORE. Mr. Chairman, I have one question.

The CHAIRMAN. Senator Gore.

Senator GORE. Senator Sparkman, I would like to ask you a question with respect to your bill.

Section 101, as you have described it, would, in your opinion, preserve the status quo?

go.

Senator SPARKMAN. Yes, insofar as the Supreme Court decisions

Senator GORE. I have some doubt that it would do so. Perhaps that doubt would turn on a definition of what constitutes an "office" or "other place of business."

Let us apply that to an insurance company, the Metropolitan Life. It has an agent in Alabama. This would not exempt Metropolitan Life from State tax on that portion of its income earned from business in the State of Alabama; is that true?

Senator SPARKMAN. Well, I do not believe the example is appropriate because I believe every State requires a life insurance company to do business within a State to maintain an office. In other words, they have to qualify as doing business in the State.

Senator GORE. I have selected an example in which it is clearly fixed that a company has an agent in a State.

Senator SPARKMAN. Yes.

Senator GORE. And I am asking you if, under the terms of your bill, the State of Alabama, or the State of Georgia, can proceed to levy a tax.

Senator SPARKMAN. If it can do so now it would continue to do so if this resolution were passed.

Senator GORE. Well, under the Supreme Court decision all States can now do so, can they not, provided they have the constitutional power within the State?'

Senator SPARKMAN. The Supreme Court said if the tax were levied on a proper basis and apportioned properly, it could be done.

Senator GORE. Well, let us take another example, a company operating and domiciled in Delaware or New York or some other State and having a salesman who goes into the State of Georgia.

This salesman does not rent an office that has his name on the door. He does not have a warehouse to maintain, but he goes to Atlanta and registers in a room and he has exhibits of shoes on the mezzanine. He stays there for 2 weeks and he sells his wares. Has he not maintained a place of business, has he not had

Senator SPARKMAN. Orders are taken and it would be shipped in? Senator GORE. Well, it might be or it might be that he sells some of his stock.

Senator SPARKMAN. If he made a practice of selling out of his stock, then he would have a stock of goods.

Senator GORE. I understand that.

Senator SPARKMAN. And he would be liable.

Senator GORE. But say he only has samples, but he registers in the hotel and he stays there 2 weeks and he calls his customers, and his customers call him at room 1015 of the Dinkler Plaza Hotel, he solicits orders, and he accepts orders, and he makes propositions and says, "You can call me back in room 1015. I will be here for 2 weeks."

Has he not maintained an "office" or "other place of business"? Senator SPARKMAN. I think it would be subject to interpretation. Certainly if he opened an office there and maintained it over a sufficiently long period of time, it would be; whether 2 weeks would be sufficient or not, I do not know. If it were a casual-if it was a trip that he makes once a year and spends 2 weeks there, it does not seem to me, just offhand, that that would be sufficient to constitute setting up an office or doing business.

Senator GORE. Then the statement I made was that I doubted that this section 101 would preserve the status quo.

Senator SPARKMAN. This would not affect that. The question would still be the same. It would be whether or not his staying there that long constituted setting up a place of business.

Senator GORE. So you agree that the whole matter turns on the definition of a representative who has maintained an "office" or a "place of business" in such State?

Senator SPARKMAN. Yes. I do not see any way of getting around it being a matter of interpretation, a definition of those words.

Senator GORE. There is one way of getting around leaving it entirely to interpretation, and that is to spell out specifically what the Congress means by a "place of business."

Senator SPARKMAN. That could be done.

Senator GORE. Would your committee, or your staff, be willing to make some suggestions along that line?

Senator SPARKMAN. Well, I shall be very glad to ask them to check the matter. My own personal feeling is that you are just not going to be able to go beyond this. A lot of times it might differ as among States. One State might have one definition of doing business and another State would have another definition, and as long as they were reasonable and within the proper limitations, I think the Court would sustain either one.

Senator KERR. I think the Senator is trying to find out the best he can what the language would be for those reasonable limitations. Senator SPARKMAN. Well, the way to answer that, I think, would be to set up a new section in here and put in definitions.

Senator TALMADGE. You could put the words "stock of goods other than for the purposes of demonstrating samples," and that would cover it insofar as the stock of goods situation is concerned.

Senator SPARKMAN. Well, that could be done. I should think that ordinarily the term "stock of goods" would not include samples from which orders will be taken. But the minute you start selling those goods off the shelves, why then, I think the nature of the goods changes, the operations change.

Senator GORE. The nature of the place of business?

Senator SPARKMAN. That is true. How long can you stay there? Senator GORE. The point I am trying to make, Senator Sparkman, is that I am not sure that section 101 accomplishes anything if enacted. Senator SPARKMAN. I think, as I said, I think it maintains the status quo and holds it to those cases which have been definitely held by the Supreme Court to be covered.

Mr. STULTS. Furthermore, Senator Gore, it does cut out completely any possibility of State taxation of mail order or the straight solicitations through the mail orders.

We had much testimony from businessmen who did not even send a salesman into a State, who were fearful that the various States would try to tax those sales made by mail order solicitation, radio solicitation, advertising and periodical solicitation.

So section 101 does definitely restrict the States insofar as those businesses are concerned.

Senator GORE. You did not find the local merchants anxious to have Montgomery Ward protected, did you?

Mr. STULTS. Montgomery Ward, I think, is qualified in almost every State, and they have their own order-solicitation offices in every State that I know of, as well as their own retail outlets.

The type of mail-order house we heard of was a man sending out stamps on approval, perhaps receiving an average order of 85 cents who would find it quite difficult to comply with State income taxes. Senator GORE. Mr. Chairman, I have reached no conclusion as to whether this bill should be enacted or not. But it does seem to me that if we are to enact a bill we ought to enact a meaningful one, and I just seriously question whether the broad and general language in section 101 accomplishes any specific purpose.

That is all; thank you.

The CHAIRMAN. Thank you very much, Senator Sparkman.
Senator SPARKMAN. Thank you, sir.

The CHAIRMAN. A bill of like import has been presented by Senator Bush, of Connecticut, and Senator Keating, of New York. It is S. 2213.

Senator Bush is a distinguished member of the Senate Committee on Banking and Currency.

Senator CARLSON. Mr. Chairman, I have submitted this letter to be made a part of the record that I read from.

The CHAIRMAN. Yes; it has been made a part of the record.
Senator Bush?

STATEMENT OF HON. PRESCOTT BUSH, U.S. SENATOR FROM THE STATE OF CONNECTICUT

Senator BUSH. Mr. Chairman, and members of the Finance Committee, I appreciate the opportunity to speak on behalf of S. 2213 which I have introduced with the cosponsorship of Senator Keating from New York, and Senator Butler, of Maryland.

I think my remarks will take, perhaps, less than 5 minutes.

At the outset I might observe that the importance and the urgency of the subject we are to discuss is demonstrated by the fact that hearings are being held on these measures less than 1 month after their introduction in the Senate. As your prompt action in sched