if it was a collect telegram, where it was paid in, and I suppose the income would only be taxable in the State where the money was actually paid.

Senator KERR. This decision, as I understand it, didn't go to where the income was received, but to where it was earned.

Senator KEATING. That is correct.

Senator KERR. Well, now, the Senator from Delaware is asking you if part of that Western Union fee wasn't earned in Oklahoma, if the facilities of that Western Union that transmitted that message crossed Oklahoma.

Senator KEATING. Well, I think that the decision of the Supreme
Court provided for taxation of the business done in the State of
Minnesota, and the amount earned on the business in that State.
The money was taken in there, as I understand it.
Senator KERR. It might not have been.

Senator KEATING. It may have been sent to the home office.
Senator KERR. Well, sure.

Senator KEATING. That is true.

Senator KERR. If nexus means the link, then every State that the Western Union transmission lines cross is a link; isn't it?

Senator KEATING. I suppose you could argue that, yes.

Senator KERR. Well, would you argue otherwise?
Senator KEATING. Yes, I would argue otherwise.

Senator KERR. Because you didn't think it was, or because you are against it? [Laughter.]

Senator KEATING. It would depend on the situation in which I was placed, whether I was arguing as a Member of Congress or a lawyer. Senator BUTLER. Mr. Chairman, may I ask one further question? Senator KERR. It is not necessary to be two different persons. Senator KEATING. NO.

Senator WILLIAMS. I merely raise the point of the confusion that exists if we do not act.

Senator BUTLER. May I ask the Senator this question:

Has there been any attempt made to have the Court clarify its decision in this case?

Senator KEATING. I don't know whether they asked for a reargument or not.

Senator BUTLER. Well, it wouldn't be so much a reargument as isn't there some procedure under which the litigants can ask the Court to clarify the opinion in this respect?

Senator KERR. Not without insulting the Court. [Laughter.] You mean the right of a litigant to ask the Court what it meant by the decision it rendered?

Senator BUTLER. There have been such instances, many such instances. It is no insult to any court. Many such petitions have been filed. It is not a daily practice, but it is a common practice, and I can see no reason if all of this confusion has arisen out of this one sentence, why wouldn't the litigant ask the Court to clarify that sentence. Senator KEATING. Well, I think the specific litigants in the cases know that they must pay the tax now. In other words, I don't think there is any doubt in their minds.

Now, there may be other, and probably are other, cases pending where the Court could well be asked to clarify what they meant in the

majority opinion. I think it is perfectly clear to Mr. Justice Frankfurter in the strong dissent which he has written that he is complety out of sympathy with what the majority are doing.

Senator BUTLER. And he feels the majority intended to tax what heretofore has been considered interstate business.

Senator KEATING. I think that is the way he feels, yes. In fact, he expressly says that, as I recall.

Senator BUTLER. But the majority doesn't expressly say, apparently.

Senator KEATING. NO.

Senator KERR. They do, though, Senator; that is the trouble with the decision. It isn't explanation that people want; it is limitation that they are seeking. The reason they are seeking limitation is that they do understand it, not because they don't.

They are not afraid because they think they are going to get hurt; they are afraid because they know that under the language of that decision they are hurt. And the relief they want is from the holding of the Court, not an explanation from the Court.

Senator KEATING. Of course, they state in this decision, in the very first sentence, that these activities are exclusively in furtherance of interstate commerce. Mr. Justice Clark's first sentence is:

These cases concern the constitutionality of State income tax laws leveying taxes on that portion of a foreign corporation's net income earned from and fairly apportioned to business activities within the taxing State when those activities are exclusively in furtherance of interstate commerce.

Senator BUTLER. Yes, but also where the company has a place of business and physical property within the State. Senator KEATING. Yes.

Senator BUTLER. That is the big distinction.

Senator KEATING. Well, that is a big distinction.

Senator BUTLER. In other words, what the Court is saying there:

If you have qualified to do business in this State, then you are going to be taxed on the business that you do here even though some of it may be of an interstate character.

Senator KEATING. That is correct.

Senator BUTLER. But they are qualified, they are subject to the law of the State, anyhow.

Senator KEATING. Well, if they have a three-room office with two salesman and a district manager and secretary, they would still be under the bill which we have introduced. This Northwestern States Portland Cement Co. still would be liable to taxation in the State of Minnesota. It would not disturb that. But it would prevent an extension of that into other areas such as is feared by many.

Senator BUTLER. Would that company be subject to process and subject to suit in that suit by reason of having that agent there?

Senator KEATING. I would have to know the laws of the State of Minnesota in order to answer that question.

Senator BUTLER. I think that would have a lot of bearing on it. Senator KEATING. Well, I can't answer that because I am not familiar with the laws of Minnesota.

The CHAIRMAN. Thank you very much, Senator Keating.

The next witness is Mr. Roland M. Bixler of the National Association of Manufacturers.

STATEMENT OF ROLAND M. BIXLER, THE NATIONAL ASSOCIATION OF MANUFACTURERS; ACCOMPANIED BY ALAN M. NEDRY, ASSISTANT GENERAL COUNSEL, NATIONAL ASSOCIATION OF MANUFACTURERS

Mr. BIXLER. Mr. Chairman, and members of the committee, I have with me Alan M. Nedry, the assistant general counsel of the National Association of Manufacturers.

I have prepared a statement for the record. With your permission, Mr. Chairman, I will just give the highlights of that and perhaps add a few other comments, since the subject has been covered quite thoroughly earlier this morning.

The CHAIRMAN. Without objection, the complete statement will be inserted in the record.

Mr. BIXLER. My name is Roland M. Bixler, and I am president of J-B-T Instruments, Inc., of New Haven, Conn. We manufacture electrical and electronic components.

I appear here today on behalf of the National Association of Manufacturers in my capacity as chairman of its committee on taxation. We appreciate the opportunity to present our views on the legislation before your committee relating to the problem of State taxation of interstate commerce.

It might be well to add just a word of background about the National Association of Manufacturers.

The National Association of Manufacturers is a voluntary membership corporation made up of more than 20,000 manufacturing concerns of all types and sizes throughout the United States. In this regard we believe it's important to point out that more than 80 percent of our members are small business concerns, as that term is generally understood. In fact, 28 percent of the members of the National Association of Manufacturers employ 50 or fewer persons, 46.5 percent employ 100 or less, and 83 percent have 500 or fewer employees.

For example, our own company in Connecticut has 140 people and it is necessary for us to sell in every State of the Union because of the relatively small market for our specialized products.

In connection with the Supreme Court decisions that have been mentioned several times this morning, the National Association of Manufacturers presented an amicus curiae brief as a friend of the Court, and in support of the Stockham Valve Co., which is a National Association of Manufacturers member.

With your permission, Mr. Chairman, I would like to add the brief as part of the record, and the statement then calls attention to various parts of it which I won't take the time to amplify.

The CHAIRMAN. It will be filed with the committee.

(The brief referred to will be found in the files of the committee.) Mr. BIXLER. We did predict in this brief that there would be real multiple burdens put upon taxpayers and those observations have been well founded, indeed, since the Court's decision.

Senator Bush has already referred to the dissenting opinion by Justice Frankfurter as to all of the burdens which will be put upon those engaged in interstate business.

Well, I can testify as to what those burdens are, but I think perhaps we can dramatize that far more effectively for the committee.

I brought along the State tax returns which are and which would be required as we understand the Supreme Court decision. These are not only State tax returns, but there are also some municipal tax returns, and there is now at least one county and presumably there will be many more counties that also have plans along this same line.

With the permission of the chairman, I don't ask that these be put into the record, but I would like to make them available for the files of the committee because they are a staggering and voluminous load. The CHAIRMAN. Without objection, they will be filed with the committee.

(The documents referred to will be found in the files of the committee.)

Mr. BIXLER. As a matter of fact, these sometimes require as many as 8 and 10 pages of schedules besides, and no two States apparently approach the problem in the same way or require the same data. The CHAIRMAN. How many State returns do you have?

Mr. BIXLER. Thirty-six States and fourteen municipalities.
The CHAIRMAN. Three States?

Mr. BIXLER. Thirty-six, and fourteen cities, one is actually a village, and I can just imagine the proliferation which is going to continue to take place.

I might say to illustrate that I know of a fellow manufacturer in New Haven who has about a thousand employees, and he has had to file a return now in a State which has passed one of these tax laws since the Supreme Court decision last February.

Senator KERR. What State was it?

Mr. BIXLER. The State of Utah, and he estimated he will have to pay $5 to Utah, but it is going to cost him $300 to do the analysis to prepare the returns.

I would further add

Senator KERR. Uncle Sam has to pay part of that $300, doesn't he? Mr. BIXLER. He will have to pay either 30 percent or 52 percent depending on the Federal tax bracket of the company.

Senator KERR. Yes.

Mr. BIXLER. On that point of Federal costs, also all the cost of preparation as well as the tax would be a deduction on the Federal return.

I hesitate to think of a company like ours, for example, we don't have a staff of tax experts to do all this kind of work, and I think this is going to devolve upon the management to do it, whereas we ought to be spending our time developing new products and creating jobs and doing the kind of job that our dynamic economy requires of us.

The point also has been raised this morning about contingent liability. This is certainly an issue, because one State, I understand, goes all the way back to 1911 with its laws, and I dare say that a great many of the small- and medium-sized businesses that are going to be affected by this problem don't possibly have records going back to that time. They don't have the right kind of data and there would be a completely monumental job to attack.

If no congressional action is taken presently, it seems to me that the company will be faced with two alternatives: Either it will need to withdraw from the market, and the consumer loses competitive prod

ucts, or a company will have to add the tax to its costs, and this could well lead to product price increases and all the inflationary spiral effects of which we are so conscious.

Actually, you may wonder why does a company want to do business in every State of the Union. I think the answer so often is that there isn't sufficient market in one State to justify staying in one locality, but instead under the U.S. Constitution we have felt it was perfectly proper to do business in all the States and tap all markets. I would like to add one other matter as to the effects on the States themselves. In many cases it is going to be so expensive to collect this tax and to administer it that no one benefits.

I quote from Commissioner Joseph Murphy of the State of New York in which he says:

How much justice have we achieved for the business community in general if the taxpayer's costs of complying with the tax law (maintaining detailed accounting records, legal expense of preparing returns, et cetera) far exceed the amount of tax liability? Furthermore, from the public standpoint we would be saddling the State government with additional administrative expenses to collect a pittance from the overwhelming majority of these new taxpayers.

Senator CURTIS. Mr. Chairman, could I interrupt for a question? The CHAIRMAN. Senator Curtis.

Senator CURTIS. Would you give us a hypothetical case the facts of which, in your opinion, face a threat under this decision?

Mr. BIXLER. May I give my own company, which is not a hypothetical one?

Senator CURTIS. All right, go ahead.

Mr. BIXLER. We sell as do a great many companies through manufacturers' representatives in various States. For example, we have one located in Atlanta who in turn sells all throughout the southeastern part of the United States.

Now, he is an independent contractor. He is not an employee of ours. He has no stock of goods. He cannot negotiate a sale. The sale is made only in Connecticut when we accept the order.

The customer takes title to our products at the time we put them in the mail or give them to the trucker when they leave our plant. Now, under the Stockham Valve case, as we understand it, we are in jeopardy as to having to allocate the sales that are made in Georgia. We keep the sales records on a regional basis for our territory. We don't even know how much we sell in Georgia. We are selling to electronic parts distributors who in turn are going to sell to somebody else.

Well, if we are required in every place where we have this kind of an arrangement to have to file State income taxes, we think that we will be penalized in several ways.

First, we are paying on 100 percent of our income to the State of Connecticut already, so everything we pay somebody else is in addition to this liability.

The second factor is that we have all the administrative and complicated burden of first getting our records in shape. We don't have the kind of electronic equipment where you push a button and the answers come rolling out, and beyond that, it raises this whole question of retroactivity, so it is no wonder that there is a great deal of feeling about this matter.