t A^ — y A = A = ^^ o m .^^ — t ? 1 ^^^5 m 1 ^^ c^ • 3 1 4 = > "^"^^ r— 8 i =^ 3= 7 i 6 i == 3=- 2 1 6 f J m UNIVERSITY OF CALIFORNIA LOS ANGELES SCHOOL OF LAW LIBRARY SUPPLEMENT TO TREASURY DECISIONS (T- D. 2889) TREASURY DEPARTMENT UNITED STATES INTERNAL REVENUE U-iS, TntermL i^€\>«y>u-e. -WvJC«< REGULATIONS NO. 57 RELATING TO THE TAX ON TELEGRAPH, TELEPHONE, RADIO, AND CABLE FACILITIES UNDER THE REVENUE ACT OF 1918 WASHINGTON GOVERNMENT PRINTING OFFICE 1919 s so in %Y 5 J \9\9 1^ ^ TABLE OF CONTENTS. PERTINENT PROVISIONS OF THE ACT. Page. Sections 500 (f), (g), and (h), 501, 502, 1310 (a), 1308, 1309 of Revenue Act of 1918, Bections 3220 and 3176, Re^'ised Statutes 5 PART I. TRANSMISSION OF DISPATCHES, MESSAGES, AND CON- VERSATIONS. IMPOSITION OF TAX. Article 1. Imposition of tax — Transmission 9 2. Imposition of tax — Carrier 9 ORIGIN OF MESSAGE DETERMINES TAXABILITY 3. Origin within United States 10 4. Reversed or collect messages 10 5. Origin on or after April 1, 1919 10 BASIS. RATE AND COMPUTATION OF TAX. 6. Basis for computation — Amount of charge 10 7. Franks : H 8. Overtime telephone messages 11 9. Messages transmitted under contract 11 EXEMPTIONS. 10. Business of transmitting carrier 11 11. Charges of 14 cents or less 11 12. Services rendered to the United States, or to any State or Territory, or to the District of Columbia 12 13. Political subdi^dsion3 of State or Territory 12 14. Government agencies 12 15. Railroads under Federal control 12 16 . Evidence of right to governmental exemption 12 17. Foreign diplomats 12 18. Evidence of right to exemption of foreign diplomats 13 PART II. LEASED WIRE AND TALKING CIRCUIT SPECIAL SERVICE. IMPOSITION OF TAX. 19. Imposition of the tax — lu'caning of leased wire and talking circuit special scr\dce 1'^ 20. I'rivate branch exchange service 14 21. Tie lines 15 22. Pnvate lines and extension lines !'"> 23. In'er.-N)mmuni(Mti')n and iuteriir systems 15 24. Long-distance terminals 1^ 3 4 TABLE OF CONTENTS. BASIS. RATE. AND COMPUTATION OF TAX. rage. Article 25. Basis for computatiou of tax 15 26. Oomputntion of tax— Effective date 16 27. Computatiou of tax — Service performed between a point within and a point without the United States IS EXEMPTIONS. 28. Governmental and of foreign diplomats 16 29. Public press 16 30. Business of common carrier or telegraph or telephone company. ... 17 PART III. PAYMENT, COLLECTION, RETURN, AND REMITTANCE OF TAXES. 31. Payment of taxes 18 32. Collection of taxes 18 33. Credit for taxes 18 34. Records. 19 35. Returns — Contents 19 36. Returns — Where and when rendered 19 37. Extension of time 19 38. Remittance of taxes collected 19 CREDITS AND REFUNDS. 39. Credit for overpayment 20 40. Refund of overpayment ^ 20 41. Refund of overcollection 20 PENALTIES. 42. Penalties ^, 21 AUTHORITY FOR REGULATIONS. 43. Promulgation of regulations 22 REGULATIONS RELATING TO THE TAX ON TELEGRAPH, TELEPHONE, RADIO, AND CABLE FACILITIES. PROVISIONS OF THE REVENUE ACT OF 1918. Title V. — Tax on Transportation and Other Facilities, and on Insurance. IMPOSITION OF TAX. SECTIONS 500 (f), (g), AND (h), 501 (a) AND (c), REVENVE ACT OF 1918. Sec. 500. That from and after April 1, 1919, there shall be levied, assessed, collected, and paid, in lieu of the taxes imposed by section 500 of the revenue act of 1917— * * * * * * * (f) In the case of each telegraph, telephone, cable, or radio, dis- patch, message, or conversation, which originates on or after such date within the United States, and for the transmission of which the charge is more than 14 cents and not more than 50 cents, a tax of 5 cents; and if the charge is more than 50 cents, a tax of 10 cents: Provided, That only one pajTnent of such tax shall be required, not- withstanding the lines or stations of one or more persons are used for the transmission of such dispatch, message, or conversation; and (g) A tax equivalent to 10 per centum of the amount paid after such date to any telegraph or telephone company for any leased wire or talking circuit special service furnished after such date. This subdivision shall not appl}^ to the amount paid for so much of such service 'as is utilized (1) in the collection and dissemination of news through the public press, or (2) in the conduct, by a common carrier or telegraph or telephone company, of its business as such; (h) No tax shall be imposed under this section upon any pay- ment received for services rendered to the United States or to any State or Territory or the District of Columbia. The right to ex- emption under this subdivision shall be evidenced in such manner as the Commissioner, with the approval of the Secretary, may by regulation prescribe. Sec. 501. (a) That the taxes imposed by section 500 shall be paid by the person paying for the services or facilities rendered. * * * * * * * (c) The taxes imposed by section 500 shall apply to all services or facilities specified in such section when rendered for hire, whether or not the agency rendering them is a common carrier. 4= « * IN « V 5 6 TAX ON TELEGRAPH, TELEPHONE, EADIO, AND CABLE FAOILITIES. COLLECTION AND RETURN OF TAX. SECTIONS 502 AND 1309 OV REVENUE ACT OF 1918. Sec. 502. That each person receiving any payments referred to in section 500 shall collect the amount of the tax, if any, imposed by such section from the person making sucl; ])ayments, and shall make monthly returns under oath, in du])licate, and ])ay the taxes so col- lected * * * to the collector of the district in which the princi- pal office or place of business is located. ******* Any person making a refund of any jjayment upon which tax is collected under this section ma}'^ repay thercAvith the amount of the tax collected on such payment; and the amount so re]>aid may be credited against amounts included in any susequent monthly return. The returns required under this section shall contain such informa- tion, and be made at such times and in such manner, as the Commis- sioner, with the approval of the Secretary, may by regulation pre- scribe. The tax shall, without assessment by the Commissioner or notice from the collector, be due and payable to the collector at the time so fixed for filing the return * * *. Sec. 1309. That the Commissioner, with the approval of the Sec- retary, is hereby authorized to make all needful rules and regula- tions for the enforcement of the provisions of this act. The Commissioner with such approval may by regulation provide ^h.at any return required by Titles * * * y [which includes sections 500, 501, and 502] * * * to be under oath may, if the amount of the tax covered thereby is not in excess of $10, be signed or acknowledged before two witnesses instead of under oath. CREDITS AND REFUNDS. SECTION 1310 (a) OF REVENUE ACT OF 1918. Sec. 1310. (a) That in the case of any overpayment or overcol- lection of any tax imposed by * * * Title V [which includes sections 500, 501, and 502] * * * the person making such over- payment or overcollection may take credit therefor against taxes due upon any monthly return, and shall make refund of any exces- sive amount collected by him upon proper application by the person entitled thereto. SECTION 3220 OF UNITED STATES REVISED STATUTES, AS AMENDED BY SECTION 131G (a) OF REVENUE ACT OF 191S. Sec. 3220. The Commissioner of Internal Revenue, subject to regulations prescribed by the Secretary of the Treasury, is authorized to remit, r(?fund, and pay back all taxes erroneously or illegally TAX ON TELEGRAPH, TELEPHONE, RADIO, AND CABLE FACILTl'iES. 7 assessed or collected, all penalties collected without authority, and all taxes that appear to bo unjustly assessed or excessive m amount, or in any manner wrongfully collected * * *. PEN'ALTIES. SECTION 3176 OF UNITED STATES REVISED STATUTES. AS AMENTOED 3Y SECTION 1317 OF REVENUE ACT OF 191S. Sec. 3176. * * * In case of any failure to make and file a retui-n or list vrithin the time prescribed by law, or prescribed by the Com- missioner of Internal Revenue or the collector in pursuance of law, the Commissioner of Internal Revenue shall add to the tax 25 per centum of its amount, except that vrhen a return is filed after such time and it is sho\vii that the failure to file it was due to a reasonable cause and not to willful neglect, no such addition shall be made to the tax. In case a false or fraudulent return or list is v/illfully made, the Commissioner of Internal Revenue shall add to the tax 50 per centum of its amount. The amount so added to any tax shall be collected at the same time and in the sam.e manner and as part of the tax unless the tax lias been paid before the discovery of the neglect, falsity, or fraud, in which case the amount so added shall be collected in the same mamier as the tax. SECTIONS .^02 AND 1308 OF REVENUE ACT OF 3018. Sec. 502. * * * If the tax is not paid when due, there shall be added as part of the tax a penalty of 5 per centum, together with interest at the rate of 1 per centum for each full month, from the time when the tax became due. Sec. 1308. (a) That any person required under Titles * * ^ * [which includes sections 500, 501, and 5021 * * * to pay, or to collect, account for and pay over any tax, or required by law or regulations made under authority thereof to make a retmii or supply any information for the purposes of the computation, assessment or collection of any such tax, who fails to pay, collect, or truly account for and pay over any such tax, make any such return or supply any such information at the time or times required by law or regulation shall in addition to other penalties provided by law be subject to a penalty of not more than $1,000. (b) Any person who willfully refuses to pay, collect, or truly ac- count for and pay over any such tax, make such return or supply Buch information at the time or times required by law or regulation, or -^Vho willfully attempts in any manner to evade such tax shall be guilty of a misdemeanor and in addition to other penalties provided by law shall be fined not moTo than $10,000 or imprisoned for no< more than one year, or both, together with the costs of prosecoition 8 TAX ON TELEGRAPH, TELEPHONE, RADIO, AND CABLE FACILITIES. (c) iViiy person who AWllfully refuses to pay, collect, or truly account for and pay over any such tax shall in atklition to other penalties provided by law bf liable to a penalty of the amount of the tax evaded, or not paid, collected, or accounted for and paid over, to be assessed and collected in the same manner as taxes are assessed and collected: Provided, however, That no penalty shall be assessed under this subdivision for any offense for which a penalty may be assessed mider authority of section 317G of the .Revised Statutes, as amended * * *. (d) The term "person" as used in this section includes an officer or employee of a corporation or a member or employee of a partner- ship, who as such ofhcer, employee, or member is mider a duty to perform the act in respect of which the violation occurs. AUTHORITY FOR REGULATIONS. SECTION 1309 OF REVENUE ACT OF 1918. Sec. 1309. That the Commissioner, with the approval of the Sec- retary, is hereby authorized to make all needful rules and regulations for the enforcement of the provisions of this act * * *. PART I. TRANSMISSION OF DISPATCHES, MESSAGES, AND CONVER- SATIONS. SECTION 500 (f) ANT) (h) OF REVENUE ACT OF 191S. Sec. 500. That from and after April 1, 1919, there shall be le\'ied, assessed, collected, and paid, in lieu of the taxes imposed by section 500 of the revenue act of 1917 — ******* (f) In the case of each telegraph, telephone, cable, or radio, dispatch, message, or conversation, wliich originates on or after such date within the United Statc-is, and for the transmission of which the charge is more than 14 cents and not more than 50 cents, a tax of 5 cents; and if the charge is more than 50 cents, a tax of 10 cents: Pro- vided, That only one i)ayment of such tax shall be required, notwithstanding the lines or stations of one or more persons are used for the transmission of such dispatch, message, or conversation; ******* (h) No tax shall be imposed under this section upon any payment received for services rendered to the United States or to any State or Territory or the District of Columbia. The right to exemption under this subdivision shall be evidenced in Buch manner as the Commissioner, mth the approval of the Secretarj-, may by regu- lation prescribe. IMPOSITION OF TAX. Article 1. Imposition of the tax — Transmission. — The tax is im- posed upon the transmission of a message or conversation, by tele- phone, telegraph, radio, or cable. Transmission includes services rendered and facilities provided b}' the carrier necessary or incidental to the actual movement of the message; for example, messenger service utilized in the movement of a toll message. Transmission begins v>-hen the message is delivered by the sender to the carrier or its agent, and continues until its receipt by the addressee or his agent. Where, therefore, a message passes by the combined facilities of several lines, there is one message and one transmission. But where a sender uses a telephone toll message to reach a telegraph ofTice to secure the transmission of a telegraph message, the place of delivery of the telegraph message by the sender to the carrier is the telegraph office, and the transmission of the telegraph message begins there. The telephone message is a separate message and as such subject to the provisions of the act. Art. 2. hnyosition of tax — Carrier. — The tax applies to transmis- sion services when rendered for hire, whether or not the agency rendering them is a common carrier (sec. 501 (c)). Accordingly, a carrier of dispatches, messages, or conversations by telegraph, tele- phone, cable, or radio is held to be any person, corporation, partner- ship, or association who or which, for hire, fm'nishes the services 122330°— 19 2 9 lU TAX ON l-ELEGRAPH, TELEPHONE, RADIO, AND CABLE FAOILITIES. or facilities described or referred to in section 500, subdivisions (f) and (g), of tile act. Tliercforc, whore the lessee of a leased wii-e or talking circuit special service transmits messages for hire, ho is a carrier of such messages and liable io the provisions of the act relative to the collection, report, and payment of the taxes thereon. ORIGIN OF MESSAGE DETERMINES TAXABILITY. Art. 3, Originating within the United States.- — The tax is upon the transmission b}'' telephone, telegraph, radio, or cable of dispatches, messages, and conversations oxiginating within the United States. Messages transmitted from a point within the United States to a point without the United States are subject to the provisions of the act unless sent with charges "reversed" or "collect." Messages transmitted from a point without the United States to a point within the United States are not subject to the tax, imless sent with charges ''reversed" or "collect." The term "United States" includes the States, the Territories of Alaska and Hawaii, and the District of Columbia; it also includes all inland waters (such as rivers, lakes, bays, etc.) lying wholly within the United States, and, where an international boundary line divides inland waters, the parts of such inland waters as lie within the boundary of the United States; and also the waters known as a marine league from low tide on the coast line. Radio messages sent from ships within the above limits are therefore subject to the pro- visions of the act. Art. 4. Reversed or collect messages. — The point of origin of mes- sages transmitted with charges "reversed" or "collect" is the point at which the charge is collectible ; that is, the point of receipt of the message by the addressee. Art. 6. Originating on or after Afril 1, 1919.~The tax is imposed upon the transmission by telephone, telegraph, radio, or cable of dispatches, messages, and conversations originating on or after April 1, 1919. The time of the payment of the charge is immaterial. BASIS, RATE, AND COMPUTATION OF TAX. Art. 6. Basis, rate, and computation of tax. — The basis for the computation of the tax is the amount of the charge for the transmission of the message. (As to the meaning of transmission, see art. 1.) The term "the charge" means the amount charged by the carrier for the transmission of the particular message. Such charge may be due in money, services or in any other valuable consideration. Only two amounts of tax are provided, 5 cents and 10 cents, im- posed as follows: (1) 5 cents on messages the charge for the transmission of which is more than 14 cents and not more than 50 cents; TAX ON TELEGRAPH, TELEPHONE, RADIO, AND CABLE FACILITIES. 11 (2) 10 cents on messages the charge for the transmission of which is more than 50 cents. Art. 7. Franks. — The fact that a message is transmitted under frank is immaterial to the determination of the taxability of the message. If the message is in fact transmitted free, no tax apphes; but if the carrier in fact makes a charge, in money, services or any other consideration, for the transmission of the message, the tax applies and is to be computed upon the amount of the charge imposed. Art. 8. Overtime felepJione messages. — The tax on overtime tele- phone messages is to be computed upon the total charge for the transmission of tlie message. The amount of the initial rate for such messages is immaterial. Art. 9. Messages transmitted under contract. — Where, by contract, a telegraph, telephone, radio, or cable company agrees, in con- sideration of the payment of a lump sum or of the performance of services, to transmit messages on frank, such messages arc subject to the tax imposed by this section (500 (f)) of the act. The tax on each such message is to be computed upon the amount of the regular established charge for the transmission of similar messages for ordinary customers, calculated at the regular fixed rate provided in the tariffs of the transmitting carrier. The questions as to whether such messages relate to the operation of the business of a common carrier and whether the}' are "on line" or "off line" are immaterial. Thus, a telegraph company' agrees to transmit over its lines on a railroad line all messages relating to railroad business "free" and all such messages over its lines oft the railroad lines "free" to an amount not exceeding SI 0,000 per 3-ear calculated at its regular rates, and all messages over that amount at half rates, in considera- tion of services to be performed by the railroad in the transporta- tion of men and materials of the telegraph company. All such mics- sages, whether "on line" or "off line," and whether "free" or at half rates, are subject to the tax provided by this section (500 (f)) of the act. The tax must be computed, collected, and paid upon each such message. (Where common carrier is a railroarl under Federal control, see art. 14.) EXEMPTIONS. Art. 10. — Exemption — Business of transmitting carrier. — The trans- mission of messages involved in the operation of the busines.« of the transmitting carrier, as such, is not subject to the tax. Art. 11. Exemption — Cliarges of I If. cents or less. — Dispatches, messages, or conversations, for the transmission of which by tele- graph, telephone, radio, or cable the charge is 14 cents or lees, are not 12 TAX ON TELEGRAPH, TELEPHONE, RADIO, AND CABLE FACILITIES. subject to tax. (As to the meaning of transmission, see Art. 1; as to the computation of the tax, see Ai-ts. 6-9.) Art. 12. Exemption — Services rendered to the United States or to any State or Territory or to the District of Columbia. — Telephone, tele- graph, cable, and radio dispatches, messages, and conversations relating to Governmejit business, which originate in the United States and which are a charge against the Treasurer of the United States, the District of Columbia, a State, or Territory, and are jaid from the funds thereof, are exempt from the tax. Messages, conversa- tions, and dispatches which are not paid from such funds are not exempt from tax, even though they relate to Government business. Art. 13. The words "State" and "Territory" as used in section 500 (h) of the act and in Article 12 (above), include political subdivi- sions thereof, such as counties, cities, towns, and other municipalities. Art. 14. Government agencies. — Services rendered to agencies of the United States are, subject to the conditions prescribed in article 12, exempt from tax. Such agencies include the American National Red Cross, United States Shipping Board, Emergency Fleet Cor- poration, United States Food Administration, United States Housing Corporation, Commission on Training Camp Activities, War Savings Committee, Liberty Loan Committee, War Lidustries Board, Federal Farm Appraisers, Federal Land Banks, Federal ReserveBanks, Panama Railroad Co., and similar agencies supported by Government funds. Art. 15. Railroads under Federal control. — Telegraph, telephone, cable, and radio dispatches, messages, and conversations transmitted for railroads under Federal control, charges for which are paid from funds of the United States, are exempt from tax, such transmission being a service rendered the United States. Art. 16. Evidence of right of exemption. — Where a message is accepted and transmitted by a carrier as a Government message, and the charges therefor are subsequently paid from Government funds, the payment of such charge by the Government shall be con- sidered evidence of the right of such message to exemption. The evidence of the payment of the charge from Government funds shall be considered sufficient evidence of the right to such exemption. Payments made by direction of the Director General of Railroads shall be considered to be made from Government funds. Art. 17. Exemptions — Foreign diplomats. — (a) Ambassadors, min- isters, and other properly accredited diplomatic representatives of foreign Governments to the United States are exempt from the payment of taxes upon the transmission of messages sent by or for them. (b) The exemption does not apply to consuls or to any officials of foreign Governments other than those specified in paragraph (a). TAX ON TELEGRAPH, TELEPHONE, RADIO, AND CABLE PACILITIKS. 13 (c) The exemption does not apply to messages the charge for the transmission of which is paid by a foreign Government, except in the cases provided for in paragraph (a). Aet. 18. Evidence of right to exemption. — The following form may be used to secure exemption when signed by an ambassador, minister, or any other properly accredited diplomatic representative of a foreign Government : ,19.. (Date.) I certify that thia message from to over is transmitted by attached to my and is exempt from tax. (Title.) (Address.) PART II. LEASED WIRE AND TALKING CIRCUIT SPECIAL SERVICE. SECTION 500 (u) AND (h) OF THE REVENUE ACT OF 1918. Seo. 500. That from and after April 1, 1919, there shall be levied, assessed, collected, and paid, in lieu of the taxes imposed by section 500 of the revenue act of 1 )n — t>v * * * * * * (g) A tax equivalent to 10 per centum of the amount paid after such date to any telegraph or telephone company for any leased wire or talking circuit special service furnished after such date. This subdivision shall not apply to the amount paid for so much of such service as is utilized (1) in the collection and dissemination of news through the public press, or (2) in the conduct, by a common carrier or telegraph or telephone company, of its business as such; (h) No tax shall be imposed under this section upon any payment received for services rendered to the United States or to any State or Territory or the District of Columbia. The right to exemption under this subdivision shall be evidenced in such manner as the Commissioner, with the approval of the Secretary, may by regu- lation prescribe. IMPOSITION OF TAX. Art. 19. Imj^osition of the tax — Leased wire or talking circuit special service. — The tax is imposed upon the amount paid for any leased wire or talking circuit sj^ecial service. Leased wire special service. — Leased "W'ire special service includes exclusive leases of wires and also contracts by which the carrier agrees to furnish a circuit (that is, a wire or wires, instruments and electrical energy) for the transmission of messages in Morse characters or by spoken word between specified points or offices during specified hours. Operators may or may not be employees of the carrier. For administrative purposes it is held that where the area covered by a leased wire special service is served by a local telephone ex- change, tolls not being charged upon messages transmitted between points within such area, such special service does not come within the provisions of the act. Talking circuit special sei^ce. — Talking circuit special service is a limited class of leased wire special service and refers to such service where the transmission is telephonic. Such a talking circuit may by contract have one terminal at a switchboard of the carrier, allowing connection with any telephone within the local exchange area of the operating station. Such addi- tional exchange and other incidental service is included in the term "talking circuit special service." Art. 20. Private branch exchange service. — Amounts paid for private branch exchange service (called P. R X. service) where the exchange equipm«nt is located on the premises of the lessee and is used for 3.4 TAX ON TELEGRAPH, TELEPHONE, RADIO, AND CABLE FACH,ITIE5. 15 intercommunication between departments of the business or parts ol the premises of the lessee, are not subject to tax. Any aaroount paid for special service at the central exchange in the handling of calls from such a private branch exchange is included in the term "private branch exchange service." Ajrt. 21. Tie lines. — The term " tie line " is used to denote a line con- necting two private branch exchanges. The amount paid for rental of a tie line connecting two or more private branch exchanges located within an area served by a local telephone exchange without charging tolls, is to be considered part of the amount paid for private branch exchange service and is not subject to tax. But a tie line connecting two or more private branch exchanges not within the same local telephone exchange area, tolls being ordinarily imposed upon the transmission of messages between the points of location of the private branch ex- changes, is a leased wire and the amount paid for the rental thereof is subject to the provisions of this section of the act. Art. 22. Private lines and extension lines are subject to the same distinction and same rules as tie lines. Art. 23. Intercommunication and interior systems are subject to the same provisions as private branch exchanges. Art. 24. Long-distance terminals. — Amounts paid for a long-dis- tance terminal, consisting of a special terminal loop from a local toll position or a long line switchboard to the subscriber's premises, and used only for long-distance calls at the regular toll, are not subject to the tax imposed by this section of the act. Messages transmitted over such wires are subject to the "message tax" provided for in section 500 (f). BASIS, RATE, AND COMPUTATION OF TAX. Art. 25. Basis, rate, and com-putation of the tax. — The tax imposed is to be computed at 10 per cent of the amovMt paid for the services specified. The amount paid includes the contract consideration and all addi- tional charges therein provided, including salaries of operators if in the employ of the carrier, charges for equipment, instrmnents, and other apparatus, drops intermediate to the terminals, branch or "log" lines, exchange service, and overtime service. It also includes charges for incidental additional service, including charges for "serv- ice connection," " termination," and "moves" when such are involved in the special service contracted for; such charges not involved in such special service are not subject to the tax. In th(i payment of any tax under this section a fractional part of a cent shall be disregarded unless it amounts to one-half cent or more, in wliich case it shall be increased to one cent. (Sec. 1313 of the act.) 16 TAX ON TEIiEGRAPlI, TELEPHONE, RADIO, AND CABLE FACILITIES. Art 26. Computation of tax — Effective date. — The tax provided in sectioTi 500 (g) applios where (a) the amount paid for such service is paid after April 1, 1919, and (b) the service is furnished after April 1, 1919. Therefore, where leased- wire special service was furnished onor after April 1, 1919, but the consideration therefor had been paid prior to that date, the tax does not apply. Likewise, where such service was furnished prior to or on April 1, 1919, the tax does no' apply, regardless of the date of the payment for the charges therefor. Art. 27. Computation of tax — Service performed heiween a point within and a point luithout the United States. — When leased wire or talking circuit special service is fiu'nislied between a point or points within the United States and a point or points without the United States and there is in the contract no reasonable established division of charges as domestic and foreign, the tax shall be paid and collected upon the amoimts paid for incidental services or facilities furnished within the United States plus that proportion of the general contract consideration as the wh'e mileage within the United States bears to the total wu-o mileage contracted for. Where there is a reasonable division of charges as domestic and foreign provided in the contract, the tax shall be paid and collected upon the amounts specified as payments for services or facilities rendered within the United States. EXEMPTIONS. Art. 28. Exemptions. — Services to^ United States, the States, the District of Columbia, and to Foreign Diploraats. — The exemptions of services rendered the United States, a State or Territory and the District of Columbia, and foreign diplomats described in Articles 12 to 18 above, apply also to this section of the act. Art. 29. Exemptions — Puhlic press. — The tax does not apply to the amount paid for so much of such special service as is utilized in the collection and dissemination of news tlirough the public press. "Pubhc press" is not restricted to newspapers or to any particular portion of the product of printing presses. Magazines, periodicals, trade and scientific publications, published for the information of the public, are included. Organizations such as the Associated Press and the United Press are also included. "News" is a word to be liberaU}^ construed. Accounts of current events, public announcements, information relating to finance, sci- ence, commerce, rehgion, civic, or other public organizations are held to be news. The exemption does not appl}^ to the publisher or to the publication as such. The exemption applies only to the amount paid for so much of such service as is utilized in the collection o.nd dissemination of news in the public press. If, however, a contract betv.'cen a person or ftompauy ««'agdged in the collection and dissemination of ncv.s tln-ough TAX ON TELEGRAPH, TELEPHONE, RADIO, AND CABLE FACH,ITIES. 17 the public press and a carrier provides for leased wire or talking circuit special service to be utilized exclusively in the business mentioned, the carrier is not required to collect the tax upon the amounts paid imder such contract in the absence of actual Imowledge on the part of the carrier that the service is being used for other purpof;es. The exemption has no application to the transmission o? messages. Art. 30. Exemption — Services utilized in the conduct of business of common carrier or telegraph or telephone compam/. — The tax does not apply to the amount paid for so much of such special service as is utihzed in the conduct, by a common carrier or telegraph or telephone company, of its business as such. A common carrier is one who undertakes, for hire or reward, to transport the goods or person of such as choose to employ him from place to place. The exemption does not apply to common caiTicrs, telegraph and telephone companies, as such. It applies only to the amount paid for so much of such service Qeased wire or talking circuit) as is utilized in the conduct by a comjnon carrier, telegraph or telephone company, of its business as such. Where, however, a contract between a common carrier (or tele- graph or telephone company) and a telegraph, telephone, radio, or cable company provides for leased wire or talking circuit special service to be utilized exclusively in the conduct of the business of the common carrier {or telegraph or telephone com,pa,ny) as such, the tele- graph, telephone, cable, or radio company is not required to collect the tax upon the amounts paid under such contract in the absence of actual knowledge on the part of the company that the service ia being used for other purposes. The exemption does not apply to contracts which provide merely for the transmission of messages. Tlius, where a telegraph or tele- phono company agi'ees by contract with a railroad to transmit, on frank or otherwise, the messages of such railroad, its officials, or employees, in a certain manner or upon certain terms, such a con- tract is a contract providing for the transmission of messages, and each such message is subject to the "message" tax. (See Art. 9 above.) No exemption exists by reason of such contract. The ex- emption applies only to leased wire special service utilized by a common carrier in the conduct of its business as such. Thus where a telegraph or telephone company agrees by contract to set apart a certain wire or wires for the use of a railroad in the conduct of its business as such, the amounts paid for such service are not subject to tax. A proviso in such a contract to the effect that when such wire or wires are not being used by the railroad they may be used by telegraph or telephone company for the t:5-ansmi8sion of commer- cial messa<>:cs will not change the character of the contract. PART III. PAYMENT, COLLECTION, RETURN, AND REMITTANCE OF TAXES. SECTIONS 501 (a), 502, AND ia09 OF REVENUE ACT OF 1918. Sec. 501. (a) That the taxed imposed by section 500 shall be paid by the person paying for the sorvices or facilities rendered. Sec. 502. That each person receiving any payments referred to in section 600 shall collect the amount of the tax, if any, imposed by such section from the person making such payments, and shall make monthly returns under oath, in duplicate, and pay the taxes so collected * * * to the collector of the district in which the principal office or place of business is located. ******* Any jierson making a refund of any payment upon which a tax is collected under thissection may repay therewith the amount of the tax collected on such payment; and the amount so repaid may be credited against amounts in eluded In any subsequent monthly return. The returns required under this section shall contain such information, and be made at such times and in such manner, as the Commissioner, with the approval of the Secretary, may by regulation prescribe. The tax shall, without assessment by the Commissioner or notice from the collector, be due and payable to the collector at the time so fixed for filing the return * * *. Sec. 1309. That the Commissioner, with the approval of the Secretary, is hereby authorized to make all needful rules and regulations for the enforce- ment of the proNdsions of this act. The Commissioner with such approval may by regulation provide that any return required by Titles * * * V [which includes sections 500, 501, and 502] * * * to be under oath may, if the amount of the tax covered thereby is not in excess of $10, be signed or acknowledged before two witnesses instead of imder oath. Art. 31. Payment of taxes. — Taxes imposed by section 500 (f) and (g) shall be paid by the person from whom the carrier collects the charges for the services or facilities rendered. Art. 32. Collection of taxes. — All such taxes shall be paid to and collected by the officers, agents, or other employees of the carrier to whiciii the charges for the services or facilities are due. Art. 33. Credit. — Where credit is extended by a carrier to a sender or addressee for the payment of charges for the transmission of a message, or to the lessee of special service for the payment of charges for such service, and such charges are not paid, the tax nevertheless applies and the carrier is liable for the collection thereof. 18 TAX ON TELEGRAPH, TELEPHONE, RADIO, AND CABLE FACILITIES. 19 Art. 34. Records. — Records and accounts of telegraph, telephone, radio, and cable companies showing records of (1) all dispatches, messages, or conversations originating on the lines of such company, the' charge for the transmission of which is over 14 cents, whether taxable or not, (2) of leased wire and talking circuit special service rendered by the company, and (3) evidences of the right of exemp- tion of dispatches, messages, conversations, and special service upon which tax is not collected, such records to contain sufficient informa- tion to determine the taxability of the message or service and the amount of tax, if any, upon same, shall at all times be open to the inspection of officers of the Treasury Department. Art. 35. Returns — Contents. — The returns of a telephone, telegraph, radio, or cable company shall be rendered on Form 727 (Revised) and shall include (a) all taxable dispatches, messages, or conver- sation originated by it or on its lines and (b) such leased wire or talking circuit special services as are recorded and accounted for by the reporting company and reflected in its billing records for the month, following its usual business routine. Taxable messages which originate at the stations of rural or farmers' line associations and which are recorded and billed by the telephone company operating the exchange to which such stations are connected for service should be included in the return of said operating company. Taxable messages, if they originate at the station of such rural or farmers' line associations and are not recorded or billed by the operating company, should be reported by such association. Art. 36. Returns — WTien and where rendered. — Returns must be made for each calendar month. Such returns must be made under oath, in duplicate, and must be filed with the collector of the district in which the principal office or place of business of the company is located on or before the last day of the calendar month following the month for which the return is made. Wliere a return covers a tax of $10 or less it may be signed and acknowledged before two witnesses, instead of under oath. Art. 37. Extension of time. — -Where it is found impossible to make the proper return within the prescribed time, request may be filed with the collector for an extension of time, and upon a proper showing the collector is authorized to fix a definite time in each instance within which the return may be filed, such extension of time not to exceed 60 days. Art. 38. Remittance of taxes collected. — The tax is due and payable by the person collecting the tax to the collector of internal revenue at the time. fixed for filing the return. 20 TAX ON TELEGRAPH, TELEPHONE, RADIO, AND CABLE FACILITIES. CREDITS AND REFUNDS. SECTION 502 OF REVENUE ACT OF 1918. Sec. 502. Any person making a refund of any payment upon which a tax is col- lected under this section may repay therewith the amount of the tax collected on such payment; and tho amount so repaid may be credited against amounts included in any subsequent monthly return. SECTION 1310 (a) OF REVENUE ACT OF 1918. Sec. 1310. (a) That in the case of any overpayment or overcollection any tax in-i- poeed by * * * Title V [which includes sees. 500, 501, and 502] * * * the person making such overpayment or overcollection may take credit therefor against taxes due upon any monthly return, and sliall make refund of any excessive amuunt collected bj'- him upon proper application by the person entitled thereto. SECTION 3220 OF UNITED STATES REVISED STATUTES, AS AMENDED BY SECTION 131S (a) OF REVENUE ACT OF 19 IS. Sec. 3220. The Commissioner of Internal Revenue, subject to regulations pre- Bcribed by the Secretary of the Treasury, is authorized to remit, refund, and pay back all taxes erroneously or illegally assessed or collected, all penalties collected without authority, and all that appear to be unjustly assessed or excessive in amount, or in any manner wrongfully collected * * *. Art. 39. Credit for overpayment. — Any individual, corporation, partnership, or association that has paid to the collector of internal revenue, as a tax under section 500 of the act, any amount erro- neously or illegally assessed or collected or any amount m excess of the amount of the tax actually imposed by that section for the month covered by that payment, may claim credit for such overpayment against the amount of the tax imposed by that section which is due upon any other monthly return thereafter made in the same behalf on Form 727 (Revised). Such credit will only be granted, however, if, in making the claim, the instructions pruited on the back of that form are carefully follovred. Art. 40. Refund of overpayment.- — Any individual, corporation, partnership, or association that has paid to the collector of internal revenue, as a tax under section 500 of the act, any .imount erro- neously or illegally assessed, or any amount in excess of the amomit of the tax actually imposed by that section for the month covered by that payment, or any amomit as a penalty for the collection of which there was no authority, may secure a refrnid of the amount BO overpaid by filing with the collector to whom such payment was made a properly prepared claim on Form 46 (revised). Art. 41. Refund of overcollection. — Every individual, corporation, partnership, or association that has collected from any person, as a tax under section 600 of the act, any amount in excess of the amount of the tax imposed by that section actually ' due from Buch person, shall upon proper application promptly refund such amount to the person entitled thereto, even though such amount hao already been paid over to the collector of internal revenue and TAX ON TELEGRAPH, TELEPHONE, RADIO, AND CABLE FACmiTIES. 21 no corresponding credit (see art.- 39) or refund (see art. 40) has yet been secured. Any person making a refund of any payment upon which tax is collected under this section may repay therewith the amount of the tax collected on such payment. PENALTIES. Art. 42. Penalties. — The penalties provided for failure or refusal to perform any of the duties imposed by section 500 (f) and (g) are the same as those provided for failure or refusal to perform the duties imposed by section 500 (a), (b), (c), (d), and (e), as set forth in article 92, Regulations 49. (1) Section 502 of the act specifically provides that the taxes under section 500 shall (without assessment by the Commissioner or notice from the collector) be due at the time fixed for filing this return, and if the tax is not paid at such time there shall be added as part of the tax a penalty of 5 per cent, together with interest at the rate of 1 per cent for each full month from the time when the tax becomes due. (2) Sec. 1308. (a) Tliat any person required under Titles V, * * * (which includes sections 500, 501, and 502) * * * to pay, or to collect, account for, and pay over any tax, or required by law or regulations made under authority thereof to make a return or supply any information for the purposes of the com]iuta- tion, assessment, or collection of any such tax, who fails to pay, collect, or truly account for and pay over any such tax, make any such return, or supply any such information at the time or times required by law or regulation shall, in addition to other penalties provided by law, be subject to a penalty of not more than $1,000. (6) Any person who willfully refuses to pay, collect, or truly account for and pay over any such tax, make such return, or supply such information at the time or times required by law or regulation, or who willfully attempts in any manner to evade such tax, shall be guilty of a misdemeanor, and in addition to other penalties provided by law shall be fined not more than $10,000 or imprisoned for not more than one year, or both, together with the costs of prosecution. (c) Any person who willfully refuses to pay, collect, or truly account for and pay over any such tax shall, in addition to other penalties provided by law, be liable to a penalty of the amount of the tax evaded, or not paid, collected, or accounted for and paid over, to be assessed and collected in the same manner as taxes are assessed and collected: Provided, however, That no penalty shall be assessed under this sub- division for any offense for which a penalty may be assessed under authority of sec- tion 317G of the Revised Statutes as amended * * *. (d) The term "person" as used in this section includes an officer or employee of a corporation or a member or employee of a partnership who, as such officer, employee, or member, is under a duty to perform the act in respect of which the violation occurs. (3) Section 3176 of the Revised Statutes, as amended, provides that in case of any failure to make and file a return within the pre- scribed time there shall be added to the tax 25 per cent of its amount. (4) Section 3176 of the Revised Statutes, as amended, further provides that in case a false or fraudulent return is willfully made there shall be added to the tax 50 per cent of its amount. 22 TAX ON TELEGRAPH, TELEPHONE, RADIO, AND CABLE FACILITIES. AUTHORITY FOR REGULATIONS. SECTION 1309 OF REVENUE ACT OF 1918. Sec. 1309. That the Oommissioner, with the approval of the Secretary, is hereby authori7.cd to make all needful rules and regulations for tlie enforcement of the provision? of thi? act. Art. 43. Promulgation of regulcdions.^lw pursuance of this pro- vision of the act the foregoing regulations are hereby made and prom'vilgated and all rulings inconsistent with them are hereby revoked. Daniel C Roper, Commissioner of Internal Revenue. Approved July 5, 1919: Carter Glass, Secretary of the Treasury. INDEX. fRcfcrences are to articles.} A. Art. Agencies of United States, exemption , 14 Ambassadors, exemption 17, 18 American National Red Cross, exemption 14 Associated Press, exemption 29 Authority for regulations c . . . 43 B. Basis of tax, leased wire and talking circuit special service 25 Transmission of messages, etc 6 , 0. Carrier, definition 2, 30 Dispatches, messages, etc 2 Exemption 30 Leased wire special service 19 Messages of, transmitted under contract 9 Charge, definition 6 Claim, credit for overpayment of tax 39 Refund of overcollection of tax 41 Overpayment of tax 40 Collect messages 3 Collection of taxes 32 Combined facilities of several lines 1 Commission of Training Camp Activities, exemption 14 Common carrier, definition 30 Computation of tax, leased wire and talking circuit special service 25-27 Transmission of messages, etc 6-9 Consuls, exemption 17, 18 Contract, messages transmitted under '. . . 9 Credit, overpayment of tax 39 Payment of charges, effect 33 D. Definitions: " Carrier " 2, 29 ' ' Charge " » "Common carrier" 30 "New^" 29 "Public press" 29 "State" i:^ "Territory" 13 "Transmission " i "United States " ? Diplomats, exemption 17, IS Director General of Railroads, evidence of right of exemption 1'. District of Columbia, exemption ^ - 12 23 24 . INDEX. _E. Art. Emergency Fleet Corporation, exemption 14 Evidence of riglit of exemption 16, 18 Eiemptious, Associated Press 29 Charges of 14 cents or less 11 Common carriers 30 District of Columbia, services rendered to 12 Evidence of right 16, 18 Foreign diplomats 17, 18 Governmental agencies 14 Governmental business 12 Leased wire and talking circuit special service 29, 30 Public press 29 Railroads under Federal control 15 States, services rendered to 12 Telephone and telegraph companies 10-30 Territories, services rendered to 12 United Press 29 United States, services rendered to 12, 15 Extension lines 22 F. False or fraudulent return, penalty 42 Federal farm appraisers, exemption 14 Land banks, exemption 14 Reserve banks, exemption 14 Foreign Government, exemption 17, 18 Frank, taxability of message sent under 7 G. Governmental agencies, exemption 14 Business, exemption 12 I. Imposition of tax, carrier ' 2 Leased ■wire and talking circuit special service 19 . Transmission 1 Inspection of records of telephone, etc . , companies 34 Intercommunication and interior sj^stems .• . 23 L. Leased wire special ser\'ice, imposition of tax 19 Liberty loan committee, exemption 14 Long-distance terminals 24 M. Magazines, exemption *. . . 29 Moves, changes for 25 N. News, definition 29 O. Origin of message, determination of taxability 3-5 Overcollection of tax, refund 41 Overpayment of tax, credit 39 Refund 40 Overtime telephone messages, computation of tax 8 INDEX. 25 P- Art. Panama Railroad Co. , exemption 14 Payment of taxes 31 Penalty for nonpayment 42 Penalties 42 Periodicals, exemption 29 Place of filing returns 36 Private branch exchange service 20 Private lines 22 Promulgation of regulations 43 Public press, definition 29 Exemption 29 R. Railroads, leased wire and talking circuit special service SO Messages of, transmitted under contract 9 Under Federal control, exemption 15 Rate of tax, leased wire and talking circuit special service 25 Transmission of messages, etc 6 Record of telephone, etc. , companies, inspection 34 Red Cross, exemption 14 Refund, overcollection of tax 41 Overpayment of tax 40 Remittance of taxes collected , 38 Returns, contents 35 Delay, penalty .- 42 False or fraudulent, penalty 42 Place of filing 36 Time 36, 37 Reversed messages 3 S. Scientific publications, exemption 29 Service connection charges 25 State, definition 13 Exemption 12 T. Talking circuit special service, basis of tax 25 Computation of tax 25-27 Extension lines 22 Imposition of tax 19 Intercommunication and interior systems 23 Long-distance terminals 24 Private branch exchange service 20 Private lines 22 Rate of tax 25 Tie lines 21 Telephone and telegi'aph facilities combined 1 Telegraph and telephone, companies, exemption 30 Termination cliarges 25 Territory, dnfinition 13 Exemption 12 Tie lines 21 26 IIsDEX. Art. Time, filinij return? 30, 37 Furiiishitig li ased wire and laHviug cinniit spfnial si rvice as deteruiining taxnUiiily 26 Origin as doterniiuing taxabilir y oi nu ssagcs, etc 5 r<,'nalty for delay in filing returns 42 Trade publications, exemption 29 Transuiission, deliuition 1 U. United Press, exemption 29 United States, definition ?, Exemption 12, 15 Services performed partly within and partly without 27 Taxability of messages originating within or without 3-5 United States Food Administration, exemption 14 Unitt^i States Housing Corporation, exemption 14 United Slates Shipping Board, exemption 14 War Industries Board, exemption 14 War Baviugs committee, exemption 14 o I I LAW LIBRARY UNIVERSITY OF GALIF^RNU LOS ANGELES Monufoctured by 3AYLORD BROS. Inc. Syracuse, N.Y. r Tt^ckton, Ca'if. >■ iiiiiiiiiiK A A 000 348 762 I