>^m:^^^m UNIVERSITY OF CALIFORNIA LOS ANGELES SCHOOL OF LAW LIBRARY TREASURY DEPARTMENT UNITED STATES INTERNAL REVENUE V^i5. Jvi"bvvvl Ptv/wu« 5"*rvi^v, REGULATIONS 53 RELATING TO THE TAX ON SOFT DRINKS, ICE CREAM AND SIMILAR ARTICLES SOLD AT SODA FOUNTAINS OR SIMILAR PLACES OF BUSINESS UNDER TH3 REVENUE ACT OF 1918 WASHINGTON GOVERNMENT PRINTING OFFICE 191? s 19)9 s^ REGULATIONS KEl.ATING TO THE TAX ON SOFT DRINKS, ICE CREAM AND SIMILAR ARTICLES OF FOOD OR DRINK SOLD AT SODA FOUNTAINS OR SIMILAR PLACES OF BUSINESS. UNDER SECTION 630. TITLE VI, OF THE REVENUE ACT OF 1918. [rublic, No. 254, 65th Congress. H. R. 12863. j Page. Table of Con tents 5 Part I. Tax on S-oft Drinks, Ice Cream and Similar Articles of Food or Drink 6 II. Administrative and General Provisions 9 Index 14 llc606°— 19 3 PART I. TAX ON SOFT DRINKS, ICE CREAM AND SIMILAR ARTICLES. [The seclion numbers refer to the statute and the article numbers to the regulations.] Page; Section 630. Soft drinks compounded or mixed at the place of business, and ice cream 6 Article 1. Effective date 6 2. ^^^lO is a vendor 6 3. Rate oUax 6 4. Place of business .,.. 7 5. Consumption at place of business 7 6. Beverages taxable 7 7. Articles taxable: Examples 8 8. Beverages not taxable: Examples 8 9. Beverages not taxable: Medicinal 8 PART II. ADMINISTRATIVE AND GENERAL PROVISIONS. Section 630. Tax paid by purchaser 9 Article 10. Payment of tax 9 11. Collection and return of tax 9 Section 1305. Extension of existing statutes 9 Article 12. Aids to collection of tax 10 Section 1314. Medium of payment of tax 10 Article 13. Payment of tax by uncertified checks 10 14. Procedure with respect to dishonored checks 10 Section 13*S. Penalties 11 Article 15. Penalty for nonpaj'ment of tax 11 16. Penalty for failure to make and for false return 12 Section 1319. Misrepresentation of tax 12 Article 17. Misrepre.sentation of tax 12 Section 1310 (a) and (b). Credits and refunds 13 Article 18. Credits and refunds 13 Section 1309. Authority for regulations 13 Article 19. Promulgation pf regulations 13 5 PART I. TAX ON SOFT DRINKS, ICE CREAM AND SIMILAR ARTICLES. SOFT DRINKS COMPOUNDED OR MIXED AT THE PLACE OF BUSINESS, AND ICE CREAM. Sec. C30. That on and after May 1, 1919, there shall be levied, assessed, • collected, and paid a tax of 1 cent for each 10 cents or fraction thereof the amount paid to any person conducting a soda fountain, ice-cream parlor, or other similar place of business, for drinks, commonly known as soft drinks, compounded or mixed at such place of business, or for ice cream, ice-cream sodas, sundaes, or other similar articles of food or drink, when any of the above are sold on or after such date for consumption in or in proximity to such place of business. Article 1. Effective date. — The tax is upon soft drinks com- pounded or mixed at the place of biisinass and upon ice cream, ice-cream sundaes, and similar articles sold at soda fountains, ice- cream parlors, and similar places of business on or after May 1, 1919. Art. 2. Who is a vendor. — -For the purpose of the tax and as used in these regulations the term "vendor" means an individual, part- nership, association, or corporation engaged in the business of selling any of the articles enumerated in section 630 to a purchaser for con- sumption. Thus, a vendor may be a manufacturer, jobber, whole- saler^ retailer, trustee in bankruptcy, receiver or peddler. Art. 3. Rate of tax. — The tax is measured by the price for which the drink or food is sold. It is on the actual sales price at the rate of 1 cent for each 10 cents or fraction thereof of the amount paid for any of the articles mentioned in section 630. Each sale for 10 cents or l«ss is taxed 1 cent and every sale for over 10 cents is taxed 1 cent for each 10 cents or fraction thereof ol the price. The tax is upon the whole amount of the price paid by the purchaser. When several articles are the subject of a single sale, the total price paid is the miit for computing the tax. Thus, if the purchaser orders two sodas at the same time, each selling for 15 cents, the tax is 3 cents and not 4 cents. If, however, he buys one soda for 15 cents the tax is 2 cents and if he purchases another 15-cent drink the tax is 2 cents on the second sale. Any means by which separate pur- chasers pool their orders for the purpose of defeating or escaping the tax imposed by section 630 shall be carefully guarded against by the vendor, for its employment subjects the purchaser and the vendor (if he connives at it) to the penalties provided in section 1308 of the Act. See articles 15-17. 6 TAET I — SOFT DRINKS^ ICE CREAM AND SIMILAR ARTICLES. 7 Art. 4. Place of business. — Tlio tax is upon the price of certain commodities "paid to any person conducting a soda fountain, ice- cream parlor, or other similar place of business." The words "other similar place of business" refer primarily to the character of the business transacted rather than to any physical resemblance to the place where such business is done. Whether a person selhng the above described articles is conducting a place of business similar to a soda fountain or ice-cream parlor is a question dependent on the facts in each particular case. Sales of soft drinks, ice cream and similar articles by individuals or organizations, such as religious, educational or charitable societies, on special occasions only, as church festivals, social parties, etc., are not taxable; such sales in stands and booths at agricultural fairs, racing parks, public exhibi- tions, circuses, shows and similar places are taxable. The distinction is between sales made by a person conducting a place of business, even though temporarily, and merely incidental sales which can not properly be considered "business." Sales of soft drinks, ice cream and similar articles of food or drink are not taxable when made in the regular course of business at a hotel, restaurant, cafeteria, lunch room or club house, unless such articles are sold separate and apart from meals. Any sales of soft drinks, ice cream and similar articles sold from a soda fountain are taxable even though sold as a part of a meal. Art. 5. Consumption at place of business. — The above section pro- vides that the tax shall be levied upon the sale of "soft drinks, ice cream, ice-cream sodas, sundaes, or other similar articles of food or drink, when * * * sold * * * for consumption in or in proximity to such places of business." Wlien any of the specified articles are sold in such containers or under such conditions as to indicate that they would ordinarily be consumed in or in proximity to the place of business they are taxable. Sales of ice cream in cones are taxable. When ice cream or any similar article is sold under conditions which indicate that it usually would be consumed at or in proximity to the premises the fact that the purchaser does not consume it there but carries it away does not render it free from tax. When soft drinks, ice cream or similar articles of drink or food are sold to be carried away for consumption at a place not in proximity to the place of business, such drink, ice cream, or food, being placed in containers of a kind ordinarily used to convey the articles indicated, the sales are not taxable. Art. 6. Beverages taxable. — In general, such beverages as are commonly known as soft drinks which are compounded or mixed at the fountain where sold are subject to the tax. Beverages sold at the fountain, ready for consumption, from a bottle or closed container on which a tax has been paid under section 628 of the Revenue Act of 1918 are not subject to the tax. 8 REGULATIONS — TAX IMPOSED BY SECTION 630. Art. 7. Articles taxable: Examples.— The following articles of food or drink arc subject to tax within the meaning of section 630 of the Revenue Act of 1918: all ])everages when compounded or mixed at the fountain, such as orangeade, lemonade, pineapple juice, coca cola, root beer, moxie, phosphates, fruit and flavoring sirups compounded or mixed with plain or carbonated water, milk shakes in any form, malted milk shakes in any form, cream and egg shakes, ice cream, ice-cream" sodas, ice-cream sundaes, ice-cream sand- wiches, flavored ices and all other similar drinks or foods not enu- merated or specified under articles 8 and 9. This list is not intended or considered to be complete but merely illustrative of the class of articles subject to tax. Art. 8. Beverages not taxable : Examples. — There are certain drinks which are often sold at soda fountains, ice-cream parlors or similar places of business which are not regarded as soft drinks, ice-cream products or similar articles of drink or food within the meaning of section 630 of the Revenue Act of 1918. Such beverages consist of such articles as hot beef tea, coffee (liot, cold, or iced), tea (hot, cold, or iced), buttermilk, milk, hot chocolate or cocoa, hot clam broth, hot clam bisque, hot tomato bisque and hot tomato bouillon. No tax applies on the sale of beverages or drinks, such as ginger ale, root beer, moxie, mmeral water, etc., when served directly from a closed container, in which case the manufacturer's tax on such drinks has already been levied. See section 628 of the Revenue Act of 1918. However, if any of the drinks or beverages herein mentioned are compounded or mixed with carbonated water, flavors, or other ingredient at the fountain, they are taxable. Art. 9. Beverages not taxable: Medicinal. — There are certain medicines, such as bromo seltzer, citrate of magnesia, rochelle salts, seidlitz powders, bicarbonate of soda, castor oil, epsom salts and essence of pepsin, which are often sold at soda fountains, ice-cream parlors and similar places of business, which are not soft drinks or ice-cream products or similar articles of food or drink, and hence are not taxable. PART II. ADMINISTRATIVE AND GENERAL PROVISIONS. TAX PAID BY PURCHASER. [S;^c. 030.] * * * Such tax shall be paid by the purchaser to the vendor at the time of the sale and shall be collected, returned, and paid to the United States by such vendor in the same manner as pro\'ided in section 502. Art. 10. Payment of tax. — The tax is upon the sale and must be paid at the time of sale by the purchaser to the vendor. Art. 11. Collection and return of tax. — The tax imposed must be paid by the purchaser to the vendor and the vendor must make return under oath, in duplicate, and pay the tax so collected to the collector of the district in which his principal place of business is located, on or before the last day of each month for the business done during the precedmg month. Daily records shall be kept by the proprietors or their agents in charge, showing the number of sales (grouped according to amount of sale) and the tax paid thereon. The daily records of the proprietors or their agents, with copies of their monthly returns, shall be kept on file, in the places of business of such proprietors, in such manner as to be readily accessible to investigatmg internal revenue officers. In case the proprietor of a soda fountain, ice-cream parlor or similar place of business does not use an adequate cash register or check system from which daily aiKl monthly records may be kept, a separate receptacle shall be used to retain the tax collected by the vendor from the pm'chaser. .Such receptacle shall be so arranged or subdivided into compartments suitable for holding tlie difi"erejit amounts of tax collected, in order to facilitate the compilation of the daily and monthly records of tax collection. EXTENSION OF EXISTING STATUTES. Sec. ]305. That all administrative, special, or stamp provisions of law, including the law relating to the assessment of taxes, so far as applicable, are hereby extended to and made a part of this Act, and every person liable to any tax imposed by this Act, or for the collection thereof, shall keep such records and render, under oath, such statements and returns, and shall comply with such regulations as the Commissioner, with the approval of the Secretary, may from time to time prescribe. Whenever in the judgment of the Commissioner necessary he may require any person, by notice served upon him, to make a return or such statements as he deems sufficient to show whether or not such person is liable to tax. The Commissioner, for the purpose of ascertaining the correctness of any return or for the purpose of making a return where none has been made, is 9 10 REGULATIONS — TAX IMPOSED BY SECTION 630. hereby authorized, l>y any revenue a.^ent or inspector designated hy him for that purpose, to examine any books, papers, records or memoranda bearing upon the matters required to be inchided in the return, and may require the attendance of the person rendering the return or of any officer or employee of such person, or the attendance of any other person having knowledge in the premises, and may take his testimony with reference to the matter required by law to be included in such return, with power to administer oaths to such person or persons. Art. 12. Aids to collection of tax. — In collecting the tax the Com- missioner has the benefit of all existing internal revenue laws. In aid of the enforcement of the statute the Commissioner may require any person to keep specified records, to render returns and state- ments as directed, to submit himself and his books to examination and to comi)ly with such regulations as may be prescribed. MEDIUM OF PAYMENT OF TAX. Sec. 1314. That collectors may receive, * * * uncertified checks in payment of * * * taxes payable other than by stamp, during such time and under such regulations as the Commissioner, with the approval of the Secretary, shall prescribe; but if a check so received is not paid by the bank on which it is drawn the person by whom such check has been tendered shall remain liable for the payment of the tax and for all legal penalties and additions the same as if such check had not been tendered. Art. 13. Payment of tax by uncertified checks. — Collectors may accept uncertified checks in payment of taxes, provided such checks are collectible at par; that is, for their full amount, without any deduction for exchange or other charges. The collector will stamp on the face of each check before deposit the words, "This check is in payment of an obligation to the United States and must be paid at par. No protest," with his name and title. The day on which the collector receives the check wiU be considered the date of payment so far as the taxpayer is concerned, miless the check is returned dis- honored. If one check is remitted to cover two or more persons' taxes, the remittance must be accompanied by a letter of transmittal stating (o) the name of the drawer of the check; (6) the amount of the check; (c) the amount of any cash, money order, or otiior instru- ment included in the same remittance; (d) the name of each person whose tax is to be paid by the remittance; (e) the amount of the pay- ment on account of each person; and (/) the kind of tax p ad. Art. 14. Procedure with respect to dishonored checks. — If the bank on which any such check is drawn should refuse to pay it at par, the check should be returned through the depositary bank and be treated in the same manner as a bad check. All expenses incident to the attempt to collect such a check and the return of it through the PART II — ADMINISTRATIVE AND GENERAL PROVISIONS. 11 depositary bank must be paid by the (Irawcr of the check to the bank on which it is drawn, since no deduction can be made from amounts received in payment of taxes. See section 3210 of the Revised Stat- utes. If any taxpayer whose check has been returned uncollected by the depositary bank should fail at once to make the check good, the collector should proceed to collect the tax as though no check had been given. A taxpayer who tenders a certified check in payment for taxes is also not released from his obligation until the check has been paid. See chapter 191 of the Act of March 2, 1911. PENALTIES. Sec. 1308. (a) That any person required under Title * * * VI * * * to pay, or to collect, account for and pay over any tax, or required by law or regulations rnade under authority thereof to make a return 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. (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 requii-ed by law or regulation, or who \villfully attempts in any manner to evade such tax shall be guilty of a misdemeanor and in addic- tion 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, howerer, That no penalty shall be assessed under this subdivision for any offense for which a penalty may be assessed under authority of section 3176 of the Revised Statutes, as amended, ****** * (rf) The term "person" as used in this section includes an officer or em- ployee 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. Art. 15. Penalty for nonpayment of tax. — (a) Any person who fails to pay the tax when due and payable is liable to a penalty of $1,000. If he willfully refuses to pay or willfully attempts to evade the tax, he is also liable to a fine of $10,000 and costs and to imprisonment for one year. (b) Any officer or employee of a corporation or a member or employee of a partnership who in the course of liis duty fails to pay or collect the tax when due and payable is liable to a penalty of $1,000. If he willfully refuses to pay or collect or will- fully attempts to evade the tax, he is also liable to a fine of $10,000 and costs and to imprisonment for a year, and to a penalty of the 12 r.EGULATIOlSrS — TAX IMPOSED BY SECTION 630. amount of the tax unpaid or evaded. Section 502 of the Revenue Act of 1918 also provides: If the tax is not paid when due, there shall be added as part of the tax a penalty of 5 per centum, together vrith interest at the rate of 1 per centum for each full month, from the time when the tax became due. Accordingly, if any person liable to pay any taxes neglects or refuses to pay them when duo, it shall be lawful for the collector or his deputy to collect such taxes with 5 per cent additional and interest at 12 per cent per annum. Art. 16. Penalties for failure to make and for false return.— (a) Any person who fails to make a rotum at the required time is liable to a penalty of SI, 000. If he willfully refuses to make a return he is also liable to a fme of $10,000 and costs, (b) Any officer or employee of a corporation or a member or employee of a partnership who in the course of his duty fails to make a return at the required time is liable to a penalty of $1,000. If he wilKully refuses to make a return he is also liable to a fine of $10,000 and costs and to imprisonment for a year, (c) Section 3176 of the Revised Statutes, as amended by section 1317 of the Revenue Act of 1918, also provides: In case of any failiu-e to make and file a return or list within the time pre- scribed by law, or prescribed by the Commissioner 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 when a return is filed after such time and it is shown 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 willfully made, the Commissioner of Internal Revenue shall add to the tax 50 per centum of ita amount. The amount so added to any tax shall be collected at the same time and in the same manner and as part of the tax unless the tax has been paid before the discovery of the neglect, falsity, or fraixd, in which case the amount so added shall be collected in the same manner as the tax. INIISREPRESENTATION OF TAX. Sec. 1319. That whoever in connection with the sale or lease, or offer for Bale or lease, of any article, or for the purpose of making such sale or lease, makes any statement, written or oral, (1) intended or calculated to lead any person to believe that any part of the price at which such article is sold or leased, or offered for sale or lease, consists of a t^ax imposed under the authority of the United States, or (2) ascribing a particular part of such price to a tax imposed imder the authority of the United States, kno\ving that such state- ment is false or that the tax is not so great as the portion of such price ascribed to such tax, shall be guilty of a misdemeanor and upon con\'iction tliereof shall be punished by a fine of not more than $1,000 or by imprisonment not exceeding one year, or both. Aet, 17. Misrepresentation of tax. — If a vendor misrcprcr,ents the tax, he is guilt}' of a misdemeanor and is liable to a fine of $1,000 and to imprisonment for a j'car. This provision is designed among PAPvT II ADMINISTRATIVE AND GENERAL PROVISIONS. 13 other things to prevent a vendor adding more than tlie amount of the tax to the price of the driak, ice cream, or similar articles of drink or food sold and representing that the increase in price is due to the tax. If the sales price of the taxable article is increased to cover the tax, the tax is on such increased sales price, but where the tax is collected as a separate item it is not to })e considered as an increase in the sales price. CREDITS AND REFUNDS. Sec. 1310. (a) That in the case of any overpaj'ment or overcollection of any tax imposed by section 628 or 6^50, * * - the person making such overpayment or overcollection may take credit therefore against taxes due upon any monthly return, and shall make refund of any excessive amount col- lected by him upon proper application by the person entitled thereto. (b) Wherever in this Act a tax is requii'cd to be paid by tlie purchaser to the vendor at the time of a sate, and such sale is made on credit, then, under regu- lations prescribed by the Commissioner, with the approval of the Secretary, the t.ax may. at the option of the vendor, be returnetl and paid by him to the United States as if paid to him by the purchaser at tlie time of the sale, and in such case the vendor shall have a right of action in any court of competent jurisdiction against the purchaser for the amount of the tax so returned and paid to the United States. Art. 18. Credits and refunds. — If a vendor overpays the tax due with one montlily return, he may take credit for the overpayment against the tax due with a succeeduig return. For the procedure with reference to claims for refund see sections 3220 and 3225 of the Kevised Statutes, as amended b}- section 1316 of the Revenue Act of 1918, and Regulations No. 14 (revised). When a tax has been illegally or erroneously collecteility 7 Fruit and flavoring sirups, taxa1)ility 7 Ginger ale, taxability 8 Hot beef tea, taxability 8 Hot chocolate or cocoa, taxability 8 Hot clam broth or bisque, taxability 8 Hot cream tomato, taxability 8 Hot tomato bisque or ])ouillon, taxability 8 Hotels!, taxability of sales in regular course of liusino-j? 4 Ice cream, taxability 7 ("ones, taxability 5 Sandwiches, taxability 7 Soda, taxability 7 Sundaes, taxability 7 Increase of ])rice to cover tax 17 Inspection of books of jjersons liable to tax 12 Lemonade, taxability 7 Letter of transmittal accompanying check in payment of tax 13 Lunch rooms, laxability of sales in regular coui-se of business 4 Malted milk, taxability 7 Medicinal lieverages, taxability 9 Milk, taxability 8 Milk shakes, taxability 7 Mineral water, taxability 8 Misi'epresentation of tax - 17 Moxie, taxability ' ? 8 Orangeade, taxalnlity - 7 "Other similar place of business." delinition 4 OvercoUection of tax. refund 18 Partnership memliers or employees, liability for failure to collect or pay tax. . 15 Liability for faihu-e to make returns 16 Payment of lax, medium 13. 14 Necessity 10. 11 Penalty for nonpayment 17 Time.' 10.11.13 Penalties, failure to make return 16 Misrepre.'^eul ation of tax 17 Nonpayment of tax l-^ Pepsin essence, taxability 9 Person liable for tax 10, 11 Phosphates, taxability 7 Pineapple juice taxal ility 7 Place of business '* Consumption of articles at 5 Pooling orders to evade lax "^ Price increased to cover tax 17 16 INDEX. Article. Public exhiliitions, taxal)ility of sales at 4 Purchasers' liability to tax 10, 11 Pacing tracks, taxability of sales at 4 Rate of tax 3 Record.^, reriuiring taxpayer to keep 11, 12 Refund of tax 18 Restaurants, taxability of sales in regular course of business 4 Returns, necessity and requisites 11, 12 Penalty for failure to make 16 Time for making 11 Rochclle salts, taxability 9 Root beer, taxability 7, S Seidlitz powders, taxability 9 Several articles subject of single sale 3 Shows, taxability of sales at - 4 Sirups, taxability 7 Social parties, taxability of sales at - 4 Soft drinks taxable C-8 Special occasions, taxability of sales on 4 Sundaes, taxability 7 Tea, taxability 8 Time, filing return 11 Payment of tax 10, 11, 13 "WTien tax attaches 1 Tomato bisque or bouillon, taxability 8 Uncertified check, payment of tax 13 Vendor, definition 2 Willful refusal to make return 16 To pay tax 15 o LAW LIBRARY UNIVERSITY OF CALlfH^RNLv LOS ANGBLES GAYLAMOUNT PAMPHLET BINDER Manufactured bv :jA I'LORDBROS. 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