Rebate (business)

“ Corporations are allowed to make certain deductions from gross income, including amounts paid for personal services of officers and employes and other ordinary expenses paid out of income in the maintenance and operation of business and property, including a reasonable allowance for depreciation, losses not compensated for by insurance or otherwise, taxes, etc. These need not be further mentioned, beyond saying that the intent and necessary effect of the act is to tax not gross receipts but net income ”

“ The national banks and trust companies in their returns to the federal government and to the state under the 12 1/2 per cent. income tax law are allowed certain deductions of income from specified types of securities in addition to the expense of conducting their business, bad debts, losses, etc. ”

“ On the other hand, if a man wishes to allow a rebate on the just price in order that he may have his money sooner, he is not guilty of the sin of usury.' [1] If, however, the seller, by giving credit, suffered any damage, he was entitled to be recompensed ”

“ Deductions from gross income.↑ The Senate Report on § 166 (f) simply states: 'Your committee also provided that business had debt treatment will be available where a noncorporate taxpayer, who was the endorser (or guarantor or indemnitor) of the obligation of another, is required to pay the other's debt (and cannot collect it from the debtor) . However, this treatment is to be available only where the debt represents money used in the other person's trade or business. ”

“ These considerations are equally pertinent to the suggestion that the 90% rebate arrangement constitutes the imposition of a 'penalty' within the meaning of § 57, sub. j upon an employer who fails or refuses to contribute to a state fund. The amount of the tax assessable under § 901 is definite and fixed, once the single variable, the total of the wages paid during the year, is determined. ”

“ The difference in effect between a tax measured by gross receipts and one measured by net income, recognized by our decisions, is manifest and substantial, and it affords a convenient and wo kable basis of distinction between a direct and immediate burden upon the business affected and a charge that is only indirect and incidental. A tax upon gross receipts affects each transaction in proportion to its magnitude and irrespective of whether it is profitable or otherwise. ”

“ Section 3408 provides that there shall be levied, collected, and paid a tax of one twenty-fourth of 1 per centum each month upon the average amount of the deposits of money, subject to payment by check or draft, or represented by certificates of deposit or otherwise, whether payable on demand or at some future day, with any person, bank, association, company, or corporation, engaged in the business of banking ”

“ The measure of damages was the pecuniary loss inflicted on the plaintiff as the result of the rebate paid. Those damages might be the same as the rebate, or less than the rebate, or many times greater than the rebate ”

“ Make it a rule to declare dividends every month. We venture to say to the business man that you are meeting all your fixed charges, paying your rent and employes, paying for postage stamps, lights, taxes and all other fixed charges. When the Government put a two cent tax on your checks you paid that tax. You certainly can add one more fixed charge to your business, and that fixed charge should be a percentage of your cash receipts. ”

“ That payments by an employer to an employee, even though voluntary, ought, by and large, to be taxable; that the concept of a gift is inconsistent with a payment's being a deductible business expense; that a gift involves 'personal' elements; that a business corporation cannot properly make a gift of its assets. ”

“ Ct. 759, it was ruled that where a statute declares that there shall be a rebate or drawback of a tax under certain circumstances, the amount to be determined under regulations prescribed by the secretary of the treasury, the inaction of the secretary is immaterial, and the drawback must be paid, whether ascertained under the secretary's regulations or not, because the right to the drawback depends on the statute, and not on the secretary's regulations, which relate merely to the ascertainment of the amount. ”

“ The man who gets or accepts a rebate is taking a risk. ‘Well,’ he argues, ‘so is the man who buys wheat or stocks or undeveloped real estate of problematical future value.’ Quite right; but when you speculate you want to be sure that your probable or possible profits bear a fair proportion to the risk and your possible losses. It’s all right to make a secured loan of one thousand dollars at five per cent., but when you put your thousand into a scheme where there is a chance of losing every cent of it, you also 157 want a chance of making a good deal more than the legal rate of interest. ”

“ It was designed to make full deductibility of a bad debt turn upon its proximate connection with activities which the tax laws recognized as a trade or business, a concept which falls far short of reaching every income or profit making activity.
Petitioner, therefore, must demonstrate that he is engaged in a trade or business, and lying at the heart of his claim is the issue upon which the lower courts have divided and which brought the case here: That where a taxpayer furnishes regular services to one or many corporations, an independent trade or business of the taxpayer has been shown. ”

“ See generally Kleine 3, figure 1. " 'The logic or rationale of the [VAT] rests squarely on the benefits received principle of taxation-government services are essential to the operation of any business enterprise . . . and a part of these public service costs should properly be included in the cost of doing business.' " Id., at 4 (citation omitted) .
The SBT Analysis, at 20-21, provides us with the following simplified example of how value added is determined. Assume a bakery's sole revenue comes from the sale of bread. ”

“ So, yes, there will be an IRS notification going out to all taxpayers about changes in phase-ins. It takes place at the time that everybody gets their tax forms, because that's the time to coincide with when those changes are made. The rebate check that arrives, separate and apart from those tax forms, is a wholly separate type of communication because it's such an unusual event. And that's the result of the fact that Congress decided, the President supported a retroactive tax cut. ”

“ Similarly, a claim for the repayment of tax paid by any person entitled to an exemption or rebate may be made within three years from the end of the year of assessment to which the claim applies; for instance, a claim in respect to the year beginning April 6, 1902, and ending April 5, 1903, would have to be made by April 5, 1906. ”

“ Therefore, if a deduction for 100% of the repayments were allowed, every time money is received and later repaid the taxpayer would make a profit equivalent to the taxes on 27 1/2% of the amount refunded. In other situations when the taxes on a receipt do not equal the tax benefits of a repayment, either the taxpayer or the Government may, depending on circumstances, be the beneficiary. Here, the taxpayer always wins and the Government always loses. We cannot believe that Congress would have intended such an inequitable result. ”

“ Under section 6 (b) persons rendering or performing the services are required 'as far as practicable, (to) add the tax imposed * * * to the value of services or charges showing such tax as a separate and distinct item and when added such tax shall constitute a part of such value of service or charge, shall be a debt from the user to the person rendering or performing service until paid, and shall be recoverable at law in the same manner as other debts.' By subsection (d) the person rendering the service is forbidden to hold out directly or indirectly that he will assume or absorb the tax. ”

“ The tax assessed to shareholders may be required by law to be paid in the first instance by the corporations themselves, as the debt and in behalf of the shareholder, leaving to the corporation the right to reimbursement for the tax paid from their shareholders, either under some express statutory authority for their recovery or under the general principle of law that one who pays the debt of another, at his request, can recover the amount from him. ”

“ In this view, the transaction is said to come within the term 'paid,' and we may disregard the word 'accrued.' This regulation has, however, not been applied in any case where income has been credited to another by a taxpayer employing the cash receipts and disbursements method of accounting; and specifically it has not been invoked to require policyholders to report as income the dividends or interest credited to them in cases such as this. No tax is demanded of them until actual receipt of the money. The constructive payment theory is, we think, untenable. ”

“ On the return for the first year in which advances are received, a taxpayer will have to report an unrealistically high net income, since he will have to include unearned receipts, without any offsetting deductions for the future cost of earning those receipts. On subsequent tax returns, each year's unearned prepayments will be partially offset by the deduction of current expenses attributable to prepayments taxed in prior years. ”

“ Petitioner first contends that the debt, to the extent that it was ascertained in 1920 to be worthless was not returnable as gross income in that year, that is, apart from any question of deductions, it was not to be regarded as taxable income at all. We see no merit in this contention. Keeping accounts and making returns on the accrual basis, as distinguished from the cash basis, import that it is the right to receive and not the actual receipt that determines the inclusion of the amount in gross income. When the right to receive an amount becomes fixed, the right accrues. ”

“ In that situation, the debt is not forgiven but is in fact satisfied in full through the debtor's performance of a "separate obligation"; discharge of the debt is merely the "medium of payment" for that performance, and must be treated as ordinary income for tax purposes. ”

“ But after the receiver has performed all obligations due the public and every member of it—that is to say, after carrying passengers and freight offered, for a reasonable compensation not exceeding the maximum authorised by law, if such maximum rates shall have been prescribed, upon equal terms to all, he may make for the litigants as much money as the road thus managed is capable of earning. ”

“ If, for example, a bank has $100,000 of undivided profits, intends to pay its depositors $75,000 interest on their deposits, and has an obligation for this tax of $10,000, it perhaps makes no difference whether the bank pays $65,000 to its depositors, without recovering anything back from them, or pays them $75,000, but later recovers back the $10,000 tax paid for their account. ”

“ Congress could have excluded from the gross income of all taxpayers the gains derived by debtors either from their acquisitions of their own obligations at a discount and their consequent control over them, or from their respective releases from all or part of such obligations by their respective creditors upon the debtor's payment to the creditor of something less than the full amount of the debt. ”

“ Nor can taxable income accrue from the mere receipt of property or money which one is obliged to return or repay to the rightful owner, as in the case of a loan or credit. Taxable income may arise, to be sure, from the use or in connection with the use of such property. ”

“ To determine whether the activities of a taxpayer are 'carrying on a business' requires an examination of the facts in each case. As the Circuit Court of Appeals observed, all expenses of every business transaction are not deductible. Only those are deductible which relate to carrying on a business. ”

“ Bank-checks, drafts, or notes for the payment of money drawn upon any bank, broker, or trust company, at sight or on demand, are subject to a tax of two cents, to be paid by the person who makes, signs, or issues the same, or for whose use or benefit the same are made, signed, or issued. ”

“ The act provided for the payment to the plaintiff and others of such amounts as should be shown to the satisfaction of the commissioner of internal revenue 'to have been paid by them as tax on distilled spirits in excess of the quantity withdrawn by them from warehouse.' It is presumed that the terms of the act were known to the plaintiff, and by his acceptance of the money it must be understood that he agreed to take it as a payment of the amount shown to have been paid by him, or, in other words, as a refunding of the money exacted. ”

“ The inequities of treating an amount as income which eventually turns out not to be income are urged upon us. The Government concedes that each of these taxpayers is entitled to a deduction for a loss in the year of repayment of the amount earlier included in income. ”

“ Property paid for out of moneys received for service belongs to the company just as does that purchased out of proceeds of its bonds and stock. It is conceded that the exchange rates complained of are not sufficient to yield a just return after paying taxes and operating expenses, including a proper allowance for current depreciation. The property or money of the company represented by the credit balance in the reserve for depreciation cannot be used to make up the deficiency. ”

“ It was to enable taxpayers to keep their books and make their returns according to scientific accounting principles, by charging against income earned during the taxable period, the expenses incurred in and properly attributable to the process of earning income during that period; and indeed, to require the tax return to be made on that basis, if the taxpayer failed or was unable to make the return on a strict receipts and disbursements basis. ”

“ We shall not ask whether it is better to pay taxes on the price of the articles we purchase, when the amount is not perceived, or, if perceived, seldom objected to, at least against government, and when the disagreeable operation of paying money is compensated, at least in some degree, by the pleasure derived from the article purchased,—or to pay them at once to the tax-gatherer, when we get nothing for our ample disbursements but a bit of paper from the collector to remind us of the extent of our losses. ”