Sales tax

“ The use tax, not in itself a relatively significant revenue producer, [6] usually appears as a support to the sales tax in two respects. One is protection of the state's revenues by taking away from inhabitants the advantages of resort to untaxed out-of-state purchases. The other is protection of local merchants against out-of-state competition from those who may be enabled by lower tax burdens to offer lower prices. In this respect, the use tax has the same effect as a protective tariff becoming due not on purchase of the goods but at the moment of bringing them into the taxing states. ”

“ It is argued, however, that the present tax is not an impost within the meaning of the Import-Export Clause. The tax is measured by the gross receipts of retail sales and is levied on retailers 'For the privilege of selling tangible personal property at retail.' Cal.Stats.1935, p. 1253. The retailers are authorized to collect the tax from the consumers. ”

“ Such must be the operation of all taxes on sales or exchanges. The owner in reality pays it, whether laid on the vender or purchaser. It matters not in the sale of a tract of land, or any other article, if a tax be imposed on the sale, whether it be paid by him who sells or him who buys, the amount must, in both cases, be deducted from the price. ”

“ It is not enough to say that the use tax and the sales tax are different. A use tax may of course have a wider range of application than a sales tax. Henneford v. Silas Mason Co., 300 U.S. 577, 57 S.Ct. 524, 81 L.Ed. 814. But a use tax and a sales tax applied at the very end of an interstate transaction have precisely the same economic incidence. Their effect on interstate commerce is identical. ”

“ A fortiori do they warrant a tax on sales which is not intended to discriminate against or to discourage them, but simply to collect a revenue for the benefit of the whole community in a convenient way. ”

“ The tax imposed upon the first $400,000 of annual gross sales is one-twentieth of 1 per cent. The rate increases on each additional $100,000 of sales between $400,000 and $1,000,000, inclusive, being seventeen-twentieths of 1 per cent. ”

“ In the present case the tax is, in form and substance, an excise conditioned on the carrying on of a local business, that of providing and selling advertising space in a published journal, which is sold to and paid for by subscribers, some of whom receive it in interstate commerce. The price at which the advertising is sold is made the measure of the tax. This Court has sustained a similar tax said to be on the privilege of manufacturing, measured by the total gross receipts from sales of the manufactured goods both intrastate trastate and interstate. ”

“ We cannot accept the reasoning of the court below that simply because there is no sanction against a vendor who refuses to pass on the tax (assuming this is true) , this means the tax is on the vendor. There can be no doubt from the clear wording of the statute that the Massachusetts Legislature intended that this sales taxbe passed on to the purchaser. For our purposes, at least, that intent is controlling. ”

“ A merchant having a gross business of $1,000,000, but a net loss, must pay a greater tax than one who has a gross of $400,000 and realizes a substantial net profit. The record discloses such a situation. In the year 1930, 24,186 merchants were subject to the tax. Two of these, whose gross sales amounted to 8 per cent. of the gross sales of all merchants, would have paid, but for the interlocutory injunction entered by the court below, more than half of the total tax due by all those subject to the impost. ”

“ Percentage tax on merchants' sales.-All merchants not herein specifically exempted shall pay a tax of one per centum on the gross value in money of the commodities, goods, wares, and merchandise sold, bartered, exchanged, or consigned abroad by them, such tax to be based on the actual selling price or value of the things in question at the time they are disposed of or consigned, whether consisting of raw material or of manufactured or partially manufactured products, and whether of domestic or foreign origin. ”

“ Under the operation of this system the Government actually levied and collected on many articles of finished industrial products a tax of six per cent, the effect of which may be thus illustrated: Many manufacturing establishments sold products annually to three times the amount of their invested capital. If the capital invested was one hundred thousand dollars and the sales three hundred thousand, the tax on that business was eighteen thousand dollars, or eighteen per cent on the cost of the establishment. ”

“ That it is imposed, as a rule, only upon the dealer who makes the first domestic sale, not upon those who may make subsequent sales, is consistent with the nature of the tax and the purpose to distribute its burden among those who ultimately consume the product. To impose a like tax each time the commodity changed hands in retail trade might place so heavy a burden upon those purchasing other than at first hand as to render it impossible for the retailer to compete and thus seriously obstruct general distribution. ”

“ The tax falls upon the owner by virtue of the mere fact of ownership, regardless of use or disposition of the security. The tax upon profits made upon purchases and sales is an excise upon the result of the combination of several factors, including capital investment and, quite generally, some measure of sagacity; the gain may be regarded as 'the creation of capital, industry and skill.' Tax Commissioner v. ”

“ To be sure, there was the possibility of a tax upon gross sales at a flat rate without graduated levels, but a burden so imposed might be subject to new objections. In the view of serious students of the problem, a flat tax upon gross sales is not always shifted to the consumer. It is often absorbed more or less by the seller, for a time, even if not permanently, to prevent the falling off of sales. ”

“ SBT Analysis 20 (addition and subtraction are "two alternative, but equivalent ways of calculating value added. . . . The important point is that, conceptually, these two calculations are equal ") .↑ The nations of the European Economic Community (EEC) each levy a value added tax under yet a third method, as a multistage sales tax. See generally Aaron. Under the EEC system, the bakery in our example would be taxed on each sale of bread, and would receive a credit for each purchase of materials going into production of the bread. ”

“ Sales by manufacturers are chiefly effected through agents. A tax upon their agents when thus engaged is, therefore, a tax upon them, and if this is made to depend upon the foreign character of the articles, that is, upon their having been manufactured without the State, it is to that extent a regulation of commerce in the articles between the States. It matters not whether the tax be laid directly upon the articles sold or in the form of licenses for their sale. ”

“ The tax on sales made by an auctioneer is a tax on the goods sold, within the terms of this last decision, and, indeed, within all the cases cited; and when applied to foreign goods sold in the original packages of the importer, before they have become incorporated into the general property of the country, the law imposing such tax is void as laying a duty on imports. ”

“ A tax upon the net profits has not the same deterrent effect, since it does not arise at all unless a gain is shown over and above expenses and losses, and the tax cannot be heavy unless the profits are large.'
Argument is not needed, and indeed practical admission was made at the bar, that the gross sales of a merchant do not bear a constant relation to his net profits; that net profits vary from year to year in the same enterprise; that diverse kinds of merchandise yield differing ratios of profit ”

“ Section 5, in addition to the graduated license fee, lays a tax of $3 on each $1,000 vlaue of stock carried in each store, or for sale in such store, and section 2 includes within the goods, wares, and merchandise from which sales are to be made those owned by the taxpayer and held in storage to be sold in or through such store. ”

“ Sales made by merchants taxed under any of the brackets of the act are made in competition with like sales of the same character of merchandise by those who are taxed under other brackets. As a general proposition, increased volume of sales results in increased profits and increased ability to pay the tax. The rate of profit from retail sales generally varies with the character of the goods sold. The management of a store or stores is one of the fundamental factors in determining whether or not a profit is realized and the amount of profit. ”

“ The tax is not on the manufacturing or on the privilege of maintaining sales offices. The tax is not on the net profits of a unitary enterprise demanding a method, not intrinsically arbitrary, of making an apportionment among different jurisdictions with respect to the processes by which the profits are earned. ”

“ But far more common in our complex economy is the kind of sale presented in this case, which exhibits significant contacts with more than one State. In such a situation, it is the commercial activity within the State, and not the sales volume, which determines the State's power to tax, and by which the tax must be apportioned. While the ratio of in-state to out-of-state sales is often taken into account as one factor among others in apportioning a firm's total net income, see, e.g., the description of the 'Massachusetts Formula' in Note, 75 Harv.L.Rev. ”

“ Every inhabitant of the republic who sells goods to the value of over $20 must give to the buyer "an invoice, note, or other document accrediting the purchase," and affix to the same, and cancel, a stamp corresponding to the value of the sale. Sales at retail are exempt from this tax; and retail sales are defined to be "sales made with a single buyer, whose value does not exceed $20. ”

“ Of taxes on contracts, the most important are those on the transfer of property; chiefly on purchases and sales. Taxes on the sale of consumable commodities are simply taxes on those commodities. If they affect only some particular commodities, they raise the prices of those commodities, and are paid by the consumer. ”

“ As a general proposition, those merchants doing the largest amount of trade are enabled to secure the highest type of management.
In the light of these findings, does the act tax sales in an unequal and arbitrary way, classifying them for the imposition of different rates without reference to any real or substantial distinction, as appellants insists; or does it impose an excise upon the conduct of retail business, reasonably adjusted in amount with regard to substantial differences in the nature of the privilege exercised, as appellees contend? ”

“ Florida Tracks ................... ( 1,500) _______ $24,100 In his notice of deficiency for 1979 respondent determined that petitioner had gambling winnings from the above dog racing tracks in the amount of $143,751, less the $24,100 reported, or $119,651, allowed a deduction for expenses for the production of gambling income in the amount of $200, and a deduction for additional sales tax of $285, and allowed a standard deduction of $1,000. ”

“ The act does not impose an income or profits tax or a license tax, is not an inspection measure or a police regulation. The tax is not confined to a particular method of merchandising. All retailers, individual and corporate, selling every description of commodities, in whatever form their enterprises are conducted, make up the taxable class. And the excise is laid in respect of the same activity of each of them-the making of a sale. ”

“ To say that there is no sale because there is no risk-shifting and that there is no risk-shifting because the price to be paid is payable only from the income produced by the business sold, is very little different from saying that because business earnings are usually taxable as ordinary income, they are subject to the same tax when paid over as the purchase price of property. This argument has rationality but it places an unwarranted construction on the term 'sale,' is contrary to the policy of the capital gains provisions of the Internal Revenue Code, and has no support in the cases. ”

“ It is spread over so vast a surface among consumers, that its weight is not felt; being mixed up with the price of the article sold, its weight is not perceived. We pay in this way half the taxes of America, Germany, and all the countries to whom we chiefly export our manufactures. Let us return them the compliment, and adopt a system which will make them pay the half of ours. The whole, or nearly the whole, of the Income Tax, which now produces L.5,400,000 a-year, would by this change be spent in increased purchases in the home market, and sensibly relieve its sinking state. ”

“ Taking the most favourable, but extremely improbable supposition, that the importation is not at all checked, nor the home production enlarged, the state gains a revenue of only half a million, while the consumers are taxed ten millions and a half; the ten millions being a contribution to the home growers, who are forced by competition to resign it all to the landlords. The consumer thus pays to the owners of land an additional tax, equal to twenty times that which he pays to the state. Let us now suppose that the tax really checks importation. ”

“ It is not-as taxes upon the privilege of selling, manufacturing or processing characteristically are-measured by the value of the privilege taxed, or by either quantity or price of what is manufactured, processed or sold. A tax on the processing or sale of an article, while an excise, commonly would be denoted a tax 'on' the article processed or sold. The contract itself speaks of such taxes which may, in the future, be 'paid by the contractor on the articles or supplies contracted for.' (Italics supplied) . ”