taxed, and it has accordingly held that in all cases where a manufacturer purchases an article subject to tax and reimbursed the manufacturer thereof for the tax so imposed, if such manufacturer uses the article in the further manufacture of another article subject to tax, he may receive a credit for any tax so reimbursed to the first manufacturer. An example of such an instance is found in section 900, subdivision (4). In this subdivision a tax is imposed upon the price for which a piano-player is sold or leased. A tax is also imposed under this subdivision upon pianos. In actual practice very few manufacturers of pianos manufacture piano-players but purchase the player action for incorporation in the piano.

It has been suggested that a new section be added to the law confirming the holding of the Treasury Department.

It has been suggested that this change could be accomplished by an amendment in substantially the following form:

Amend the Revenue Act of 1918 by adding thereto a new section as follows:

Sec. 1331. That a taxpayer under this act may take as a credit against any tax imposed in respect to the sale by him of any article taxable under this act, an amount equal to any tax imposed under this act which he has reimbursed to the vendor from whom he purchased any article forming a component part (whether or not changed in form by process of manufacture) of the article sold by him and in respect to which tax is paid by him. This credit shall be allowed only if the taxpayer keeps such records and evidence as will clearly establish his right to the exemption.

Title XIII (new section). Records and computation of tax in the case of sales of articles taxable under sections 628, 900, 902, 905, or 906 of the Revenue Act of 1918.

In many instances manufacturers of articles subject to tax under sections 628, 900, 902, 905, or 906 do not pass the tax on to the purchaser at least by billing the amount of the tax separately. In all such cases the tax is computed upon the selling, leasing, or licensing price. To require the tax due the Government in the case of each individual transaction to be computed upon the selling price of such transaction would entail a great amount of clerical burden upon such manufacturers and all that could possibly be gained would be 1 cent on each transaction where the fraction of a cent is fivetenths of a cent or more. It is suggested that in practically all cases the Government will receive the same amount of revenue by allowing the tax to be computed upon the gross sales of such taxable articles. The department has so held and it has been suggested that the ruling be confirmed by legislative enactment.

It has been suggested that this change could be accomplished by an amendment in substantially the following form:

Amend the revenue act of 1918 by adding thereto a new section as follows:

Sec. 1332. That in all cases of sales, leases, or licenses of articles taxable under the provisions of sections 628, 900, 902, 905, or 906 of this act, the person liable to make return and payment of the tax shall, in order that such return may be readily checked and verified by internal-revenue officers, keep such records and memoranda as will clearly show the amount of the sales of taxable articles for each month. In such cases the tax may be computed upon the gross amount of such sales during the month for which the return is made.

Title XIII (new section). Basis of the tax imposed by sections 628, 900, 902, 905, or 906 of the Revenue Act of 1918.

The Treasury Department has ruled that in computing the tax imposed by sections 628, 900, 902, 905, or 906 if the selling, leasing or licensing price is increased to cover the tax imposed, the tax shall be computed upon the basis of the increased price, however, if the tax is billed as a separate item, that the amount of the tax need not be included in the price of the article in computing the tax. The Department has also held, in the case of a rescinded sale, that no tax shall be deemed to be imposed under the aforementioned sections and that if a tax has been paid upon a sale which is later entirely rescinded, the person making the return and paying the tax may take a credit for such tax so paid in any subsequent monthly tax return. It has been suggested that this ruling be confirmed by legislative enactment.

It has been suggested that this change could be accompanied by an amendment in substantially the following form:

Amend the Revenue Act of 1918 by adding thereto a new section. as follows:

Sec. 1333. That in the case of the sale, lease, or license of articles taxable under the provisions of sections 628, 900, 902, 905, or 906 of this act, if the selling, leasing or licensing price is increased to cover the tax imposed, the tax shall be computed upon the basis of such increased price. If the tax is billed as a separate item and the contract states that the purchaser will reimburse the manufacturer for the tax, the tax need not be included in the price of the article in computing the tax. If an article taxable under the provisions of sections 628, 900, 902, 905, or 906 of this act is returned after sale, leasing or licensing and the sale, lease or license is entirely rescinded, no tax with respect to such sale, lease, or license shall be payable, and if a tax has been paid upon such a transaction, it may be credited against the tax included in a subsequent monthly return.

Title XIII (new section). Articles shall not be doubly taxed. With the exception of the cases specially provided for under section 904, the section containing the most specific description of the article subject to tax shall govern.

It is the opinion of the Treasury Department that, with the exception of the cases specially provided for under section 902, it was not the intention of Congress that an article shall be doubly taxed, and it has accordingly held that, with the exception of the cases specially provided for under section 904, the section containing the most specific description of the article subject to tax shall govern. Article 32 of Regulations 54 clearly sets out the holding of the department in such cases and is as follows:

ART. 32. When an article is within the language of two or more sections of the statute, by each of which a tax is imposed, the article shall not be doubly taxed, but shall, as a general rule, be held taxable under that section which contains the more specific description; thus, subdivision 14 of section 904 (a) imposes a tax on shoes and section 905 imposes a tax on articles made of, or ornamented, mounted or fitted with precious metals or imitations thereof, or ivory. A pair of leather shoes ornamented with gold buckles would fall within the terms of both these sections; but the description "shoes," being the more specific, would be the controlling description for taxable purposes. (See art. 26 of these Regulations.) While this is the general rule, the statute makes certain broad exceptions. As an illustration of the exceptions made by the statute, the case of fans may be taken. Fans are taxable as such under paragraph (8) of section 904 (a). They are also within the language of section 905 when made of or ornamented, mounted, or fitted with precious metals or imitations thereof or ivory. In the absence of statutory provisions to the contrary, the description "fans," being the more specific, would control, but subdivision (b) of section 904 specifically provides that articles enumerated in paragraphs (2) to (8), both inclusive, of section 904 (a), when made of or ornamented, mounted, or fitted with precious metals or imitations thereof or ivory, shall not be subject to the tax imposed by section 904; and this specific exclusion (so far as the articles which it covers are concerned) reverses the above-mentioned general rule and makes the less specific description apply. For instance, a fan, being one of the articles specifically exempted from taxation under section 904, when made of or ornamented, mounted, or fitted with precious metals or imitations thereof or ivory, is taxable under section 905 at the rate of 5 per cent of the full sales price and not under subdivision (8) of section 904 (a). (See art. 20 of these Regulations.) And any other article which is made of or ornamented, mounted, or fitted with precious metals or imitations thereof or ivory, if it is one of the articles enumerated in paragraphs (2) to (8), inclusive, of section 904 (a) (arts. 14 to 20, inclusive, of these Regulations), is not subject to tax under section 904. Of course, a fan or any other article enumerated in paragraphs (2) to (8), inclusive, of section 904 which is not made of or ornamented, mounted, or fitted with precious metals or imitations thereof or ivory, and which is not within either of the other exceptions made by section 904 (b), is taxable under section 904.

Of the other exceptions made by section 904 (b), one relates to articles made of fur on the hide or pelt or of which any such fur is the component material of chief value (an article will not be regarded as within this exception unless fur is that component material which is not exceeded in value by any other single component material in the article); the other relates to articles enumerated in subdivisions (17) and (18) of section 900. Of these two subdivisions, (17 relates to liveries and livery boots and hats, and (18) relates to hunting and shooting garments and riding habits. These exceptions are not limited to any particular subdivisions of section 904 (a), but relate

to them all. Therefore any article whatever, which is made principally of fur on the hide or pelt or of which any such fur is the component material of chief value, or which is enumerated in subdivision (17) of section 900 of the statute, covering liveries and livery boots and hats, or in subdivision (18) of section 900, covering hunting and shooting garments and riding habits, is not subject to tax under these regulations but to the 10 per cent tax on the full sales price imposed by section 900 of the statute. (See arts. 29, 30, and 31, of Regulations No. 47.)

It will sometimes happen that the same article is within more than one of the exceptions specified by section 904 (b) of the statute. The rule, that the more specific description governs, again applies. Either of the other designations (that is, furs, liveries, or hunting garments) covered by the several exceptions, is more specific than that relating to articles made of, or ornamented, mounted, or fitted with, precious metals or imitations thereof, or ivory. This latter is also the only designation covering a tax of 5 per cent on the full sales price. All the other designations covered by the exceptions cover a tax of 10 per cent on the full sales price. It accordingly follows that if any article is within more than one exception specified by section 904 (b), it is subject to a 10 per cent tax on its full sales price. It is only when it is within the exception relating to articles made of, or ornamented, mounted, or fitted with precious metals, or imitations thereof, or ivory, solely, that the tax at the rate of 5 per cent on the full sales price applies. Take, for example, purses. A leather purse without ornaments of precious metals, etc., would not be within any of the exceptions and if sold for more than $7.50 would be taxable on the excess of the sales price over that amount, under paragraph (5) of section 904 (a), simply as a purse. Next, take a leather purse with gold ornaments. The gold ornaments would bring it within the exception relating to articles ornamented with precious metals, etc., and it would, therefore, be subject to tax of 5 per cent of the full sales price. Now, take a purse made principally of fur or of which fur is the component of chief value. It would be within the exception covering articles made of fur, etc., and would be subjet to a tax of 10 per cent of the full sales price. Even though this latter purse were also ornamented with precious metals, it would still be subject to the same tax as an article made of fur, since the designation covering articles made of fur takes precedence over that covering articles ornamented with precious metals, etc.

In short, an article which is within any of the specific designations of section 904 (a) of the statute is subject to the tax imposed thereby unless it is covered by any of the exceptions enumerated in section 904 (b). If it is covered by the exception relating to articles ornamented with precious metals, etc., it is not subject to tax under section 904 (a), but to a tax of 5 per cent of the full sales price under section 905. If it is within either of the other exceptions, even though it is also within that relating to articles ornamented with precious metals, etc., it is subject to a tax of 10 per cent of the full sales price under section 900 of the statute.

It has been suggested that this holding of the Treasury Department should be confirmed by legislative enactment.

It has been suggested that this change could be accomplished by an amendment in substantially the following form:

Amend the Revenue Act of 1918 by adding thereto a new section as follows:

Sec. 1334. That except as otherwise provided under section 904 of this act, when a tax is imposed upon the selling or leasing price of an article within the language of two or more sections of the act, the tax shall be deemed to be imposed only under the section which contains the most specific description of the article subject to

tax.

Title XIII (new section). Amendment proposed to section 7 of the act of August 2, 1886, to permit the required statement for properly marking oleomargarine packages to be printed on the package in lieu of affixing labels.

It has been suggested that in view of the fact that section 6 of the act of August 2, 1886, was amended by H. R. 9054, "An act making appropriations for the Department of Agriculture for the fiscal year ending June 30, 1919," to permit the use of paper containers as original packages for oleomargarine, that section 7 of the act of August 2, 1886, should also be amended to permit the required statement in properly marking such packages to be printed on the package in lieu of affixing labels.

It has been suggested that this change could be accomplished by an amendment in substantially the following form:

Amend the Revenue Act of 1918 by adding thereto a new section as follows:

Sec. 1335. That section 7 of the act approved August 2, 1886, entitled, "An act defining butter, also imposing a tax upon and regulating the manufacture, sale, importation, and exportation of oleomargarine, is hereby amended by adding at the end thereof a sentence as follows:

In the case of paper packages the required statement may be printed on the package, in lieu of affixing labels under such regulations as the Commissioner of Internal Revenue, with the approval of the Secretary of the Treasury, may prescribe.

Title XIII (new section).-Severe penalty imposed if taxpayer refuses to keep books in a manner to reflect the income.

It has been suggested that in a few instances taxpayers do not keep books in such a way as to clearly reflect the income and absolutely refuse to comply with the request of the Treasury Department, and that a sufficient penalty should be provided in order to enable the commissioner in all cases to require taxpayers to keep their books in such a manner as to clearly reflect their income.

It has been suggested that this change could be accomplished by an amendment in substantially the following form:

Amend the Revenue Act of 1918 by adding a new section as follows:

Sec. 1336. That if in the opinion of the Commissioner, a taxpayer does not keep his books in a manner that will clearly reflect the income, he may require the taxpayer to keep his books in a manner that will so reflect the income.

Whenever any person fails to comply with the provisions of this section, he shall be punished by a fine of not more than $10,000, or by imprisonment not exceeding one year, or both.