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STATEMENT OF GORDON PEYTON, COUNSEL FOR THE ASSOCIATION

OF COCOA AND CHOCOLATE MANUFACTURERS OF THE UNITED STATES

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Mr. PEYTON. My name is Gordon Peyton, and I am counsel for the Association of Cocoa and Chocolate Manufacturers of the United States.

This is a statement relative to S. 843 and H. R. 2290, proposed legislation now before this committee for consideration.

Mr. BATES. Are you a resident of the District ?

Mr. PEYTON. I am a resident of the State of Virginia. My office is in the District.

The legislation provides for the imposition of a sales tax on retail sales but exempts food products with exception of candy confectionery.

We have been informed that sweet chocolate and milk chocolate are interpreted by the office of the counsel of the District of Columbia to be in the category of candy confectionery.

There are two major points we think would be appropriate to make here.

Mr. Bates. I would like to have Mr. West listen to this testimony. I have had a representative of the candy manufacturers speak to me about this.

Mr. Peyton. The first is that to place candy and confectionery items which are generally wholesome foods processed from basic agricultural commodities in a separate commodity from other goods, many of which cannot compare in monetary value, is discriminatory.

The membership of this association is against such discrimination.

The second is that the inclusion of sweet chocolate and milk chocolate items within the category of candy and confectionery is contrary to the general accepted classification. The manufacture of cocoa and chocolate products constitutes a separate industry from the manufacture of candy and confectionery.

Candy and confectionery manufacturers are customers of the cocoa and chocolate manufacturers. The two industries are separate.

There will be submitted a list of the membership of the association, and it is my understanding that there will be made here a statement for and on behalf of the confectionery association with which we generally concur.

I might say that the membership of the cocoa and chocolate association, for whom I speak here, is made up of folks like the Hershey Chocolate Co., Walter Baker Co., Rockwood, and companies of that sort.

Under regulations promulgated pursuant to the Federal Food, Drug, and Cosmetic Act, their rigid standards set up the manufacture of cocoa and chocolate products. There are no such standards in effect for candy and confectionery items, which is a further indication that milk chocolate, also sweet chocolate, are not considered in that category.

The tariff regulations for many years have made special provision in this connection, and cocoa and chocolate receive completely separate attention by the committee for reciprocity information.

The Bureau of the Census also recognizes the manufacture of cocoa and chocolate as a separate industry, and issues separate statistics therefor.

During the war cocoa and chocolate were accepted as a war food for the armed forces. There was also a war-food regulation which controlled all 5-cent candy bars, both chocolate bars and candy bars, and set a certain volume of them aside for sales to the armed services.

The exception of candy and confectionery products from the food exemption provided in the proposed legislation, and particularly the inclusion of sweet chocolate and milk chocolate was within the classification of candy and confectionery, would appear to place milk chocolate and sweet chocolate in a luxury-type category.

Sweet chocolate and milk chocolate can in no way be considered as luxuries. Chocolate is one of the most inexpensive, highly concentrated foods generally available on the markets.

Proof can be found then in the use of chocolate during the war. The Army emergency ration D was made of three 4-ounce chocolate bars.

A 2-ounce chocolate bar was a component part of Army ration K. Chocolate bars are part of the naval aircraft and liferaft rations.

Chocolate was purchased in large quantities by lend-lease and the Red Cross.

Prisoners-of-war packages contained chocolate.
Chocolate bars are part of the merchant-marine lifeboat ration.

There will be submitted a table showing the food value of chocolate, as compared to other products. It shows that sweet chocolate and milk chocolate compare favorably with such items as milk, meat, eggs, fish, potatoes, and peanuts in fat protein, carbohydrates, caloric content.

Certainly, such a food commodity cannot be properly excepted from any tax exemption governing food commodities. Either chocolate should be excepted from the class of candy and confectionery or candy and confectionery should be excepted along with other foods.

It is strongly urged therefore that either candy and confectionery be included in the stated food exemption or that milk chocolate and sweet chocolate be specifically excepted by amendment to the proposed legislation or that there is a third alternative.

The legislative history of these bills clearly shows that it is not the intention of the Congress to include chocolate in the category of candy and confectionery.

Mr. BATEs. Thank you, Mr. Peyton.
The next is Mr. Harold O. Smith.

STATEMENT OF HAROLD O. SMITH, JR., MANAGER OF THE WASH

INGTON OFFICE OF THE NATIONAL CONFECTIONERS' ASSOCIATION OF UNITED STATES, INC.

Mr. Smith. My name is Harold 0. Smith, Jr. I am manager of the Washington office of the National Confectioners' Association of the United States, Inc., which is one of the oldest trade associations in the United States, having been organized in 1883. It represents 85 percent of the candy production in this country.

In appearing for this industry we do not pose as tax experts. We have come here as laymen with a great respect for the knowledge of taxation, which your joint committee represents. We desire to be helpful-helpful to you as well as to our industry.

We do not want the claims of our industry to be in conflict with the setting up of a system of just taxation, and we do not believe that any such conflict exists, or need exist. Out of our knowledge of the confectionery industry, we desire to give you information and viewpoint which will help you deal justly with that industry, as we know you wish to do.

We ask only that candy and confectionery be given their proper place in a taxation system, that they be treated equitably with other food products.

Therefore, in considering the proposed legislation set forth in S. 813 and H. R. 2290, we wish to urge the following deletions on page 5 of each bill:

Line 2, after “Milk products”, delete the words "other than candy and confectionery”.

Line 5, after “sugar products”, delete the words "other than candy and confectionery".

Lines 7 and 8, after "cocoa products”, delete the words other than candy and confectionery”:

It is candy as a food that we ask you to consider and, in doing so, we urge that you think of food in terms of modern life and modern standards of dietetics and not in terms of tradition and early experience, when candy was eaten almost entirely as a pleasing delicacy and was given to children as a reward for good behavior.

The candy industry, through its many departments and with the assistance of the Nation's leading dietitians, is giving the public one of the most wholesome of food products at a price that all can afford. Candy itself is not only a food but, in common with most other wholesome foods, draws its basic elements from the great food industry-agriculture.

The United States Department of Commerce in 1944 reported that this industry used 77 varieties of agricultural products—3,219,756,000 pounds—with a value of $286,317,000. For example, some of the ingredients going into the production of candy are, approximately, $26,000,000 worth of milk and dairy products, 10,000,000 dozen eggs, $2,000,000 worth of fruits, $57,000,000 worth of nuts, and $57,000,000 worth of sugar. Due to the scarcity of sugar, the candy industry is using even more fruits, nuts, corn sirup, honey, and other food ingredients which supplement the use of sugar.

Candy quickly relieves fatigue. The most exhaustive studies were conducted by the Government, with the assistance of many of the Nation's foremost dietitians, to determine the contents of the emergency rations for the armed services. Candy was used extensively in these rations where space was a factor and the maximum of food energy was required. The Government was not buying nonessentials for the members of the armed services; it was buying food essentials.

Candy as a food has frequently been given authoritative recognition. In a notable case on May 10, 1939, the Supreme Court of OhioE. A. Andrews v. the State of Ohio-held that candy was a food and that therefore under the constitution of the State of Ohio, since other similar foods were not subject to tax, the retailer did not have to pay a sales tax on candy.

After the submission of plenty of evidence proving that candy is an important wholesome food, the Congress in 1934 repealed an excise tax on candy.

The Committee on Ways and Means, House of Representatives, when considering revenue revisions of 1941, 1942, and 1943, after

careful deliberation based on the evidence presented during these hearings, agreed that candy and confectionery should not be subject to tax from which other similar foods are exempt. For the record we respectfully refer you to these published hearings.

We do not wish to burden the committee with voluminous documentary evidence from leading authorities, establishing candy's recog. nized importance as a food. However, if the committee so desires, we will be very glad to furnish additional evidence to support this conclusion.

To exempt from taxation milk products, sugar products, and cocoa products, and then single out candy and confectionery and make these the one exception would be to discriminate against candy and confectionery in relation to other wholesome foods and to work an injustice upon the consumer and the candy industry itself. It is, therefore, urged that this discriminatory provision be deleted from these two bills.

Mr. Chairman, I would like very much to have you hear a brief statement from Mr. C. E. Steidel, vice president of the Fannie May Candy Co., Inc., a local manufacturer.

Mr. BATES. We will be glad to hear from him.

STATEMENT OF C. E. STEIDEL, VICE PRESIDENT, FANNIE MAY

CANDY CO., WASHINGTON, D. C. Mr. STEIDEL. My name is C. E. Steidel. I am vice president of the Fannie May Candy Co., 1010 E Street, NW., Washington, D. C. Our company manufactures candy in the District of Columbia and sells it through its own retail stores within the District of Columbia.

Our company has been operating in the District of Columbia for 29 years.

The candy industry is an extremely complex industry. Its products consist of innumerable types of candies, packaged in many sizes.

I would like to present as evidence a chart showing the distribution of candy sales, by type and price, as prepared by the Department of Commerce and based on an annual survey which the Department makes covering confectionery sales and distribution throughout the United States.

(The chart referred to appears on the opposite page.)

You will note from this chart that 65 percent of all candy is sold to the public for pennies, nickels, and dimes and 3.9 percent is sold in the form of gift packages. Our business, and that of numerous other concerns, is predominantly in the plain-package field, which represents 10.3 percent of the total volume of business.

The retail-sales-tax bills, which are before you are not only discriminatory with respect to nonconformity of taxes on all foods but also are discriminatory with respect to taxes on candy.

Section 3 (b) authorizes the Commissioners— to exempt from the taxes imposed by this title any and all sales, the cost of which amounts to 50 cents or less.

This is a gross discrimination against different segments of the candy industry, in that the sale of candy as bars and low-weight packages could be exempt from the tax at the discretion of the Commissioners, but the purchase of bulk or boxed candy in excess of 50 cents would be taxable.

The Distribution of Candy Sales

by Type and Price, 1945

PENNY GOODS 3.1 %

AVERAGE VALUE 18.9 CENTS PER LI.

FANCY PACKAGES

3.9%
AVERAGE VALVE
125 CENTS

PLAIN
PER LB.

PACKAGES

10.3%
AVERAGE VALUE
26.9 CENTS PER LB.

BARS
16. SC AND OTHERS

53.1%
AVERAGE VALUE
23.6 CENTS PER LE.

BULK CANDY

19.3 % AVERAGE VALUE 107 CENTS PER U.

S AND 10

PACKAGE
OTHER THAN BARS

9.1%
AVERAGE VALUE
2.0 CENTS PER LB.

Our candies are purchased primarily for home consumption. They are recognized as family boxes, the sales of which are higher on Friday and Saturday than other days of the week because the family wants candy in the house over the week-end.

Obviously, to place a tax on the products sold by our type of retail candy outlet is unfair, when there are so many other types of candy, as well as retail outlets, which sell candy on which there might be no sales tax.

Mr. Chairman, you will find on your record Mr. Philip Gott, who is vice president of the National Confectioners' Association, who has come from Chicago to present to you very briefly several facts pertaining to confectionary, if he may.

Mr. BATES. Mr. Gott.

STATEMENT OF PHILIP P. GOTT, PRESIDENT, NATIONAL

CONFECTIONERS' ASSOCIATION

Mr. Gorr. I would like to set up this exhibit, if I might, Mr. Chairman, to facilitate the presentation.

My name is Philip P. Gott, president of the National Confectioners' Association, with headquarters in Chicago, with members in the District of Columbia and throughout the country.

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