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if that same department store chose to use machines instead of overthe-counter selling.

This would amount to a tax on a mode of selling rather than on the merchandise sold.

Moreover, there are many outlets here in this city which, in addition to selling cigarettes through a vending machine, also carry them behind the counter in small quantities for the purpose of having same on hand should the machine go out of order, or more frequently, to carry brands which are not stocked in the machines.

The manner in which the bill is now written would require the retailer to purchase a license and would also require the vending machine operator to purchase a license.

Moreover, by setting up a separate classification for retailers and vending machines, the license for each of which is separately stated, "at a rate not to exceed $5," it is possible, although not probable in view of the fair-mindedness of the Commissioners-that a license fee of 50 cents might be set up for retailers and a license fee of $5 for each and every vending machine.

Operators of vending machines seek no special tax privilege. However, if each establishment is required to pay “X” dollars for a license to sell cigarettes, the vending machine operator is willing to pay "X" dollars to operate a machine or machines in that same establishment.

The vending-machine operator does not want to be singled out for special taxation.

For the information of the committee, there are at least 11 States in which licenses for cigarette retailers and cigarette vending machines are identical and in the amount of $1 each, or less. Included among them are Massachusetts, New York, Rhode Island, Vermont, and Washington.

Incidentally, there was killed in the Vermont Senate on April 3 a bill to provide for a fee of $5 for each vending machine outlet; therefore, the present law remains, that a cigarette-vending machine is classed as a retail outlet, a $1 fee being required for same.

The above arguments may appear a trifle academic to the committee. However, my particular industry has been battling over the last 20 years to remove from the public's mind the idea that machines should be taxed per se.

The profit from our business comes from the sale of merchandise which the machine contains and not from the machine itself, just as the retailer makes no profit from the number of shelves on which his merchandise is stocked.

Attached to the formal memorandum which I am submittting, is a copy of the cited bill, showing the slight changes which would accomplish the effect desired; namely, to establish one category composed of the retailer, and the vending machine.

Now, finally, to descend to a practical matter which concerns our business probably even more than the previous one: - We refer to the amount of the license, which may be set, at the discretion of the Commissioners, at a rate not to exceed $5 for each and every such machine. It is respectfully pointed out to the committee that a license of $5 is altogether out of proportion to the regulation

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necessary and, in the case of our business alone, would require an annual payment of $7,725 for the 1,545 machines installed within the District of Columbia.

Audited records for our fiscal year, which I am perfectly agreeable co submit to the committee in closed session, show that the net profit from each cigarette-vending machine is slightly less than $18 before Federal income tax.

It must be remembered that the sale of cigarettes through machines is a supplementary, casual sale.

In those retail establishments where there is a large volume of business, the proprietor will always prefer to provide a cashier or other person to sell them.

The committee will probably be surprised to learn that the average daily sale of cigarettes through machines in the District of Columbia amounts to 15 packages.

For the most part, machines are located in outlets only having an occasional call for cigarettes, and particularly in out-of-the-way offices, shops, and buildings, where management desires cigarettes to be available on the premises. Thus, with a net profit of only $18 per machine, a license of $5 would amount to a levy of more than 27 percent of the profits of this entire business.

In one fell swoop it would more than double the taxes we already pay to the District, since we paid $7,000 last year,

This is an unreasonable burden which we do not think it is the desire of your committee or the Congress or the District Commissioners to impose on any particular category of retailer.

Neverthelessand this is the important point-just such a condition can be created if the present bill is permitted to stand as it is written.

Therefore, we earnestly request your committee to remove this serious threat to our business by setting a maximum license of not more than $1, which, as it has been mentioned earlier, is the very amount in the same States in which most of this committee's members reside. In conclusion, may I again state my basic feeling, that the tax is

I undesirable because of the geographical nature of the District, which would cause a decrease in local cigarette sales.

Should the committee fail to be impressed with these objections which the other speakers and myself have made, I respectfully ask. them to make the alterations in the bill which I have suggested (1) to put the vending machine and the retailer on a parity, both as to. classification and as to amount of license; and (2) that the license fee be prescribed at a rate not to exceed $1, which is certainly adequate for regulatory measures. I thank you, gentlemen, for your kind attention.

Senator Cain. You have raised several questions in my mind about your business, with which I am totally unfamiliar, and I appreciate that very much.

If you will leave what you care to leave for the record thenMr. GOLDMAN. I should like to leave this whole memorandum, with: the attached statement. Senator Cain. Very well.

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(The material referred to is as follows:)

MEMORANDUM IN CONNECTION WITH H. R. 2281 AND S. 838, CITED AS THE "DISTRICT

OF COLUMBIA CIGARETTE Tax Act"

The above-cited bills, which appear to be identical, seek "to raise additional revenue for the Government of the District of Columbia by levying a tax on the sale of cigarettes in the District of Columbia and for other purposes." We re spectfully call your attention to that portion of the bill dealing with vendingmachine operators' license as set out on page 6, paragraph B.

The said paragraph B sets up a vending-machine license by creating a classification which may cause considerable confusion and may lead to double, or discriminatory, taxation, which we feel is not the intention nor desire of your committee. Vending-machine operators are retailers, and, as such, would already be included under the tax law as levied in the preceding paragraph of section 6.

The operator of merchandise-vending machines is a retail merchant. Along with other retail merchants, he already pays all required taxes and licenses. (As an illustration, attached herewith please find certified schedule of District taxes paid by this company for the fiscal year ended September 30, 1946, in the amount of $7,029.81.) The vending machine operator does not, in any manner, seek special tax privileges but desires only to be treated in the same manner as other retail merchants.

Vending machines bave been recognized by the United States Congress as an established method of retailing. This was evidenced in the revenue bill of 1941 when Congress made its intent clear by not including vending machines under the excise taxing provisions of that act, thus: “The term does not include bona fide vending machines in which are not incorporated gaming or amusement features."

Each year sees a larger number of State legislatures recognizing, by statute, the identity, for tax purposes, between the outlet and retail autfit and the mechanical vending outlet. Within the past few days, Maine and Montana hare done exactly this.

Maine: Section 187, house bill 23, approved March 13: “Each vending mashall be considered a retail outlet

Each application for a retail-outlet Hcense shall be accompanied by a fee of $1."

Montana : House bill 269, approved March 11, is very similar. "The word dealer shall mean any person other than a distributor, who is engaged in selling cigarettes at retail, and shall also mean cigarette-vending machines.

“Each cigarette-vending machine shall be licensed at a particular place of business, provided that only one machine is to be licensed at a particular place of business where the licensee has more than one machine in operation."

Being a retailer, the vending-machine operator desires to be placed in the category of a-retailer and not in the position of one outside the fold so as to warrant a special taxing section.

Therefore, in order to avoid discrimination both in classification and, possibly, in the license itself, it is respectfully requested that the following changes be made in the cited bills (copy of bill incorporating these changes appended hereto):

Page 6: Line 1, substitute "two” for “three"; lines 12, 13, 14, strike; line 15, strike “B Vending Machine Operator's License"

Page 7: Line 1, 2, strike "at a rate not to exceed $5 for each and every such machine" and substitute "at a rate not to exceed $1 for each retail establishment."

Line 3-Change section designation from "C" to "B".

It will be noted that the requested change would reduce the license rate from a maximum of $5 to a maximum of $1. It is respectfully pointed out that a license of $5 is altogether out of proportion to the regulation necessary, and, in the case of the writer alone, would cause him to pay annually the sum of $7,725 for the 1,545 machines installed within the District. Audited records for the year ended September 30 (which the writer will furnish the committee, if it so desires) show that the annual net profit from each cigarette-rending machine (before Federal income tax) amounted to slightly less than $18.

Thus, a license of $5 would amount to a levy of more than 27 percent of the profits of this business. In one fell swoop it would more than double the taxes

already pay to the District. This is an unreasonable burden which we do not l; it is the desire of the Congress or of the District Commissioners to impose

ticular category of retailer.

Nevertheless, just such a condition can be created if the present bill is permitted to stand as it is written, namely, at "$5 for each and every such machine." Therefore, we earnestly request that this serious threat to our business be removed by setting a maximum of not more than $1.

As a matter of principle, we have earlier requested to be included as a retailer and thus not to pay any higher license than such a retailer would be obliged to pay. If the committee, in its deliberation, should feel obliged to retain separate sections—one for the retailer and one for the cigarette-vending machine-we still earnestly request that the license fee for each be identical, namely $1.

For the information of the committee, there are at least 11 States known to the writer in which licenses for cigarette retailers and cigarette vending machines are identical and in an amount of $1 each, or less, namely, Connecticut, Delaware, Louisiana (no charge if applied for before February 1), Maine, Massachusetts, New Hampshire, New Mexico, New York (no charge), Pennsylvania, Rhode Island, Vermont, and Washington.

In conclusion, it is pointed out that the cigarette vending machines operated by this concern and others sell approximately 12 percent of the cigarettes sold in the District. In this respect, they will account for approximately $100,000 of the estimated $800,000 to be realized by the District from the levying of this 1-cent tax on cigarettes. Respectfully submitted.

A. GOLDMAN, President, the G. B. Macke Corp., Washington, D. C.

OSCAR J. BERNSTEIN & Co.,

WASHINGTON 5, D. C., March 25, 1947. To Whom It May Concern:

This is to certify that the G. B. Macke Corp. has paid various taxes to the District of Columbia during the year ended September 30, 1946, as follows: D. C. personal-property tax. $3, 489. 82 | D. C. corporation license--- $10.00 D. C. income tax.. 1, 684. 66 Food license_

5. 00 D. C. auto licenses. 778. 57 | Pyroxylin license.

5. 00 D. C. real-estate tax. 740. 98 Tax on safe deposit box_-

3. 00 D. C. unemployment tax.--- 197.23 Boiler license-

1. 00 D. C. water rent-business.. 104. 55 D. C. elevator license..

10.00 Total taxes and licenses. 7, 029. 81 Respectfully submitted,

Oscar J. BERNSTEIN & Co.,
By OSCAR J. BERNSTEIN,

Certified Public Accountant. SEC. 2. DEFINITIONS.-As used in and for the purposes of this act, unless the context indicates otherwise:

(a) The word "cigarette" shall mean any roll of tobacco, or any substitute therefor, wrapped in paper or in any substance other than tobacco.

(b) The word “person” shall mean any individual, partnership, corporation, association, receiver, executor, administrator, trustee, conservator, or other representative appointed by order of any court.

(c) The word “District" shall mean the District of Columbia.

(d) The word "Commissioners' shall mean the Commissioners of the District of Columbia.

(e) The words “designated District agency” shall mean any officer, employee, department, office, or agency in or under the municipal government of the District of Columbia who or which is designated by the Commissioners to perform a function or duty under the terms and provisions of this act.

(f) The word "sell" or "sale" shall include offering for sale, keeping for sale, bartering, trafficking in, peddling, and any transfer or exchange in any manner or by any means for a consideration.

(8) The term "original package” shall mean the individual package, parcel, or other container in which cigarettes are put up by the manufacturer to which is affixed the required United States Government Internal Revenue stamp, and the Commissioners may, by regulation, include within this definition any wrapper immediately enclosing such package, parcel, or other container.

(h) The word "stamp' shall include impressions made by metering machines authorized to be used under the provisions of this act.

SEO. 3. IMPOSITION OF TAX.-(a) There shall be levied, collected, and paid on all cigarettes sold in the District by licensed wholesalers, licensed retailers, or

by licensed vending-machine operators, to consumers, a tax at the rate of 1 cent on each 20 cigarettes or fractional part thereof, such tax to be levied, collected, and paid once only on cigarettes sold as aforesaid.

(b) Said tax shall be collected by and paid to the Collector of Taxes of the District and shall be deposited in the Treasury of the United States to the credit 'of the District.

(c) Said tax shall be collected and paid by the affixture of a stamp or stamps secured from the Collector of Taxes, denoting the payment of the amount of the tax imposed by this act upon such cigarettes, each such affixture to be on the original package, unless the Commissioners shall by regulation permit otherwise. Cancellation of such stamps shall be in the manner prescribed by regulation approved by the Commissioners.

(d) The Collector of Taxes shall furnish suitable stamps, to be prescribed by the Commissioners, denoting the payment of the tax imposed by this act and shall by the sale of such stamps at the amounts indicated on the faces thereof cause the said taxes to be collected.

(e) If at the time of acquisition of original packages by licensed retailers or by licensed vending-machine operators such original packages do not have affixed thereto the stamp or stamps denoting payment of the tax imposed by this act it shall be the duty of each such retailer and vending-machine operator to affis to eacı such original package such stamp or stamps before selling or delivering cigarettes to consumers and before removing or permitting the removal of cigarettes from the licensed premises or licensed vending machines of such retailers or operators for delivery to consumers.

(f) No person shall use or cause to be used for the payment of the tax imposed by this act a stamp already theretofore used for the payment of any such tax.

(g) Any person who shall counterfeit or forge any stamp required or authorized by this act shall, upon conviction, be subject to a fine not exceeding $5,000 or to imprisonment of not more than 2 years, or to both such fine and imprisonment.

(h) The Commissioners are authorized by regulation to permit licensees to pay the tax imposed by this act by the method of imprinting impressions upon original packages by the use of metering devices in lieu of the method of paying such tax by the affixture of stamps : Provided, That the Collector of Taxes shall control the use of such metering devices. In addition to their usual meanings the terms "affix stamp", "affixture of stamp or stamps”, and like terms shall mean and include the imprinting of impressions denoting payment of the tax imposed by this act as authorized by this section.

(i) Stamps may be purchased only by licensed wholesalers, by licensed retailers, and by licensed vending-machine operators. Discount from face value of such stamps at a rate not to exceed 10 percentum may be allowed under such terms and conditions as the Commissioners may by regulation prescribe.

Sec. 4. No person shall within the District of Columbia, manufacture for sale, keep for sale, sell, or offer to sell cigarettes, or display cigarettes for sale in vending machines, without having first obtained a license or licenses under this act for such purpose or purposes.

SEC. 5. The designated District agency is authorized to issue licenses to individuals, partnerships, or corporations, but not to unincorporated associations, on application duly made therefor for the manufacture or sale of cigarettes within the District of Columbia. The designated District agency shall keep a full and complete record of all applications for licenses and of action taken thereon.

SEC. 6. Licenses shall be of two kinds, namely:

A. RETAILER'S LICENSE.-Such a license shall authorize the holder thereof to keep for sale and to sell cigarettes to consumers, from the place therein designated and to deliver such cigarettes to consumers in original packages: Provided, That cigarettes may be sold in number less than the number contained in the original package if such sales be permitted by regulations approved by the Commissioners. A separate license shall be required for each such place or establishment. Such a license shall not authorize the licensee to sell to other licensees for resale.

Such a license shall authorize the holder thereof to sell or offer to sell cigarettes from or by means of vending machines located in the place or places described therein. The Commissioners may by regulation require that a separate license be obtained for each machine or may permit a blanket license for one or more machines and may also prescribe that evidence of licensing of such machines

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