(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 respectfully 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 have 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 have 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 license 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-vending 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 we already pay to the District. This is an unreasonable burden which we do not think it is the desire of the Congress or of the District Commissioners to impose on a particular 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.

740. 98

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--

D. C. auto licenses_

D. C. real-estate tax

D. C. water rent-business__

104.55

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.

(g) 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.

SEC. 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 affix to each 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

be attached to each such machine by means of markers, stickers, or otherwise. The annual fee for such a license shall be fixed by the Commissioners at a rate not to exceed $1 for each retail establishment.

B. WHOLESALER'S LICENSE.-(1) Such a license shall authorize the holder thereof to manufacture or to purchase or otherwise to acquire and to sell cigarettes in original packages to any person holding a license under this act as wholesaler, retailer, or vending-machine operator, or to consumers.

(2) Such a licensee may at his election purchase from the Collector of Taxes and affix to original packages stamps denoting payment of the tax imposed by this act and, upon delivery to a vendee licensed under this act, of such original packages with such stamps properly affixed may add to the selling price of such cigarettes an amount equal to the face value of such stamps and collect such amount from such vendee. If a wholesaler licensed hereunder shall sell cigarettes to consumers, it shall be the duty of such wholesaler prior to the sale and delivery of such cigarettes to affix to the original packages the stamp or stamps denoting the payment of the tax imposed by this act.

(3) A license as wholesaler shall authorize the holder thereof to manufacture at and to sell cigarettes from the place or places in the District therein designated. The Commissioners are empowered in their discretion to authorize, by regulation and upon such terms and conditions as they may require, the issuance of such a license for a place outside the District. A separate license shall be required for each such place within or without the District.

The annual fee for each such license shall be fixed by the Commissioners at a rate not to exceed $50.

SEC. 7. Licenses issued under authority of this act shall remain in effect for periods as may be fixed by regulation approved by the Commissioners, not exceeding 1 year from the effective date of such licenses or unless revoked prior to their expiration.

Licenses issued under this act may be suspended or revoked for any violation of this act or the regulations issued thereunder, by the Commissioners or by a designated District agency, after hearing held by a designated District agency. SEC. 8. The taxes imposed and the licenses required by this act shall be in addition to the taxes imposed and the licenses required by any other act.

SEC. 9. This act shall be administered by designated District agencies except where specific duties are imposed upon specific officers by the terms hereof. The Commissioners are authorized to make rules and regulations to carry out the provisions of this act.

SEC. 10. The Commissioners are authorized to employ personal services in accordance with the Classification Act of 1923, as amended, and to incur such other expenses as may be necessary to carry out the provisions of this act and to include such amounts in their annual estimates.

SEC. 11. Whoever violates any provision of this act for which no specific penalty is provided, or any of the rules and regulations promulgated under the authority of this act, shall be punished by a fine of not more than $1,000 or by imprisonment for not longer than 1 year, or by both such fine and imprisonment, in the discretion of the court. Prosecutions for violations of this act shall be on information filed in the municipal court for the District of Columbia by the Corporation Counsel or any of his Assistants, except for such violations as are felonies, and prosecutions for such violations as are felonies shall be by the United States Attorney in and for the District of Columbia, or any of his assistants.

SEC. 12. Nothing in this act shall be construed as repealing any portion of section 7 of the District of Columbia Appropriation Act for the fiscal year ending June 30, 1903, approved July 1, 1902, as amended.

SEC. 13. If any provision of this act, or the application thereof to any person or cirmumstances, is held invalid, the remainder of the act, and the application of such provisions to other persons or circumstances, shall not be affected thereby. SEC. 14. EFFECTIVE DATE.-This act shall take effect 90 days after enactment.

STATEMENT SUBMITTED TO THE JOINT SUBCOMMITTEE ON FISCAL AFFAIRS, DISTRICT OF COLUMBIA, BY DEPARTMENTS THAT HAVE NOT TESTIFIED. AND COVERING A 10-YEAR PERIOD

1942: Increase of 15 employees developed by transfer of budget, personnel and retirement sections from the Auditor's Office to the Executive Office. In addition the operation of Public Law 200, Seventy-seventh Congress, approved August 1, 1941, authorizing within-grade increases required provision to be made for such increases.

1943: Increase of six employees is accounted for by the addition of three clerical employees to absorb the increased volume of business; an assistant to the Secretary, Board of Commissioners, and two investigators in the Personnel Unit. 1944: Increase of six employees is accounted for by the addition of three special assistants to provide an administrative aide to each Commissioner and three employees to be utilized for "special service. It should be noted that the salary figure includes overtime compensation authorized by the act of December 22, 1942.

1945: The decrease of six employees is accounted for by retransfer of the Retirement Section to the Auditor's Office. It should also be noted that the salary figure includes overtime compensation authorized by the act of December 22, 1942.

1946: The increase of five employees is accounted for by the addition of three clerks to absorb added administrative detail; transfer of the Chief, Division of Printing and Publication; one budget analyst.

The 10-year personnel increase of 150 percent is more apparent than real by virtue of the fact that 9 of the employees added resulted from interagency shifts. Fourteen employees have been added by virtue of the increased administrative burdens imposed on the Office as reflected in the foregoing statements plus three employees carried for the purpose of rendering special service to the appropriation committee chairman. It should also be borne in mind that the Mead-Ramspeck Act of August 1, 1941, and the Overtime Act of December 22, 1942 contributed to the salary increases reflected in the above statement.

1938: Increase of two employees-one attorney (P-5) and one stenographer (CAF-3)-to handle the tax work resulting from the passage of the new revenue act to provide additional revenue for the District of Columbia.

1939: Increase of three employees-two attorneys (P-3 and P-2) and one junior stenographer (CAF-2)—to take care of the additional tax work resulting from the passage of the 1939 Income Tax Act and the creation of the Board of Tax Appeals for the District of Columbia, as well as the increase in legislative