PREFACE.

IT has been my design in the preparation of this Manual to furnish to the offi cers of the revenue, to business men, and to members of the legal profession, such authority and information for the transaction of business, as can be derived from the proceedings, experience, and decisions of the Office of Internal Revenue. In the execution of this design I have received the aid and counsel of Commissioner Lewis, Deputy Commissioner McPherson, and of the clerks of the largest experience in the administration of the excise system. Among these I mention Messrs. George Parnell, William Richards, W. F. Downs, A. B. Johnson, and W. J. Gilbert.

I am also indebted to Mr. George G. W. Morgan for constant, intelligent, and faithful aid in the labor of compilation.

I do not claim that the treatise is either accurate or complete; but it is the best which, under the circumstances, it was practicable for me to prepare.

The following correspondence with the Hon. the Secretary of the Treasury indicates the plan of the work, and is the authority for the undertaking:

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“TREASURY DEPARTMENT,

Office of Internal Revenue, Washington, March 30, 1863. "SIR: Authority was given by Congress at the recent session for the publication of an edition of the Excise Laws, with such an index as might be prepared by the Commissioner of Internal Revenue. The index is now so far advanced that the printing may be commenced without delay.

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Many of the decisions which have been made from time to time have been printed by the office, in the newspapers, and by various persons who have prepared works upon the excise system; but these decisions have never been revised, and several of them are changed by the act of the third of March instant. There are also in the office many letters that were prepared by the Commissioner, relating to the application of the law to the pursuits and business of the people. It would be agreeable to me to prepare a hand-book, which shall contain the law, including sections from acts which do not relate exclusively to the internal revenue system, the decisions of the office, extracts from correspondence concerning the assessment and collection of taxes, together with the forms and regulations which have been established.

“I should undertake the labor without compensation, and with the understanding that the government might freely print the work for the use of its officers or for gratuitous distribution.

"It is my desire, however, to enter the work for copyright in my own name, with the privilege of publication, if there shall appear to be a demand therefor. "With great respect, your obedient servant,

"TREASURY DEPARTMENT, April 1, 1863. "SIR: I have received your letter of the 30th ultimo, suggesting the preparation by you of a Hand-book of Internal Revenue, which shall contain the acts and parts of acts relating to the subject, the decisions of the office, extracts from correspondence concerning the assessment and collection of taxes, together with the forms and regulations which have been established; the work to be prepared (without compensation) by you for the use of the department or for gratuitous distribution, the copy-right to be taken out in your name, and you to have the privilege of publishing the work, if there should appear to be a demand therefor.

"I approve the plan as set forth above, and hereby authorize its execution. "I am, very respectfully,

“S. P. CHASE,

“Hon. GEORGE S. Boutwell.”

"Secretary of the Treasury.

INTRODUCTION.

AMONG the historical events, originating in the present civil war, is the passage of the act "to provide internal revenue to support the government and to pay interest on the public debt," approved July 1, 1862. It was my privilege to organize the Office of Internal Revenue; and in my attempt to perform the duty I was sustained by the generous confidence and unwavering support of the Secretary of the Treasury.

I received notice of my appointment while I was at Cairo in the service of the War Department. I arrived at Washington on the 16th of July, and entered upon my duties on the following day. My first labor was to read the excise law, which I had not before seen. Within a few days the Secretary assigned me a single clerk, then a second, then a third, and from time to time additions were made, till the clerical force now numbers one hundred and forty persons.

I examined the records of the Excise Bureau, established during the war of 1812; but they furnished no aid whatever in the execution of the work that was before me. I had neither time nor opportunity to study the excise system of Great Britain; and hence the organization of the system of the United States was based upon, and grew out of, the requirements of the law. I do not deem this a misfortune. The preliminary work of the office consisted in the division of the States into collection districts, the examination of the papers filed in behalf of applicants for the places of assessor and collector, the preparation of forms and books, and of instructions to collectors and assessors.

The public anxiety in regard to the construction of the law induced a large amount of correspondence with persons in various parts of the country, and, in the month of October, the letters sent numbered, occasionally, eight hundred per day. A considerable portion of these letters were formal, and others were repetitions of opinions previously given; but each day compelled attention to a large number of new questions. The correspondence of the office was arranged in eight divisions, and a competent and experienced clerk was placed at the head of each. In the beginning the Commissioner read each letter, and indicated, briefly, the answer to be returned. As the business increased, a clerk was charged with the work of separating those letters which corresponded to letters answered previously from those that contained new inquiries. The latter were considered by the Commissioner, answers dictated, and the letters and answers referred to the clerks charged, respectively, with the several branches of business to which the letters pertained.

The preparation of revenue stamps early engaged the attention of the Com missioner. By the provisions of the law it was necessary that each stamp should indicate upon its face the nature of the paper or instrument to which it was to be applied. This requisition involved the preparation of a large number of engravings and dies, which were to be dissimilar in design or in appearance. As the time was limited, and in case an attempt should be made to procure stamps of various designs, the risk of failure in some instances, at least, would be great, it was thought that the leading feature in each should be the same. Upon consultation with the Secretary of the Treasury, and with his approval, the head of Washington, after Stuart's painting, was adopted. By the first of January, 1863, more than ninety stamps, of different designs and denominations, had been engraved and prepared for use.

It was contemplated by the law that stamped paper should be furnished, on which might be written the various instruments subject to stamp duty. It has not yet been found practicable to comply with this requisition.

A system of bookkeeping was established in conformity to the requirements of the law, the purpose being to enable the office to furnish at any time a statement of the amount of revenue derived from every article subject to taxation in each and every district throughout the country.

The assessment lists returned to the office are carefully examined in detail, and all errors in the rate of taxation, or in computation, are noted, and the assessor informed thereof. Inasmuch as the office is in possession of the name and residence of every assistant assessor, and the limits of every division or subassessment district, each officer can be made responsible at once for any error which he may have committed.

The practice of the office in the construction of the law has been controlled. by a few leading principles.

First. To levy a tax in those cases only which are clearly provided for by the statute, and, consequently, whenever a reasonable doubt exists, to rule against the government and in favor of the individual.

Second. In deciding whether an article is or is not a manufacture, to ascertain how it was regarded by business men at the time the excise law was passed; in all cases abstaining from inquiry as to the mode of preparation, or the nature or extent of the change produced. If the article in question was regarded by the makers and by business men as a new article of commerce, and it was produced by hand or machinery, it has been the practice to treat it as a manufacture under the law, unless specially exempt.

Third. To assess the tax upon articles manufactured and removed for consumption by the manufacturer, precisely as the tax would have been assessed if the articles had been removed for sale.

Fourth. In considering the law relating to the use of stamps it has been the

practice of the office to give that signification to the names used in the statute descriptive of various instruments subject to stamp tax, which is ordinarily given to such descriptive terms by business and professional men.

Guided by these rules, and sustained by the patriotic sentiments of the people, it is a matter for congratulation that the taxes assessed have, with few unimportant exceptions, been paid with cheerfulness, and in no portion of the country with more alacrity than in the States of Maryland, Missouri, and Kentucky. The receipts thus far have not corresponded with the anticipations of the framers of the law, nor sustained the estimate made by the Commissioner in December last. It is believed, however, that the deficiency is in a large degree temporary, and that the average monthly receipts of the fiscal year 1863-'4 will be considerably in excess of the average monthly receipts. from the 1st of September, 1862, to the 1st July, 1863.

The act of March 3, 1863, reduced the revenues of the country, and to the extent, probably, of several millions per annum. The difference between the actual receipts and estimates made is due in part to the action of Congress, and in part to circumstances connected with the business of the country, which were either unknown to the Commissioner or not sufficiently appreciated when the estimates were made. Congress also imposed new taxes, but the results have not yet been felt in the revenue receipts.

The estimate of the revenue to be derived from the tax on manufactures was based upon the product of the year ending 1st October, 1862. The product was necessarily large, growing, in part, out of the impetus given to that branch of business by the passage of the excise law, leading manufacturers to increase their operations to the greatest possible extent, in anticipation of the almost certain advance of prices consequent upon the imposition of the tax after the 31st of August.

The activity thus given to manufacturing industry at once supplied the market with goods and consumed the stock of raw cotton on hand. Hence it happened that the first year of the operation of the excise law found the country well supplied with goods and destitute of the material for continuing the manufacture upon a large scale. The revenue was thus diminished in amount by circumstances which were not clearly foreseen, or which were not sufficiently considered when the estimates of December were made.

A corresponding impetus was given to every other branch of manufacturing industry during the months of May, June, July, and August, 1862, followed by a decrease, more or less considerable, from September to the present time. The stamp tax took effect, nominally, on the 1st of October, 1862, but the office was unable to furnish a supply of all denominations of stamps until the 1st day of the following January, and their use was not made imperative by law until the 1st day of June, 1863. It may therefore be assumed that the revenue from all sources has been less than it will be in future.