*1370 Taxpayer corporation, a manufacturer of sporting goods, kept its books on an accrual basis. In the fiscal year 1937 additional excise taxes and interest thereon for the period July 1, 1933, to February 29, 1936, were asserted against the taxpayer. In the fiscal year 1938 a compromise was made and the amount agreed upon was paid by the taxpayer. Held, taxpayer is not entitled to a deduction on its 1937 income tax return of the amount so paid in 1938 which was accrued by it in 1937.
*161 This proceeding involves asserted deficiencies in income and excess profits taxes for the fiscal year ended February 28, 1937, in the amounts of $3,163.89 and $430.04, respectively. The sole question involved is whether petitioner, keeping its accounts on the accrual basis, is entitled to a deduction in the fiscal year 1937 as a business expense or loss, in the amount of $10,142.69, or any part thereof, representing additional tax on sporting goods and interest thereon proposed against it for the period July 1, 1933, to February 29, 1936, by*1371 the respondent in January 1937, for which a payment in a slightly lesser sum was made by petitioner during its fiscal year 1939, following a compromise settlement of the asserted liability.
FINDINGS OF FACT.
Petitioner, a manufacturer of articles used both as sporting goods and as general wearing apparel, is a corporation organized and existing under and by virtue of the laws of the State of Missouri, with its principal office in the city of St. Louis. Petitioner has for many years kept its books and accounts on an accrual basis and has filed its income tax returns on such basis.
The items sold as sporting goods or used as sporting goods were subject to the excise tax imposed by section 609 of the Revenue Act of 1932, while all other items were sold without tax.
When the 1932 Act was passed, petitioner wrote to the Commissioner seeking information about the tax on sporting goods. Failing to receive an answer, advice was sought from the local collector of internal revenue as to what price was to be used in computing the tax and which date should be used in paying the tax on merchandise *162 sold under the industry-wide dating plan. The local collector made certain*1372 rulings and informed petitioner thereof.
Petitioner made every effort to comply with the excise tax regulations and rulings known to it, and was given a clear approval after an audit consuming several days in 1934. The petitioner's returns were again checked and its books audited in October 1935, at which time it was again given clear approval up to June 30, 1935, except for a small additional tax which was assessed and paid. Petitioner's books were again audited beginning in the summer of 1936, and covering the period from July 1, 1933, to June 30, 1936. In the course of this audit, the deputy collectors making the audit relied on several private rulings issued by respondent which had never been published and which were contrary to many of the rulings relied upon by petitioner.
When the deputy collectors produced these private rulings, the petitioner asked leave to obtain individual rulings on the more important points, first by submitting copies of its catalogues to be marked by the respondent and later by letters covering each point.
In January 1937 petitioner received from the collector of internal revenue at St. Louis a report of the audit for the period from July 1, 1933, to*1373 June 30, 1936, disclosing an additional excise tax of $8,909.67, with interest of $1,695.35, or a total of $10,605.02. Petitioner's treasurer and secretary called on the deputy in charge of miscellaneous tax and sought permission to examine the deputy collector's records on this last audit, which request was refused, as was a request for time in which to make payment. At this conference a jeopardy assessment was threatened. After the conference, petitioner accrued this additional excise tax on its books and treated it as a deduction in preparing its income tax return for the fiscal year ended February 28, 1937.
The petitioner then obtained leave from the respondent to check the deputy collector's figures, and spent the next year in checking and verifying the audit.
The magnitude of petitioner's excise tax problem may be seen from the fact that the petitioner issued an average of 150 invoices a day, the invoices containing an average of 7 items each, which meant a total of over 800,000 items had to be checked in the third audit and the reaudits. The various factors determining whether these items were subject to the tax were: (a) The use to which the articles were put; (b) *1374 whether sold as part of a uniform or not; (c) whether containing special features (such as letters, numerals, reinforcement, etc.); (d) whether sold as replacements or not; and (e) the size and quality of the article.
*163 On February 24, 1938, petitioner filed a protest with respondent, accompanied by a letter explaining the procedure followed in preparing the protest and further reciting that the bulk of the protest was aimed at clerical errors of the deputy collectors and taxes paid, but not credited to petitioner on the audit. During this year of auditing frequent rulings had been requested and received from respondent by petitioner and were used as the basis for petitioner's protest.
Respondent, after the filing of petitioner's protest, started to check it; but, as Congress had repealed the law, effective June 30, 1938, extended the audit further to cover that period. Several conferences were held and in September 1938 an additional tax and interest of $7,441.45 was agreed on and paid.
The audit made in the summer of 1936 and the final reaudit on which the tax was finally paid showed the following additional tax due in the various fiscal years:
| Fiscal year | 1936 audit | Tax paid |
| 1934 | $4,071.16 | $3,859.63 |
| 1935 | 2,991.98 | 2,664.55 |
| 1936 | 2,576.67 | 1,772.12 |
| 1937 | 730.14 | * 489.06 |
In the deficiency notice determining its taxable net income for the fiscal year 1937 the respondent allowed petitioner a deduction in the amount of $489.06, representing the additional tax on sporting goods for that fiscal year as finally agreed upon by the parties by way of the compromise settlement during petitioner's fiscal year 1939.
OPINION.
KERN: Petitioner's position in this proceeding is based upon the primary assumption that this liability based on an additional excise tax is not to be treated as a tax liability, but is to be treated as a business expense or loss and, therefore, subject to the rules applicable to business losses. That provision of the acts allowing deductions for taxes accrued or paid, depending on the basis of the taxpayer's report, is an exclusive section. Taxes which actually accrue against a taxpayer or which are paid by him can not be deducted under any other provision than section 23(c). "The general must succumb to the specific", *1376 . 1 The petitioner, therefore, has attempted to point *164 out that the excise tax upon sporting goods imposed by section 609 of the 1932 Act was not actually a tax upon itself, but rather one upon the vendee. In support of his contention he has pointed to section 625 of the act of the same year. The section last referred to, however, does not present the general basis of the excise tax, but specifically refers only to cases where the manufacturer had entered into contracts for the sale of taxable goods prior to May 1, 1932. We are not concerned here with any application of that section, nor do we feel that the inference which petitioner has drawn therefrom is correct. As we view the tax, it is upon the transaction (i.e., the sale by the manufacturer) and the vendor is liable for its payment, although the effect thereof is not to put the manufacturer out of pocket, inasmuch as he adds the tax to the sale price, which makes the ultimate purchaser the actual taxpayer. The liability for the payment to the Government of that tax, however, is the manufacturer's. Cf. *1377 ; ; ; ; ; , affirming .
Inasmuch as we disagree with petitioner's contention that the tax imposed by section 609, about which this controversy centers, was not upon this petitioner, we are forced to disregard his theory of business expenditure or loss. Assuming, as is here the case, that petitioner accrues or pays a tax assessed against itself, then the only relief afforded by way of Federal income tax deduction is to be found in section 23(c).
Petitioner has not based his deduction on section 23(c), however. On the contrary, he has specifically avoided this contention. The difficulty of claiming a deduction based on that section*1378 has been disclosed in ; ; affd., ; ; ; and . In the last cited case this Board said:
* * * It is well settled that the liability for Federal income tax is incurred in the year for which the tax is imposed, irrespective of the time the tax may be assessed or may become due and payable, for, all of the events upon which the tax is predicated having occurred in that year, the amount of the tax liability is then fixed by law and ascertainable. * * *
Although this excise tax liability seems to have been a decidedly complex matter, conducive to distinct differences of opinion as to what sales were taxable, nevertheless we see no reason for laying down a rule with regard to the time when the liability for Federal excise taxes is incurred different from that applicable to the liability *165 for Federal income tax, which is also frequently complex and involves differences of*1379 opinion.
Petitioner, on the accrual basis, could only have availed himself of a deduction in the earlier years for which the tax was imposed, not in the year here claimed, and then only by virtue of the provisions of section 23(c).
Decision will be entered for the respondent.