1942 BTA LEXIS 780">*780 1. On the facts held that during period in question petitioner shifted the burden of its liability for taxes imposed by the Bituminous Coal Conservation Act of 1935 in certain instances, so as to be liable to the tax on unjust enrichment, and did not shift the burden in other instances.
2. Date when excise tax was declared unconstitutional held to be crucial date in computing extent of unjust enrichment, rather than earlier date when payment under taxing statute was due.
46 B.T.A. 1035">*1035 By this proceeding petitioner challenges a determination of a deficiency of $1,758.06 in its unjust enrichment tax for the calendar year 1936.
The questions presented are (1) whether petitioner shifted the burden of the tax imposed by the Bituminous Coal Conservation Act of 1935, and (2) whether the tax was imposed by that act on sales made prior to May 18, 1936, when it was invalidated, or on sales made prior to March 31, 1936, by reason of the provision of that act that the tax shall be "payable monthly for each calendar1942 BTA LEXIS 780">*781 month, on or before the first business day of the second succeeding month."
46 B.T.A. 1035">*1036 Petitioner also raises but does not argue the issue as to the constitutionality of the unjust enrichment tax.
FINDINGS OF FACT.
The case was presented upon evidence adduced at the hearing.
Various stipulations were made which are hereby found accordingly.
Petitioner is a corporation engaged in the business of mining and selling bituminous coal, with its principal office at Tracy City, Tennessee.
Petitioner keeps its books and renders its tax returns upon the accrual basis and by calendar years. It filed a timely unjust enrichment tax return for 1936 (Form 945), with the collector for the district of Tennessee, in which it denied any liability for tax. Respondent has determined that petitioner had income from unjust enrichment in 1936 in the amount of $3,414.45 and has determined an unjust enrichment tax thereon of $1,758.06.
On August 30, 1935, Congress passed the Bituminous Coal Conservation Act, hereinafter sometimes referred to as the Guffey Act. Section 3 of that act levied an excise tax on the sale of bituminous coal of 15 percent of the sale price at the mine, and provided1942 BTA LEXIS 780">*782 for a credit or drawback of 90 percent of the tax if the coal producer accepted and complied with the code regulating the conduct of its business. The tax was "to be payable monthly for each calendar month, on or before the first business day of the second succeeding month." It took effect on November 1, 1935.
Pursuant to the Guffey Act a Coal Commission was established which promulgated rules and regulations to which the coal producers could subscribe and thereby receive the benefit of the 90 percent credit on their coal taxes. Petitioner subscribed to and operated under the rules and regulations of the Coal Commission. It thereby received the benefit of the 90 percent drawback so that its Guffey coal tax amounted to 1 1/2 percent of the sale price of its coal at the mine, or approximately $.03 a ton.
Petitioner filed tax returns under the Guffey Act for November and December of 1935 and January, February, and March of 1936. These returns disclosed the sales of coal and the amount of tax called for by the Guffey Act, but no such tax was ever paid by petitioner or accrued on its books or taken into its accounts in any manner or form. Petitioner obtained an injunction in1942 BTA LEXIS 780">*783 December 1935 against the collection of the tax and petitioner put up a bond. The Guffey Act was declared unconstitutional by the Supreme Court of the United States on May 18, 1936. 1 As a result of this decision petitioner was relieved of its liability for Guffey coal taxes which during 46 B.T.A. 1035">*1037 the period January 1 to March 31, 1936, amounted to $2,625.82 and for the period from January 1 to May 18, 1936, amounted to $3,346.15.
Aggregate average margin (Revenue Act of 1936, sec. 501(f)(1)) is correctly computed as follows:
| 1. Name of Commodity | COAL | |
| 2. Units of Commodity | 1,501,332.06 | |
| 3. Aggregate selling price of articles reported in item 2 | ||
| for 6 prior years | $2,586,024.07 | |
| 4. Aggregate Cost of articles reported in item 2, De- | ||
| pletion | 43,464.39 | |
| 5. Margin (item 3 minus item 4) | 2,542,559.68 | |
| 6. Average Margin per unit (item 5 divided by item 2) | $1.693535859 | |
| 7. Units sold during the taxable year for which com- | ||
| putation isbeing made | 116,350.80 | |
| 8. Aggregate average margin (item 6 multiplied by item 7) | 197,044.25 |
The extent of shift of the burden1942 BTA LEXIS 780">*784 of the Guffey tax (Revenue Act of 1936, sec. 501(e)(1)) is correctly computed as follows:
| 1. Name of Commodity | COAL | ||
| 2. Selling price of article with respect to which | |||
| the Guffey tax was imposed but not paid | $223,076.33 | ||
| 3. Cost of Materials entering into articles | $3,368.42 | ||
| 4. Aggregate average margin as computed above with | |||
| respect to the quantity of articles reported in | |||
| item 2 | 197,044.25 | ||
| 5. Total of items 3 and 4 | 200,412.67 | ||
| 6. Net income presumed to be attributable to | |||
| shifting to others the burden of the Guffey tax | |||
| (item 2 minus item 5) | 22,663.66 | ||
| 7. Amount of Guffey tax imposed with respect to | |||
| the articles | $3,346.15 | ||
| 8. Net income presumed to be the extent to which | |||
| the burden of the Guffey tax was shifted to others (items 6 or 7 whichever is the lesser) | $3,346.15 |
In 1935 and 1936 petitioner operated a union mine under labor contracts with the United Mine Workers of America. On October 1, 1935, petitioner's then existing contract with the union expired. A new contract not having been agreed upon, petitioner's mine closed.
On October 17 or 18, 1935, petitioner completed its negotiations with the union1942 BTA LEXIS 780">*785 and a new labor contract was executed. Wages in general were up and the contract granted wage increases to petitioner's employees, effective October 31, 1935, as follows:
$.09 a ton to coal diggers
$.50 a day to day men
$.70 a day to conveyer men
$.10 on yardage.
46 B.T.A. 1035">*1038 On October 24, 1935, petitioner's secretary-sales manager made his computation of the increased cost of production resulting from the above mentioned wage increases, based on the production of mine-run coal for the previous year. He determined that the wage increase would increase cost of production by $.167 a ton. "Mine-run coal" means the coal as it comes out of the mine before being screened into the 20 different sizes sold by petitioner.
The tons of coal mined by petitioner, the total labor cost, the labor cost per ton for the periods indicated, and the amount of increase per ton during the tax period over the three-month period preceding the wage increase are shown by the following:
| Tons mined | Labor cost | Per ton | |
| 1935 | |||
| July | 13,721.55 | $14,301.35 | $1.042 |
| August | 12,711.80 | 12,740.80 | 1.002 |
| September | 9,508.50 | 8,968.80 | .943 |
| Total | 35,941.85 | 36,010.95 | 1.002 |
| 1936 | |||
| January | 31,230.55 | $33,800.40 | $1.082 |
| February | 31,224.45 | 33,017.55 | 1.057 |
| March | 28,631.05 | 29,956.20 | 1.046 |
| April | 24,332.40 | 25,803.65 | 1.060 |
| Total | 115,418.45 | 122,577.80 | 1.062 |
| Average labor cost July, August, and September 1935 | 1.002 | ||
| Amount of increase | .06 |
1942 BTA LEXIS 780">*786 The tons of coal mined by petitioner, the total labor cost, and the labor cost per ton for the periods indicated are as follows:
| 1935 | Tons mined | Labor cost | Per ton |
| October | 10,356.50 | $10,466.30 | $1.011 |
| November | 15,410.75 | 16,751.15 | 1.087 |
| December | 25,754.10 | 25,645.20 | .996 |
| Total | 51,521.35 | 52,862.65 | 1.026 |
Following the invalidation of the N.I.R.A. on May 27, 1935, there were no fixed prices for coal until October 1940. Under the N.I.R.A. certain standard forms of contract were used which contained specific provisions with respect to increased labor costs, and petitioner continued to use the same forms after the N.I.R.A. was invalidated. The material provision was as follows:
The purchase price of coal specified herein is based in part upon the present agreement with the mine employees as to wages and any increase or decrease in the cost of production of coal shipped hereunder, caused by changes in such wage agreements, shall operate to increase or decrease correspondingly as the case may be. [sic ] the price of coal herein named, provided that any such increase or decrease in wages, shall not be applied to change the price specified1942 BTA LEXIS 780">*787 herein unless it is a part of the general increase or decrease in wages in the district which the mine or mines of the producer, from which the coal is 46 B.T.A. 1035">*1039 shipped, is located. Likewise, any increase or decrease in the cost of production, caused by the imposition by State or Federal statutes, of a direct tax on coal, or on the sale, or on the mining thereof, or by subsequent changes in the rate of such taxes, or by Federal or State legislation, operating to limit the hours of labor or by any other regulation, State or Federal, increasing the cost of production, shall correspondingly increase or decrease said price of coal on any tonnage hereinafter shipped hereunder. * * *
After completing its new wage agreement with the United Mine Workers petitioner set about to adjust its prices to the new costs. It found that the most of its coustomers, with whom it had contracts, would not take coal at increased prices, even though their contracts provided for the increase. Rather than lose these customers petitioner continued to fill their orders at the old contract prices. After January 1, 1936, there were only three customers under contract to whom coal was shipped at increase1942 BTA LEXIS 780">*788 over their contract prices. The names of the three, the tons of coal purchased at increased prices, the total sales price and the excess of sales price over the contract prices are as follows:
| Name | Tons | Total sales | Excess | Average excess |
| purchased | price | sales price of | per ton of | |
| over contract | sales price | |||
| price | over contract | |||
| price | ||||
| Easton Oliver Coal Co | 152.70 | $316.95 | $0.225 | |
| Lucas Coal Co | 154.95 | 311.73 | 25.07 | .161 |
| Stegall Coal Co | 72.50 | 250.13 | 50.75 | .700 |
| Total | 380.15 | 878.81 | 110.27 | .290 |
Prior to January 1, 1936, egg coal was shipped on the date shown to the following customers at the indicated figure over the contract price:
| Name | Date | Tons | Excess of sales price |
| over contract price | |||
| Easton Oliver Coal Co | Dec. 27, 1935 | 41 | $0.15 |
| Lucas Coal Co | Nov. 4, 1935 | 35.30 | .20 |
| Do | Nov. 27, 1935 | 37.80 | .30 |
| Do | Dec. 20, 1935 | 34.95 | .15 |
| Do | Dec. 31. 1935 | 37 | .15 |
| Stegall Coal Co | Oct. 21, 1935 | 35.20 | .25 |
| Do | Dec. 23, 1935 | 35.50 | .35 |
| Tullahoma Ice & Coal Co | Oct. 23, 1935 | 45 | .20 |
| Do | Dec. 20, 1935 | 36.80 | .40 |
Becaue of its inability to recover its increased labor costs on1942 BTA LEXIS 780">*789 contract customers petitioner found it necessary to raise prices on spot sales as much as possible in order to overcome the loss of profit on the contract sales.
Due to the unusually severe winter of 1935-1936, there was a greater demand for domestic coal than for small size coal, with the result 46 B.T.A. 1035">*1040 that petitioner began to accumulate slack. It had no storage facilities other than in railroad cars and it was allowed only a limited number of them at any time. It was necessary for petitioner to sell and move the slack for any price that it could get, even as low as $.40 per ton.
The Nashville, Chattanooga & St. Louis Railway Co. purchased over 50 percent of petitioner's total tonnage for the tax period. Prior to the N.I.R.A. petitioner had a written contract with the rairoad. They were unable to agree on a price satisfactory to the Code Authority, which would not approve a contract for sale of coal at less than $2.15 a ton. The parties continued their arrangement for coal at $2.05 a ton under a verbal agreement which was in effect during 1935. After the labor wage increase took place petitioner discussed its selling price with officials of the railway company and1942 BTA LEXIS 780">*790 in October 1935 the railway company agreed that it would pay an additional $.10 a ton, effective as of October 18, 1935, thus increasing the selling price per ton to $2.15. About the middle of April 1936 the railway company refused to comply with this increased price and thereafter petitioner received only $2.05 for the coal sold to the railway company.
Petitioner increased the sales price of 56,377.45 tons of coal from the contract price of $2.05 to the price of $2.15 per ton on that number of tons sold to the railway company. This increase of $.10 per ton amounted to $5,637.47. The amount of total labor increase by reason of wage increase on the 56,377.45 tons amounted to $3,382.65 (56,377.45 multiplied by $.06). The sum of $5,637.74 exceeded by the sum of $2,255.09 the actual increased cost of labor per ton on the coal sold.
The net result of the above increases was that petitioner's total realization on all coal sold on spot orders during the period January 1 to May 18, 1936, was $1.55 per ton of mine-run coal, while the average realization on all coal sold on contract during the same period was $2.06 per ton of mine-run coal. The average realization of coal sold during1942 BTA LEXIS 780">*791 the period January 1 to May 18, 1936, was $1.89 per ton of mine-run coal. These average price realizations are shown by the following tables:
| For Period January 1 to May 18, 1936 | |||
| Tons sold | Sales price | Average realization | |
| N.C. & St. .l. Ry. Co | 56,377.45 | $121,211.52 | $2.15 |
| 5,889.55 | 12,149.89 | 2.05 | |
| Total tonnage to railway company | 62,267.00 | 133,361.41 | 2.14 |
| Other contract tonnage | 17,666.25 | 30,928.50 | 1.76 |
| Total railway and contract tonnage | 79,933.25 | 164,289.91 | 2.06 |
| Spot orders | 37,464.95 | 58,178.92 | 1.55 |
| Total | 117,398.20 | 222,468.83 | 1.89 |
| For Period January 1 to March 31, 1936 | |||
| Tons sold | Sales price | Average realization | |
| N.C & St. L. Ry. Co | 47,737.85 | $103,268.11 | $2.15 |
| Other contract tonnage | 10,436.95 | 19,633.91 | 1.88 |
| Railway and contract | 58,174.80 | 122,902.02 | 2.11 |
| Spot orders | 33,192.25 | 52,152.90 | 1.57 |
| Total | 91,367.05 | 175,054.92 | 1.91595 |
46 B.T.A. 1035">*1041 The average realization during the three months immediately preceding November 1, 1935, was $1.95 per ton of mine-run coal. The average realization during the four months preceding November 1, 1935, was $1.945. The average realization for1942 BTA LEXIS 780">*792 the 12 months immediately preceding November 1, 1935, was $1.956.
Petitioner did not add the Guffey coal taxes to its invoices and it had no side agreements with its customers regarding the coal tax. Petitioner did not receive more for its coal than the sales price shown on its invoices.
Petitioner did not recover the aggregate of its increased lavor costs on all of its sales of coal during the periods January 1 to March 31, 1936, or January 1 to May 18, 1936. It shifted the burden of its liability for Guffey taxes during the period January 1 to May 18, 1936, to the extent of the tax imposed on the coal sold to the railroad, and to the Easton Oliver Coal Co., Lucas Coal Co., and Stegall Coal Co.
For the purpose of section 501(a)(1) of the Revenue Act of 1936, the net income from the sale of coal, for the calendar year 1936, was in excess of any amount of tax imposed by the Guffey Act or which may be held to have been imposed by that act on the sales of coal during 1936. For the purpose of section 501(e)(3) of the Revenue Act of 1936, the net income as defined by section 501(c) of the Revenue Act of 1936, from the sales of coal during the period or periods subject to the1942 BTA LEXIS 780">*793 Guffey coal tax, was in excess of Guffey tax which was imposed, or which may be held to have been imposed for such period or periods.
OPINION.
OPPER: The conclusions of fact set out in our findings dispose of all the disputed issues of fact. As the findings show, these are that petitioner passed on the burden of the tax with respect to some of its sales of the products upon which an excise tax was imposed but not paid and that with respect to others the tax was not passed on.
In arriving at this ultimate finding, we have relied upon the rules for evaluating evidence established by subsections 501(e) and (i). 46 B.T.A. 1035">*1042 By subdivision (e) a presumption of the existence and amount of the tax shift is created and by subdivision (i) provision is made for the introduction of evidence by which the presumption may be rebutted. Petitioner concedes that under the presumption there is shown to have been a passing on to others of the tax burden in the amount of $3,346.15. It claims, however, that the affirmative evidence suffices to rebut it. We think this is true as to certain of petitioner's sales. These were to customers with whom contracts had been made prior to the imposition1942 BTA LEXIS 780">*794 of the excise tax but containing the language "Any increase or decrease in the cost of production caused by the imposition * * * of a direct tax on coal or on the sale thereof * * * shall correspondingly increase * * * said price." Petitioner endeavored to collect the additional amount from these contract customers but in most cases was unsuccessful. As to them, therefore, it did not succeed in shifting the tax burden and the presumption had been rebutted. See .
In other instances, however, the evidence shows that the price of petitioner's product was increased by an amount exceeding the tax at about the time the tax liability arose, an increase which at least in certain instances was canceled at about the time the tax disappeared. This is evidence expressly made available to the respondent to demonstrate a shift of the tax burden. The delicate question of the precise legal effect of a presumption upon the weighing of evidence is accordingly absent here. See 1942 BTA LEXIS 780">*795 . For whether we say that petitioner has failed to overcome the presumption in respondent's fovor by its affirmative evidence; or that the presumption disappeared upon the introduction of evidence of the true facts, but that respondent's burden of going forward has been sustained by evidence tending to show that the tax burden was passed on; the conclusion is the same. On either hypothesis the ultimate effect of the record is that in certain cases petitioner shifted to its customers the burden of the excise tax upon the commodities sold and that accordingly it failed to bear it.
There is no evidence of any adequate increase in petitioner's costs or other showing that rise in price did not include a shifting of the tax burden. . It is contended that the increase in price was due solely to a rise in labor costs. But, as our findings show, the evidence fails to bear this out. Petitioner, to be sure, insists that the tax was not considered when the increase took place and concludes that this constitutes persuasive evidence of a failure1942 BTA LEXIS 780">*796 to pass the tax on. But if the facts show that the burden was 46 B.T.A. 1035">*1043 shifted, it is of no consequence what was petitioner's purpose or that it did not pass the tax on intentionally. "We are of the view, however, that plaintiff's intention or motive is immaterial. Certainly it is not controlling. The question at issue must be determined on the basis of what was actually done." See ;;.
Petitioner's claim that the statute is unconstitutional can not be sustained. ; .
The remaining question is whether the period to be covered ended May 18, 1936, when the Guffey tax was held to be invalid in the Carter case, or on the prior March 31, on the theory that no payment was due under the invalidated excise until the first day of the second month following, and therefore no tax was ever accrued from April 1 on.
1942 BTA LEXIS 780">*797 The description supplied by the statute of the tax to which the unjust enrichament levy relates is an "* * * excise tax * * * imposed * * * but not paid." Revenue Act of 1936, sec. 501(a)(1). It seems to follow that the question narrows to whether the Guffey tax was "imposed" during the period from April 1 to May 18 within the intent of that section. Since a tax may be "imposed" without being immediately payable or subject to collection, , the use of that word does not denote a legislative purpose to exclude the period in question merely because the tax was not then due. On the other hand, the general objective of the provision and its meager legislative history indicate that the intention was to include all taxes which might have been collected from others but not handed on to the Treasury, thus remaining as an unearned benefit in the hands of the supposed taxpayer.
That the purpose of the legislation under review is to recapture the principal portion of a taxpayer's income which can be thought of as unjust enrichment can not well be questioned. The principle is that if he collects the amount of an excise tax from some other1942 BTA LEXIS 780">*798 person, as for example his customer, and in addition escapes payment of the tax, he has been unjustly enriched to the extent of his collection. The converse situation, where a taxpayer is refused refund of a tax already paid because the burden has been shifted, is thus described by Mr. Chief Justice Hughes in : "While the taxpayer was undoubtedly hurt when he paid the tax, if he has obtained relief through the shifting of its burden, he is no longer in a position to claim an actual injury * * *."
The 46 B.T.A. 1035">*1044 present situation could not, of course, arise under the circumstances so considered; for the tax being as yet uncollectible there would ordinarily have been no payment to the fiscal authorities for which an application of refund could be made. That a similar principle exists, however, is clear from the discussion by sponsors of the bill on the floor of the House of Representatives in the course of its consideration by that body. For example, Congressman Hill, a Member of the Ways and Means Committee, states: "Under the processing taxes, which the Supreme Court invalidated, a burden was placed upon commodities1942 BTA LEXIS 780">*799 which the processor either did not pay or had refunded to him, but at the same time passed the burden on to his customer. This is an unjust enrichment, a straight-our bonus, and we propose to tax that 80 percent * * *." 80 Cong. Rec. 6005. Congressman Cooper, also a member of the Committee, commented: "* * * The ideal we had before us was that no man in this country should be enriched by one penny be reason of collecting this tax and passing it on to his customers and failing to pay it to the Government * * *." 80 Cong. Rec. 6094.
From the facts as we have found them, it is apparent that the situation so described existed here as clearly during the period from April 1 to May 18 as it had during the preceding months. There is no suggestion that either of the operative conditions, collection of the tax from customers and failure to pay the Government, were any the less effective then than they had been previously and without the gift of prophetic discernment it is difficult to see that the fact could have been otherwise; for, although it might possibly have been anticipated that the Carter case would be decided as it was, it was wholly impossible to forecast the date when that1942 BTA LEXIS 780">*800 would take place. And if it is true that the decision when rendered was retroactive in the sense of invalidating the tax on coal from its inception, that was no more true of the period after April 1 than of the prior months. The result is that the legislative purpose could be achieved in full only by an application of the tax on unjust enrichment for a period coinciding with collection, on the one hand, and failure to pay, on the other, and that that is what the provisions of section 501(a)(1) effectively accomplished. We conclude that petitioner is taxable for the full amount of the excise taxes, the burden of which it passed on until May 18 and which it did not pay.
Decision will be entered under Rule 50.
Footnotes
1. . ↩