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Related Cases

Jefferson Electric Mfg. Co. v. U.S., 81 Ct.Cl. 530, 10 F.Supp. 950, 35-2 USTC P 9429, 16 A.F.T.R. 251

Facts

The Jefferson Electric Manufacturing Company, an Illinois corporation, manufactured and sold ignition coils from May 1919 to April 1926. These coils were sold to various wholesale purchasers, and the company initially invoiced them with a separate excise tax. However, due to customer objections, the company stopped itemizing the tax and instead absorbed it into the invoice price. The company later sought to recover excise taxes paid during a specific period, arguing that it had borne the tax burden.

During the period from about May 19, 1923, to February 26, 1926, plaintiff computed and paid the excise tax on ignition coils in the following manner: The total invoice price (as described in finding 5) was collected from its customers.

Issue

Did the Jefferson Electric Manufacturing Company bear the burden of the excise tax, or did it pass the tax on to its customers?

If by its invoices the plaintiff represented to its purchasers that the amount shown thereon included the tax as well as the selling price, and if it returned that amount less the tax as the selling price, and caused the tax to be computed on that basis, it cannot be heard to say, in the absence of other controlling circumstances of which there is no finding, that it did not collect the tax from the purchasers but itself bore the burden thereof.

Rule

The court applied the principle that if a seller represents to purchasers that the invoice amount includes both the selling price and the tax, and computes the tax based on that amount, the seller cannot claim to have borne the tax burden.

The findings leave it uncertain whether the plaintiff in making its returns to the revenue officers gave the amount shown on the invoices or 20/21 (later 40/41) of that amount as the selling price; and they also leave it uncertain on which basis the tax was computed.

Analysis

The court analyzed the evidence presented and determined that the Jefferson Electric Manufacturing Company had invoiced its products in a way that indicated the tax was included in the total price charged to customers. The company had computed the excise tax based on a fraction of the invoice price, which suggested that it had passed the tax onto its customers rather than absorbing it. This finding aligned with the precedent set in previous cases.

It is clear from the record as now presented that plaintiff, in making returns to the revenue officers, gave 20/21 or 40/41, depending upon the period involved, as the selling price and computed the tax which it now seeks to have refunded upon those fractional amounts of the invoice price.

Conclusion

The court concluded that the Jefferson Electric Manufacturing Company could not recover the excise taxes paid, as it had passed the tax burden onto its customers. Therefore, the petition was dismissed.

The petition must be dismissed. It is so ordered.

Who won?

United States, as the court found that the plaintiff had passed the excise tax onto its customers and thus could not recover the taxes paid.

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Brushaber v. Union Pac. R. Co., 240 U.S. 1, 36 S.Ct. 236, 60 L.Ed. 493, L.R.A. 1917D, 414, 1 USTC P 4, 3 A.F.T.R. 2926, Am.Ann.Cas. 1917B, 713

McBroom v. Department of Revenue, State of Or., 1997 WL 680650, 14 Or. Tax 239

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Lehnhausen v. Lake Shore Auto Parts Co., 410 U.S. 356, 93 S.Ct. 1001, 35 L.Ed.2d 351

Alcoa Bldg. Products, Inc. v. Commissioner Of Revenue, 440 Mass. 224, 797 N.E.2d 357