Opinion
Suit by the Flash Chemical Company against the United States to recover the amount of a manufacturer's excise tax allegedly erroneously collected from the plaintiff.
Petition dismissed.
Plaintiff sues to recover $3,390.37 with interest, manufacturer's excise tax alleged to have been erroneously and illegally collected upon the price at which a certain product known as "Flash" was sold by the manufacturer.
The Commissioner of Internal Revenue held that this product was a toilet soap or a similar article used or applied, or intended to be used or applied, for toilet purposes and, therefore, taxable under section 603 of the Revenue Act of 1932, 47 Stat. 261, 26 U.S.C.A. § 1420 et seq. note, and Art. 22, Regs. 46, made and promulgated under and by authority of the Revenue Act of 1932.
Plaintiff insists that "Flash" is a cleaner of the scouring detergent type and not a toilet soap or an article similar to toilet soap, and that, therefore, the price at which such product was sold by the manufacturer was not taxable under section 603 and Treasury Regs. 22.
Special Findings of Fact
1. Plaintiff is a Maine corporation, with its principal place of business at Cambridge, Mass. It is, and for more than twenty-five years has been, engaged in the manufacture and sale of cleansing preparations, toilet liquid soap, and polishes.
For the period June 1, 1933, to June 30, 1934, plaintiff filed monthly excise tax returns in which it reported the sale of various articles manufactured by it. Included in those returns were the sums received by plaintiff from the sale of one of its products known as "Flash." The excise taxes paid upon that product were as follows, such taxes being paid under protest:
1933:
June .......
$ 239.91
July ..........
334.89
August ........
372.37
September .....
253.27
October .......
247.86
November ......
111.22
December ......
105.47
1934:
January ....
$ 253.06
February ......
203.26
March .........
346.46
April .........
253.26
May ...........
309.15
June ..........
360.39
---------
Total ....
$3,390.57
2. August 10, 1934, plaintiff filed a claim for refund in the amount of $8,066.40, asserting the following grounds therefor:
"Items referred to in schedule hereto attached are not subject to excise tax imposed by Revenue Act of 1932 and taxes were illegally collected from the taxpayer on the ground that sales of article enumerated in schedule hereto attached are taxable. Said taxes were paid by taxpayer under protest and duress in order to avoid the seizure and sale of taxpayer's property and the infliction of penalties provided by law.'
The schedule referred to listed taxes paid on various products manufactured by plaintiff, including "Flash," but the only product involved in this proceeding is "Flash."
3. At the time this suit was instituted on December 7, 1935, more than six months had elapsed since the filing of plaintiff's claim, and no action had been taken thereof by the Commissioner of Internal Revenue. Subsequently, however, the claim was rejected.
4. "Flash" is a cleaner of the scouring detergent type. Its composition is substantially as follows: 43 per cent mineral abrasive (pumice and silica sand), 8 per cent soap stock (made of grease and cocoanut oil), 1.5 per cent sodium carbonate, 0.25 per cent sodium silicate, 0.75 per cent essential oils, and 42.5 per cent water. The general character of the product and method of manufacture have not changed since plaintiff began its manufacture, though there have been minor changes in the formula and on account of improvements in soap technology. There has also been no substantial change in the character and method of advertising the product. "Flash" conforms to the Federal Standard Specifications (prepared by the United States Bureau of Standards) for a detergent for mechanics' use under the type "Hand grit paste soap," which reads as follows:
"C-1. Detergent for mechanics' use shall be a uniform mixture in paste or powder form, as specified, and shall be satisfactory for removing oil, grease, paint, printing inks, and other occupational soil from the hands of automobile mechanics, machinists, and other operatives without harmful effect on the skin (see secs. F-1c and 1-5)."
5. The principal uses of "Flash" are (1) for cleaning kitchen utensils, sinks, bath tubs, woodwork, floors, paint, stains on linoleum, and other similar utensils or materials in the home, factory, etc., and (2) for cleaning the hands of mechanics, laborers, or persons in general who are performing work where their hands become greasy, dirty, or stained. It removes grease, dirt, or stains on the hands in a thorough manner without harmful effect to the skin, and when applied to the hands with water it will lather because of its soap content. The amount of mineral abrasive contained therein makes it objectionable and unpleasant for use in cleansing the more tender parts of the human body; in other words, it is not of practical use when taking a bath or washing the face. Its sodium carbonate content, which is greater than the content of the same ingredient in toilet soap, based on the soap content, would not be harmful if the product were applied to the human body. Federal Standard Specifications for ordinary toilet soap prescribe a sodium carbonate content of not in excess of 1.5 per cent. Laundry soaps contain a greater sodium carbonate content than "Flash."
In general terms the principal differences between "Flash" and toilet soap are the mineral abrasive constituents in the former which are generally entirely absent from the latter and the lower grade of cocoanut oil used in the manufacture of the former as compared with the latter. With the mineral abrasive removed from "Flash" it would be approximately the same from a chemicaL standpoint as ordinary toilet soap.
6. A survey made by a large and well known manufacturer for the purpose of determining whether the field for abrasive cleaners was sufficiently large to justify its participation in that phase of the industry disclosed that "Flash" was used to the extent of approximately 75 per cent for handcleaning purposes and 25 per cent for general household use.
7. "Flash" is advertised extensively by plaintiff as suitable for cleaning houses and hands. Typical among the slogans, phrases, and words used in its advertising matter were the following: "FLASH Antiseptic--House and Hand CLEANER;" "FLASH Cleans Pots, Pans, Homes, Hands--The World's Best Known Hand Cleaner;" "FLASH Cleans Burnt Pots and Pans, Homes and Hands. Does Wonders for the Housewife;" "FLASH CLEANS Pots-- Pans Homes--Hands;" BRIGHT Pots and Pans CLEAN Homes and Hands --FLASH;" "FLASH Antiseptic House and Hand CLEANER--Quicker and Better than Soap;" "FLASH. Hand Cleaner, House Cleaner, Everything Cleaner;" "Whatever your Day's Work is DO IT WELL! Then wash up with FLASH." It was advertised as being useful "For housewives," "For school children," "For machinists," and "For office workers."
8. "Flash" is packed and sold in tin cans upon which its uses are described. The legend appearing on the cans has been changed from time to time. Typical of the descriptive matter appearing on the cans is the following: "Tested against all other Brands you will find FLASH superior. It goes father, cleans better, does not roughen the skin but leaves it soft and smooth and helps keep it so. FLASH CLEANS quickly and thoroughly removes dirt, oil, paint, rust, ink, stains of all kinds, makes easy work of cleaning sinks, bathtubs, all kitchen utensils, painted woodwork, etc. Use Flash in your home. FLASH Antiseptic--House and Hand CLEANER. Does Wonders for the Housewife. Flash is the quickest, most thorough and economical preparation made for cleaning woodwork, painted walls, bathtubs, pots, kettles, pans, and all kitchen utensils. For such uses always apply with a damp rag or brush and rinse thoroughly with clean water. Flash cleans the hands. Quickly: Thoroughly: Safely. Flash is a scientifically combined product. The result of years of study and experience. It not only removes the most obstinate stains in an instant, but it does it completely. DIRECTIONS: If your hands are very grimy, apply Flash before wetting hands. Rub well into skin, allowing the cleansing oils in Flash to absorb the stains. Then moisten hands, wash and rinse thoroughly."
9. "Flash" sold at the same price both before and after June 2, 1932. Plaintiff paid the Federal excise tax on that product and made no notation on its invoices to its customers with respect to the tax, a typical invoice reading as follows:
5 Cases 24/1 # FLASH Cleaner at 1.70 cs.....
$8.50
Less 15W27
1.28
-----
$7 22
Plaintiff did not render a separate bill to its customers for the tax, nor did it collect any amount from its customers on account of the same of the product other than shown on the invoice. [Copyrighted Material Omitted] Andrew J. Aldridge, of Boston, Mass., for plaintiff.
J.H. Sheppard, of Washington, D.C., and James W. Morris, Asst. Atty. Gen. (Robert N. Anderson and Fred K. Dyar, both of Washington, D.C., on the brief), for the United States.
Before BOOTH, Chief Justice, and GREEN, LITTLETON, WILLIAMS, and WHALEY, Judges.
LITTLETON, Judge.
Plaintiff contends that the product "Flash" is not a toilet soap nor an article similar to a toilet soap or a toilet preparation and is not a preparation used or intended to be used for toilet purposes within the meaning of section 603 of the Revenue Act of 1932, 26 U.S.C.A. § 1420 et seq. note, and Art. 22 of Regs. 46; that such conclusion is supported by the familiar and universally accepted rule of statutory construction that where an enumeration of specific articles or things is followed by some general word or phrase, such word or phrase is held to refer only to articles or things of the same kind; and that in the interpretation of statutes levying taxes it is the universally established rule not to extend their provisions by implication beyond the clear import of the language used, or to enlarge the operations of same so as to embrace matters not specifically pointed out.
Section 603, 26 U.S.C.A. § 1420 et seq. noted, which is entitled "Tax on Toilet Preparations, etc.," imposes a tax of 10% and 5% upon the sales price by the manufacturer of certain enumerated articles, and the rate of 5% is made applicable to "toilet soaps, * * * toilet powders, and any similar substance, article, or preparation, by whatsoever name known or distinguished; any of the above which are used or applied or intended to be used or applied for toilet purposes." Art. 22, Regs. 46, interpreting the provisions of the section mentioned, provides as follows:
"Scope of Tax.--The tax attaches to the sale by the manufacturer of the articles enumerated in section 603 and similar articles commonly or commercially known as toilet articles, which are used or applied, or intended to be used or applied, for toilet purposes. Any article advertised or held out to be suitable for toilet purposes, or for any purposes for which the articles enumerated in the Act are customarily used, will be subject to the tax, regardless of the name by which it may be known or distinguished. The tax attaches to the sale by the manufacturer of all preparations which are used or applied or intended to be used or applied for toilet purposes or used in connection with the bath or care of the body, or applied to the clothing as a perfume or to the body as a toilet article. The fact that any particular product, preparation, or substance coming within the scope of the Act may have, or be held out to have, a medicinal, stimulating, remedial, or curative value does not exempt it from the tax, if it is commonly used as an adjunct to the toilet or for toilet purposes.
The tax will not attach to an article which is not a finished product or is not susceptible of use for toilet purposes but is only suitable for use in the manufacture of article subject to tax, or to any article or substance which has only an incidental or occasional use as a toilet preparation. Toilet soap is taxable whether in the form of a liquid, semiliquid, paste, flake, powder, or cake. Soaps and soap powders advertised or held out as suitable for toilet purposes or for application to the body, or parts of the body, as cleansing agents are taxable. Toilet soap advertised or held out as having medicinal properties, medicated toilet soaps, shaving soaps, creams, and powders, and shampoo soaps and soap powders are taxable. A soap used chiefly for removing grease and stains from the hands, though capable of incidental use for cleaning kitchen utensils, is taxable as a toilet soap. Soaps which are made, advertised, held out, and sold primarily for general cleaning or laundry purposes, but which may have an incidental and trivial use as a toilet soap, are not taxable unless advertised or held out as suitable for toilet purposes. Shampoo oils and liquids not containing saponaceous matter are taxable as toilet preparations."
In view of the facts and circumstances disclosed in the findings and the language of the provisions of the statute and the Treasury regulation interpreting the statute, which regulation we think is reasonable, we are of opinion that the product known as "Flash" is an article, substance, or preparation similar to a toilet soap and was used and applied, and intended to be used and applied, for toilet purposes. The facts disclose that the product "Flash" is approximately the same as ordinary toilet soap with the addition of mineral abrasive, and that while, because of this mineral abrasive, its application to the more tender parts of the human body would be unpleasant, it would not be harmful. The facts further show that when "Flash" is used with water it will lather because of its soap content. The product is used to the extent of 75% for toilet purposes in cleaning hands and of 25% for general household use, and that the product so used for toilet purposes was manufactured and sold and intended to be so used and applied seems clear from the extensive advertisements of the product by plaintiff, in which advertisements the value and effect of the product for toilet purposes in cleaning the hands were stressed. This use was strongly recommended by plaintiff for the use of housewives, school children, mechanics, and office workers. On each can in which the product was packed and sold the manufacturer called attention, among other things, to the fact that the product "does not roughen the skin but leaves it soft and smooth and helps keep it so." We think a reasonable interpretation of the statute is, as stated in the Treasury regulation, that soaps, whether in the form of cake, liquid, past, flake, or powder, when advertised or held out as suitable for toilet purposes, for application to the body, or parts of the body, as cleansing agents, are taxable.
The record does not support the claim that the use of "Flash" in cleaning the hands is a mere incidental use and that the purpose for which it was manufactured, sold, and intended to be used was cleaning kitchen utensils, sinks, bath tubs, and other articles in the household. On the contrary, the record requires the conclusion that the product was used and intended to be used and applied for toilet purposes. It was not necessary in order for the product to be taxable under section 603 and Regs. 46 that it be unsuitable for any use other than for toilet purposes. If it was similar in substance to toilet soap, and we think it was, and was used and applied for toilet purposes, and the facts established that it was so used and applied, this is sufficient to bring the product within the articles enumerated, the sales prices of which was intended to be taxed by section 603 of the Revenue Act of 1932.
The Commissioner of Internal Revenue correctly held that the product "Flash" was subject to tax as a substance, article, or preparation similar to toilet soap and used and applied, or intended to be used and applied, for toilet purposes. The petition is therefore dismissed. It is so ordered.