Jaski v. Commissioner

SOPHIE JASKI, TRADING AS WHITE HOUSE BAKERY, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT. Jaski v. Commissioner Docket No. 100241. United States Board of Tax Appeals 43 B.T.A. 321; 1941 BTA LEXIS 1514; January 15, 1941, Promulgated *1514 During the years 1936 and 1937 the petitioner received small reimbursements from vendors of processing taxes imposed by the Agricultural Adjustment Act which was held to be unconstitutional by the Supreme Court in United States v. Butler,297 U.S. 1. The evidence conclusively shows that during the period such processing taxes were in effect the petitioner bore the burden of such taxes and did not pass them on to her vendees. Held, that the petitioner is not subject to the unjust enrichment tax imposed by section 501(a)(2) of the Revenue Act of 1936. Arthur W. A. Cowan, Esq., for the petitioner. Eugene G. Smith, Esq., for the respondent. SMITH *322 This is a proceeding for the redetermination of deficiencies in unjust enrichment tax imposed by section 501(a)(2) of the Revenue Act of 1936 of $240 for 1936 and $900.02 for 1937. The petitioner alleges that she is not liable for the tax, since she bore the burden thereof and did not pass it on to her vendees. FINDINGS OF FACT. During the years 1936 and 1937 the petitioner conducted a wholesale bakery business in Philadelphia, Pennsylvania. The business was formerly*1515 carried on by the White House Bakery, Inc., which corporation was dissolved in 1934. Since that time the petitioner has conducted the business as a sole proprietor but under the name of "White House Bakery." For many years prior to 1933 the business was conducted by the petitioner and her husband in the corporate name. Petitioner manufactured bread and cakes. Nearly all of the business, however, consisted of the manufacture of bread, which was sold at wholesale to restaurants, chain stores, and groceries. During all of this period the bread was sold at a uniform price of 4 cents for a 12-ounce loaf and no change at any time was made in the size of the loaf or in the formula by which it was made. There was sharp competition among the different bakeries in Philadelphia. There were some negotiations among them for an increase in the price by reason of the increased cost of flour due to the imposition of the processing taxes, but nothing came of the negotiations. An attempt was made in 1938 to increase the price from 4 cents to 5 cents, but it was in effect for only one day and the vendees refused to buy the bread at the higher price. During the years 1936 and 1937 the petitioner*1516 received reimbursements from her vendors of $300 and $1,125.02 in respect of the processing taxes which had been included in the price at which the petitioner had purchased flour. The petitioner did not pass these refunds on to her vendees. They served only to reimburse petitioner for diminished profits during the years 1936 and 1937 arising from the payment by petitioner of higher prices for flour. The records of the corporation were all destroyed shortly after its dissolution and the petitioner has no records showing detailed costs during which she carried on the bakery business. Prior to the date of the hearing she had sold out her bakery business. OPINION. SMITH: By section 501(a)(2) of the Revenue Act of 1936 a tax on unjust enrichment is imposed: * * * equal to 80 per centum of the net income from reimbursement received by such person from his vendors of amounts representing Federal *323 excise-tax burdens included in prices paid by such person to such vendors, to the extent that such net income does not exceed the amount of such Federal excise-tax burden which such person in turn shifted to his vendees. *1517 After the Agricultural Adjustment Act was declared to be unconstitutional by the Supreme Court in , on January 6, 1936, the petitioner received from vendors certain amounts in reimbursement of processing taxes. She filed unjust enrichment tax returns for 1936 and 1937 showing the receipt by her of such reimbursements of $300 in 1936 and $1,125.02 in 1937. In such returns there was not given the detailed information called for by the return form. The returns showed, however, no taxes due. The respondent has determined the deficiencies herein in question upon the ground that the petitioner is liable for the taxes. The burden of showing that she is not liable rests upon her. Petitioner is not able to furnish all of the information called for by the respondent in the unjust enrichment tax returns and he contends that without such information it must be held that the deficiencies in tax are correctly determined. We think it clear that it was not the intention of Congress to impose the unjust enrichment tax in a case where the burden of the tax has been borne by a taxpayer and not shifted to others. In our opinion Congress*1518 did not limit a taxpayer to any particular form of proof to show that he has borne the burden of the processing taxes and not shifted such burden to his vendees. For instance, if a taxpayer can prove to the Board that he has refunded to his vendees the reimbursement which he received from his vendors we think that such proof is competent to show that the taxpayer is not liable for the unjust enrichment tax, even though all the information called for by the return form is not given. We also think that this is not the only method of proof which is open to a taxpayer. Cf. ; ; . In the last cited case the court said with reference to floor stock taxes: * * * I know of no decision which goes to the length which the Government now asks this Court to go. To put such interpretation upon the requirements as to the burden of proof prescribed by Section 902 would be, in effect, to say that the taxpayer faces a duty that is impossible of performance, namely, he must produce figures, which do not exist, - in*1519 this case they do not exist, through no wilfulness or neglect on the part of the taxpayer, but because of the very nature of the business * * *. The obvious result would be to defeat, by an arbitrary ruling of the administrative branch of the Government, the very mandate of the Supreme Court in , to the effect that the tax was invalid. [Emphasis supplied.] The evidence in this case is to the effect that the petitioner sold during the years 1936 and 1937 the same bakery products at the *324 same prices at which like bakery products were sold by the corporation before the processing taxes went into effect. While such taxes were in effect the petitioner was required to pay more for her flour than she would have paid if the taxes had not been in effect. The result was that her profits from the sales of bakery products during the years that the processing taxes were in effect were less than they otherwise would have been by the amount of the taxes. When she received the refunds which are here in question she was not unjustly enriched within the meaning of the statute. The reimbursements simply restored to her a part*1520 of the profits that she lost by reason of the levying of the processing taxes. The tax deficiencies are expunged. Reviewed by the Board. Decision will be entered for the petitioner.