
    B. F. HOFFMAN, INC., v. THE UNITED STATES
    [No. E-463.
    Decided April 2, 1928]
    
      On the Proofs
    
    
      Excise lax; seo. 000, revenue acts of 1918 and, 102,1; automobile trueles; separate sales of chassis and body; assembly. — A dealer in automobiles and accessories, who sells truck chassis and bodies therefor separately, keeping the chassis in stock and ordering the bodies as and when required, is not by reason of such sales a manufacturer or producer of automobile trucks, within the meaning of section 900, revenue acts of 1918 and 1921, imposing an excise tax, notwithstanding the chassis and body are assembled, before delivery, by the company manufacturing the body.
    
      The Reporter's statement of the case:
    
      Mr. Richard S. Doyle for the plaintiff. Messrs. Charles D. Hamel, John Enrietto, and Louis J. Bergson, and Hopkins, Stain- ds Hopkins were on the brief.
    
      Mr. Ralph C. Williamson, with whom was Mr. Assistant Attorney General Herman J. Galloway, for the defendant.
    The court made special findings of fact, as follows:
    I. The plaintiff is and was at all times mentioned herein a corporation organized under the laws of the State of Pennsylvania, with its principal office and -place of business at 321 Broad Street, Philadelphia, Pa.
    II. From March 1, 1920, to April 1, 1923, plaintiff was engaged in the business of selling at retail automobiles and tractors manufactured by the Ford Motor Company and accessories therefor, including bodies for truck chassis. During this period plaintiff did not manufacture or assemble any trucks or automobiles at its place of business. It did not have any factory or facilities for manufacturing trucks or automobiles, and the only profit derived from the sale as a dealer in Ford automobiles, chassis, and accessories therefor was an amount equal to 20 per cent of the listed retail price, said 20 per cent being known as the “ dealer’s discount.”
    III. During the said period plaintiff sold to its customers certain Ford chassis, the exact number of which is unknown, and also sold to some of the same customers, for use on the said chassis, automobile and truck bodies manufactured by the Lyter Body Company, a cox-poration organized under the laws of Pennsylvania, with its principal office and place pt business in Philadelphia, Pa.
    IY. In the aforesaid transactions plaintiff made separate sales to the customer, first of the chassis, according to the class, weight, and type desired, and then of the body, the type and class of which was selected by the customer from a catalogue of the said Lyter Body Company.
    Y. In the delivery of these articles the plaintiff, at the request of its customer, sent the chassis to the Lyter Body Company. The body company mounted the body on the chassis, making such changes in the body as the customer might direct personally or through plaintiff. In many cases the customer would personally interview a representative of the Lyter Body Company and give him specific instructions as to style, color of paint, and character of lettering, if any, and other details concerning construction of the body. No separate charge for such mounting was made by plaintiff or by the Lyter Body Company. Mounting consisted simply in setting the body on the chassis and fastening about eight bolts, consuming approximately an hour’s time. The truck so assembled was then delivered by the body company to a representative of the plaintiff and by the plaintiff delivered to the customer.
    VI. In all such transactions the plaintiff issued to its customers separate invoices, one covering the sale of the chassis and the other the sale of the body. The Ford Motor Company billed the chassis to the plaintiff as a dealer at the list' price minus “ dealer’s discount ” and added thereto the amount of the manufacturer’s excise tax, commonly known as the “ war tax,” which tax was passed on by plaintiff in the exact amount in its bill to the customer. The Lyter Body Company billed the body to the plaintiff as dealer at list price minus “ dealer’s discount,” and included ,in said list price (as noted on the bill) the amount of the manufacturer’s excise tax, commonly called the “war tax,” and plaintiff also passed that exact amount on to the customer in its bill.
    VII. Believing that it was not a manufacturer within the meaning of the statutes imposing excise taxes on automobile trucks and accessories therefor, plaintiff did not file any returns for or collect from its customers any excise taxes on the aforesaid sales- of chassis and bodies other than the amount of manufacturer’s excise taxes so included in the bills from the Ford Motor Company and the Lyter Body Company, which excise taxes had been passed on to plaintiff by the said companies.
    
      VIII. On or about June 9, 1923, the Commissioner of Internal Revenue received from the collector of internal revenue for the first district of Pennsylvania a report made by Internal Revenue Agent Lewis Appel June 5, 1923, recommending the assessment against plaintiff of $4,961.36 as manufacturer’s excise tax, penalties and interest on the aforesaid sales, during the period in question, as sales of automobile trucks by the manufacturer. This report was based on an examination of invoices of sales of bodies and chassis for the period January 1, 1922, to April 1, 1923. Most of the invoices and records of sales of bodies and chassis for the period March 1, 1920, to January 1, 1922, had been lost or destroyed. There is no evidence that any invoices or records were destroyed in order to avoid the imposition of taxes. The said revenue agent made his estimate of the proposed tax for the year 1921 by deducting 10 per cent from the tax he proposed for the corresponding months in 1922; and for the period March 1, 1920, to January 1, 1921, by deducting 10 per cent from the tax thus calculated for the corresponding months in 1921.
    Plaintiff at no time agreed to or acquiesced in this method of determining tax liability.
    IX. The Commissioner of Internal Revenue in June of 1923 assessed against the plaintiff manufacturer’s, excise tax in the sum of $3,220.86, together with a penalty of $966.28 and interest in the sum of $114.22, for the period March, 1920, to March, 1923, inclusive, a total of $4,961.36, as estimated by the internal revenue agent. Said total was paid by plaintiff September 10, 1923.
    X. Claims for refund of the entire amount so assessed and paid were filed by the plaintiff May 20, 1924, with the proper collector of internal revenue, ope for the sum of $3,601.91, being $3,220.86 tax plus $387.11 interest thereon, and the other for the balance of $1,353.39, representing $966.28 penalty and $387.11 interest. On the claim for $1,353.39 the Commissioner of Internal Revenue on or about March 31, 1925, remitted 25 per cent penalty, $805.24, and interest amounting to $144.66, a total of $949.90, on the ground that a reasonable cause for delinquency in filing returns had been established, and rejected the balance of the said claims. The said sum of $949.90 has been repaid to the plaintiff, and the difference rejected, $4,011.46, remains in the Treasury of the United States.
    The court decided that plaintiff was entitled to recover $4,011.46, with interest thereon from September 10, 1923, to date of judgment.
   Moss, Judge,

delivered the opinion of the court:

Plaintiff, B. F. Hoffman, Inc., during the period March 1, 1920, to April 1, 1923, was engaged in selling, at retail, automobiles and tractors, and accessories therefor, including bodies for automobiles and truck chassis. The bodies were manufactured by the Lyter Body Company, situated some ten blocks from plaintiff’s place of business in Philadelphia. In brief, the customary method followed by plaintiff was to make a sale of a chassis according to the type desired by the purchaser. If the purchaser also desired a body a selection would be made from a catalogue of the Lyter Body Company and same would be attached to the chassis by that company at its own plant. Changes from the catalogue design would be made by the Lyter Body Company as requested by the purchaser, or by plaintiff for the purchaser. The Ford Motor Company billed the chassis to the plaintiff as a dealer at the list price less a 20 per cent discount, adding thereto the amount of the manufacturer’s excise tax. The Lyter Body Company billed the body to the plaintiff as dealer at the list price, less a 20 per cent discount, including in the list price the amount of the manufacturer’s excise tax. Plaintiff would issue to the purchaser two invoices, one covering the sale of the chassis and the other for the sale of the body, and the purchaser was also billed for the amount of’ the manufacturer’s tax in each invoice.

In August, 1923, plaintiff received a notice and demand from the collector of internal revenue for the first collection district of Pennsylvania for the payment of the sum of $4,961.36, same being claimed as manufacturer’s sales tax, penalties, and interest, under the provisions of section 900 of the revenue act of 1918, 40 Stat. 1122, and of section 900 of the act of 1921, 42 Stat. 291, almost identical in language with the first-named statute. The pertinent portions read as follows:

“ That there shall be levied, assessed, collected, and paid upon the following articles sold or leased by the manufacturer, producer, or importer, a tax equivalent to the following percentages of the price for which so sold or leased—
“(1) Automobile trucks and automobile wagons (including tires, inner tubes, parts and accessories therefor, sold on or in connection therewith or with the sale thereof), 3 per centum:
* ífc * * ❖
“ (3) Tires, inner tubes, parts, or accessories, for any of the articles enumerated in subdivision (1) and (2), sold to any person other than a manufacturer or producer of any of the articles enumerated in subdivision (1) or (2), 5 per centum.”

The amount of said tax, penalties, and interest was paid by plaintiff under protest on September 4, 1923, and thereafter two claims for refund were filed with the Commissioner of Internal Kevenue, one for $3,601.91, representing the amount of tax and interest, and the other for $1,353.39, representing the penalties and excess interest. The claim for the refund of $3,601.91 was rejected, and the claim for the refund of $1,353.39 was allowed in the sum of $949.90, and rejected in the sum of $403.49. This suit is for the recovery of the balance, claimed by plaintiff, amounting to $4,011.46.

The sole question for determination is whether or not plaintiff was, for the period involved, a manufacturer of automobile trucks in the meaning of the statute above quoted.

No charge of bad faith or of any purpose to evade taxation is made. Plaintiff, believing that it was not a manufacturer of automobile trucks, did not collect from its customers the manufacturer’s sales tax., and, of course, did not include same in its tax returns.

Defendant relies upon the case of Klepper v. Carter, 286 Fed. 370. The facts in that case were substantially as follows : Klepper was a retail dealer in automobile trucks. At various times in the year 1919 he bought thirteen automobile trucks from the Bethlehem Motors Company. The trucks were equipped with cabs. Plaintiff purchased bodies-as they were needed from the Weber automobile body works and mounted the bodies on the chassis and sold the completed trucks at retail. The court said:

“ In our opinion Klepper was properly held to be a manufacturer or producer of automobile trucks. While he did not make any of the several parts, nevertheless he bought the parts made by others, and he sold a. completed automobile truck. * * *
“ We are not going too far when we recognize that the commonly known method of transacting the automobile truck business was for a person to buy a chassis from one dealer or maker, and a body from another, and then to assemble the two. Klepper saved the purchaser all this trouble, and made it his business to retail the product of his purchases as an automobile truck. Thus lie produced or manufactured the truck.”

In the instant case a different method was pursued. Plaintiff purchased chassis from the Ford Company and carried same in stock, together with Ford bodies and accessories, Bodies were not carried in stock. A customer would select and purchase a chassis, which was separately billed to the customer. If a body was desired, the customer would be shown a catalogue of the Lyter Body Company and from that a body would be selected and an order would be issued by plaintiff to the Lyter Company for same. If special features were desired by the customer, they were entered on the purchase order to the Lyter Company. The body was billed to plaintiff, and by plaintiff was billed to the customer. No bills were ever rendered for a completed truck. The body was mounted on the chassis at the plant of the Lyter Body Company. This process involved about an hour’s labor and the adjustment of eight bolts, and was done by the Lyter Company without charge and as an inducement to purchase its products. It was a very simple operation and could be performed by the purchaser himself. We are of the opinion that the facts do not bring this case within the rule announced in the Klepper case, supra. Plaintiff was not a manufacturer in the meaning of the statute on the subject and is entitled to recover, and it is so ordered.

GRAham, Judge; Booth, Judge; and Campbell, Chief Justice, concur.  