temporary revenue-raising measure the 8-percent Federal excise tax on truck bodies should have been terminated years ago. As an association we have attempted to encourage full and universal conformity by furnishing the manufacturer with accurate information concerning the tax.

We respectfully urge this committee to take immediate and effective action to bring about the complete elimination of the Federal excise tax on truck bodies, equipment, chassis, and accessories as a service to the industry and to our national economy which action can only result in benefits for the good of all concerned. There is no desire on the part of these manufacturers, once the tax is repealed, to pocket the 8 percent with no reduction in selling price; the savings would be passed on.

To this end we recommend early and favorable action on H. R. 3186, sponsored by Representative Oakman.

As a first alternative, we recommend that this committee report out favorably the measure sponsored by Representative Dingell, H. R. 5, which would reduce the tax from the present high 8 percent level to 2 percent.

As a second alternative, we urge and recommend that no action be taken to disturb the status quo of section 3403 of the Internal Revenue Code as it now reads, which provides that the present rate of 8 percent automatically reverts to 5 percent effective April 1, 1954.

Speaking for members of the Truck Body and Equipment Association, its officers and directors, and for myself, I appreciate the privilege of this opportunity of appearing before you, and your courtesy in receiving this statement. We sincerely hope that our expression of interest and concern in this matter will receive your favorable consideration.

The CHAIRMAN. Thank you very much.

Mr. NUESSE. Thank you, sir.

The CHAIRMAN. Are there any questions?
Mr. Mason will inquire.

Mr. MASON. This 8 percent on trucks-would you consider it fair if we maintained it at 5 percent, if we applied the 5 percent rate to the making of freight cars and ships and everything else, applied, say, as a general manufacturer's tax? Then we would be treating you all alike and we would be raising the necessary amount of revenues that we have to have.

Mr. NUESSE. That would be an alternative, sir.

Mr. MASON. Would you suggest that alternative? It has been suggested.

Mr. NUESSE. We do believe, speaking for the industry as represented by the association, that the tax should be repealed entirely, to start with. We appreciate that the Government needs the money, and it is a difficult matter to obtain the repeal of any tax under those circumstances. I would say that as a temporary expedient looking forward to the time when the tax could be repealed entirely, it would be more equitable for the tax to be reduced to 5 percent and then applied to other forms of commercial transportation.

Mr. MASON. You see, you offer two alternatives.

Mr. NUESSE. Yes, sir.

Mr. MASON. I am offering you a third, which I think would be fair. all along and raise the necessary revenue.

Mr. NUESSE. That is right. That would be a fairer third alternative, sir.

Mr. MASON. You see, we have to have the revenue.

Mr. NUESSE. That is right.

Mr. MASON. And we cannot repeal your tax and the other fellow's tax and the other fellow's tax, unless we have this substitute.

Mr. NUESSE. That is right. I agree with you 100 percent.
The CHAIRMAN. Mr. Sadlak will inquire.

Mr. SADLAK. If you will refer to your statement on page 5, the third sentence, and I quote:

And to make the tax pill still more bitter, there are instances where the sales tax is computed on the overall selling price of the truck body and equipment including the Federal excise tax.

Mr. NUESSE. Yes, sir.

Mr. SADLAK. I believe it was last Thursday night that I asked a question along that line of our witness, who I believe was a Mr. Parr, seeking information if, perchance, in States where they have a sales tax, the sales tax is not imposed upon the retail price plus the Federal tax. You are giving me the answer to the question I put to Mr. Parr, and you say there are some instances of that. Are there very many? Mr. NUESSE. Frankly, I don't know how many there are. I have never made an actual survey of the extent of that application, but I do know very definitely that in the State of Ohio that is true.

Mr. MASON. And it is true in Illinois, because I just bought a car last week, and had to pay a 2 percent retail sales tax on the total

amount.

Mr. NUESSE. On the 10 percent Federal excise tax.

Mr. SADLAK. And the gentleman let them get away with it?

Mr. MASON. I expect to put that down on my tax receipts next March and say, "Uncle Sam, you cannot have this."

Mr. SADLAK. I was seeking some information on this, but I did not expect to get as much as I did.

Mr. NUESSE. I intend to make a complete survey of that nature, because it is important to us.

Mr. SADLAK. I would be very happy to have the result of that survey, because it interests me very much.

Mr. NUESSE. Thank you, sir. I will make it a point to see that you get it.

The CHAIRMAN. Are there any other questions? If not, I want to thank you, sir, for your appearance and the information you have given us.

Mr. NUESSE. Thank you for your courtesy.

The CHAIRMAN. It will be very useful, I am sure.

Mr. NUESSE. Thank you, Mr. Chairman.

The CHAIRMAN. At this point I wish to state that I have received a telegram from Mr. George J. Burger, vice president in charge Washington office, National Federation of Independent Business, Inc. It is quite a long telegram. I will not take the time, because we have too many witnesses to cover here, to read it into the record, but I would like, unless there is objection, to insert it in the record in full. I will read the first part of it. It is addressed to me as chairman:

It is my understanding that your committee, Ways and Means, will receive testimony today from representatives of the motor industry on excise taxes. Will you be kind enough to read this statement into the record? It is to be noted

the National Association of Manufacturers appeared before your committee yesterday and gave testimony in support of a general Federal sales tax. In their statement they included part of their Federal tax program as revised May 13, 1953. It says:

"A. Excise tax law, regulation and administration should be designed to achieve equity consistent with revenue goals, and to minimize enforcement and compliance burdens and costs," and so on.

It goes on. It is a very strong statement. If there is no objection, I will insert it in the record at this point.

(The telegram referred to is as follows:)

Hon. DANIEL REED,

House Office Building:

WASHINGTON, D. C., August 4, 1953.

It is my understanding that your committee, Ways and Means, will receive testimony today from representatives of the motor industry on excise taxes. Will you be kind enough to read this statement into the record? It is to be noted the National Association of Manufacturers appeared before your committee yesterday and gave testimony in support of a general Federal sales tax. In their statement they included part of their Federal tax program as revised May 13, 1953. It says:

"A. Excise tax law, regulation and administration should be designed to achieve equity consistent with revenue goals, and to minimize enforcement and compliance burdens and costs." NAM's tax committee must be aware of the rank injustice in the levy of excise tax on hundreds of thousands of independent tire retailers, and 3 or more major tire manufacturers operating 1,500 or more retail stores in competition with independent retailers are exempt from the excise tax until their tires are sold. Rank discrimination.

We have repeatedly called this to the attention of the Small Business Committees and the Committee on Ways and Means beginning in 1942. Both Small Business Committees recomended an immediate correction. Testimony was given before the Committee on Ways and Means on the proposition June 13, 1947. The Senate Small Business Committee on July 27 in its staff report to the Select Committee on Small Business, United States Senate, stated: "It is evident that the application of the manufacturers' excise levy, whereby company-owned retail stores may defer payment of this tax on tires and tubes because they receive their merchandise 'on consignment' from the parent company, gives company stores a very material advantage over the independent dealer who must pay the tax upon receipt of his tires and tubes. If the Bureau of Internal Revenue feels that no administrative remedy exists for this discrimination, the solution of the problem might become the concern of the appropriate committees of Congress." In its report preceding the Senate Small Business Committee report the House Small Business Committee also approved immediate correction of this discrimination. Internal Revenue has been repeatedly advised of this discrimination with no relief forthcoming. May we request that your committee go on record in demanding "equity consistent with revenue goals" as stated by NAM. The administration is interested in increased taxes so why exempt tire manufacturers' retail stores who are in a better financial position to advance this money to the Government than the hundreds of thousands of independent retailers?

GEORGE J. Burger,

Vice President in Charge Washington Office,
National Federation of Independent Business.

The CHAIRMAN. The next witness is Mr. Howard Reed, counsel, Motor and Equipment Wholesalers, Chicago.

Is your home in Chicago, Mr. Reed?

Mr. REED. Evanston.

The CHAIRMAN. Will you give your full name and the capacity in which you appear, for the record?

Mr. MASON. All the rich people who work in Chicago live in Evanston.

The CHAIRMAN. Yes, I have a few friends there.

Mr. REED. I wish that were true about the rich part.

STATEMENT OF J. HOWARD REED, COUNSEL, MOTOR AND EQUIPMENT WHOLESALERS ASSOCIATION, CHICAGO, ILL.

Mr. Chairman, my name is J. Howard Reed, attorney at law, and I am admitted to practice both in the State of Illinois and here in the District of Columbia.

I certainly appreciate the opportunity of appearing before the committee on this problem this evening, which we feel is very important to the automotive wholesalers in this country.

We have prepared and submitted to the committee a brief on behalf of the Motor and Equipment Wholesalers Association, and before proceeding I would like to offer, as a part of the record, a copy of this brief which we have previously submitted to the committee. The CHAIRMAN. Without objection, it is so ordered. (Mr. Reed's prepared statement is as follows:)

STATEMENT OF J. HOWARD REED, ATTORNEY, ON BEHALF OF MOTOR AND EQUIPMENT WHOLESALERS ASSOCIATION, CHICAGO, ILL., IN RE EXCISE TAXES UNDER SECTION 3403 (C) OF THE INTERNAL REVENUE CODE

EXCISE TAXES ON SALES BY THE MANUFACTURER UNDER CHAPTER 29, SUBCHAPTER A OF THE INTERNAL REVENUE CODE

The Internal Revenue Code now provides:

"SECTION 3403. TAX ON AUTOMOBILES, ETC.

"There shall be imposed upon the following articles sold by the manufacturer, producer, or importer, a tax equivalent to the following percentages of the price for which so sold:

"(a) Automobile truck chassis * * *

"(b) Other automobile chassis and bodies * *

"(c) Parts or accessories (other than tires and inner tubes and other than radio and television receiving sets) for any of the articles enumerated in subsection (a) or (b), 8 per centum, except that on and after April 1, 1954, the rate shall be 5 per centum. For the purposes of this subsection and subsections (a) and (b), spark plugs, storage batteries, leaf springs, coils, timers, and tire chains, which are suitable for use on or in connection with, or as component parts of, any of the articles enumerated in subsection (a) or (b) shall be considered parts or accessories for such articles, whether or not primarily adapted for such use. This subsection shall not apply to chassis or bodies for automobile trucks or other automobiles. Under regulations prescribed by the Commissioner, with the approval of the Secretary, the tax under this subsection shall not apply in the case of sales of parts or accessories by the manufacturer, producer, or importer to a manufacturer or producer of any of the articles enumerated in subsection (a) or (b). If any such parts or accessories are resold by such vendee otherwise than on or in connection with, or with the sale of, an article enumerated in subsection (a) or (b) and manufactured or produced by such vendee, then for the purposes of this section the vendee shall be considered the manufacturer or producer of the parts or accessories so resold. In determining the sale price of a rebuilt automobile part or accessory there shall be excluded from the price, in accordance with regulations prescribed by the Secretary, the value of a like part or accessory accepted in exchange."

It is proposed that section 3404 (c) of the Internal Revenue Code be amended by inserting in the first sentence of subsection (c) immediately after the words "receiving sets" the words "and other than repaired, reconditioned, or rebuilt automobile parts and accessories" or such other phrase as will clearly indicate the congressional intent to tax the manufacture of new automobile parts and accessories and not the repairing, reconditioning, or rebuilding of worn automobile parts and units.

PROPONENTS OF THE AMENDMENT

The proponents of this amendment are the more than 1,500 automotive wholesalers of the Motor and Equipment Wholesalers Association located in trading areas in every State of the United States and who serve the tens of thousands

of car and truck dealers and the hundreds of thousands of independent repair shops and automotive service stations that are responsible for the continuous, dependable, and safe operation of over 52 million automobiles and trucks that ply the highways of America today.

STATEMENT OF PROBLEM

Section 3403 of the Internal Revenue Code imposes an excise tax on the manufacture or production of automobiles, trucks, motorcycles, and automotive parts and accessories. Although Congress levied the tax on new manufactured items only, the Commissioner of Internal Revenue-under his authority to prescribe and publish all needful rules and regulations for enforcement of this law-has usurped the legislative functions of Congress by the promulgation of rules and regulations holding that the repairing, rebuilding, or reconditioning of used or worn automotive parts is the manufacturing or production of automotive parts and that the sale thereof is taxable under section 3403 (c) as amended even though the tax has been paid on these automotive parts when originally manufactured.

Although the Bureau of Internal Revenue concedes that no liability for tax is incurred in the repairing, reconditioning, or rebuilding of used automobiles, trucks, or motorcycles, it takes the opposite position with respect to the repairing, reconditioning, or rebuilding of used or worn automotive parts.

The regulations and rulings issued by the Bureau of Internal Revenue are confusing, discriminatory, and unjust. The Bureau has held that the repairing, reconditioning, and rebuilding of some parts is taxable while the repairing, reconditioning, and rebuilding of others is not taxable. The Bureau issues inconsistent rulings with respect to the same part and enforcement varies with each district throughout the country. There have been instances where the Bureau has issued detailed rulings to individual automotive wholesalers stating that no tax liability was being incurred with respect to their business and then at some later date made retroactive assessments covering the periods during which the wholesaler relied upon the ruling given him.

LEGISLATIVE INTENT

It is a well-known rule in law that the language of a statute should not be extended beyond its clear import and burdens of tax should not be increased by implication or inference from the provisions of the statute.

The legislative history concerning the original enactment of this law deals specifically with the application of the tax to the manufacture of new automobile parts and accessories and it is silent on the subject of repaired, rebuilt, and reconditioned automobile parts. Therefore, it must necessarily follow that it was not the intent of Congress to include repaired, reconditioned, and rebuilt parts in the original law.

There have been only minor changes in section 3403 (c) of the Internal Revenue Code since 1932. These changes for the most part dealt with changes in the tax rate or the exclusion of televisions and radios from the tax on automobile parts and accessories. The Treasury Department has by rules and regulations broadened the scope of the tax to include repairers, rebuilders, and reconditioners of used and worn automotive parts.

The question primarily resolves itself into the definition of who is a manufacturer or producer under section 3403 (c). Unless Congress in its legislation gives special meaning to a word, then it is to be read, understood, and construed in its ordinary sense and usage.

When Congress, in dealing with a special subject, has found it necessary to give to certain words an unusual or a special meaning, then it will specifically define the word in its legislation as it did in the case of the Tobacco Manufacturers, title 26, section 710, United States Code, and Oleomargarine Manufacturers, title 26, section 972, United States Code.

Therefore, in view of the fact that the statute does not provide a definition giving special meaning for the words "manufacturer" and "producer", it is obvious that it was the intention of Congress that the words "manufacturer" and "producer" should be recognized, understood, and accepted in their ordinary meaning and usage. If Congress had intended to take the words "manufacturer" and "producer" out of the usual significance of the words, they would have given them special and unusual meaning by definition in the statute.