Section 21 provided that after the 31st of December, 1870, in lieu of the duties then imposed by law, there should be levied upon brandy and other spirits not otherwise provided for, $2 per proof gallon.

34. Domestic Tax.-On June 6, 1872 (42d Cong., 2d sess., ch. 315; 17 Stat. 230), the Congress passed "An act to reduce duties on imports and to reduce internal taxes", etc.

Section 12 of the act amended section 1 of the former act by striking out the word "fifty" and inserting in lieu thereof the word "seventy." Thus the tax became 70 cents per proof gallon.

Section 13 of this act amended the act of July 20, 1868, imposing taxes on distilled spirits, etc. as amended by the act of April 10, 1869, and removed the special tax upon distilled spirits of $4 per barrel, and the tax upon wholesale and retail sales and the tax on rectifiers of 50 cents per barrel in cases of 200 barrels.

35. Domestic tax.-On February 9, 1875 (43d Cong., 2d sess., ch. 36; 18 Stat. 307), Congress passed "An act to amend existing customs and internal revenue laws," etc.

Section 18 provided that retail dealers in liquors should pay a license of $20 and wholesale dealers should pay $100.

Exemption.-Section 22 provided "That nothing hereinafter contained in the revenue laws shall be construed so as to authorize the imposition of any stamp tax upon any medical articles prepared by any manufacturing chemist, pharmaceutist, or druggist, in accordance with a formula published in any standard dispensary or pharmacopoeia in common use by physicians and apothecaries, or in any pharmaceutical journal issued by any incorporated college of pharmacy, when such formula and where found shall be distinctly referred to on the printed label attached to such article, and no proprietary interest therein is claimed. Neither shall any stamp be required when the formula of any medicinal preparation shall be printed on the label attached to such article where no ownership in such article shall be claimed.”

36. Domestic.-On March 3, 1875 (43d Cong., 2d sess., ch. 127; 18 Stat. 339), Congress passed an act providing that from and after that date the tax on distilled spirits should be 90 cents per proof gallon or, when below proof, per wine gallon.

37. On February 18, 1878 (45th Cong., 2d sess., 20 Stat. 248), the Congress passed a joint resolution that a reduction of the tax on distilled spirits was inexpedient.

38. Domestic tax.-On March 1, 1879 (45th Cong., 3d sess., ch. 123; 20 Stat. 327), the Congress passed an act to amend the laws relating to internal revenue. This act reduced distillers' licenses on the small distilleries so that the license was $100 where any person distilled less than 500 barrels of 40 gallons proof spirits a year. Retail dealers paid $25 for their license and wholesale dealers paid $100.

39. Impost.-On March 3, 1883 (47th Cong., 2d sess., ch. 121; 22 Stat. 488), the Congress passed "An act to reduce internal revenue taxation," etc.

Schedule H, Liquors, (p. 304) provided for a tax on "brandy and other spirits... not specifically enumerated or provided for in this act, $2 per proof gallon, each and every gage or wine gallon of measurement, shall be counted as at least one proof gallon."

This act also repealed the tax on medicinal prepartions and other articles imposed by Schedule A following Section 3437 of the Revised Statutes of that period.

40. Impost.-On October 1, 1890, (51st Cong., 1st sess., ch. 1244; 26 Stat. 567), in an act to reduce and revise the duties on imports, the Congress imposed a rate (Schedule H, p. 589) on brandy and other spirits not provided for of $2.50 per proof gallon, to become effective October 6, 1890.

41. Impost and domestic.-On August 27, 1894, (43d Cong., 2d sess., ch. 349; 28 Stat. 409), Congress passed "An act to reduce taxation, to provide revenue for the Government," etc.

This act imposed an impost tax, Schedule H, (p. 525) on brandy and other spirits... not specifically provided for of $1.80 per proof gallon.

Section 48 of the act imposed a tax upon all distilled spirits in bond at the time of the passage of the act and thereafter produced in the United States, of $1.10 on each proof gallon or wine gallon when below proof.

42. The Act of June 3, 1896 (54th Cong., 1st sess., ch. 310; 29 Stat. 195) repealed section 61 of the act of August 27, 1894.

This act provided that a joint, select committee of three Senators and three Members of the House of Representatives should be appointed to "consider all questions relating to the use of alcohol in the manufactures and arts free of tax, and to report their conclusions to Congress on the first Monday in December 1896."

43. Impost. On July 24, 1897 (55th Cong., 1st sess., ch. 11; 30 Stat. 151) the Congress passed "An act to provide revenue for the Government and to encourage the industries of the United States."

Schedule H imposed an import tax upon brandy and other spirits not specifically provided for of $2.25 per proof gallon.

Provision was made in section 3 (p. 203) for reciprocal trade provisions with other countries on several articles, chiefly brandy or spirits. The duties imposed under this provision would be $1.75 per proof gallon.

NOTE. To raise revenue for the Government in the conduct of the war in 1898, no provision was made with respect to distilled spirits but the tax on fermented liquors was increased from $1 to $2. This was reduced to $1.60 on March 2, 1901 (56th Cong., 2d sess., ch. 806; 31 Stat. 938), and on April 12, 1902 (57th Cong., 1st sess., ch. 300; 32 Stat. 96) the old rate of $1 was restored.

44. On June 7, 1906 (34 Stat. 217; chap. 3047), the Congress passed an act providing, from and after January 1, 1907, for the withdrawal from bond, taxfree, of domestic alcohol "for use in the arts and industries, and for fuel, light, and power, provided said alcohol shall have been mixed * with methyl alcohol or other denaturing material or materials, or admixture of same, suitable to the use for which the alcohol is withdrawn, but which destroys its character as a beverage and renders it unfit for liquid medicinal purposes.” 45. On March 2, 1907 (34 Stat. 1250; chap. 2571), the act of June 7, 1906, was amended by an act providing that, notwithstanding anything in the act of 1906, domestic alcohol, when suitably denatured, may be withdrawn from bond without the payment of internal-revenue tax and used in the manufacture of ether and chloroform and other definite chemical substances where said alcohol is changed into some other chemical substance and does not appear in the finished product as alcohol."

66

46. Impost.-On August 5, 1909 (61st Cong., 1st sess., chap. 6; 36 Stat. 11). the Congress passed "An act to provide revenue, equalize duties, and encourage the industries of the United States", etc.

Schedule H provided an import tax upon brandy and other spirits of $2.60 per proof gallon.

47. Impost.-On October 3, 1913 (63d Cong., 1st sess., chap. 16; 38 Stat. 114), the Congress passed "An act to reduce tariff duties and to provide revenue for the Government ", etc.

Schedule H provided an impost tax on brandy and other spirits of $2.60. Provision was made in section IV (N), subsection 2, that after the 1st day of January 1914, under regulations of the Commissioner of Internal Revenue and the Secretary of the Treasury, "any farmer or association of farmers, any fruit grower or association of fruit growers, or other person or persons might manufacture alcohol free of tax for denaturization only, out of any of the products of farms, fruit orchards, or any substances whatever, on condition that such alcohol shall be directly conveyed from the still by continuous closed pipes", etc.

48. Impost and domestic tax.-On October 3, 1917 (65th Cong., 1st sess., chap. 63; 40 Stat. 300), the Congress passed “An act to provide revenue to defray war expenses ", etc.

Section 300 provided for a tax of $1.10 in addition to the taxes then imposed on all distilled spirits in bond then or thereafter to be produced in the United States or imported.

There was an additional provision that if spirits were to be withdrawn for beverage purposes or used in the manufacture of any beverage the tax should be $2.10. Section 304 imposed an additional tax in addition to the increased tax imposed by the act of 15 percent on all distilled spirits or wines thereafter to be rectified.

49. Domestic tax.-On February 24, 1919 (65th Cong., 3d sess., chap. 18; 40 Stat. 1057), the Congress passed "An act to produce revenue ", etc.

Section 600 (a) imposed a tax on distilled spirits of $2.20 or, if withdrawn for beverage purposes, $6.40.

Section 604 imposed a floor tax of $3.20 upon all distilled spirits tax-paid and held at the date of the passage of the act if intended for beverage purposes or use in beverages.

Section 605 imposed a tax of 30 cents a gallon on all spirits rectified with an exception for those distilled over juniper, etc.

50. Domestic.-On October 28, 1919 (66th Cong., 1st sess.) the Congress passed the National Prohibition Act, section 10 of title III of this act reads, in part, as follows:

"SEC. 10. Upon the filing of application and bond and issuance of permit, denaturing plants may be established upon the premises of any industrial alcohol plant, or elsewhere, and shall be used exclusively for the denatur ization of alcohol by the admixture of such denaturing materials as shall render the alcohol, or any compound in which it is authorized to be used, unfit for use as an intoxicating beverage.

"Alcohol lawfully denatured may, under regulations, be sold free of tax either for domestic use or for export.'

51. Domestic tax.-On November 23, 1921 (67th Cong., 1st sess., ch. 135; 42 Stat. 227), the Congress passed "An act to reduce and equalize taxation, to provide revenue," etc., and by this act continued the tax of $2.20 per proof gallon.

Section 600 contained a provision that there should be imposed a tax of $4.20 upon all distilled spirits diverted to beverage use which had been taxed at the nonbeverage rate of $2.20 per proof gallon.

52. Impost.-On September 21, 1922 (67th Cong., 2d sess., ch. 356; 42 Stat. 858), the Congress passed "An act to provide revenue, to regulate commerce with foreign countries, to encourage the industries of the United States," etc.

Paragraph 4 provided an import tax of 6 cents on "alcohol, amyl, butyl, propyl, and fusel oil. Upon methyl or wood (or menthanol) 12 cents per gallon and upon ethyl and alcohol for nonbeverage purposes only, 15 cents per gallon.

Schedule 8, on spirits, wines, and other beverages, imposed a tax of $5 per proof gallon on brandy and other spirits distilled, or cordials, liqueurs, etc., containing spirits and compounds and preparations of which distilled spirits are the component material of chief value, not specially provided for. Angostura bitters were taxed at $2.60 per proof gallon.

53. On June 1924 (68th Cong., 1st sess., chap. 234, 43 Stat. 353), the Congress passed "An Act to reduce and equalize taxation, to provide revenue ", etc. Under "Miscellaneous Occupational Taxes", section 701 (9), distillers and wholesale liquor dealers and retail dealers shall pay $1,000 license tax in addition to all other taxes.

STATEMENT OF W. BRUCE PHILIP, NATIONAL ASSOCIATION OF RETAIL DRUGGISTS, WASHINGTON, D.C.

Mr. BRUCE. Mr. Chairman and members of the committee: My name is W. Bruce Philip, and I am counsel for the National Association of Retail Druggists, and that association represents by direct membership and affiliated membership more than half of the 60,000 retail druggists in the United States. I am also a pharmacist and a drug-store owner.

I have two briefs here, one supporting Mr. Thompson's suggested amendment that the alcohol tax on medicinal alcohol be reduced or left at the old figure of $1.10.

May I suggest a comment on this? The sick man becomes unemployed, and you reduce his resources, and he becomes an expensive charity patient. Therefore, you increase the charges of the Government, and the tax, when you exhaust the resources of the sick. The alcohol tax is one way of reducing the sick man's limited income or the income he receives from friends. It seems odd that a gallon of whisky for beverage purposes would pay $2 tax, but a gallon of alcohol to be used as a rub, on a tubercular or some other patient, should pay the Government $3.60 for a wine gallon.

Also I think we are very desirous of eliminating the bootlegger. The higher the tax, the more temptation to buy small lots of alcohol that is continually thrown up to the retail druggist. We are really proud of our record during the eighteenth amendment, and we feel that we do not want to be tempted by higher alcohol tax, because we will face that issue.

I will leave this brief in support of the statement.
As to soda-fountain tax-

Senator KING (interrupting). Soft drinks?

Mr. PHILIP. Soft drinks. That is not a tax of sirups or ingredients. It is a tax on the retail druggist. He pays it out of his sales and out of his profits, if he has any. And furthermore, the amount of bookkeeping, the amount of notations that must be made is astonishing. Take the still drink. You serve 6 ounces of orangeade or lemonade, and you make a record. 128 ounces to the gallon means that the druggist makes 21 records to pay the munificent sum of 2 cents to the Government. Or you make 1,050 records to pay to the Government $1 under the alleged soda fountain or soft drink tax. We feel that that is unfair to charge 2 cents per gallon, that seems reasonable, and ask the retail druggist to pay 10 to 20 to 30 times as much in order to make the records. There are thousands of reports under $1 where the bookkeeping and the labor has amounted to more than $1 in order to pay the Government a few

cents.

I will leave this brief also, Mr. Chairman.

Senator GORE. Do you think there ought to be any tax on fruit juices?

Mr. PHILIP. We pay, Senator, a tax of 2 cents a gallon on the finished product, that is, the water plus the fruit juice. Carbonated or plain.

Senator GORE. Don't you think that ought to be tax-free?

Mr. PHILIP. I do.

The CHAIRMAN. That is free in this bill, isn't it?

Mr. PHILIP. I understood that there was no change in that.
The CHAIRMAN. On fruit juices?

Mr. PHILIP. On still drinks.

The CHAIRMAN. Thank you very much.

(The two briefs referred to are as follows:)

SUBMITTED BY W. BRUCE PHILIP

On behalf of the National Association of Retail Druggists, an organization which represents by direct and affiliated membership over half of the 60.000 retail druggists of the United States, I ask you to very seriously consider the removing of the excise taxes, under section 615 of the Revenue Act of 1932, which were passed by the last session of Congress.

These obnoxious excise taxes have received the name of nuisance taxes because of the aggravating, ranking unfairness of them.

They are a nuisance to the drug trade which I represent. They cause a vast amount of detail work and worry that in the end is not justified, because the tax has not in any measure brought in the revenue anticipated to be brought in by it. Therefore, again I ask that this section be rescinded.

To illustrate, the amount of clerical labor and the number of notations that must be made to pay $1 to the United States under a section of these nuisance taxes just consider the following:

There are 128 fluid ounces to 1 gallon. When 6 ounces of orangeade or lemonade is served to a customer a record must be made. Six ounces divided into 128 ounces gives 21 glasses to the gallon. That is, 21 records must be made to pay the Government the magnificent sum of 2 cents.

In the same way it is seen that to pay the Government $1 in tax for these sales there are 1,050 transactions, regardless of how simple a bookkeeping system is worked out. Surely there is no justification in the United States Government demanding that a busy drug store making orangeade and lemonade fresh for each customer should have to keep a record numbering 1,050 times in order that one single dollar be paid.

You can readily see that this means the druggists are put to an unreasonable expense to keep records so as to pay a dollar asked by this measure. There is nothing fair or reasonable about this. Such a tax should be repealed.

Let us look at a few generalities that are familiar to the committee, but which may aptly be brought up in this specific case.

It is the solid business man, the merchants in the class of retail druggists, who have education enough to keep the kind of records required by the Government, and who are the ones who really pay the excise taxes.

There are competitors of these established merchants-fly-by-night vendors of soft drinks. Come-and-goers who appear on holidays and festive occasions, and those who remain in locations but for short periods, who do not pay the tax. Is that just?

On the other hand, those persons who are evading paying the tax cannot be caught or collected from by our Government. If they were caught, there would still remain no profit. No profit from the amount collected because of the expense of the procedure.

It then may well be assumed that the Government is collecting a tax from honest merchants, and excusing the dishonest ones. The dishonest ones are not only defrauding the Government, but are stealing business from the merchants who are supporting the Government. If such were the history of a few isolated cases, business men would accept the inevitable.

Inasmuch as the aggression just cited is far flung and universal, it is high time that an adjustment be made in favor of the merchants who have paid already for a year. The abolition of the tax is requested.

Let me illustrate. Under section 615 of the Revenue Act of 1932, a tax of 6 cents a gallon was levied upon a gallon of finished soda fountain sirup, as well as a tax on soft drinks, orangeade, and lemonade. Who pays this tax? The people have been told, and the people believe, that this tax is paid to the Government by sirup manufacturers, who sell to the retailer, as the tobacco tax is paid. The people believe that this tax is added to the price of the commodity (say, soda-fountain drinks) when the customer, who consumes the drink pays for it. In a like manner are consumers supposed to pay in the same way what the stamps on tobacco and cigarettes really repay to the manufacturers the amount which manufacturers have paid to the Government. The ultimate consumer of tobaeco thereby pays the tax.

Nothing could be further from the reality of what has taken place in business the last year. No longer are we druggists arguing, we are presenting the facts that have become established data fit to present to this committee. To continue the illustration about soft drinks and soda fountain sirups: The public today pays the same price for a glass of ice-cream soda, orangeade, or lemonade as it paid prior to the passage of the 1932 Revenue Act.

If there has been any change in the price of beverages which contain taxable sirup, it has been due to trade conditions, and is not due to the tax put on by section 615 of the 1932 Revenue Act. The theory that the manufacturer who would absorb and pay the tax has not become a fact.

The well-known Coca Cola Co. at once added the 6 cents a gallon to their wholesale price. The new price paid by the druggists includes this tax. Other manufacturers followed the lead of the Coca Cola Co. The correct answer to the question "Who pays the tax on fountain sirups?" is answered by that portion of the 60,000 retail druggists who have soda fountains, after a year of experience. The druggists pay the tax. The druggists do not even get that slight reward of having their customers know that they, the druggists, personally pay the tax. The customers are deluded, the druggists are not, and they ask to be relieved.