as required by the 1898 Law, no information having been given to the person from whom the stamps were bought of the particular purpose, or claim made to the collector or Commissioner that the tax was unconstitutional, and no claim having been made to the collector of the port of New York that the taxpayer was acting under restraint and. yielding only to enable his ship to depart, recovery was denied because the tax was not paid under duress, even though clearance papers could not be procured without the delivery to the collector of the port of outward foreign manifests of cargo properly stamped, and even though the master of a vessel failing to deliver the proper manifest and to obtain a clearance, was subject to a penalty.279

279 U. S. v. N. Y. & Cuba etc. Co., 200 U. S. 488.

CHAPTER 48

TAX ON EMPLOYMENT OF CHILD LABOR

This tax is a new feature of the internal revenue laws of the United States, designed to effect the abandonment of child labor in the establishments specified in the law. No exhaustive statement of the tax is intended to be made herein, but the features of the law will be briefly pointed out in order that readers may readily ascertain the apparent scope of the statute.1

Effective Date of the Act. The tax goes into effect beginning sixty days after the passage of the Revenue Act of 1918.2 The Revenue Act of 1918 was signed by the President on February 24, 1919, and the effective date is therefore April 25, 1919.

Persons to Whom the Tax Applies. The tax applies to any individual, corporation, partnership, association or company operating a (1) mine, (2) quarry, (3) mill, (4) cannery, (5) workshop, (6) factory or (7) manufacturing establishment situated in the United States (except only a boys' or girls' canning club duly recognized by a State Agricultural Department or United States Agricultural Department).3

MINE OR QUARRY. In the case of a mine or quarry, the tax applies if any child under the age of sixteen years has been employed or permitted to work therein.*

MILL, CANNERY, WORKSHOP, FACTORY OR MANUFACTURING ESTABLISHMENT. In the case of these establishments

1 Revenue Act of 1918, Title XII.

2 Id. 1207.

3 Id. § 1200.

4 Id.

the tax applies if (a) any child between the ages of 14 and 16 (presumably both ages inclusive) has been employed or permitted to work more than eight hours in any day or more than six days in any week or before six o'clock a. m. or after seven o'clock p. m. and (b) if any child under the age of fourteen has been employed or permitted to work at all.5

DURATION OF EMPLOYMENT. Employment contrary to the provisions of the act for a single day is sufficient to impose the tax on the net profits for the whole taxable year. The first taxable year is a period beginning on April 25, 1919, and ending either on December 31, 1919, or on an earlier date if the taxpayer has a fiscal year ending between those dates. Thus if a taxpayer has a fiscal year ending April 30, its first taxable year will be April 25 to April 30, both dates inclusive, while if another taxpayer has no fiscal year its first taxable year will be from April 25, 1919, to December 31, 1919, both dates inclusive. If both taxpayers should employ child labor contrary to the Act on April 25, 1919, the first would be taxed on its net profits for six days and the second on its net profits for eight months and six days.

6

MISTAKE AS TO AGE OF CHILD. If a child has been employed or permitted to work under a mistake of fact as to the age of such child, and without intention to evade the tax, said employment shall not cause the tax to be imposed.7

CERTIFICATE OF AGE. Any person subject to the provision of the law who in good faith obtains a certificate at the time of employment showing the child to be of such age as not to come within the purview of the law, and keeps such certificate on file, may rely in good faith on such certificate to relieve him from the tax. Such certificate is to be issued in such form, under such conditions and by such persons as may be prescribed by a board com

5 Id.

6 See § 1200 and § 1207. 7 § 1203 (b).

The

posed of the Secretary of the Treasury, the Commissioner of Internal Revenue and the Secretary of Labor. board may also authorize the use of employment certificates or other similar papers as to the age of the child issued under the laws of any State designated by the board.

Inspection of Establishments. The Commissioner, or any person authorized by him, may enter and inspect at any time any mine, quarry, mill, cannery, workshop, factory or manufacturing establishment. The Secretary of Labor, or any person duly authorized by him, shall have like authority to make inspections for the purpose of complying with a request of the Commissioner.9

Basis and Rate of Tax. The tax is imposed at the rate of 10% on the entire net profits received or accrued for any year in which child labor is employed for any period of time, as indicated in the law. The net profits are computed by deducting from the gross amount received or accrued during the taxable year from the sale or disposition of such products manufactured within the United States (a) the cost of raw materials entering into the production; (b) running expenses, including rentals, repairs, maintenance, heat, power, insurance, management, and a reasonable allowance for salaries and depreciation; (c) interest on money borrowed and used to meet the needs of the business; (d) taxes of all kinds paid during the taxable year with respect to the business or property relating to the production and (e) losses actually sustained within the taxable year in connection with the business of producing such products, including losses from fire, flood, storm or other casualties, not compensated for by insurance or otherwise. If the product is sold at less than the fair market price in such manner as to directly or indirectly benefit any person directly or indirectly interested in the business or with intent to cause such benefit, the tax is imposed on the gross amount received or

8 § 1203 (a).

9 §1206.

accrued from the sale or disposition during the period that any such sales took place.10

Returns to Be Filed. Every person subject to the provisions of the law (which seems to mean those who operate establishments of the kind enumerated in the law) is required to file a return annually showing the gross amount of income received or accrued during the year from the sale or disposition of the product of any mine, quarry, mill, cannery, workshop, factory or manufacturing establishment in which children have been employed subjecting him to the tax and the amounts allowed by the law to be deducted therefrom, and other particulars, in such form as the Commissioner may require. Such returns are to be filed on or before the first day of the third month following the close of each taxable year, with the local Collector of Internal Revenue. Extension of time to file returns may be granted by the collector in case of sickness or absence.11

Tax Due. The tax becomes due on or before thirty days from the date of the notice of assessment given to the taxpayer by the Commissioner. 12

Penalties. The general penalties apply for failure to file returns, or pay the tax, or for filing false or fraudulent returns.13 Refusal to permit entry or inspection of any establishment is punished by fine of not more than $1,000 or imprisonment for not more than one year, or both fine and imprisonment.14

10 §§ 1200, 1201, 1202.

11 § 1204; R. S. § 3176.

12 § 1205.

18 See Revenue Act of 1918, § 1308 and § 1317, containing R. S. § 3176 as amended.

14 § 1206.