(400.) Special tax-Puts, calls, and spreads. A dealer in puts, calls, and spreads is subject to special tax and stamp tax under the first clause of paragraph 3, section 8, act of March 2, 1901, notwithstanding the fact that his business is not the same as that commonly known as "bucket shop." TREASURY DEPARTMENT, OFFICE OF COMMISSIONER OF INTERNAL REVENUE, Washington, D. C., August 8, 1901. SIR: I have received your letter of the 3d instant, relating to firms in your district who are engaged in those transactions in stocks, etc., known as "puts" and "calls" and "spreads," and whom you have informed that, in taking out the special-tax stamp contemplated by the third paragraph of section 8 of the act of March 2, 1901, they do not thereby place themselves in the same class as those persons and firms who are conducting what is commonly known as "bucket shops." In the opinion of this office, you are entirely correct on this point. The provisions of this statute, when carefully read, can not be held to be confined to the business ordinarily known as that of bucket shops. Persons engaged in the business to which you refer, although it does not include bucket shop transactions, are engaged in transactions which are neither completed by actual delivery of the property nor closed on any regular stock exchange as bona fide transactions. They accordingly come under the first clause of the paragraph of the statute herein referred to, and are required to pay the additional special tax therein contemplated, and to issue a memorandum for each transaction and affix thereto the requisite stamps and comply with all the other require. ments of this statute. Respectfully, J. W. YERKES, Commissioner. Mr. CHARLES H. TREAT, Collector Second District, New York, N. Y. (401.) Tax on capital of banks. Trust companies doing a general banking business must include, as part of their capital in their special-tax return, moneys required to be deposited as security with the treasurer of the State, as required by State laws, before doing business.-New ruling. TREASURY DEPARTMENT, OFFICE OF COMMISSIONER OF INTERNAL REVENUE, Washington, D. C., August 8, 1901. SIR: Your letter of the 26th ultimo has been received, referring to trust companies who are doing a general banking business for which they are required to pay special tax under the first paragraph of section. 2 of the act of March 2, 1901, and submitting the question whether or not each of these companies must not include, as part of its capital and surplus in its special-tax return, the sum of $100,000 required to be deposited under the provisions of the law of the State of Ohio, which you quote, namely: That no such Company shall accept any trusts which may be vested in, transferred or committed to it by any individual or by any court of record, as provided in 'section 3821c, until the capital stock shall amount to two hundred thousand dollars, fully paid up, and until such company shall have deposited with the Treasurer of State one hundred thousand dollars in cash, or in securities in which said company is by law allowed to invest its capital: Provided, The full amount of such deposit may be made in bonds of the United States or State of Ohio. In the opinion of this office, the sum of $100,000 thus required to be deposited in cash or securities should properly be regarded as part of the capital of the trust company, though the law of the State of Ohio, requiring such deposit, further expressly provides that The Treasurer of State shall hold such fund or securities deposited with him as security for the faithful performance of all the trusts assumed by said Company. This sum, therefore, should be included in the full amount on which the special tax of this company is to be reckoned. Respectfully, J. W. YERKES, Commissioner. Mr. JOHN W. SINSEL, Revenue Agent, Cincinnati, Ohio. (402.) Tax on capital of banks. Trust companies doing a banking business must include with their banking capital, in reckoning the amount of special tax which they are required to pay, the amount set apart for use in conducting their storage business. TREASURY DEPARTMENT, OFFICE OF COMMISSIONER OF INTERNAL REVENUE, Washington, D. C., August 8, 1901. SIR: I have received your letter of the 1st instant, inclosing a communication addressed to you by the Union Trust and Storage Company, of Washington, D. C., wherein they claim that the amount of money which they have set apart for use in conducting the storage business should not be included with their banking capital in reckoning the amount of special tax which they are required to pay for conducting the banking business. The secretary, Mr. Fleming, after referring to the act of Congress approved October 1, 1890, providing for the incorporation of trust, loan, mortgage, and certain other corporations within the District of Columbia, and to that provision of the act which reads— Provided, further, That any of said companies may also do a storage business when their capital stock amounts to the sum of not less than one million two hundred thousand dollars says: By reason of the above proviso the cash capital is $1,200,000, of which amount a sum of $346,000 has, from time to time, by resolutions of the board of directors, been set apart for the exclusive purpose of conducting a merchandise, freight, household storage, and warehousing business. This capital, so invested, represents the cost of the entire square of ground on the line of the Baltimore and Ohio Railroad in this city, and is bounded by First and L streets, Delaware avenue, and K street. On this square have been erected three immense warehouses, with stable, trackage, and other equipment. This enterprise is conducted as a separate department by our company under the authority of the aforesaid act of Congress, and no part of the capital so invested is in any way used, pledged, or considered in connection with our banking business. Notwithstanding this statement, I am of the opinion, and so hold, that the special tax must be reckoned on the entire capital of $1,200,000, without deduction of the sum of $346,000 herein referred to. Respectfully, J. W. YERKES, Commissioner. Mr. BENJ. F. PARLETT, Collector of Internal Revenue, Baltimore, Md. (403.) Redemption of imprinted stamps. Under existing laws it is not possible to return checks to the owners after the imprinted stamps have been redeemed, but they will be preserved subject to future action of Congress. TREASURY DEPARTMENT, OFFICE OF COMMISSIONER OF INTERNAL REVENUE, To collectors of internal revenue and others concerned : Application having been made to this office by banks and bankers for the return, after redemption of the stamps, of checks on which stamps have been imprinted, you are advised that when the war-revenue act imposing a tax on checks and notes went into effect, at the request of the bankers, and to meet their convenience, a system of imprinting the 2-cent stamps upon checks was devised by this Bureau, which was a great saving of annoyance and trouble to the banks and their customers. Upon the repeal of the stamp tax on checks by the act of March 2, 1901, the question arose as to the redemption of such imprinted stamps, and instructions were issued March 22, 1901 (Circular No. 596), relative to redemption of documentary and proprietary stamps. This office has been requested to cancel the imprinted checks, after allowance of the claim for redemption, in such a manner as to render their further use possible, and return them to the original owner in order to effect a saving to the owner or bank of the cost of stationerv and the binding of the checks and drafts in book form. The extent to which these imprinted stamps are being presented shows that a large pecuniary loss will fall upon banks and owners if the checks and drafts are destroyed, after refund is made for the stamps thereon. After careful consideration of this whole question, the conclusion reached is that, under the existing laws, it is not possible to return these instruments to the owners, but this office will proceed as rapidly as possible to consider the claims for redemption, and refund to the owners the amounts due by reason of the stamps imprinted; will cancel these instruments so as to allow their future use; will preserve the various checks, and will recommend to Congress, at its session in December next, to pass a law under which it will be possible and legal to return these checks and drafts to the claimants and owners. It is understood that the banks will also petition Congress for relief, and in this way it is believed speedy action may be had. J. W. YERKES, Commissioner. (404.) Bay rum. Bay rum manufactured in Porto Rico, when brought into the United States, is liable to internal-revenue tax as distilled spirits. TREASURY DEPARTMENT, OFFICE OF COMMISSIONER OF INTERNAL REVENUE, Washington, D. C., August 15, 1901. SIR: I am in receipt of your letter of the 12th instant, requesting that you be advised whether bay rum brought into the United States from Porto Rico is subject to an internal-revenue tax because of the spirits therein contained. In submitting this question you call attention to the fact that prior to the recent proclamation of the President (by virtue of which all customs duties levied by the act of April 12, 1900, on articles of Porto Rican manufacture have been removed), the article in question was taxed under the internal revenue laws only as a proprietary article; and you express the opinion that, as this tax has also been repealed, this article is not now liable to tax under the internal-revenue laws. This question was recently submitted to this office by Messrs. Lehn and Fink, of your city, and, after a careful examination of the act above referred to and the statutes relating to distilled spirits, it was held that all such rum brought from Porto Rico was subject, as distilled spirits, to the tax imposed by section 3251, Revised Statutes, as amended by the act of August 28, 1894. Section 3248, Revised Statutes, declares that— Distilled spirits, spirits, alcohol, and alcoholic spirit, within the true intent and meaning of this Act, is that substance known as ethyl alcohol, hydrated oxide of ethyl, or spirit of wine, which is commonly produced by the fermentation of grain, starch, molasses or sugar, including all dilutions and mixtures of this substance; and the tax shall attach to this substance as soon as it is in existence as such, whether it be subsequently separated as pure or impure spirit, or be immediately, or at any subsequent time, transferred into any other substance, either in the process of original production or by any subsequent process. Section 3254, Revised Statutes, also provides that— All products of distillation, by whatever name known, which contain distilled spirits or alcohol, on which the tax imposed by law has not been paid, shall be considered and taxed as distilled spirits. From information received at this office it appears that imported bay rum is ordinarily of an alcoholic strength of from 102 to 106 proof, and on examining the tariff act of 1897, now in force, I find that, while subject to a somewhat lower rate of duty than that imposed on other distilled spirits, bay rum or bay water, whether distilled or compounded, is included in Schedule H of that act (paragraph 294) under the general description of "Spirits." In imposing customs duties on articles of Porto Rican manufacture coming into the United States, section 3 of the act of April 12, 1900, provides that there shall be paid, in addition to such duties, "a tax equal to the internal-revenue tax imposed in the United States upon the like articles of domestic manufacture," and this last-named provision of the act is still in force. It is clear that, under the provisions of sections 3248 and 3254, Revised Statutes, above quoted, bay rum, if produced in this country, either by original distillation or by compounding with nontax-paid spirits, would be subject to tax, and according to the quantity of spirits contained therein; and it seems equally clear that this tax would, under the provisions of section 3 of the act named, attach to like spirits of Porto Rican manufacture coming into the United States. In extending the internal-revenue tax to articles brought from Porto Rico it was evidently the intention of Congress that all articles so brought and placed in competition with domestic articles upon which tax had been paid should pay a like tax. While no internal-revenue tax is imposed on bay rum as such, a tax is imposed on the spirits therein contained as here shown, and I am clearly of the opinion that neither the designation given this article nor the fact that the spirits are combined with other substances exempts such spirits from such tax. If otherwise held, dangerous opportunities would exist for the importation of large quantities of distilled spirits under the guise of nontaxable articles, and for the subsequent recovery of such spirits by redistillation or by other process. While spirits so recovered would still be subject to the tax imposed, it would be obviously difficult, and in many cases impossible, for the Government to trace the spirits and enforce payment of the tax thereon. Such evasion of the tax would not only result in loss of revenue, but would work a manifest injustice to distillers and importers, who are required to pay tax or duty on all distilled spirits produced or imported by them. With reference to your statement that prior to the issuing of the proclamation referred to, the article in question was held to be subject to tax as a proprietary article only, I would state that prior to the date (May 1, 1900) when the act relating to Porto Rico went into effect |