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partnership in the course of his duty, who fails to pay or collect a tax or to make a return, is liable to a penalty of $1,000. If his failure is willful, or he otherwise tries to evade the tax, he is guilty of a misdemeanor and liable to a fine of $10,000 and imprisonment for a year. If his failure is willful, he is also liable to the addition to the tax of a 25 per cent. penalty for failure to make a return and a 50 per cent. penalty for a fraudulent return. See section 3176 of the Revised Statutes, as amended by section 1317 of the Revenue Act of 1918. See also sections 903 and 1312 (4) and articles 37 and 47.

CREDITS AND REFUNDS.

1166. Art. 41. Credits and refunds.-If a manufacturer overpays the tax due with one monthly return, he may take credit for the overpayment against the tax due with a succeeding return. If under section 1312 of the statute or otherwise he similarly overcollects the tax, he shall refund the overcollection to the purchaser from him. If in a case under section 1312 he sells on credit, other than on conditional sale, he shall return the tax at the time of the sale, but may defer collection of it from the purchaser. See articles 44-46. For the procedure with reference to claims for refund see sections 3220 and 3225 of the Revised Statutes, as amended by section 1316 of the Revenue Act of 1918, and Regulations No. 14 (revised).

EXPORTS.

1167. Art. 42. Exemption of export sale. The tax does not attach to the sale of an article which is either (1) shipped direct to a foreign destination by the manufacturer himself, or (2) both (a) sold by him for export and (b) in due course so exported by the purchaser. Where a manufacturer at the time an article is sold or shipped (whichever is prior) has in his possession an order or contract of sale showing in writing (1) that the manufacturer is to export the article, or (2) that the purchaser is buying the article in order to export it prior to its being used or subjected to further manufacture, there is a presumption that the sale of the article is exempt from tax, as an export sale, and the manufacturer may, for a period of six months from the date of sale or shipment (whichever is prior), rely on such presumption. This temporary presumption becomes a permanent presumption upon the manufacturer's receiving, and attaching to such order or contract, before the termination of such period of six months, due "proof of exportation" (see article 43) of such article. On the other hand, if, within such period of six months, the manufacturer has not received, and attached to such order or contract, such "proof of exportation," then the temporary presumption that such sale is an export sale disappears, and the manufacturer shall include a

tax on the sale of such article in his return for the month in which such period of six months expires. The order or contract of sale and the "proof of exportation" must be preserved by the manufacturer in such a way as to be readily accessible for inspection by internal revenue officers. No sale shall be considered to be exempt from tax under section 1310 (c) of the act. unless its character as an export sale has been established in accordance with the above provisions.

1168. Art. 43. Proof of exportation. By the term "proof of exportation" is meant: (1) An affidavit containing the following information: The name and address of the manufacturer, the name and address of the exporter (who, if not the manufacturer, must be a person who has purchased direct from the manufacturer), the respective dates of the sale or shipment (whichever is prior), and exportation of the article, the price for which purchased, the fact that the article has been exported by the manufacturer or original purchaser without having been used or subjected to further manufacture, the name of the port of foreign destination, the name and address of the carrier issuing the export bill of lading, and any further inforination necessary to identify the article sold with the article exported; and (2) attached to such affidavit a copy of the export bill of lading, or a certificate by the agent or representative of the export carrier showing the exportation of the article, or, if exported by parcels post, a copy of the certificate of mailing.

TRANSFER OF BURDEN OF TAX.

1169. Art. 44. Contract of sale before May 9, 1917.-If before May 9, 1917, A, a manufacturer, made with B, a wholesaler, a contract of sale which does not permit the addition of the tax to the amount payable under the contract, then the liability for the tax is on B, with the duty on A only to collect and pay it to the collector as provided in article 47. If B also made before May 9, 1917, a contract of the character described with C, a retailer, the liability for the tax thus imposed on B is transferred from B to C, B being -obliged only to collect the tax from C and to pay it over to A for payment to the collector. If, however, any person before May 9, 1917, made a contract of the character described with any person other than a dealer as defined in article 48, no tax is payable in respect of the sale by him, since on May 9, 1917, no tax was in force on the sale of any of the articles described in these regulations.

1170. Art. 45. Contract of sale before September 3, 1918, of article not then taxable.-If before September 3, 1918, A, a manufacturer of candy or other article not taxable under the Revenue Act of 1917, made with B, a wholesaler, a contract which does not permit the addition of the tax to the amount payable under the contract, then the liability for the tax is on B, with the duty on A only to collect and pay it to the collector as

provided in article 47. If B also made before September 3, 1918, a contract of the character described with C, a retailer, the liability for the tax thus imposed on B is transferred from B to C, B being obliged only to collect the tax from C and to pay it over to A for payment to the collector. If, however, any person before September 3, 1918, made a contract of the character described for the sale of candy with any person other than a dealer as defined in article 48, no tax is payable in respect of such sale by him.

1171. Art. 46. Contract of sale before September 3, 1918, of article then taxable.-If before September 3, 1918, A, a manufacturer of chewing gum or other article taxable under the Revenue Act of 1917, made with B, a wholesaler, a contract which does not permit the addition to the amount payable under the contract of the difference between the present tax and the corresponding tax imposed by the Revenue Act of 1917, then B is liable for such difference. A must collect and pay to the collector as provided in article 47 the portion of the tax for which B is so liable, and he must also include in his return and pay the portion of the tax for which B is not so liable. If B also made before September 3, 1918, a contract of the character described with C, a retailer, the liability for the tax thus imposed on B is transferred from B to C, who is liable for the difference between the tax imposed by the present statute and the tax imposed by the Revenue Act of 1917. B must collect and pay over to A for payment to the collector the portion of the tax for which C is so liable. For example, if any person made before September 3, 1918, a contract of the character described for the sale of chewing gum with any person other than a dealer as defined in article 48, the tax to be collected under the present statute will be the tax in force on September 3, 1918; that is, the tax under the Revenue Act of 1917.

1172. Art. 47. Return of tax.-Each person receiving any payments referred to in section 1312 of the statute shall collect the amount of the tax, if any, imposed by such section from the person making such payments, and shall make monthly returns under oath in duplicate and pay the taxes so collected to the collector of the district in which his principal office or place of business is located. Any person making a refund of any payment upon which the tax is so collected may repay therewith the amount of the tax collected on such payment; and the amount so repaid may be credited against amounts included in any subsequent monthly return. The return shall be made on Form 728 (revised) on or before the last day of the month following the month in which the sale is made, as provided in article 37. The tax shall without assessment by the Commissioner or notice from the collector be due and payable to the collector at the time fixed for filing the return. If the tax is not paid when due, there shall be added as a part of the tax a penalty

of 5 per cent., together with interest at the rate of 1 per cent. for each full month from the time when the tax became due.

1173. Art. 48. Meaning of "dealer."-The term "dealer" includes not only dealers in the ordinary sense-that is, persons engaged in the business of selling articles-but also a person who purchases an article with the intention of using it in the manufacture or production of any article intended for sale. The term does not include a person buying an article for his personal consumption or use. The United States, a State, Territory, or a political subdivision thereof, or a foreign government, purchasing an article for its own use is not a dealer.

FRACTIONAL PART OF CENT.

¶ 1174. Art. 49. When fractional part of cent may be disregarded. [See law Sec. 1313.]

MEDIUM OF PAYMENT OF TAX.

¶ 1175. Art. 50. Payment of tax by uncertified checks.— [Same as Art. 1733, Reg. 45, ¶ 1011.]

1176. Art. 51. Procedure with respect to dishonored checks. -[Same as Art. 1734, Reg. 45, ¶ 1012.]

MISREPRESENTATION OF TAX.

1177. Art. 52. Misrepresentation of tax.—If a manufacturer or other vendor misrepresents the tax, he is guilty of a misdemeanor and is liable to a fine of $1,000 and to imprisonment for a year. This provision is designed, among other things, to prevent a vendor adding more than the amount of the tax to the price of an article and representing that the increase is due to the tax.

1178. Art. 53. Promulgation of regulations. In pursuance of the statute the foregoing regulations are hereby made and promulgated and all rulings inconsistent herewith are hereby revoked.

DANIEL C. ROPER,
Commissioner of Internal Revenue.

Approved May 1, 1919:

J. H. MOYLE,

Acting Secretary of the Treasury.

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