prescribed in the Act of June 30, the certificates must be taken for each month separately.

The Collector will receive the certificates as a payment of the amount stated in the Assessor's certificate, and upon the receipt of the certificate and the balance due, will enter the whole amount of the tax as collected, and credit himself in his quarterly account, under the head of "Amount allowed on certificates of articles delivered to the United States under section 97," and forward the original certificates to the Office of Internal Revenue, with his account, as vouchers, retaining the duplicates in his own possession.

No. 147.

DECISION with reference to the Tax on Thread, Yarns, and Warps, and Cloth and Fabrics made therefrom.

1.

The Act of June 30, 1864, section 94, provides that ". on cloth and all textile or knitted or felted fabrics of cotton, wool, or other materials, a duty of five per centum ad valorem shall be levied, collected, and paid: Provided, That thread and yarn, and warps for weaving, shall be regarded as manufactures, and be subject to a duty of five per centum ad valorem."

2. Another clause of the same section, declares that there shall be levied on all manufactures of cotton, wool, silk, worsted, flax, etc., etc., or of other materials not in this act otherwise provided for, a duty of five per centum ad valorem: Provided, that any cloth or fabrics, as aforesaid, when made of thread, yarn, or warps, upon which a duty, as aforesaid, shall have been assessed and paid, shall be assessed and pay a duty on the increased value only thereof.

3. Under these provisions, it is held that when the same person or firm manufacture thread and yarns, and warps, which they use or consume in the manufacture of cloth, or fabrics of cotton, wool, or other material, whether woven, knit, or felted, no tax is to be assessed upon the thread and yarn, or warps, but the tax is to be assessed on the finished cloth or fabrics, or other material.

4. When thread and yarn, and warps, are manufactured and sold, or delivered to other parties to be woven, knit, felted, or finished into cloth, or other primary fabrics of the nature of cloth, then such thread and yarn, and warps, are to be regarded as a distinct manufacture, and are to be assessed, and the tax is to be collected on them when they are sold or delivered.

5.

When thread and yarns, and warps, as aforesaid, after having been purchased of a manufacturer who has paid the tax thereon, shall be converted by the purchaser into cloth or other fabrics, the tax to be imposed upon such cloth or fabrics shall be assessed and collected only on their increased value.

6.

Whenever cloths, or other fabrics of cotton, wool, or other material, whether woven, knit, or felted, are manufactured into clothing, hosiery, gloves, mittens, or other articles of dress or apparel for the wear of men, women, or children, or into articles adapted to other uses, all such manufactured goods and articles are subject to duty on their entire value, under the limitation relative to increased value, in the last clause of section 96.

7. Whenever hosiery, gloves, mittens, or any article of dress or apparel for the wear of men, women or children, are woven, knit, or felted, as a primary manufacture directly from the thread, yarn, or warp, all such goods and articles are liable to a duty on their entire value, though the thread, yarn, or warp has been previously assessed for a duty. Such articles are something more than cloth or a fabric. The fabric is in fact the material of which the articles themselves are constituted; the articles being an advanced or an additional manufacture produced by a single operation, instead of passing through two processes to reach the same end.

No. 146.

DECISION relative to the Tax on Molasses and Sugar made from Sorghum or Imphee, Wine from Berries, and Cider.

The Act of June 30, 1854, provides, that on molasses produced from sugar cane, and not from sorghum or imphee, a duty of five cents per gallon shall be levied,

collected, and paid, and on sugar produced from the sugar cane, and not from sorghum or imphee, a duty of one cent and one-fourth of one cent per pound.

By the express terms of the law, as cited above, molasses and sugar made from sorghum or imphee, are excepted from the duty therein provided. Section 96, of the same act, enumerates the various articles and manufactures exempt from duty, while a general clause of the 94th section makes provision for levying a tax of five per centum on all manufactures not in the act otherwise provided for.

As molasses and sugar from sorghum or imphee are excepted under the clause imposing tax on molasses and sugar produced from sugar cane, or sugar-cane juice, etc., while at the same time they are not enumerated in the list of articles especially exempt from duty, it follows necessarily that they are included under the general clause of manufactures not otherwise provided for, and are subject to an ad valorem duty of five per centum.

Under the same general clause, cider made from apples and pears, wine made from currants, rhubarb, or berries, without being rectified or mixed with other spirits, and into which no foreign matter whatever has been infused, are subject to an ad valorem duty of five per centum. But persons producing either of the abovementioned articles, where the product does not exceed the rate of $600 per annum, and is made or produced by their own labor or the labor of their families, are exempt from duty.

No. 150.

DECISION concerning the Tax on Ships, Vessels, or Water-craft, when built or repaired, and on Sails and Rigging.

1. By the Act of June 30, 1864, it is provided that on the hulls, as launched, of all ships, barks, brigs, schooners, sloops, sail-boats, steamboats, canal-boats, and all other vessels or water-craft (not including engines or rigging) hereafter built, made, constructed, or finished, a duty of two per centum ad valorem shall be levied, collected and paid.

2. Under this provision the tax of two per centum is to be levied only on the hull of the ship, boat, or vessel, and the assessment is to be made on the hull when launched, and upon its entire value at the time of launching.

3. The law having thus specially provided for taxing ships, barks, etc., no additional tax can be assessed under the 95th section, on the hull of a vessel, in consequence of its having been more completely finished or fitted for use or sale, when the same has been previously assessed upon its value as launched.

4. The builder or shipwright who furnishes his own materials, and builds or constructs a ship, boat or vessel, whether the same is built on contract or for general sale or use, must be regarded as the manufacturer or producer, and must be held liable to make return of the same, and pay the duty assessed thereon.

5. When the builder or shipwright acts simply in the capacity of an employee, the materials being furnished by the owner, who controls the entire operations, and settles all the bills, the owner must be regarded as the manufacturer or producer, and be held liable to make return of the same, and pay the duty assessed thereon.

6. The Act of June 30, 1864, provides that on all repairs of ships, steamboats, or other vessels, when such repairs increase the value of the ship, steamboat, or other vessel, ten per centum or over, a duty of two per centum on such increased value shall be levied, collected, and paid. In determining the increased value for purposes of taxation, an estimate must be made of the value of the vessel when repaired, together with the cost of such repairs. Whenever the cost of repairing equals or exceeds one-eleventh of the value of the hull of such vessel, the duty of two per centum accrues, and must be collected and paid. The same rule will apply in regard to the party liable for the tax in the case of repairs, as in the case of a new ship or other vessel.

7. The same act provides that on sails, etc., made of cotton, flax or hemp, or part of either, or other material, a duty of five per centum shall be levied, collected, and paid; provided, that when the material, etc., was imported, or has been subject to and paid a duty, and the same is made by sewing, a duty of five per centum ad valorem shall be assessed only on the increased value thereof.

Under this provision sails made from untaxed material are to be assessed on their entire value; but if made from taxed materials, the tax must be assessed on the

increased value, provided the increased value exceeds five per cent. The increased value in this case will be ascertained by deducting from the value of the finished sails, when sold or removed for sale, use, or delivery, the cost or value of the cloth, duck, canvas, or other material from which the sails are made.

8. Under the general clause of section 94, on rigging of all descriptions, (not including masts, spars, ship or vessel blocks, which are especially provided for,) and on ground or other tackle, a duty of five per centum ad valorem must be assessed. But where such rigging has been assessed and a tax paid thereon, no additional tax should be assessed in consequence of cutting, fitting, and attaching the same to the masts and spars of the ship or vessel, or for what is technically known rigging a vessel."

86

No. 148.

DECISION concerning the Tax on Cigarettes.

In the schedule, under Decision No. 138, imposing a tax upon cigars according to a graduated scale of values, the rates of tax on different grades of cigarettes, instead of being written out in full, were left to be inferred from the corresponding rate of cigars. As the manufacture of cigarettes has somewhat enlarged, and the quality of the article become improved, since the passage of the Act of June 30, 1864, it is deemed advisable to extend the schedule contained in the decision, so as to include all cases of tax to which the law is applicable.

The 94th section of the act provides, that "on cigarettes made of tobacco, enclosed in a paper wrapper, valued at not over five dollars per hundred packages, each containing not more than twenty-five cigarettes, one dollar per hundred packages shall be paid; and all cigarettes made of tobacco, enclosed in a paper wrapper, valued at over five dollars per hundred packages, as aforesaid, shall be subject to the same duties herein provided for cigars of like value."

Adopting the same schedule of values as in the case of cigars, we obtain the following rates:

Cigarettes, in paper wrappers, selling at not over $6 per 100 packages,

of not more than twenty-five cigarettes each, per 100 packages..... $1.00 Cigarettes, selling at over $6 per 100 packages, as aforesaid, will be taxed in the same manner as cigars of like value per thousand, that is to say:

Cigarettes, selling at over $15 per thousand, and not over $30 per thousand...

8.00

Cigarettes, selling at over $30 per thousand, and not over $55 per thousand..

15.00

Cigarettes, selling at over $55 per thousand, and not over $85 per thousand..

25.00

Cigarettes, selling at over $85 per thousand.

40.00

Form 72, Cigar Manufacturers' Weekly Return, can be used by manufacturers of cigarettes by simply changing, when necessary, the word "cigars," under the heading of "kind or description," to cigarettes.

No. 138.

DECISION concerning the Tax on Cigars.

Section 94, of the Act of June 30, 1864, in imposing a tax upon cigars according to a graduated scale of values, provides that the valuation shall in all cases be the value of the cigars, exclusive of the tax. A literal compliance with this provision is a sheer impossibility, inasmuch as it requires the elimination of twounknown quantities from a given total. When, for instance, cigars are sold at $50 per thousand, if, for the purpose of the exclusion, we assume the tax to be $15, the net value remains $35, and the cigars fall into the class subject to a tax of $25; while if the latter be assumed as the tax to be deducted, the valuation exclusive of the tax is but $25, and the cigars appear to be subject to a tax of but $15.

There is, however, one fixed point furnished by the law, and by starting from here we obtain a clue to guide us out of the labyrinth. Cigars valued above $45 per thousand, exclusive of the tax, are subject to a tax of $40. It is clear that no cigars can be worth more than $45, exclusive of a tax of $40, unless they are worth, inclusive of the tax, more than $85; and the tax must always be included in the price for which cigars are sold, inasmuch as the manufacturer, and not the purchaser, is responsible for its payment.

It follows that cigars which do not sell for more than $85 per thousand are not subject to the tax of $40. The next lower tax is $25 per thousand, and the problem to be solved is to determine the lower limit of the class which is subject to this rate of tax. Applying the same principle by which we arrived at $85 as the lower limit of the next higher class, and we have $55. Pursuing the same course with the several classes established by the law, we obtain the following schedule:

Cigarettes, in paper wrappers, selling at not over $6 per 100 packages, of 25 each, per 100 packages.

1.00

Cigarettes, in paper wrappers, selling at over $6 per 100 packages, of 25 each, per 100 packages.

3.00

Cigarettes, made wholly of tobacco, per M

3.00

Assessors will therefore be guided by this schedule in making assessments upon cigars.

For the purpose of aiding in the detection and prevention of fraud, the law provides for the inspection and stamping of cigars by an inspector. As a general rule, the tax does not accrue upon cigars until after their sale, and the advantage of the fixed and positive basis afforded by the sale would designate the selling price as the point of departure in assessing the tax, even if the positive provision of section 86 did not prescribe it for our guidance. But the inspection is made before a sale, and thus it follows that the Inspector is obliged to estimate the value as best he can, and this at a time when the tax has not yet attached. It is therefore as feasible for him to estimate the value exclusive of the tax a it would be to include the tax, and the double check furnished by an inspection upon this basis will tend to prevent fraudulent and fictitious sales.

Inspectors have therefore been instructed to estimate the value of cigars, exclusive of the tax, including in this estimate the cost of production, packing, boxing, inspecting, and whatever may be properly regarded as a part of the expense of putting the commodity into a complete and final condition for the market, as well as the reasonable and ordinary profit of the manufacturer. After he has thus determined the value, he will affix the stamp according to the following schedule: Not over $5 per hundred packages, (exclusive of the tax,).. Over $5 per hundred packages, (exclusive of the tax,). Not over $5 per thousand, (exclusive of the tax,).. Over $5, and not over $15, (exclusive of the tax,). Over $15, and not over $30, (exclusive of the tax,) Over $30, and not over $45, (exclusive of the tax,) Over $45, (exclusive of the tax,).........

$1.00

3.00

3.00

8.00

15:00

25.00

...

40.00

The duties of the Assistant Assessor are entirely distinct from those of the Inspector, and much of the confusion which has existed in connection with the tax on cigars has arisen from a disregard of this fact. Circular No. 19 relates exclusively to the duties of the Inspector, while assessments are to be made, in all cases, upon the basis of the actual sales.

The inspection and stamping of cigars required by the law, is intended to assist in securing the payment of the tax, and therefore no cigars which were manufactured and had passed out of the possession of the manufacturer before the first of July, are to be inspected or stamped; nor is there anything in the law requir ing a second inspection of cigars in the hands of a purchaser, when they have once been inspected and assessed in the hands of the manufacturer.

When cigars are returned as sold at a price which would subject them to tax at a lower rate than that at which they have been stamped, the Assessor should make a prompt investigation of the facts, as such return would afford strong presumptive evidence of fraud.

Several letters have been received at this office from persons claiming to have purchased or sold cigars at a stated price, exclusive of the tax. It is hardly necessary to say, that the price must be considered as including all that is paid by the purchaser to the seller, without reference to any imaginary distinction the parties may recognize between the portion paid for the cigars and the portion paid for the tax.

SPECIAL No. 5.

INSTRUCTIONS concerning the Assessment of Tobacco, Snuff and Cigars.

Information has been given to this office, that many manufacturers have made returns as for the month of June or for previous months-of tobacco, snuff, and cigars, not bona fide sold or removed for consumption or sale during those months. It has been stated that colorable sales have been made, and taxes paid according to the rates under the former acts, with the view of avoiding the additional tax required by the Act of June 30, 1864.

Sales made by a manufacturer to his foreman, or to some convenient friend or man of straw, with the view of a retransfer to the manufacturer, or of a sale afterwards to his use, though possession may have been delivered to such foreman or other person, will not affect the right of the Government to the increased tax. Such sale is fraudulent, so far as the Government is concerned, whatever it may be between the parties, and ought not to be recognized as valid by the officers of internal revenue. Upon the sale, or consumption, or removal for consumption or sale, or removal from the place of manufacture, of such articles after the first of July, the tax thereon became due and must be paid at the increased rates, pursuant to the last act.

Articles which in June or previous months were the subjects of such colorable sales, remaining actually the property of the manufacturer, though in other hands for his use, and actually sold during the month of July, ought to have been returned as belonging in the weekly returns of that month; and Assessors and Assistant Assessors should be careful to see that those returns include all such articies as really belonged to the manufacturer, though they may have been subjects of pretended sales and deliveries.

There may be articles on hand which, in order to avoid the increased tax, were pretended to be sold, and which may be hereafter actually sold. These ought to be hereafter returned, and the same caution, herein enjoined as to the returns for the month of July, ought to be observed as to the returns of subsequent months. This course is rendered necessary in order to secure to the Government its just dues, and to protect the fair dealer from fraudulent competition. It is therefore the duty of Assessors to scrutinize carefully all returns which have been made by manufacturers of tobacco, snuff and cigars, since the first of July, or which may hereafter be made.

Under section 90, manufacturers of tobacco, snuff and cigars, are required to make weekly returns of the amounts of each made or manufactured and sold, or consumed, or removed for consumption or sale, or removed from the place of manufacture, during the week; and also render an account of the full value of the same as shown by actual sales. Whenever it shall appear that cigars have actually been sold by the manufacturer at prices which would render them liable to a higher rate of tax than that denoted by the Inspector's stamp, or when it shall be discovered that articles have been fraudulently returned under former rates, and that the manufacturer is legally liable to the increased tax under the instructions herein given, the Assessor will immediately proceed to re-assess such cigars for the additional tax to which actual sales show them to have been liable. The assessment and collection of such additional tax may be enforced as provided in section 84, or proceedings may be commenced under section 48, or section 89, as either may be applicable, and an investigation may be had under section 14.

The monthly declaration required by section 91, has been prepared by the Commissioner. This declaration should have been made and signed by every manufacturer of tobacco, suuff and cigars, on the last day of July. In all cases where it has not yet been made and signed substantially in the form now prescribed by the Commissioner, Assessors must be particular to require it now as of that time, and at the end of every month hereafter. It is evidently contemplated by the law that this declaration may be an essential aid in the discovery of possible