20 



HARDWOOD RECORD 



June 2.",. 1921 



iiiaiiit.-iiii tlu'ir own sales forces. This would constitute a monopoly 

 and would inevitably mean much higher prices for lumber. Reten- 

 tion of the j)enalty would seriously affect small retail yards and 

 tend to drive them out of business, it was also claimed. If these 

 small dealers could not buy transit lumber they could not stay in 

 business, because they could not carry large enough stocks to serve 

 their trade. In general the penalty was described by the com- 

 plainants as unfair and discriminatory. 



The complainants maintained that they did not believe in the 

 retention of a car under load and asserted that they never pur- 

 posely did so. But the forty-eight hour free time, they said, is too 

 brief. They protested against the inclusion of Sundays, legal holi- 

 days and Mondays following legal holidays in this free time. They 

 al.so objected to the frequent declaration by the railroads of 

 embargoes without due notice, causing delay (jf transit cars for 

 which the lumber wholesalers were penalised. 



The principal witness for the complainants was L. (iermain, Jr.. 

 the Germain Company, Pittsburgh, Pa., a director of the American 

 Wliolesale Lumber Association. Those intervening in favor of the 

 original complainant wore the Associated Cooperage Industries of 

 America, St. Louis, Mo., and the Central Wisconsin Supply Com- 

 pany, Beaver Dam, Wis. Joseph E. Davies and Franklin D. Jones 

 of Davies & Jones, Washington, D. C, and Edward A. Haid of 

 St. Louis, MO; appeared as attorneys for the American Wholesale 

 Lumber Association. The defense was directed by Eoyal T. 

 McKenna, representing the director general of railroads. A num- 

 ber of defendant railroads were individually represented by attor- 

 neys. 



Several lumber trade organizations intervened to sustain the 

 $10 penalty charge, among these being the National Betail Lumber 

 Dealers' Association, represented by Warren T. Duffy and George 

 N. Brown; the Southern Pine Association, represented by L. C. 

 Boyle; the National Lumber Manufacturers' Association, by Frank 

 Carnahan; the Georgi;i-Florida Saw Mill Association, by W. E. 

 Gardner and the Michigan Hardwood Manufacturers ' Association, 

 by J. C. Knox. 



Sustainers of the penalty charge contended that it has served 

 to reduce demurrage; that it prevents abuse of equipment and 



contributes to the maintenance of an adequate supply of cars. 

 They denied that the transit car necessarily keejis the price of 

 lumber down, declaring that there are occasions when an "auc- 

 tion" market is created by this means, when a car of lumber is 

 passed from wholesaler to wholesaler, increasing the cost each time. 

 It was said that the transit car is often held while the wholesaler 

 liargains for a better price. It was contended that the use of the 

 tr.-insit car retards the movement of traffic generally and without 

 the penalty would become a serious retardant. 



The most important witness for the railroads was W. C. Kendall, 

 head of the commission on car service, American Railroad Associa- 

 tion, Washington, D. C, who during the war was chief of the car 

 service section of the Railroad Administration. He introduced a 

 great mass of data applying to car supply during .md after the war, 

 but the testimony which he gave on present and future ear supply 

 w.is most valuable from the standpoint of general interest. Sup- 

 ]p()rtiiig Ins contention that the penalty should remain, he declared 

 lliat the volume of traffic is already on the increase; that a great 

 liuilding boom is developing which will demand the movement of 

 i|uantities of lumber and other building materials that will take 

 the capacity of the railroads. He quoted statistics to sustain this 

 contention: During the week ending May 21 the railroads of the 

 country hauled 50,000 caTs of ' ' forest products, ' ' while the week 

 following, ending May 28, they hauled 54,000 cars of forest products, 

 .■I gain of 4,000 cars in one week. But the gain in traffic does not 

 apply only to forest products, Mr. Kendall said. He gave the fol- 

 lowing figures on general traffic, covering the four weeks of May — 

 first week, 718,000 carloads; second week, 750,000 carloads; third 

 week, 768,000 carloads; fourth week, 787,000 carloads. In sum the 

 ' ' revenue freight ' ' on the railroads of the country increased 69,000 

 carloads during May. 



In conjunction with this rapidly growing volume of traffic the 

 perecentage of bad order cars is increasing, Mr. Kendall said. Such 

 ears are now 14 per cent of the total, instead of 7 per cent as a 

 year ago. 



From the above figures Mr. Kendall drew the conclusion that 

 ' • We should conserve our car supply in every way possible, and 

 the penalty charge should be retained in order to give the shipping 

 public the use of all ears necessary." 



The Capital Stock Tax Return 



By Gen. L. C. Boyle 

 Counsel for National Lumber Manufacturers* Association 



The capital stock tax is an excise tax imposed on the privilege of 

 "doing business." It applies to corporations including concerns in 

 the nature of corporations, such as associations, joint stock com- 

 panies, whether created by statute or contract, and insurance com- 

 panies, but not to partnerships. 



The tax applies to both domestic and foreign corporations "doing 

 business" within the meaning of the act, unless specifically exempt, 

 provided such corporation is engaged in "doing business" in the 

 two fiscal years 1921 and 1922. Thus in July, 1921, corporations 

 which were engaged in "doing business" at any time between 

 June 30, 1920, and July 1, 1921, and which are engaged likewise in 

 "doing business" at any time between July 1, 1921, and June 30, 

 1922, are liable to the tax, payable in advance, the tax being based 

 upon the value of the capital stock (for domestic corporations) or 

 capital employed (for foreign corporations) of the previous year. 

 A corporation which starts for the first time "doing business" 

 during the year between July 1, 1921, and June 30, 1922, is not liable 

 to the tax, but a corporation which starts "doing business" prior 

 to July 1, 1921, and continues past that date is liable, no matter if 

 it be engaged in "doing business" but a short time, the length of 

 time making no difference in the tax. . 



The rate of tax is $1 for every full ,$1,000 of the ' ' fair average 

 value of its capital stock for the preceding fiscal year" for a 

 domestic corporation and $1 for every full. $1,000 of the "average 

 amount of capital actually employed in the transaction of business 



in the United States during the preceding fiscal year" for a foreign 

 corporation. Domestic corporations, however, are allowed a spe- 

 cific exemption for $5,000. 



The tax is payable in advance. That is, a corporation which is 

 doing business in July, 1921, and which was also engaged in doing 

 business prior to such date, will pay for the privilege of doiug busi- 

 ness in the period subsequent to July 1, 1921, during July, the tax 

 being based upon the value of capital stock or capital employed in 

 the previous year. 



The return is due during the month of July, 1921, and the tax is 

 i:)ayable upon notice and demand by the collector but may be paid 

 at the time of filing return. 



Every corporation, including associations, joint stpek companies, 

 etc., should file a return on Form 707 whether or not it is exempt 

 or whether or not it is, in its opinion, "doing business" within the 

 meaning of the Act. If, in its opinion, it is specifically exempt or 

 not "dong business" Form 707 (Revised) should be filled out and 

 filed with the collector, together with a comprehensive statement of 

 the reasons for claiming exemption. In such case the fair value 

 should be reported on page 1 of the form, but the tax not computed, 

 notation "exemption claim" being made instead. If exemption 

 has been allowed for the preceding taxable year and there has been 

 no change in the status or position of the company, then the first 

 fourteen lines of Form 707 (Revised) should be completed and a 

 statement attached to the effect that exemption is claimed for 

 the same reasons as for the previous year and that the same status 

 and condition of the company exists for the taxable period in 

 (iuestion. 



