§609 Processing Tax; Methods of Computation; Rate; What Constitutes Processing; Publicity as to Tax to Avoid Profiteering

Summary

Imposes a processing tax on certain farm commodities to raise money for emergency national expenses. The tax begins when the Secretary of Agriculture says benefit payments under section 608 will be made for a commodity; it then applies from the start of that commodity’s next marketing year. Special start dates are: sugar beets and sugarcane on and after the thirtieth day after May 9, 1934 (calendar year is the marketing year, and 1934 begins January 1, 1934), and rice on and after April 1, 1935 (rice marketing year is August 1 to July 31). The tax is charged at the first domestic processing of the commodity, whether grown here or imported, and is paid by the processor. The normal tax rate equals the gap between the current average farm price and the fair exchange value, plus up to 20% more to cover estimated refunds, credits, and exempt government processings. The Secretary sets the rate when the tax starts and can change it as needed. If the tax seems to cause surplus stocks or hurt farm prices, the Secretary must investigate, hold hearings, and lower the rate until the problem is fixed. Some commodities had set rules and rates for fixed periods: the rate in force on August 24, 1935 applied for wheat, cotton, field corn, hogs, peanuts, paper, and jute (and, except as noted, sugarcane and sugar beets) from that date through December 31, 1937. Rice was taxed at 1 cent per pound of rough rice from April 1, 1935 through July 31, 1936. Rye was taxed at 30 cents per 56‑pound bushel from September 1, 1935 through December 31, 1937; barley, if made effective before December 31, 1937, was taxed at 25 cents per 48‑pound bushel through December 31, 1937. Rates prescribed for those commodities must be reduced or increased under formulas in the law to avoid depressing farm prices; specific adjustments depend on how the average farm price over a defined 12‑month span compares to the fair exchange value (adjustments set rates to 20%, 15%, or 10% of fair exchange value in certain cases). After December 31, 1937 (and after July 31, 1936 for rice), the Secretary sets rates under the chapter’s formulas. Fair exchange value is the price that gives the same buying power as the base period (for prewar commodities August 1909 to July 1914) and, where applicable, reflects interest and tax payments per acre; the Secretary uses USDA statistics to calculate these numbers. The law defines “processing” differently by commodity: for wheat, rye, barley, and corn it means milling or similar work (not cleaning or drying); for cotton it means spinning or manufacturing (not ginning); for tobacco it means manufacturing (not drying); for rice it means cleaning, shelling, milling, etc., of rough rice (with rules about producer processing and tax-payment warrants); for sugar it gives terms for raw sugar, direct‑consumption sugar, molasses, “raw value,” and first domestic processing. The Secretary must publish information about the tax and its price effects to avoid layers of tax and profiteering, and processing is treated to include manufacturing. No tax is allowed on processing that makes newsprint.