PRIA, Government Policy, Made Personal

Summary

When a processing tax starts, stops, or changes, people who hold finished goods made from the taxed commodity must have their taxes adjusted. If the tax begins, the holder (including items in transit) must pay what the tax would have been if the processing happened on that start date. Imported goods in customs must pay before release. For sugar, non-retail floor stocks have a special monthly payment rule set by the Commissioner of Internal Revenue with Treasury approval. If the tax ends, holders get refunds, credits, or abatements equal to what would have been owed if processing had happened on the end date. If the tax rate had been raised before June 1, 1934, refunds cannot be larger than the original rate in effect before that increase. Retail store stocks are generally exempt when a tax starts, but not if they are in a warehouse or not sold within 30 days. Some special rules and exceptions apply for cotton, wheat products, sugar, and sugar products. Sugar imported before the tax is effective is exempt if the import duty paid was the rate in effect on January 1, 1934. Sugar held on April 25, 1934 under contracts made before that date for use in making non-sugar goods, and goods made from sugar beets or cane, are also exempt. The Agriculture Secretary may buy up to 300,000 tons (raw-sugar value) from surplus U.S. direct-consumption sugar at market price for relief or sale, and use the proceeds for certain USDA purposes. If the processing tax rate is lowered on or after June 1, 1934, holders get credits or refunds for the difference; if the rate is raised, holders must pay the difference. Hogs have a special limit on refunds. These rules do not apply to rice.

Title 7, §616

Agriculture, Source: USLM XML via OLRC

(a)Upon the sale or other disposition of any article processed wholly or in chief value from any commodity with respect to which a processing tax is to be levied, that on the date the tax first takes effect or wholly terminates with respect to the commodity, is held for sale or other disposition (including articles in transit) by any person, there shall be made a tax adjustment as follows:

(1)Whenever the processing tax first takes effect, there shall be levied, assessed, and collected a tax to be paid by such person equivalent to the amount of the processing tax which would be payable with respect to the commodity from which processed if the processing had occurred on such date. Such tax upon articles imported prior to, but in customs custody or control on, the effective date, shall be paid prior to release therefrom. In the case of sugar, the tax on floor stocks, except the retail stocks of persons engaged in retail trade, shall be paid for the month in which the stocks are sold, or used in the manufacture of other articles, under rules and regulations prescribed by the Commissioner of Internal Revenue with the approval of the Secretary of the Treasury.

(2)Whenever the processing tax is wholly terminated, (A) there shall be refunded or credited in the case of a person holding such stocks with respect to which a tax under this chapter has been paid, or (B) there shall be credited or abated in the case of a person holding such stocks with respect to which a tax under this chapter is payable, where such person is the processor liable for the payment of such tax, or (C) there shall be refunded or credited (but not before the tax has been paid) in the case of a person holding such stocks with respect to which a tax under this chapter is payable, where such person is not the processor liable for the payment of such tax, a sum in an amount equivalent to the processing tax which would have been payable with respect to the commodity from which processed if the processing had occurred on such date: Provided, That in the case of any commodity with respect to which there was any increase, effective prior to June 1, 1934, in the rate of the processing tax, no such refund, credit, or abatement, shall be in an amount which exceeds the equivalent of the initial rate of the processing tax in effect with respect to such commodity.

(b)The tax imposed by subsection (a) of this section shall not apply to the retail stocks of persons engaged in retail trade, held at the date the processing tax first takes effect; but such retail stocks shall not be deemed to include stocks held in a warehouse on such date, or such portion of other stocks held on such date as are not sold or otherwise disposed of within thirty days thereafter. Except as to flour and prepared flour, and cereal preparations made chiefly from wheat, as classified in Wheat Regulations, Series 1, Supplement 1, and as to any article processed wholly or in chief value from cotton, the tax refund, credit, or abatement provided in subsection (a) of this section shall not apply to the retail stocks of persons engaged in retail trade, nor to any article (except sugar) processed wholly or in chief value from sugar beets, sugarcane, or any product thereof, nor to any article (except flour, prepared flour and cereal preparations made chiefly from wheat, as classified in Wheat Regulations, Series 1, Supplement 1) processed wholly or in chief value from wheat, held on the date the processing tax is wholly terminated.

(c)(1)Any sugar, imported prior to the effective date of a processing tax on sugar beets and sugarcane, with respect to which it is established (under regulations prescribed by the Commissioner of Internal Revenue, with the approval of the Secretary of the Treasury) that there was paid at the time of importation a duty at the rate in effect on January 1, 1934, and (2) any sugar held on April 25, 1934, by, or to be delivered under a bona fide contract of sale entered into prior to April 25, 1934, to, any manufacturer or converter, for use in the production of any article (except sugar) and not for ultimate consumption as sugar, and (3) any article (except sugar) processed wholly or in chief value from sugar beets, sugarcane, or any product thereof, shall be exempt from taxation under subsection (a) of this section, but sugar held in customs custody or control on April 25, 1934, shall not be exempt from taxation under subsection (a) of this section, unless the rate of duty paid upon the withdrawal thereof was the rate of duty in effect on January 1, 1934.

(d)The Secretary of Agriculture is authorized to purchase, out of such proceeds of taxes as are available therefor, during the period this chapter is in effect with respect to sugar beets and sugarcane, not in excess of three hundred thousand tons of sugar raw value from the surplus stocks of direct-consumption sugar produced in the United States beet-sugar area, at a price not in excess of the market price for direct consumption sugar on the date of purchase, and to dispose of such sugar by sale or otherwise, including distribution to any organization for the relief of the unemployed, under such conditions and at such times as will tend to effectuate the declared policy of section 608a of this title. The sugar so purchased shall not be included in the quota for the United States beet-sugar area. All proceeds received by the Secretary of Agriculture, in the exercise of the powers granted, are appropriated to be available to the Secretary of Agriculture for the purposes described in subsections (a) and (b) of section 612 of this title.

(e)Upon the sale or other disposition of any article processed wholly or in chief value from any commodity with respect to which the existing rate of the processing tax is to be increased, or decreased, that on the date such increase, or decrease, first takes effect with respect to the commodity, is held for sale or other disposition (including articles in transit) by any person, and upon the production of any article from a commodity in process on the date on which the rate of the processing tax is to be increased or decreased, there shall be made a tax adjustment as follows:

(1)Whenever, on or after June 1, 1934, the rate of the processing tax on the processing of the commodity generally or for any designated use or uses, or as to any designated product or products thereof for any designated use or uses, or as to any class of products, is decreased, there shall be credited or refunded to such person an amount equivalent to the difference between the rate of the processing tax payable or paid at the time immediately preceding the decrease in rate and the rate of the processing tax which would have been payable with respect to the commodity from which processed, if the processing had occurred on such date: Provided, however, That no such credit or refund shall be made in the case of hogs unless the rate of the processing tax immediately preceding said decrease is equal to, or less than, the rate of the processing tax in effect on the date on which any floor stocks tax was paid prior to the adoption of this subsection. In the case of wheat the provisions of this paragraph and of paragraph (2) of this subsection shall apply to flour, prepared flour and cereal preparations made chiefly from wheat, as classified in Wheat Regulations, Series 1, Supplement 1 only; in the case of sugarcane and sugar beets the provisions of this paragraph and of paragraph (2) of this subsection shall apply to sugar only.

(2)Whenever the rate of the processing tax on the processing of the commodity generally, or for any designated use or uses, or as to any designated product or products thereof for any designated use or uses, or as to any class of products, is increased, there shall be levied, assessed and collected a tax to be paid by such person equivalent to the difference between the rate of the processing tax payable or paid at the time immediately preceding the increase in rate and the rate of the processing tax which would be payable with respect to the commodity from which processed, if the processing had occurred on such date.

(3)Whenever the processing tax is suspended or is to be refunded pursuant to a certification of the Secretary of Agriculture to the Secretary of the Treasury, under section 615(a) of this title, the provisions of paragraph (1) of this subsection shall become applicable.

(4)Whenever the Secretary of Agriculture revokes any certification to the Secretary of the Treasury under section 615(a) of this title, the provisions of paragraph (2) of this subsection shall become applicable.

(5)The provisions of this subsection shall be effective on and after June 1, 1934.

(f)The provisions of this section shall not be applicable with respect to rice.

Notes & Related Subsidiaries

Editorial Notes

Constitutionality Section may be obsolete in view of the Supreme Court’s holding that the processing and floor stock taxes provided for by the Agricultural Adjustment Act of 1933 are unconstitutional. See U.S. v. Butler, Mass. 1936, 56 S.Ct. 312, 297 U.S. 1, 80 L.Ed. 477, 102 A.L.R. 914.

Amendments

1936—Subsec. (e)(1). Act

June 22, 1936, § 601(a), (g), reenacted par. (1) for certain refund purposes only and substituted “on or after

June 1, 1934” for “subsequent to

June 26, 1934”, respectively. Act

June 4, 1936, substituted “on or after

June 1, 1934” for “subsequent to

June 26, 1934”. Subsec. (e)(3). Act

June 22, 1936, § 601(a), reenacted par. (3) for certain refund purposes only. Subsec. (g). Act

June 22, 1936, § 601(c), repealed subsec. (g) which related to the time for filing refunds. 1935—Subsec. (a)(2). Act Aug. 24, 1935, § 25, substituted a new par. (2) for former par. (2). Subsec. (b). Act Aug. 24, 1935, § 26, amended second sentence generally. Subsec. (c). Act Aug. 24, 1935, § 20(b), struck out last sentence. Subsec. (e). Act Mar. 18, 1935, redesignated former subsec. (c) as (e). Subsec. (e)(1). Act Aug. 24, 1935, § 27(a), inserted “subsequent to

June 26, 1934” at beginning of paragraph, and “in the case of hogs” after “made” in proviso and inserted “In the case of wheat the provisions of this paragraph and of paragraph (2) of this subsection shall apply to flour, prepared flour and cereal preparations made chiefly from wheat, as classified in Wheat

Regulations

, Series 1, Supplement 1 only; in the case of sugarcane and sugar beets the provisions of this paragraph and of paragraph (2) of this subsection shall apply to sugar only.” Subsec. (f). Act Mar. 18, 1935, added subsec. (f). Subsec. (g). Act Aug. 24, 1935, § 27(b), added subsec. (g). 1934—Subsec. (a)(1). Act

May 9, 1934, § 10, inserted second sentence. Subsec. (c). Act

June 26, 1934, added subsec. (c). Subsec. (c)(1). Act

May 9, 1934, § 17, added par. (1). Subsec. (d). Act

May 9, 1934, § 17, added subsec. (d).

Statutory Notes and Related Subsidiaries

SeparabilityValidity of remainder of this chapter as not affected should any of the provisions of this chapter be declared unconstitutional. See section 614 of this title. AppropriationsAppropriations for refunds, etc., see note set out under section 610 of this title.

Executive Documents

Transfer of Functions

Functions of all officers of Department of the Treasury, and functions of all agencies and employees of such Department, transferred, with certain exceptions, to Secretary of the Treasury, with power vested in him to authorize their performance or performance of any of his functions, by any of such officers, agencies, and employees, by 1950 Reorg. Plan No. 26, §§ 1, 2, eff. July 31, 1950, 15 F.R. 4935, 64 Stat. 1280, set out in the Appendix to Title 5, Government Organization and Employees. Commissioner of Internal Revenue, referred to in this section, is an officer of Department of the Treasury.

§616 Stock on Hand When Tax Takes Effect or Terminates