A-6870, APRIL 7, 1925, 4 COMP. GEN. 838

A-6870: Apr 7, 1925

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SUCH COMMISSIONS ARE NOT PAYABLE BY THE UNITED STATES FROM THE PROCEEDS OF THE DISTRAINT SALE. WHEREIN WAS DISALLOWED HIS CLAIM FOR $99 FOR COMMISSIONS ALLEGED TO BE DUE ON THE SALE OF 87 CASES OF GORDON DRY GIN. THE FACTS APPEAR THAT CLAIMANT WAS AN AGENT OF THE GORDON'S DRY GIN CO. THAT HE HAD MADE SALES OF 87 CASES OF GIN FOR WHICH PAYMENTS HAD BEEN MADE BY THE VENDEES AND FOR WHICH SALES HE CLAIMS HE IS ENTITLED TO COMMISSION AMOUNTING TO $99. 1924: THIS IS TO ADVISE YOU THAT THE UNITED STATES COLLECTOR OF INTERNAL REVENUE FOR THE SECOND DISTRICT OF NEW YORK HAS PLACED A LIEN FOR ADDITIONAL 1917 TAXES ON THE ENTIRE ASSETS OF THIS COMPANY. THE LIEN IS OF SUFFICIENT AMOUNT TO CLOSE BOTH COMPANIES.

A-6870, APRIL 7, 1925, 4 COMP. GEN. 838

INTERNAL REVENUE - DISTRAINT OF ASSETS OF DELINQUENT TAXPAYER - COMMISSIONS OF SALES AGENT A TAX LIEN ESTABLISHED AGAINST THE ASSETS OF A DELINQUENT TAXPAYER AND THE DISTRAINT AND SALE OF SUCH ASSETS UNDER AND PURSUANT TO SECTIONS 3186 AND 3191, REVISED STATUTES, TAKES PRECEDENCE OVER A CLAIM BY A SALES AGENT AGAINST THE TAX DELINQUENT FOR COMMISSIONS ON SALES, AND SUCH COMMISSIONS ARE NOT PAYABLE BY THE UNITED STATES FROM THE PROCEEDS OF THE DISTRAINT SALE.

DECISION BY COMPTROLLER GENERAL MCCARL, APRIL 7, 1925:

NATHANIEL M. BOWIE APPLIED DECEMBER 13, 1924, FOR REVIEW OF SETTLEMENT NO. 051845, OF OCTOBER 8, 1924, WHEREIN WAS DISALLOWED HIS CLAIM FOR $99 FOR COMMISSIONS ALLEGED TO BE DUE ON THE SALE OF 87 CASES OF GORDON DRY GIN, SAID CLAIM HAVING BEEN FORWARDED TO THIS OFFICE FOR DIRECT SETTLEMENT ON AUGUST 28, 1924, BY AN ACTING DEPUTY COMMISSIONER OF INTERNAL REVENUE, APPROVED FOR PAYMENT UNDER THE APPROPRIATION FOR "SALARIES AND EXPENSES OF COLLECTORS OF INTERNAL REVENUE," ETC., 1924, ACT OF JANUARY 3, 1923, 42 STAT. 1096.

THE FACTS APPEAR THAT CLAIMANT WAS AN AGENT OF THE GORDON'S DRY GIN CO. (LTD.), ENGAGED IN SELLING ITS PRODUCTS ON A COMMISSION BASIS; THAT HE HAD MADE SALES OF 87 CASES OF GIN FOR WHICH PAYMENTS HAD BEEN MADE BY THE VENDEES AND FOR WHICH SALES HE CLAIMS HE IS ENTITLED TO COMMISSION AMOUNTING TO $99; AND THAT THE GORDON'S DRY GIN CO. (LTD.) HAD NOT PAID SAID COMMISSIONS, BECAUSE, AS STATED IN ITS FORM LETTER OF MAY 12, 1924:

THIS IS TO ADVISE YOU THAT THE UNITED STATES COLLECTOR OF INTERNAL REVENUE FOR THE SECOND DISTRICT OF NEW YORK HAS PLACED A LIEN FOR ADDITIONAL 1917 TAXES ON THE ENTIRE ASSETS OF THIS COMPANY, AND ITS PARENT COMPANY, LA MONTAGNE, CHAPMAN CO. (INC.).

THE LIEN IS OF SUFFICIENT AMOUNT TO CLOSE BOTH COMPANIES, AS THE DIFFICULTY OF OPERATING LEGALLY IN COMPETITION WITH ILLEGAL PRODUCTS HAD GRADUALLY DIMINISHED RESOURCES AND REVENUE.

THE ADMINISTRATION OF BOTH COMPANIES HAS IN CONSEQUENCE PASSED FROM OUR HANDS, AND WE HAVE ABSOLUTELY NO CONTROL OVER ANY ASSET OF EITHER COMPANY.

WE REGRET THE SITUATION, WHICH HAS ARISEN THROUGH NO FAULT OF OUR OWN, BUT FROM THE DIFFICULTY OF INTERPRETING THE COMPLEX INCOME TAX LAWS EXISTING IN 1917.

THE COLLECTOR OF INTERNAL REVENUE, NEW YORK, N.Y., IN HIS LETTER OF SEPTEMBER 17, 1924, TO THE COMMISSIONER OF INTERNAL REVENUE, WHICH LETTER WAS TRANSMITTED TO THIS OFFICE ON SEPTEMBER 20, 1924, STATED:

AN INVESTIGATION DISCLOSES THAT MESSRS. BOWIE AND BALDWIN WERE AGENTS OF THE GORDON DRY GIN O., AND SOLD PRODUCTS FOR WHICH THEY RECEIVED NO COMMISSIONS. INASMUCH AS THIS OFFICE LEVIED UPON AND DISTRAINED BY VIRTUE OF A WARRANT FOR DISTRAINT AGAINST THE PROPERTY OF THE GORDON DRY GIN ., THESE PARTIES ASSUME THAT THEY SHOULD BE REIMBURSED BY THE GOVERNMENT.

IT IS THE OPINION OF THIS OFFICE THAT MESSRS. BOWIE AND BALDWIN ARE NOT ENTITLED TO THE CLAIMS SUBMITTED.

THOUGH NOT SO STATED, IT APPEARS THAT THE APPROPRIATION OF THE ASSETS OF THE GORDON'S DRY GIN CO. (LTD.) WAS UNDER AND PURSUANT TO SECTIONS 3186 AND 3191, REVISED STATUTES. SECTION 3186, REVISED STATUTES, AS AMENDED BY THE ACTS OF MARCH 1, 1879, 20 STAT. 331, AND MARCH 4, 1913, 37 STAT. 1016, PROVIDES THAT IF ANY PERSON LIABLE TO PAY ANY TAX NEGLECTS OR REFUSES TO PAY THE SAME AFTER DEMAND, A LIEN IS ESTABLISHED IN FAVOR OF THE UNITED STATES UPON ALL PROPERTY AND RIGHTS OF THE TAX DELINQUENT FOR THE AMOUNT OF THE TAX, INTEREST, PENALTIES, AND COST, BUT THAT SUCH LIEN SHALL NOT BE VALID AS AGAINST ANY MORTGAGEE, PURCHASER, OR JUDGMENT CREDITOR UNTIL NOTICE THEREOF SHALL BE FILED BY THE COLLECTOR IN THE MANNER AND PLACES PROVIDED. SECTION 3187 PROVIDES THAT IF ANY PERSON LIABLE TO PAY ANY TAXES NEGLECTS OR REFUSES TO PAY THE SAME WITHIN 10 DAYS AFTER NOTICE AND DEMAND, IT SHALL BE LAWFUL FOR THE COLLECTOR TO COLLECT SAID TAXES, PENALTIES, AND INTEREST BY DISTRAINT AND SALE OF THE GOODS, CHATTELS, OR EFFECTS, INCLUDING STOCKS, SECURITIES, AND EVIDENCE OF DEBT, OF THE DELINQUENT, EXCEPT AS TO CERTAIN PROPERTY EXEMPTED, SUCH AS SCHOOL BOOKS, WEARING APPAREL, HOUSEHOLD FURNITURE, ETC.; SECTION 3188 PROVIDES THE PROCEDURE OF LEVYING THE DISTRAINT; SECTION 3189 FOR THE EXHIBITING OF ALL BOOKS CONTAINING EVIDENCE OR STATEMENTS RELATING TO THE SUBJECT OF DISTRAINT; SECTION 3190 FOR THE PROCEDURE TO BE FOLLOWED BY THE COLLECTOR IN CONNECTION WITH THE DISTRAINT; SECTION 3191 FOR THE APPROPRIATION OF THE PROCEEDS OF THE DISTRAINT TO THE PAYMENT OF THE DELINQUENT TAXES AND EXPENSES; AND SECTION 3205 FOR SUCCESSIVE SEIZURES OF PROPERTY UNTIL THE TOTAL AMOUNT OF TAXES AND EXPENSES IS REALIZED.

THE AMOUNT OF THE TAX DELINQUENCY, THE CHARACTER AND QUANTITY OF GOODS, ETC., DISTRAINED, THE AMOUNT REALIZED FROM SUCH DISTRAINT, AND WHETHER SUFFICIENT WAS REALIZED TO SATISFY THE TAX, ETC., ARE NOT DISCLOSED. CLAIMANT DOES NOT DEFINITELY STATE THE BASIS OF HIS CLAIM AGAINST THE UNITED STATES; HOWEVER, FROM THE MATTERS SUBMITTED IT IS INDICATED THAT HIS CLAIM IS ON THE BASIS THAT HIS UNPAID COMMISSIONS CONSTITUTED A CHARGE AGAINST THE ASSETS OF THE TAX DELINQUENT, SO AS TO RENDER SUCH ASSETS DISTRAINABLE ONLY TO THE EXTENT THAT THEY WERE UNAFFECTED BY SUCH CHARGES. CLAIMANT PARTICULARLY INVITES ATTENTION TO A REMITTANCE FROM ONE OF THE VENDEES, STATING THAT THE COLLECTOR "ALSO GOT, I AM TOLD, A CERTAIN CHECK, DATED MAY 12, 1924, FOR $1,137.58 FROM J. L. THOMPSON AND SONS (INC.), TROY, N.Y., AND USED SAME," AND THAT IF THE CHECK FOR $1,137.58 WAS A PART OF THE ASSETS DISTRAINED,"I DOUBT VERY MUCH IF THE GOVERNMENT SEIZURE WOULD COVER BILLS PAYABLE TO GORDON DRY GIN CO. (LTD.) WITHOUT THE GOVERNMENT PAYING THE COMMISSIONS DUE ME FOR THE SALE OF THESE VERY GOODS.'

AS HEREINBEFORE STATED, IT IS NOT DISCLOSED WHAT ASSETS OF THE GORDON'S DRY GIN CO. (LTD.) WERE DISTRAINED; THEREFORE IT IS NOT KNOWN, AND FOR THE PURPOSES OF THIS DECISION IT DOES NOT APPEAR MATERIAL OR NECESSARY TO ASCERTAIN, WHETHER THE REMITTANCE OF $1,137.58, SUPRA, WAS UTILIZED BY THE GORDON'S DRY GIN CO. (LTD.) OR APPLIED BY THE COLLECTOR. THE REMITTANCE, IT APPEARS, WAS TO THE GORDON'S DRY GIN CO. (LTD.), AND CONSTITUTED AN ASSET OF THAT COMPANY SUBJECT TO DISTRAINT THE SAME AS ANY OTHER ASSET. SUCH AMOUNT AS MAY HAVE BEEN DUE FROM THE GORDON'S DRY GIN CO. (LTD.) TO CLAIMANT WAS A LIABILITY OF THAT COMPANY, OVER WHICH THE TAX LIEN OF NECESSITY MUST HAVE HAD PRECEDENCE. IT APPEARS TO HAVE BEEN THE DUTY OF THE COLLECTOR TO SEIZE AND REALIZE THE ASSET HERE CONSIDERED, AND IT APPEARS FURTHER TO BE FOR THE ATTENTION AND CONSIDERATION OF THE COMMISSIONER OF INTERNAL REVENUE TO DETERMINE WHETHER THAT WAS DONE.

THE APPROPRIATION UNDER WHICH THE CLAIM HERE IN QUESTION WAS APPROVED FOR PAYMENT BY THE ACTING DEPUTY COLLECTOR OF INTERNAL REVENUE, ACT OF JANUARY 3, 1923, 42 STAT. 1096, PROVIDED:

FOR SALARIES AND EXPENSES OF COLLECTORS OF INTERNAL REVENUE, * * * EXPENSES OF SEIZURE AND SALE, AND OTHER NECESSARY MISCELLANEOUS EXPENSES IN COLLECTING INTERNAL-REVENUE TAXES * * *.

THE APPROVAL OF THE CLAIM HERE IN QUESTION UNDER THE APPROPRIATION JUST QUOTED OBVIOUSLY WAS IMPROPER AND UNWARRANTED. THE AMOUNT CLAIMED WAS IN NO SENSE AN EXPENSE OF SEIZURE AND SALE NOR A MISCELLANEOUS EXPENSE OF COLLECTING INTERNAL REVENUE TAXES.