U.S. Supreme Court Boylan v. United States, 77 U.S. 10 Wall. 58 58 (1869)
Boylan v. United States
77 U.S. (10 Wall.) 58
ERROR TO THE CIRCUIT
COURT OF NEW YORK
1. Under the 96th section of the Excise Act of June 30, 1864, exempting from a tax laid on sundry articles of dress by section 95, clothes manufactured of materials on which a duty had been paid, unless "the in creased value" exceeds five percent ad valorem, such "increased value " is to be ascertained by a comparison between the market value of the materials at the time the tax on them was paid, with the market value of the manufactured goods at the time of the assessment of the tax upon them.
2. When the sale and delivery is to the government which imposes and collects the tax, the market value of the goods may be well enough determined by the price which the government agrees to pay, and the contractor agrees to receive.
By the 95th section of the Act of June 30, 1864, a tax of five percent was imposed on ready-made clothing, and sundry other articles of dress. [ Footnote 1 ] But the 96th section of the same act exempted from the tax goods manufactured of materials on which duties had been paid, unless the increased value of such goods exceeded five percent ad valorem. [ Footnote 2 ]
These provisions of the statute being in force, Boylan, a manufacturer of clothing, on the 10th of May, 1864, entered into a contract with the United States to manufacture and deliver to it at times specified, a certain amount of army clothing, for which he was to receive a price fixed. He did
manufacture and deliver the clothing during the month of October, 1864, under his contract, and received the contract price from the United States. These goods were manufactured of materials, the cash value of which, in open market, was more than the price received by him for the goods. But the cost of manufacturing the goods was more than five percent of their value when manufactured. Boylan, in his return of manufactures for October, 1864, under the internal revenue laws, made return of the goods. An internal revenue tax of five percent ad valorem upon the price received by Boylan for the goods having been assessed, the suit below, an amicable one, was brought to recover the amount of the tax. The materials of the manufactured goods had been previously assessed under the internal revenue law, and the tax on them had been duly paid: though when paid was not shown. Judgment having been rendered in favor of the United States, Boylan brought the case here to reverse it, the general question being whether the assessment was made in accordance with the proper construction of the act of Congress -- or, in other words, by what rule the "increased value," spoken of in the 96th section of the act, was to be ascertained.
The case did not show what was the actual cost to Boylan of the materials, nor so whether the price agreed on for the clothes was greater than the actual cost by more than five percent ad valorem.
THE CHIEF JUSTICE delivered the opinion of the Court.
The general question in this case is, by what rule is the increased value to be ascertained?
It was insisted in argument that the true mode of ascertaining the amount of increase is to deduct from the price of the manufactured goods sold and delivered, the market value of the materials at the time of the delivery.
And we think it reasonable that in a case where the sale and delivery is to the government which imposes and collects the tax, that the market value of the goods shall be taken as determined by the price which the government agrees to pay and the contractor agrees to receive. But it is not so clear that the value of the materials is to be determined by their market value at the time of the delivery of the manufactured goods. On the contrary, it seems to us that when the legislature made the degree of increased value after the payment of the tax on materials, the criterion by which to determine whether the manufactured goods should be liable to, or exempt from taxation, its intention was to require a comparison between the market value of the materials at the time the tax on them was paid, with the market value of the manufactured goods at the time of the assessment of the tax upon them. The time of this assessment in the case before us was in October, 1864, and the market value, on that day, must, as we have just said, be taken as determined by the contract price.
When the duties on the materials were paid is not shown, but it is agreed that they were paid, and that the market
value of the clothing at the time of delivery to the United States was greater than the market value of the materials when made or sold by the manufacturers, or purchased by the plaintiff in error, by more than five percent ad valorem. We infer that the duties on the materials were paid when or before they became the property of the plaintiff in error.
And these circumstances, as it seems to us, take the manufactured goods out of the category of exemption established by the law.
The language of the act seems, indeed, hardly to admit of any other interpretation. In terms stripped of superfluous words, it provides that goods manufactured from materials upon which duties have been paid, when the increased value shall not exceed the amount of five percent ad valorem, shall be exempt. The obvious construction of this language is, that increased value means the value augmented since the original payment of the duties; and that the five percent is to be computed on the value of the materials when those duties were paid.
This construction requires the affirmance of the judgment of the circuit court, and it is accordingly
[ Footnote 1 ]
13 Stat. at Large 269.
[ Footnote 2 ]