James R. Harris letter to George H. Moore - April 13, 1917
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April 13, 1917 George H. Moore, Collector, Internal Revenue Service, St. Louis, [Missouri] Dear Sir: Referring to writer's visit to your office April 9th and personal interview with the Collector regarding Munitions Manufacturers' Tax Return which you felt should be made by our Company, we submit the following resume of your correspondence and interview with you regarding the matter; also giving our reason for not making the return before March 1st, with a view of getting the matter settled to the satisfaction of the Government. 1. We have felt from the first that the law did not apply to our Company's business, for the reasons set forth in our correspondence as shown by your files, your final letter to us advising that in your opinion we are liable for the tax, being dated March 16th, 1917, having been received by us March 17th, 1917. In addition to the reasons set forth in the correspondence, we feel that the fact that only Submarines Submersibles and Motor Boats are liable and that Torpedo Boats, Destroyers and other War Vessels are not taxable shows that the framers of the bill had in mind taxing only vessels and munitions being built for foreign powers, a s the vessels covered by the law are the only kind which have been built since the war began for foreign nations. However your final ruling was received by us on March 17th, 1917, and the proper procedure for us to have taken was to file a return under protest on or before March 31st, 1917, in order to avoid the penalty provided by the law for not making return before that date. 2. Our reason for delaying in making the return until this time, was due to the writer's absence from the City, beginning March 14th, it being necessary for him to take an enforced vacation on account of the condition of his health and he did not return to St. Louis until after March 31st, 1917. During his absence there was no one in the Company's employ authorized to make the return and the matter was therefore unavoidably delayed until after the final filing date. 3. We submit the above for your consideration with request that penalty for not filing our return on time be waived, as there has been
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George H. Moore, Collector - Page 2 no disposition on the part of the Company to evade complying with the law, the delay being due to unfortunate circumstances beyond our control. 4. Upon the writer's return he took up the matter of making the tax return, and he called upon the Collector by appointment April 9th for instructions. The Collector and his assistants were unable to give definite instructions as to the return to be made, owing to the nature of our business, and it was decided that our Company should make out a return in accordance with our best judgment and submit same with full explanation, and the Collector after receiving same would advise us if the Government wished the return made upon a different basis, at which time we could make out a new return. 5. We are submitting herewith return made out showing no net income for the fiscal year ended December 31st, 1916. Our reasons for so doing are set forth in the following paragraphs. 6. Up to December 31st, 1916, we have had on our books the following contracts which you have decided are subject to the Munitions Manufacturers' Tax:- (a) Contract dated May 27th, 1914, for six engines for the Lake Torpedo Boat Company Bridgeport, [Connecticut], destined for U.S. Submarine L-5, L-6 and L-7; also sundry orders for additional spare parts, etc. for the same boats received since original contract was made. (b) Contract dated January 20th, 1915, for two engines for the Deselektro Company, Bridgeport, [Connecticut], destined for U.S. Submarine L-8; also sundry orders for additional spare parts, etc. for the same boat, received since original contract was made. (c) Contract dated March 13th, 1915, for eight engines for the Lake Torpedo Boat Company, Bridgeport, [Connecticut], destined for U.S. Submarines N-4, N-5, N-6 and N-7. (d) Contract dated November 10th, 1915, for six engines for the Lake Torpedo Boat Company, Bridgeport, [Connecticut], destined for U.S. Submarines 0-11, 0-12 and 0-13. (e) Contract dated November 10th, 1915, for six engines for the California Shipbuilding Company, Long Beach [California], destined for U.S Submarines 0-14, 0-15, and 0-16. (f) Contract dated December 20th, 1916, for two engines for the Lake Torpedo Boat Company, Bridgeport, [Connecticut], destined for the U.S. Submarine No. 106.
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7. The contract dates of deliveries for all of the above orders range from eighteen (18) to twenty-three (23) months from dates of contracts, and as all the parts for all engines covered by one contract are placed in the shop for manufacture on one order, it is manifestly impossible to ascertain the cost of any of the engines until all the engines on such contract are completed and shipped, at which time the costs are ascertained and profits accrued on our books. Any other method of handling the matter would be simply estimating anticipated profits, which is absolutely wrong in any manufacturing business and could be made to show a loss in every case as readily as a profit, until the whole order was finally completed, at which time, proper profits or losses would have to be taken into account. 8. We respectfully submit, that in our judgment, if returns are to be made by our Company, they should be compiled as follows in order to comply with the intention of the law:- (a) Return of Net Income for each contract to be made out for the calendar year in which the contract is completed. (b) Our Company's business is confined to strictly to the manufacture and sale of Diesel Engines and parts therefor and the manufacture of the marine engines covered by the above mentioned contracts, is not separated in our shops from the manufacture of our stationary engines, it being part of our regular work. We distribute our overhead expense against each contract and order in the proportion that the labor on such contract or order bears to the total labor on all productive work in the shop. (c) Items 1 and 2 - Form 1089: As our business is conducted as a whole and not divided into a separate department for the manufacture of marine engines, we should insert opposite these items our total Capital Stock and our total debts and interest bearing loans. (d) Item 3 -form 1089: Opposite this item we should insert the total sales price of the contract or contracts completed during the calendar year for which the return is made: less the pro-portion of the sales price, applicable to the period from date of contract or contracts up to January 1st, 1916, (this proportion to be the percentage that the cost of labor, material and the proportion of the overhead expense properly chargeable to the contract or contracts (see paragraph 8 (f)) up to January 1st, 1916, bears to the total cost of labor, material and overhead expense properly charge-able to such contract or contracts from the date of the
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George H. Moore, Collector - Page 4. contracts to the completion of same) and less the actual cost of productive labor charged to such contract or contracts from January 1st, 1916 up to the time contracts are completed. Gross Income, as usually figured, would be the sales price less actual Cost of Labor and Material, charged direct to the order, but as provision is made in Item 4 deducting the Cost of Material, it could not be deducted from sales under Item 3. (3) Item 4 - Form 1089; Opposite this item we should insert the cost of all material entering into the manufacture of the engine from January 1st, 1916 to date of completion of contract or contracts. (f) Item 5 -Form 1089: Opposite this item we should insert the proportion of our total amount of expenses of operation and maintenance properly chargeable against the contract or contracts completed. This proportion to be the percentage that the total cost of labor, chargeable to the contract or contracts from January 1st, 1916 up to date of completion of such contract or contracts, bears to the total labor chargeable to all productive work in the shops during the same period. (g) Item 6 - Form 1089: Opposite this item we should insert the same proportion of our total amount of interest from January 1st, 1916 to date of completion of contract or contracts as that figured in paragraph 8 (f). (h) Item 7 -Form 1089: Opposite this item we should insert the same proportion of our total amount of Taxes from January 1st, 1916 to date of completion of contract or contracts as that figured in paragraph 8 (f). (i) Item 8 - Form 1089: Opposite this item we should insert the actual amount of losses sustained and charged off from January 1st, 1916, to date of completion of contract or contracts and which were suffered on account of such contract or contracts and not compensated for by insurance or otherwise (j) Item 9 -Form 1089: Opposite this item we should insert the same proportion of our total amount of Depreciation from January 1st, 1916, to date of completion of contract or contracts, as that figured in paragraph 8 (f). (k) Item 10 - Form 1089: Opposite this item we should insert an amount figured on
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George H. Moore, Collector - Page 5. on the basis outlined on Form 1089 under General Instructions - Amortisation for the period January 1st, 1916 to date of Completion of Contract or Contracts. 9. None of the contracts mentioned in paragraph 6 were completed up to December 31st, 1916, and no profits on same were taken into account on our books. We have therefore made out the attached return (Form 1089) simply certifying to statement to this effect. Respectfully yours, BUSCH-SULZER BROS. -DIESEL ENGINE CO. By 1st V.P. & Gen. Mgr. JRH LG
Details
| Title | James R. Harris letter to George H. Moore - April 13, 1917 |
| Creator | Harris, James R. |
| Source | Harris, James R. Letter to George H. Moore. 13 April 1917. Busch-Sulzer Collection. Wisconsin Historical Society, Madison, Wisconsin. |
| Description | Letter from James R. Harris, Vice-President and General Manager of the Busch-Sulzer Brothers Diesel Engine Company, to George H. Moore, collector for the Internal Revenue Service. This letter concerned the Munitions Manufacturer's Tax, which implemented a 12,5% tax on companies who produced munitions for the federal government. |
| Subject LCSH | Diesel engine; Submarine boats; Busch-Sulzer brothers Diesel engine company |
| Subject Local | WWI; World War I; Munitions Manufacturer's Tax |
| Contributing Institution | Wisconsin Historical Society |
| Copy Request | Transmission or reproduction of items on these pages beyond that allowed by fair use requires the written permission of the Wisconsin Historical Society: 608-264-6535 |
| Rights | The text and images contained in this collection are intended for research and educational use only. Duplication of any of these images for commercial use without express written consent is expressly prohibited. |
| Date Original | April 13, 1917 |
| Language | English |