Reporter's Statement of the Case 114 C. Cls. such customers, for the compensation agreed upon, were substantially those of a contract-carrier engaged in the business of transporting property for hire by motor vehicle, and plaintiff is not entitled to recover the 3 per cent tax, plus penalty and interest, for the period December 18 to 31, 1945, assessed and collected under the Revenue Act of 1942 (26 U. S. C. 3475). Internal Revenue 1161 Same; taxing statute concerned not with form but substance.—The taxing statute is not concerned with the form of the arrangements if the substance of the agreements or arrangements between the parties, when considered as a whole, add up to the transportation by one person of the property of another for hire. Internal Revenue 1161 The Reporter's statement of the case: Mr. Robert H. McNeill for the plaintiff. Mr. T. Bruce Fuller was on the brief. Mr. Mr. John W. Hussey, with whom was Mr. Assistant Attorney General Theron Lamar Caudle, for the defendant. Andrew D. Sharpe was on the brief. In this suit plaintiff seeks to recover $152.49 representing a 3 percent tax of $132.59, plus penalty and interest, for the period December 18 to 31, 1945, assessed and collected under the Revenue Act of October 21, 1942 (26 U. S. C. 3475), on $4,419.71 alleged by defendant to have been received by plaintiff for the transportation by it of property for hire. Plaintiff insists that it was not engaged in the business of transporting property for hire but was engaged in leasing trucks to commercial concerns for their use and as to the 14 percent of its trucks with respect to which the tax in question was exacted, it hired through contracts with the Unions the drivers or chauffeurs therefor as an accommodation or as employment agent for the lessees of the trucks. The court having made the foregoing introductory statement, entered special findings of fact as follows: 1. The plaintiff is a Delaware corporation, with its principal place of business at 510 West 21st Street, New York, New York. 2. Plaintiff is engaged in the business of owning and leasing trucks to various business firms in and near the city of 599 Reporter's Statement of the Case New York. At present it owns approximately 1,300 trucks which it leases to some 80 customers. To 27 of such customers, including those listed on page eight of the petition, it furnishes chauffeurs as well as trucks. 3. During 1945 plaintiff was furnishing trucks and drivers to certain business firms including those listed on page eight of the petition. From December 18, 1945, to December 31, 1945, inclusive, said listed concerns paid to plaintiff the aggregate amount of $4,419.71 for services of the plaintiff's trucks and the drivers furnished. The Commissioner of Internal Revenue determined that a 3% transportation of property tax in the amount of $132.59 imposed by Section 3475 of the Internal Revenue Act should be collected by plaintiff upon such receipts. On the ground that it was not liable under the terms of the statute plaintiff failed and refused to make the collection or pay the transportation tax to the Collector of Internal Revenue. 4. In February 1946 there was assessed against plaintiff, by reason of its refusal and failure to collect the amount for the transportation of property tax on payments made to it in the said period December 18 to December 31, 1945, for the services of its trucks and drivers, a 100% penalty tax under the provisions of Sec. 1718 (c) of the Internal Revenue Act made applicable to transportation of property taxes by Section 3475 of the Internal Revenue Act. Notice and demand for payment of the amount of the tax was forwarded to plaintiff early in April 1946. A warrant for distraint was issued. September 16, 1947, plaintiff paid the penalty tax of $132.59 together with 5% penalty for late payment amounting to $6.63 and interest of $13.27, a total of $152.49. 5. On or immediately after September 16, 1947, plaintiff filed claim for refund of the said $152.49 on the ground that it was not engaged in transportation of property as a carrier and that to hold that the furnishing of drivers with its trucks subjected it to the transportation of property tax was arbitrary. The claim was rejected by letter dated April 12, 1948. 6. Plaintiff sues to recover said sum of $152.49 on the ground that it is not engaged in the transportation of Reporter's Statement of the Cass 114 C. Cls. property as a carrier either generally or specifically as to the customers upon whose payments the assessment was made. 7. Plaintiff's dealings with its customers are covered by written contracts with each customer defining fully the duties and obligations of both plaintiff and the customer. The contracts for the period involved with the concerns listed on page eight of the petition are filed herein as Plaintiff's Exhibits 1 to 8, inclusive, and are incorporated herein by reference. There has been no insistence by the Commissioner of Internal Revenue that the relationship created by said written contracts in and of itself and without the furnishing of chauffeurs by plaintiff constitutes plaintiff a transporter of property as a carrier, 8. Where plaintiff furnishes to the customer a chauffeur there is appended to the written contract Schedule "B" defining such relationship. Schedule "B" for six of the concerns involved is in substantially the following words and figures: The Lessor agrees to provide chauffeurs (and helpers if required) for all vehicles leased under this agreement and all clauses otherwise in this agreement referring to "Lessee's Chauffeurs" etc. shall be deemed amended to read and mean "Lessor's Chauffeurs" etc. The Lessor agrees to pay the wages of such chauffeurs and helpers at the union wage scale or scales prevailing at any time this Schedule may be in force. The Lessor will also pay any and all contributions or taxes for Unemployment Insurance and for Old Age Benefits now in effect or hereafter in effect which may be imposed by the United States or State Government or Governments which may be measured by wages, salary or other remuneration paid to such employees. The Lessor shall also be liable solely and fully for the expense of Workmen's Compensation Insurance and will, upon request, furnish satisfactory evidence that such compensation insurance is duly provided for as required by law. At all times when the said motor vehicle or vehicles are in the service of the Lessee and notwithstanding any chauffeur or helper shall be provided by the Lessor, the operation of the said vehicle or vehicles including the activities of such employees shall be under the sole direction and control of the Lessee. 599 Reporter's Statement of the Case The Lessee herewith agrees to hold the Lessor harmless for the following acts of such employees: A. Breakage, damage, spoilage, loss or theft of merchandise, including improper or erroneous delivery thereof; B. Damage resulting from installation of merchandise or to property at the place of delivery or pick-up thereof; C. The Lessor assumes no liability or responsibility for any cash, checks or funds entrusted to any such employees and the safety of same shall be solely the responsibility of the Lessee, whether such cash, checks or funds are in the actual possession of such employees or whether such employees temporarily deposit the same for safekeeping with any one or in any place of storage provided by the Lessor, it being understood that such place of storage, if provided, shall be solely for the convenience and accommodation of the Lessee, without any compensation being paid therefor. Upon receipt of a written complaint from the Lessee specifying any reckless, careless or abusive handling of a vehicle or any other incompetence of any such chauffeur or helper the Lessor shall remove such chauffeur or helper and substitute a competent one in his place. Inability on the part of the Lessor to provide chauffeurs and/or helpers required shall in no wise vitiate this agreement nor shall the Lessor incur any liability for such failure to provide. In consideration of the provisions of this Schedule the Lessee agrees to pay to the Lessor separately and in addition to the rental provided in Schedule "A" of this agreement an amount equal to the wages paid by the Lessor to such chauffeurs (and helpers if required) plus 8 per cent thereof, such separate and additional compensation to be paid by the Lessee to the Lessor weekly. If, however, at any time when this Schedule shall be in force, there shall occur an increase or reduction, as compared with the date of this agreement in the required rate of contributions or taxes payable by the Lessor for Unemployment Insurance and for Old Age Benefits referred to hereinabove the amount of this separate and additional compensation to be paid by the Lessee to the Lessor shall be reduced or increased, as the case may be, substantially in the same amount as such operating expenses of the Lessor are so reduced or increased on that account. 9. For two of the customers whose contracts were executed at an earlier date, a schedule similar to Schedule "B" but in 862464-50- -40 Reporter's Statement of the Case 114 C. Cls. a slightly shorter form was used, in words and figures as shown by Plaintiff's Exhibits Nos. 2 and 7, to which reference is made. 10. It has not been the practice to furnish any helpers. Where goods are too heavy or bulky for a driver to handle alone the customer usually sends two trucks with chauffeurs who help each other. 11. In practice the chauffeurs furnished by plaintiffs to its customers are carried on plaintiff's pay roll and are paid by plaintiff. The trucks which it furnishes to its various customers are of the kinds and capacities required by the customers in their business and bear the customers' marking and not those of the plaintiff. Where the chauffeurs are furnished by the plaintiff, they wear the uniforms of the customers. 12. In order to service its trucks and house them plaintiff maintains, at locations in and around the city of New York convenient to the customers it serves, 32 garages. Except in special instances the trucks are returned at night to plaintiff's garages. Where chauffeurs are furnished, they are carried on plaintiff's pay roll and are paid by plaintiff. Their time is measured by time clocks in plaintiff's garages from the time the trucks and chauffeurs leave until the chauffeurs return the trucks. The amounts so paid to such chauffeurs are then billed to the customers with the addition of the percentage specified in Schedule "B". 13. For the most part the chauffeurs employed by plaintiff and furnished to its customers were formerly employed by the respective customers. All of them are subject to the jurisdiction of unions. These unions contract with plaintiff as the employer of such chauffeurs with reference to their pay scales and other conditions of their employment. However, in said contracts the customer is referred to by name and the union having jurisdiction is determined by the nature of the customer's business and its location. The contracts between plaintiff and the unions, having jurisdiction of the concerns listed in the petition, are filed herewith as Plaintiff's Exhibits Nos. 9 to 16 inclusive, and are incorporated herein |