United States v. Leslie Salt Company

PETITIONER: United States
RESPONDENT: Leslie Salt Company

DECIDED BY: Warren Court (1955-1956)
LOWER COURT: United States Court of Appeals for the Ninth Circuit

ARGUED: Dec 07, 1955
DECIDED: Mar 05, 1956

Facts of the case


Media for United States v. Leslie Salt Company

Audio Transcription for Oral Argument - December 07, 1955 in United States v. Leslie Salt Company

Earl Warren:

United States of America versus Leslie Salt Company.

Mr. Davis.

John F . Davis:

If the Court please.

This is a tax case involving a federal documentary stamp tax imposed upon the issuance of corporate debt securities.

It is imposed by Section 1801 of the Internal Revenue Code of 1939 and it corresponds roughly to the tax which is imposed upon the issuance of corporate equity securities, corporate stock.

The issue in this case is really the application of this tax provision to what is known as a private placement as distinguished from a public offering of these securities.

Leslie Salt is a corporation which issued two instruments, one for $1 million payable to the Pacific Mutual Life Insurance Company, and, one, for $3 million dollars so that the total debt was $4 million to the Mutual Life Insurance Company of New York.

Now, these two instruments, one of which is reprinted at page 87 of the record, are called Sinking Fund Promissory Notes, which in itself is an unusual term.

They have a term of 15 years and they are supported by a loan agreement, which was simultaneously entered into and which imposes detailed restrictions upon the corporation's policies with respect to financing, business and its dividend policies.

On demand from the Government, stamp -- stamp taxes were fixed to these documents.

The corporation then petitioned for a refund which was refused and the suit for a refund followed.

Stanley Reed:

What -- what does that mean on demand by the Government?

John F . Davis:

The matter of fact in this case, the -- there was a letter addressed to them by the Commission in saying, we believe this is a situation which requires the tax and you -- when you put a tax on.

Stanley Reed:

(Voice Overlap) -- did Leslie Salt asked if it required them?

John F . Davis:

I don't know, it doesn't appear in the record.

It is -- it's not important whether there's a demand, the demand isn't a formal part of -- of the provision.

They were -- if it is taxable, they were required to put a stamp on it, if it wasn't, they won't.

It's not a -- it's not a functional part of this case.

It might, just as well, not have been a demand.

I think the only -- the only importance of the demand is that there's no concession by Leslie Salt that this was a taxable transaction.

They put it on there because they were told to do it, not because they thought it was taxable transaction.

The taxpayer asserts that its instruments are not debentures within the meaning of the statue by reason of the fact that they were not issued under an indenture and by reason of the fact that there was no trustee involved.

The Government, on the other hand, claims that these instruments are taxable as corporate debt securities being both debentures and certificates of indebtedness.

That brings us to the statute involved.

Statutory provisions, Section 1800 and 1801 are reprinted at page 2 -- in pages 2 and 3 of the Government's brief.

At the top of page 3 of the -- if the language was -- this Court has called upon to construe, that the language which describes the instruments on which the tax -- the stamp tax is imposed, it reads on all bonds, debentures are certificates of indebtedness issued by any corporation.

Those are the -- those are the words that we believe covered this situation.

The note, which we must determine much as must examine to determine whether it falls within that language is reprinted at page 87 of the record.

The loan agreement which was entered into simultaneously with the note follows that beginning at page 93 and running through 40 odd pages thereafter.

The fact that these instruments are called notes cannot be determinative as to whether or not they are taxable.