Page images
PDF
EPUB

sensible retail credit extension has been reached, and, in addition, our own New England bankers seem to avoid even reasonable credit to a profit-making wholesaler that is in business.

Therefore, the relative position of our concern, and many other concerns just like us, would mean that we could not possibly survive the chaos and turmoil that we feel would definitely follow the increased tax, without a compensatory floor-stock tax. Without a floor tax, it means we would be forced out of business through no fault of our own. With a floor tax, it means a condition of what we feel would be a normal business operation, with no particular advantages to any partiular party.

You must appreciate that an unusual situation has developed in this industry. Here is an industry that has had its taxes increased effective July 1, and is now appearing before you to plead that you tax it an additional amount.

We are firmly convinced that the main reason for such an unusual situation is because we all realize that the floor tax in the long run would be considerably less expensive than the cost of the chaos that would develop otherwise for a period, in my mind, of 6 to 8 months.

Frankly, gentlemen, I feel that I am here to fight for the existence of my own company; for the right to continue as a going concern, because without a floor tax that right will be injured and hampered or possibly destroyed.

Actually, gentlemen, we want a floor tax because we do not want to be "floored."

I thank you.

Mr. THOMPSON. Mr. Chairman, I would like to ask the witness who said he is an "average wholesaler" a question.

How much liquor do you have on hand at one time? How much would the tax amount to at 25 cents a gallon, if this tax became effective?

Mr. ROSBECK. I imagine at the present time, if it becomes effective, it would involve a tax of between $2,000 and $2,500 on my present floor stock.

Mr. THOMPSON. In other words, you have a stock of about 16,000 gallons on hand? Would you say that the average wholesaler kept that sized stock?

Mr. ROSBECK. I would sav in Boston or Massachusetts the average wholesaler does keep that stock. My stock varies from $50,000 to $75,000 at a time.

Mr. THOMPSON. Of course, the tax is not levied on an ad valorem basis, but is levied upon a gallonage basis.

Mr. ROSBECK. I figure that on an average of $20 a case-which is about what mine would average, $20 a case-I think it would come pretty close to $2,000 to $2,500.

Mr. THOMPSON. That is all.

Mr. DUNCAN. Mr. Chairman, I want to ask a question.

I did not get your name.

Mr. ROSBECK. R-o-s-b-e-c-k (spelling).

Mr. DUNCAN. Mr. Rosbeck, do you buy liquor from the larger distilleries represented here today?

Mr. ROSBECK. I buy from some of them. I buy from the Walsh Distilling Co. I am an agent for Frankfort, and I am an agent for Sea

70769-38- -3

gram's, and some of that necessarily must be bought through their key distributors.

Mr. DUNCAN. Do you have any arrangement, or do you know of any arrangement in the trade by which distillers make the distributors take a certain amount of liquor over a given period of time?

Mr. ROSBECK. At no time in my business experience have I had a distiller come to me and tell me I had to take a certain quantity.

Mr. DUNCAN. Do you know of any such arrangement in the industry?

Mr. ROSBECK. I have known of no such arrangement, because I personally have not come in contact with it.

Mr. DUNCAN. Have you heard it discussed?

Mr. ROSBECK. We do hear these things, but it is a question of whether or not there is any truth to it.

Mr. DUNCAN. You have heard it discussed?

Mr. ROSBECK. I have heard it.

Mr. DUNCAN. And there is a very strong urge on the part of some distillers to require the distributors or wholesalers to increase the amount of their purchases in order to keep their particular brand? Mr. ROSBECK. I do not know that, sir.

Mr. DUNCAN. You have heard that discussed?

Mr. ROSBECK. No; I have not. I have not heard it discussed that they are required to increase their requirements.

Mr. DUNCAN. I asked that question because I have been told in the city of Washington by certain distributors that they are told constantly, with some instances of veiled threats, that if they do not increase their output continuously, the right to handle and control particular brands of liquor, particularly highly advertised brands, will be taken away from them and given to other distributors whose output and sales are greater. I just wanted to learn whether or not such a trade practice is in effect, so far as you know.

Mr. ROSBECK. I personally never have come in contact with a trade practice of that kind.

Mr. DUNCAN. Do you have any exclusive right to the sale of any particular brands of liquor?

Mr. ROSBECK. Only one particular Scotch which we import, and with which I imagine you would not be concerned.

Mr. DUNCAN. With respect to the imported brands of liquor, is there any such arrangement in existence as I have mentioned to you? Mr. ROSBECK. No, sir.

Mr. DUNCAN. You know of no such arrangement?

Mr. ROSBECK. No, sir; I do not.

Mr. DUNCAN. That is all.

Mr. KNUTSON. Mr. Rosbeck, if this resolution should go into effect that is, we would make this tax effective July 1-would it help your industry if the tax were imposed when the resolution is signed by the President?

Mr. ROSBECK. I am afraid you possibly would have a more chaotic condition, because if it was signed by the President in the next few days, everybody would tax-pay all they have, and then during the interim between the next few days and the 1st of July they would buy up as much merchandise as they possibly could in order to avoid the 25-cent tax.

Mr. KNUTSON. I do not believe you got my question. What I mean is, would it be of any help to your industry if the tax were

imposed at the time it is signed by the President rather than on July 1?

Mr. ROSBECK. The entire tax?

Mr. KNUTSON. Yes, sir.

Mr. ROSBECK. The 25-cent increase and the floor tax

Mr. KNUTSON. That is the floor tax.

Mr. ROSBECK. Yes; it would help us.

Mr. KNUTSON. The total is 25 cents on everything on the floor. Mr. ROSBECK. Yes. It would help our industry considerably, because that particular feature would prevent those who are in the financial position to buy up a considerable amount of merchandise, to buy that merchandise and operate for a period of 6 to 8 months, and would be to our particular advantage.

Mr. McCORMACK. I am curious to find out how it would help your business. Suppose you have stock on hand now. You have purchased that upon a $2 tax now, have you not?

Mr. ROSBECK. Yes, sir.

Mr. McCORMACK. And you are making your sales upon a basis that includes the $2 tax in the purchase price and not $2.25?

Mr. ROSBECK. Yes, sir.

Mr. McCORMACK. Suppose we recommended a bill or reported a bill out to have the tax become effective today, and assuming it passed, the earliest possible moment that that bill would pass and become a law would be approximately a week.

Mr. ROSBECK. Yes, sir.

Mr. McCORMACK. And what would happen meanwhile? You would be selling this liquor upon a $2 tax, and you would be subject retroactively to a tax of $2.25. Would not that have some effect on you and everybody else in the business?

Mr. ROSBECK. I think it would, but I do not think it would have as serious an effect as a period wherein our bigger competitors would be allowed to buy in larger quantities.

Mr. McCORMACK. You are selecting what you consider to be the lesser of two evils. In other words, that would be much better from your angle than the present law?

Mr. ROSBECK. Than the present law without a floor tax.

Mr. McCORMACK. But it would still impose a burden upon business which you could not anticipate. Is not that right?

Mr. ROSBECK. That is right.

Mr. McCORMACK. And you would have to absorb the retroactive extra 25 cents excise tax?

Mr. ROSBECK. Yes, sir.

Mr. McCORMACK. Everybody along the line?

Mr. ROSBECK. Yes, sir.

Mr. FULLER. May I ask a question right there?

Mr. CULLEN. Yes, sir; Mr. Fuller.

Mr. FULLER. If we were to make this law so that all liquor which is withdrawn from the warehouses would have to pay the 25 cents starting from now, that would not affect you at all?

Mr. ROSBECK. No, sir. I think we would have a similar condition as you would have if you said that the floor tax went into effect the same day, the increased tax of 25 cents went into effect.

Mr. FULLER. Therefore, you would favor the proposition according to the suggestion which I made—that is, pay the tax if they withdraw it now-would stop big business from going out and buying up

thousands upon thousands of dollars' worth of whisky to save the 25 cents a gallon, which would come in competition with you, and you would be put on an equality with him, and everybody else would be, because you can sell the stuff you now have without paying the 25

cents?

Mr. ROSBECK. That is true. If it went into effect immediately and continued in effect afterward.

Mr. FULLER. If that would continue in effect from now on. Now, the other law goes into effect the 1st day of July, and if we start it now, it will start at this time and go on, and when you have exhausted the supply on hand, then of course, you would have to pay the 25 cents more per gallon?

Mr. ROSBECK. That is right.

Mr. FULLER. But it would stabilize business and it would stop the big fellows from going out and buying up a big stock and trying to put you out of business?

Mr. ROSBECK. Yes, sir.

Mr. FULLER. Or put you at a disadvantage?

Mr. ROSBECK. Yes, sir.

Mr. McCORMACK. There is still another phase of the matter.
Mr. ROSBECK. Yes, sir.

Mr. McCORMACK. When you buy from the distiller, of course, the $2 tax is included in the purchase price?

Mr. ROSBECK. Yes, sir; that is right.

Mr. McCORMACK. So that from the tax angle, so far as the excise tax is concerned, you have no concern directly with that?

Mr. ROSBECK. That is right.

Mr. McCORMACK. Now, assuming that the bill was reported out of this committee, I want to point out to you, without indicating any state of mind on this bill-my mind has been completely open and it is still open because I am waiting to hear the opposition but you see the position in which you put yourself. The distiller in determining the purchase price to you would have to consider whether it is $2 or a possible $2.25, would he not?

Mr. ROSBECK. Yes; but if it is $2.25, and the floor tax is effective immediately, of course, what they naturally would do would be to pass that on to me.

Mr. McCORMACK. What about the liquor which you sold before any such bill became a law? Suppose the tax is applicable today, effective today, and becomes a law a week from today, and there is an awful lot of liquor sold in the next week, what will happen to the liquor which has been sold and disposed of? The tax on that will be applied somehow. Will it be $2 or $2.25?

Mr. ROSBECK. I imagine the distiller would sell us on the basis of the $2.25 tax.

Mr. McCORMACK. Suppose it does not become a law and it is sold on a $2.25 tax basis and you pay the $2.25 tax to the distiller between now and July 1, but he pays the $2 tax, then what would happen? Suppose it did not become a law?

Mr. ROSBECK. I think you would have to assume that the distiller sells to the wholesaler with the floor tax.

Mr. McCORMACK. Then he would have 25 cents back, would he not?

Mr. ROSBECK. Yes, sir.

Mr. McCORMACK. That would produce some uncertainty in the business?

Mr. ROSBECK. We in turn would have to pass it on to the retailer. Mr. McCORMACK. That would certainly create a degree of uncertainty in the business?

Mr. ROSBECK. Yes, sir.

Mr. TREADWAY. May I ask a question, Mr. Chairman?

Mr. CULLEN. Mr. Treadway.

Mr. TREADWAY. This is a question for information. You carry on your business as a free agent, do you not?

Mr. ROSBECK. Yes, sir.

Mr. TREADWAY. There is no compulsion as to whom you sell or from whom you buy?

Mr. ROSBECK. No, sir; not at all. I am the controller of my business.

Mr. TREADWAY. I wanted to clear up that situation in a general way as a result of some of the questions which were asked you. Mr. ROSBECK. That is right.

Mr. TREADWAY. Coming from Massachusetts also, I have an interest in knowing that business is conducted in a competitive and free, open, and aboveboard manner. That is true, so far as you know? Mr. ROSBECK. Yes, sir; absolutely.

Mr. TREADWAY. Thank you.

The CHAIRMAN. Thank you, Mr. Rosbeck.

Mr. ROSBECK. I thank you.

Mr. O'NEAL. Mr. Felix Goldsborough.

Mr. Buck. Mr. Chairman, may I offer for the purpose of the record at this point three telegrams received in support of this resolution, one from the Wholesale Liquor Distributors Association of Northern California, Inc.; one from J. J. Bottaro; and W. F. Geary, president, McKesson, Kirk, Geary Co.

Mr. CULLEN. If there is no objection, it is so ordered. (The telegrams referred to are as follows:)

Hon. FRANK BUCK,

[Telegram]

SAN FRANCISCO, CALIF., May 20, 1938.

House of Representatives, Washington, D. C.:

The wholesale liquor distributors in the State of California are unanimously in favor of extending the additional 25 cents per gallon liquor tax to floor stock on hand on July 1, 1938. This is absolutely necessary to prevent an exorbitant amount of liquor from being tax-paid prior to July 1 and thereby creating a demoralized condition in the industry by giving an undue advantage to a few large firms and also depriving the United States of a considerable amount of revenue. The proposition which has been advanced to exempt a limited quantity for the purpose of protecting the small retailer would seem to be advisable. We respectfully ask your support in this measure.

WHOLESALE LIQUOR DISTRIBUTORS ASSOCIATION
OF NORTHERN CALIFORNIA, INC.

SACRAMENTO, CALIF., May 25, 1938.

Hon. FRANK BUCK,

House of Representatives, Washington, D. C.:

Please give your support to the resolution extending the 25 cents per gallon tax on distilled spirits to floor stock. This must be done to prevent heavily financed companies from buying tremendous quantities of liquor before July 1 and then demoralizing the market for the next 6 months. The smaller fellow could never hope to compete under these circumstances.

Regards,

J. J. BOTTARO.

« PreviousContinue »