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CONTENTS

Statement of -

Arnn, Charles E., representing Los Angeles News and Times, and all

western newspapers, Los Angeles, Calif.------

Bertsch, George T., circulation manager, Baltimore Sun, also repre-

senting Baltimoré News-Post, Baltimore, Md...

Cohen, Wilbur J., technical adviser to the Commissioner, Social Security

Administration, Washington, D. C.-----

Denning, William J., Attorney, National Publishers Association,

Washington, D. C.------

Mitchell, William L., Acting Commissioner for Social Security,

Washington, D. C.-----

O'Keefe, John, secretary, Chicago Newspaper Publishers Association,

Chicago, Ill.------

Price, Harry L., representing San Francisco Publishers Association,

San Francisco, Calif.---

Taylor, Davis, general manager, the Globe Newspaper Co., Boston.

Mass., statement submitted by Hon. George J. Bates of Mass-

achusetts.---

Willcox, Alanson W., assistant general counsel, Federal Security

Agency ------

Statements and miscellaneous data presented for the information of the

committee:

American Newspaper Publishers Association, statement from...

H. R. 3704, to exclude vendors of newspapers from certain provisions

of the Social Security Act and the Internal Revenue Code....

H. R. 3920, to exclude certain vendors of newspapers from certain

provisions of the Social Security Act and Internal Revenue Code.

H. R. 3997, to exclude certain vendors of newspapers or magazines

from certain provisions of the Social Security Act and Internal

Revenue Code..--.

Newspapers represented by Charles E. Arnn, list of..

United States District Court for the Northern District of California;

Southern Division-Decision.--------

NEWSPAPER VENDORS

THURSDAY, JUNE 12, 1947

HOUSE OF REPRESENTATIVES,
COMMITTEE ON WAYS AND MEANS,

Washington, D. C. The committee met at 7:30 p. m., Hon. Daniel A. Reed presiding. Mr. REED. The committee will come to order.

The committee has met this evening to consider H. R. 3704, to exclude vendors of newspapers from certain provisions of the Social Security Act and the Internal Revenue Code.

I shall ask that the bill be inserted in the record at this point. (H. R. 3704 is as follows:)

(H. R. 3704, 80th Cong., 1st sess.] A BILL To exclude vendors of newspapers from certain provisions of the Social Security Act and the

Internal Revenue Code Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That section 209 (b) (15) of the Social Security Act, as amended (53 Stat. 1376; 59 Stat. 671, sec. 5 (a); 42 Ú. S. C. 409), is amended to read as follows:

"(15) Service performed by an individual in the delivery, sale, or distribution of newspapers or shopping news, not including delivery or distribution

to any point for subsequent delivery or distribution; or”. SEC. 2. Section 1426 (b) (15) of the Internal Revenue Code, as amended, is amended to read as follows:

"(15) Service performed by an individual in the delivery, sale, or distribution of newspapers or shopping, news, not including delivery or distribution

to any point for subsequent delivery or distribution; or”. SEC. 3. Section 1607 (c) (15) of the Internal Revenue Code, as amended, is amended to read as follows:

"(15) Service performed by an individual in the delivery, sale, or distribution of newspapers or shopping news, not including delivery or distribution

to any point for subsequent delivery or distribution; or”. Sec. 4. Section 1621 (a) of the Internal Revenue Code, as amended, is amended (a) by striking out the word “or” at the end of paragraph (8); (b) by striking out the period at the end of paragraph (9) and inserting in lieu thereof a semicolon and the word “or”; and (c) by inserting at the end of paragraph (9) the following new paragraph:

"(10) for services performed by an individual in the delivery, sale, or distribution of newspapers or shopping news, not including delivery or distribu

tion to any point for subsequent delivery or distribution." Sec. 5. Sections 1, 2, and 3 of this Act shall be effective as of January 1, 1940; section 4 shall be effective as of July 1,1943. (The above bill superseded by H. R. 3920:)

(H. R. 3920, 80th Cong., 1st sess.) A BILL To exclude certain vendors of newspapers from certain provisions of the Social Security Act

and Internal Revenue Code Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That (a) section 209 (b) (15) of the Social Security Act, as amended (U. S. C., 1940 edition, Supp. V, title 42, sec. 409 (b) (15)), and section 1426 (b) (15) of the Internal Revenue Code, as amended, are hereby amended to read as follows:

“(15) (A) Service performed by an individual under the age of eighteen in the delivery or distribution of newspapers or shopping news, not including delivery or distribution to any point for subsequent delivery or distribution;

“(B) Service as an employee performed by an individual in, and at the time of, the sale of newspapers to ultimate consumers, under an arrangement under which the newspapers are to be sold by him at a fixed price, his compensation being based on the retention of the excess of such price over the amount at which the newspapers are charged to him, even though he is guaranteed a minimum amount of compensation for such service, or is entitled

to be credited with the unsold newspapers turned back; or”. (b) The amendment made by subsection (a) to section 209 (b) (15) of the Social Security Act shall be applicable with respect to services performed after the date of the enactment of this Act, and the amendment made to section 1426 (b) (15) of the Internal Revenue Code shall be applicable with respect to services performed after December 31, 1939.

Sec. 2. (a) Section 1607 (c) (15) of the Internal Revenue Code, as amended, is hereby amended to read as follows:

"(15) (A) Service performed by an individual under the age of eighteen in the delivery or distribution of newspapers or shopping news, not including delivery or distribution to any point for subsequent delivery or distribution;

"(B) Service as an employee performed by an individual in, and at the time of, the sale of newspapers to ultimate consumers, under an arrangement under which the newspapers are to be sold by him at a fixed price, his compensation being based on the retention of the excess of such price over the amount at which the newspapers are charged to him, even though he is guaranteed a minimum amount of compensation for such service, or is en

titled to be credited with the unsold newspapers turned back;". (b) The amendment made by subsection (a) shall be applicable with respect to services performed after December 31, 1939, and, as to services performed before July 1, 1946, shall be applied as if such amendment had been a part of section 1607 (c) (15) of the Internal Revenue Code as added to such code by section 614 of the Social Security Act Amendments of 1939.

Sec. 3. If any amount paid prior to the date of the enactment of this Act constitutes an overpayment of tax solely by reason of an amendment made by this Act, no refund or credit shall be made or allowed with respect to the amount of such overpayment.

(H. R. 3997, appearing at p. 37, supersedes H. R. 3704 and H. R. 3920.)

Mr. REED. Our first witness this evening is Mr. Charles E. Arnn, representing the Los Angeles News and Times, and all Western newspapers.

Mr. Arnn, will you please give your name and the capacity in which you appear, to the reporter? You may then proceed with your statement. We shall be glad to hear you.

STATEMENT OF CHARLES E. ARNN, REPRESENTING LOS ANGELES

NEWS AND TIMES AND ALL WESTERN NEWSPAPERS, LOS ANGELES, CALIF.

Mr. ARNN. I am Charles E. Arnn, vice president of Los Angeles Daily News, and representing a committee of all metropolitan newspapers on the Pacific coast from the Canadian to the Mexican border, a list of which I will hand to the clerk here.

Mr. JENKINS. Mr. Arnn, is that the list of the papers you are representing?

Mr. ARNN. That is right. Mr. REED. We will insert those in the record, with no objection. (The list referred to is as follows:)

San

.

Seattle Times, Seattle Wash.

Los Angeles Examiner, Los Angeles, Sacramento Bee, Sacramento, Calif. Calif. Salt Lake Tribune, Salt Lake City, San Diego Union Tribune, San Diego, Utah.

Calif. Tacoma News-Tribune, Tacoma, Wash. California Newspaper Publishers AsLong Beach Press-Telegram, Long sociation, San Francisco, Calif. Beach, Calif.

South California Associated NewsSanta Monica Outlook, Santa Monica, papers, Los Angeles, Calif. Calif.

Oakland Post-Inquirer, Oakland, Calif. Pasadena Star-News, Pasadena, Calif. San Francisco Chronicle, San FranSeattle Star, Seattle, Wash.

cisco, Calif. Oregon Journal, Portland, Oreg. San Francisco Examiner, San FranHollywood Citizen News, Hollywood, San Francisco Call-Bulletin. San Fran.

cisco, Calif. Calif.

cisco, Calif. Portland, Oregonian, Portland, Oreg. Spokane-Review, Spokane, Wash.

San Francisco News, San Francisco,

Calif. Los Angeles Times, Los Angeles 12, Seattle Post-Intelligencer, Seattle, Calif.

Wash. Tacoma Times, Tacoma, Wash.

Oakland Tribune. Oakland, Calif. Los Angeles Herald and Express, Los Allied Daily Newspapers of Washington, Angeles, Calif.

Olympia, Wash. Mr. ARNN. I think several of the members of the committee have a copy of the list also, sir.

I appear in support of H. R. 3704, a bill to exclude newspaper vendors from certain provisions of the Social Security Act and the Internal Revenue Code.

News vendors are the people who sell our newspapers to the public. Traditionally and factually they have been considered by us and by themselves as independent businessmen, who buy their newspapers from us at a wholesale rate, sell them to the public at retail price, and retain the difference as their individual profit.

In addition, it is our belief that the Congress in creating these social security and internal revenue statutes never intended these people to be covered as employees. The Bureau of Internal Revenue has obviously taken this viewpoint because they have made no effort to secure withholding taxes by us from news vendors for income-tax purposes.

On the other hand, the Social Security Administration has taken the position that news vendors are employees of the newspapers and as such are covered by the provisions of the Federal insurance contributions and Federal unemployment taxes.

Their attitude has subjected us to constant uncertainty as to our position under the law and has resulted in actual as well as potential harassment. We are faced with constant administrative and judical litigation.

For example, recently Judge Goodman, of the United States district court in San Francisco, rendered a decision holding that the man selling newspapers on the streets of San Francisco, commonly called "vendors,” were employees of the publishers and as such, subject to the levy of Federal insurance and Federal unemployment taxes under the provisions of the Social Security Act.

This decision, then, will make it necessary for publishers to pay Federal insurance contributions and unemployment taxes and to make income tax withholding on all “vendors” and, of course, to maintain records for the preparation of returns and reports.

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