The opinion of the court was delivered by: DAWSON
This case, which was tried by the Court without a jury, raises the question as to whether certain items of jewelry and luggage sold by the Salvation Army to its officers and members were subject to the Federal excise tax on jewelry and luggage under the provisions of § 1651 and § 2400 of 26 U.S. Code (Internal Revenue Code 1939).
The action is one for a refund of Federal excise taxes. It is a consolidated action resulting from the consolidation of two actions brought by the plaintiff in which the plaintiff seeks a refund of excise taxes paid by the plaintiff. The first action covers taxes collected for the period from October 1, 1941 through December 31, 1948, while the second action relates to the subsequent period from January 1, 1949 through March 31, 1949.
It has been stipulated that the total amount of the refund claim involved in this action is $ 8,134.40. It has been further stipulated that in the event the plaintiff should prevail in the action, the defendant is entitled to a set-off of $ 598.60 plus interest at 6% per annum from August 1, 1952; and in the event that the defendant should prevail, the defendant is entitled to an affirmative judgment for such amount. This setoff and/or counterclaim, as the case may be, results from the fact that after commencement of the first action, the defendant had made a refund to the plaintiff of certain monies which was excessive by $ 598.60 due to an error in calculations.
All of the tax paid was paid with respect to jewelry items with the exception of $ 36.93 which was paid with respect to items of luggage.
There is no substantial dispute as to any of the following facts. The significant facts are as follows:
1. The plaintiff is a religious and charitable corporation organized pursuant to a special statute of incorporation of the New York State Legislature, L. 1899, c. 468. It is the temporal and legal organization in this country for the Salvation Army, which is an international religious organization. The Commissioner of Internal Revenue has ruled that the national headquarters of the Salvation Army and its various components throughout the United States constitute a church or a convention or association of churches as that term is used in the 1954 Revenue Code, 26 U.S.C.A. § 1 et seq.
2. The Salvation Army uses military terminology in connection with its organization and work. The lay members of the denomination are described as 'soldiers'. The ministers are described as 'officers' with various ranks similar to that used in a military organization and with a 'general' at the top of the hierarchy. The congregations are called 'corps'. The members sign articles of faith which are designated as 'Articles of War'. The denomination has regular religious services on Sundays as well as other days. The officers are recognized as ministers who are legally empowered to perform marriage services.
3. The Orders and Regulations for officers of the Salvation Army provide that: 'The Officer must always appear in Regulation Uniform' and also that 'Officers are strictly forbidden to wear wordly adornment or ornaments of any kind.' The Regulations also state that: 'This rule prohibits jewellery, including ear-rings, rings, lockets, gold or silver chains and other ornaments; also articles, such as brooches, made of fancy material.'
4. The soldiers who are the laity of the Salvation Army are not required to wear uniforms, nor are they prohibited from engaging in ordinary lay activities. In the Manual of Orders and Regulations for Soldiers of the Salvation Army, a solider is instructed to let it be known wherever he works that he belongs to the Salvation Army. Such Orders then state: 'This he will do most effectively by wearing -- at times when full uniform is impossible -- a shield or other Army badge upon his everyday or working clothes.'
5. The Manual further states: 'A soldier should avoid worldly fashions. This he will do most effectually by wearing a uniform.' The Regulations further provide with respect to soldiers: 'Every convert, directly he is saved, should make a beginning in uniform wearing. * * * Conformity to the fashions of the world in regard to dress -- trimmings, jewellery, bangles, stylish cut, etc. -- is inconsistent with the spirit of uniform wearing.'
6. Eighty-six categories of jewelry are involved in this action and have been received in evidence. The items fall into four classes: (1) insignia which is required to be worn on Salvation Army uniforms, (2) brooches, emblems and pins which are paid for by a local corps and given to the wearer as an award for service in or connection with a Salvation Army unit or organization, (3) emblems, brooches, etc. which may be worn on or in connection with ordinary civilian clothes, but which identify the wearer as a soldier of the Salvation Army, (4) crosses of different designs, and a brooch which reads: 'Jesus Saves', all of which have no special relationship to the Salvation Army. These are items 81-86, inclusive.
7. Four categories of luggage are involved in the action: bible cases, bonnet cases, brief cases and over-night cases. The bonnet cases and over-night cases are specially designed to take the uniform cap and other objects worn by officers of the Salvation Army.
8. The plaintiff distributes the items of luggage and jewelry from its warehouse on West 13th Street in New York City where its Supply and Purchasing Department is located. In order to make a purchase from this Department, a purchaser must satisfy the Department either that he is an officer in the Salvation Army or, if not, that he is a soldier in the Army with specific authority from his corps officer to make the purchase. Members of the general public may buy religious books from the Department, but they may not buy any ...