United States v. P. Lorillard Co.

Background

A cigarette manufacturer paid federal taxes on 153,050,000 cigarettes and later exported them. The taxes were first paid by stamps attached in the factory under earlier laws. After new laws raised the tax, the company paid an extra 95 cents per thousand after the goods had left the factory (a so-called “floor tax”). The Commissioner refunded earlier payments but refused to refund that 95-cent payment, and the manufacturer sued to recover it.

Reasoning

The core question was whether a tax paid after the cigarettes left the factory could be treated like value added to the original stamps and thus be refunded when the goods were exported. The Court agreed with the Court of Claims. Chiefly because the tax system relied on stamps and Congress aimed not to tax exports, the Court concluded the later payment could be treated as adding to the stamps’ value and so was recoverable. The opinion notes that a provision of the 1919 Act supports this view but bases the decision mainly on the stamp-based tax system and the policy against taxing exports.

Real world impact

The ruling lets this manufacturer recover the 95-cent floor tax and affirms the lower court’s judgment. Practically, manufacturers who paid similar post-removal taxes may claim drawback when goods are exported. The Court also made clear a protest at the time of payment was not required because the right to drawback had not yet arisen.