TAXATION - SALES - RECOVERY OF PROCESSING TAXES - REMEDIES OF THE BUYER

Defendant, a flour milling company, was subjected to payment of processing taxes under the Agricultural Adjustment Act. It entered into contracts with plaintiffs, by the terms of which the amount of such taxes was included in the purchase price of flour. The contracts provided that the amount of any decrease in processing taxes levied against defendant would inure to the benefit of the buyers and be credited against the contract price. Meanwhile, defendant, contesting the validity of the tax, had deposited in court a sum equal to the amount of accrued taxes.

After the Supreme Court invalidated the A. A. A. and ordered the impounded sums returned to taxpayers, defendant recouped its deposits. Plaintiffs, denied the right to intervene in the first proceeding, brought a class suit in equity for an accounting and declaration of a trust in the funds. Held, the amount of the tax passed by defendant to plaintiffs was buried in the contract price. The contracts did not provide for refunds to plaintiffs if the tax was held illegal.

Defendant holds no specific funds in which plaintiffs have any right. O'Connor Bills, Inc. v. Washburn Crosby Co., (D. C. Mo. 1937) 20 F. Supp. 460.