Mr. Arnold F. Schaetzle, of Des Moines, Iowa, for petitioner. [323 U.S. 582, 583] Mr. Andrew D. Sharpe, of Washington, D.C., for respondent.
Mr. Justice MURPHY delivered the opinion of the Court.
Section 603 of the Revenue Act of 1932, c. 209, 47 Stat. 169, 261, Internal Revenue Code, 3401, 26 U.S.C.A. Int.Rev.Code, 3401, imposes on toilet preparations sold by manufacturers or producers an excise tax equivalent to stated percentages 'of the price for which so sold.' Petitioner was subject to this tax from October 1, 1936, to June 30, 1939, and has sought a refund of a portion of the tax paid on the ground that its selling and advertising expenses should have been excluded from the selling prices in computing the tax. The District Court after trial upheld this claim and awarded a refund, D.C., 52 F.Supp. 292, but the court below reversed that judgment, 8 Cir., 141 F.2d 380. The alleged conflict with the decisions of the Circuit Court of Appeals for the Seventh Circuit in Campana Corporation v. Harrison, 7 Cir., 114 F.2d 400, and Campana Corporation v. Harrison, 7 Cir., 135 F.2d 334, led us to grant certiorari.
The controversy here centers about Section 619(a) of the Act, 26 U.S. C.A. Int.Rev.Code 3441(a), which provides for the inclusion and exclusion of certain items in computing the selling price for purposes of the tax levied by Section 603 as well as various other sections. Section 619(a) states that, in computing the sales price,
Petitioner contends that advertising and selling expenses fall within the term 'other charge' appearing in the last sentence of Section 619(a) and hence are excludable in determining the selling price for tax purposes. This claim, however, is refuted by both the spirit and the letter of this statutory provision.
Congress sought in the Revenue Act of 1932 to use the manufacturer's or wholesaler's selling price, rather than the retail price, as the measure of the excise taxes imposed by Section 603. 75 Cong.Rec. 11383, 11657. Section 619(a) was designed to lay down specific rules for determining this selling price, especially in relation to costs incurred after the article itself had been manufactured. It provides for the use of the manufacturer's or producer's f.o.b. price at the factory or place of production. In essence, all manufacturing and other charges incurred prior to the actual shipment of an article and reflected separately or otherwise in the f.o.b. wholesale price are to be included in the sale price underlying the tax, while all charges incurred subsequent thereto are to be excluded. Hence any additional charge which a purchaser would not be required to pay if he accepted delivery of the article at the factory or place of production may be so excluded. See H.Rep. No. 708 (72d Cong., 1st Sess.) p. 37; S.Rep.No. 665, Part 3 (72d Cong., 1st Sess.) p. 3; H.Conf. Rep. No. 1492 (72d Cong., 1st Sess.) p. 22.
Advertising and selling expenses incurred by a manufacturer such as petitioner clearly fall within the class of charges which Congress intended to be included in the tax base. Regardless of whether we consider such ex- [323 U.S. 582, 585] penses technically as manufacturing costs, it is obvious that they are incurred prior to the actual shipment of articles to wholesale purchasers and that they enter into the composition of the wholesale selling price. Even if the purchaser accepts delivery at the factory, he pays for the advertising and selling expenses. Thus they must be included in the taxable sales price.
The inclusion of these expenses is plainly warranted by the language of Section 619(a). Pre-shipment charges relative to coverings, containers and placing an article in condition for shipment are specifically included in the determination of the selling price. But a subsequent 'transportation, delivery, insurance, installation, or other charge' is to be excluded if properly established. In the setting of this case, no rule of reason or grammar justifies placing advertising and selling expenses within the meaning of this exclusionary sentence.
To begin with, advertising and selling expenses are obviously not comparable to the specified charges for transportation, delivery, insurance or installation-all of which are incurred subsequent to the preparation of an article for shipment and are not included in the manufacturer's f.o.b. selling price. Hence advertising and selling expenses cannot be encompassed by the term 'other charge' unless that term be taken to include charges entirely dissimilar to those specified. This term, however, was understood by its framers to mean 'like charges' or 'similar charges' to those specifically enumerated in the same sentence. H. Rep. No. 708 (72d Cong., 1st Sess.) p. 37; S.Rep. No. 665, Part 3 (72d Cong., 1st Sess.) p. 3; H.Conf.Rep. No. 1492 (72d Cong., 1st Sess.) p. 22. When this fact is added to the general intent of Congress to include all costs or charges incurred prior to shipment, the applicability of the ejusdem generis rule to the term 'other charge' becomes clear. This rule, which appro- [323 U.S. 582, 586] priately may be invoked here since it does not conflict with the general purpose of the statute, compare Securities and Exchange Commission v. C. M. Joiner Leasing Corporation 320 U.S. 344, 350 , 351 S., 64 S.Ct. 120, 123, with Smith v. Davis, 323 U.S. 111 , 65 S.Ct. 157, limits the 'other charge' to expenses similar in character to those incurred for transportation, delivery, insurance and installation. Since advertising and selling expenses arise prior to shipment and are necessarily components of the f.o. b. selling price, the term 'other charge' cannot cover them. 1 They must be included in the tax base. Such has been the consistent administrative construction of the statute, G.C.M. 21114, 1939-1 Cum.Bull. 351, 353. And such is the result made necessary by the accepted rules of statutory construction.