Excise taxes imposed on insuring exported goods held unconstitutional if based on the value of goods.In International Business Machines Corp. (IBM (International Business Machines Corporation, Armonk, NY, www.ibm.com) The world's largest computer company. IBM's product lines include the S/390 mainframes (zSeries), AS/400 midrange business systems (iSeries), RS/6000 workstations and servers (pSeries), Intel-based servers (xSeries) ), Ct. Fed. Cls., 6/23/94, the court held that the excise tax Excise Tax 1. An indirect tax charged on the sale of a particular good. 2. A penalty tax applied to ineligible transactions in retirement accounts. This penalty is assessed by and paid to the IRS. Notes: 1. imposed by Sec. 4371 was unconstitutional unconstitutional adj. referring to a statute, governmental conduct, court decision or private contract (such as a covenant which purports to limit transfer of real property only to Caucasians) which violate one or more provisions of the U. S. Constitution. , since it violated the Export Clause of the Constitution. IBM sold computer equipment manufactured in the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. through its foreign subsidiaries. IBM required all of its U.S. manufactured products sold to its foreign subsidiaries to be covered by casualty insurance. Insurance was purchased from U.S. insurers if bought by IBM and from foreign insurers if procured by a foreign subsidiary. The Service asserted that IBM was liable for the excise tax on premiums paid to foreign insurers with respect to U.S. risks under Sec. 4371. The IRS An abbreviation for the Internal Revenue Service, a federal agency charged with the responsibility of administering and enforcing internal revenue laws. believed that IBM was an insured party because the insurance policies were obtained for its use and benefit. The key question presented to the court was whether the insurance policies were so vitally connected with the exporting of the goods that the tax was essentially a tax on the exports themselves. Because the insurance premiums were based on the value of IBM goods in a particular shipment, the court determined that the excise tax was effectively a burden on the export process and, therefore, a violation of the Constitution's Export Clause. Taxpayers who pay excise taxes excise taxes, governmental levies on specific goods produced and consumed inside a country. They differ from tariffs, which usually apply only to foreign-made goods, and from sales taxes, which typically apply to all commodities other than those specifically exempted. on insurance premiums in connection with exported goods, and as to which the premiums are based on the value of the goods being exported, should examine the implications of this case with respect to their specific circumstances. |
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