In that case a mattress company seeking a refund of floor stock taxes had raised the price on this product chiefly because its competitor did the same. We find definite distinction therein from the present case. In the Honorbilt base the court said: "The increase was more than sufficient to take care of the tax and there is nothing in the record to show that the increase in price was due to any increase in the cost of raw materials, of labor or of manufacture generally ". [Italics supplied.] This distinction was also drawn in the case of H.T. Poindexter & Sons M. Co. v. United States, supra, wherein the language above was specifically quoted. 40 F.Supp. at page 789. The ase at bar is replete with evidence held to be lacking in the Honorbilt case. Increases in labor and material costs and changed conditions in manufacture generally were amply demonstrated.
Let us now consider the facts in this case. The Interwoven Stocking Company was incorporated in 1906. From 1917 for approximately ten years the prices of plaintiff remained almost identical for all grades of merchandise. Established lines were sold each year without change, the quality remaining the same. Rising costs in labor, materials, and selling and administrative expenses, in the early part of 1933, which continued to rise steadily, culminated in a price increase on July 1, 1933. The plaintiff was operating at an average monthly loss of $100,000 at the time these costs began to rise. A code for the hosiery industry under the National Industrial Recovery Act, 48 Stat. 195, was being prepared at this time. A preliminary code went into effect in July of 1933 and the final code for the industry in September of 1933. These codes, in the preparation of which plaintiff's president participated, had the effect of increasing the cost of plaintiff's production. On July 1, 1933, prices on goods of the plaintiff known to the trade as "staples" were increased. The major portion of plaintiff's business is transacted in what are known to the trade as "fancies". The prices of the fancies were increased on October 1, 1933.
Very complete records were offered in evidence to show the composition of the inventory of August 1, 1933, and the date and quantity of sale of the various styles listed therein and the balance of such inventory left on hand on January 6, 1936. The plaintiff paid taxes on goods in its inventory on August 1, 1933, which were processed in chief value from cotton. The total inventory of plaintiff of this merchandise, (i.e., the combined inventory of Interwoven Stocking Company and The Interwoven Mills, Inc.), at the date amounted to 455,642 dozen pairs of hose. Of this total, 247,578 dozen pairs were in a finished state, 26,943 dozen pairs in a partly finished state and 181,121 dozen pairs in raw materials. At the close of the taxable period, January 6, 1936, plaintiff still had on hand 8,267 dozen pairs. The goods which were in a finished state on August 1, 1933, sold subsequently at the increased prices, netted the plaintiff a loss of $13,635.72. The goods in a partly finished state on August 1, 1933 and the goods consisting of raw materials on that date, most of which were subsequently finished and sold, netted the plaintiff profits of $2,579.53 and $16,270.49 respectively. Upon recapitulation we find that the plaintiff's revenue increased $5,214.30 on all the goods in inventory on August 1, 1933, which were sold subsequently at increased prices with the exception of 8,267 dozen pairs of hose which were unsold as of January 6, 1936. The unsold portion amounting to 8,267 dozen pairs in the inventory of August 1, 1933, is inconsequential inasmuch as it represents less than 2% of the total inventory on August 1, 1933.
The income account of the plaintiff for 1932 shows a gross profit from sales of $127,874.08 and $774,204.37 in administrative and selling expenses with a net loss for the year of $690,301.62. In 1933 the loss was reduced to $341,846.80 with gross profit from sales rising to $597,954.71 and administrative and selling expenses increasing to $946,112.15. The net loss was further decreased in 1934 to $48,967.61, with a gross profit from sales of $883,618.30 and administrative and selling expenses amounting to $943,982.37. The 1935 figures show an increase in the net loss to $326,024.74, a decrease in the gross profit from sales to $780,735.29 and an increase in administrative and selling expenses to $1,072,114.31.
The cost of raw materials increased steadily from 1933 to 1935.Typical examples of the increased cost of cotton yarn were as follows: Style #36/2 Mercerized was .33 in 1933 and .51 in 1935; style #60/2 Mercerized was .43 1/2 in 1933 and .66 in 1935; style #80/2 Mercerized was .66 1/2 in 1933 and .90 in 1935.
The increase in the average manufacturing labor cost per dozen is disclosed by reference to the following table prepared and offered in evidence by the plaintiff:
Dozens Total Average
Year Payroll Period Produced Payroll Cost
1933 May 1 to 27th 107,871-4 $51,246.95 $ .4751
June 12 to July 8th 115,204-4 55,251.70 .4796
Oct. 1 to 28th 133,026-4 121,600.75 .9141
Oct. 30 to Nov. 25th 158,006-1 159,282.65 1.0081
1934 Year 1,375,670-4 1,386,413.05 1.0078
1935 Year 1,382,085-7 1,510,993.60 1.0933
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