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Senator MATHIAS. Feel free to answer that.

Mr. STUMP. Well

Mr. HALFPENNY. We appreciate very much this opportunity. I do have a Mailgram and I think it was also sent to your office, Senator, from a gentleman that was going to be here today by the name of Edward Smith, owner and manager of the National Wholesale Company of Lexington, North Carolina and it's very short. I'd like to have the opportunity to get it placed in the record if you have no objection.

Senator MATHIAS. It will be placed in the record.

Mr. HALFPENNY. And one other thing, on behalf of the Direct Mail Marketing Assn., as I stated in my direct testimony, we have compiled on their behalf an amicus curiae brief in the Supreme Court on the National Geographic case. And I would be happy-it's very thorough-but it has all of the citations on this very serious development of the slightest presence of a seller within the taxing State where it's outlined, and of course the Supreme Court didn't go that far. If you felt it would be of any value to the committee

Senator MATHIAS. We would be very grateful for a copy of it. Mr. HALFPENNY. All right. And fortunately the Supreme Court now requires you keep your briefs down to 15 pages so it's very short. Senator MATHIAS. We are grateful to you for being here.

Mr. HALFPENNY. We appreciate it and if we can be of more assistance to the committee, we'll be happy to and we'll submit some additional information as I suggested.

Senator MATHIAS. I'm glad you said that because I do want to announce that we are holding the record open, that if upon review of testimony further questions occur to the committee or Counsel we may be back at you for clarifying or supplementary information.

I'm glad to note that the schedule called for adjournment at 3:45 p.m. and this is one of the rare cases where we will be not only on time but 1 minute ahead of time.

The committee is now adjourned.

[The hearing was adjourned at 3:44 p.m.]

ADDITIONAL STATEMENT OF EDWARD G. SMITH

My name is Edward C. Smith, owner and manager of National Wholesale Company of Lexington, North Carolina.

We have been in the mail order business in Lexington selling primarily ladies' hosiery and panty hose by mail for the past 27 years. We have no other facilities anywhere but Lexington and we do all of our selling by mail and ship all of our packages by the U.S. Mails. We have about 60 employees whose very livelihood depends on the successful operation of our business and there are several hundred employees of our suppliers who would be out of a job if our business is made unprofitable by government regulations as well as the high postal rates.

I mention this because our business has been very profitable up until the last couple of years and now due to the unbelievable increases in package postage and Third Class Mail, we are actually fighting for our business life.

Now, looming on the horizon is the threat of taxation from other states and cities. We have been somewhat harassed by the state of California and Kentucky already. Inasmuch as these and other factors have squeezed our profits to almost zero, it is extremely important to our company and I am sure to many other small mail order companies that the Interstate Taxation matter be settled once and for all. Senator Mathias' bill S. 2173, as I understand it, would do just that. The small companies like ours just cannot afford to hire lawyers to fight the 50 states and all the cities there are who might like to impose a tax on us.

We do not have a computer. Our study of this matter shows that it would cost us much more to try to keep records than the amount of the actual tax would be. Can you imagine what it would cost to manually try to sift through thousands of small five and ten dollar orders to ascertain the amount of tax that the various states and cities might feel they are entitled to if this important Interstate Taxation matter is not laid to rest once and for all.

I beg of this committee and plead with this committee on behalf of all the small mail order companies in the country to vote favorably on Senate Bill S. 2173 and urge your colleagues to follow your committee's lead.

INTERSTATE TAXATION S. 2173

MONDAY, FEBRUARY 13, 1978

U.S. SENATE,

COMMITTEE ON THE JUDICIARY,
Charleston, South Carolina.

The committee met, pursuant to notice at 1:00 p.m. in the L. Mendel Rivers Federal Building, Charleston, South Carolina, Senator Charles McC. Mathias, Jr., (acting chairman of the committee) presiding.

Also present: Britt Singletary, professional staff member and Riley Temple and Emory Sneeden of the subcommittee staff.

Senator MATHIAS. This meeting of the Committee on the Judiciary of the U.S. Senate will come to order. The meeting is authorized by Senator James C. Eastland of Mississippi, who is Chairman of the committee. We are meeting in Charleston, South Carolina pursuant to public notice of the meeting which appeared in the Congressional Record on February 6, 1978.

On behalf of the committee I want to thank all of you for making these facilities available to us, particularly Senator Thurmond, who has helped in making these arrangement in South Carolina. He is the ranking minority member of the Judiciary Committee. We were hopeful that at some point during these hearings, he would be able to be here, but he had some previously scheduled commitments which will make that somewhat problematical.

OPENING STATEMENT OF SENATOR MATHIAS

We are today considering S. 2173, the Interstate Taxation bill of 1977, which would provide for judicial review of the application of jurdisdictional guidelines for state taxation of interstate commerce and for the apportionment of interstate revenues among the states. This bill is designed to eliminate the most troublesome problems arising from state and local taxation of interstate commerce, an area in which I think tax reform is very long overdue.

S. 2173 is a refinement of a bill that I introduced several times since 1961. Both in the 90th and 91st Congresses, the House actually passed these measures by overwhelming majorities. But although this or similiar bills have been introduced in the Senate regularly since 1968, we still have not succeeded in enacting any minimum uniform rules under which all types of state and local taxes can be levied.

The reason we've been at this so long is because up until now the gap between what state and local governments could tolerate and what the businesses could live with in an interstate tax reform bill seemed

to be unbridgeable. But I'm hopeful that the bill that's now before us can bridge the gap. It contains major concessions to states and localities not included in earlier versions of the legislation and it still has wide support in the business community, notably the National Association of Manufacturers. the Council of State Chambers of Commerce and the National Association of Wholesaler-Distributors, all of whom gave very valuable advice and counsel in the course of the drafting.

Last December the Committee held hearings in Biloxi, Mississippi, While a parade of witnesses echoed the exasperation, discouragement and frustration of coping with the existing chaos of competing rules and regulations of thousands of taxing jurisdictions, the representatives of state and local governments expressed fears that their revenues, already strained, would dwindle even further if the bill were enacted. I must admit I was pleased to see that the state tax authorities have somewhat tempered the opposition I can recall of several years ago. But I think one of the big jobs that's still before us is to allay their fears and to help state and local authorities recognize that this bill serves their best interest. I think they have to come to see that they have a mutuality of interest with the business community on this issue. I am convinced that with the growth of sophisticated tax collection methods state and local governments would, for the first time, be able to look at a record of total sales from out of state and thus be able to collect the maximum revenues. Uniform application of the rules in S. 2713 would certainly result in increased revenues for state and local governments in the long run because of their enhanced ability to tax all transactions that occur in their jurisdiction.

Businesses for their part will know for the first time how much they actually owe in taxes, which is the necessary first step in paying them off. In addition, the uniform standards are crucial for businesses interested in expanding or diversifying their operations and it is through such business growth that state and local governments will be able to significantly increase their tax base. As this day of hearings proceeds we hope to explore the significance of this legislation and to discover how best to achieve its purposes. We'll hear from witnesses representing state administrations and from witnesses who represent a wide variety of businesses that deal across state lines, I hope the committee will learn from each of them how this legislation will affect their operations and I'm sure that we can count on them to help us improve the bill in order to achieve the Committee's goal.

I want to thank Senator Thurmond's administrative assistant, Emory Sneeden for being present today and for his assistance in these arrangements. I call on him to make such statement as he may want to make either on Senator Thurmond's behalf or on his own steam.

Mr. SNEEDEN. Thank you, Mr. Chairman. Senator Thurmond did send down a statement, Mr. Chairman, and with your permission I would like to submit the statement for the record.

OPENING STATEMENT BY SENATOR THURMOND

While other commitments prevent me from attending the hearings on this legislative proposal, I wish to welcome Senator Charles Mathias to the State of South Carolina. Senator Mathias has given

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