Music Trade Review
Issue: 1918 Vol. 66 N. 5 - Page 6
Music Trade Review -- © mbsi.org, arcade-museum.com -- digitized with support from namm.org
THE MUSIC TRADE REVIEW
HOW WAR REVENUE TAX AFFECTS THE PIANO MERCHANT
(Continued from page 5)
that where the entire property is devoted to
business purposes the whole rental and all ex-
penses for electric current, etc., should come out
of gross income. However, in the not infrequent
instances where piano merchants are occupying
certain portions (say the rooms above the first
floor) of such buildings for residential purposes,
the expense account must be split and only that
portion of the rental, etc., ascribed to the main-
tenance of the part of the building devoted to
offices and salesrooms and storage uses may be
charged off as an outlay for purposes of trade.
Don't Forget Paying Yourself a Salary
In view of the practice so generally prevalent
in the business world, presumably every progres-
sive piano merchant follows the plan of paying
himself a salary, even though his is a one-man
business. If he does not thus provide remunera-
tion for his personal services when balancing
his own books he is entitled to make the sub-
traction when preparing a basis for "war taxa-
tion." However, there are two deterrents to
any temptation to be greedy in paying oneself
a salary in order to cut down tax liability. In
the first place, the Internal Revenue officials
have let it be known that they will regard with
suspicion any claim for personal remuneration
that is out of proportion to the salaries that
rule in the field where the taxpayer happens to
be in business. Secondly, there is the circum-
stance that a business man who voted himself a
fancy salary would, in effect, be going around
in a circle. If his salary allotment is sanctioned
it would, to be sure, cut down his business prof-
its and corporate income, if his business be in-
corporated; but on the other hand it would boost
his individual income, which would, presumably,
be liable to taxation.
The Importance of Inventory
Making inventory of the piano man's assets is
not the least of his responsibilities in connection
with making ready to tell Uncle Sam his busi-
ness secrets. The inventory of instruments and
merchandise on hand may be on the basis of
cost or present market price, whichever is lower
or whichever the merchant prefers. However,
it is not clear that there is much choice, because
the Treasury officials have given warning that a
business man is likely to be required, in years
to come, to stick to the same inventory basis
that he adopts for 1917, so that there may be
no advantage either way in the long run. In
the estimation of Uncle Sam's tax experts, the
ideal procedure for the piano man bent upon
making a "return" that will receive a prompt
" " " " " " " " " " "
inilllMIIMHnilllMIHMMIIINMIIIHiniU
O. K. at Washington is to make use of two in-
ventories as of date, respectively, December 31,
1916, and December 31, 1917. To the inventory
of stock on hand at the close of 1916 may be
added the cost of all goods purchased during
1917, and there is derived a total which, when
balanced against the inventory at the end of
1917, plus total receipts for that year, gives the
"gross income" to be entered on the tax return.
The Income Tax and Instalment Business
Piano men as a class will probably have to do
more figuring to ascertain the proper entries for
the tax "returns" than will merchants in almost
any other line, owing to the credit system under
which most piano merchandising is carried on.
As a veteran piano executive remarked to the
writer, "All the profit in the business is in the
contracts or leases" and consequently it becomes
of first importance what treatment is to be ac-
corded "piano paper" and payments on piano
contracts. It is this element in the situation
which prevents even the smallest merchant in
the trade from adopting the care-free plan of
the storekeeper who sells for cash, keeps no
books worthy of the name, and makes his return
on the basis of actual receipts for the year.
It makes all the difference in the world, from
the war-tax angle, whether or not title to a piano
has passed in a credit transaction. Of course,
the great majority of pianos are sold under con-
tract whereby title does not pass until the final
monthly payment has been made. Nevertheless,
in the case of a customer whose responsibility
is well known a piano dealer will sometimes ac-
cept promissory notes and close the transac-
tion. Such notes must, in making a war tax
return, be treated as the equivalent of cash re-
ceipts. Not so a contract where title to the
instrument remains with the dealer. Here the
only thing to be taken into account in report-
ing for 1917 is the aggregate amount of pay-
ments made on that contract during the year
past.
The Little "Joker" You Must Watch
A little '"joker" lies hidden just here, however.
Profit must be extracted from each payment on
contract. Many piano merchants are in the habit
of looking to the final payments on a contract
for all the profit. Uncle Sam will not counte-
nance any such waiting game. He insists that
each payment embraces reimbursement for in-
vestment and also a margin of profit. The case
that is cited at the Treasury Department for the
benefit of perplexed piano men is that of a dealer
who buys a piano at wholesale for $300 and re-
iiiiMiiiiiuiiiniiinniiiniinnnn
niiMiiiiiiiiiiiiii
inn HI
niiiii
iiiiiMii|iiiiiiiiiii[iiiiiinmn
Its ready response to the touch and re-
quirements of the most critical forcibly
^ ^ ^ ^ ^ ^ ^ demonstrates the superiority of the Strauch
C j 3 ^ ^ T 9 Player Action.
. _
Manufacturers should know of its capacity
for greater repetition ; the increased strength and stur-
diness (with no addition to the size) which are so
essential to dependable player actions.
The placing of the action in the instrument is a matter
for considerable care and experience and here is where
Strauch skill insures the perfect performance that has
characterized Strauch manual actions, in quality pianos,
for nearly half a century.
I
PIANO
ACTIONS-HAMMERS
FEBRUARY 2, 1918
tails it at $400 under contract for twenty month-
ly payments of $20 each. The Federal tax ar-
biters construe each monthly payment to repre-
sent a return of capital amounting to $15 and a
profit amounting to $5. Hence, if twelve pay-
ments have been made during the year an in-
come entry of $60 must be made. In the event
that repossession, becomes necessary, the entire
amount paid is regarded as rental and must be
credited to income.
The Matter of Piano Depreciation
While the Internal Revenue officials admit
that piano merchants are, under certain circum-
stances, entitled to an allowance for deprecia-
tion on instruments—say the depreciation that
has actually occurred in the case of a repos-
sessed instrument—they have not attempted to
fix the "life" of a piano as a basis for figuring
annual depreciation as they have done in the case
of the various classes of buildings and of auto-
mobiles used for business purposes, which latter
are credited with a life of four or five years.
The nearest that the officials at Washington
have come to this question was when they ruled
that the estimated lifetime of "ordinary ma-
chinery" is ten years, a calculation that may con-
tain a hint for estimators of depreciation on
mechanical instruments. Any piano merchant
who charges off the full measure of depreciation
on old or used instruments in his hands must be
careful not to include as business expenses any
outlay for labor and material employed in re-
pairing or restoring such instruments. Uncle
Sam will reject such parallel charges as duplica-
tion. If repairs and replacements are to form
exemptions, the depreciation quota must be re-
duced by the amount of the outlay expended to
make the instruments "like new."
SUPPORTS CHAMBER OF COMMERCE
J. A. Coffin, as President of National Piano
Manufacturers' Association, Votes for Reso-
lution Adopted by Chamber of Commerce of
the United States Relative to German Embargo
J. A. Coffin, as president of the National Piano
Manufacturers' Association, voted in favor this
week of Referendum No. 23 of the Chamber of
Commerce of the United States of America on
a proposal to discriminate against Germany in
trade after the war if necessary for self-defense.
The resolution adopted is as follows:
"Whereas, The size of Germany's present
armament and her militaristic attitude have been
due to the fact that her government is a mili-
tary autocracy, not responsible to the German
people; and
"Whereas, The size of the German armament
after the war will be the measure of the great-
ness of the armament forced on all nations; and
"Whereas, Careful analysis of economic con-
ditions shows that the size of Germany's future
armament will fundamentally depend on her
after-war receipts of raw materials and profits
from her foreign tra-de; and
"Whereas, In our opinion the American peo-
ple, for the purpose of preventing an excessive
aimament, will assuredly enter an economic
combination against Germany if governmental
conditions in Germany make it necessary for
self-defense; and
"Whereas, We believe the American people
will not join in discrimination against German
goods after the war if the danger of excessive
armament has been removed by the fact that the
German Government has in reality become a re-
sponsible instrument controlled by the German
people; therefore, be it
"Resolved, That the Chamber of Commerce of
the United States of America earnestly calls the
attention of the business men of Germany to
tl.ese conditions and urges them also to study
this situation and to co-operate to the end that
a disastrous economic war may be averted and
that a last'ug peace may be made more certain."
An explosion of 400 quarts of nitro-glycerine
in an adjoining building caused heavy loss to
Ladd's music store, in Bowling Green, O.
THE MUSIC TRADE REVIEW
HOW WAR REVENUE TAX AFFECTS THE PIANO MERCHANT
(Continued from page 5)
that where the entire property is devoted to
business purposes the whole rental and all ex-
penses for electric current, etc., should come out
of gross income. However, in the not infrequent
instances where piano merchants are occupying
certain portions (say the rooms above the first
floor) of such buildings for residential purposes,
the expense account must be split and only that
portion of the rental, etc., ascribed to the main-
tenance of the part of the building devoted to
offices and salesrooms and storage uses may be
charged off as an outlay for purposes of trade.
Don't Forget Paying Yourself a Salary
In view of the practice so generally prevalent
in the business world, presumably every progres-
sive piano merchant follows the plan of paying
himself a salary, even though his is a one-man
business. If he does not thus provide remunera-
tion for his personal services when balancing
his own books he is entitled to make the sub-
traction when preparing a basis for "war taxa-
tion." However, there are two deterrents to
any temptation to be greedy in paying oneself
a salary in order to cut down tax liability. In
the first place, the Internal Revenue officials
have let it be known that they will regard with
suspicion any claim for personal remuneration
that is out of proportion to the salaries that
rule in the field where the taxpayer happens to
be in business. Secondly, there is the circum-
stance that a business man who voted himself a
fancy salary would, in effect, be going around
in a circle. If his salary allotment is sanctioned
it would, to be sure, cut down his business prof-
its and corporate income, if his business be in-
corporated; but on the other hand it would boost
his individual income, which would, presumably,
be liable to taxation.
The Importance of Inventory
Making inventory of the piano man's assets is
not the least of his responsibilities in connection
with making ready to tell Uncle Sam his busi-
ness secrets. The inventory of instruments and
merchandise on hand may be on the basis of
cost or present market price, whichever is lower
or whichever the merchant prefers. However,
it is not clear that there is much choice, because
the Treasury officials have given warning that a
business man is likely to be required, in years
to come, to stick to the same inventory basis
that he adopts for 1917, so that there may be
no advantage either way in the long run. In
the estimation of Uncle Sam's tax experts, the
ideal procedure for the piano man bent upon
making a "return" that will receive a prompt
" " " " " " " " " " "
inilllMIIMHnilllMIHMMIIINMIIIHiniU
O. K. at Washington is to make use of two in-
ventories as of date, respectively, December 31,
1916, and December 31, 1917. To the inventory
of stock on hand at the close of 1916 may be
added the cost of all goods purchased during
1917, and there is derived a total which, when
balanced against the inventory at the end of
1917, plus total receipts for that year, gives the
"gross income" to be entered on the tax return.
The Income Tax and Instalment Business
Piano men as a class will probably have to do
more figuring to ascertain the proper entries for
the tax "returns" than will merchants in almost
any other line, owing to the credit system under
which most piano merchandising is carried on.
As a veteran piano executive remarked to the
writer, "All the profit in the business is in the
contracts or leases" and consequently it becomes
of first importance what treatment is to be ac-
corded "piano paper" and payments on piano
contracts. It is this element in the situation
which prevents even the smallest merchant in
the trade from adopting the care-free plan of
the storekeeper who sells for cash, keeps no
books worthy of the name, and makes his return
on the basis of actual receipts for the year.
It makes all the difference in the world, from
the war-tax angle, whether or not title to a piano
has passed in a credit transaction. Of course,
the great majority of pianos are sold under con-
tract whereby title does not pass until the final
monthly payment has been made. Nevertheless,
in the case of a customer whose responsibility
is well known a piano dealer will sometimes ac-
cept promissory notes and close the transac-
tion. Such notes must, in making a war tax
return, be treated as the equivalent of cash re-
ceipts. Not so a contract where title to the
instrument remains with the dealer. Here the
only thing to be taken into account in report-
ing for 1917 is the aggregate amount of pay-
ments made on that contract during the year
past.
The Little "Joker" You Must Watch
A little '"joker" lies hidden just here, however.
Profit must be extracted from each payment on
contract. Many piano merchants are in the habit
of looking to the final payments on a contract
for all the profit. Uncle Sam will not counte-
nance any such waiting game. He insists that
each payment embraces reimbursement for in-
vestment and also a margin of profit. The case
that is cited at the Treasury Department for the
benefit of perplexed piano men is that of a dealer
who buys a piano at wholesale for $300 and re-
iiiiMiiiiiuiiiniiinniiiniinnnn
niiMiiiiiiiiiiiiii
inn HI
niiiii
iiiiiMii|iiiiiiiiiii[iiiiiinmn
Its ready response to the touch and re-
quirements of the most critical forcibly
^ ^ ^ ^ ^ ^ ^ demonstrates the superiority of the Strauch
C j 3 ^ ^ T 9 Player Action.
. _
Manufacturers should know of its capacity
for greater repetition ; the increased strength and stur-
diness (with no addition to the size) which are so
essential to dependable player actions.
The placing of the action in the instrument is a matter
for considerable care and experience and here is where
Strauch skill insures the perfect performance that has
characterized Strauch manual actions, in quality pianos,
for nearly half a century.
I
PIANO
ACTIONS-HAMMERS
FEBRUARY 2, 1918
tails it at $400 under contract for twenty month-
ly payments of $20 each. The Federal tax ar-
biters construe each monthly payment to repre-
sent a return of capital amounting to $15 and a
profit amounting to $5. Hence, if twelve pay-
ments have been made during the year an in-
come entry of $60 must be made. In the event
that repossession, becomes necessary, the entire
amount paid is regarded as rental and must be
credited to income.
The Matter of Piano Depreciation
While the Internal Revenue officials admit
that piano merchants are, under certain circum-
stances, entitled to an allowance for deprecia-
tion on instruments—say the depreciation that
has actually occurred in the case of a repos-
sessed instrument—they have not attempted to
fix the "life" of a piano as a basis for figuring
annual depreciation as they have done in the case
of the various classes of buildings and of auto-
mobiles used for business purposes, which latter
are credited with a life of four or five years.
The nearest that the officials at Washington
have come to this question was when they ruled
that the estimated lifetime of "ordinary ma-
chinery" is ten years, a calculation that may con-
tain a hint for estimators of depreciation on
mechanical instruments. Any piano merchant
who charges off the full measure of depreciation
on old or used instruments in his hands must be
careful not to include as business expenses any
outlay for labor and material employed in re-
pairing or restoring such instruments. Uncle
Sam will reject such parallel charges as duplica-
tion. If repairs and replacements are to form
exemptions, the depreciation quota must be re-
duced by the amount of the outlay expended to
make the instruments "like new."
SUPPORTS CHAMBER OF COMMERCE
J. A. Coffin, as President of National Piano
Manufacturers' Association, Votes for Reso-
lution Adopted by Chamber of Commerce of
the United States Relative to German Embargo
J. A. Coffin, as president of the National Piano
Manufacturers' Association, voted in favor this
week of Referendum No. 23 of the Chamber of
Commerce of the United States of America on
a proposal to discriminate against Germany in
trade after the war if necessary for self-defense.
The resolution adopted is as follows:
"Whereas, The size of Germany's present
armament and her militaristic attitude have been
due to the fact that her government is a mili-
tary autocracy, not responsible to the German
people; and
"Whereas, The size of the German armament
after the war will be the measure of the great-
ness of the armament forced on all nations; and
"Whereas, Careful analysis of economic con-
ditions shows that the size of Germany's future
armament will fundamentally depend on her
after-war receipts of raw materials and profits
from her foreign tra-de; and
"Whereas, In our opinion the American peo-
ple, for the purpose of preventing an excessive
aimament, will assuredly enter an economic
combination against Germany if governmental
conditions in Germany make it necessary for
self-defense; and
"Whereas, We believe the American people
will not join in discrimination against German
goods after the war if the danger of excessive
armament has been removed by the fact that the
German Government has in reality become a re-
sponsible instrument controlled by the German
people; therefore, be it
"Resolved, That the Chamber of Commerce of
the United States of America earnestly calls the
attention of the business men of Germany to
tl.ese conditions and urges them also to study
this situation and to co-operate to the end that
a disastrous economic war may be averted and
that a last'ug peace may be made more certain."
An explosion of 400 quarts of nitro-glycerine
in an adjoining building caused heavy loss to
Ladd's music store, in Bowling Green, O.
Future scanning projects are planned by the International Arcade Museum Library (IAML).