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Federal Stamp Taxes on
Drafts, Checks

and Promissory Notes

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Stamp Taxes on Drafts, Checks and Promissory Notes"

THE

HE Revenue Act of 1918 imposes a tax drafts and checks, payable otherwise than at sight or on demand, upon their acceptance or delivery, whichever is prior, within the territorial jurisdiction of the United States, and on promissory notes, except those listed below as exempt, and on each renewal of the same. The term "United States" includes the states, the District of Columbia, Hawaii and Alaska.

The tax is at the rate of 2 cents on each $100 or fractional part thereof. On amounts not in excess of $100 the tax is 2 cents.

Any instrument or writing operating as a renewal of a promissory note is taxable, but the mere suspension of payment or forbearance does not constitute a taxable renewal within the meaning of the law, nor does payment of interest on a demand note, without any agreement in writing extending the note. *Based on Treasury Regulations No. 55.

The payment, however, of interest in advance, after maturity of a promissory note, evidenced by an indorsement, constitutes a taxable renewal.

Liability to tax and the amount thereof, is determined by the form and face of a check or draft and cannot be affected by proof of facts or instructions outside of the instrument. Payment for the stamp is a matter for adjustment between the parties, but obligation rests upon the drawee, payee, or indorsee of a draft to see that the tax is paid before or at the time of acceptance or delivery and both parties to a promissory note are responsible for affixing and cancelling stamps in the required amount.

Checks and Drafts

The following instruments payable otherwise than at sight or on demand are included among taxable drafts and checks:

1. Trade and bankers' acceptances.

2. Post-dated checks expressly payable after their date.

3. Time drafts drawn against the proceeds of drafts exempt under (4) below.

4. Drafts stating no time for payment which are accepted for payment at a certain future date. 5. Time drafts drawn on a domestic bank for the purpose of securing money to purchase goods to be exported.

6. Time drafts, not covering exports, drawn and delivered or accepted in the United States and payable in foreign countries.

7. Time drafts covering articles shipped from the United States, Hawaii and Alaska to the Canal Zone, if such drafts are delivered within the United States, Hawaii or Alaska.

8. Time drafts drawn against shipments from the Virgin Islands, the Philippines and Porto Rico into the United States, if delivery or acceptance of such drafts first takes place within the United States, Alaska or Hawaii.

The following checks and drafts are exempt from tax:

1. Demand checks.

2. Post-dated checks not expressly payable after their date.

3. Time drafts covering shipments to the Virgin Islands, the Philippines and Porto Rico. 4. Time drafts directly covering exports to a foreign country, and constituting an inherent, necessary and bona fide part of the actual process of exportation.

5. Time drafts drawn on domestic banks against export shipments delivered to the first carrier for transportation, covering the period of transit from the interior point to the seaboard.

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