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                        Federal Stamp Taxes on
                            Drafts, Checks
                         and Promissory Notes

                                 1919

                        Guaranty Trust Company
                              of New York




                        Federal Stamp Taxes on
                            Drafts, Checks
                         and Promissory Notes

                              Imposed by
                  Title XI of the Revenue Act of 1918

                                 1919

                  Guaranty Trust Company of New York

                             140 Broadway

                          FIFTH AVENUE OFFICE
                     Fifth Avenue and 43rd Street

                         MADISON AVENUE OFFICE
                    Madison Avenue and 60th Street

                             LONDON OFFICE
                         32 Lombard St., E. C.

                           LIVERPOOL OFFICE
                         27 Exchange Buildings

                             PARIS OFFICE
                        Rue des Italiens, 1 & 3

                            BRUSSELS OFFICE
                            158 Rue Royale

                          COPYRIGHT, 1919, BY
                  GUARANTY TRUST COMPANY OF NEW YORK




Stamp Taxes on Drafts, Checks and Promissory Notes[1]

[1] Based on Treasury Regulations No. 55.


The Revenue Act of 1918 imposes a tax on 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. 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.

    6. Drafts drawn abroad on a foreign drawee with a foreign
    payee, passing through a bank in the United States in the
    course of collection unless delivered by an agent of the drawer
    to an agent of the payee within the United States.


_Promissory Notes_

The following promissory notes and renewals of the same are included
among instruments taxable:

    1. Notes given for security only.

    2. Notes payable on demand or after date.

    3. Promissory notes accompanying mortgages of joint-stock land
    banks.

    4. Promissory notes secured by bonds of the War Finance
    Corporation.

    5. Promissory notes executed and mailed in the United States to
    a payee in Canada.

    6. Extensions or renewals of promissory notes brought about by
    extension of mortgages by which such notes are secured.

    7. Instruments in the form of promissory notes, representing
    the interest upon promissory notes, not included under (6)
    below, and either separate from or prepared in a form and for
    the purpose of being separated from the principal note.

    8. Policy loan and premium extension agreements containing
    an unqualified promise to pay a specified sum of money at a
    certain date, except where the sole remedy of the payee in
    case of non-payment of the premiums or loans is to reduce or
    cancel the rights of the insured.

The following instruments are exempt:

    1. Certificates of deposit.

    2. Bank notes issued for circulation.

    3. Promissory notes executed and mailed in Canada to a payee
    within the United States.

    4. Promissory notes issued directly by foreign governments and
    placed in this country for sale.

    5. Promissory notes secured by certificates of indebtedness
    issued by the Director General of Railroads.

    6. Coupons and interest notes which are attached to a principal
    obligation and are substantially repetitions of the promise to
    pay interest contained in the principal obligation.

    7. Promissory notes secured by United States bonds or
    obligations issued after April 24, 1917 or secured by the
    pledge of a promissory note which itself is secured by the
    pledge of such bonds or obligations. Such bonds must have a par
    value of not less than the amount of such notes to exempt the
    latter.


_Cancellation of Stamps_

Any person using or affixing stamps must so deface the same as to
render them unfit for further use by writing or stamping his initials
and the date thereon with ink, or by cutting and canceling such stamp
with a machine or punch, which will affix the initials and date.
The cancellation should not so deface the stamp as to prevent its
denomination and genuineness from being readily determined.

In addition to the above, stamps of the value of 10 cents or more must
have three parallel incisions made by some sharp instrument lengthwise
through the stamp after the same has been attached to the document,
except where the stamps are cancelled by perforation.


_Use of Cancelled Stamps--Refunds_

A stamp affixed to an instrument and cancelled cannot lawfully be
removed and attached to another instrument. Refund will be made by
the collector of internal revenue for amounts paid for stamps used in
excess of requirements, or on instruments not actually effective and
for which a substitute is prepared and stamped, or on instruments not
subject to tax.