Bornstein Sea Foods, Inc. v. State
Decision Date | 28 June 1962 |
Docket Number | No. 35911,35911 |
Citation | 60 Wn.2d 169,373 P.2d 483 |
Court | Washington Supreme Court |
Parties | BORNSTEIN SEA FOODS, INC., Appellant, v. The STATE of Washington, Respondent, |
Jack Kurtz, Bellingham, for appellant.
John J. O'Connell, Atty Gen., James A. Furber, Assistant, Olympia, for respondent.
In this case the state tax commission has determined that certain activities of the appellant, Bornstein Sea Foods, Inc. (the taxpayer), are included within the term 'to manufacture,' and are taxable under the business and occupation taxing statutes of this state. On the taxpayer's appeal to the superior court, the tax imposed by the commission was upheld, and judgment was entered for the state of Washington in the amount of $5,859.18 (together with interest allowable by law and costs). The taxpayer has appealed.
The activities taxed by the commission involve filleting, packaging, and freezing of fish. The filleting process is accomplished in the following manner. Appellant purchases varying species of bottom fish, such as cod, perch, sole, and others from fish boats. In appellant's establishment the fish are placed by an employee on an endless rubber belt conveyor. The fish arrive whole in front of other employees, called 'filleters.' A filleter takes the fish from the conveyor, lays the fish on its side and with a special knife makes a diagonal cut across the fish behind the head. The knife is then inserted at the initial cut and moved along the backbone of the fish, separating the flesh from the skin. The same process is repeated on the other side of the fish. The fillets (sides of fish) are then cut into appropriate sized pieces, and approximately sixty-five per cent of the total production is packaged in one-pound units and frozen for eventual shipping and sale. The remaining fillets are placed in large tins, iced, and sold on the wholesale fresh fish market. The remains of the fish are saved and marketed as 'mink' or 'pet' food. There is no evidence in the record relating to the details of the packaging and freezing operation.
RCW 82.04.110 defines a 'manufacturer' as follows:
"Manufacturer' means every person who, either directly or by contracting with others for the necessary labor or mechanical services, manufactures for sale or for commercial or industrial use from his own materials or ingredients any articles, substances or commodities. When the owner of equipment or facilities furnishes, or sells to the customer prior to manufacture, all or a portion of the materials that become a part or whole of the manufactured article, the tax commission shall prescribe equitable rules for determining tax liability.'
And RCW 82.04.120 defines the term 'to manufacture' in the following manner:
"To manufacture' embraces all activities of a commercial or industrial nature wherein labor or skill is applied, by hand or machinery, to materials so that as a result thereof a new, different or useful substance or article of tangible personal property is produced for sale or commercial or industrial use, and shall include the production or fabrication of special made or custom made articles.'
The statutory provision levying the tax is found in RCW 82.04.220.
It is pertinent that Rule 136 of the tax commission implements the term 'to manufacture.' After a recitation of the statutory definition, Rule 136 provides:
'* * * [To manufacture] means the business of producing articles for sale, or for commercial or industrial use from raw materials or prepared materials by giving these matters new forms, qualities, properties, or combinations.
It includes such activities as making, fabricating, processing, refining, mixing, slaughtering, packing, curing, aging, canning, etc. It includes also the preparing, packaging and freezing of fresh fruits, vegetables, fish, meats and other food products, the making of custom made suits, dresses, and coats, and also awnings, blinds, boats, curtains, draperies, rugs, and tanks, and other articles constructed or made to order. * * *
At a hearing held before the tax commission, appellant contended that the previously described process amounted to nothing more than a 'mere cleaning of whole fish,' and that the activity was, therefore, excluded from taxation as 'manufacturing' by virtue of the tax commission's own definition of 'to manufacture,' reflected in Rule 136. The tax commission ruled, however, that the portion of the rule relied upon by appellant dealt with activities which are merely incidental to non-manufacturing activities. The commission held that the filleting process herein involved was incidental to a manufacturing activity because the end product is new and different. Hence, the commission found that the exclusion in Rule 136, relating to 'the mere cleaning and freezing of whole fish,' is inapplicable. Subsequently, an implementing letter was sent to the appellant (which, by its terms, was incorporated into the tax commission's prior ruling with respect to appellant's contentions), indicating a determination that those who purchase fillets in prepared form and who purchase fillets in and freeze them, absent any other form of preparing or processing, are not engaged in a manufacturing activity within the statutory definition.
The basic question presented in this appeal is whether the appellant's activities, as previously described, fall within the definition of 'to manufacture' within the context of the business and occupation tax statutes. Or, to put it another way, do the appellant's activities result in the production of new, different, or useful articles of trade or commerce?
The term 'to manufacture,' or in the broader context the activity of 'manufacturing,' usually connotes a creative type of enterprise where various elements or component parts are assembled or fabricated to make a new and different article. That was the position of this court in Crown Zellerbach v. State (1958), 53 Wash.2d 813, 328 P.2d 884, where reliance was placed on a dictionary definition of 'manufacturing' to dispose of the problem there at hand. That definition is:
The statutory definitions of 'manufacture' and 'to manufacture' reflect this commonly understood and accepted version of the term 'manufacturing.' There is, however, another facet of the statutory definition of 'manufacturing' which tends to broaden the scope of the term. We are referring to the phrase, 'so that as a result [of application of labor or skill] a new, different or useful substance or article of tangible personal property is produced. * * *' The tax commission, by virtue of Rule 136, has effectively utilized this language to include in the concept of 'manufacturing' not only activities of the type which connote creative assembling of elements in the sense of fabrication, but also activities encompassing preparation and processing in the sense of treatment or handling as 'curing, aging, canning, etc.' and 'preparing, packaging and freezing.' In short, we have come to the position now where we are classifying as 'manufacturing' activities which realistically are not manufacturing in the ordinary sense at all.
No criticism of the tax commission is intended for the definition it has promulgated and the position taken by the commission. Indeed, criticizing the action of the commission would be inconsistent with the opinion in Stokely-Van Camp, Inc. v. State (1957), 50 Wash.2d 492, 312 P.2d 816. That case not only held that the term, 'to manufacture,' included certain processes with respect to food, but it also, more or less, gave approval and sanction to the tax commission's Rule 136. The purpose of this particular discussion is to call attention to the conceptual difficulty involved when it becomes necessary to determine whether or not certain processing activities with respect to foods constitute 'manufacturing.' It may well be that the...
To continue reading
Request your trial-
Bain v. Department of Revenue, 1393
...Wash.2d 829, 384 P.2d 862 (1963); McDonnell & McDonnell v. State, 62 Wash.2d 553, 383 P.2d 905 (1963); and Bornstein Sea Foods, Inc. v. State, 60 Wash.2d 169, 373 P.2d 483 (1962), considering both statutory definition and tax rule.3 The word "manufacturing" appears in Oregon Revised Statute......
-
Group Health Co-op. of Puget Sound, Inc. v. State Through Dept. of Revenue
...et cetera, which may be indicative of the existence of a "new, different, or useful substance." See also Bornstein Sea Foods, Inc. v. State, 60 Wash.2d 169, 175, 373 P.2d 483 (1962). The carpentry and print activities of Group Health, albeit minimal, constitute manufacturing even though the......
-
Beare Co. v. Tennessee Dept. of Revenue
...50 Wash.2d 492, 312 P.2d 816 (1957) (vegetables sorted, cleaned, cut, blanched, packaged, and frozen); Bornstein Sea Foods, Inc. v. State, 60 Wash.2d 169, 373 P.2d 483 (1962) (filleting, packaging, and freezing fish); Perdue Foods, Inc. v. State Dept. of Assessments, 264 Md. 672, 288 A.2d 1......
-
Valley Fruit v. State, Dept. of Revenue, s. 16906-5-II
...Wash.2d 492, 500, 312 P.2d 816(197). The filleting, packaging, and freezing of fish is also manufacturing. Bornstein Sea Foods, Inc. v. State, 60 Wash.2d 169, 177, 373 P.2d 483 (1962). In Bornstein, the court looked at the total process used by the taxpayer to determine if the process was m......