Buffelen Lumber & Mfg. Co. v. State

Decision Date07 December 1948
Docket Number30632.
CourtWashington Supreme Court
PartiesBUFFELEN LUMBER & MFG. CO. v. STATE.

Department 2

Action by the Buffelen Lumber & Manufacturing Company against the State of Washington to recover back the amount of manufacturer's and occupation taxes collected by the defendant. Judgment for plaintiff, and defendant appeals.

Affirmed.

Appeal from Superior Court, Thurston County; D. F Wright, Judge.

Smith Troy, Max Kaminoff and William C. Klein, all of Olympia, for appellant.

McMicken Rupp & Schweppe and A. Vernon Stoneman, all of Seattle, for respondent.

W. E Heidinger and Oliver Malm, both of Tacoma, amici curiae.

SIMPSON Justice.

The state of Washington appeals from a judgment of the superior court of Thurston county rendered in favor of the plaintiff.

For cause of action plaintiff alleged in its complaint that a substance known as 'hog fuel' is a waste product resulting from plaintiff's operations in producing plywood, doors, and other lumber products, and that plaintiff is not a manufacturer of 'hog fuel'; that the state tax commission has claimed that plaintiff has consumed this fuel to the value of $37,500, and has collected a tax known as a manufacturer's or business and occupation tax of one-quarter of one per cent, and a compensating tax of three per cent; further, that the collection of these taxes is without warrant in law.

The answer of the state denies that 'hog fuel' produced by plaintiff is a waste product, but asserts that plaintiff is a manufacturer thereof.

The appellant's assignments of error challenge the findings of fact that, respondent was not a manufacturer of hog fuel, and that as to the hog fuel respondent was not using an article produced for commercial use.

The respondent is primarily engaged in the business of manufacturing plywood and doors. As a natural result of processing at each stage from the log to finished product, various scraps are produced. These scraps are removed from the production line by means of conveyor belts and are then ground into small fragments in machines known as 'hogs.' There are several of these machines at various places in the plant. As the result of the grinding operations, the scraps are more easily handled, particularly at points where the conveyor system makes right angle turns. The belts lead to a collection point outside the main buildings where the various fragments are deposited. A portion of this material known as 'hog fuel' or 'hogged fuel,' is burned under the plant boilers, and the remainder is piled up outside where it is sold or hauled away by truck to a disposal area and never used. Only that part of the fuel that is consumed by respondent under its boilers is in issue here. There is no dispute between the parties as to the facts or the amount involved.

As indicated in the pleadings, there are two taxes in issue here--a manufacturer's tax and a compensating tax. In this case we are called upon to interpret the two taxing statutes. In interpreting those statutes, we are confronted at once by the general canon of construing legislative acts, which requires an ascertainment of the legislative intent.

Judicial power is never exercised for the purpose of giving effect to the will of the courts, but always for the purpose of giving effect to the will and intent of the legislature; or, in other words, to the will of the law. The intent of the legislature in enacting a law must be gleaned from the wording of the statute itself. State ex rel. Port of Seattle v. Department of Public Service, 1 Wash.2d 102, 95 P.2d 1007.

It must be borne in mind that if there is any doubt as to the meaning of a taxing statute, it must be construed most strongly against the taxing power in favor of the citizen. Weyerhaeuser Co. v. Henneford, 185 Wash. 46, 53 P.2d 308.

Of course, if the statute is plain and unambiguous, then there is no room for construction, and the rule will not apply. Ernst v. Kootros, 196 Wash. 138, 82 P.2d 126.

The pertinent portions of the law imposing a tax on manufacturers are:

'* * * there is hereby levied and there shall be collected from every person a tax for the act or privilege of engaging in business activities. * * *
'(b) Upon every person engaging within this state in business as a manufacturer; as to such persons the amount of the tax with respect to such business shall be equal to the value of the products manufactured, multiplied by the rate of one-quarter of one per cent;
'The measure of the tax is the value of the products so manufactured regardless of the place of sale or the fact that deliveries may be made to points outside the state'. Rem.Supp.1943, § 8370-4.
'(j) The word 'manufacturer' means every person who, either directly or by contracting with others for the necessary labor or mechanical services, manufactures for sale or commercial 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;
'(k) The term 'to manufacture' embraces all activities of a commercial nature wherein labor or skill is applied, by hand or machinery, to materials so that as a result thereof a new, different or useful article of tangible personal property or substance of trade or commerce is produced and shall include the production or fabrication of special made or custom made articles;

'( l) The term 'commercial use' means the following uses of products by the extractor or manufacturer thereof:

'(1) Manufacturing of articles, substances or commodities from extracted products;

'(2) Leasing or renting of extracted or manufactured products;

'(3) Consigning, shipping or transferring extracted or manufactured products to another either without consideration or in the performance of contracts;

'(4) Any other use of products extracted or manufactured on a commercial scale under such rules and regulations as the Tax Commission shall prescribe'. Rem.Supp.1945, § 8370-5.

Before respondent may be taxed as here attempted, it must appear that it was engaged in the manufacture of hog fuel.

Seeberger v. Castro, 153 U.S. 32, 14 S.Ct. 766, 38 L.Ed. 624, indicates the path to be followed in this case. That case is so much in point that we deem it necessary to state the facts upon which it was based, and set out a liberal quotation from the opinion. The facts were:

'The Rayner & Baxter Cigar Company imported the tobacco in question, which consisted of 'clippings from the ends of cigars, and pieces broken from the tobacco of which cigars are manufactured, in the process of such manufacture, the said clippings and pieces not being fit for any use in the condition in which the same are imported, and their only use being to be manufactured into cigarettes and smoking tobacco.' The collector assessed upon the tobacco a duty of 40 cents per pound, under [Rev.Stat.] § 2502 [as amended by the act of March 3, 1883, c. 121, 22 Stat. 488, 491, 503], which took effect on March 3, 1883, including it within the terms of the fifth paragraph of Schedule F of that act, which reads as follows: 'Tobacco, manufactured, of all descriptions, and stem tobacco, not specially enumerated or provided for in this act, forty cents per pound.''

After calling attention to an opinion of the attorney general and two Federal court cases, the supreme court stated:

'It seems to us, however, that both the meaning of the word 'manufactured' and the analogy of the internal revenue provisions require us to hold that these scraps are not manufactured tobacco. The court below found in this case that the scraps were 'clippings from the ends of cigars, and pieces broken from the tobacco of which cigars are manufactured, in the process of such manufacture that said clippings and pieces are not fit for any use in the condition in which the same are imported; and that their only use is to be manufactured into cigarettes and smoking tobacco.' It is thus evident that the clippings are the mere waste resulting from a process of manufacture, and not in themselves manufactured articles. In Lawrence v. Allen, 7 How. 785, 794, 795 [48 U.S. 785, 12 L.Ed. 914], the process of manufacturing was defined to be 'making an article entirely by hand or machinery into a new form, capable of being used and designed to be used, in ordinary life.' A like view of what constitutes an article of manufacture had been previously announced by the court of king's bench: 'The word 'manufacture' has been generally understood to denote either a thing made, which is useful for its own sake, and vendable as such,' etc. Rex v. Wheeler, 2 Barn. & Ald. 349. In Holden v. Clancy, 58 Barb. [N.Y.], 590, the test of whether an article was manufactured is thus defined: 'A manufacture is defined as the process of making anything by art, or of reducing materials into a form fit for use by the hand or by machinery; and it seems to imply a proceeding wherein the object or intention of the process is to produce the article in question. The residuum or refuse of various kinds of manufactories is more or less valuable for certain...

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11 cases
  • Dravo Corp. v. City of Tacoma
    • United States
    • Washington Supreme Court
    • May 4, 1972
    ...favor of the citizen. Foremost Dairies, Inc. v. State Tax Comm., 75 Wash.2d 758, 763, 453 P.2d 870 (1969); Buffelen Lbr. & Mfg. Co. v. State, 32 Wash.2d 40, 43, 200 P.2d 509 (1948). However, there is a corollary which provides that the foregoing rule is inapplicable unless it can be automat......
  • MAC Amusement Co. v. State Dept. of Revenue
    • United States
    • Washington Supreme Court
    • August 27, 1981
    ...against the taxing power. Foremost Dairies, Inc. v. State Tax Comm'n, 75 Wash.2d 758, 453 P.2d 870 (1969); Buffelen Lumber & Mfg. Co. v. State, 32 Wash.2d 40, 43, 200 P.2d 509 (1948). The other is that tax exemptions are to be strictly construed in favor of the tax and, as a corollary, they......
  • St. Regis Paper Co. v. State, 36466
    • United States
    • Washington Supreme Court
    • January 16, 1964
    ...of a taxing statute, it must be construed most strongly against the taxing power in favor of the taxpayer. Buffelen Lbr. & Mfg. Co. v. State (1948), 32 Wash.2d 40, 43, 200 P.2d 509; Weyerhaeuser Timber Co. v. Henneford (1936), 185 Wash. 46, 51, 53 P.2d 308. I dissent. OTT, C. J., and WEAVER......
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    ...goes far beyond, statutory definitions of the words 'manufacturer' and 'to manufacture.' Respondent cites Buffelen Lumber & Manufacturing Co. v. State, 32 Wash.2d 40, 200 P.2d 509, in support of these contentions. In that case the taxpayer was taxed as a manufacturer of hogged fuel which wa......
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