Burke, Tax Com'R, v. Stizel-Weller Distillery

• Decision Date: 06 December 1940
• Citation: 284 Ky. 676
• Parties: Burke, Tax Com'r, et al. v. Stitzel-Weller Distillery.
• Court: United States State Supreme Court — District of Kentucky

284 Ky. 676

Burke, Tax Com'r, et al. v. Stitzel-Weller Distillery.

Court of Appeals of Kentucky. Chancery Branch, First Division.

December 6, 1940.

1. Taxation. — Under statute exempting machinery of corporations engaged in manufacturing from local taxation, meaning of the word "manufacture" varies according to the circumstances and it is not susceptible of a definition that is all-embracing or all-exclusive, but the word has been defined as to work, as raw or partly wrought materials, into suitable forms for use, and as a general rule no article is manufactured until it has been put in condition for sale on the open market for the purpose for which it was intended to be used (Ky. Stats., sec. 4019a-10(3)).

2. Taxation. — Under liberal construction of statute exempting machinery of corporations engaged in manufacturing from local taxation, machinery used in bottling whisky after it was distilled

constituted a part of the "manufacturing" machinery necessary to make ready the whisky for final use for which it was intended and was exempt from local taxation, since whisky cannot be put on the market for use for which it was intended until it is bottled, notwithstanding that in a restricted sense of the word "manufacture," whisky is completely manufactured before it is bottled (Ky. Stats., sec. 4019a-10(3)).

Appeal from Jefferson Circuit Court

Lawrence S. Grauman and Robert L. Sloss for appellants.

Carroll, McElwain & Ballantine for appellee.

Before Churchill Humphrey, Judge.

OPINION OF THE COURT BY CHIEF JUSTICE RATLIFF.

Affirming.

The sole question presented by this appeal is whether machinery used by distilleries in bottling whisky is exempt from local taxation pursuant to Section 4019a-10, Subsection (3), Kentucky Statutes, which reads in part:

"Machinery and products in course of manufacture, of persons, firms, or corporations, actually engaged in manufacturing, and their raw material actually on hand at their plants for the purpose of manufacture and unmanufactured agricultural products in the hands of the producer or in the hands of any agent or agency of the producer to which said products have been conveyed or assigned for the purpose of sale by the producer. * * *"

Appellee is a Kentucky corporation and engaged in distilling and bottling whisky in Jefferson County, Ky. Its bottling machinery was assessed by the local taxing authorities at a valuation of $3,000 and appellee brought this action against Thomas F. Burke, Tax Commissioner of Jefferson County, and J. Hunter Matthews, Sheriff of Jefferson County, under the Declaratory Judgment Act, Civil Code of Practice, Section 639a — 1 et seq., seeking a declaration of rights of the parties and insisting that its bottling machinery is used in the course of manufacturing whisky in contemplation of the Statutes, supra, and therefore exempt from local taxation.

The petition set out certain facts relating to the process of manufacturing and bottling whisky. We here set out a part of the pertinent agreed facts:

Under Kentucky Statutes, Section 2554b-119, distillers can sell distilled spirits in barrels to licensed rectifiers or other distillers and can sell to wholesalers distilled spirits in bottles containing not less than one-half pint nor more than one quart. The distillers may purchase distilled whisky in barrels from other licensed distillers in Kentucky or any other state and rectifiers may purchase distilled spirits in barrels from licensed distillers or from nonresidents authorized by law of the state of their residence. Under Section 2554b-120, wholesalers may purchase from distillers distilled spirits in bottles containing not less than one-half pint nor more than one quart, and under Section 2554b-121, wholesalers may sell distilled spirits in bottles containing not less than one-half pint nor more than one quart to other licensed wholesalers, to licensed retailers, or for export out of the state. Under Section 2554b-172, no wholesaler shall purchase, import or keep upon his premises or sell any distilled spirits in any cask, barrel, keg, hogshead or other container except in original sealed packages containing quantities of not less than 8 oz. each and not to exceed one quart of distilled spirits. And under Section 2554b-184 no holder of a license to sell distilled spirits for consumption off the premises shall purchase, keep upon the premises or sell any such beverage in any cask, barrel, keg, hogshead or other container except in the original sealed package containing quantities of not less than 8 oz. nor more than one quart of distilled spirits. Under Section 2554b-187, no holder of a license for the sale of distilled spirits at retail for consumption on the premises shall keep upon the premises any beverage in any cask, barrel, keg, hogshead or other container, except in the original package containing quantities not to exceed one quart of distilled spirits. Also, Section 73 of Regulation No. 5 promulgated by the Federal Alcohol Administrator under authority of Section 6(a) of the Federal Alcoholic Administration Act, 27 U.S.C.A., Section 206(a), prohibits the sale of whisky for consumption in any state of the United States until it has been placed in bottles containing not less than one-tenth of a pint nor more than one gallon.

The case was submitted to the court and upon consideration the court held and adjudged that the machinery used in the bottling of whisky comes within the exemption of Section 4019a-10, Subsection (3), of the Statutes, and is, therefore, exempt from the local taxation. The Tax Commissioner and Sheriff have appealed.

Appellants contend that the whisky which is...