Coca-Cola Bottling Corp. v. Lindley

Decision Date22 November 1978
Docket Number78-69,Nos. 78-60,COCA-COLA,s. 78-60
Citation56 Ohio St.2d 99,382 N.E.2d 775
Parties, 10 O.O.3d 254 BOTTLING CORPORATION, Appellant and Appellee, v. LINDLEY, TAX COMMISSIONER, Appellee and Appellant.
CourtOhio Supreme Court

Coca-Cola Bottling Corporation (taxpayer) is a bottler and distributor of carbonated soft drinks under nationally franchised labels. During the personal property tax return years in question, 1971 through 1974, taxpayer operated bottling franchises principally in Cincinnati, Ohio, but also in Springfield, Hamilton and Hillsboro. The taxpayer sold its soft drink products directly to retail vendors in its franchise territory and charged them a single combined price for the product and its containers. This combined charge was listed on the taxpayer's sales invoices.

Taxpayer bottles its soft drink products in returnable and nonreturnable containers of various sizes. Each bottle has a trademark or label identifying the product. These trademarked labels are permanently affixed to the bottle. After delivery to the retail vendors, there is no way to identify a returnable bottle as one originally purchased from the taxpayer. The same situation prevails regarding the "shells" (wooden cases in which 24 bottles are placed).

Taxpayer purchased the bottles and shells which it used in its business from several sources. New bottles and shells were purchased from manufacturers of those products. Used bottles were purchased from retailers and customers with whom the taxpayer regularly did business, and from a bottle exchange, which is an independent party acting as a broker for new and used glass bottles and shells. In addition, used bottles were occasionally purchased in bulk from other bottling companies when those companies are discontinuing a certain size package or when they otherwise desire to reduce their bottle inventory.

There is a well-known practice in the soft drink bottling industry that bottles and shells may be resold to the bottling companies for an established price called the "deposit" charge. For Ohio personal property tax listing purposes, the taxpayer made a physical inventory of returnable glass bottles and shells on hand at each of its locations on the tax listing date for each year in question and valued all such bottles and shells at the repurchase deposit price.

The Tax Commissioner's personal property tax assessment of the taxpayer for the years 1971 through 1974 included the value of returnable bottles and shells estimated to be in the possession and control of retailers and consumers of taxpayer's product on tax listing day, and increased the value of the returnable bottles and shells from the deposit or repurchase price to a value equal to original acquisition cost.

The Board of Tax Appeals on December 20, 1977, determined that taxpayer's personal property tax should be assessed only upon the bottles and shells actually within the possession of the taxpayer, but upheld the Tax Commissioner's determination of the true value of the returnable bottles and shells.

On January 17, 1978, the taxpayer filed its notice of appeal from the board's decision with this court (case No. 78-60). The taxpayer contends that "(t)he decision of the Board * * * that the true value of such returnable bottles and cases is the original purchase price of such containers is unreasonable and unlawful."

On January 18, 1978, the Tax Commissioner appealed that portion of the decision of the board which was adverse to it (case No. 78-69), contending that the board " * * * unreasonably and unlawfully held that the Coca-Cola Bottling Corporation did not have ownership or control of the soft drink bottles, cases and shells in issue once they were 'in the field.' "

Additional facts are found in the body of the opinion.

Taft, Stettinius & Hollister, Stephen M. Nechemias and Donald C. Hess, Cincinnati, for appellant and appellee, Coca-Cola Bottling Corp. William J. Brown, Atty. Gen. and Charles M. Steines, Columbus, for appellee and appellant, Tax Commissioner.

I.

PER CURIAM.

The taxpayer contends in its appeal that the true value of returnable bottles and shells is their deposit or repurchase price, which was 2 cents, later raised to 5 cents, for bottles (10 cents for 32 oz. bottles) and 12 cents, later raised to 30 cents, for shells, during the years in question. Taxpayer argues further that the repurchase or deposit price represents the true value for these returnable goods because (1) it is a price determined in the market place which is necessary to induce the return of the bottles and cases, and (2) a returnable bottle, once filled with beverage, immediately depreciates in value.

The Tax Commissioner contends that the true value of returned bottles and shells is the original purchase price of the containers as determined from the arms-length transaction between the taxpayer-bottler and the manufacturers or suppliers of the containers not the lower deposit price actually paid by the taxpayer.

The Board of Tax Appeals in its decision emphasizes the fact that the price paid by the taxpayer to repurchase the bottles and shells from customers constitutes a return of the price or deposit paid by the consumer and that the taxpayer sets that price unilaterally and, consequently, that it was not an arms-length transaction. The evidence presented at the hearing before the board, however, demonstrates that market factors play a significant role in the determination of the price which taxpayer must pay to repurchase used bottles and shells and of the quantity which it is able to purchase. For 1972, for example, taxpayer raised its price (for return of bottles) from 2 cents to 5 cents in order to be able to repurchase more of those bottles including those bottles in which, from an accounting standpoint, 2 cents had been included in the sale price to the retailer. The evidence shows that there is no direct correlation between the number of bottles the taxpayer sells and the number it repurchases. Bottles frequently cross franchise boundaries, and, as a result, taxpayer sells bottles that it will never repurchase, and it repurchases bottles which it did not sell. In addition, some bottles are discarded, others are broken and are used for a variety of purposes; never being offered for resale to the taxpayer.

The taxpayer further presented evidence demonstrating that a new bottle depreciates substantially once it is filled with beverage and that the value of a used bottle is less than the value of a new bottle. Used bottles returning from the trade must be sorted, culled and sanitized before they may be reused, resulting in increased costs to the bottler. In addition, there is significantly increased risk of breakage on the bottling line when used bottles are filled.

In addition, this court held, Inter alia, in Red Top Brewing Co. v. Bowers (1955), 163 Ohio St. 18, 125 N.E.2d 188, that the deposit price paid by a taxpayer for return of bottles is a proper figure for listing such personal property, and a determination by the commissioner or board that such property should be listed at a higher figure is unreasonable. Therefore, the decision of the board with respect to the true value of taxpayer's returnable bottles and shells for personal property tax purposes is unreasonable and unlawful and it is reversed.

II.

The Tax Commissioner maintains in his appeal that the taxpayer has retained such control over the returnable bottles and cases sold to retail customers so as to be obligated to list them for personal property tax purposes.

The board made a factual determination that the taxpayer did not have " 'ownership or control' " of the bottles and shells "in the field."

As found by the board, "(f)rom the testimony presented at the hearing, the customers are under no duty to return the bottles to the appellant, nor can the appellant compel them to do so. The sale of the beverage in bottles and cases to the appellant's customers is considered a sale of the container as well. The taxpayer sells the beverage to its customer and at that time also relinquishes all possession and any possibility of control over the containers to the customer who purchases the beverage and the containers. That ownership of the containers is with the customer is manifested by the fact that the taxpayer cannot compel the return of the bottles and shells, and that the customer may dispose of these containers as he wishes. The deposit paid by the beverage customer to the taxpayer and later given back to the customer if the bottle is returned does not create a legal obligation on the customer to return...

To continue reading

Request your trial
2 cases
  • Coca Cola Bottling Co. of Northampton v. Commissioner of Revenue
    • United States
    • United States State Supreme Judicial Court of Massachusetts Supreme Court
    • January 22, 1985
    ...333 N.Y.S.2d 824 (N.Y.App.Div.1972), aff'd, 34 N.Y.2d 808, 359 N.Y.S.2d 44, 316 N.E.2d 331 (1974). Cf. Coca-Cola Bottling Corp. v. Lindley, 56 Ohio St.2d 99, 382 N.E.2d 775 (1978) (property tax question); Canada Dry Bottling Co. of Fla. v. Fahs, 109 F.Supp. 187 (S.D.Fla.1952) (income tax Th......
  • Copperweld Steel Co. v. Edgar L. Lindley, Tax Commissioner of Ohio
    • United States
    • Ohio Court of Appeals
    • June 30, 1986
    ... ... materials in the furnaces. Ohio Ferro-Alloys Corp. v ... Kosydar (1973), 34 Ohio St.2d 113 ... Appellant, as to ... of the court in Coca-Cola Bottling v. Lindley ... (1978), 56 Ohio St.2d 99, is pertinent in the instant case ... ...

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT