Institutional Food House, Inc. v. Coble

• Decision Date: 29 January 1976
• Docket Number: No. 71,71
• Citation: 289 N.C. 123,221 S.E.2d 297
• Court: North Carolina Supreme Court
• Parties: INSTITUTIONAL FOOD HOUSE, INC. v. J. Howard COBLE, Secretary of Revenue of the State of North Carolina.

Page 297

221 S.E.2d 297

289 N.C. 123

INSTITUTIONAL FOOD HOUSE, INC. v. J. Howard COBLE, Secretary of Revenue of the State of North Carolina.

No. 71.

Supreme Court of North Carolina.

Jan. 29, 1976.

Smith, Anderson, Blount & Mitchell by John H. Anderson and Michael E. Weddington, Raleigh, for plaintiff-appellant.

Rufus L. Edmisten, Atty. Gen., and Myron C. Banks, Sp. Deputy Atty. Gen., Raleigh, for defendant-appellee.

HUSKINS, Justice:

This action presents two questions for decision. The first question is whether the sales of frozen concentrated orange juice herein involved are properly taxable under the provisions of the North Carolina Soft Drink Tax Act, G.S. 105--113.41 et seq. (1969). If this be so, the second question is whether said Act, on its face, or as interpreted and applied by the Secretary of Revenue to these sales, violates the equal protection of the laws guaranteed by Article I, Section 19 of the North Carolina Constitution and the Fourteenth Amendment to the United States Constitution.

The North Carolina Soft Drink Tax Act provides, in pertinent part, as follows:

' § 105--113.41. Short title.--This Article shall be known and cited as the 'Soft Drink Tax Act.'

§ 105--113.42. Purpose of Article.--It is the purpose of this Article to provide a source of additional revenue which shall be applied to the general fund of the State.

§ 105--113.43. Liability for tax.--Every person doing domestic or intrastate business within this State and engaging in the business of selling, manufacturing, purchasing, consigning, using, shipping or distributing, for the purpose of sale within this State, soft drinks of every kind whatsoever, including but not limited to the following articles or things, viz: soda water, ginger ale, Coca-Cola, lime-cola, Pepsi-Cola, near beer, fruit juices, vegetable juices, and all fountain drinks and other beverages and things commonly designated as 'soft drinks' shall, for the privilege of carrying on such business, be subject to the payment of a license tax which shall be measured by and graduated in accordance with the sales of such person within the State, except as may be otherwise provided in this Article.

Every person within the State of North Carolina, importing, receiving or acquiring from without the State, or from any other source, beverages commonly designated as soft drinks as contemplated by this Article, for use or consumption within North Carolina, shall be subject to payment of the soft drink tax at the rates provided for the sale, offer for sale, or distribution of such soft drinks.

§ 105--113.44. Definitions.--As used in this Article, unless the context otherwise requires:

(1) 'Base products' means hot chocolate flavored drink mix, flavored milk shake bases, concentrate products to which milk or other liquid is added to complete a soft drink, and all like items or products as herein defined which will be taxed as syrups.

(2) 'Bottled' means enclosed in any closed or sealed glass, metal, paper or other type of bottle, can, carton or container, regardless of the size of such container.

(3) 'Bottled soft drink' means any complete, finished, ready-to-use, nonalcoholic drink, whether carbonated or not, such as soda water, ginger ale, Nu-Grape, Coca-Cola, lime-cola, Pepsi-Cola, bud-wine, near beer, fruit juice, vegetable juice, milk drinks when any flavoring or syrup is added, cider, bottled carbonated water and all bottled preparations commonly referred to as soft drinks of whatever kind or description.

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(9) 'Natural fruit juice' means the natural liquid which results from the pressing of sound ripe fruit, and the liquid which results from the reconstitution of natural fruit juice concentrate by the restoration of water to dehydrated natural fruit juice.

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(18) 'Soft drink syrups and powders' includes the compound mixture or the basic ingredients, whether dry or liquid, practically and commercially usable in making, mixing or compounding soft drinks by the mixing thereof with carbonated or plain water, ice, fruit juice, milk or any other product suitable to make soft drinks, among such syrups being such products as Coca-Cola syrup, Chero-Cola syrup, Pepsi-Cola syrup, Dr. Pepper syrup, root beer syrup, Nu-Grape syrup, lemon syrup, vanilla syrup, chocolate syrup, cherry smash syrup, rock candy syrup, simple syrup, chocolate drink powder, malt drink powder, or any other prepared syrups or powders sold or used for the purpose of mixing soft drinks commercially at soda fountains, restaurants or similar places as well as those powder bases prepared for the purpose of domestically mixing soft drinks such as kool-aid, oh boy drink, tip-top, miracle aid and all other similar products. Concentrated natural frozen or unfrozen fruit juices or vegetable juices when used domestically are specifically excluded from this definition.

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§ 105--113.45. Taxation rate.--(a) A soft drink excise tax is hereby levied and imposed on and after midnight, September 30, 1969, upon the sale, use, handling and distribution of all soft drinks, soft drink syrups and powders, base products and other items referred to in this section.

(b) The rate of tax on each bottled soft drink shall be one cent (1cents).

(c) The rate of tax on each gallon of soft drink syrup or simple syrup shall be one dollar ($1.00), and on a fraction of a gallon the rate shall be an amount which represents one dollar ($1.00) multiplied by the same fraction of a gallon. The rate of tax on each ounce or fraction of an ounce of soft drink syrup or simple syrup shall be four fifths of a cent (4/5cents), and no exemption or refund shall be allowed on such syrup even though it may subsequently be diverted to some purpose other than the making of soft drinks.

(d) The rate of tax on dry soft drink powders and base products which are used to make soft drinks without being converted into syrup shall be one cent (1cents) per ounce or fraction thereof of the dry powder or base product weight. However, the tax on dry soft drink powder or base product which is to be converted into syrup shall be the same as that which would be due upon the syrup produced, if the syrup were being taxed according to the rates set out in subsection (c) above.

(e) The excise tax herein levied on syrups, powders and base products shall not apply to syrups, powders and base products used by persons in the manufacture of bottled soft drinks which are otherwise subject to tax under this Article. The Commissioner (now Secretary) may by administrative rules or regulation, provide for the storage of such syrups, powders and base products when they are not for use in the manufacture of bottled soft drinks.

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§ 105--113.47. Natural fruit or vegetable juice or natural liquid milk drinks exempted from tax.--(a) All bottled soft drinks containing thirty-five percent (35%) or more of natural fruit or vegetable juice and all bottled natural liquid milk drinks containing thirty-five percent (35%) or more of natural liquid milk, are exempt from the excise tax imposed by this Article, except that this exemption shall not apply to any fruit or vegetable juice drink to which has been added any coloring, artificial flavoring or preservative. Sugar, salt or vitamins shall not be construed to be an artificial flavor or preservative.'

The threshold question is whether the sales of frozen concentrated orange juice involved in this case are taxable events within the meaning of the Soft Drink Tax Act. The parties have stipulated, and the court has found, that the concentrate involved in these sales is taxable only if it is either a 'base product' as that term is defined in G.S. 105--113.44(1), or a 'soft drink syrup' as that term is defined in G.S. 105--113.44(18). The trial court heard the case upon stipulations, including the stipulated testimony of plaintiff's witness W. W. Brown, made findings of fact, and concluded as a matter of law that canned frozen concentrated orange juice is a soft drink 'base product' as defined in G.S. 105--113.44(1) and therefore taxable. Plaintiff contests the propriety of this conclusion, and we turn to the rules of statutory construction for enlightenment on the question involved.

In construing and interpreting the language of a statute we are guided by the primary rule of construction that the intent of the Legislature controls. Watson Industries, Inc. v. Shaw, Comr. of Revenue, 235 N.C. 203, 69 S.E.2d 505 (1952). If the language of a statute is clear and unambiguous, judicial construction is unnecessary and its plain and definite meaning controls. Davis v. North Carolina Granite Corp., 259 N.C. 672, 131 S.E.2d 335 (1963). But if the language is ambiguous and the meaning in doubt, judicial construction is required to ascertain the legislative intent. Underwood v. Howland, Comr. of Motor Vehicles, 274 N.C. 473, 164 S.E.2d 2 (1968); Young v. Whitehall Co., Inc., 229 N.C. 360, 49 S.E.2d 797 (1948); State v. Humphries, 210 N.C. 406, 186 S.E. 473 (1936).

Where the meaning of a tax statute is doubtful, it is construed against the State and in favor of the taxpayer unless a contrary legislative intent appears. Colonial Pipeline Co. v. Clayton, Comr. of Revenue, 275 N.C. 215, 166 S.E.2d 671 (1969); Sabine v. Gill, Comr. of Revenue, 229 N.C. 599, 51 S.E.2d 1 (1948); Henderson v. Gill, Comr. of Revenue, 229 N.C. 313, 49 S.E.2d 754 (1948); State v. Campbell, 223 N.C. 828, 28 S.E.2d 499 (1944). 'In the interpretation of statutes levying taxes it is the established rule not to extend their provisions, by implication, beyond the clear import of the language used, or to enlarge their operations so as to embrace matters not specifically pointed out. In case of doubt they are construed must strongly against the government, and in favor of the citizen.' Gould v. Gould, 245 U.S. 151, 38 S.Ct. 53, 62 L.Ed. 211 (1917). Conversely, a provision in a tax statute providing an exemption from the tax,...