Luer Packing Co. v. State Bd. of Equalization

• Decision Date: 11 December 1950
• Citation: 101 Cal.App.2d 99,224 P.2d 744
• Court: California Court of Appeals Court of Appeals
• Parties: LUER PACKING CO. v. STATE BOARD OF EQUALIZATION. Civ. 18146.

Page 744

224 P.2d 744

101 Cal.App.2d 99

LUER PACKING CO. v. STATE BOARD OF EQUALIZATION.

Civ. 18146.

District Court of Appeal, Second District, Division 2, California.

Dec. 11, 1950.

Bernbaum & Freeman, Max Bernbaum, Los Angeles, for appellant.

Fred N. Howser, Atty. Gen., James E. Sabine and Irving H. Perluss, Deputies Atty. Gen., for respondent.

McCOMB, Justice.

From a judgment in favor of defendant after trial before the court without a jury in an action to recover a tax paid under protest, plaintiff appeals.

Stipulated facts: Plaintiff as a corporation is engaged in the operation of a meat packing business. It makes a skinless wiener or frankfurter sausage prepared in the following manner:

Previously prepared meat emulsion is stuffed into cellulose sausage casings to the full capacity thereof by the use of standard pressure stuffers. Prior to stuffing, the casings are in a substantially dry (to the touch) state. Upon stuffing of a cellulose casing the moisture in the meat emulsion wets the casing and a portion of the glycerine migrates from the casings into the meat. The stuffed tubular casings are then linked to provide frankfurters of the proper length.

The linked frankfurters are spread out on smoke sticks which in turn are racked on smokehouse cages. When the frankfurters have been subjected to the smoking operation for the desired length of time the cages are removed from the smokehouse. During the smoking the frankfurters lose a substantial amount of moisture and at the same time soluble proteins normally present in the meat emulsion migrate to the area immediately adjacent to the inner surface of the casing and a portion of the protein is coagulated, whereby the casing is firmly secured and bonded to the meat mass. At the end of the smoking operation neither the animal casing nor the cellulose casing can be peeled from the frankfurter without disrupting or carrying with it the meat mass of the frankfurter.

The loaded cages after removal from the smokehouse are introduced into a water-cooking apparatus (a Jourdan Cooker) wherein water of a temperature of about 160 to 170 degrees Fahrenheit is continually recirculated and showered on the frankfurters from approximately six to twelve minutes.

Next, the frankfurters, after removal of the cages from the Jourdan Cooker, are quickly cooled by showering with tap water. The frankfurters are then placed in a cooler for a sufficient time to thoroughly child them and dry the surfaces thereof.

Finally the cellulose casings are peeled from the frankfurter leaving a skinless frankfurter or wiener. Thereafter they are packaged and sent to the retailer for sale.

In the present case defendant levied upon plaintiff a use tax on 'cellulose sausage casings', similar to those mentioned above, in the amount of $653.20, together with interest thereon in the amount of $56.02, and penalties of $65.32, resulting in a total amount of $774.54, which plaintiff paid under protest and is now suing to recover.

Question: Is a producer of skinless wieners who purchases cellulose sausage casings primarily for use in the manufacture of skinless wieners and frankfurters as forms or molds, and who, after such use but prior to the sale of the wieners, removes and destroys the casings, subject to a use tax measured by the purchase price of the casings?

This question must be answered in the affirmative. Pertinent sections of the Revenue and Taxation Code read as follows:

Section 6201. 'An excise tax is hereby imposed on the storage, use, or other consumption in this State of tangible personal property purchased from any retailer on or after July 1, 1935, for storage, use, or other consumption in this State at the rate of 3 percent of the sales price of the property, and at the rate of 2 1/2 percent on and after July 1, 1943, and to and including June 30, 1949, and at the rate of 3 percent thereafter.'

Section 6202. 'Every person storing, using, or otherwise consuming in this State tangible personal property purchased from a retailer is liable for the tax. His liability is not extinguished until the tax has been paid to this State except that a receipt from a retailer maintaining a place of business in this State or from a retailer who is authorized by the board, under such rules and regulations as it may prescribe, to collect the tax and who is, for the purposes of this part relating to the use tax, regarded as a retailer maintaining a place of business in this State, given to the purchaser pursuant to Section 6203, is sufficient to relieve the purchaser from further liability for the tax to which the receipt refers.'

Section 6241. 'For the purpose of the proper administration of this part and to prevent evasion of the use tax and the duty to collect the use tax, it shall be presumed that tangible personal property sold by any person for delivery in this State is sold for storage, use, or other consumption in this State until the contrary is established. The burden of proving the contrary is upon the person who makes the sale unless he takes from the purchaser a certificate to the effect that the property is purchased for resale.'

Section 6008. "Storage' includes any keeping or retention in this State for any purpose except sale in the regular course of business or subsequent use solely outside this State of tangible personal property purchased from a retailer.'

Section 6009. "Use' includes the exercise of any right or power over tangible personal property incident to the ownership of that property, except that it does not include the sale of that property in the regular course of business.'

The following arguments by plaintiff are untenable for the reasons stated:

(a) The artificial casings are exempt from taxation as...