Nelson-Ricks Creamery Co. v. US, 164-79T.
| Decision Date | 22 October 1980 |
| Docket Number | No. 164-79T.,164-79T. |
| Citation | 634 F.2d 566 |
| Parties | NELSON-RICKS CREAMERY COMPANY v. The UNITED STATES. |
| Court | U.S. Claims Court |
J. Gordon Hansen, Salt Lake City, Utah, atty. of record, for plaintiff.
Theodore D. Peyser, Washington, D. C., with whom was Asst. Atty. Gen. M. Carr Ferguson, Washington, D. C., for defendant; Donald H. Olson and Kevin B. Shea, Washington, D. C., of counsel.
Before KASHIWA, KUNZIG and BENNETT, Judges.
ON CROSS-MOTIONS FOR SUMMARY JUDGMENT
The sole issue we face here is whether a cheese manufactured by plaintiff is subject to a manufacturer's excise tax imposed by Congress on "artificial lures, baits, and flies." 26 U.S.C. § 4161(a) (1976).
Plaintiff-taxpayer is a manufacturer and distributor of dairy products in Utah and several other mountain states. In the 1950's, Nelson-Ricks introduced Gold Nugget Processed Cheese Spread into its line of dairy products. The cheese spread combined bulk cheddar cheeses and other milk products to produce a spreadable cheese. This cheese was sold along with other dairy products on the grocer's shelves.
As plaintiff states in its brief, the company soon learned that fishermen were buying "Gold Nugget" not only for their own lunch, but to feed to fish as bait. Having discovered this new market, Nelson-Ricks changed the packaging of its "Gold Nugget" cheese and relabeled the cheese "Targhee Cheese Fish Bait."
Previously, "Gold Nugget" was packaged in two pound cardboard boxes. Obviously, this bulky package did not fit easily into a tackle box or creel. Consequently, "Targhee Cheese Fish Bait" was packaged in 8 ounce containers, 3 inches round by 3 inches high, which, conveniently, fit into a standard tackle box or creel.
In terms of the cheese itself, there have been just two minor "changes." First, "Targhee" contains a different emulsifier than does "Gold Nugget." This emulsifier, or binder, is the same one used by other cheese spread manufacturers and does not change the cheese's edibility. In other words, the fishermen can still eat the cheese for lunch. Secondly, there are now three flavors and colors to choose from-yellow, red and green in regular, garlic and anise flavors. Apparently, this was a marketing technique designed to assure greater shelf space than a competitor. Otherwise, this cheese is the same as "Gold Nugget" and fit for the consumption of either humans or fish.
These labeling and packaging changes prompted Treasury to argue that "Targhee Cheese Fish Bait" is an "artificial bait" under 26 U.S.C. § 4161(a) and plaintiff owes a 10 percent manufacturer's excise tax. Plaintiff was assessed these taxes on its cheese, paid the tax and sought timely refund. Its claim was disallowed and taxpayer timely petitioned this court for refund.
The excise tax is imposed by § 4161(a) which provides:
(a) RODS, CREELS, ETC. — There is hereby imposed upon the sale of fishing rods, creels, reels, and artificial lures, baits, and flies (including parts or accessories of such articles sold on or in Connection therewith, or with the sale thereof) by the manufacturer, producer, or importer a tax equivalent to 10 percent of the price for which so sold.
26 U.S.C. § 4161(a) (1976). Reg. § 48.4161(a)-2(d).
As a perusal of this statute will show, the key word is "artificial." Defendant essentially argues that anything altered from its natural state by people is "artificial" and subject to this tax. Thus, while milk might avoid this tax, presumably, pasteurized milk would not. In this day and age, with the numerous refinings and processings that "natural products" go through, almost anything could be artificial. Actually, defendant's own regulation gives a more common-sense and appropriate definition of what is an "artificial bait, lure, or fly" within the meaning of the statute.
The Treasury's regulation reads as follows:
(d) Artificial lures, baits, and flies. The term "artificial lures, baits, and flies" includes all artifacts, whatever materials made, that simulate an article considered edible to fish, and that are designed to be attached to a line or hook to attract fish so that they may be captured. Thus, the term includes such artifacts as imitation flies, blades, spoons, spinners, etc., and edible materials that have been processed so as to resemble a different edible article considered more attractive to fish, such as bread crumbs treated so as to simulate salmon eggs, and pork rind cut and dyed to resemble frogs, eels, or tadpoles.
Defendant alleges that the cheese resembles fish eggs or fish flesh and hence falls within the regulation's requirement that an artificial bait "simulate an article considered edible to fish."
As another court reviewing this same section noted, in interpreting this statute, "The law is relatively clear that a taxing provision, as opposed to an exemptive provision, should be construed against the Government and any doubt resolved in favor of the taxpayer." Norton Manufacturing Corp. v. United States, 288 F.Supp. 829, 831 (N.D.Ill.1968), aff'd, 409 F.2d 902 (7th Cir. 1969). Moreover, the words of the statute are usually construed according to their common and ordinary meaning.
To start, the dictionary defines artificial for our purposes as a product "produced by man's skill to imitate nature," or an "imitation of a natural object." Webster's Third New International Dictionary ...
To continue reading
Request your trial