Northwestern Ohio Poultry Ass'n, v. Schneider

• Decision Date: 31 March 1965
• Docket Number: No. 38715,38715
• Citation: 205 N.E.2d 905,2 Ohio St.2d 34
• Parties: , 31 O.O.2d 18 NORTHWESTERN OHIO POULTRY ASSN., Inc., Appellee, v. SCHNEIDER, Tax Commr., Appellant.
• Court: Ohio Supreme Court

Page 34

2 Ohio St.2d 34

205 N.E.2d 905, 31 O.O.2d 18

NORTHWESTERN OHIO POULTRY ASSN., Inc., Appellee, v. SCHNEIDER, Tax Commr., Appellant.

No. 38715.

Supreme Court of Ohio.

March 31, 1965.

The Northwestern Ohio Poultry Association, Inc., appellee herein, organized as a co-operative association, is engaged in the business of obtaining, from poultry-farmer members, eggs which it prepares for sale and sells to distributors.

The farmer gathers the eggs, places them on cardboard trays called filler-flats, sprays and cools them and packs them in egg cases containing 30 dozen eggs each, and then delivers them to the appellee, or the appellee picks them up in its trucks. The farmer is paid for his eggs after they have been graded and classified and the price determined.

After being received in appellee's plant, the cases are removed, and the eggs remain on the filler-flats and are started through an assembly line. The eggs are washed and cleaned by water containing a certain formula of cleaning fluid and are then dried by blown hot air. The eggs are then 'candled' by passing them over a portion of the assembly line under which are bright lights enabling a trained employee to inspect them for blood spots and irregularities. Eggs not passing this test are removed and placed in other categories or rejected as not fit for market. The eggs are then mechanically placed on a conveyor which takes them over a series of scales which weigh and separate them as to size. They then pass a final visual inspection as to irregularities and color, are oiled with mineral oil to close the pores of the shell, thus preventing the escape of carbon dioxide and halting the process of deterioration, and are then crated and placed in coolers until they are shipped to distributors.

The egg cases, cardboard trays or fillerflats, pads and gummed tape used to seal egg cases are purchased in large quantities by the appellee and furnished to the poultry farmers free of charge. They are purchased without the payment of sales or use tax on the theory that the items are going to be used directly in the production of tangible personal property for sale by processing, and that, therefore, the purchases and use are excepted from the sales and use taxes under the provisions of Sections 5739.01 and 5741.01, Revised Code.

The Board of Tax Appeals held that the appellee was not engaged in the production of personal property by processing or farming and did not use the items in question...