Richmond v. Dairy Co.

• Court: Virginia Supreme Court
• Writing for the Court: Prentis
• Citation: Richmond v. Dairy Co., 156 Va. 63, 157 S.E. 728 (1931)
• Decision Date: 19 March 1931
• Parties: CITY OF RICHMOND v. RICHMOND DAIRY COMPANY.

Page 63

156 Va. 63

CITY OF RICHMOND v. RICHMOND DAIRY COMPANY.

Supreme Court of Virginia, Richmond.

March 19, 1931.

Present, Prentis, C.J., and Campbell, Holt, Hudgins and Browning, JJ.

1. TAXATION — Manufacturer — Dairy Company. — A dairy company engaged in the purchase, pasteurization and sale of milk and cream and the production and sale of buttermilk is not a manufacturer as that term is used in section 73 of the Tax Code.

2. WORDS AND PHRASES — "Manufacture" — Pasteurizing Milk. — Manufacture implies a change, but every change is not a manufacture, and yet every change in an article is the result of treatment, labor and manipulation. There must be transformation; a new and different article must emerge, having a distinctive name, character or use. After the pasteurization process, there is no difference in the characteristic form, appearance, taste and use of milk and cream. It remains milk and cream, and the pasteurizing of milk has been more than once adjudged not to be a manufacturing process.

3. TAXATION — Merchant — Dairy Company — Case at Bar. — In the instant case the question at issue was whether a dairy company engaged in the business of the purchase, pasteurization and sale of milk and cream and the production and sale of buttermilk was taxable as a merchant under section 188 of the Tax Code, or under section 73 of the Tax Code upon its capital, it was insisted by the company that it was not taxable as a merchant, and emphasis was placed upon the fact that a merchant generally has a fixed place of business at which he usually sells his merchandise. While this is true, the Tax Code itself, section 192, recognizes that there is a class of merchants who have no fixed place of business. Moreover, for many years dairy companies and city authorities have classified dairy companies as merchants. The purpose of the Tax Code was to reach all similar classes of business by the imposition of license taxes, and it cannot be assumed that the dairy business would be intentionally exempted from local taxation.

4. TAXATION — Merchant — Dairy Company. — While the business of a dairy company engaged in the purchase, pasteurization and sale of milk and cream and the production and sale of buttermilk differs from that of a merchant who never peddles his goods but has a fixed place of business and is somewhat like that of a merchant who is a mere peddler of his goods from house to house, the company is nevertheless engaged in the business of a merchant; that is, in the buying and selling of food. By the express provision of the statute (section 192 of the Tax Code) the company is not taxable as a peddler on this business, and so, being a merchant, it has been and can be fairly so classified, and should be subjected to a license tax similar to that imposed upon other merchants who are not taxed as peddlers.

5. TAXATION — Licenses — Whether Dairy Company Taxable as Merchant or Upon Its Capital — Case at Bar. — The instant case was an application by a dairy company for relief from an assessment of an additional city license tax as a merchant. The sole question at issue was whether the dairy company should be taxed as a merchant under section 188 of the Tax Code and sections 106 and 107 of chapter 10 of the Code of the city of Richmond, or under section 73 of the Tax Code upon its capital, as to that part of its business which consisted of the purchase, pasteurization and sale of milk and cream and the production and sale of buttermilk. The relief prayed for was granted.

Held: Error, as the company was taxable as a merchant under section 188 of the Tax Code and sections 106 and 107 of chapter 10 of the Code of the city of Richmond, and not under section 73 of the Tax Code as a manufacturer or as upon capital in business not otherwise taxed.

Error to a judgment of the Law and Equity Court of the city of Richmond, on an application for relief from an erroneous assessment of a city license tax. Judgment for the applicant. The city of Richmond assigns error.

The opinion states the case.

James E. Cannon, for the plaintiff in error.

Shewmake & Gary, for the defendant in error.

PRENTIS, C.J., delivered the opinion of the court.

This is an application by the Richmond Dairy Company, hereafter called the company, filed under section 414 of the Tax Code of Virginia (see Code 1930, p. 2131 et seq.), for relief from an assessment of an additional city license tax as a merchant. The relief prayed for was granted and the applicant exonerated from paying an additional merchant's city license tax of $2,042.50.

It is said in the brief for the company: "The sole question involved in the case is whether the applicant should be taxed as a merchant under section 188 of the Tax Code of Virginia and sections 106 and 107 of chapter 10 of the Code of the city of Richmond, or under section 73 of the Tax Code of Virginia upon its capital, as to that part of its business which consists of the purchase, pasteurization and sale of milk and cream, and the production and sale of buttermilk."

In the original application it was claimed that the company should be taxed under section 73, as a manufacturer, but it now seems to be claimed that it should be taxed under the same section of the Tax Code as upon capital in business not otherwise taxed.

The facts of the case are thus stipulated: "Richmond Dairy Company, hereinafter called the applicant, a corporation organized and existing under the laws of the State of Virginia, with its principal office in the city of Richmond, Virginia, is and has for a number of years been engaged in the dairy business in the said city of Richmond. This business consists, and has for the past several years consisted, of the pasteurization and sale of milk and cream; the production and sale of buttermilk, cheese, condensed milk and milk powder and the purchase and sale of butter and other dairy products. In addition, the said company is now, and has been since the 25th day of March, 1930, engaged in the production and sale of ice cream.

"There has been a lack of uniformity in the State of Virginia with respect to the classification of dairies for purposes of taxation. In some of the localities, persons, firms and corporations engaged in the dairy business were taxed on the capital used and employed in business in accordance with the provisions of section 73 of the Tax Code of Virginia. In the city of Richmond, Virginia, persons, firms and corporations engaged in the dairy business were classified and taxed as merchants in accordance with the provisions of section 188 of the Tax Code. Whereupon, during the month of January, 1930, the question as to the proper method of taxing persons, firms and corporations engaged in the dairy business was submitted to the Hon. C. H. Morrissett, State Tax Commissioner, for a ruling. This ruling is fully set forth in the following communication:

"COMMONWEALTH OF VIRGINIA,

"DEPARTMENT OF TAXATION.

"RICHMOND, April 26, 1930. "Hon. J. Vaughan Gary, "Attorney at Law, "State Planters Bank Building, "Richmond, Virginia. "My dear Mr. Gary:

"The Department of Taxation on several occasions has considered the proper method of taxing dairies. It was ascertained that the problem was not so simple as it appears on its face. It was ascertained also that there was no uniformity in the taxation of dairies in Virginia, but that the several commissioners of the revenue were following their own ideas on the subject.

"The dairy business involves numerous items. Raw milk, pasteurized milk, butter, cheese, cream, buttermilk, condensed milk, evaporated milk, chocolate milk, milk powder, ice cream, ice cream mixtures and skimmed milk are involved.

"Prior to this year the large dairies in the city of Richmond, which buy their milk from the producers, were taxed by the State as merchants. In some of the cities, however, dairies doing the same kind of business were taxed on capital and not as merchants.

"When the question of changing the classification of the Richmond dairies from the mercantile classification to the capital classification was again submitted to me early in 1930, I proceeded to make a personal examination of the plant of the Richmond Dairy Company in order to ascertain for myself the exact manner in which the milk and the milk products were being handled. I was greatly surprised to note the extent of the operations necessary in these modern days to handle milk and milk products. I was particularly struck with the great amount of machinery necessary for the pasteurization of milk. As a matter of fact, I found that the plant of the Richmond Dairy Company was full of machinery.

"This view of the actual operations necessary to handle milk and milk products led me to the conclusion that a dairy doing business in the manner in which the Richmond Dairy Company does its business is not a merchant within the meaning of the State law imposing a State license tax on merchants, but that such a dairy is properly taxable on capital as to all of its business, except the goods, wares and merchandise which it purchases from others and sells in the same form in which purchased. As to the business last mentioned, the mercantile classification is, of course, proper.

* * *

"It is admitted on behalf of the applicant that it is a merchant as to that part of its business which consists of the purchase from others of butter and other dairy products and the subsequent sale thereof in the form purchased, without subjecting the same to pasteurization or other manufacturing processes while in its possession. It is admitted on behalf of the city of Richmond that the applicant is a manufacturer as to that part of its business which consists of the production of condensed milk, milk powder and cheese, and that the capital employed in such part of its business is taxable under section 73 of the Tax Code. The sole question involved, therefore, is whether the said applicant should be taxed under section...