Taxes, Hawaiian Pineapple Co., Ltd., In re

• Decision Date: 25 July 1961
• Docket Number: No. 4110,4110
• Citation: 45 Haw. 167,363 P.2d 990
• Parties: In re TAXES, HAWAIIAN PINEAPPLE COMPANY, LIMITED.
• Court: Hawaii Supreme Court

Page 990

363 P.2d 990

45 Haw. 167

In re TAXES, HAWAIIAN PINEAPPLE COMPANY, LIMITED.

No. 4110.

Supreme Court of Hawai'i.

July 25, 1961.

SYLLABUS BY THE COURT

Proceeds from the sale of products manufactured in a cannery are not taxable at the two and one-half per cent rate prescribed for canneries in R.L.H.1945, § 5455, subd. A, unless such products are 'canned'.

In general, words of statutes, including taxing statutes, are to be given their ordinary meaning.

In the absence of legislative intent to the contrary, terms which have a uniform and definite meaning in a particular trade or business will be given such meaning in construing a statute relating to or directed at the trade or business, even though such meaning may differ from the ordinary meaning of the terms.

The trade or commercial meaning of a term is a fact to be proven in each case. Until such fact is proved, an alleged commercial or trade meaning of a term in a statute is presumed to be the same as the common meaning.

If doubt exists as to the construction of the provisions of a statute imposing taxes, the doubt should be resolved in favor of the taxpayer.

Statutes imposing taxes are to be construed strictly against the government and in favor of the taxpayer and no person, property or business is to be included within their scope unless placed there by clear language.

The rule of strict construction as applied to taxing statutes is not a substitute for other rules of construction and is subordinate to the fundamental principle that the intent of the legislature, when clearly ascertainable and reasonably borne out by the language used, must be given effect.

The business of packing frozen pineapple products in hermetically sealed cans is not 'canning' within the meaning of the term as used in R.L.H.1945, § 5455, subd. A.

Proceeds from the sale of frozen pineapple products packed in hermetically sealed cans are subject to taxation under the general excise tax law at the general manufacturer's rate of one and one-half per cent prescribed by R.L.H.1945, § 5455, subd. A.

Shiro Kashiwa, Atty. Gen., and Nobuki Kamida, Deputy Atty. Gen., for appellant.

Marshall M. Goodsill, Jr., Honolulu (Anderson, Wrenn & Jenks, Honolulu, of counsel), for respondent.

TSUKIYAMA, C. J., CASSIDY and WIRTZ, JJ., and TASHIRO, Circuit Judge, assigned by reason of vacancy, and CROCKETT, Circuit Judge, in place of LEWIS, J., disqualified.

CASSIDY, Justice.

The issue on this appeal requires the determination of the general excise tax rate applicable to proceeds obtained by the taxpayer from the sale of frozen pineapple products packed by it in hermetically sealed cans.

The taxpayer has for many years operated a cannery in Honolulu in which it manufactures various products from the fruit of the pineapple. Its main product is and has always been conventionally packed pineapple, manufactured by placing raw trimmed and cut fruit, with syrup, in hermetically sealed cans and then subjecting the cans and contents to a temperature of 195 degrees for a period of time sufficient to sterilize the contents. Since 1932 the company has also manufactured single strength pineapple juice, which is processed and put up in a similar manner. These two products, like all conventionally canned fruit, vegetable, juice, or other food products, may be stored and kept indefinitely without deterioration. The taxpayer also manufactures several by-products and incidental products, including glaced pineapple, pineapple bran cattle feed, citric acid, pineapple soft drink base, and bromelain.

In 1946 the taxpayer established a division in its cannery equipped for the manufacture of frozen pineapple products and began packing three items--frozen pineapple chunks, frozen Hawaiian fruit salad, and frozen pineapple juice concentrate. These products were and are manufactured in the manner described below.

In the manufacture of frozen pineapple chunks, pieces of raw pineapple are placed in a container with a sugar-water syrup added and then subjected to a temperature of zero or less degrees for approximately an hour and a half, after which the product is stored, preliminarily to shipping, in a warehouse, at no greater than zero degree.

The frozen Hawaiian fruit salad consists of pieces of raw pineapple, papaya and banana, with a syrup made of guava puree, pineapple juice and sugar. The combination is placed in a container and subjected to the same freezing process and treatment followed in manufacturing frozen pineapple chunks.

In the manufacture of frozen pineapple juice concentrate, raw pineapple juice is heated to a temperature of between 135 to 140 degrees to deaerate the juice and evaporate some of the water from it. The temperature is reduced to 100 and finally to between 60 and 70 degrees. The flavor, removed at the first concentration stage, is added. The juice is put in containers and subjected to the same freezing process and treatment used with the other two frozen products. The heating phase involved in manufacturing frozen pineapple juice concentrate is only for the purpose of deaerating and concentrating the juice, and not to sterilize it.

Prior to 1952 each of the three frozen products was packaged in a polyethylene bag surrounded by a cardboard and cellophane overwrap. From 1952 on the frozen pineapple chunks and the Hawaiian fruit salad have been packed in hermetically sealed tin cans and the frozen pineapple juice concentrate has been put up in hermetically sealed cans or polyethylene bags.

The tax period here involved covers five fiscal years commencing June 1, 1952, and ending May 31, 1957. During that period the imposition of the tax and the rate thereof were governed by the provisions of R.L.H.1945, § 5455, subd. A(1)(2), as amended by S.L.1947, Act. 111. The pertinent portions of the applicable law as so amended are quoted in the margin ¹.

It is the taxpayer's contention that its income from the sale of its frozen pineapple products packed in hermetically sealed cans was taxable under the statute at the general manufacturer's rate of one and one-half per cent. The company made its gross income tax returns and paid the general excise tax for the years involved on that basis. The tax commissioner's position is that frozen pineapple products packed in hermetically sealed cans are 'canned' within the meaning of the word in the statute, and that the two and one-half per cent rate prescribed for 'canneries' applied to the proceeds received by the taxpayer from the sale of such products. The commissioner made an additional assessment on that basis. The taxpayer appealed to the tax appeal court. That court ruling in favor of the taxpayer, stated, in part, as follows:

'The evidence produced by the taxpayer shows that the terms 'canning', 'canned' and 'cannery' have uniform and definite meanings, both in the trade and in the popular sense. These terms refer to the process of preservation rather than to the container in which the products are packaged.

'The Court finds that the term 'cannery' is obviously connected with the words 'canning' and 'canned' as used in the statute as a whole. The Court finds that the meaning of 'cannery' is a place where people do 'canning'. Further, the Court finds that 'canning' means packing food in hermetically sealed containers--not necessarily tin cans--for preservation. Preservation requires that the product be sterilized by heat or some other process. This is the meaning of 'canning', regardless of whether the word is used in the popular sense or whether the trade meaning is given to it. The Court feels that both meanings are synonymous.

'The Court finds that in actuality, as far as pineapple is concerned, the most practical method of 'canning' is by heat treatment, though other methods might be developed. At present, sterilization by heat is the only method in commercial use.

'The Court feels that the test of whether a product is a 'canned' product or produced by the 'canning' process is whether the finished product can be taken and stored in an ordinary type room at ordinary room temperatures and be preserved for a reasonable length of time.

'The frozen products of the taxpayer, whether or not packed in tin cans, do not conform to this test. The fruit in the can, in the case of the frozen products which are placed in cans, is not preserved. It is still a perishable commodity which would spoil if stored at room temperature. If there is any preservation, it is done by continuously keeping the product at a low temperature. The so-called freezing plant does nothing more than do this efficiently and in such a manner that the freezing will not spoil the flavor of the product.

'The Court feels that there has been no showing at all by the Tax Commissioner that the Legislature in passing this particular statute intended to impose any higher rate on the pineapple industry than on any other industry, other than the fact that the pineapple industry is the largest canner in the Territory. The statute applies to 'canneries'--not just pineapple canneries.

'Moreover, the tax at the 2 1/2% rate is based on the value of the products 'canned'. It is not levied at the 2 1/2% rate on the value of other products produced by the pineapple industry.

'The statute speaks of manufacturing, compounding, canning, preserving, packing, milling, processing, refinding or preparing for sale. 'Canning' is only one of the various categories mentioned. What is done in freezing truits, and Court feels, is actually packing or possibly processing, but certainly not 'canning'. When the Legislature places a tax on 'canneries' it means to tax at the cannery rate the products produced by what is normally known as 'canning'--that is, products which can be stored at room temperature for a reasonably long period of time, such as a year or two years.

'It is, therefore, the opinion of this Court that the assessment is improper. Said assessment is set aside and the appeal...