323 Mass. 730 | Mass. | 1949
These are twelve appeals by the- board of assessors of Boston from decisions of the Appellate Tax Board. The commissioner of corporations and taxation, acting under G. L. (Ter. Ed.) c. 58, § 2, as most recently amended by St. 1941, c. 726, § 2, prepared and submitted on April 17, 1947, to the board of assessors a list of corporations known to him to be liable on January 1, 1947, to taxation under G. L. (Ter. Ed.) cc. 59, 60A and 63, in which list he classified as manufacturing corporations the twelve corporations hereinafter mentioned. The commissioner having failed to act within twenty days upon applications of the board of assessors filed with him on May 15, 1947, seeking a change in the classification of these twelve corporations on the ground that they were business but not manufacturing corporations, the board of assessors on June 20, 1947, appealed to the Appellate Tax Board. Each of these corporations was allowed to intervene by the Appellate Tax Board in the appeal in which its classification was questioned. All these twelve appeals were heard by thé Appellate Tax Board upon statements of agreed facts, and the board decided that these corporations had been properly classified as manufacturing corporations.
The board adopted and accepted as true all the facts contained in each statement of agreed facts and these findings of fact are final, leaving open the question, as raised by the appellant before the board, whether on those findings the decision of the board was vitiated by error of law. Assessors of Boston v. Boston, Revere Beach & Lynn Railroad, 319 Mass. 378. Brockton Knights of Columbus Building Association, Inc. v. Assessors of Brockton, 321 Mass. 110.
The importance of classifying a corporation as a business or as a manufacturing corporation lies in the fact that the machinery used by a business corporation in the conduct of its business is subject to local taxation at the tax rate fixed by the assessors of the city or town in which the machinery is located, while the machinery of a manufacturing corporation is exempt from local taxation and there is substituted for such local taxation a tax at the rate of $5 per thousand in the assessment of the corporate franchise tax. G. L. (Ter. Ed.) c. 59, § 5, Sixteenth (see St. 1941, c. 467); c. 63, §§ 32, 38C, 39, 42B, as amended.
The nature of the entire businesses actually conducted by these corporations respectively must be examined in order to determine whether their commercial activities conducted in this Commonwealth are such that they may be properly considered as engaged in manufacturing and to such a degree that they may fairly be considered as manufacturing corporations.
The first group of these corporations consists of four corporations, Dwinell-Wright Company, Stanley W. Ferguson, Inc., LaTouraine Coffee Co., and Standard Brands Incorporated, whose business consists in the importation and purchase of green coffee beans, preparing the coffee for the market by roasting, grinding and packaging it, and selling the product. All of them have plants in Boston where these coffee operations are conducted. Dwinell-Wright Company employs one hundred twelve persons, all of whom except three are engaged in preparing the raw coffee for the market. Ninety-seven per cent of its total sales in 1946 or
The raw coffee beans are imported by these corporations from a number of semitropical countries. The coffee from each country has its own particular flavor due to conditions of growth, soil and climate, and to secure the flavor required by the American public it is necessary to blend different kinds of coffee. This blending is done in accordance with a secret formula of the roaster. After the coffee is blended it is put through graders or cleaners to remove all foreign substances, and is then deposited in the roasting machines where it is subjected to a heat of between three and four hundred degrees Fahrenheit for about twenty minutes. The determination of the amount of heat to be applied requires considerable skill and experience so that the coffee will not be baked and all the oils and aroma destroyed. If too little heat is applied the beans will be too bright in color and will
The second group of corporations consists of three corporations; all of them have plants in Boston; two of them are engaged in the preparation of soft drinks, and the third is engaged in the production of fruit syrups, the extraction of juice from oranges and lemons, and the shredding of orange and lemon peels. Coca-Cola Bottling Company, of Boston is engaged solely in the business of making and selling a certain carbonated beverage. Water from the city mains is purified and combined with carbon dioxide gas which is derived from dry ice purchased by the company. This carbonated water is fed into bottles which have been cleaned and sterilized and in which an appropriate amount of syrup purchased by the company has been placed. The bottles are then capped and ready for shipment. All of these various operations are performed by machinery. All of the company’s employees are engaged in the production- and sale of this beverage, and it is the only source of the company’s income. American Dry Ginger Ale Company, Incorporated, makes soft drinks of various flavors. It compounds its own syrups and combines them with water that has been charged with carbonic acid gas. Orange
Whiting Milk Company maintains a plant in Boston, employing over one thousand persons, and is engaged in the pasteurization and homogenization of milk, the preparation of chocolate milk, the separation and pasteurization of cream, the making of butter, buttermilk, soft cheeses and ice cream mix, and the sale of all of these products except butter which is used in making some of its products. The ice cream mix is composed of cream, condensed milk or milk powder, sugar or corn syrup, egg yolk, some stabilizing material, and flavoring. Its gross sales for 1946 of products treated, prepared and made in this Commonwealth and sold here amounted to nearly $15,000,000 and those sold in Rhode Island amounted to over $500,000. The principal revenue was received from sales of pasteurized and homogenized milk and cream. The sales of ice cream mix amounted to more than $600,000, and of soft cheeses to more than $400,000. The average annual sales of chocolate milk when there were nó shortages of sugar and chocolate amounted to $90,000.
Merchants Wool Scouring Company, a Massachusetts corporation, is engaged in the business of processing raw and waste wool for the account of others at its plant in Boston. If the wool when received is not in condition for scouring because it contains a slightly excessive amount
Pittsburgh Plate Glass Company, a foreign corporation, is engaged in the business of manufacturing and selling plate glass and articles consisting principally or partly of glass. It has plants and sales offices in Boston, Worcester and Springfield. It makes no glass in this Commonwealth but ships large quantities of glass from its main plant in Pennsylvania. Glass in large sheets is shipped to its Massachusetts plants where it is cut to size and edged by grinding for store fronts and windows, partitions, and kitchen and bathroom walls. Glass for show cases is cut, shaped and polished, set in metal or wooden frames, and supplied with mirrors if the customer requires. Glass is also fashioned for automobile windows, and for tops for tables and desks. All of the mirrors sold in this Commonwealth are manu
Carter, Rice and Company Corporation, a domestic corporation, organized for the purpose of manufacturing, buying and selling all kinds of paper, cardboard, envelopes and articles in the manufacture of which paper or cardboard is used, occupies more than sixty-seven thousand square feet of floor space in a Boston building as its administrative headquarters and plant, of which an entire floor comprising nine thousand square feet is fully equipped with machinery and is devoted almost exclusively to the operations next described. Paper is slit and cut to the desired sizes for business cards and also into small rectangular pieces to be used in wrapping bar candy. Sometimes, when the paper is cut to the appropriate size, the corners are rounded or segments are cut in the sides in order that, when used as separators in candy boxes, they may be readily grasped or removed. Cards for wedding invitations or calling cards are paneled so as to present a sunken panel to receive the printed matter for which the finished product is ultimately intended. Many designs, as for greeting cards, require the cutting of one or more windows in the paper, and this work, like the other operations herein mentioned, is done by machinery, and in connection with the particular process last stated the company has a machine to make the embossing plates and the steel rule dies used in producing cards like greeting cards. Paper or cards for book fillers, filing systems and indices are produced. Some of the paper is embossed with the name,
Boston Mailing Company maintains a plant in Boston where various operations in the making of folders, pamphlets, briefs, books and magazines are conducted. Large sheets containing advertising matter are cut and folded into different sizes best adapted to the quality of the paper to be folded and the number of folds to be made. An addressing and mailing service is carried on for customers who furnish the material to be mailed and a mailing list. The envelopes are addressed by the use of addressographs for which the company cuts the plates. Pamphlets, records and briefs of counsel in pending litigation and paper covered books and magazines which are to be bound by the company arrive in the form of large sheets already printed, which are cut into the proper sizes so that, when folded, they will make a pamphlet or book of eight, sixteen, thirty-two or sixty-four pages. The sheets are usually cut so as to make a sixteen-page section when folded. These sections, if not too thick, are put in the appropriate page order with a cover into a stapling machine and bound together. Sections of a program are usually stitched together by an electric silk stitcher. If the sections are too thick, they are bound together by stapling the left hand side of the pages, and the left hand edges are smeared with glue and the cover attached. Records and briefs instead of being stapled are sewn by an electric sewing machine. Eighty-three per cent of its income is derived from its binding business.
What is or is not manufacturing has been frequently decided in our own decisions. In Commonwealth v. Green, 253 Mass. 458, 459, it was said, in holding that the brewing of beer by a householder for his own use was the manufacture of beer, that “The verb ‘manufacture’ is synonymous with make. To manufacture is to make wares or other products by hand, machinery or other agency. It may also be defined to work, as raw or partly wrought materials into suitable forms for use”; and in Boston & Maine Railroad v. Billerica, 262 Mass. 439, 444, 445, it was said that “Involved in the conception of manufacture is the implication of change wrought through the application of forces directed by the human mind, which results in the transformation of some preexisting substance or element into something different, with a new name, nature or use.” In dealing with this same question of the classification of business and manufacturing corporations, a definition of manufacturing similar to the two just quoted was recently adopted and applied in Commissioner of Corporations & Taxation v. Assessors of Boston, 321 Mass. 90, 94. The term manufacturing has no technical meaning, Friday v. Hall & Kaul Co. 216 U. S. 449, 454, and definitions are not of much assistance in cases lying close to the line between nonmanufacturing and manufacturing activities. Assessors of Springfield v. Commissioner of Corporations & Taxation, 321 Mass. 186, 191. Many cases like the supplying of water, Dudley v. Jamaica Pond Aqueduct Corp. 100 Mass. 183,
The statutes granting exemption from the local tax on the machinery of corporations engaged in manufacturing must be fairly construed and reasonably applied in order to effectuate the legislative intent and purpose to promote the general welfare of the Commonwealth by inducing new industries to locate here and to foster the expansion and development of our own industries, so that the production of goods shall be stimulated, steady employment afforded to our citizens, and a large measure of prosperity obtained. Commissioner of Corporations & Taxation v. Assessors of Boston, 321 Mass. 90, 95, 96.
The coffee business, in which the first group of corporations .is engaged, consisted in the conversion of a raw material which was unfit for human consumption or any other practical use into a finished product which differed substantially from the raw material in appearance, form and taste, and which was thereby made adaptable to a use for which it otherwise would not be available. To be sure, it retained the name of coffee, but that term in the public mind ordinarily refers not to green but to roasted and ground coffee ready for immediate use as a beverage. No
Of the two soft drink concerns included in the second group of corporations, one purchases its syrup, the other makes its syrups; one carbonates the water, the gas being derived from dry ice, the other charges the water with carbonic acid gas; but both combine different ingredients into a new product. They make a soft drink. It was said in Murphy v. Arnson, 96 U. S. 131, 134, that “Beer may well be said to be manufactured from malt and other ingredients, whiskey from com, or cider from apples.” That the making of these beverages is within the concept of manufacturing is settled by Commonwealth v. Green, 253
The third corporation in this group sells fruit juices, makes and sells fruit syrups, and shreds and sells orange and lemon peels. The making of fruit syrups constitutes manufacturing the same as the making of jams and jellies, Commissioner of Corporations & Taxation v. Assessors of Boston, 321 Mass. 90, 94, the canning of foods, County Commissioners of Carroll County v. B. F. Shriver Co. 146 Md. 412, and the making of potato chips, Commonwealth v. Snyder’s Bakery, 348 Pa. 308.
The assessors contend that the'extraction of juice and the shredding of peel are not manufacturing operations, and that the remaining business, which was the making of syrups, was too insignificant to warrant the classification of this corporation as a manufacturing corporation. They point out that, even if the sales of syrup were greatly restricted by governmental control over sugar, they amounted to only ten per cent of the total sales of all its products by the corporation in 1945, five and one half per cent in 1946, and eight and three tenths per cent for the first nine months of 1947. Even if we assume in favor of the assessors, but without making any intimation, that the operations mentioned were not manufacturing processes, it does not follow that the classification was wrong for reasons which will presently appear in dealing with a similar contention raised in the Whiting Milk Company case. We think that the classification made by the commissioner was right.
Whiting Milk Company pasteurizes and homogenizes large quantities of milk. The first of these processes by the use of various mechanical devices removes foreign matter from the milk, kills bacteria, and preserves the freshness of the milk, and the second subjects the milk to pressure sufficient to break up the butter fat globules and distribute the butter fat uniformly throughout the milk. It is unnecessary to decide whether either of these operations consti
The company realized in 1946 from its sales of soft cheeses more than $400,000, and from its sales of ice cream mix more than $600,000. It was agreed that in normal times, in the absence of governmental sugar restrictions, $90,000 would be the income from the sales of chocolate milk. We are therefore dealing with three branches of the company's business in which the annual sales amount to more than $1,000,000. If its entire business consisted only of conducting these three branches, there could be little doubt but that it would be a manufacturing corporation, but it is contended that, as these sales comprised only a comparatively small percentage of the total sales, the operation of these three branches did not entitle the corporation to be classified as a manufacturing corporation. It is contended by the assessors that the gross income from its manufacturing activities should amount to at least a certain percentage of its total income before a company should be classified as a manufacturing corporation. They suggest twenty per cent. 10 East 40th Street Building, Inc. v. Callus, 325 U. S. 578. Baldwin v. Emigrant Industrial Savings Bank, 150 Fed. (2d) 524, 525, certiorari denied sub nomine Emigrant Industrial Savings Bank v. Baldwin, 326 U. S. 767. That might have been a convenient standard for the Legislature to have adopted, but the difficulty is that it has provided no such criterion. The statutes do not require a corporation to be wholly engaged in manufacturing, or indeed that its principal business should be manufacturing, before it should be deemed to be a manufacturing corporation. On the other hand, it is to be noted that the extent of the exemption granted to manufacturing corporations is not only the machinery actually used in manufacturing but all the machinery of the corporation. The exemption is extensive when applicable. The purpose of the exemption, however, was not to aid nonmanufacturing corporations, and the performance of any manufacturing by what is essentially a nonmanufacturing corporation does not confer upon it the right to enjoy the exemption. Commissioner
Merchants Wool Scouring Company does nothing but the scouring of wool for the account of others. It was said, although by way of dictum, in Hartranft v. Wiegmann, 121 U. S. 609, 615, that “Washing and scouring wool does not make the resulting wool a manufacture of wool.” It was decided in Commonwealth v. Densten Felt & Hair Co. 304 Pa. 536, that the cleaning of cattle hair preparatory to its use in trade and commerce was not a manufacturing operation. The same conclusion was reached in Georgia Warehouse Co. v. Jolley, 172 Ga. 172, with reference to the ginning of cotton. The assessors contend that the scouring of wool does not comprise manufacturing any more than does the conducting of a laundry — a business generally considered not to be manufacturing. Commissioner of Corporations & Taxation v. Assessors of Boston, 321 Mass. 90, 95, and cases cited.
The intervener does not contend that it is a manufacturer of wool, and the statutes here involved are entirely different in their language and purpose from the tariff regulations in question in Hartranft v. Wiegmann, 121 U. S. 609. The Densten case is in line with the Pennsylvania decisions which indicate a tendency to construe somewhat strictly the statutes granting tax exemptions on machinery used in manufacturing. See Commonwealth v. Glendora Products Co. 297 Pa. 305,
In Burke v. Stitzel-Weller Distillery, 284 Ky. 676, it was held that bottling machinery was exempt from taxation notwithstanding a contention that the whiskey bottled had been completely manufactured before it reached this machinery. The bottling of whiskey in and of itself might not be regarded as a manufacturing process, but it is when it appears that it is a practical and necessary step in the-production of the finished article.
It is a matter of indifference to our public policy, declared by the statutes exempting the machinery of manufacturing corporations, whether all the manufacturing is done by one corporation or a part of it is performed by an independent contractor if the latter is also a manufacturing corporation,' provided of course the work is performed in this Commonwealth. These statutes favor manufacturing corporations and are not directed against such corporations acting as independent contractors. These statutes must be fairly construed to effectuate if reasonably possible the legislative intent and purpose. The words "engaged in manufac
Pittsburgh Plate Glass Company in making mirrors to the amount of $143,825 at its Boston plant alone was engaged in manufacturing. Cutting, shaping and polishing glass according to specifications, grinding the edges of the glass, and then setting the glass in wooden or metal frames and assembling the glass into show cases constitute at least a partial if not the complete manufacture of show cases. The work performed with reference to show cases was one item under the heading of “fabrication” amounting to $148,689, which denotes the labor expended and the amount apparently collected for cutting and setting up specially prepared glass for store fronts, windows, partitions, show cases, and other work. The sales of the mirrors and at least the work done in manufacturing show cases, even if we disregard the other labor items comprising “fabrication,” were substantial in amounts and furnished employment to our citizens. Under the principles already discussed, it is plain that it would contravene the public policy of this Commonwealth declared in the tax exemption statutes to say that the company was not properly classified as a manufacturing corporation.
Carter, Rice and Company Corporation in producing the layer cards for wrapping bar candy and as separators in packaged candy, the embossed paper with the name or trade mark or symbol of the customer for the confectionery trade and also sheets of such embossed paper reinforced by tabs and used in the making of confectionery, the paneled cards for wedding invitations and calling cards, and the greeting cards with and without windows cut into them, was engaged in manufacturing operations. All these operations were performed by machinery. They all constituted necessary and
The relationship of these operations to the corporation, in view of the value of the machinery employed, the space occupied, the number of employees engaged in them, the value of the output of the department in which these operations were conducted, the amount of the sales of the goods produced in this department, and its proportion to the gross sales of the company and to its net profits, prevents us under the principles already discussed from saying that these operations were merely trivial or incidental to the entire operations of the company and that the company was not rightly classified as a manufacturing corporation.
Boston Mailing Company, which cuts the printed sheets, arranges them according to the number of the pages, puts them in sections, and attaches these sections by stapling machines or sews them together by a stitching machine, and then puts them together under a permanent cover to form pamphlets, books and magazines, is clearly engaged in manufacturing. Seeley v. Gwillim, 40 Conn. 106. American Newspapers, Inc. v. State Tax Commission, 174 Md. 56.
The decision in each of these cases must be for the commissioner.
So ordered.
We have already cited this decision and have declined to adopt its conclusion that coffee roasters were not engaged in manufacturing.