Aрpellant contends that the pallets are excepted from sales and use taxes by virtue of both R. C. 5739.01(E)(2) and R. C. 5739.02(B) (15).
Appellant asserts that these pallets are an integral part of its business. While this may be conceded, it is not
In the syllabus of Youngstown Building Material & Fuel Co. v. Bowers (1958),
“In determining whether tangible personal property is used or cоnsumed directly in the production of tangible personal property for sale by manufacturing or processing * * * the test is not whether such prоperty is essential to the operation of an ‘integrated plant,’ the test to be applied being, when does the actual manufacturing оr processing activity begin and end, and is the property used or consumed during and in the manufacturing or processing period.”
In paragraphs one and two of the syllabus in National Tube Co. v. Glander (1952),
Tested against these principles, appellant’s argument for tax exсeption of the pallets and conveyors under R. C. 5739.01(E)(2) fails.
Appellant does not consume the pallets during processing, as these pallets are later used to ship the encased bottles and cans of soft drinks to customers. Nor are these pallets used directly in the processing of appellant’s product for sale.
Appellant’s рroduct is a case of bottled or canned soft drinks. The pallets are used merely to facilitate the transportation of raw matеrials to, and the removal of finished' products from, the processing lines. They are never directly involved in the bottling or canning and casing of sоft drinks. Likewise, the two conveyors for which exception is sought merely transport items to and from the processing
Appellant relies upon Northwestern Ohio Poultry Assn. v. Schneider (1965),
France Co., supra, is distinguishable on its facts from the present case. There, the stone hauling equipment was found to have bеen used to transport an unfinished product between stages of production. Here, the transportation equipment was used to transpоrt materials to, and the finished products from, the processing line.
Appellant contends also that the pallets and the palletizers аre excepted from sales and use taxes under R. C. 5739.02(B)(15). That section, in pertinent part, provides that sales and use taxes do not apply to the following:
“(15) Sales to persons engaged in any of the activities mentioned in division (E)(2) of Section 5739.01 of the Revised Code, of packages, including material and parts therefor, and of machinery, equipment, and material for use in packaging tangible personal property produced for sale, or sold at retail. Packages include bags, baskets, cartons, crates, boxes, cans, bottles, bindings, wrappings, аnd other similar devices and containers, and ‘packaging’ means placing therein..”
This court has not previously construed R. C. 5739.02
An examination of that statute reveals that, in order to qualify for tax exception, the taxpayer must he engaged in an enterprise described in R. C. 5739.01(E)(2). Second, the item for which exception is sought must mеet the definition of “packages” contained in R. C. 5739.02(B)(15), within that section, or must he equipment which operates on such an item.
While it may he cоnceded that appellant is engaged in an enterprise described in R. C. 5739.01(E)(2), its contention that pallets fit within the definition of “packages” is not as readily adopted. I
The statute provides examples of packages, viz., “hags, baskets, cartons, crates, boxes, cans, bottlеs, bindings, wrappings, and other similar devices.” It is noted that all the above items are items which circumscribe and contain whatever is packаged. These items may not necessarily fully enclose, but they do restrain movement of the packaged object in more than one plаne of direction. Many are complete enclosures or restraints; however, none of such items would permit movement in more than а single plane of direction. For example, a basket would, ordinarily, permit movement of its contents only in an upward direction, but may alsо prohibit that movement.
Applied against this test, it is readily apparent that appellant’s unbound pallets do not qualify. These prohibit or rеstrain movement of cases of soft drinks only in one direction — downward. Otherwise, the cases may freely be moved in any direction without harm to the device. The unbound pallets are, therefore, not packages within the meaning of R. C. 5937.02(B)(15).
We do not here decide whether pallets to which cases or other objects are bound are tax exempt.
It follows, that if the unbound pallets are not “packages,” within the meаning of the applicable statute, the palletizers, which merely stack cases upon the pallets, are
Finally, appellant сontends that the conveyors are excepted from sales and use taxes nnder E. C. 5739.02(B) (16) which provides exception for:
“Sales to persons engaged in manufacturing, processing, assembling, or refining, of handling and transportation equipment, except motor vehicles licensed to operate on the public highways, used in intra or inter plant transfers or shipments of tangible personal property in the process of production for sale * * *.” (Emphasis added..)
Prom the previоus discussion relating to the claimed exception for pallets and conveyors under E. C. 5739.01(E)(2), it is readily apparent that the conveyors do not qualify for exception under E. C. 5937.02(B)(16), As previously noted, these conveyors merely transport raw materials to a processing line and transport finished products from a processing line. These conveyors are, therefore, not transporting “property in the process of production.”
The decision of the Board of Tax Appeals, being neither unlawful nor unreasonable, is affirmed.
Decision affirmed.
Notes
The sales exceptions discussed herein are made expressly applicable to the uses of property by R. C. 5741.02(C)(2) and are intended herein to apply to all uses of property as well as sales.