*1 July 18, En 36407. Banc. [No. 1963.] McDonnell Respondent, McDonnell, & v. The State
Washington, Appellant. V. Allen Smith, Inc., Respondent, State
Washington, Appellant. McDonnell Respondent, Company, Inc., Seed v. The of Washington, Appellant.*
State General, Attorney Timothy R. Malone and James A. Furber, Assistants, for appellant. Baker,
Parr & for respondents. The taxpayers, Finley, respondents these consoli causes, dated have challenged action of the State Tax in imposing Commission a business and tax occupation *Reported in 383 P.
respecting activity as defined RCW 82.04- petitioned paid .120, have for a refund of taxes there- under. position Tax Commission has taken split peas by dried *2 scope
taxpayers the comes within the of definition of “manu- facturing activity,” as set forth the aforementioned stat- judge taxpayers’ ute. The trial sustained the contentions manufacturing that their activities did not constitute voiding judgment statutory definition, rendered the pointed imposition the tax. It out that of should be these by heard and determined the trial were lawsuits prior the Bornstein Sea to decision (1962), 169, 373 P. engaged involving taxpayer1 in a the business
The peas acquisition raw, dried, farmers field in bulk. from of preparatory disposition by processed then to sale These are market, both within and without the state the wholesale Washington. processing the The record establishes that of as follows: or being pods prior peas from removed their to
The are peas by taxpayer. acquired After the are received the kept storage placed they taxpayer, are for three the through peas put thereafter The a ma- four weeks. whereby peas, clipper cleaner, the undersized a called chine any pods, vines, and other less useful or parts stalks, of step prep- foreign The are removed. next materials peas through put gravity processing the a is to aration pressure shaking utilizes air and a machine This cleaner. weevily peas. and defective substandard to remove motion organism, weevily peas with a small are infected actu- Rhyneophora group, which, the ally dur- small beetle a storage period four week referred to three way peas. literally of the out This eats its results above, being lighter, weevily peas and this difference in processing peas that the stipulated time of trial 1It was narrating respondents; therefore, of the facts for each the same taxpayers be used. will singular form grav- possible separation specific gravity makes weevily At ity peas uninfected. from those of the cleaner operations, approximately thirds two the conclusion of these bagged peas peas sold on the whole- as whole attempted tax has not sale market. tax commission processing operations, these relative whole peas, activity. as a remaining peas third
We are concerned split peas. which destined to become These are sub- jected through type conveyor, further a screw part apparatus auger. a of machine steam called the peas through As the are carried steam chamber, the steam softens the hulls or treatment shells to facilitate re- their subsequent splitting peas. moval and Thereafter, peas go through splitter, rotary consists plates. peas drum top with vertical are fed into the splitter *3 of the centrifugal machine, where, the of exertion they against force, are thrown the side the of drum and split. trial The court found on that occasion was neces- sary peas through splitter to rerun the complete the to the splitting peas. all taxpayer’s However, the the exhibits (these samples peas through include which have been splitter respectively) the once twice, and and the testi- mony taxpayer clearly of a witness for the indicate that peas usually processed through the be splitter must the at accomplish splitting or three least two times to of all of peas. split peas go through the The next a machine similar clipper purpose grading to the cleaner for the and further portions. going through Then, removal of undesirable after apparatus polishing an improving or machine for and the they appearance peas, packed shipment. of the for process resulting During splitting peas, the in the (the being latter hulls and hearts a pea) small stem in the scrap pieces, pea These removed. combined with the by-product chips, constitute referred to as Offal offal. processing the peas. result from does not of whole splitting process hull in the removal results in an product, peas, split i.e., end in from the differs color original pea hull whole intact.2 respective for
There are differences in the demand the products—whole dependent peas split peas—the demand part upon personal preferences in the ultimate con- demand, a difference in there would sumers. Without such engage operation splitting practical in be no reason to might peas. passing, judge In the trial erred we observe that regard refusing permit testimony price in re- in taxpayer split peas ceived as contrasted with change price peas. By do not mean that a for whole this we determining in in differ- value is the factor whether it is factor. resulted, ent has but useful substance argument, pigs,” “pigs that or that effect, peas peas, an identical whole and substance—whether pea- inception split at the conclusion of the splitting process—and, processing therefore, the should not manufacturing, rejected made and be considered as was change supra. from There the was fish Bornstein, fish 176) (page the court, case fact, the Bornstein fillet. referring a manufacturer’s tax to another case which taxpayer performed imposed, . . stated . process, peas he and, . . after the still peas.” had processing peas preparation effect respect closely approximates
upon the situation with them bottom fish involved We are convinced that the reason- case. holding applicable in Bornstein is and con- trolling in the instant case. criterion stressed Bornstein— realize
We *4 significant change—is namely, been there has whether may general easier in nature seem as matter somewhat application. a matter Neverthe- than as of articulation product—that Bornstein, the is, end in stated less, we as product as it is released substance sold compared process—must performing be one from an derived examination of been Plaintiffs’ has 2This conclusion 3 and 6. No. exhibits making initially processor. In substance received given comparison, this to the fol- consideration should be lowing changes quality, among in others, form, factors: (such changes physical, properties may chemical, be and/or nature), functional the extent value, enhancement demand, kind of involved, differences may cetera, et of a be indicative existence different, “new, or useful substance.” utilizing necessary factors, aforementioned mind the short, bear admonition in that “In position classify- we have come to the now where we are ‘manufacturing’ realistically activities which are not manufacturing ordinary is, all.” That sense at definition in RCW 82.04.120of the term manufacture subject scope legislative its tax determination. This necessarily determination is not confined to a classical manufacturing, orthodox definition of which, in common understanding, usually spinning, knitting, would connote a sewing, sawing, synthesizing, assembly or other fabrication process. presented
The instant case has been this though only question upon appeal to be resolved this respondents engaged is whether the in “manufactur ing” definition set forth in RCW 82.04.120. Both parties apparently activity have assumed that if con manufacturing activity stitutes may then be taxed (tax manufacturers). under RCW 82.04.240 However, parties apparently both have overlooked RCW 82.04.440: persons . That “. taxable under RCW 82.04.250 or be 82.04.270shall not taxable under RCW 82.04.230, 82.04- (Italics ours.) .240 ...” respondents It been engaged has conceded that the wholesaling both within state; and without the therefore, regard wholesaling activity with their within the state they are taxable under RCW 82.04.270. Those activities being taxable under RCW 82.04.270cannot be taxed under However, RCW 82.04.240. those sales made without state not taxable under 82.04.270; RCW therefore, products may of those be taxed under RCW
558 (1954), Corp.
82.04.240. Crown 45 Wn. Zellerbach (2d) (2d) 749, 278 P. 305. for a cause should be remanded
This trial portion respondents’ determination to what manu- wholesaling facturing activity by is outside distributed portion only respondents’ state, manu- since facturing activity can be taxed under RCW 82.04.240. judgment reflect and should con- should this determination expressed form herein. It is so views otherwise ordered. JJ., J., Donworth, C. and Rosellini, Hunter, Hale,
Ott, concur. (dissenting)—I ma- dissent, for I believe
Weaver, jority opinion the doctrine of Bornstein Sea extends (1962) P. to a 169, 373 82.04- is not the ambit RCW factual situation quoted .120, infra. question. process majority opinion describes give im- however, me the exhibits, do The record complicated opinion pression as the is as that the suggests. it in pea” misnomer;
“Splitting nature furnishes unwraps processing only wraps parts, it. and then two separated. parts are thus taxing I do under statute? Is this not think so. provides:
The statute all commer- embraces activities manufacture’ ‘To applied, wherein labor or skill is nature industrial cial or machinery, materials so that a result hand or substance or article of or useful new, different thereof produced property com- tangible personal sale or production use, shall include industrial or mercial special made articles.” made custom or fabrication 82.04.120. RCW requirements: four lists
The statute a commercial or industrial be of must activities 1. The nature; machinery; applied hand or Labor skill must be
3. A or useful or article different substance tangible personal property produced; must be produced
4. The article or must be for sale substance commercial or industrial use. requirement: only Is
areWe concerned with the third *6 new, “. . . a different or article or useful substance tangible personal property produced”? . . . supra,
Bornstein Sea the latest is pronouncement subject. Therein, of this court on the “manufacturing” filleting that concluded a fish was under the statute because produced,
“. . fillet, fish, . once is different from and hence a new and different article has created. been by applying following
This conclusion was reached rule: “. . applied . We think the test that should be determine whether a different, and useful article has produced significant change
been is whether a has been ac- complished product compared when the end subjected process. article By before it was to the the end product is sold or released product appears we mean the as it at the time it performing process.” the one (Italics mine.) majority opinion restates the rule of Bornstein but recognizes that it is general may
“. . . somewhat in nature and seem ap- easier as matter of articulation than as a matter of plication.” comparison “significant change,” The nucleus test is may many things which, abstract, mean to different change pea split pea sig- men. Is the from a whole to a meaningful, consequence, nificant, or momentous? I do Implicit “manufacturing” think concept so. is the something changed that has been to make a new or different product. The found, however, trial court and the record substantially finding sustains the change split “. . . Whether there is no whole, change pea chemically, by color, substance either change taste, ...” otherwise. process prior held the
Decisions of this court to Bornstein change I to be if there substance. agree change significant. must be boundary of the definition of fixes outer It a new under statute. introduces element. filleting value- . . . The transforms near consumer into useful and salable
less whole bottom fish ” change significant. . . items. This change substance; there no case, there is instant significant change processor started in usefulness. is no the routine had the end of with a substance and at substance—only pieces. Both the whole same smaller substantially pur- split pea same and the are used pea poses. pieces or different are not a new meaning tangible property personal article *7 taxing statute; hence the taxable “manufacturing.” places majority opinion logic the definition of Tax Commission. whim argument, “Pigs Pigs”4 so be it.
If this is a judgment of the trial court. affirm the I would JJ., Weaver, concur with Hamilton, Hill, and rehearing denied. September Petition 20, 1963. (2d) (1957); (2d) 492, Camp State, 312 P. 3Stokely-Van 50 Wn. v. 813, Corp. 328 P. Zellerbach Crown (1958). Encyclopedia (1905). Modem story Butler Parker Ellis 4Short (1954). Company, Doubleday Humor, Inc. & American