*1 Sausage, Farm Inc. Ballard’s etc. Dailey, L. Richard Goodwin, Thomas R. Tax W. Va. Commissioner 14025)

(No. Sausage Co. W. Va. etc. Dailey, Richard L. Goodwin, R.

Thomas Tax Va. W.

(No. 14026) July 11, 1978. Decided *2 Chauncey Browning, Attorney General, H. Page C. III, Special Attorney Hamrick General, ap- Assistant for pellant. Kay, Kay, Chaney appellee

Robert H. C. Casto & for Sausage W. Va. Co. Ketchum, Greene,

Menis appel- E. Ketchum & Mills for Sausage. lee Ballard’s Farm

Neely, Justice: presented

The issue proper these cases is the Busi- Occupation applicable produc- ness and Tax rate sausage by tion of taxpayers, and salads ap- made the pellees, Sausage, Virginia Ballard’s Farm Inc. and West Sausage Company. April taxpayers Until 1971 both reported manufacturing classification but reported have wholesaling. since The State Tax assessed to changes deficiencies due reporting. taxpayers petitioned reassessment; for hearings held; before the State Tax Commissioner were administrative decisions of the Tax Commissioner were assessments; affirming issued taxpayers ap- both (Ballard’s pealed Sausage circuit court Farm Wayne County Virginia Sausage Circuit Court and West Company County Court); to Mason Circuit and both cir- cuit courts reversed the decision Tax Commission- er. We affirm. controversy proper centers around the construc-

tion W.Va. Code, ll-13-2b ^[1974] which establishes originally rate classification. As enacted 1935, Code, applied “Upon every person ll-13-2b en- gaging continuing or within this State in the business of manufacturing, compounding preparing sale, prof- or for it, or Legislature commercial use ...” In add- dressing “However, processing of proviso;

ed person, corporation turkeys by a firm or ... poultry compound- as or be shall basis products these on wholesale ing, sale wholesaling subject rate classifica- to ..the shall Reg. Sess., In Leg., 179. C. tion. Acts again, effective Legislature ll-13-2b amended “poultry substituting and tur- 1, 1971, for April “food” Sess., 1971, Leg., Reg. 169. The keys.” C. Acts currently reads follows: statute continuing every person engaging or Upon manufac- in the business within this State sale, profit, turing, preparing or compounding directly use, through or either or commercial any activity part, article or in whole or of others commodity substances, articles, substance equal commodities, the tax to be .. the amount of article,... by multiplied to the value of per- hundredths of one eighty-eight rate of one However, ... cent. *3 by corporation, food person, firm or which

food by person, basis such to be on a wholesale sold as corporation shall not be considered firm or manufacturing compounding, sale of or products basis be sub- on a wholesale shall these imposed busi- ject tax as is on the same provided selling as in section at wholesale ness [§ ll-13-2c]. two-c they “dressing and

Taxpayers fall within the contend report the wholesal- proviso and can under processing” contends tax- ing Tax Commissioner rate while the manufacturing. 1974, the Tax operations In payers’ regulations under W.Va. promulgated ll-13-2b ^[1974] which provide that: process which is to dress and food Persons who by person such shall on a basis be sold wholesale manufacturing com- or not be considered purposes and pounding business prod- occupation law. The sale of these food tax subject to the basis shall be ucts on a wholesale imposed tax under the wholesale classification only. processing” The term shall mean slaughtering, butchering breaking down of poultry, meat, fish, fowl and other foods into composite parts but prepa- does not include the parts prod- ration of these into new or different slaughtering ucts substances. To illustrate: butchering pork roast, chops, pork swine into pork liver, pork brains, qualify etc. will as dress- ing processing composite parts of food. If ground mixed, swine are or cooked and have other ingredients, condiments, thereto, such as added product, make a new pork such as different sausage, procedure merely such is more than and the income of food subject manufacturing therefrom classifi- Therefore, preparation meats, cation. of luncheon as, bologna, salami, spread, such ham salad liver- wurst, etc., reported be must under the manufac- turing by person classification when sold who prepared the same.

Any processed food item which is dressed and sold at retail is treated as a manufactured and the income therefrom must re- ported the retail classification and the classification. Persons who dress process reporting food are relieved from sale such classi- only if fication such food sold on wholesale basis.

W. Occupation Va. Business Regulations Tax 76-506(D) (1974). § ¶ 1.2b [emphasis added] *4 We find the regulation Commissioner’s to be inconsis- tent with the statute. The argues that taxpayers manufacturing, are but we find that even as- suming they are, they if dressing are also proc- essing wholesale, food to be they sold at come under wholesaling proviso. If dressing processing' food were not also proviso would not

14 appel- necessary. proper inquiry is whether preparation sausage operations in the salads lees’ they find that “dressing of food.” We are are. he has error has been that consid-

The Commissioner’s “manufacturing” processing” ered mutually resort dictionaries or We need not to exclusive. many operations complex recognize semantics styled speech “manufacturing” as either are common Obviously, interchangeably. “processing” more or opera- capital a transformation intensive and industrial likely is, is to be called “manufac- tion more it pastoral turing,” more intensive or while the labor is, likely operation the more it is to be transformation Thus, always speaks “processing.” almost called one “manufacturing” conversely one of steel while al- always “processing” speaks of the of cheese. In most however, opera- speech, many transformation normal lumber, tions, converting trees into usable are such as interchangeably “processing” either referred Thus, “manufacturing.” while at the extreme ends of industrial-agricultural spectrum one or either par- uniformly used to describe the other word is almost operation question, there middle ticular operations which can be considered both.1 numerous 1 attempting following to make distinction between cases “manufacturing” inherently “processing” a vis demonstrate vis definition, legal any as well as the lack result-oriented nature the two: an artificial distinction between (1955) Exp., (Killing Texas v. Frozen Food 351 U.S. 49 East Lines “processing,” not chickens is Act); Refining Products v. Interstate Co. Fed Commerce Corn (1945) (Conversion Commission, 324 U.S. eral Trade 726 dextrose Clayton Act); candy “processing” into Cochrane Deener, (Certain (1876) “process” 94 U.S. treatment flour is patented); Oregon Company, Mitchell v. Frozen Food that can be (9th 1958) (under Labor Act F.2d 599 Fair Standards no Cir. place); place change “processing” until a takes Bowie Gon takes (1st 1947) (Grinding sugar zales, preparing 117 F.2d Cir. production of, agricultural “processing,” cane is Co., (D. Supp. product); v. Bodine Produce 206 F. United States 1962) (dicta) applesauce pork (Changing apples into Ariz. into

15 making plastic soybeans clearly The of from is not “dressing processing pasteurization and of food” but the clearly impossible of milk is. It is at to articulate what point operation an dressing becomes more than processing. stipulated by counsel, As the Tax Commis- perparation turkeys injected sioner treats the of with cutting parts butter and the of chickens into which are dipped in dressing batter and processing. frozen as any We fail to see distinguish reasons to making of sausage operations and salads from those similar involv- ing poultry.2 impossible clearly

Given the task of distinguishing the processing from of food” the “manufac- turing” food, we look to the time-honored maxim that taxing strictly against statutes will be construed taxpayer,3 Compa- State and in favor of the Baton Coal ny Battle, 519, (1967); 151 W. Va. S.E.2d 153 522 State Co., ex. rel. Battle v. B. 810, & O. R.R. 149 Va.W. 143 (1965); Carman, 331 635, S.E.2d State v. 145 W. Va. 116 (1960), appellees’ operations 265 S.E.2d and find that are dressing processing proviso. within the Simply stat- ed, taxpayer begins usually if a with what is sausage “processing” Act); is the Federal Food Prentice v. City Richmond, (1956) (Killing, 197 Va. 90 S.E.2d 839 clean- ing chilling “manufacturing” exempt is chickens from li- merchants); Corporations cense on tax and Taxa- Boston, (1947) tion Assessors 321 Mass. N.E.2d 874 (Production sausage exempt from mu- nicipal machinery); Packing Co., tax on Commonwealth v. Weiland (Producer (1928) pickled 292 Pa. 141 A. 148 and smoked tax.) exempt meats not “manufacturer” from merchants’ license 2 Taxpayers’ sausage operations purchasing, slaughter consist of ing, skinning, viscerating, boning, cooling butchering swine. sausage ground spices The meat used is then and blended with packaged. to be preparation simple: ingredients pur- of salads chased, prepared, packaged. mixed and exception general against rule of strict construction imposition taxpayer claiming exemption tax where the an from taxation, Battle, Owens-Illinois Glass Co. v. 151 W. Va. (1967) apply taxpayers S.E.2d 854 does not here since the are not claiming exemption merely contesting but are the rate classifi cation. product, he a food substance and ends with

a food purposes of for the W.Va. dressing [1974]. 11-13-2b

Affirmed. Miller, Justice, concurring: major- by the

Although I in the result reached concur ity making sausage constitutes *6 food, I has formulat- processing believe the Court overly warranted test. A narrower test is ed an broad statutory language, even the nar- the processing sausage making be the test would rower food. by starting problem with can best be illustrated majority's Tax criticism the State Commissioner’s

the applicable statutory language: interpretation of the that he error has been “The Commissioner’s processing’ ‘dressing has at, mutually ‘manufacturing’ exclusive.” Va. [W. at, Majority Opinion 3-4] at S.E.2d proceeds in majority to commit error the then by concluding that the terms “dress- opposite direction virtually processing” are ing and syllabus synonymous, third with result states: usually begins taxpayer what con

“If a with and ends a food a food substance with sidered food for he is Code, purposes Va. 11-13-2b [1974].” of W. analysis statutory Interpreting involves a careful law utilizing legal principles language fundamental merely statutory It a matter of sub- construction. judgment stituting or social the- one’s own economic sponte ory means. to determine sua what statute applied some of the tradi- This Court summarized interpreting rules a statute in Wooddell v. tional (1976). There, Dailey, Va., the issue W. 230 S.E.2d 466 exempt interior was from was whether an decorator pro- paying consumer sales and service taxes under exemption in fessional set out W.Va. 11-15-8. The taxpayer Court concluded was not entitled to the exemption. applica- rules out

Several set Wooddell have direct bility present to the case: given spirit, purpose “Effect be should limiting

intent the lawmakers without in- terpretation in such a manner as to defeat underlying purpose statute; of the ... Each word given of a statute should be some effect and a statute must be construed accordance with import language; of its ... Undefined words legislative and terms in a used enactment will given common, ordinary accepted their meaning; at, [W. ...” Va. 469] 230 S.E.2d at recognized strictly also Wooddell tax statutes against taxing authority construed and in favor of taxpayer, exemption but noted that where provided “exemption strictly tax statute such against person claiming exemption.” construed at, Va. [W. S.E.2d at 469] *7 Code, 11-13-2b, category

W.Va. establishes a broad for imposition of a occupation business on tax manufacturing, compounding “business preparing any article, commodity. for sale” provi substance or The permits so on which this case centers “the processing of food” to be taxed at the reduced wholesale tax rate in lieu rate. apparent Legislature

It is if had intended to confer on engaged reduced rate all businesses in “manufacturing, compounding food, preparing” as suggested by majority opinion, now it would have placed language proviso. Instead, this broader in the it to chose use the term of food” proviso. only in the can One conclude that the choice of language proviso this in the was deliberate and mani- Legislature’s except fested the intention all food manufacturers from the business and oc- cupation tax rate.

18 differentiating between term

I do not believe that concept proc “manufacturing” “dressing and by majority. impossible, suggested essing” as “dressing” applied to a technical term as term essentially freeing product relates ani human from matter not suitable con mal carcass (D.C. Co., Fleming Supp. 41 F. 825 sumption. v. & Swift (7th 1942); 1941), aff'd, 131 F.2d 249 Cir. Shain Ill. (D.C. 1943). Co., Ky. Supp. 50 907 Armour & F. ambiguous It “Processing” an term. is some- of food is conjunctively with the term “manufac- times used statutes, turing” and in such case the courts will in the synonymous being it as with the term “manu- construe Co., Kosydar, facturing.” Inc. v. Produce Ohio Gressel (1973); Laundry Pellerin Ma- 297 N.E.2d 532 St.2d Cheney, chinery 237 Ark. 371 S.W.2d 524 Co. v. Sales (1963).

Here, however, “processing” used term is not con- juctively “manufacturing,” separately with but estab- category proviso independent clause. Un- lish exemption in a tax statute rule that an clause der the claiming exemp- narrowly against the one construed tion, adopting narrow construc- we are warranted “processing.” This also accords with the of the term tion noted, intent, previously since broad Legislature’s exemption “manufacturing” was not used in the term “processing” clause, was chosen. instead the word recognized as a “processing” has been sub- The term larger term East category Freight Express, Food Motor Lines Frozen Texas (1956), L. S.Ct. 574 where the Ed. U.S. dressed poultry which had been issue was whether product agricultural of an was a manufactured frozen commodity. Court, concluding not a it was manu- stated: factured *8 point processing

“At some commodity merge. retains But where will identity proc- through continuing substantial say stage it has been essing cannot we 54, ‘manufactured’ at ..[351 U.S. 100 L. Ed. at 924]

It also relied on its earlier definition of the term where it stated:

“The Court in Brewing Anheuser-Busch Asso. States, 562, 556, 338,

United 207 US 52 L ed S in arising Ct a case the tariff laws, said, “ ‘... implies Manufacture a change, every

change manufacture, yet every change treatment, in an article the result of labor and manipulation. something necessary, But more set forth and in Wieg- illustrated Hartranft v mann, 121 US 609. There must be transforma- tion; emerge, a new and different article must ’ ” “having name, a distinctive character or use.” [351 U.S. at 100 L. Ed. at 923] Virginia Court, City in Richmond, Prentice v. (1956), 197 Va. S.E.2d at some length question of what constitutes regard products. in approved following It of the general test: general comprehensive

“In the more defini- recognize tions three essential elements involved (1) manufacturing: original material referred (2) material; process whereby to as raw the raw (3) changed; resulting product material which, by subjected being proc- reason of essing, original is different from the raw materi- largely al. The conflict in the authorities results viewpoints degree different as to the change necessary satisfy require- the third may said, however, ment. It that mere ma- nipulation rearrangement of the raw materi- sufficient; substantial, is not als there must be a well-signalized form, quality transformation adaptability ...” [90 843] S.E.2d at can There be no doubt involves some original product. transformation Where the trans- form, quality ingredi- formation is substantial *9 A product, it is manufactured. end deemed ents of the processing category. change marks the less substantial material, pork, Here, original has been raw adding changed by reducing certain condi- its size and there has been that substantial ments. I do not believe ingredient form, quality which an alteration product done on the man- would elevate work ufacturing level. bright is no line what is manu-

While there between distinguished processed from food factured as categories cannot that the two this does not mean given product separated. fact generally food categories may present does characteristics of both any attempt we should abandon to define the mean that they synonymous treat when not. terms and them help language I but feel that the loose cannot syllabus third was unintended this Court does opin- majority recognize in the the difference terms. open all not be read as an invitation to those ion should products engaged who are processing exemption. to claim the ex E. D. rel.

State Aldredge The Hon. Naaman J. Judge, etc.

Chief (No. 14194) July 11, 1978. Decided