Summary
In Miller v. Peck, 158 Ohio St. 17, 106 N.E.2d 776 (1952), the Supreme Court of Ohio held that the operation of a chicken hatchery does constitute manufacturing.
Summary of this case from Hatcheries, Inc. v. CobleOpinion
No. 32927
Decided June 4, 1952.
Taxation — Listing personal property — Section 5388, General Code — Machinery. tools and equipment used in manufacturing — Mechanical incubator and tools used in operating commercial hatchery.
A mechanical incubator and tools exclusively devoted to the operation of a commercial hatchery in incubating chicken eggs and hatching baby chicks for immediate sale as an independent commercial business are for the purpose of taxation used in a manufacturing process and, under the provisions of Section 5388, General Code, are assessable for tangible personal property taxes at 50 per cent of their true value in money.
APPEAL from the Board of Tax Appeals.
This is an appeal from a decision of the Board of Tax Appeals confirming increased tangible personal property tax assessments for the years 1948 and 1949 on certain incubator equipment and tools owned by the taxpayer, appellant herein, and used in a commercial hatchery. The taxpayer, claiming this property was machinery or equipment used either in agriculture or in manufacturing, maintains that under the provisions of Section 5388, General Code, it was assessable at 50 per cent of its true value in money instead of 70 per cent of such value as in case of other tangible personal property. The Tax Commissioner, appellee herein, held that such property was not entitled to the preferential rate of assessment and assessed it at 70 per cent of its true value.
The taxpayer operates a commercial hatchery on a small tract of land near Lisbon, Ohio. Chicken eggs are purchased and incubated by the equipment in question as a result of which baby chicks are commercially hatched and sold. He does not engage in any farm production of crops or livestock other than the hatching of chickens. The operation of this hatchery is his sole business activity.
The Board of Tax Appeals affirmed the orders of the Tax Commissioner holding that the taxpayer in the use of the incubator and tools was not engaged in agriculture but not indicating any view as to whether he used the property in manufacturing.
Messrs. Riddle Riddle and Mr. Richard D. Kennedy, for appellant.
Mr. C. William O'Neill, attorney general, Mr. Thomas R. Lloyd and Mr. Paul Tague, Jr., for appellee.
The question at issue is whether under Section 5388, General Code, incubator equipment operated in a commercial hatchery is used in agriculture or manufacturing so as to render it assessable for tangible personal property tax purposes at 50 per cent of its true value rather than at 70 per cent of such value, the rate required in case it is not so used.
The determination of the issue involved depends upon the construction of Section 5388, General Code, the pertinent parts of which are as follows:
"Excepting as herein otherwise provided, personal property shall be listed and assessed at 70 per centum of the true value thereof, in money, on the day as of which it is required to be listed * * *.
"* * *
"Personal property of the following kinds, used in business, shall be listed and assessed at 50 per centum of the true value thereof, in money * * *:
"(1) All engines, machinery, tools and implements of a manufacturer mentioned in Section 5386 of the General Code * * * and all engines, machinery, tools, implements and domestic animals used in agriculture * * *."
The statutes do not define the term, "agriculture," as related to the use of personal property for the conduct of agriculture as a business. But in the instant case there was no connection between the use of the property in question and any agricultural pursuit carried on by the taxpayer. A majority of the court is of the opinion that the property in question was not "used in agriculture," and the Board of Tax Appeals was justified in so holding.
A more serious question is whether the equipment and tools involved in the instant case were the tools and implements of a "manufacturer," as that term is defined in Section 5385, General Code. This section defines a manufacturer as follows:
"A person who purchases, receives or holds personal property, of any description, for the purpose of adding to the value thereof by manufacturing, refining, rectifying, or by the combination of different materials with a view of making a gain or profit by so doing, is a manufacturer * * *."
The term, "manufacturing," is otherwise defined as the production of articles for use from raw or prepared materials by giving to these materials new forms, qualities, properties, or combinations, whether by hand labor or by machinery. See the Century Dictionary.
Usually, where, through the use of tools and machinery, commodities or items of personal property are by special treatment or processing transformed into other more valuable items of personal property as a commercial business, the operation is that of manufacturing. If by the use of equipment very similar to the incubator in question more heat had been applied to the eggs, powdered or dehydrated eggs, a commercial product, would have been produced and unquestionably the process would have been that of manufacturing.
In the instant case, does the fact that the process had to do with the mechanical stimulation and development of an animal germ to a living animal itself as the end product for immediate sale in the channels of commerce take the operation out of the category of manufacturing? The answer may be suggested by the fact that in certain clearly manufacturing processes, a germ is seized upon for development and transformation into a clearly manufactured product. The manufacturer in the production of his products — by hand or machinery or both — often has to deal with living as well as nonliving substances. For instance, the production of commercial yeast, which is an aggregate of vegetable microorganisms characterized by their ability to convert sugar into carbondioxide and alcohol, is a manufacturing process. The yeast organism is used for fermentation in the manufacturing process of making bread or brewing beer.
Likewise, a chicken egg has within itself a living reproductive cell. The accomplishment by artificial means of the development and transformation of this cell into a different form of life as a business enterprise for profit fully qualifies as a manufacturing operation.
The somewhat antithetical process has been recognized by this court as manufacturing, e. g., the slaughter of hogs and the adding to the value and use thereof by certain processes and combinations with other materials — whereby they are converted into bacon, lard and cured meats — with a view of making gain or profit. Engle v. Sohn Co., 41 Ohio St. 691.
The reason for the partial exemption from taxation of tools and machinery used in agriculture or manufacturing is to encourage such use since it results in the production of more valuable personal property which in turn becomes subject to taxation.
We are of the opinion that the tools and equipment in the instant case were used in manufacturing, and that within the spirit and purpose of the statute they were entitled to partial exemption from taxation as provided for by the taxing statute.
The decision of the Board of Tax Appeals is reversed and the matter is remanded to the Tax Commissioner for further proceedings consistent with the judgment and opinion of this court.
Decision reversed.
ZIMMERMAN, STEWART, MIDDLETON, TAFT and MATTHIAS, JJ., concur.