McCarroll, Comm. of Rev. v. Scott Paper Box Co.

G-rifein Smith, C. J. The question to be determined is whether appellee, Scott Paper Box Company, must collect and pay the Arkansas retail sales tax on pasteboard boxes it manufactures and sells to the Wortz Biscuit Company. The case was tried on an agreed statement of facts, the material provisions of which are: “The biscuit company,. in the manufacture of its packaged articles, uses the paper boxes as a component part of the article and resells the same in unchanged form to the wholesaler, jobber, or retailer, who in turn sells the package in unchanged form to the ultimate consumer. “The biscuit company sells said manufactured products in original containers or packages for a greater or larger amount of money than they sell the same cakes, cookies, etc., in bulk. ‘ ‘ The cost of the box merges into and is an element in the cost of the packaged article, representing twelve to fourteen per cent, of the net selling price of the finished article, and is so computed by the biscuit company and not considered by it as a part of its general overhead expense. | • ! “The cost of the box is computed in arriving at the selling price of the finished article by the biscuit company the same as the cost of all other ingredients and constituents of the finished article. “The biscuit company does not use the boxes for any other purpose than resale to the wholesaler, jobber, or retailer, as aforesaid, and the retail merchant ultimately sells the packaged goods in small quantities to the house-ivife or other consumer; that the said retailer in the ultimate sale of packaged goods'places the same in a sack along Avith other goods purchased by the consumer, unless otherwise requested toy the ultimate purchaser or consumer. “The housewife or-ultimate consumer can purchase from the retailer in hulk a greater quantity of the product for the same amount of money as the original packaged goods cost.” The tax sought to toe sustained is levied toy act 154 of 1937. Under “Definitions” in § 3 the act reads-: “The term ‘sáfe at retail’ shall mean any transaction, transfer, exchange, or barter, by which is transferred for a consideration the ownership of personal property. '^Subdivision 1 of paragraph to]. The test of a sale at retail [Subdivision i] is whether the sale is to a consumer for use and not for resale. Sales of goods which, as ingredients oí* constituents, go into and form a part of the tangible personal property for resale by the buyer are not within the act. ’ ’ Section 9 directs that the tax ‘ ‘ shall be collected toy the retailer from the consumer.” Section 14 is: “Any person engaged or continuing in business as a retailer; and retailer and wholesaler or jobber, shall keep his books so as to show separately the sales of each business. He shall consider as retail sales all sales made by him to any person other than a person purchasing for resale in the regular course of business or for processing. ’ ’ In its decree permanently enjoining the commissioner of revenues the chancery court said: “The biscuit company does not change the form of the boxes which become a component part of the articles it sells in large quantities and at wholesale. Neither the Scott Paper Box Company nor the Wortz Biscuit Company uses or consumes the pasteboard or paper boxes, but both of them resell them at wholesale. . . . The tax levied by act 154 is paid by the final purchaser of individually boxed products upon purchase by the final consumer from a retailer.” We agree with the chancellor’s analysis of the transactions and his determination of the law applicable thereto. The stipulation is not reasonably susceptible of any other interpretation. It is clear that the Wortz Company sells at wholesale, to a retailer a package of its manufactured products — not a quantity of cakes or cookies or crackers enclosed in a box it has consumed. It is shown that the container appreciates the sell; ing price by-twelve to fourteen per cent. The stipulation makes use of the term “finished article” in identifying the object of ultimate sale. These commodities-— cakés, cookies, and crackers — are also sold in bulk by the. Wortz Company, and for less, proportionately, than the same merchandise is sold when supplied in packages. The conclusion is inescapable, and the stipulation concedes, that the cost of the packing is added to the sale price, just as the flour, sugar, and other constituents which enter into the manufacturing process become a part of the completed transaction. Expressed differently, the Wortz Company proposes to prepare, box, and offer in the market at wholesale the particular commodities in question. It buys flour, sugar, soda, salt, shortening, flavoring, etc., as ingredients. None of these components is taxable under act 154 when purchased for the purposes mentioned. The plan of sale, however, calls for wrapping or enclosure in individual cartons at the time of manufacture; and it is for the latter purpose that purchase of pasteboard boxes is made. Appellant contends there is consumption when the packing operation occurs, and that the boxes form no part of the integration. It urges that the instant case is controlled by Wiseman, Commissioner, v. Arkansas Wholesale Grocers’ Association, 192 Ark. 313, 90 S. W. 2d 987, where it was held that the’sales tax applied to wrapping paper, paper -bags, and- twine sold by wholesalers to retailers, for use by the latter in facilitating individual sales. But there is this difference: In the suit at bar the retailer receives the completed, wrapped packages. In the Wiseman case the wrapping paper, -bags, and twine were sold for convenience of retailers in manually wrapping or enclosing bulk, commodities. The price of a dozen oranges, a peck of potatoes, a roast, and other merchandise customarily found in a retail grocery store, is predetermined either by weight or count, without reference to the attributes of delivery. The opinion in the Wiseman case expressly declares that the subject of the tax was absorbed by the merchant as a part of the cost of doing business, “that is, they are taken care of out of his profits, and not added to the selling price.” In the instant case it is stipulated- that the cakes, cookies, and crackers, when sold in bulk, retail for less than if delivered in packages. This admission by appeJU. lant shows that, cost of packing was added to the wholesale price paid by the retailer; and the retailer, in turn, computed his or her profit by requiring the consumer to pay the wholesale cost, plus the percentage of gain which the circumstance justified. The decree is affirmed. Smith and Donham, JJ., dissent.