Case Name: STEWART HONEYBEE PRODUCTS, INC., Appellee, v. COMMONWEALTH of Pennsylvania, BOARD OF FINANCE AND REVENUE, Appellant
Court: Supreme Court of Pennsylvania
Jurisdiction: Pennsylvania
Decision Date: 1990-09-12
Citations: 525 Pa. 222
Docket Number: No. 49 M.D. Appeal Docket 1989
Parties: STEWART HONEYBEE PRODUCTS, INC., Appellee, v. COMMONWEALTH of Pennsylvania, BOARD OF FINANCE AND REVENUE, Appellant.
Judges: Before NIX, C.J., and LARSEN, FLAHERTY, McDERMOTT, ZAPPALA, PAPADAKOS and CAPPY, JJ.
Reporter: Pennsylvania State Reports
Volume: 525
Pages: 222–232

Head Matter:
579 A.2d 872
STEWART HONEYBEE PRODUCTS, INC., Appellee, v. COMMONWEALTH of Pennsylvania, BOARD OF FINANCE AND REVENUE, Appellant.
Supreme Court of Pennsylvania.
Argued May 10, 1990.
Decided Sept. 12, 1990.
Michael A. Roman, Sr. Deputy Atty. Gen., for appellant.
Lloyd R. Persun, Harrisburg, for appellee.
Before NIX, C.J., and LARSEN, FLAHERTY, McDERMOTT, ZAPPALA, PAPADAKOS and CAPPY, JJ.

Opinion:
OPINION OF THE COURT
FLAHERTY, Justice.
The Capital Stock Tax imposes a tax liability on certain business entities in Pennsylvania, but exempts, inter alia, manufacturers. Act of March 4,1971, P.L. 6, No. 2, art. VI, § 602 as amended, 72 P.S. § 7602. Stewart Honeybee, the taxpayer herein, claimed that it was entitled to the manufacturing exemption for the years 1980 and 1981, and sought review before Commonwealth Court of the decisions of the Board of Finance and Revenue, which denied the manufacturing exemption. The cases for 1980 and 1981 were consolidated, and a panel of Commonwealth Court affirmed the Board's denial of the manufacturing exemption. 118 Pa.Cmwlth. 430, 545 A.2d 468 (1988). Stewart Honeybee then filed timely exceptions, and Commonwealth Court, en banc, sustained the taxpayer's exceptions and vacated the panel's decision. Judge Palladino, the author of the panel opinion, strongly dissented. 128 Pa.Cmwlth. 132, 562 A.2d 1015 (1989). The Commonwealth then took this direct appeal, pursuant to § 723(b) of the Judicial Code, 42 Pa.C.S. § 723(b), and Pa.R.A.P. 1101(a)(2), which provide for an appeal as of right from the final orders of the Commonwealth Court in cases seeking review of decisions of the Board of Finance and Revenue.
Our opinion in Ski Roundtop v. Commonwealth, 520 Pa. 227, 553 A.2d 928 (1989), which intervened between the two Commonwealth Court opinions, restated the requirements of qualification for the manufacturing exemption. The taxpayer in Ski Roundtop operated a ski resort and claimed that its snow-making activity on ski slopes was manufacturing within the meaning of section 602(a) of the Tax Reform Code of 1971, 72 P.S. § 7602(a), which exempts from taxation businesses "organized for manufacturing, processing, research or development purposes." We agreed that Ski Roundtop's snow-making activity was manufacturing, and we summarized the requirements for manufacturing activity as follows:
(1) the application of labor and skill (2) which changes a material (3) substantially (4) into a new, different and useful item.
520 Pa. at 231, 553 A.2d at 930. The question raised in this appeal is whether Stewart Honeybee's business activities fall within this definition of manufacturing.
Stewart Honeybee's business activity consists primarily in processing raw honey in such a way that it is transformed from a crystalline mass into a liquid which has been pasteurized and filtered to remove impurities. The honey, which Stewart largely purchases from outside suppliers, is also blended for flavor and is packaged in containers of various sizes from twelve ounce bottles to fifty-five gallon drums. The honey is processed in commercial equipment, some of which is the same as that used to pasteurize milk, and it is heated and cooled to various appropriate temperatures in order to kill harmful bacteria and in order to transform the honey into a liquid state.
The Commonwealth's primary contentions are that Stewart Honeybee is not eligible for the manufacturing exemption because its activities can be summarized as filtration and pasteurization, both of which have been determined not to constitute manufacturing. Commonwealth v. Tetley Tea Co., 421 Pa. 614, 220 A.2d 832 (1966) (removal of impurities or foreign matter from a substance does not result in a new and different product); Commonwealth v. Sunbeam Water Co., 284 Pa. 180, 130 A. 405 (1925) (distillation of water to remove impurities does not result in a new and different product); Rieck-McJunkin Dairy Co. v. Pittsburgh School District, 362 Pa. 13, 66 A.2d 295 (1949) (pasteurization of milk does not create a new and different product).
Stewart Honeybee, on the other hand, argues that raw untreated honey is not approved for human consumption by the Food and Drug Administration or the United States Department of Agriculture and that the physical and chemical changes to the honey which result from its treatment combined with the fact that its finished product is fit for human consumption require that its process be regarded as manufacturing.
Philosophically, it might be argued, as an embellishment of Stewart Honeybee's position, that the application of heat and filtration to honey in this case is not fundamentally different from the application of pressurized air at certain temperatures to water in Ski Roundtop: in both cases a basic substance — honey in the case of Stewart Honeybee and water in the case of Ski Roundtop — is treated and re-formed in some fashion by the taxpayer. Although it is true that this Court determined in Ski Roundtop that both pressurized air and water were the raw materials used to produce snow, not water alone, 520 Pa. at 232-33, 553 A.2d at 931, the situation in the present case, according to this analysis, might be regarded as no different: heat and honey, not raw honey alone, could be seen as the original materials used to make liquid honey.
Even if we were to agree with this analysis, however, that would not cause us to regard Stewart Honeybee's process as manufacturing within the meaning of section 602(a) of the Tax Reform Code of 1971, for the basic substance with which the taxpayer works, honey, is not substantially changed, and is not, therefore, a new, different and useful item. If honey is heated and filtered in order to make a liquid, that is not different in principle from washing, filtering or heating any food which is then consumed in its washed, filtered or heated form. But such treatment of food has never been characterized as manufacturing. See Van Bennett Food Co. v. City of Reading, 87 Pa.Cmwlth. 30, 486 A.2d 1025 (1985), and cases cited therein. Processed honey, like other foods which are washed, heated and filtered, may be more suitable for certain uses, but processed foods generally, including honey, remain essentially what they were before they were treated. The water and pressurized air in the Ski Roundtop case, on the other hand, were substantially changed into a new material which had properties and uses which the water and air did not have prior to Ski Roundtop's treatment. Stewart Honeybee's honey is not, therefore, "a new, different and useful item."
For the foregoing reasons, we conclude that the taxpayer has not demonstrated that it is entitled to the manufacturing exemption. The judgment of the Commonwealth Court is reversed.
CAPPY, J., files a concurring opinion which is joined by McDermott, j.
LARSEN, J., files a dissenting opinion.
. The Commonwealth is correct in its view that Ski Roundtop merely summarized existing law and that prior cases are, therefore, still authoritative.
. Because the dispute in this case is focused on whether the processed honey is a new, different and useful product which is substantially changed from the original materials from which it is made, and because of our disposition of the case, we assume, without deciding, that the requisite skill and labor are involved in its production.
. Both processed and raw honey are sold to consumers for use as sweeteners. In fact, some people prefer raw honey. As Judge Palladino observed in the first Stewart Honeybee case, many honey connoisseurs prefer honey in its crystallized form, and some experts maintain that honey should not be heated at all. 118 Pa.Cmwlth. 430, 435 n. 5, 545 A.2d 468, 470 n. 5 (1988).
. Compare Commonwealth v. Berlo Vending Co., 415 Pa. 101, 202 A.2d 94 (1964) (the transformation of popcorn kernels into greatly expanded kernels after mixing, heating and salting is a superficial, not a substantial change). Any changes in the filtered, heated honey, like the changes in popcorn are comparatively insubstantial; honey, after it is processed, remains a food that is used as a sweetener.