Opinion ID: 2632643
Heading Depth: 1
Heading Rank: 1

Heading: facts

Text: Agrilink produces chili con carne and chili con carne with beans, requiring raw beef to be (1) ground, (2) mixed with vegetable protein, (3) extruded, (4) brazed at 160 degrees, (5) drained, (6) diced, (7) canned, and (8) cooked until commercially sterile. Clerk's Papers at 23-25. Once canned, the chili has an indefinite shelf life in terms of remaining fit for human consumption, although it is likely to acquire an unsavory taste after four to six years. In short, Agrilink's chili-making process converts raw meat into a nonperishable finished product. In 1991, Agrilink requested that DOR reclassify its chili production as taxable under the lower rate pursuant to RCW 82.04.260(4) and claimed a refund was due dating back to 1987. RCW 82.04.260(4) reads in full as follows: Upon every person engaging within this state in the business of slaughtering, breaking and/or processing perishable meat products and/or selling the same at wholesale only and not at retail; as to such persons the tax imposed shall be equal to the gross proceeds derived from such sales multiplied by the rate of 0.138 percent. The parties settled their first dispute in 1997 but left open the final determination of the appropriate taxation rate. In 1999, DOR advised Agrilink it would thereafter be taxed at the general manufacturing rate of .484 percent. Agrilink paid the additional $42,330.52 in taxes from June to December 1999 but filed a refund request that ultimately led to the matter before this court. After a bench trial upon stipulated facts, Thurston County Superior Court Judge Richard A. Strophy ruled that RCW 82.04.260(4), imposing the lower tax rate on those processing perishable meat products, applied to Agrilink's chili-making activities discussed above. The court reasoned that each of the activities listed in the statute is clearly disjunctive, indicating that any person undertaking one such activity is entitled to the lower rate. The court went on to conclude that even if the statute were ambiguous as to the question of whether the finished product must be perishable, such ambiguity must be resolved in favor of the taxpayer. DOR appealed, and Division Two of the Court of Appeals reversed in an unpublished opinion. See Agrilink Foods, Inc. v. Dep't of Revenue, noted at 117 Wash.App. 1037, 2002 WL 32123542, at . The court held that the plain language of RCW 82.04.260(4) requires a perishable finished product in all cases. Id. at . However, early in the analysis, the court stated that [g]iven the broad definition of `processing,' the phrase `processing perishable meat' includes subjecting perishable meat to a special process that converts it into nonperishable (canned) meat. Id. at  (emphasis added). The court went on to state that [i]nterpreting the phrase `processing perishable meat products' to exclude nonperishable end products is consistent with deriving plain meaning from the statute. Id. The Court of Appeals based its holding on two lines of reasoning. First, the court concluded that because two other activities listed in RCW 82.04.260(4) result in perishable end products  that is slaughtering and breaking  then the third activity, processing, should be interpreted narrowly to require a perishable end product as well. Id. Second, the court concluded that the term perishable in the phrase processing perishable meat products would be superfluous if the legislature intended the lower rate to apply to manufacturers of nonperishable goods. Id.