Court Opinion

ID: 9842833
Source: CourtListenerOpinion
Date Created: 2023-09-24 02:19:23.975974+00
Date Added: 2024-06-11T09:13:56.940628
License: Public Domain

WOODBURY, Circuit Judge
(dissenting).
This is indeed a close case. Nevertheless the fact remains that Polaroid fabricated no part of the completed cameras, nor is there any basis for saying that the cameras were made by Greist either as Polaroid’s agent, or as Polaroid’s alter ego. Greist did not manufacture only Polaroid’s cameras but in addition manufactured a variety of mechanical “precision assemblies,” principally for sewing machines, for other purchasers. Neither were the cameras fabricated by Greist from any parts or materials furnished by Polaroid to which it retained title which would bring this case within the provisions of subsection (b) of Treasury Regulations 46 (1940) § 316.4 which in its ■entirety reads:
“Who is a manufacturer — (a) The term ‘manufacturer’ includes a *279person who produces a taxable- article from scrap, salvage, or junk material, as well as from new or raw material, (1) by processing, manipulating, or changing the form of an article, or (2) by combining or assembling two or more articles.
“(b) Under certain circumstances, as where a person manufactures or produces a taxable article for a person who furnishes materials and retains title thereto, the person for whom the taxable article is manufactured or produced, and not the person who actually manufactures or produces it, will be considered the manufacturer.”
Polaroid and Greist are wholly separate and distinct entities who struck an arm’s length bargain whereby Greist as an independent contractor “manufactured” the cameras in the sense of making them, fabricating them, putting them together, with its own employees out of its own materials, and parts it purchased from third parties, and then sold them for an agreed price to Polaroid. The fact that because of Polaroid’s patents Greist had and legally could have only one customer for the cameras and the fact that the cameras were made according to Polaroid’s specifications and subject to its inspection seem to me beside the point. Certainly if Greist in violation of the patent law and its contract with Polaroid sold a camera or cameras to some one other than Polaroid it Would be liable for the tax on those cameras.
It seems to me that in ordinary language Greist was the manufacturer and Polaroid a purchaser who sold the cameras at wholesale. Thus to impose the tax on Polaroid is to base the tax not on the manufacturer’s sale price in accordance with the statute but on the wholesaler’s sale price, which naturally is greater since it includes, presumably, in addition to the cost of the goods to the wholesaler (the price for which the manufacturer sold them) the wholesaler’s mark-up for handling costs, selling, overhead and profit. I would reverse.