Court Opinion

ID: 6779426
Source: CourtListenerOpinion
Date Created: 2022-07-21 00:54:16.701119+00
Date Added: 2024-06-11T16:02:50.686310
License: Public Domain

Lundberg Stratton, J.,
dissenting. I believe that the bottle drying system, Videojet coder, and the glue labelers are exempt under the packaging exception of former R.C. 5739.02(B)(15).
The majority holds that the bottle drying system, glue rollers, and the Videojet coding system are not subject to the packaging exemption because (1) these pieces of equipment are not packages or packing material and (2) none of this equipment places the beer into the bottles. I believe that this interpretation is not supported by the language of former R.C. 5739.02(B)(15). I also believe that the majority’s holding continues the artificial and unreasonable conclusion that labeling falls into a “no man’s land” that is neither packaging nor manufacturing. Certainly this was not the intent of the General Assembly in enacting the manufacturing and packaging tax exemption statutes.
Labels are a Material that Constitutes Part of a Package
In support of its holding that these pieces of equipment are not packages or packaging material, the majority relies primarily upon Loctite Corp. v. Tracy (1994), 71 Ohio St.3d 401, 644 N.E.2d 281. In Loctite, this court held that color separation negatives and chromolin proofs were not exempt under the packaging *520exemption because neither the negatives nor the chromolin proofs were part of the material that restrained the movement of the packaged goods. Id. at 403, 644 N.E.2d at 283.
The restraint requirement for the packaging exemption was originally formulated in Custom Beverage Packers, Inc. v. Kosydar (1973), 33 Ohio St.2d 68, 62 O.O.2d 417, 294 N.E.2d 672. In Custom Beverage, the issue was whether unbound pallets were packages as defined in former R.C. 5739.02(B)(15). The court determined that the packages listed in former R.C. 5739.02(B)(15) restrained the packaged object in more than one direction. Custom Beverage at 73, 62 O.O.2d at 419, 294 N.E.2d at 675. Under this test, the court determined that unbound pallets were not packages because they restrained movement of cases of soft drinks in only one direction — down.
In Custom Beverage, the court justifiably restricted its interpretation as to the nature of a package to prevent an unwarranted expansion to an item that does not truly restrain the packaged item but merely provides a convenient support base for transportation of groups of the packaged items. I agree with this definition as to the general nature and purpose of a “package.” However, I believe that the court in Loctite, and now the majority in this case, have taken the restraint requirement from Custom Beverage too far in holding that only materials incorporated into the package that also restrain the packaged product are exempt. More importantly, I believe that the court in Loctite misinterpreted former R.C. 5739.02(B)(15).
Former R.C. 5739.02(B)(15) exempted “packages, including material and parts therefor.” (Emphasis added.) In Loctite, the majority held that the language of R.C. 5739.02(B)(15) meant that “[o]nly those items that are essential to the restraining of movement of the goods to be sold are exempt from taxation under the packaging exception of R.C. 5739.02(B)(15).” Loctite at the syllabus. The court in Loctite reasoned that “the last sentence of the statute [R.C. 5739.02(B)(15) ], which cites examples of packages, indicates that only material and parts that serve the essential purpose of the package [restraining movement of the packaged product] are exempt.” Id. at 403, 644 N.E.2d at 283. I disagree.
The last sentence of former R.C. 5739.02(B)(15) states that •“ ‘[p]ackages’ includes bags, baskets, cartons, crates, boxes, cans, bottles, bindings, wrappings, and other similar devices and containers, and ‘packaging’ means placing therein.” This sentence gives a nonexhaustive list of examples of packages, but in no way restricts the material or parts used to create a package to only those materials or parts that actually restrain the packaged product. Thus, I believe that the court in Loctite misinterpreted R.C. 5739.02(B)(15) in an overly restrictive fashion with regard to what materials that make up a package are exempt from taxation.
*521The language of R.C. 5739.02(B)(15) is unqualified by any limiting language as to the definition of materials and parts that make up a package. Further, common sense dictates that this description was intended to be broad and inclusive. Accordingly, I would hold that the plain language of former R.C. 5739.02(B)(15) indicates that all material and parts incorporated into the package are exempt from taxation, regardless of whether the particular material restrains movement of the packaged product.
I find this interpretation particularly compelling when the relationship between a package and a label are considered. In today’s society, a label is an absolute requirement to every commercially created package, and probably most noncommercial packages also.
Further, both packaging and labeling serve equally compelling purposes. Practically speaking, packaging is necessary primarily to protect and restrain the packaged product for shipping. Labeling on the package, althoúgh not helpful in restraining a product, is just as essential for the purpose of informing the recipient of the nature, quantity, components, features, etc. of the packaged product. A product simply would not be marketable without a label. No one would purchase a bottle of beer without a means to determine its contents or manufacturer. Without a label, the packaged product may be useless or even dangerous to the ultimate consumer. Thus, I would find that common usage of the word “package” also includes its “label.”
Because of the plain language of R.C. 5739.02(B)(15) and the symbiotic relationship between packages and labels, I would hold that a label is part of the material that constitutes a package even though a label does not restrain the packaged product. Consequently, I would also modify Loctite to hold that while a package by nature must restrain the packaged product, no such limitation is placed on the material that is incorporated into the package. In other words, I would hold that all materials, specifically including labels, that are incorporated into or onto a package are exempt from taxation pursuant to R.C. 5739.02(B)(15).
The Bottle Dryer, Glue Rollers, and Videojet Coder are Equipment or Machines that Package Tangible Personal Property
The majority also holds that the bottle dryer, glue rollers, and the Videojet coder are not machines that are integral to packaging the beer because none of these machines places the beer into bottles. I disagree. In light of my aforementioned definition that a label is part of the material that constitutes a package, I would also hold that any machine or- piece of equipment that applies or facilitates the application of a label onto a package is a machine or piece of equipment “for use * * * in packaging tangible personal property” pursuant to R.C. 5739.02(B)(15).
*522In this case, the bottle dryer dries the bottle in preparation to accept a label, the glue roller distributes glue on the label so it can be affixed to the bottle, and the Videojet coder applies a code (label) to the bottle. Therefore, I would find that each of these machines “packages” beer in bottles as the term is defined in R.C. 5739.02(B)(15). Accordingly, I would hold that the glue rollers, bottle dryer, and Videojet coder are exempt from taxation pursuant to R.C. 5739.02(B)(15). Accordingly, I dissent.