Translate
Text Highlighter

Bookmark

PDF

Share

Report a problem
AMICUS AI
Citation Codes
Equivalent Citations
citation codes
Docket Number
Attorney(S)
  • Proceeding by the Fulton Market Cold Storage Company against the United States to recover taxes paid. Petition dismissed. This case having been heard by the Court of Claims, the court, upon the evidence and a stipulation of the parties, makes the following special findings of fact: 1. The plaintiff, the Fulton Market Cold Storage Company, is an Illinois corporation with its office and principal place of business located in Chicago. 2. The plaintiff now is, and for many years, including the period from June 21, 1932, to August 31, 1933, inclusive, was engaged in distributing a refrigerating agent in liquid form through pipe lines on its premises for the purpose of producing refrigeration for the treatment and preservation in its public warehouse of perishable products owned by patrons of such warehouse, and processing such products, and then removing the refrigerating agent in vapor form to reliquefy it for recirculation. The term "processing" is limited to mean such natural reactions, if any, as may result during cold storage. 3. The plaintiff operates an indirect refrigeration system, operated by electrical energy, in which it uses a readily liquefiable fluid, i.e., anhydrous ammonia, so that the vapor can be readily condensed to a liquid with cooling water when it is compressed to a reasonable pressure, averaging about 150 pounds per square inch gauge, and when the pressure is reduced on the liquid again, say to 15 pounds gauge, it evaporates at a temperature of approximately 0° F. with the absorption of a large amount of heat. The absorption of the heat is from a secondary system of calcium chloride brine which circulates through the refrigerator in coils or pipes. The ammonia vapor formed is drawn away from the refrigerator by the suction action of a compressor and is compressed to the condenser pressure, and is here again liquefied. The ammonia continuously passes through a cycle of operation as follows: (1) the vapor from the refrigerator is compressed and cooled until it liquefies, (2) the liquid is discharged into the refrigerator at a predetermined pressure and in evaporating absorbs heat from the brine, (3) the vapor is then returned to the compressor. The temperature at which the heat is absorbed is regulated by maintaining the required pressure in the refrigerator. At 15 pounds gauge the liquid boils at about 0° F.; if the pressure is reduced to 0 pounds gauge, the liquid boils at — 28° F.; and if the pressure is increased to 30 pounds gauge, the liquid boils at 17° F. Thus any desired refrigerator temperature can be obtained in this manner. The anhydrous ammonia is used over and over again in the cycle, and only that quantity which escapes through leaks in the system must be replaced. 4. The plaintiff uses the aforementioned calcium chlorine brine by circulating the brine at various predetermined temperatures through pipes and coils placed in specially constructed and insulated rooms in plaintiff's public refrigerated warehouse, which rooms contain perishable commodities, such as eggs, cheese, butter, meat, poultry, fish, apples, vegetables, beer, frozen fruits, frozen berries, potatoes, etc., and as the brine circulates, it extracts the heat from these commodities resulting in their preservation for food purposes. The brine returns to the refrigerator where the accumulated heat from the food is absorbed by the evaporating ammonia. 5. Commodities are customarily placed in refrigerated warehouses for preservation (1) at points of origin or production of such commodities, or (2) at points of destination or consumption of such commodities, or (3) at any points located between such origin points and such destination points. 6. The electrical energy used by the plaintiff in its refrigerated warehouse operations was used by plaintiff at an intermediate stage of the passage of perishable products from the producers to the retailers who vend such products. After passing through this intermediate stage the perishable products reach the custody of the retailer who uses refrigeration service for the preservation of the perishable products in connection with his selling operations. 7. As to its refrigerated warehouse operations plaintiff's dealings are with wholesalers, retailers, etc., in carloads or other large lots, and not with individual consumers or in lots of goods as small as are involved in transactions with individual consumers. 8. Plaintiff stores butter, eggs, poultry, fruits, pecans, apples, fish, cheese, vegetables, and in fact all perishable food products in its warehouse. Such butter, eggs, and poultry originate in Illinois, Kansas, Nebraska, Iowa, California, Oregon, and Washington, and, after storage in plaintiff's warehouse, are reshipped to points in Indiana, Pennsylvania, New York, and in fact the entire eastern seaboard. Such fruits, pecans, apples, and many other commodities originate in Arkansas, Tennessee, Alabama, Georgia, Louisiana, Washington, Oregon, Idaho, and other states, and, after storage in plaintiff's warehouse, are reshipped to points in all other states east of the Mississippi River. 9. Plaintiff solicits its storage business from practically every state by direct personal contacts, solicitation by mail, and through national advertising, two of its officers or solicitors traveling extensively throughout the United States soliciting such business. 10. Plaintiff's refrigerated warehouse is in direct competition with all large refrigerated warehouses located on railroad tracks in the United States, the extent of such competition depending upon the particular commodity in question and the location of such other refrigerated warehouses, and plaintiff's rates for storage are fixed in competition with such competing warehouses. 11. No tax on electrical energy used in refrigerated warehouse operations was assessed against, or collected by the Collector of Internal Revenue from, (1) refrigerated warehouses located in the State of California, because under the laws of California such warehouses are deemed to be affected with a public interest and classified as public utilities, and as such are exempted by paragraph 40, Regulations 42, of the Bureau of Internal Revenue, relating to the electrical energy tax, and (2) refrigerated warehouses owned and operated by any state or municipality. 12. Railroads, as a general rule, grant transit privileges on shipments for the temporary stoppage, handling, storage, and processing of such perishable products at convenient transit points en route between the points of origin and destination of shipments, and, in their filed and published tariffs, designate Chicago, including plaintiff's warehouse in that city as one of the points entitled to such transit privileges. 13. Railroads also provide and furnish refrigeration for and during the transportation of such perishable products, in that railroad systems provide specially equipped refrigerator cars therefor, precool the cars, keep the bunkers of the cars iced, and frequently stop the cars en route to replenish the supply of ice in the bunkers. Railroads also permit their refrigerated cars to stand while loaded with such perishable product, at transit points and destination, thus augmenting their cold storage services. 14. The electrical energy used by plaintiff in its operations described in finding 4 was furnished and sold to plaintiff by the Commonwealth Edison Company of Chicago, Illinois. 15. On or about April 5, 1935, the Collector of Internal Revenue for the First District of Illinois demanded of plaintiff a tax equivalent to 3% of the amount plaintiff paid for electrical energy consumed by it during the period from June 21, 1932, to August 31, 1933, inclusive, which tax, totaling $683.12, plaintiff duly paid, under protest, to said Collector of Internal Revenue for the First District of Illinois on or about April 13, 1935. 16. August 22, 1935, the plaintiff filed a claim for refund of the aforesaid taxes with the Collector of Internal Revenue for the First District of Illinois, at Chicago, on the grounds that: 1. Such electrical energy was not furnished to taxpayer for domestic or commercial consumption. 2. Such electrical energy was furnished to taxpayer for industrial consumption, and is therefore exempt from tax. 3. Such electrical energy was furnished to taxpayer for uses other than domestic or commercial, and is therefore exempt from tax. The said claim was rejected by letter of the Commissioner to plaintiff, dated November 1, 1935, reading in part as follows: "This office has consistently held that electrical energy consumed in operating compressors in the manufacturing of refrigeration for cold storage purposes is not used in manufacturing or processing of articles of commerce and that the business is commercial in scope and subject to tax. Your claim is therefore rejected in full." This letter is of record as Exhibit A attached to the stipulation herein and is made a part hereof by reference. 17. No repayment of tax paid by plaintiff to the Collector of Internal Revenue for the First District of Illinois, or any part thereof, has been made to plaintiff. 18. No part of the tax so paid by the plaintiff was billed separately or was otherwise passed on to its customers or patrons, but said tax was wholly absorbed and paid by plaintiff out of its own funds without any reimbursement therefor. 19. Facts as to Regulations, Interpretation, and Administration of Section 616 of the Revenue Act of 1932: 1. By section 616 of the Revenue Act of 1932, approved June 6, 1932, and effective June 21, 1932, 47 Stat. 169, 266, 26 U.S.C.A. Int.Rev. Acts, page 615, Congress imposed a tax on the amount paid for electrical energy for domestic or commercial consumption. Pursuant to that act, Treasury Regulations 42, Article 40, were promulgated June 17, 1932, eleven days after approval of the act. They were drafted under pressure, and since it was necessary to draft regulations covering other features of the act at the same time, the draftsmen in the Bureau of Internal Revenue were required to work practically every night from June 6, the date the act was approved, to June 17, when the Regulations were promulgated. The evidence shows that regulations are drafted in the Miscellaneous Tax Unit of the Bureau of Internal Revenue, subject to approval or revision by the Rules and Legislative Section of the General Counsel's Office, after which they are submitted to the General Counsel, then to the Commissioner of Internal Revenue for approval, and finally they must be approved by the Secretary of the Treasury. Such procedure was followed in this case. The act referred to was the first excise tax imposed by Congress on electrical energy, and therefore the Bureau of Internal Revenue had, prior thereto, no experience in administering this type of tax. The provisions of the Regulations were general in their nature. It was difficult to determine whether a particular use of electrical energy was taxable. In an effort to clarify the language used in the Regulations Treasury Decision 4342 was issued on July 26, 1932. Among other things it provided for the exemption from taxation of certain nonprofit institutions and held that electrical energy consumed in any commercial phase of an industrial or other business was taxable. Accordingly Regulations 42, Article 40, were revised October 22, 1932, to include the amendments contained in Treasury Decision 4342. 2. Although the Regulations were revised several times in an effort to clarify the scope of the tax, it was and still is necessary for the Bureau to administer the act involved on the basis of individual rulings governing specific uses of electricity, resulting in numerous published and unpublished rulings covering almost every taxable use of electricity. While Regulations 42, Article 40, construe as exempt from tax the noncommercial use of electrical energy by public utilities, telegraph, telephone, and radio communication companies, railroads and other common carriers, educational institutions not operated for private profit, churches, and charitable institutions, they at the same time construe the statute as meaning that the electrical energy consumed by these organizations in any commercial phase of their activities is not tax-exempt. Electrical energy is held taxable when utilized in the sales and display rooms, office buildings, retail stores, etc., operated by these organizations, where the energy is supplied from a meter not connected with their trunk lines, these activities being a commercial phase of their business. Electrical energy used by cold storage warehouses is consumed in a commercial activity, except where the warehouses are part of a railroad system, etc., or where they are used to store raw materials. This ruling applies in all states except California, whose law holds that cold storage warehouses are public utilities. The Bureau previously held that all cold storage warehouses were tax-exempt. 3. The Treasury Department holds that the published rulings of the Bureau of Internal Revenue do not have the force or effect of Treasury Decisions and do not commit the Department to any interpretation of the law which has not been formally approved and promulgated by the Secretary of the Treasury. Each ruling embodies the administrative application of the law and Treasury Decisions to the entire set of facts upon which a particular case rests. Unpublished rulings are not cited or relied upon by officers and employees of the Bureau as a precedent in the disposition of other cases. Walter W. Ahrens, of Washington, D.C. (John J. Hickey, of Washington, D.C. and James K. Polk, of New York City, on the brief), for plaintiff. James K. Polk, of New York City (Robert E. Coulson, of New York City, on the brief), for Consolidated Edison Co. of New York, Inc., amicus curiae. Hubert L. Will, of Washington, D.C. and Samuel O. Clark, Jr., Asst.Atty. Gen. (Robert N. Anderson, Fred K. Dyar, and George H. Foster, all of Washington, D.C. on the brief), for defendant.
Judges
  • PER CURIAM.
Are you a practicing lawyer?
Enhance your digital presence and reach by creating a Casemine profile.
Upload pleading to use the new AI search
Click here to upload
Cites
Cited by
Citation Codes
Equivalent Citations
citation codes
Docket Number
Attorney(S)
  • Proceeding by the Fulton Market Cold Storage Company against the United States to recover taxes paid. Petition dismissed. This case having been heard by the Court of Claims, the court, upon the evidence and a stipulation of the parties, makes the following special findings of fact: 1. The plaintiff, the Fulton Market Cold Storage Company, is an Illinois corporation with its office and principal place of business located in Chicago. 2. The plaintiff now is, and for many years, including the period from June 21, 1932, to August 31, 1933, inclusive, was engaged in distributing a refrigerating agent in liquid form through pipe lines on its premises for the purpose of producing refrigeration for the treatment and preservation in its public warehouse of perishable products owned by patrons of such warehouse, and processing such products, and then removing the refrigerating agent in vapor form to reliquefy it for recirculation. The term "processing" is limited to mean such natural reactions, if any, as may result during cold storage. 3. The plaintiff operates an indirect refrigeration system, operated by electrical energy, in which it uses a readily liquefiable fluid, i.e., anhydrous ammonia, so that the vapor can be readily condensed to a liquid with cooling water when it is compressed to a reasonable pressure, averaging about 150 pounds per square inch gauge, and when the pressure is reduced on the liquid again, say to 15 pounds gauge, it evaporates at a temperature of approximately 0° F. with the absorption of a large amount of heat. The absorption of the heat is from a secondary system of calcium chloride brine which circulates through the refrigerator in coils or pipes. The ammonia vapor formed is drawn away from the refrigerator by the suction action of a compressor and is compressed to the condenser pressure, and is here again liquefied. The ammonia continuously passes through a cycle of operation as follows: (1) the vapor from the refrigerator is compressed and cooled until it liquefies, (2) the liquid is discharged into the refrigerator at a predetermined pressure and in evaporating absorbs heat from the brine, (3) the vapor is then returned to the compressor. The temperature at which the heat is absorbed is regulated by maintaining the required pressure in the refrigerator. At 15 pounds gauge the liquid boils at about 0° F.; if the pressure is reduced to 0 pounds gauge, the liquid boils at — 28° F.; and if the pressure is increased to 30 pounds gauge, the liquid boils at 17° F. Thus any desired refrigerator temperature can be obtained in this manner. The anhydrous ammonia is used over and over again in the cycle, and only that quantity which escapes through leaks in the system must be replaced. 4. The plaintiff uses the aforementioned calcium chlorine brine by circulating the brine at various predetermined temperatures through pipes and coils placed in specially constructed and insulated rooms in plaintiff's public refrigerated warehouse, which rooms contain perishable commodities, such as eggs, cheese, butter, meat, poultry, fish, apples, vegetables, beer, frozen fruits, frozen berries, potatoes, etc., and as the brine circulates, it extracts the heat from these commodities resulting in their preservation for food purposes. The brine returns to the refrigerator where the accumulated heat from the food is absorbed by the evaporating ammonia. 5. Commodities are customarily placed in refrigerated warehouses for preservation (1) at points of origin or production of such commodities, or (2) at points of destination or consumption of such commodities, or (3) at any points located between such origin points and such destination points. 6. The electrical energy used by the plaintiff in its refrigerated warehouse operations was used by plaintiff at an intermediate stage of the passage of perishable products from the producers to the retailers who vend such products. After passing through this intermediate stage the perishable products reach the custody of the retailer who uses refrigeration service for the preservation of the perishable products in connection with his selling operations. 7. As to its refrigerated warehouse operations plaintiff's dealings are with wholesalers, retailers, etc., in carloads or other large lots, and not with individual consumers or in lots of goods as small as are involved in transactions with individual consumers. 8. Plaintiff stores butter, eggs, poultry, fruits, pecans, apples, fish, cheese, vegetables, and in fact all perishable food products in its warehouse. Such butter, eggs, and poultry originate in Illinois, Kansas, Nebraska, Iowa, California, Oregon, and Washington, and, after storage in plaintiff's warehouse, are reshipped to points in Indiana, Pennsylvania, New York, and in fact the entire eastern seaboard. Such fruits, pecans, apples, and many other commodities originate in Arkansas, Tennessee, Alabama, Georgia, Louisiana, Washington, Oregon, Idaho, and other states, and, after storage in plaintiff's warehouse, are reshipped to points in all other states east of the Mississippi River. 9. Plaintiff solicits its storage business from practically every state by direct personal contacts, solicitation by mail, and through national advertising, two of its officers or solicitors traveling extensively throughout the United States soliciting such business. 10. Plaintiff's refrigerated warehouse is in direct competition with all large refrigerated warehouses located on railroad tracks in the United States, the extent of such competition depending upon the particular commodity in question and the location of such other refrigerated warehouses, and plaintiff's rates for storage are fixed in competition with such competing warehouses. 11. No tax on electrical energy used in refrigerated warehouse operations was assessed against, or collected by the Collector of Internal Revenue from, (1) refrigerated warehouses located in the State of California, because under the laws of California such warehouses are deemed to be affected with a public interest and classified as public utilities, and as such are exempted by paragraph 40, Regulations 42, of the Bureau of Internal Revenue, relating to the electrical energy tax, and (2) refrigerated warehouses owned and operated by any state or municipality. 12. Railroads, as a general rule, grant transit privileges on shipments for the temporary stoppage, handling, storage, and processing of such perishable products at convenient transit points en route between the points of origin and destination of shipments, and, in their filed and published tariffs, designate Chicago, including plaintiff's warehouse in that city as one of the points entitled to such transit privileges. 13. Railroads also provide and furnish refrigeration for and during the transportation of such perishable products, in that railroad systems provide specially equipped refrigerator cars therefor, precool the cars, keep the bunkers of the cars iced, and frequently stop the cars en route to replenish the supply of ice in the bunkers. Railroads also permit their refrigerated cars to stand while loaded with such perishable product, at transit points and destination, thus augmenting their cold storage services. 14. The electrical energy used by plaintiff in its operations described in finding 4 was furnished and sold to plaintiff by the Commonwealth Edison Company of Chicago, Illinois. 15. On or about April 5, 1935, the Collector of Internal Revenue for the First District of Illinois demanded of plaintiff a tax equivalent to 3% of the amount plaintiff paid for electrical energy consumed by it during the period from June 21, 1932, to August 31, 1933, inclusive, which tax, totaling $683.12, plaintiff duly paid, under protest, to said Collector of Internal Revenue for the First District of Illinois on or about April 13, 1935. 16. August 22, 1935, the plaintiff filed a claim for refund of the aforesaid taxes with the Collector of Internal Revenue for the First District of Illinois, at Chicago, on the grounds that: 1. Such electrical energy was not furnished to taxpayer for domestic or commercial consumption. 2. Such electrical energy was furnished to taxpayer for industrial consumption, and is therefore exempt from tax. 3. Such electrical energy was furnished to taxpayer for uses other than domestic or commercial, and is therefore exempt from tax. The said claim was rejected by letter of the Commissioner to plaintiff, dated November 1, 1935, reading in part as follows: "This office has consistently held that electrical energy consumed in operating compressors in the manufacturing of refrigeration for cold storage purposes is not used in manufacturing or processing of articles of commerce and that the business is commercial in scope and subject to tax. Your claim is therefore rejected in full." This letter is of record as Exhibit A attached to the stipulation herein and is made a part hereof by reference. 17. No repayment of tax paid by plaintiff to the Collector of Internal Revenue for the First District of Illinois, or any part thereof, has been made to plaintiff. 18. No part of the tax so paid by the plaintiff was billed separately or was otherwise passed on to its customers or patrons, but said tax was wholly absorbed and paid by plaintiff out of its own funds without any reimbursement therefor. 19. Facts as to Regulations, Interpretation, and Administration of Section 616 of the Revenue Act of 1932: 1. By section 616 of the Revenue Act of 1932, approved June 6, 1932, and effective June 21, 1932, 47 Stat. 169, 266, 26 U.S.C.A. Int.Rev. Acts, page 615, Congress imposed a tax on the amount paid for electrical energy for domestic or commercial consumption. Pursuant to that act, Treasury Regulations 42, Article 40, were promulgated June 17, 1932, eleven days after approval of the act. They were drafted under pressure, and since it was necessary to draft regulations covering other features of the act at the same time, the draftsmen in the Bureau of Internal Revenue were required to work practically every night from June 6, the date the act was approved, to June 17, when the Regulations were promulgated. The evidence shows that regulations are drafted in the Miscellaneous Tax Unit of the Bureau of Internal Revenue, subject to approval or revision by the Rules and Legislative Section of the General Counsel's Office, after which they are submitted to the General Counsel, then to the Commissioner of Internal Revenue for approval, and finally they must be approved by the Secretary of the Treasury. Such procedure was followed in this case. The act referred to was the first excise tax imposed by Congress on electrical energy, and therefore the Bureau of Internal Revenue had, prior thereto, no experience in administering this type of tax. The provisions of the Regulations were general in their nature. It was difficult to determine whether a particular use of electrical energy was taxable. In an effort to clarify the language used in the Regulations Treasury Decision 4342 was issued on July 26, 1932. Among other things it provided for the exemption from taxation of certain nonprofit institutions and held that electrical energy consumed in any commercial phase of an industrial or other business was taxable. Accordingly Regulations 42, Article 40, were revised October 22, 1932, to include the amendments contained in Treasury Decision 4342. 2. Although the Regulations were revised several times in an effort to clarify the scope of the tax, it was and still is necessary for the Bureau to administer the act involved on the basis of individual rulings governing specific uses of electricity, resulting in numerous published and unpublished rulings covering almost every taxable use of electricity. While Regulations 42, Article 40, construe as exempt from tax the noncommercial use of electrical energy by public utilities, telegraph, telephone, and radio communication companies, railroads and other common carriers, educational institutions not operated for private profit, churches, and charitable institutions, they at the same time construe the statute as meaning that the electrical energy consumed by these organizations in any commercial phase of their activities is not tax-exempt. Electrical energy is held taxable when utilized in the sales and display rooms, office buildings, retail stores, etc., operated by these organizations, where the energy is supplied from a meter not connected with their trunk lines, these activities being a commercial phase of their business. Electrical energy used by cold storage warehouses is consumed in a commercial activity, except where the warehouses are part of a railroad system, etc., or where they are used to store raw materials. This ruling applies in all states except California, whose law holds that cold storage warehouses are public utilities. The Bureau previously held that all cold storage warehouses were tax-exempt. 3. The Treasury Department holds that the published rulings of the Bureau of Internal Revenue do not have the force or effect of Treasury Decisions and do not commit the Department to any interpretation of the law which has not been formally approved and promulgated by the Secretary of the Treasury. Each ruling embodies the administrative application of the law and Treasury Decisions to the entire set of facts upon which a particular case rests. Unpublished rulings are not cited or relied upon by officers and employees of the Bureau as a precedent in the disposition of other cases. Walter W. Ahrens, of Washington, D.C. (John J. Hickey, of Washington, D.C. and James K. Polk, of New York City, on the brief), for plaintiff. James K. Polk, of New York City (Robert E. Coulson, of New York City, on the brief), for Consolidated Edison Co. of New York, Inc., amicus curiae. Hubert L. Will, of Washington, D.C. and Samuel O. Clark, Jr., Asst.Atty. Gen. (Robert N. Anderson, Fred K. Dyar, and George H. Foster, all of Washington, D.C. on the brief), for defendant.
Judges
  • PER CURIAM.
See more information ...
Smart Summary

FULTON MARKET COLD STORAGE CO. v. UNITED STATES.

PER CURIAM.

The material facts in this case are substantially the same as the facts in St. Louis Refrigerating Cold Storage Co. v. United States, Ct.Cl., 43 F. Supp. 476, decided this day. The question presented is the same.

Upon the facts disclosed and for the reasons set forth in St. Louis Refrigerating Cold Storage Co. v. United States, supra, the court is of the opinion that the plaintiff is not entitled to recover, and the petition is therefore dismissed.

It is so ordered.

Use AI to get other relevant cases.
Try AI Pro free for 7 days Upgrade to AI Pro

Comments

FULTON MARKET COLD STORAGE CO. v. UNITED STATES, (1942)
(Mar 2, 1942)