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Martinelli v. Washington State Department of Revenue

filed: March 22, 1996.

S. MARTINELLI & COMPANY, INC., A CALIFORNIA CORPORATION, APPELLANT/CROSS-RESPONDENT,
v.
WASHINGTON STATE DEPARTMENT OF REVENUE, RESPONDENT/CROSS-APPELLANT.



Superior Court of Thurston County. Superior Court Docket No. 92-2-01557-6. Date Filed In Superior Court: June 29, 1993. Superior Court Judge Signing: Paula Casey.

Houghton, A.c.j., Morgan, J., Fleisher, P.t.j., concur

Author: Houghton

HOUGHTON, A.C.J. -- S. Martinelli and Company (Martinelli) and the Washington Department of Revenue (DOR) appeal from the trial court's grant of a partial summary judgment to each party on different provisions of the State excise tax statute. The trial court determined that Martinelli's sparkling, 100% fruit juices were "carbonated beverages" subject to the carbonated beverage tax, RCW 82.64. The trial court also determined that the same juices were not "carbonated beverages" under RCW 82.12, the use tax. We conclude that Martinelli's sparkling juices are "carbonated beverages" and taxable under both the carbonated beverage tax, RCW 82.64, and the use tax, RCW 82.12. Therefore, we reverse on the use tax and affirm on the carbonated beverage tax.

FACTS AND PROCEDURAL HISTORY

On June 29, 1992, Martinelli filed a tax assessment appeal pursuant to RCW 82.32.180. The appeal challenged the DOR's assessment for the years 1989 and 1990 of (1) $128 for use tax pursuant to RCW 82.12 on Martinelli's "sparkling juices" and (2) $19,304 for carbonated beverage tax pursuant to RCW 82.64 and WAC 458-20-255 on Martinelli's "sparkling juices." Martinelli paid the assessed taxes under protest on September 23, 1991.

On April 12, 1992, Martinelli moved for summary judgment, attaching the declaration of the company president, Stephen C. Martinelli (SCM). SCM testified that Martinelli is an apple processing business, primarily producing undiluted apple juice and cider; however, the products relevant to this case are its sparkling apple, apple-cranberry, apple-raspberry, and apple-boysenberry juices and sparkling apple cider. SCM maintained that "producing bottled juices from fresh apples" and "manufacturing carbonated beverages from acidified syrups and carbonated water" are different processes. SCM also testified that other States have concluded either that its products were "tax exempt food products" or were not "carbonated beverages" under their returnable bottle acts.

The DOR did not dispute the factual assertions made by SCM in his declaration or by Martinelli in its motion; however, the DOR did question the relevance of most of the asserted facts. The DOR argued that the only relevant facts were that Martinelli's products (1) are nonalcoholic, (2) are liquids intended for human consumption, and (3) contain carbon dioxide. The DOR alleged that Martinelli did not dispute these facts.

The DOR further argued that the use tax was applicable to the samples that Martinelli distributed in Washington. Martinelli claimed to be a "food product" exempt from the use tax under RCW 82.12.0293, which states:

"Food products" include all fruit juices, vegetable juices, and other beverages except bottled water, spirituous, malt or vinous liquors or carbonated beverages, whether liquid or frozen. . . .

The DOR analyzed the structure of this sentence, concluding that carbonated fruit juices are taxable under the use tax as "carbonated beverages."

Martinelli replied arguing that (1) the ordinary meaning of "carbonated beverage" in the soda industry refers to "soda pop"; (2) its 100% fruit juices are "fruit product[s]" within the RCW 82.12.0293 exemption; and (3) other jurisdictions have construed similar language to exempt its products.

On May 7, 1993, the trial court granted summary judgment in favor of Martinelli, concluding that under both RCW 82.12 and RCW 82.64, its sparkling fruit juices were not "carbonated beverages." The DOR filed a motion for reconsideration on May 17, 1993. The trial court granted the DOR's motion for reconsideration on June 28, 1993, and vacated its previous order.

On reconsideration, the trial court concluded that the use tax should be analyzed independent of the carbonated beverage tax, and that "the ordinary meaning of the term 'carbonated beverage' does not include an undiluted carbonated fruit juice. Therefore, Martinelli Sparkling

Juice products are not 'carbonated beverages' within the meaning of RCW 82.12.0293(1) [the use tax] and are exempt 'food products' not subject to taxation under chapter 82.12 RCW."

The trial court also concluded on reconsideration that "the statutory definition of 'carbonated beverage' in RCW 82.64.010(1) [the carbonated beverage tax] unambiguously includes an undiluted carbonated fruit juice. Therefore, Martinelli Sparkling Juice products are 'carbonated beverages' within the ...


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