Commercial Solvents Corp. v. Riley

LANGDON, J.

Plaintiff is engaged in the manufacture and sale of industrial alcohol, including ethyl alcohol which may be thereafter denatured and rendered unfit for beverage purposes, but which prior thereto, can be used for beverage purposes. In November, 1935, plaintiff sold a manufacturer of flavoring extracts 54 gallons of ethyl alcohol in a steel drum. The purchaser intends to use it solely for the. manufacture of flavoring extracts unfit for beverage use and is not licensed to manufacture or deal in alcoholic

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beverages. At the time of this sale, defendants, representing the state board of equalization, demanded that the plaintiff pay an excise tax of 80 cents per gallon on the alcohol in said drum, claiming that the same was due under the provisions of the Alcoholic Beverage Control Act. Defendants threatened to seize the drum and destroy the alcohol if payment were not made. Plaintiff then brought- this action to restrain the seizure. Defendants’ demurrer was overruled, and the court granted a temporary injunction, afterwards made permanent, restraining the defendants from attempting to collect the tax or to seize the alcohol. Defendants appealed.

The question raised by this appeal is whether sales of ethyl alcohol, destined for use in the manufacture of nonbeverage products, are subject to tax under the provisions of the Alcoholic Beverage Control Act. (Deering’s Gen. Laws, 1935 Supp., Act 3796, p. 1129.) In our opinion they are not.

The short title of the statute, “Alcoholic Beverage Control Act”, and the provisions of its full title, which refer to the licensing and taxation of “alcoholic beverages”, indicate at the outset an intention to tax alcoholic liquors used for beverage purposes, and disclose no intent to tax industrial alcohol as such. The taxing provision, section 24, provides for an excise tax on “all distilled spirits” sold in this state, with a rate graduated according to the quantity, from twp ounces to one gallon. Although “distilled spirits” by definition in section 2, subdivision (d), include “ethyl alcohol”, this does not compel the conclusion that ethyl alcohol intended for nonbeverage purposes is covered. As already stated, the unmistakable purpose of the act is to the contrary.

Moreover, the taxing provision specifies rates which are applicable to the maximum quantity of one gallon, and under section 33, the tax upon the sale is collected “by means of attaching to each package containing such distilled spirits a stamp or stamps of a denomination equivalent to the amount of excise tax imposed”. These stamps are attached “by the holders of on- or off-sale distilled spirits licenses” upon the opening of the original cases or the delivery of the spirits. And under section 34, such spirits cannot be delivered by the manufacturer in packages containing more than one gallon. It is clear that the tax is intended for the