Commonwealth v. Tetley Tea Co.

Opinion by

Mr. Justice Cohen,

This appeal is taken from the judgment of the lower court which sustained the imposition of franchise tax on the Tetley Tea Company.

The Act of 1889, P. L. 420, as amended, imposes on certain foreign corporations a franchise tax computed as set forth in the Act. Inter alia, a company “organized for manufacturing” receives an exemption to the extent its property is used in, its employees are engaged in and its receipts are incident to manufacturing in Pennsylvania. Act of June 1, 1889, P. L. 420, §21, as amended, 72 P.S. §1871.

Tetley is a New York corporation maintaining facilities in Pennsylvania for the blending of tea, the filling of tea bags and the distribution and sale of its product. Arguing that the company is engaged in manufacturing within the meaning of the aforesaid provision, Tetley claims an exemption from the tax. Even though it has been stipulated that Tetley’s certificate of incorporation states that one of the purposes of the company is to manufacture tea, it remains to be determined, however, whether the activity conducted by Tetley is, in fact, manufacturing so as to permit the exclusion of the property values, wages and receipts in computing its tax.

We have defined “manufacturing” to be the application of skill and labor to materials so that there results a new, different and useful product. Philadelphia School District v. Parent Metal Products, Inc., 402 Pa. 361, 167 A. 2d 257 (1961). To be new and different the manufacturing process must have substantially transformed the ingredients in form, quality and use. Commonwealth v. Berlo Vending Company, 415 Pa. 101, 202 A. 2d 94 (1964); Commonwealth v. Peerless Paper Specialty, Inc., 344 Pa. 283, 25 A. 2d 323 (1942).

At its plant, Tetley separates the tea from foreign matter, blends the tea and places precisely measured amounts in bags. The bags are composed of paper specially treated to impart a heat-sealing characteristic and to withstand boiling water. Intricate machinery is required to fold, fill, seal and attach string and tags to the bags. The mechanics who service the machinery must be specially trained.

The process results in a bag of tea that is dipped into a container of boiling water. No teapot or strainer is required to prevent the tea leaves from remaining in the cup. The bag permits of easy disposal, enables the tea to be precisely measured for each cup and may even improve the flavor by maintaining an exact blending-

All this, however, does not make it a “new and different” product. The process starts and ends with tea. The use to which the loose tea can be put is basically no different from that which can be made of the end-product. Mere convenience, leading to a greater and wider appeal for a product, does not make the process by which that convenience is achieved manufacturing within the purview of the statute. See, also, Commonwealth v. Lowry-Rodgers Co., 279 Pa. 361, 123 Atl. 855 (1924).

Judgment affirmed.