Ghegan & Ghegan, Inc. v. Barclay

Donald L. Corbin, Justice,

dissenting. I respectfully dissent because I believe that there is no rational basis for taxing retailers differently based upon whether the soft drinks they sell are made with powder or syrup. I concur with Justice Brown’s opinion that the majority has faded in its attempt to distinguish the facts of this case from those in Bosworth v. Pledger, 305 Ark. 598, 810 S.W.2d 918, cert. denied, 502 U.S. 995 (1991). This case undoubtedly presents an issue of equal protection.

I believe, contrary to the trial court and the majority herein, that the Soft Drink Tax statutes do treat retailers or the distributors, wholesalers, or manufacturers differendy. I see no rational basis that justifies the differing tax rates upon syrups, finished soft drinks, and powders used to mix finished soft drinks. While I can understand that it may be more convenient to assess the tax on powder mixes on the basis of how much finished product the mixes will produce, I fail to see why that amount should be less than that charged to retailers who use syrup to mix their soft drinks. The majority points out that, when broken down, the computation of the effect of the $2.00 tax upon each gallon of syrup would equal between $0.32 and $0.35 per gallon for each gallon of finished product. Meanwhile, the tax on soft drinks made with powder is only $0.21 per gallon of finished product. The State has offered no rational basis for this disparate taxing treatment, and I can see none.

Moreover, while I acknowledge the holding in Medlock v. Leathers, 311 Ark. 175, 842 S.W.2d 428 (1992), cert. denied, 508 U.S. 960 (1993), that our task is only to determine whether any rational basis exists, I do not believe that any such basis exists here. I am not questioning that it may be easier to calculate the tax on powder according to the amount of finished product it will make, while it may be easier to calculate the tax on syrup based on the amount of syrup in the container. However, I can see no rational reason why the end result of the tax should not be equal. Taxing retailers who use syrup to make soft drinks at a higher rate than those who use powder as a base is nothing but arbitrary.

Furthermore, I am not persuaded by the majority’s suggestion that the retailer may avoid the higher tax by using powder, instead of syrup, to mix its soft drinks. This court has no idea what such a switch would entail, i.e., whether it would require the retailer to purchase new equipment or to otherwise change its existing facility. Additionally, this ignores the personal preference of the retailer to choose the process it desires to manufacture the ultimate soft-drink product. The State should only be interested in taxing the ultimate product. Only then could the tax be fairly imposed. Because the current tax scheme treats these similarly situated retailers disparately with no rational basis, I must dissent.