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November 14, 1946

McGOWAN, Collector of Internal Revenue

The opinion of the court was delivered by: KNIGHT

Plaintiff owns Randleigh Farm, a breeding farm for Jersey cattle, located near Lockport, New York, comprising about 600 acres. On it he maintains about 200 head of cattle. He alleges that it is not a dairy farm but that he obtains milk and dairy products as by-products of his breeding operations and that these are sold either on the farm or through delivery to customers on one milk route and are superior to ordinary commercial milk and command a premium price; that it is impracticable to sell them at wholesale; that his only practical alternative to disposing of the milk as waste is to sell it and the dairy products on the farm and milk route. Plaintiff claims that the milk and dairy products are merely incidental to his main business of operating the breeding farm.

Defendant, over plaintiff's protest, exacted and collected from him $ 666.62 as taxes for the period from January 31, 1937, to March 31, 1945, under Sections 801 and 804 of Title VIII of the Social Security Act, 42 U.S.C.A. §§ 1001, 1004, and under Sections 1400 and 1410 of the Internal Revenue Code, 26 U.S.C.A.Int.Rev.Code, §§ 1400, 1410, together with $ 166.70 penalties and $ 160.10 interest. Defendant likewise collected $ 25.52, as taxes for the period from April 1, 1945, to June 30, 1945, under Sections 1400 and 1410 of the Internal Revenue Code.

Plaintiff, after making said payments, now demands judgment for their sum, amounting to $ 1,019.03. He claims that the taxes were unlawfully collected because his employees, on account of whom the taxes were levied, performed agricultural labor.

 The decision of this case turns on the nature of the employment of said employees and the meaning of the term 'agricultural labor.'

 The employees involved in the imposition of the taxes are Wendell Bennett, George A. Clayton, Delia Groff, Charles Reid, Carleton Sparks and Dorothy Wendler Glynn.

 At the trial on July 17, 1946, the only witness who testified was Torrence E. Grow, manager of the Randleigh Farm, who testified on behalf of the plaintiff. He employed each of the said six employees and gave the following testimony regarding the nature of their employment:

 Wendell Bennett: 'His work is in connection with the dairy, that is, he is the man that operates this milking machine, milks the five cows at once. * * * He also washes the bottles, bottles (the milk) and washes the pans and pails and other things used in the dairy * * * . * * * for several years in his spare time, which is in the afternoon, he has worked on the farm like in haying, and things like that, regular farm work. * * * He has worked on the farm since January 1st, 1937 * * * . He lives right there at the farm in one of the farm houses.'

 George A. Clayton: 'He makes the ice cream. He makes the cottage cheese. He brings out the bottles of milk. Our milk is bottled in the casement, and it has to be brought to the next floor at the counter. He brings up the milk and cream. He waits on trade at times, and he also works in maintenance work on the building, that is, cleaning the building, keeping it clean. He was employed as a barn man at first. He took care of some 25 or 30 head of cattle for several years, until there was an opening in this Dairy Inn, and he took that over * * * probably seven or eight years ago * * * . He lives in a house on the farm * * * .'

 Delia Groff: She came 'about six or seven years ago.' Before that ' * * * she had never done anything of that kind. She had worked in a home. * * * we trained her there at the farm.' ' * * * Miss Groff totals the amount of milk or cream for the month and figures the amount of money that is due the farm from this particular customer for that month. * * z Miss Groff makes out (a milk bill) at the beginning of each month and mails to our monthly accounts on the milk routes.' 'Sometime during the month she keeps those figures on those cards. This is a yellow card. Each customer has one. Q. She simply copies those figures from the route sheet? A. That is right.' 'Bennett * * * as he milks the cows, he records the weight each day for each animal * * * . The weight of the milk * * * . Miss groff adds these figures on the adding machine, and using the figures for the -- that the tester from Cornell University has left with us during that month, the butter fat percentage, she multiplies the pounds of milk by the percentage of the butter fat to obtain the contents of butter fat that cow produced during that month for each animal. * * * After she has added the figures, the milk weights from the yellow sheet I had a moment ago, those figures are copied in the spaces fro them on this sheet, and this is then sent to the American Jersey Cattle Club. * * * Miss groff makes copies of those (pedigree sheets) on the farm for use in making sales. * * * She types copies, things like that, pedigree, also types heading for the milk production sheets * * * she does not write the letters.' She is not a bookkeeper. 'q. Is she a stenographer? A. No, sir. I would not say so. She is to a certain extent, but she is not successful at it.' She does not keep records of plaintiff's employees. 'Her work in the Diary Inn, with the exception of cleaning up in the morning, is confined to counter work, that is, passing out milk, making milkshakes, selling ice cream.' She waits on customers in the Diary Inn. All her work is done on the farm.

 Charles Reid: 'He operated the milk route * * * but he never worked on the farm.' He entered the Armed Services 'quite early in the war.'

 Carleton Sparks: 'He is the man that operates out milk route. * * * He loads the milk in the morning in our truck, takes it into town and delivers it at these various householders. * * * In the summer he works on the farm. Right now he is working haying in the afternoon after his milk is delivered.'

 Dorothy Wendler Glynn: 'Her duties were exactly the same as those of Miss Groff now, things Miss Groff does not she did when she worked there.' All her work was done on the farm.

 Witness said that the work of all these employees was a normal incident of farming operations and necessary to such.

 Witness further testified that on plaintiff's Randleigh Farm there were 7 houses and 6 barns and 'a lot of smaller buildings#; that the barns are made to keep cattle in; that there are three different farms. 'In the main farm we have this Dairy Inn * * * in addition to the regular dairy barn.' There are normally about 18 or 19 employees 'divided into several different groups * * * seven men that work on the farm, and seven working the barns taking care of the cattle. There is a repair man. A man that works in the dairy, milk route driver, and two people that work in * * * Dairy Inn (which) is built in connection with a place where we take care of the milk, and where we milk the cows. It has the observation room * * * for the purpose of allowing the public to see the cows milks, and * * * in this same room we sell products of the farm, such as milk and ice cream and various other things. * * * The farm is a pure bred Jersey farm for breeding Jersey cattle. * * * We sell the male calves, sold for breeding purposes and shipped all over the country. * * * The farm is 600 acres. * * * About 450 in crop land and about 150 in pasture.' 'Q. What crops do you grow? A. General farm crops * * * to feed cattle. * * * A. Do you sell any of those crops? A. Very seldom. Practically the only crop we ever sell is when we have a surplus of wheat.' The crops 'are all used to feed the cattle. * * * We have approximately 100 milking cows and a hundred others. That counts, calves, young stock and everything.'

 Witness then described the milking operations. 'We run a retail milk route in Lockport and we also sell milk over this counter in the Dairy Inn * * * our driver takes this milk that the other man has bottled into Lockport every morning and delivers it to our customers, house to house in the town. * * * On the milk route we sell cream and butter when we have it, which is not often, and over the counter we sell cream and milk and cottage cheese when we have it, and ice cream, buttermilk sometimes -- the general run of things that are produced on the farm. * * * We make what is known as a special raw milk. * * * It sells for two cents more than the standard milk' The wholesale sale of milk was discontinued about 15 years ago. Witness said that the income from the sale of milk and dairy products was more than that from the breeding operations and gave this reason -- 'because * * * all these years we have been breeding up a herd, and we still have just about reached our capacity as to milch cows now and thus far we have sold very few females. We have sold only bull calves. We occasionally have sold a female because she was not up to our standard. With 100 milking cows we naturally produced a lot of milk. ...

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