Tax and Taxonomy (ep. 188)

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Who you gonna believe -- me or your lying eyes?  Today we look at court cases where people try to avoid taxes by arguing that things aren't the things that they clearly are.

00:50 Tomato

08:18 Jaffa Cakes

17:48 Hydrox vs Oreo

37:40 X-Men

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We like labels, as humans we like labeling things.  Taxonomy is the branch of science concerned with classification and there used to be several inconsistent and sometimes conflicting systems of classification in use.  Then came Carl Linneaus and his influential “Systema Naturae” in 1735, laying down the system we use to this day.  Linnaeus was the first taxonomist to list humans as a primate, though he did classify whales as fish. Years later, a New York court agreed with him.  My name’s…

D&D Stats Explained With Tomatoes

Strength is being able to crush a tomato. Dexterity is being able to dodge a tomato. Constitution is being able to eat a bad tomato. Intelligence is knowing a tomato is a fruit. Wisdom is knowing not to put a tomato in a fruit salad. Charisma is being able to sell a tomato based fruit salad.

 

TOMATOES

So that’s more clear, but it raises a rather mad –and for some, maddening– question: Is the tomato a fruit or a vegetable?  Well, yes, it’s both, but actually no.  Botanically, it’s a fruit. But legally, it’s not.  A fruit is technically the seed-bearing structure of a plant whereas a vegetable can be virtually any part of the plant we eat.  

 

Things must have been slow in March of 1893, because this definition was set by the Supreme Court.  The issue at hand was tariffs, specifically a 10% tariff on the import of vegetables into the United States.  Just veggies.  Imported fruits were not.  This was of particular interest to John Nix of Manhattan.  He ran a produce wholesale business along with his four sons and found himself the proud owner of an enormous tax bill on a shipment of Caribbean tomatoes.  John Nix & Co. were one of the largest sellers of produce in New York City at the time, and one of the first companies to bring the Empire state produce from such far-flung places as Florida and Bermuda.  Nix disputed the tax on the grounds that tomatoes were scientifically-supportably fruit.  Full of seeds, ain’t they?  That’s the part that seems to turn grown adults into fussy toddlers when their burger has a tomato despite their very clear instructions.  Worse than the anti-pickle crowd.  Anyway, Nix filed a suit against Edward L. Hedden, Collector of the Port of New York, to get back the tax money he’d been forced to pay under protest. 

 

The crux of Nix’s case was the opening of an uninspired speech -  counsel read the definitions of the words "fruit," "vegetables," and tomato from Webster's Dictionary, Worcester's Dictionary, and the Imperial Dictionary.  Judgment for the plaintiff, case closed!  But wait, there’s more.  Not to be outdone, defendant's counsel then read into evidence the Webster’s definitions of the words pea, eggplant, cucumber, squash, and pepper.  Oh, it’s on now! Countering this, the plaintiff then read in the definitions of potato, turnip, parsnip, cauliflower, cabbage, carrot and bean.  That’s when, I assume, all hell broke loose in the courtroom and perhaps a giant musical number broke out.  Just trying to jazz it up a bit.  Nix’s side called two witnesses, not botanists or linguists, but men with a lot of years in the fruit & veg business, to say whether these words had "any special meaning in trade or commerce, different from those read."

 

The supreme court decided to look more practically and less pedantically at the situation and ruled that it’s how a tomato is used that makes it a vegetable, not the official scientific definition.  If people cook and eat them like vegetables, then vegetables they must be, and so they were subject to the tariff.  “Botanically speaking, tomatoes are the fruit of a vine, just as are cucumbers, squashes, beans, and peas,” wrote Justice Horace Gray in his 1893 opinion. “But in the common language of the people, whether sellers or consumers of provisions, all these are vegetables.”  

 

What was really important about Nix’s case was the timing.  We’re talking late Victorian, after the age of sail had been obviated by the steam power of the industrial revolution.  You might have heard about it, it was in all the papers.  Ships could now cross the Atlantic in 1-2 weeks, rather than the 6-12 weeks it took in a century prior.  Foods from the tropics could now reach New England in a week or less, making their import a viable option.  This was when bananas went from being expensive oddity to must-have trend to staple of every grocery store, though that was the Gros Michelle banana, the one our fake banana flavor is based on, not the Cavendish banana we eat today, but that’s a topic for another show.  To service the evolving tastes of urban population, a new class of national wholesalers, such as the Nixes, were born.

 

The tomato’s identity crisis was far from settled, though.  In 1937, the League of Nations, precursor to the UN, sought to classify various goods for the purpose of tariffs and they too labeled tomatoes a veggie, putting them under the heading of “vegetables / edible plants / roots and tubers.”  Not to be left out, the U.S. Department of Agriculture agreed, citing 1890s Nix v. Hedden case. 

 

But there are always exceptions, hold-outs, outliers, and just plain contrarians.  Tennessee and Ohio made the tomato their state fruit.  If you think that’s silly, you might want to swallow your coffee before I tell you the state vegetable of Oklahoma is the watermelon.  I did not care to look into their reasoning.  The European Union went a step further with a directive in December 2001 classifying tomatoes as fruit — along with rhubarb, carrots, sweet potatoes, cucumbers, pumpkins and melons.  It’s bad enough all prepackaged fruit bowls have some form of melon in them (which causes me instantaneous reverse peristalsis), but it you gave me a fruit salad and it had cucumbers in it, I have a parking lot and I’ll fight you in it.

 

But I think I’ll give the last word to George Ball of the Burpee’s seed and plant company: “Are [tomatoes] fruits? Of course,” he said. “Are they vegetables? You bet.”  Though Burpee’s does put “vegetable” on the seed packet, so maybe it’s not settled after all.

JAFFA CAKES

Maybe things that grow are too ephemeral for man’s taxonomy.  Things are a lot of simpler when we’re talking about man-made goods, things that don’t grow on trees, and it is only a tragedy that you can’t plant an entire orchard of Jaffa cake trees.  For those whose life has not yet contained this job, a Jaffa cake it a little round of dense yellow cake –sponge, as they say in the home counties– with a disc of orange jelly on top enrobed in chocolate.  It.  Is.  So. Good.  You can sometimes find them in big grocery stores like Kroger and Publix if they have a large enough “International” aisle stock Branston pickle along with pad thai sauce and Tajin.

 

This issue here it again taxes, but this time VAT.  For those that don’t speak British, VAT or  Value-Added Tax is “A type of consumption tax that is placed on a product whenever value is added at a stage of production and at final sale.”  Basically sales tax cranked to 11.  VAT is a tax that is paid by everyone involved with the manufacture of a given object or foodstuff, as well as the consumer.  As I go to air, the VAT rate in the UK is 20%.  If you’re a UK-based widget-maker, you pay VAT on the price of the raw materials.  When you sell the widgets wholesale to a store, the retailer pays VAT on that sale.  Then, when someone comes into the shop to buy one of your cutting-edge widgets, they pay VAT too.    

 

As with most areas of life, there are exceptions –  a number of things are subjected to a reduced 5% rate and some things are exempt altogether.  The exceptions are for the really necessary things, like mobility aids, menstrual hygiene products, stamps, end of life care, and most food, including cake.  That’s some grade A foreshadowing right there.  But some foods are just so wonderful, they absolutely must be taxed and taxed fully.  Such luxury items include alcohol, mineral water, confectioneries and, with the specificity that all governments seem to love, chocolate-covered biscuits.  Regular biscuits are apparently basic essentials.  No, American listeners, not like buttermilk biscuits, because even I’d have to think twice about covering one of those in chocolate.  Whereupon I would do it.  I could make that work.  You’re talking to the chick that made a startling good roasted garlic and parmesan ice cream.  No, British biscuits are cookies.  And British listeners, don’t at me on soc meds with the definition of biscuit, because you know you’re not consistent with it.  The only word that’s more confusing is pudding.  Is that a dessert course, a sausage made of 80% blood, a flambeed Christmas dessert, or a suet dough stuffed with beef and veggies and steamed for eight hours?  While I’m on British language, Cockney rhyming slang has got to be the worst thing…

 

The McVities company had a notion otherwise.  They appealed, prompting a Customs and Exchange VAT tribunal.  Jaffa cakes, they said, shouldn’t be taxed at the “most food” 20% rate, but at the 5% rate of chocolate-covered biscuits.  It takes a lot of brass to make that claim when you yourself named the product Jaffa *cakes. [tiktok] origin story] According to the website for Her Majesty’s Revenue and Customs, the court first had to establish a legal definition of what made a cake a cake and what makes a biscuit a biscuit, before determining which column Jaffa Cakes belonged in.  Jaffa Cakes were assessed using the following criteria: The product name, ingredients, texture, structure of the product, the size, how the product is sold, and how the product is marketed.

 

Towards this end, the main arguments on behalf of the office of Customs and Excise were that Jaffa Cakes are the approximate size and shape of biscuits, are stocked on the shelves with the biscuits, and, owing in no small part to McVities’ own marketing, people eat them in the sort of contexts biscuit are eaten. 

 

McVities countered by stating that Jaffa Cakes are baked in the manner of cake and of the same base ingredients.  Their master stroke was staleness – cakes go hard as they stale and biscuits go soft.  When Jaffa cakes go stale, and it’s hard to imagine them sitting there long enough, they go hard.  McVities actually let a bunch of them out to go stale and brouhght them into court as evidence.  And in a legal tactic I’d like to see more often, McVities baked a big ol’ 12-inch version of a Jaffa Cake, to show that if you blew it up to the size of a normal cake, it would just be a cake. 

 

If I were on the other side of it, I might make a big deal over the name, but the judge presiding over the case, Mr D.C Potter, ruled that to be of “no serious relevance” because a product’s name often has little to do with its actual function.  In the end, the court decided the Jaffa Cake was, in fact, a cake, and the Irish Revenue Commissioners agreed, though their ruling was based on the Jaffa Cakes’ moisture content being greater than 12%.  So no VAT on Jaffa cakes, which means we can buy more of them, hooray!

 

HYDROX VS OREO

In 1882, the entrepreneur Jacob Loose bought a biscuit and candy company that would eventually be known as Sunshine Biscuits, the company that would eventually give us Cheez-its, which my ex-husband went through at least a box of a week, dipping in port wine cheese spread.  About as close as he ever got to a balanced diet.  In 1908, launched the cream-filled chocolate sandwich biscuit known as Hydrox.  The name, he thought, would be reminiscent of sparkling sunlight and evoked an impression of cleanliness (probably because it sounds like a disinfectant).  This was after all only a few years after the Pure Food and Drug Act, before which your canned veggies might be full of borax and your milk be a watered down concoction of chalk dust and cow brains, and you wouldn’t know.  Some tellings have it that Hydrox is a portmanteau of hydrogen and oxygen, the elements that make up water, the gold standard of purity.  Meanings aside, the fact that there actually was a Hydrox Chemical Company in business at the time, one that sold hydrogen peroxide and was caught up in a trademark lawsuit at the time over the use of the word “hydrox,” should have given them a hint to maybe go back to committee.  Hydrox chemicals lawsuit, btw, pointed out that the word “hydrox” was already in use for such disparate things as coolers, soda, and ice cream, so maybe Jacob Loose figured the word is out there, might as well use it.

 

For four years, Hydrox cookies with their lovely embossed flower design made cash registers ring for Sunshine Biscuits.  Then, 90 years almost to the day of this episode dropping, the National Biscuit Company came along –you probably know them by their shortened name, Nabisco– with the launch of three different cookies, the Mother Goose biscuit, the Veronese biscuit, both now lost to history, and the Oreo.  The cookies were very similar, with Oreos even being embossed by the same time of production machine, but Hydrox have a sweeter filling and less-sweet cookie.  Like VHS vs beta, which you can learn more about in the book and audiobook, the newcomer soon came to dominate the landscape, and there’s no clear reason why.  Any chocolate sandwich biscuit is offhandedly called an Oreo, no matter how cheap a replica it may be.  It’s literally the best-selling cookie in the world now, with $3.28 billion in sales in the U.S. alone.  They sell 92 million cookies per day throughout 100-plus countries under the parent brand Mondelez International.  That ubiquity has led a lot of people to erroneously assume that Oreo is the original and Hydrox is the Mr. Pibb to their Dr. Pepper.  Hydrox did manage to hold onto a cadre of die-hards, especially in areas with significant Jewish populations, because Hydrox were always kosher.  Oreo cream used to be made with lard from pigs and Nabisco would later have to invest a lot of resources into replacing the lard with shortening in the 90’s.  

 

Sunshine Biscuits was purchased by Keebler in 1996, who replaced Hydrox with a reformulated product called "Droxies," which 100% sounds like drug slang for a veterinary tranquilizer.  Keebler was acquired by Kellogg's in 2001, and Kellogg's yanked Droxies from the shelves before adding a similar chocolate sandwich cookie to the Famous Amos brand, then discontinued them.  In August 2008, on the cookie's 100th anniversary, Kellogg's resumed distribution of Hydrox under the Sunshine label, a limited distribution, one and done.  Hydrox-heads besieged Kellogg's with phone calls and an online petition, asking that Hydrox be brought back for good, but all for naught.  Less than a year later Kellogg's had removed Hydrox from their website.  “This is a dark time in cookie history,” one Hydrox partisan, Gary Nadeau, wrote, according to the Wall Street Journal. “And for those of you who say, ‘Get over it, it’s only a cookie,‘ you have not lived until you have tasted a Hydrox.”  As of the time of writing, I’ve never had one myself, but I’ll see if I can’t lay my hands on some before going to air.

 

Getting my hands on some may be a touch trickier than it should be.  They exist; that’s not the issue.  In 2015, entrepreneur Ellia Kassoff, a lover of Hydrox who knew the trick to getting a trademark someone else had allowed to lapse, was able to pick up Hydrox for his own company, Leaf Brands—itself a dormant brand that Kassoff had revived.  Hip to the time, Leaf Brands made Hydrox available on Amazon, so anyone anywhere could get them whenever they wanted (plus two days for delivery).  These new Hydrox weren’t going to bow gracefully to the dominant Oreo.  Their website points out that they use real cane sugar instead of high-fructose corn syrup, and no hydrogenated oils, artificial flavors, and GMOs, and warn consumers, "don't eat a knock-off!"  Hydrox are also made in the USA while Mondelez International was laying off U.S. workers.  Sales of Hydrox grew by 2,406 percent from 2016 to 2017, amassing more than $492,000 in sales — clearly, still light-years away from Oreo's overwhelming dominance in the market, but impressive progress nonetheless.

 

If you ask Leaf Brands, they’d be doing a lot better if not for Mondelez – not out-competing them, deliberately sabotaging them.  This is the hard-to-find bit I alluded to.  In August 2018, Leaf Brands filed a lawsuit against Mondelez International, seeking $800 million in damages because of "lost sales and reputation.”  The charges claimed that Mondelez was using its massive industry muscle "to place their own products in favorable locations in stores and move competitors in less desirable positions on store shelves."  On their Facebook page, you can see pictures of grocery stores where Hydrox cookies are hidden behind other displays, scooted to the back of shelves, and even turned sideways so the short end is facing out.  If you’ve never worked grocery retail, your instinct may be to blame the store staff, but a lot of brands are actually stocked by the manufacturer.  Ever pass a guy in a Pepsi polo shirt with hand-truck loaded with soda?  That, but with cookies.  And it’s not just their own products.  Mondelez is what’s called a “category captain,” meaning they get to determine much of the layout for the whole cookie aisle.  Leaf alleges that Mondelez employees and agents are deliberately making Hydrox harder to find while making Oreos pert near impossible to miss.

 

This is far from the first lawsuit over Oreos.  A class action lawsuit was filed claiming the cookies misled buyers by stating that the product contains real cocoa.  The judge dismissed the case.  And they were sued for Fudge Covered Mint Oreos not containing any actual fudge.  The plaintiffs claim that these cookies don't contain any milkfat from dairy, a key component of fudge, but rather cheaper palm and palm kernel oil.  As so often happens, there are eleventy-hundred articles from the week the case was filed and nothing on the outcome.  That’s what happened with the main point of this article.  I was dead sure I remembered Hydrox and Oreo going to court over the basic infringement question, and Hydrox losing, but I couldn’t turn up anything on that because of the sabotage lawsuit sucking up all the search results.

 

X-MEN

It’s not all foodie fact fun today.  I’m going to risk a copyright strike to play 15 seconds of a song that will make everyone near me in age go “aw yeah!” [sfx Xmen theme]  For the young or those who had social lives in high school, that’s the theme song to the 90’s Xmen cartoon, and it slaps, as they kids used to say.  For the truly uninitiated, and c’mon even my mom knows who the Xmen are, the story centers on a group of superheroes who get their powers from genetic mutations…and government experiments, time travel, by dint of being aliens – it’s a comic book, what do you want.

 

Ever since their introduction to the Marvel Universe in 1963, the X-Men have always had to deal with questions about their humanity.  While their enemies will stop at nothing to cast them as monsters, the team continues to fight for a world where they are treated just like humans.  That’s in-universe.  In the broader reality, it’s actually in the X-Men’s best interest not to be considered humans.  Well, Marvel comics financial bottom line, anyway, and they went to court over it.

 

In 1993, international trade lawyers Sherry Singer and Indie Singh found an interesting provision in a book of federal tariff classifications – “dolls” are taxed at 12% on import while “toys” are only taxed 6.8%.  The devil is in the details, or in this case, the definition.  A “toy” can be any shape, representing any thing, but a "doll" can only be a representation of a human being, like Barbie or GI Joe.  [tik tok Joe’s thumbnail]  Singer and Singh knew this distinction could be a sizable financial benefit for their client, Marvel Entertainment, who had an ownership stake in ToyBiz at the time.  For years, Marvel had been importing action figures that were taxed as dolls, despite their wide panoply of brightly colored characters often being anything but human.  Taking a direct approach, the two lawyers gathered up a literal bag full of action figures and went to the U.S. Customs and Border Protection headquarters in Washington, D.C. to try and convince them that Marvel wasn't importing humanlike “dolls,” but instead very non-human “toys.”

 

The Customs staff’s reaction to the bag of toys is not recorded, but their official response was that the “non-human characteristics” of the X-Men and other action figures “fall far short of transforming [these figures] into something other than the human beings which they represent.” 

Singer and Singh were locked onto this tactic and pursued it for a decade.  A judge considered various figures from Marvel’s whole line to decide whether or not individual characters were human or not.  Rippling pecs, long claws, blue skin, red eyes, all were scrutinized, as lawyers on both sides expostulated on the philosophical ramifications of what it means to be human.  How can these action figures be human if they have "tentacles, claws, wings, or robotic limbs?"  

 

I’d loved to have been there to hear people with expensive educations in tailored suits, stand before a learned jurist in a wood-paneled courtroom and say things like, 

"The figure of 'Kingpin' resembles a man in a suit carrying a staff. Nothing in the storyline indicates that Kingpin possesses superhuman powers.  Yet, Kingpin is known to have exceedingly great strength (however 'naturally' achieved) and the figure itself has a large and stout body with a disproportionately small head and disproportionately large hands. Even though 'dolls' can be caricatures of human beings, the court is of the opinion that the freakishness of the figure’s appearance coupled with the fabled 'Spider-Man' storyline to which it belongs does not warrant a finding that the figure represents a human being."

 

In 2003, Judge Judith Barzilay ruled that Marvel characters aren't quite human enough to taxed as dolls.  “They are more than (or different than) humans. These fabulous characters use their extraordinary and unnatural physical and psychic powers on the side of either good or evil. The figures’ shapes and features, as well as their costumes and accessories, are designed to communicate such powers."

 

Yay, a victory for the giant multimillion dollar corporation!  But a slap in the face for diehard X-Men fans.  Chuck Austen, one of the writers for Uncanny X-Men at the time, said his whole goal in the story was to show the team's humanity.  The nerds grew restless and Marvel had to issue a statement that read, "Don't fret, Marvel fans, our heroes are living, breathing human beings—but humans who have extraordinary abilities ... A decision that the X-Men figures indeed do have 'nonhuman' characteristics further proves our characters have special, out-of-this world powers."

And that’s…

To protect the public from contaminated oil, New York State law required that all fish oil be gauged, inspected and branded, with a penalty of $25 per barrel on those who failed to comply.  Samuel Judd purchased three barrels of whale oil that had not been inspected, and James Maurice, a fish oil inspector, sought to collect the penalty from him.  Judd pleaded that the barrels contained whale oil, not fish oil, and so were not subject to the fish oil legislation. At trial, one side said the term "fish oil" was commonly understood to include whale oil, and the other side plead the obvious science that whales are mammals.  The jury deliberated for 15 minutes and returned a verdict in favor of the fish oil inspector. 

 

Mr. Judd, dissatisfied with the verdict, moved for a new trial. By then, the Legislature was in session and the Recorder, knowing that a new fish oil bill was pending, delayed his decision on the motion. The new enactment limited the inspection to fish liver oil, and the Recorder took the view that this implicitly confirmed that the earlier legislation covered whale oil. Accordingly, he refused to grant Judd’s motion for a new trial.

 

James Maurice resigned his position as fish oil inspector because he considered that the position under the new law had too little value or importance.

 

 

Sources:

https://www.constantpodcast.com/episodes/are-whales-fish

https://www.npr.org/sections/money/2013/12/26/256586055/when-the-supreme-court-decided-tomatoes-were-vegetables

https://www.washingtonpost.com/news/wonk/wp/2017/10/18/the-obscure-supreme-court-case-that-decided-tomatoes-are-vegetables/

https://www.insider.com/interesting-facts-about-oreo-2018-7#oreo-first-appeared-on-the-market-in-1912-1

https://www.mashed.com/223360/the-strange-history-of-the-oreo-and-hydrox-cookie-rivalry/

https://www.mashed.com/702384/why-this-snack-food-giant-is-being-sued-over-an-oreo-flavor/?utm_campaign=clip

http://www.todayifoundout.com/index.php/2015/10/time-company-baked-giant-cake-win-court-case/ 

https://www.edinburghnews.scotsman.com/read-this/is-a-jaffa-cake-a-cake-or-a-biscuit-heres-the-definitive-answer-as-decided-by-a-court-1379222

https://www.mentalfloss.com/article/92007/why-us-federal-court-ruled-marvels-x-men-arent-humans

https://www.polygon.com/comics/2019/9/12/20862474/x-men-series-toys-human-legal-issue-marvel-comics

https://observer.com/2007/12/thar-she-blows-19thcentury-court-case-harpoons-a-whale-of-a-story/

https://en.wikipedia.org/wiki/Nix_v._Hedden

https://www.youtube.com/watch?v=FtpJFEBcKoE