Because I’m not a tax lawyer, I didn’t see Paul Caron’s coverage of the Court of Appeal judgment in the Pringles case, but I did see the New York Times opinion piece this morning. It’s interesting to watch an obscure little case generate so many different interpretations.
The facts are pretty simple: Most food items are exempt from taxation under Britain’s VAT system, but potato crisps (chips) and related potato-based products are taxable, if they are “potato crisps, potato sticks, potato puffs and similar products made from the potato ….” Proctor & Gamble argued that its Pringles product constituted a “savoury snack,” which would make it exempt. A VAT Tribunal disagreed with P&G but was reversed on appeal. Last month, the Court of Appeal reversed and reinstated the Tribunal’s judgment. A Pringle, which is about 40 percent potato flour, but which also contains corn and rice flour, wheat starch, and a sizable helping of fat, is a taxable potato crisp. Despite P&G’s pleading to the contrary, the taxable item need not embody “potatoness.”
Shades of Judge Friendly and the famous decision in Frigaliment Importing Co. v. B.N.S. International Sales Corp.!
Adam Cohen writes in the Times that the judgment shows the illusory nature of the debate over “strict construction” in judging, which I think makes a bit too much out of the case, because he tries to use the Pringle to connect Britain’s VAT statute and Judge Sonia Sotomayor, now nominated to the Supreme Court of the United States.
I’m tempted to reach back to my “Things” article from a few years ago and point out that the question isn’t really “what is a Pringle” but “what is a potato crisp,” then map the series of methods for determining “what is a thing?” that I discussed in that piece to the series of methods considered by the Court of Appeal. The range of perspectives that I wrote about — what the producer thinks the thing is; what Aristotle might have said (“potatoness”); what some objective inventory of attributes might yield; what consumers perceive; and what public policy should conclude, all things considered — gets a good airing in the judgment. Given the fact that £20 million of tax per year was riding on the case, the metaphysics of things real and legal turn out to have significant consequences.
There is even an IP angle here, in that the question turns in part on whether a Pringle is “made from” potatoes “or from potato flour, or from potato starch.” By analogy to copyright law, one might ask whether the Pringle is a “derivative work” that is “based on” the potato. Using the copyright analogy doesn’t help at all in the potato case itself, because a Pringle is clearly “based on” the potato; the question is whether the Pringle is *sufficiently* based on the potato. The Court of Appeal (Jacob LJ) has a sensibly pragmatic answer: “There is more than enough potato content for it to be a reasonable view that it is made from the potato.” The precise amount of potato content doesn’t matter, if it’s reasonable to conclude that there is enough. Does thinking about potatoes help us, by analogy, think more clearly about derivative works in copyright? Perhaps, but only in the limited sense that the metaphysics of whether one work is “based on” another work will get us only so far. In the end, the “potatoness” of a Pringle is as much a judicial and policy conclusion as it is a prior question of chemistry. I’ve always thought of a Pringle as something that has no natural antecedent. It’s an edible thing that it entirely artificial, manufactured to produce the sensation of eating a potato chip. Disney’s Main Street USA bears a comparable relationship to a real street in a real town. As Cab Calloway might have sung, but never did, a Pringle ain’t nothing but a chip.