In Re Tax Appeal of Fuji Photo Film Hawaii, Inc.

KLEIN, Justice.

The question in this appeal by the Department of Taxation from the Tax Appeal Court is whether the “photoprocessing” activities of Fuji Photo Film Hawaii, Inc. (Fuji) constitute “manufacturing,” which is taxable at the rate of one-half of one percent, or a “service,” which is taxable at the rate of four percent. We agree with the Tax Appeal Court’s conclusion that the Director of Taxation’s (Tax Director) assessment of taxes on the taxpayer’s income at the higher rate was inconsistent with the General Excise Tax Law and the Use Tax Law.

I. BACKGROUND

The facts in this case are…