United States v. Colfax Grain Growers, Inc.

The question presented by this appeal is whether a farmers’ cooperative association is required to pay social security taxes on its employees who perform services in connection with the warehousing, handling, grading and storage of agricultural commodities produced by both members and non-members of the cooperative when more than half the services rendered are performed on products of members of the cooperative association.

Appellee, to whom we shall hereafter refer as taxpayer, was incorporated in the state of Washington as a farmers cooperative association. It paid social security taxes on its^ employees engaged in the warehousing and above-mentioned activities in 1940, 1941 and 1942. Claims for refund of these taxes were rejected by the Commissioner of Internal Revenue, and this suit was then brought by taxpayer to recover the taxes paid.

Appellant, hereafter referred to as the Government, entered a counterclaim for an amount approximately equalling a credit previously allowed by the Government for contributions paid by taxpayer to the Washington State Unemployment Fund. These contributions were later recovered *634 by taxpayer in a proceeding brought in the appeal tribunal…