867 P.2d 871 (Ariz.Tax 1994), TX 92-00279, Arizona Dept. of Revenue v. Cyprus Sierrita Corp.

Docket Nº:TX 92-00279.
Citation:867 P.2d 871, 177 Ariz. 301
Party Name:ARIZONA DEPARTMENT OF REVENUE; State of Arizona v. CYPRUS SIERRITA CORPORATION.
Case Date:February 03, 1994
Court:Tax Court of Arizona
 
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Page 871

867 P.2d 871 (Ariz.Tax 1994)

177 Ariz. 301

ARIZONA DEPARTMENT OF REVENUE; State of Arizona

v.

CYPRUS SIERRITA CORPORATION.

No. TX 92-00279.

Tax Court of Arizona.

February 3, 1994

Page 872

[177 Ariz. 302] Atty. Gen. by Michael P. Worley, Phoenix, for plaintiff.

Fennemore Craig, P.C. by Paul J. Mooney, David T. Cox and Ray T. Harris, Phoenix, for defendant.

OPINION

SCHAFER, Judge.

The issue in this case is whether three chemicals, sulfuric acid, LIX, and Orfom SX-7, used to produce cathode copper from copper ore, are "machinery" or "equipment." If they are, A.R.S. 42-1409(B)(1) exempts their cost from taxation.

The taxpayer, Cyprus Sierrita Corporation, is engaged in the business of producing copper from oxide copper ore and sulfide copper ore. The ores contain very low concentrations of copper; their bulk consists mainly of metallic oxides and non-metallic materials (referred to as "gangue") that have no commercial value. To make the business profitable the copper must be extracted from the gangue--and that is accomplished with chemicals. The process involves three steps: (1) leaching, (2) solvent extraction, and (3) electrowinning. Here's how it works:

First, the ore is mined and collected into large mounds. Then a weak sulfuric acid solution, containing sulfate and hydrogen ions, is sprayed on the mounds and allowed to percolate down through the ore. As it does, things happen--molecules are released and exchanged, and hydrogen ions combine with oxygen ions to form water; copper ions in the ore bond with the sulfate ions in the acidic solution; and impurities (gangue) are released from the ore. When the solution gets to the bottom of the mounds it is changed, it now contains nascent copper. This new solution is sent to a solvent extraction plant where it is mixed and agitated with a solution of LIX and Orfom SX-7. Again molecules are released and exchanged. The result is a mix of copper in an organic solution and fluid with the same chemical composition of the original leach solution (with the addition of dissolved gangue and a small amount of residual copper ions). That mix separates into two layers; the leach solution is sent back to the mounds to leach again and the copper in the organic solution is mixed with an electrowinning solution (sulfuric acid). That mix again separates into two layers; the organic solution (once again LIX and Orfom SX-7 with only a small amount of residual copper) is recycled within the solvent extraction plant and used again. The copper bearing electrowinning solution cycles to the electrowinning plant where an electric current is applied. The copper in the solution adheres to plates (copper plating) and the...

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