Heidelberg Central, Inc. v. Director of Dept. of Revenue

• Court: Missouri Supreme Court
• Writing for the Court: PER CURIAM
• Citation: Heidelberg Central, Inc. v. Director of Dept. of Revenue, 476 S.W.2d 502 (Mo. 1972)
• Decision Date: 22 February 1972
• Docket Number: No. 56761,No. 2,56761,2
• Parties: HEIDELBERG CENTRAL, INC., Respondent, v. DIRECTOR of the DEPARTMENT OF REVENUE of the State of Missouri, Appellant

Page 502

476 S.W.2d 502

HEIDELBERG CENTRAL, INC., Respondent, v. DIRECTOR of the DEPARTMENT OF REVENUE of the State of Missouri, Appellant.

No. 56761.

Supreme Court of Missouri, Division No. 2.

Feb. 22, 1972.

Jack N. Bohm, Kansas City, for respondent.

John C. Danforth, Atty. Gen., E. Thomas Coleman, Jr., Asst. Atty. Gen., Kansas City, for appellant.

HENRY I. EAGER, Special Commissioner.

In this matter the Circuit Court reversed the decision of a Hearing Officer of the Department of Revenue which assessed sales taxes allegedly due, with interest and penalties. The amount was $12,276.66. We have jurisdiction because a construction of § 144.030, RSMo 1969, V. A.M.S., ¹ a part of our Sales Tax Law, is required. The hearing was rather informal, but there is enough in the evidence and agreements to permit our review. The Circuit Court acquired jurisdiction upon a petition for review under § 536.100.

Respondent, Heidelberg Central, Inc., manufactures printing presses at its plant in Kansas City, Missouri. It sells these to printers in various parts of Missouri. The types, sizes and values vary greatly. The assessment here in question covers most of the period from April 1, 1968 to December 31, 1969. During that period Respondent billed sales taxes to its Missouri customers and collected most of them. On the transactions here in question each of the purchasers requested of Respondent a form for sales tax exemption, received it and executed it; consequently they paid no sales tax and Respondent remitted none. It is indicated that the same practice had been followed for about 17 years or more, until an audit precipitated the present assessment. As shown by exhibits (invoices and exemption certificates), sales taxes on the sales of 11 printing presses are involved here, valued at from $3,000 to $140,726 each. The evidence was that these purchasers were all commercial printers engaged in what is described as 'job printing'; their products varied somewhat, but they produced, generally, business forms, stationery, printed advertising, postcards, church bulletins, calendars, etc., and the Hearing Officer so found; some of the work involved color printing. The presses were purchased either to expand existing plants or to replace existing machines because of changes in design. Respondent knew of the situation existing in the plant of each of these purchasers. Respondent did not solicit letters from customers claiming sales tax exemptions.

The ultimate question here is whether or not commercial printing of the type described is 'manufacturing' within the meaning of the statute cited. In its appropriate parts it is as follows: '144.030. Exemptions. * * * 3. There are also specifically exempted from the provisions of sections 144.010 to 144.510 and 144.600 to 144.745 and from the computation of the tax levied, assessed or payable under sections 144.010 to 144.510 and 144.600 to 144.745: * * * (3) Machinery and equipment, replacing and used for the same purposes as the machinery and equipment replaced by reason of design or product changes, which is purchased for and used directly for manufacturing or fabricating a product which is intended to be sold ultimately for final use or consumption; (4) Machinery and equipment purchased and used to establish new or to expand existing manufacturing, mining or fabricating plants in the state if such machinery is used directly in manufacturing, mining or fabricating a product which is intended to be sold ultimately for final use or consumption; * * *.' 3(1) of the statute refers to tangible things which become a part of the product or are consumed in the process. We deem it inapplicable here. Our question must be decided from 3(3) and 3(4). The parties agree that our issue is as stated above. The Hearing Officer of the Department concluded from these facts that the petitioner (seeking a reassessment) had failed to prove that such printing constitutes 'manufacturing' within the meaning of the statute. The Circuit Court held to the contrary, finding that such printing was 'manufacturing' and reversed the decision, thus negating the assessment.

There is no controlling Missouri law. In Mathews Real Estate Co. v. National Printing & Engraving Co., 330 Mo. 190, 48 S.W.2d 911, suit was filed to enjoin the alleged violation of building restrictions. The defendant was printing posters, display advertising and certain types of tickets in a building within the restricted area. The prohibition included any 'manufacturing business' but coupled that designation with sundry specifically named and obviously objectionable businesses, such as slaughter houses, livery stables, etc. The Court said, loc. cit. 913, that 'technically, it (defendant's business) is a manufacturing business, because the materials purchased and used by defendant are altered by its processes and made up into the different finished products desired.' But it further held that the term was not used there in its allinclusive sense, but was limited by the reference to any such 'place of business,' etc., as would be regarded as objectionable in a 'first-class residence neighborhood.' The injunction was denied. In a limited sense, the case is applicable.

The definitions of 'manufacturing' are somewhat helpful, but very broad. In Webster's Third International Dictionary we find: 'to make (as raw material) into a product suitable for use * * * to make from raw materials by hand or by machinery * * *.' Such a meaning would encompass many things which, in ordinary parlance, we do not consider as manufacturing.

In prohibition days it was held in United States v. Brunett et al. (W.D.Mo.), 53 F.2d 219, that anyone who takes part in any of the processes involved in making liquor is engaged in the 'manufacture' of intoxicating liquor. That is not helpful here. The State says that the words of a statute must be given a meaning consonant with the intent and purpose of the legislature and must also be given their plain and rational meaning. Tiger v. State Tax Commission, Mo., 277 S.W.2d 561. We need not argue with that proposition, but it does not answer our question. More specifically, the State cites: City of Lexington v. Lexington Leader Co., 193 Ky. 107, 235 S.W. 31; Lawyers' Ass'n of St. Louis v. City of St. Louis, Mo.App., 294 S.W.2d 676; Patterson v. City of New Orleans, 47 La.Ann. 275, 16 So. 815; State v. Gardner & Jacob Co., Inc., 176 La. 221, 145 So. 521; Sutherland, Statutes & Statutory Construction (3rd Ed.), Vol. III, p. 313. The Lexington case involved the claimed tax exemption of a corporation engaged solely in publishing and distributing a newspaper; the statutory exemption was applicable to the machinery and products of those actually engaged in manufacturing; the publisher used sundry machines, equipment, plates, etc. in its printing. The Court held that the test was the kind and character of the article produced and not the kind of treatment given; that the legislature obviously did not intend to adopt the broad dictionary definition, and that this taxpayer was not 'engaged in manufacturing.' That case seems to be in line with the general trend regarding the publication of newspapers. As some have said, the product has no intrinsic or permanent value, and is simply a means of communication.

In Lawyers' Ass'n, supra, the Court, in so far as we are concerned, merely announced rules of statutory construction, including those that tax exemption statutes will generally be construed against the ones who claim the exemption, and that the object and manifest purpose of a statute is to be sought. In Patterson, supra (La. 1895), the plaintiff claimed under a constitutional exemption for the 'manufacture of stationery'; it bought paper and converted it into bill heads, blank books, order blanks and commercial business forms, cutting, shaping and printing the paper. We first note the unusual form and limits of the exemption. The Court said that cotton and textile mills, furniture factories, etc. were manufacturers, but that one who merely added something to the material to permit a change of use was not such, and that folding or cutting was not manufacturing. The case seems to give some support to the appellant, but its value is substantially lessened in view of the narrow scope of the exemption. In the case of State v. Gardner & Jacob Co., Inc., supra, the taxpayer was a processor of hams. It bought the fresh hams, soaked, cured and cooked them and sold the finished products. The statutes exempted manufacturers who sold products exclusively to dealers for resale. The Court held that this process was not manufacturing, but it also noted in the course of the opinion that commercial printers were not manufacturers, citing Patte...