Pacific Northwest Alloys, Inc. v. State, 33587
| Decision Date | 25 January 1957 |
| Docket Number | No. 33587,33587 |
| Citation | 306 P.2d 197,49 Wn.2d 702 |
| Parties | PACIFIC NORTHWEST ALLOYS, Inc., Respondent, v. The STATE of Washington, Appellant. |
| Court | Washington Supreme Court |
Don Eastvold, Atty. Gen., G. Keith Grim, Asst. Atty. Gen., for appellant.
Paine, Lowe, Coffin & Herman, R. E. Lowe, Alan P. O'Kelly, Spokane, for respondent.
The state tax commission assessed a use tax against Pacific Northwest Alloys, Inc., hereinafter referred to as the company. The tax was paid. The company's petition to the commission for refund was denied. This action was commenced to recover the payment, pursuant to RCW 82.32.180.
The cause was tried to the court upon stipulated facts, which the court adopted as its findings. The court's findings disclose that the company is engaged in the manufacture of a metal alloy known as ferrosilicon, the components of which are iron and silicon. The raw materials used to manufacture ferrosilicon are scrap iron, hydrate quartz, coal, coke, and wood chips. Heat only is necessary to manufacture ferrosilicon from these raw materials. The materials are introduced into an electric furnace which the company uses in manufacturing the alloy. Three carbon electrodes protrude from above the furnace into the charge to a depth of about five feet. The electrodes, nipples, and joint compound are composed of pure carbon made from finely pulverized anthracite coal, coke, and pitch. While other material may be used for electrodes, carbon is the most desirable material because it withstands, with the least oxidation, the high heat which is generated in the furnace and, upon oxidation, does not introduce any impurities or unwanted materials into the charge. The electrodes are threaded at each end so that others can be attached to permit continuous feeding into the furnace as they are consumed. The electrodes are used to introduce electric current into the furnace, which creates the heat necessary for the chemical process to occur. The current passes between the electrodes through the charge and brings the heat in the furnace to approximately two thousand degrees Centigrade. At this heat, the carbon which is present in the mix unites with the oxygen in the quartz, creating carbon monoxide.
The coal, coke, and wood chips are used for the purpose of supplying carbon which, in the presence of the heat, chemically reacts with the quartz to produce silicon and carbon monoxide. The silicon unites with the iron to form ferrosilicon. No attempt is made to gather the carbon monoxide. It passes off into the atmosphere as waste.
In the reduction of 165,800 pounds of raw materials (steel borings 40,800 pounds; silica rock (quartz) 72,000 pounds; coke, coal, and wood chips 53,000 pounds) consumed in one day in producing fifty per cent ferrosilicon, approximately 2,500 pounds of electrodes, nipples, and joint compound are consumed.
As the electrodes are consumed, a part of the carbon in them reacts with the quartz in the same manner as does the carbon supplied by the coal, coke, and wood chips. An undetermined amount of the carbon also reacts with free oxygen in the air to form carbon monoxide.
Query: As to the electrodes used, is the plaintiff company a consumer, as defined by the use tax law, and subject to the tax?
RCW 82.12.020 provides, in part:
'There is hereby levied and there shall be collected from every person in this state a tax or excise for the privilege of using within this state as a consumer any article of tangible personal property purchased at retail, or acquired by lease or by gift, or extracted or produced or manufactured by the person so using the same: * * *.' (Italics ours.)
A consumer is defined by RCW 82.04.190 as:
'(1) Any person who purchases, acquires, owns, holds, or uses any article of tangible personal property other than for the purpose of resale as tangible personal property in the regular course of business or for the purpose of consuming such property in producing for sale a new article of tangible personal property or a new substance, of which such property becomes an ingredient or component or is a chemical used in processing, when the primary purpose of such chemical is to create a chemical reaction directly through contact with an ingredient of a new article being produced for sale; * * *.' (Italics ours.)
The trial court concluded that the carbon electrodes, upon which the use tax was levied, constituted a chemical used in processing and that a primary purpose of such chemical was to create a chemical reaction directly through contact with an ingredient of a new article being produced for sale, and that the electrodes were, therefore, not subject to the use tax.
From a judgment directing a refund of the tax payment, the state has appealed.
The appellant's principal assignment of error is...
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