Pfizer, Inc. v. Madison County, 12289

• Decision Date: 19 January 1973
• Docket Number: No. 12289,12289
• Citation: 505 P.2d 399,161 Mont. 261
• Parties: PFIZER, INC., successor to Chas. Pfizer and Co., Inc., a corporation, Plaintiff and Respondent, v. MADISON COUNTY, a political subdivision of the State of Montana, et al., Defendants and Appellants.
• Court: Montana Supreme Court

Page 399

505 P.2d 399

161 Mont. 261

PFIZER, INC., successor to Chas. Pfizer and Co., Inc., a corporation, Plaintiff and Respondent, v. MADISON COUNTY, a political subdivision of the State of Montana, et al., Defendants and Appellants.

No. 12289.

Supreme Court of Montana.

Submitted Dec. 4, 1972.

Decided Jan. 19, 1973.

Edward Jene Bell (agrued), Helena, Chester L. Jones, Virginia City, for defendants-appellants.

Gough, Booth, Shanahan & Johnson, Helena, Ward Shanahan (argued), Helena, for plaintiff-respondent.

CASTLES, Justice.

This appeal is from the district court of the fifth judicial district, county of Madison. The court, sitting without a jury, found plaintiff had paid excess taxes and ordered defendant State Board of Equalization to refund such excess taxes. From that judgment, defendant appeals.

The trial court made rather exhaustive findings of fact and conclusions of law. The findings of fact, as such, are not challenged individually; but rather, the issues, as will hereinafter appear, encompass the conclusions of law as to the meaning of the metal mines act as it applies to the mining of talc.

Plaintiff is Pfizer, Inc., hereinafter called Pfizer, successor to Chas. Pfizer and Co., a corporation which owns and operates the Treasure State Mine in Madison County, from which it mines raw talc ore. Pfizer also owns and operates the talc milling and reduction works some thirty miles away near Barretts in Beaverhead County. Pfizer hauls the ore mined at the Treasure State Mine, in trucks, to a stockpile at the Barretts plant. The raw talc is then put through a beneficiation stage of processing, which is a process of washing, screening, sorting and crushing the raw talc by means of hand labor and centrifugal machines. The beneficiated talc is placed in a pile at the Barretts plant in pieces of ore ranging up to 8 inches. The talc, in this stage is called beneficiated talc. There is a market for talc in that stage at a price of $22 per ton, and Pfizer sells approximately 2% of its talc in that stage. The remaining 98% of the beneficiated talc is further milled in Pfizer's roller mill, hammer mill, jet mill and calcining operation at Barretts. This process reduces the pieces of beneficiated talc to various fine sizes. Pfizer then sells the talc under various trade names and packaging to its customers who use the talc in manufacturing paint, ceramics, cosmetics, plastics, insecticides, glass, paper, and other products.

The State Board of Equalization, hereinafter called the Board, determined that Pfizer's net proceeds of mines tax should be based upon the value of the talc from sales on the open market. Pfizer contends that its milling and reducing operation at Barretts is a 'manufacturing' process as distinguished from a 'mining' process and that its not proceeds tax should be based upon the value of the talc at the beneficiation stage, and not at the value which the talc has after it is further milled and reduced.

Pfizer's predecessor in interest, Tri-State Minerals Company, operated a beneficiation plant at Barretts. But, Tri-State sold and shipped all of its beneficiated talc to Utah, where the product was further milled and reduced. The Board determined that Tri-State's net proceeds tax was based on the value of the beneficiated talc, which is the same standard which Pfizer wants to be used.

Pfizer exhausted its administrative remedies and each year brought actions claiming refunds for the tax years 1968, 1969 and 1970, which actions were consolidated for trial purposes. From the judgment for Pfizer ordering refunds for back taxes, the Board appeals.

The Board raises three issues for review. The principal issue concerns whether Title 84, Chapter 54, R.C.M.1947, imposes the net proceeds of mines tax on the profit earned by Pfizer through all stages of its mining, including its milling and reduction operation.

The Board contends that Pfizer's milling and reduction operation is nothing more than an integrated mining operation, which begins with the digging of large chunks of raw talc ore and ends after the millong stage with finely gound particles of raw talc ore. It maintains this operation by Pfizer is not a 'manufacturing' process and Title 84, Chapter 54, R.C.M.1947, requires the determination of Pfizer's net proceeds of mines tax on the basis of the value of its raw talc ore product, which it sells subsequent to the milling operation.

The Board bases its argument on Section 3, Article XII, Montana Constitution, which provides:

'All mines and mining claims, both placer and rock in place, containing or bearing gold, silver, copper, lead, coal or other valuable mineral deposits, after purchase thereof from the United States, shall be taxed at the price paid the United States therefor * * * and all machinery used in mining, and all property and surface improvements upon or appurtenant to mines and mining claims which have a value separate and independent of such mines or mining claims, and the annual net proceeds of all mines and mining claims shall be taxed as provided by law.'

The legislature in compliance with this provision of the Constitution enacted section 84-5401, R.C.M.1947, which provides in pertinent part:

'All mines and mining claims, both placer and rock in place, containing or bearing gold, silver, copper, lead, coal, or other valuable mineral deposits, after purchase thereof from the United States, shall be taxed at the price paid the United States therefor * * * and all machinery used in mining, and all property and surface improvements upon or appurtenant to mines and mining claims, which have a value separate and independent of such mines or mining claims, and the annual net proceeds of all mines and mining claims, shall be taxed as other personal property.'

Subsequent sections in Chapter 54, Title 84 spell out the net proceeds tax in more detail. Based on this Constitutional and statutory authority, the Board levied the tax on the mining products of Pfizer.

In its argument the Board cites Northern Pacific Ry. Co. v. Musselshell County, 54 Mont. 96, 169 P. 53. That decision interprets Section 3, Article XII, of the Montana Constitution, and explains that there is a necessity for taxing mining property differently than ordinary real property, and that mining property must be looked on as both real and personal property. It is real property in regard to the surface value, but is regarded as personal property as to the minerals.

The Board argues that if this net proceeds tax does not extend to the value of the product after it is milled and reduced to fine talc, the intent of the Constitution and the legislature would be thwarted. The Board contends it was the intent of the legislature that the net proceeds tax extend all the way through the mining process to the point where the product is marketed, sold and converted into money. Further,...