R. L. Polk & Co. v. Armold

Decision Date02 November 1974
Docket NumberNo. 47453,47453
Citation215 Kan. 653,527 P.2d 973
PartiesR. L. POLK AND COMPANY, Appellee, v. Harold A. ARMOLD, Director of Taxation, Department of Revenue, State of Kansas, Appellant.
CourtKansas Supreme Court

Syllabus by the Court

In an action for refund of tax paid under the Kansas retailers' sales tax act, the record on appeal is examined and it is held: The trial court did not err in ruling that certain materials used in printing city directories were consumed in the production and manufacture of tangible personal property within the meaning of the exemption provided in K.S.A.1970 Supp. 79-3606(m), as amended.

Robert L. Deam, Topeka, argued the cause, and William L. Harris, Jr., Topeka, was with him on the brief for appellant.

John F. Hayes of Gilliland, Hayes, Goering & Mills, Hutchinson, argued the cause and was on brief for appellee.

HARMAN, Commissioner:

This is an action for refund of sales taxes paid under the Kansas retailers' sales tax act (K.S.A. 79-3601 et seq.) The trial court entered summary judgment granting the refund and the director of taxation has appealed.

Appellee R. L. Polk and Company, a corporation, operates a printing plant in Hutchinson, Kansas, where its sole business is to print city directories for retail sale to chambers of commerce and cities throughout the United States. In the printing process it uses film, lithoplates, developer and other supplies which are the subject matter of this suit.

In 1970 the Kansas Legislature amended our retailers' sales tax act by providing in general terms an exemption for consumable items of tangible personal property used in the manufacturing process (Laws, 1970, Chap. 389). Appellee paid sales tax upon the items in question from July 1, 1970, to December 31, 1971. Early in 1972 appellee concluded it had made these payments erroneously and made application for refund, which was denied by the director of revenue, predecessor in office of the director of taxation.

Appellee then instituted action in the district court seeking refund. Issues were joined and pretrial conference was held at which the parties agreed the deposition of appellee's plant manager correctly reflected use of the items in question and that the director of taxation would submit an itemization of that property with the amounts of taxes already paid. Upon this state of the case each side moved for summary judgment. The trial court found that the property in question was immediately dissipated and consumed in appellee's printing process as a matter of law, making it exempt from taxation, and the court ordered refund of the total amount revealed by the director's itemization.

As indicated, the facts before the trial court were not in dispute; however, the record here is not at all clear as to the use of certain minor items nor as to the agreement of the parties respecting the tax liability of these items. The plant manager's deposition as narrated in the record reveals the following: The film in question is a type used for photographing lithographic material in order to make a lithoplate; the film is used from four hours to two days; it is accumulated by appellee for a period of time, them sent out to have the silver processed from it, which is sold. The lithoplate is composed of aluminum. It is processed by the use of two chemicals, a desensitizer which takes the emulsion off and a lacquer which brings out the image. A gum is used on the lithoplate to keep it from oxidizing. These materials as well as a certain type of tape become part of the lithoplate. The lithoplate is transferred to a rubber blanket, inked and used to transfer an image to paper for use in the directories. After use the lithoplates are sold for junk. From three to five or six days are required after the film is applied to the lithoplate before the process of applying the image to the printing blanket is completed. Developer is used for both film and plates. It is kept in a ten gallon film developing tank approximately two days. It weakens as the film goes throught and is replenished by taking two gallons out of the tank and adding two gallons of developer, which procedure could occur every two or three days or two or three times in a day, depending on the amount of film used. Developer removed from the tank is destroyed. Three kinds of tape and other supplies are also used in the printing process (included here are some of the obscure items already mentioned).

The three principal kinds of property indicated in the director's itemization, and concerning which the record is clear, are the film, lithoplates and developer, along with the desensitizer, lacquer, gum and tape which become a part of the lithoplates.

Our sales tax law was enacted in 1937. For the privilege of engaging in the business of selling tangible personal property at retail a tax is imposed (K.S.A.1970 Supp. 79-3603, since amended). There are, however, certain exemptions, reasons for which are stated generally in 68 Am.Jur.2d, Sales and Use Taxes, § 112, thus:

'In order to prevent the pyramiding of taxes on the same commodity when it is sold in a different form after it is processed or when it is used in the manufacture of a more or less different character of commodity, the sales tax statutes usually contain a provision which in terms or in effect exempts the sale of such commodity from the sales tax in anticipation that the finished product processed or manufactured from such commodity will, when ultimately sold, share its burden of the tax.' (p. 159.)

The specific proviso involved here is K.S.A.1970 Supp. 79-3606(m), which exempted the following:

'All sales of tangible personal property or services which are consumed in the production, manufacture, processing, mining, drilling, refining or compounding of tangible personal property . . ..'

(By amendment in 1971 the term 'or services' was deleted from the foregoing, and the exemption currently appears as K.S.A.1973 Supp. 79-3606(n).)

A definitional section was included in the act. K.S.A.1970 Supp. 79-3602(m) provided:

'property and services which are consumed' means tangible personal property or services which are essential or necessary to and which are actually used in and immediately consumed or dissipated in (1) the production, manufacture, processing, mining, drilling, refining or compounding of tangible personal property . . ..'

(In 1971 this section was also changed by deleting 'services' from its inclusion and it now appears as K.S.A.1973 Supp. 79-3602(m).)

The crux of this appeal is whether the materials in question come within the purview of the exemption statutes.

Appellant first points out taxation is the rule-exemption the exception and exemption provisions are to be construed strictly against the claimant for exemption (Assembly of God v. Sangster, 178 Kan. 678, 290 P.2d 1057) and that the rule that one who claims a statutory exemption from a tax must bring himself clearly within the statute, is applicable to the sales tax act (Warren v. Fink, 146 Kan. 716, 72 P.2d 968). Appellant concedes in his brief the items in question are essential and necessary to appellee's operation but he contends they art not 'used in the actual process of and immediately consumed or dissipated in . . . production, manufacture (or) processing . . . of tangible personal property'. Appellant makes essentially three arguments: The film, lithoplates and certain other items are not used in the actual manufacturing process but are used in preparatory processes preliminary to it; the lithoplates and attachments are in the nature of machinery, which is not exempt, and the items are not immediately consumed or dissipated.

The Questions at issue are of first impression in this state. Cases in other jurisdictions are of limited aid because of differing wording in the exemption statutes and differing types of property asserted to be exempt. Our statutes do not define the term 'manufacture' nor has our case law done so. Webster's Third New International Dictionary supplies this broad definition: '. . . the process or operation of making wares or other material products by hand or by machinery esq. when carried on systematically with division of...

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7 cases
  • Collingwood Grain, Inc., Matter of
    • United States
    • Kansas Supreme Court
    • March 10, 1995
    ...adopted by this court. The KDR points to two cases, Warren v. Fink, 146 Kan. 716, 72 P.2d 968 (1937), and R.L. Polk & Co. v. Armold, 215 Kan. 653, 527 P.2d 973 (1974). In Warren, this court construed a statute which provided that "[s]ales and purchases of electricity, ... for use in ... pro......
  • Appeal of K-Mart Corp., K-MART
    • United States
    • Kansas Supreme Court
    • December 6, 1985
    ...against the party claiming the exemption and the burden of proof is on one claiming exemption from taxation. R.L. Polk & Co. v. Armold, 215 Kan. 653, 655, 527 P.2d 973 (1974). This court cannot substitute its judgment for that of an administrative board and on appeal the court is restricted......
  • In re Appeal of Cessna Emps. Credit Union from an Order of the Div. of Taxation
    • United States
    • Kansas Court of Appeals
    • April 6, 2012
    ...256 P.2d 850 (1953) (ultimate consumer should pay the tax and no article should carry more than one sales tax); R.L. Polk & Co. v. Armold, 215 Kan. 653, 657, 527 P.2d 973 (1974); In re Tax Appeal of Derby Refining Co., 17 Kan.App.2d 377, 385, 838 P.2d 354 (1992), rev. denied 252 Kan. 1092 (......
  • Capital Elec. Line Builders, Inc. v. Lennen
    • United States
    • Kansas Supreme Court
    • December 3, 1982
    ...is one basic principle about our sales tax act. It is that the ultimate consumer should pay the tax ...." See also R.L. Polk & Co. v. Armold, 215 Kan. 653, 527 P.2d 973 (1974). Since K.A.R. 92-21-18 authorizes the local taxing unit to collect the sales tax on services outside its jurisdicti......
  • Request a trial to view additional results
1 books & journal articles
  • The Kansas Retailers' Sales Tax an Overview
    • United States
    • Kansas Bar Association KBA Bar Journal No. 62-12, December 1993
    • Invalid date
    ...is accomplished within a time reasonably requisite. [FN124] In Derby, the court acknowledged its reliance on R. L. Polk & Co. v. Armold, 215 Kan. 653, 526 P.2d 973 (1984). [FN125] Polk was a case of first impression in Kansas interpreting the consumables exemption. The items of personal pro......

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