Woods v. General Oils, Inc.
Decision Date | 05 December 1977 |
Citation | 558 S.W.2d 433 |
Parties | Jayne Ann WOODS, Commissioner of Revenue, Appellant, v. GENERAL OILS, INC., Appellee. 558 S.W.2d 433 |
Court | Tennessee Supreme Court |
William J. Haynes, Jr., Asst. Atty. Gen., Nashville, for appellant; Brooks McLemore, Jr., Atty. Gen., Nashville, of counsel.
Wayne E. Thomas, Stophel, Caldwell & Heggie, Chattanooga, for appellee.
This is an action by a taxpayer, General Oils, Inc., to recover sales and use taxes, paid under protest, which were assessed by the defendant Commissioner on the purchase of three large oil tanks and their appurtenances which are used by the taxpayer in its oil merchandising business located on the banks of the Tennessee River at Chattanooga. The trial court granted the plaintiff a recovery and the Commissioner appeals.
The issue presented is whether the tanks in question should be classified as "industrial machinery" within the meaning of T.C.A., § 67-3002(n), which is taxable at the rate of only 1%, whereas, the sale or use of ordinary non-favored property is taxable at the regular rate of 31/2%.
The legislature in T.C.A., § 67-3002(n), has defined "industrial machinery" as:
". . . machinery, including repair parts and any necessary repair or installation labor therefor, which is directly and primarily utilized in fabricating or processing tangible personal property for resale. . . ."
Pursuant to statutory authority, the Commissioner of Revenue has adopted Rule No. 1320-5-1-1.06, which, in pertinent part, provides:
(Emphasis added.)
It is these standards which we must apply to the evidence.
The decree of the Chancellor comes to this Court with "a presumption of correctness . . . unless the evidence preponderates otherwise." T.C.A., § 27-304. Thus, our task is to determine whether or not the evidence in the record preponderates against the finding of the Chancellor that the tanks and appurtenances in question were used "directly and primarily in fabricating or processing" the oil which the taxpayer sold to its customers. 1
General Oils, Inc., is in the business of buying, processing and selling industrial and heating oils at its plant in Chattanooga. It sells to customers located in Tennessee, Alabama, Georgia, North Carolina, Virginia and Kentucky. It receives shipments of oil by way of barges which tie up at its docks on the Tennessee River. The oil is pumped directly from the barges into its tanks located on the bank near the river. General Oils mixes or blends oils of different weights and sulphur contents to obtain oils that meet the specifications of its various customers. It delivers oil to its customers by means of tank trucks which are loaded at its loading platform. Oils of different weights and sulphur content are kept in thirteen separate tanks, e. g., # 6 oil in one tank, # 2 oil in another tank, etc. Blending is achieved at the time of loading the delivery trucks by means of an "in-line proportioner" which draws oil from two or more of the tanks in such quantities that the resulting mixed oils constitute a blend that possesses the weight and sulphur content required by the customer. This blended oil is piped directly from the storage tanks through the proportioner and into the waiting delivery tank trucks.
The Commissioner conceded that the "in-line proportioner" and its appurtenances were utilized directly and primarily in the processing of oil for resale, but denied that three large tanks at the taxpayer's plant are so utilized. These tanks were purchased by General Oils and erected on its premises in the period from July 1, 1971, through June 30, 1974. It is the sales and use taxes on the purchase of these three tanks that is the subject of this litigation.
It is our conclusion that the evidence preponderates against the finding of the trial court that these tanks were utilized "directly and primarily" in the processing of the taxpayer's oil; in our opinion, the preponderance of the evidence is that the tanks are primarily used for material handling, i. e., storage, of oil prior to the beginning of fabricating or processing of the oil for delivery.
The taxpayer called its Vice President and General Manager, Mr. E. Lee Rayburn, as its chief witness. His testimony is somewhat obscure and indefinite and leaves much to be desired. The experienced trial judge more than once remonstrated with this witness for his unsatisfactory answers which the judge described as "evasive." This witness referred to the three tanks in question as "storage tanks." Thus, he stated: "We bring heavy industrial oils in by barge to our terminal where we pump it into our storage tanks." He stated that these particular tanks ". . . mostly hold # 6 oil." And, again, he stated: Fi...
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Beare Co. v. Tennessee Dept. of Revenue
...437, 441 (1957). This Court has recognized the distinction between "processing" and material handling or storage. Woods v. General Oils, Inc., 558 S.W.2d 433, 436 (Tenn.1977). Other courts have also distinguished between "processing," on the one hand, and preservation or storage on the othe......
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...Corp. v. Tollett, Tenn., 596 S.W.2d 801 (1980). Taxation is the rule, exemption from taxation is the exception. Woods v. General Oils, Inc., Tenn., 558 S.W.2d 433 (1977). The decision of the Chancery Court is affirmed and this cause is remanded for appropriate further proceedings consistent......